TXO Partners LP: 16%-Yielder Has 80%+ Upside Potential
December 16, 2025
Wall Street Bullish on TXO Partners
It’s time to take another look at TXO Partners LP (NYSE:TXO).
When crude oil prices take a sustained breather, it’s always good to keep an eye on a diversified energy play that also has a strong foothold in the natural gas and natural gas liquids space.
Right now, U.S. natural gas futures are above $5.00 per million British thermal units (MMBtu), their highest level since 2002. Natural gas prices are being energized by the cold winter weather and strong exports. In fact, prices are up by more than 70% since October.
Thanks to these tailwinds, the outlook for natural gas remains robust. So, TXO Partners LP, an oil and gas exploration and production company, is one energy pick investors may want to keep on their radar.
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Rich Resources & New Acquisitions
Fort-Worth-Texas-based TXO Partners LP is an oil and gas company focused on conventional oil, natural gas, and natural gas liquid reserves in North America. (Source: “Investor Presentation,” TXO Partners LP, last accessed December 9, 2025.)
Its current acreage positions cover approximately 642,000 net acres across three major U.S. basins: the Permian Basin of West Texas and New Mexico, the San Juan Basin of New Mexico and Colorado, and the Williston Basin of Montana and North Dakota.
With long-lived, low-decline assets, the partnership has identified a rich inventory of development opportunities. This includes resources in excess of 50 million barrels of oil. It has also announced two significant acquisitions that have made TXO Partners a much more valuable company.
In May, it entered an agreement to purchase producing assets in the Elm Coulee Oil Field in the Williston Basin of Montana and North Dakota for approximately $350.0 million. Elm Coulee’s rich resource base has an estimated four billion barrels of oil in place. (Source: “TXO Partners, L.P., Announces Entry Into Definitive Agreement for Additional Elm Coulee Properties,” TXO Partners LP, May 13, 2025.)
In January, TXO Partners announced overall gas resource potential of three trillion cubic feet equivalent (TCFE) of natural gas in the Mancos shale region of the San Juan basin. (Source: “TXO Partners Announces 3 TCFE of Natural Gas Potential in the Mancos Shale of the San Juan Basin,” TXO Partners LP, January 15, 2025.)
On an oil equivalent basis, management believes this could represent as much as five times its current total reserve base. Phase 1 of development represents just six percent of the current Mancos position. This single position holds about 200 to 300 billion cubic feet of natural gas with 25 billion cubic feet equivalent estimated per drill well and has the potential to almost double its existing natural gas reserves.
Solid Q3 Results for TXO Partners LP
TXO Partners LP has been reporting strong revenue over the last number of years, with revenue climbing from $227.3 million in 2021 to a record $380.7 million in 2023.
For the year ended December 31, 2024, revenue slipped to $282.8 million. The lower revenue was due, in part, to lower prices for oil and natural gas. On the plus side, the partnership reported net income of $23.4 million, or $0.65 per share, a sharp improvement over the 2023 net loss of $103.9 million, or a loss of $3.44 per share.
TXO Partners continues to do well in 2025. For the third quarter ended September 30, the partnership announced that total revenue increased 67% to $100.8 million. While crude and natural gas liquids experienced a modest increase in revenue, natural gas revenue jumped almost 600% to $27.0 million (Source: “FORM 10-K,” TXO Partners LP, last November 4, 2025.)
During the quarter, TXO Partners generated 29,000 barrels of daily oil equivalent. Its daily oil production has expanded at a compound annual growth rate (CAGR) of 15.5% from 2022 through the third quarter of 2025. Daily oil production has also increased 39% year to date versus full year 2024.
The company’s net income jumped to $4.3 million, or $0.08 per unit, from $203,000, or $0.01 per unit, in the third quarter of 2024.
Quarterly Distribution of $0.35/Unit
Returning value to shareholders is an important part of TXO’s business. Since its January 2023 initial public offering, TXO Partners has returned over $229.0 million in cash to shareholders through dividends.
Most recently, in November, it paid out a third-quarter distribution of $0.35 per unit, or $2.02 per unit on an annual basis, for a forward dividend yield of 16.2%. (Source: “TXO Partners Declares a Third Quarter 2025 Distribution of $0.35 on Common Units; Files Quarterly Report on Form 10-Q,” TXO Partners LP, November 4, 2025.)
Commenting on the payout, Gary D. Simpson, co-chief executive officer, said, “TXO Partners provides a unique opportunity in the energy sector by offering a durable distribution strategy combined with a resource-rich inventory for continued development. This production and distribution model is built such that execution today yields visibility for success in the future. Given our focus as financial stewards, we are delivering $0.35 per unit to the owners for our Q3 operational results.”
TXO Units Have 80%+ Upside Potential
Despite posting solid quarterly and annual results, TXO units have been having a rough go of it lately. Currently trading at an all-time low of $12.00 per unit, TXO is down 19% year to date and 18% on an annual basis.
Not much to cheer about. That said, Wall Street is increasingly bullish on TXO units over the longer term, with analysts providing a 12-month share price target range of $19.00 to $22.00. This points to potential upside of 58% to 83%.
Hitting $22.00 per share would put TXO units in record territory.
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The Lowdown on TXO Partners LP
TXO Partners LP is a great energy company with a growing property portfolio in the Permian, San Juan, and Williston Basins, each characterized by low geological risk, low decline rates, and high recoveries.
Good news for passive income investors: the partnership legally has to distribute all of its cash on hand at the end of each quarter. Management has said that the low decline nature of its reserves and the relatively low cost to maintain production combined with its low-leverage profile will continue to support distributions.
That should continue to be good news for all shareholders. This includes the 24.7% held by insiders and 31.5% held by institutions. Of the 65 institutional holders, three of the largest are King Luther Capital Management, CIBC Private Wealth Group, LLC, and Goldman Sachs Group Inc. (Source: “TXO Partners, L.P. (TXO),” Yahoo! Finance, last accessed December 9, 2025.)
