txo-20250930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 001-04321

TXO Partners, L.P.

(Exact name of registrant as specified in its charter)


Delaware			32-0368858
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

400 West 7th Street, Fort Worth, Texas			76102
(Address of Principal Executive Offices)			(Zip Code)

(817) 334-7800

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units	TXO	New York Stock Exchange
Common Units	TXO	NYSE Texas

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The registrant had outstanding 54,784,292 common units as of November 4, 2025.

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TABLE OF CONTENTS


			Page
Part I - Financial Information
Item 1. Financial Statements			1
Consolidated Balance Sheets			1
Consolidated Statements of Operations			2
Consolidated Statements of Cash Flows			3
Consolidated Statements of Partners’ Capital			4
Notes to Financial Statements			5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			33

Part II - Other Information
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3. Defaults Upon Senior Securities			34
Item 4. Mine Safety Disclosures			34
Item 5. Other Information			34
Item 6. Exhibits			35
Signatures			36

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Part I - Financial Information

Item 1. Financial Statements


TXO PARTNERS, L.P. Consolidated Balance Sheets

(in thousands)


	September 30, 2025		December 31, 2024
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	5,308	$	7,305
Accounts receivable, net	45,602		39,689
Derivative fair value	11,095		6,412
Other	14,916		11,041
Total Current Assets	76,921		64,447
Property and Equipment, at cost – successful efforts method:
Proved properties	2,308,971		1,912,624
Unproved properties	18,772		18,706
Other	88,894		85,425
Total Property and Equipment	2,416,637		2,016,755
Accumulated depreciation, depletion and amortization	(1,132,108)		(1,065,364)
Net Property and Equipment	1,284,529		951,391
Other Assets:
Note receivable from related party	7,131		7,131
Derivative fair value	1,203		2,065
Other	6,374		5,807
Total Other Assets	14,708		15,003
TOTAL ASSETS	$	1,376,158	$	1,030,841
LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities:
Accounts payable	$	29,664	$	18,217
Deferred payment	70,000		—
Accrued liabilities	47,177		38,927
Derivative fair value	8,481		5,846
Asset retirement obligation, current portion	3,500		2,000
Other current liabilities	1,795		1,347
Total Current Liabilities	160,617		66,337

Long-term Debt	271,100		157,100
Other Liabilities:
Asset retirement obligation	205,426		188,904
Derivative fair value	2,115		8,022
Other liabilities	680		1,062
Total Other Liabilities	208,221		197,988
Commitments and Contingencies
Partners’ Capital:
Partners’ capital	736,220		609,416
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	1,376,158	$	1,030,841

See accompanying notes to the Consolidated Financial Statements

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TXO PARTNERS, L.P. Consolidated Statements of Operations (Unaudited)

(in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
REVENUES
Oil and condensate	$	66,330	$	56,111	$	190,379	$	136,944
Natural gas liquids	7,504		7,195		23,958		20,367
Natural gas	27,042		5,425		60,743		36,167
Total Revenues	100,876		68,731		275,080		193,478
EXPENSES
Production	47,864		39,437		133,469		108,959
Exploration	91		20		224		214
Taxes, transportation and other	16,648		14,466		49,763		43,240
Depreciation, depletion and amortization	23,697		13,573		66,810		34,422
Accretion of discount in asset retirement obligation	3,982		2,926		11,623		8,491
General and administrative	4,834		3,275		16,729		10,520
Total Expenses	97,116		73,697		278,618		205,846
OPERATING (LOSS) INCOME	3,760		(4,966)		(3,538)		(12,368)
OTHER INCOME (EXPENSE)
Other income	4,984		6,329		20,352		28,584
Interest income	113		700		516		947
Interest expense	(4,505)		(1,860)		(10,697)		(3,885)
Total Other Income	592		5,169		10,171		25,646
NET INCOME	$	4,352	$	203	$	6,633	$	13,278

NET INCOME PER COMMON UNIT
Basic	$0.08		$0.01		$0.14		$0.39
Diluted	$0.08		$0.01		$0.14		$0.39

WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
Basic	54,784		39,272		48,079		33,762
Diluted	55,807		39,828		49,006		34,340

