$2.40
$11.30
bear $2.40
base $7.60
bull $11.30
margin of safety $4.00
market price* $14.22
TXO Partners is a publicly traded partnership that owns producing oil and gas properties and pays out most of its cash to unitholders. At the end of 2025 it held about 129 million barrels of oil equivalent of proved reserves (roughly 60% liquids, 80% already developed) in three areas: the Permian Basin, the San Juan Basin (mostly natural gas, coalbed methane) and the Williston Basin (Elm Coulee field, Montana and North Dakota). It produced about 28,300 barrels of oil equivalent per day in 2025. The business is a depleting asset: the company's own filing puts the natural decline at about 6% a year in the Permian and 8% in the San Juan, so cash flow only lasts if capital is spent to drill or if properties are bought. How we measured earnings. We start from operating cash flow, remove swings in working capital, subtract unit-based compensation as a real cost, and subtract the money spent drilling and maintaining wells. Property acquisitions are treated as optional growth and not deducted, but we also do not credit any future acquisitions. On this basis, owner earnings per unit were about $0.98 in 2023, $1.98 in 2024 and $0.76 in 2025. The company only listed in 2023 and its unit count has risen from about 30 million to about 55 million through equity raises, so we use 2023 through 2025 as the base period and set the starting level at about $1.00 per unit, near the middle of those years. Earlier years belong to a private predecessor and are not used. 2024 was flattered by unusually low drilling spend ($25 million versus about $73 million in 2025); 2025 was held down by that spending step-up and by owning the White Rock Energy acquisition (closed July 31, 2025, $331.6 million) for only five months. Growth check. Owner earnings per unit fell about 62% in 2025 from 2024. Our first-year assumption is $1.00, about 32% above 2025. The reason is dated and in the filings: the White Rock properties contributed about $32 million of revenue in their five months of 2025 and will be in for all of 2026, and first-half 2026 operating cash flow was $82.5 million versus $57.5 million a year earlier. We do not assume price gains. Base case, about $7.6 per unit. Owner earnings hold near $1.00 per unit for five years. The support is the drilling plan: 25.4 million barrels of undeveloped reserves scheduled to be drilled by 2030 at a projected cost of $220.8 million (about $65.6 million in 2026, $63.0 million in 2027), plus a roughly $70 million development budget for 2026. After that we let cash flow decline 7% a year through year 20, then stop. We deduct the $221 million retirement obligation for plugging wells (about $4 per unit undiscounted) at the end of that period. No further acquisitions, price increases or new areas are credited: the company has bought properties every year since 2024, but paid for them with new units and borrowing, not from its own cash, so that is not growth we can count on. Bear case, about $2.4 per unit. The company carries $284 million borrowed under its bank facility (borrowing base $410 million, redetermined twice a year) plus a $70 million deferred payment due July 31, 2026 for the White Rock deal, which management intends to fund partly with about $40 million expected from selling Cross Timbers assets. In this case owner earnings start at $0.65 per unit as drilling spend and interest costs keep absorbing cash, no undeveloped locations add value, production declines 8% a year (about what Permian volumes fell in 2024 and 2025) for 15 years, and the full $221 million retirement obligation comes due when production ends. This is a lower case, not a wipeout: the business still covers its debt in this path. Bull case, about $11.3 per unit. Owner earnings run at about $1.30 per unit for five years as the completed drilling program and a full year of White Rock production work as planned, then decline 5% a year through year 20, well below the 2024 level of $1.98 achieved with low drilling spend. We do not assume higher commodity prices. What we left out. Our per-unit values do not include any future equity raises, which have repeatedly increased the unit count (about 55.2 million as of February 2026); more issuance would reduce per-unit value. The company also has a history of large impairments ($223 million in 2023, $42 million in 2025), which is why the bear case charges for weaker asset values. We could not verify anything about the second-quarter 2026 filing beyond the headline cash flow and revenue figures, so the current debt balance is from year-end 2025. What would make this wrong: a sustained drop in gas and oil prices (San Juan gas realized only $2.14 per Mcf in 2024) would cut owner earnings quickly, and a lower borrowing base could force debt repayment. Given that exposure, the margin-of-safety price is set at a large discount to the base value, about $4.00 per unit.