TXO Partners, L.P. EnerCom Denver – The Energy Investment Conference

Thank you. Thanks, Kevin. It's nice to be back at EnerCom. I don't think we've been back for a considerable period of time. I got my Co-CEO, Gary Simpson, with me as well down front. Tell you a little bit about TXO. We've not been big on the conference circuit. Just to give you a little bit of a refresh about the story, the headline things I'd point out to begin with is we have a nice portfolio of assets, and I'll give you a little history lesson. I know the last thing you want is an old guy up here telling you history, but I'm going to give you a little history, and I think it sets the stage about how we think about the business and how we manage the business, which I think is really helpful.

We do think like long-term owners because we own a lot of the stock. Our board and our insiders own about a third of the company. We try to make decisions with the owner view in mind, and we think that's very, very helpful. Again, building value with the right assets over time. This is what I call the placemat. It tells you a lot about what we've been able to distribute. We are a unique company in that we're a production and a distribution company. I think I'll start here at the bottom, really, with the timeline, because I think how we got here is relatively important. For those of you who don't know us, we started this company shortly after we sold our old business, XTO, to Exxon.

For perspective, that was a business that started essentially from zero, much like this business. We sold to Exxon for $41 billion in 2010. At the time we sold, we were the largest producer of natural gas in the U.S. We did that primarily through an acquire and exploit strategy. I'll talk a little bit more about the strategy we used to build XTO and the things we did at XTO were really the same strategies we deploy today. If you go back legacy wise, Bob Simpson and Keith Hutton were two of the most important drivers to what we built at XTO, and their DNA and their training really flows through to what we're doing today. Most of the important people making the decisions in the business today all have that legacy and all came up the same way.

That history is very relevant to what we do today. As I said, we started this business in 2011, 2012. You can see it down in the bottom, really in the Permian. We started it with assets we got in a joint venture with Exxon. I will talk later about the unwinding of that joint venture. Really, that was the foundational asset of the company. It really relied on the expertise we had at the time. We really recentered the business in 2020. We had the conviction that the commodity environment was going to be different, that the industry discipline was finally more foundational and was likely to be sustainable.

We had a view on commodities that while AI and data centers were not necessarily a big thing then, we did think that the supply and demand equation and the regulatory environment that had been present over the previous period of time was likely to be more favorable to what we did. I would say we repositioned the company, and it was critical to where we went today. We built it foundationally. In 2020, we did an acquisition in the San Juan Basin. It was a basin that we had been in at XTO for a very long period of time. We followed that in 2021 with two assets in the Permian, both from Chevron.

In 2024, we went public in 2023, and really, that was a foundational event for us, and we thought that was the ability for us to build a more valuable company, not necessarily a bigger company. As I relayed earlier, at XTO, we were the largest producer of natural gas at the time we sold. We were not interested in being bigger. We were interested in making a more valuable company. What does that mean? Assets that are not as operational intensive as some of the legacy assets we had in our portfolio. High margin assets. If you look at what we have done to the cost per barrel over the last three or four years and where that has gone, we brought that down a lot.

While we had a view that commodity prices were likely going to be sustainably higher for longer, we wanted to build our cost structure for if that was not the case, we would have a nice sustainable business. Again, as I said earlier, we are big owners of the company. We are interested in building a sustainable, durable business that is much more valuable, and I think we have done that. If you look at what we have created, we did two acquisitions, one in 2024. It marked our, I call it our re-entry, but for TXO, it was our entry into the Williston Basin. When we talk about the Williston Basin, what we are really talking about is the Montana side. That is the Elm Coulee Basin. It is a basin that for us, we had been in at XTO. We bought the assets in 2008 from Headington Oil Company.

Interestingly, in 2025, when we did our White Rock acquisition, we rebought those assets. We viewed that as an asset that was going to be very high margin for us, and we viewed that as an asset that really had been underexploited. When I talk more specifically about the Williston, I will tell you why that was underexploited. Really, it has given us a nice foundation. So between the asset we have in Montana, the foundational assets we have in the Permian, and our assets in San Juan, we have a business where we can toggle between gas and we can toggle between oil. As the world sits today, oil is where we are spending most of our capital. I will talk a little bit more about that. We have built a business that we have 520,000 net acres across these three high impact basins.

We have about $1 billion in PDP. We think we have a very valuable business. Because all this is HBP, we view it as having a tremendous amount of optionality. Bob likes to say you always find oil or find natural resources where they are, and by all means, that is what we have done. It is kind of the gift that keeps on giving. We have been talking about the Mancos for a very long period of time, and I will show you a slide. When time is right, we will be in a position to really exploit that asset, and I think we have one of the most valuable assets in the Mancos that anybody has.

As you may or may not be aware, LOGOS, who presented yesterday, just sold their business for north of $1 billion here recently, and we think we have a really compelling position as well. Very low decline rate. Again, when you go back to what built XTO, it was the low decline rate of the assets. We think the decline rate of the assets are about 12% over time. We have taken it probably from about 9.5% when we went public in 2023 to 12%. We want to keep it less than 15%. I think when we exited at XTO, we had a 14% decline rate. We do think we have some great targets and some great ability to move the needle, but we want to be very, very sensitive.

When we went public, as I said, we did things to make a more valuable company. We branded as a production and distribution company. Our goal, we wake up every year saying we want to raise our distribution every single year. This is a commodity business. The commodity curve is typically backwardated. It is not easy to do, but that is what we strive to do every year. Our goal is to maximize, is a strong word, but I will use it, maximize our distribution in the short and intermediate term while building long-term value, right? We do not want to go in blow-down mode. We think we have the assets to make a more valuable company. That is what we set out to do every year. We think we have done a pretty good job about it, but we call ourselves a production and distribution company.

If commodity prices are such that it's a favorable environment, then we will seek to grow, but we're not going to be growing organically 10% every year or 5% a year, maybe a couple percent a year. If commodity prices look like they did back in January, there may be a period of time we say, "Hey, look, we're okay with the business declining a couple of percent because keeping our distribution and managing our business for the long term is what makes sense to us." That's the way we think about the business. One of the things we did is kind of looked at the portfolio. We've got a nice portfolio of conventional assets that help our decline rate. We've got a nice portfolio of unconventional assets. Then we've got some sensitivity.

We did the White Rock acquisition about a month after Liberation Day last year, right? The right assets come to market when the right assets come to market. For us, it was very critical for us to do that transaction. We issued equity against it as an MLP and distributing cash flow. We are dependent on using the public markets as a means of financing our transactions on a go-forward basis. We'd like to think we've earned the ability to do that, and we'd like to think the results would suggest we've done that. What we did here is just gave a little bit of sensitivity. Commodity environments have been a little bit volatile. We want to give you a sense of what we think the business can earn over time.