See accompanying notes to the Consolidated Financial Statements

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TXO PARTNERS, L.P. Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2025		2024
OPERATING ACTIVITIES
Net income	$	6,633	$	13,278
Adjustments to reconcile net income to net cash provided by operating activities, net of effects of assets acquired and liabilities assumed:
Depreciation, depletion and amortization	66,810		34,422
Accretion of discount in asset retirement obligation	11,623		8,491
Derivative fair value (gain) loss	(15,668)		1,269
Net cash received from (paid to) derivative counterparties	8,574		2,278
Non-cash incentive compensation	12,835		4,569
Other non-cash items	867		871
Changes in operating assets and liabilities (a)	(5,939)		3,614
Cash Provided by Operating Activities	85,735		68,792
INVESTING ACTIVITIES
Proceeds from sale of property and equipment	—		5
Proved property acquisitions	(268,850)		(260,769)
Development costs	(36,018)		(10,866)
Unproved property acquisitions	(66)		(220)
Other property and asset additions	(498)		(1,162)
Cash Used by Investing Activities	(305,432)		(273,012)
FINANCING ACTIVITIES
Proceeds from long-term debt	360,500		222,000
Payments on long-term debt	(246,500)		(95,000)
Net proceeds from public offering	189,502		141,245
Proceeds from sale of units to cover withholding taxes	1,215		930
Withholding taxes paid on vesting of restricted units	(2,358)		(851)
Debt issuance costs	(2,429)		(3,173)
Distributions	(82,230)		(61,590)
Cash Provided by Financing Activities	217,700		203,561
DECREASE IN CASH AND CASH EQUIVALENTS	$	(1,997)	$	(659)
Cash and Cash Equivalents, beginning of period	7,305		4,505
Cash and Cash Equivalents, end of period	$	5,308	$	3,846


(a) Changes in Operating Assets and Liabilities
Accounts receivable	$	(4,675)	$	(2,997)
Other current assets	(1,726)		1,238
Current liabilities	2,637		6,473
Other operating liabilities	(2,175)		(1,100)
	$	(5,939)	$	3,614

See accompanying notes to the Consolidated Financial Statements

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TXO PARTNERS, L.P. Consolidated Statements of Partners’ Capital (Unaudited)

(in thousands)


	Units	$
Balances, June 30, 2025	54,784	$	753,024
Net income	—	4,352
Expensing of unit awards	—	3,468
Distributions to unitholders	—	(24,624)
Balances, September 30, 2025	54,784	$	736,220


	Units	$
Balances, June 30, 2024	37,438	$	572,788
Net income	—	203
Net proceeds from sale of units	975	18,745
Units issued in acquisition of oil & gas properties	2,500	50,000
Expensing of unit awards	—	1,596
Distributions to unitholders	—	(21,953)
Balances, September 30, 2024	40,913	$	621,379


	Units		$
Balances, December 31, 2024	40,913		$	609,416
Net income	—		6,633
Net proceeds from sale of units	13,417		189,502
Proceeds from sale of units to cover withholding taxes	454		2,422
Withholding taxes paid on vesting of restricted units	—		(2,358)
Expensing of unit awards	—		12,835
Distributions to unitholders	$	—	$	(82,230)
Balances, September 30, 2025	54,784		$	736,220


	Units	$
Balances, December 31, 2023	30,750	$	473,798
Net income	—	13,278
Net proceeds from sale of units	7,475	141,245
Units issued in acquisition of oil & gas properties	2,500	50,000
Proceeds from sale of units to cover withholding taxes	188	930
Withholding taxes paid on vesting of restricted units	—	(851)
Expensing of unit awards	—	4,569
Distributions to unitholders	—	(61,590)
Balances, September 30, 2024	40,913	$	621,379

See accompanying notes to the Consolidated Financial Statements

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TXO PARTNERS, L.P.

Notes to Consolidated Financial Statements (Unaudited)

1.Organization and Summary of Significant Accounting Policies

TXO Partners, L.P. (TXO Partners or the Partnership) is an independent oil and gas company that was formed as a Delaware limited partnership in January 2012 (with an effective inception of operations at January 18, 2012). The operations of TXO Partners are governed by the provisions of the partnership agreement, as amended, executed by the general partner, TXO Partners GP, LLC (the General Partner) and the limited partners. The General Partner is the manager and operator of TXO Partners. The General Partner is managed by the board of directors and executive officers of our General Partner. The members of the board of directors of our General Partner are appointed by MorningStar Oil & Gas, LLC (“MSOG”), as the sole member of our General Partner. TXO Partners will remain in existence unless and until dissolved in accordance with the terms of the partnership agreement.

TXO Partners’ assets include its investment in an unincorporated joint venture, Cross Timbers Energy, LLC (“Cross Timbers Energy”). TXO Partners owns 50% of Cross Timbers Energy, and TXO Partners is the manager of Cross Timbers Energy. Cross Timbers Energy is governed by a Member Management Committee (MMC) and is comprised of six representatives, three from each group, with each group having one voting member. All matters that come before the MMC require the unanimous consent of the voting members. On the last day of each calendar quarter, Cross Timbers Energy distributes all excess cash to the members based on their ownership percentage of 50% each, except for earnings from the note receivable which is owned 5% by TXO Partners. Cross Timbers Energy’s properties are located primarily in the San Juan Basin of New Mexico and Colorado and the Permian Basin of West Texas and New Mexico.

TXO Partners also has a wholly-owned subsidiary, MorningStar Operating LLC which owns oil and gas assets primarily in the San Juan Basin of New Mexico and Colorado, the Permian Basin of West Texas and New Mexico and the Williston Basin of Montana and North Dakota.

2.Basis of Presentation and Significant Accounting Policies

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and on the same basis as our audited financial statements as of December 31, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024. The consolidated balance sheet as of September 30, 2025 and the consolidated statements of operations and cash flows for the periods presented herein are not audited but reflect all adjustments that are of a normal recurring nature and are necessary for a fair statement of results for the periods shown. Certain information and note disclosures normally included in annual financial statements have been omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Because the consolidated interim financial statements do not include all of the information and notes required by US GAAP for a complete set of financial statements, they should be read in conjunction with the audited consolidated financial statements referred to above. The results and trends in these interim financial statements may not be indicative of results for the full year.

Significant Accounting Policies

For a complete description of TXO Partners’ significant accounting policies, see our annual audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

3.Acquisitions

In July 2025, we completed the acquisition of certain oil and gas assets from White Rock Energy, LLC, which are located in the Elm Coulee field in Montana and North Dakota for cash consideration of $338.6 million (the “WRE Acquisition”), including a deferred payment of $70.0 million which is due on July 31, 2026, subject to customary purchase price adjustments. In connection with entering into the purchase agreement, we paid a deposit of $34.8 million. Our preliminary purchase price allocation included $349.8 million to proved properties, $3.0 million to other properties, $1.7 million to other current assets, $6.7 million to other current liabilities and $9.2 million to asset retirement obligation. The WRE Acquisition was funded by a combination of cash on hand from the Offering (Note 12) and borrowings under our Credit Facility (Note 5).

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In the statements of operations, we recorded $11.5 million of revenues and net income of $2.5 million for both the three months ended September 30, 2025 and for the nine months ended September 30, 2025 from the WRE Acquisition.

In August 2024, we completed the acquisition of producing properties from Eagle Mountain Energy Partners and VR 4-ELM, LP, located in the Elm Coulee field in Montana and the Russian Creek field in North Dakota, which are part of the Greater Williston Basin, for cash consideration of $244.2 million and 2.5 million common units of TXO valued at $50.0 million (the “EMEP Acquisition”). Our purchase price allocation included $314.8 million to proved properties, $0.6 million to other properties, $0.3 million to other current assets, $1.0 million to other assets, $5.7 million to other current liabilities and $16.8 million to asset retirement obligation. The cash portion of the acquisition was funded by a combination of cash on hand from the public offering and borrowings under our Credit Facility (Note 5).

Additionally, in August 2024, we completed the acquisition of producing properties from Kaiser-Francis Oil

Company in the Russian Creek field in North Dakota for cash consideration of $17.0 million (the “KFOC Acquisition”). Our purchase price allocation included $19.1 million to proved properties, $0.5 million to current liabilities and $1.6 million to asset retirement obligation. The acquisition was funded by cash on hand from the public offering.

Pro forma financial information (Unaudited)

The following unaudited pro forma financial information represents a summary of the condensed consolidated

results of operations for the three months and nine months ended September 30, 2025 and 2024, assuming the WRE Acquisition, EMEP Acquisition and KFOC Acquisition had been completed as of January 1, 2024. The pro forma financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been. Future results may vary significantly from the results reflected because of various factors.


(in thousands)	Three Months Ended September 30, 2025		Three Months Ended September 30, 2024		Nine Months Ended September 30, 2025		Nine Months Ended September 30, 2024

Total revenue	$	111,937	$	118,618	$	371,383	$	353,212
Net income	$	6,411	$	4,515	$	34,004	$	28,710

4.Related Party Transactions

We earned management fees from Cross Timbers Energy of $1.2 million for the three months ended September 30, 2025 and $1.4 million for the three months ended September 30, 2024. We earned management fees from Cross Timbers Energy of $3.7 million for the nine months ended September 30, 2025 and $3.7 million for the nine months ended September 30, 2024.

5.Debt


(in thousands)	September 30, 2025		December 31, 2024
Credit Facility, 8.0% at September 30, 2025 and 8.3% at December 31, 2024	$	264,000	$	150,000
September 2016 Loan, 7.7% at September 30, 2025 and 8.0% at December 31, 2024	$	7,100	$	7,100
Total Long-term Debt	$	271,100	$	157,100

November 2021 Credit Facility

On July 31, 2025, we entered into Amendment No. 5 and Borrowing Base Agreement (“Amendment No. 5”) on our senior secured credit facility (the “Credit Facility”) with certain commercial banks, as the lenders, and JPMorgan Chase Bank, N.A., as the administrative agent. We use the Credit Facility for general corporate purposes. Amendment No. 5 increased the borrowing base from $275 million to $410 million, extended the maturity date to August 30, 2029 and joined certain new Lenders to the Credit Facility. Previously, on August 30, 2024, we entered into Amendment No. 4 and Borrowing Base Agreement (“Amendment No. 4”) which extended the maturity date of the Credit Facility to August 30, 2028, increased the borrowing base from $165 million to $275 million and joined certain new Lenders to the Credit Facility. In connection with the Credit Facility, we incurred financing fees and expenses, which are included in other assets on the balance sheets, of approximately $8.6 million as of September 30, 2025 and $6.2 million as of December 31, 2024 before accumulated amortization of $3.3 million as of September 30, 2025 and $2.5 million as of December 31, 2024. We

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incurred $2.4 million of financing fees and expenses in conjunction with Amendment No. 5. These costs are being amortized over the life of the Credit Facility. Such amortized expenses are recorded as interest expense on the statements of operations.

On July 31, 2025, the funds needed to close the WRE Acquisition, which totaled $233.8 million, were borrowings under our Credit Facility (See Note 3).

Redetermination of the borrowing base under the credit facility is based primarily on reserve reports that reflect commodity prices at such time, occurs semi-annually, in March and September, as well as upon requested interim redeterminations, by the lenders at their sole discretion. We also have the right to request additional borrowing base redeterminations each year at our discretion. Significant declines in commodity prices may result in a decrease in the borrowing base. These borrowing base declines can be offset by any commodity price hedges we enter. Our obligations under the credit facility are secured by substantially all assets of the Partnership, including, without limitation, (i) our interest in the joint venture, (ii) all our deposit accounts, securities accounts, and commodities accounts, (iii) any receivables owed to us by the joint venture and (iv) any oil and gas properties owned directly by TXO Partners or its wholly-owned subsidiaries. We are required to maintain (i) a current ratio greater than 1.0 to 1.0 and current assets shall include availability under the Credit Facility, but shall exclude the fair value of derivative instruments, and current liabilities shall exclude the fair value of derivative instruments and any advances under the Credit Facility and (ii) a ratio of total indebtedness to EBITDAX of not greater than 3.0 to 1.0. For purposes of the total net debt-to-EBITDAX ratio (“Leverage Ratio”), total net debt includes total debt for borrowed money (including capital leases and purchase money debt), minus unrestricted cash and cash equivalents on hand at such time (not exceeding $15.0 million in the aggregate), minus the unpaid balance of the FAM Loan. EBITDAX means sum of (i) net income plus interest expense; income taxes paid; depreciation, depletion and amortization; exploration expenses, including workover expenses; non-cash charges including unrealized losses on derivative instruments; and, any extraordinary or non-recurring charges, minus (ii) any extraordinary or non-recurring income and any non-cash income including unrealized gains on derivative instruments. Our hedge requirements are based on availability under the Credit Facility and the Leverage Ratio. If the Leverage Ratio is greater than 0.75 to 1.00, we are required to hedge at least 50% of reasonably anticipated projected production of proved developed producing reserves for the 24 months following the end of the most recent quarter. If the Leverage Ratio is less than 0.75 to 1.00 and availability under the Credit Facility is greater than 20% of the then current borrowing base, the minimum required hedge volume would be 35% for the 12 months following the end of the most recent quarter. If the Leverage Ratio is less than 0.50 to 1.00 and availability under the Credit Facility is greater than 66.7% of the then current borrowing base, there would be no minimum required hedge volume. Our Credit Facility prohibits us from hedging more than 90% of our reasonably projected production for any fiscal year. Under the terms of the Credit Facility, we were in compliance with all of our debt covenants as of September 30, 2025 and December 31, 2024. Additionally, we believe we have adequate liquidity to continue as a going concern for at least the next twelve months from the date of this report.

At our election, interest on borrowings under the Credit Facility is determined by reference to either the secured overnight financing rate (“SOFR”) plus an applicable margin between 3.00% and 4.00% per annum (depending on the then-current level of borrowings under the Credit Facility) or the alternate base rate (“ABR”) plus an applicable margin between 2.00% and 3.00% per annum (depending on the then-current level of borrowings under the Credit Facility). Interest is generally payable quarterly for loans bearing interest based on the ABR and at the end of the applicable interest period for loans bearing interest at SOFR. We are required to pay a commitment fee to the lenders under the Credit Facility, which accrues at a rate per annum of 0.5% on the average daily unused amount of the lesser of: (i) the maximum commitment amount of the lenders and (ii) the then-effective borrowing base.

September 2016 Loan

On September 30, 2016, TXO Partners entered into an unsecured loan agreement with Cross Timbers Energy (the “FAM Loan”). The proceeds for the loan were taken from the cash held by the offshore subsidiary of Exxon Mobil Corporation and the loan was assigned to the offshore subsidiary (Note 6). The loan matures on November 29, 2029, but is automatically extended should the maturity date of the Credit Facility be extended. In all instances, this loan will mature ninety-one days after the maturity of the Credit Facility. Interest on the loan is the lesser of (a) SOFR plus three and one-quarter of one percent (3.25%) per annum, adjusted monthly or (b) the highest rate permitted by applicable law. Though the note is unsecured, we are required to stay in compliance with the terms of the Credit Facility.

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6.Note Receivable from Related Party

As of September 30, 2025 and December 31, 2024, we, through our 5% ownership interest in investment assets at Cross Timbers Energy, had a note receivable totaling $7.1 million outstanding with a highly-rated, offshore subsidiary of Exxon Mobil Corporation. Under the terms of the agreement, there is no stated maturity date and Cross Timbers Energy may demand repayment of all or any portion of the outstanding balance on two business days’ notice. Interest is earned based on the one-month SOFR rate and is paid monthly. Interest income totaled $0.2 million in the first nine months of 2025 and $0.3 million in the first nine months of 2024.

The note receivable is treated as a non-current asset, since Cross Timbers Energy does not have any intention of demanding repayment of all or any portion of the outstanding balance at this time. Repayment would require the approval of the Cross Timbers Energy MMC.

7.Asset Retirement Obligation

Our asset retirement obligation primarily represents the estimated present value of the amount we will incur to plug, abandon and remediate our proved producing properties at the end of their productive lives, in accordance with applicable state and federal laws. We determine our asset retirement obligation by calculating the present value of estimated cash flows related to the liability. The following is a summary of changes in TXO Partners’ asset retirement obligation activity for the nine months ended September 30, 2025:


	(in thousands)
Asset retirement obligation, January 1	$	190,904
Liability incurred upon acquiring and drilling wells	9,209
Liability settled upon plugging and abandoning wells	(2,810)
Accretion of discount expense	11,623
Asset retirement obligation, September 30	208,926
Less current portion	(3,500)
Asset retirement obligation, long term	$	205,426

8.Commitments and Contingencies

From time to time, the Partnership is subject to various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Partnership.

To date, our expenditures to comply with environmental and occupational health and safety laws and regulations have not been significant and are not expected to be significant in the future. However, new regulations, enforcement policies, claims for damages or other events could result in significant future costs.

9.Fair Value

We periodically use commodity-based and financial derivative contracts to manage exposures to commodity price. We do not hold or issue derivative financial instruments for speculative or trading purposes. We periodically enter into futures contracts, costless collars, energy swaps, swaptions and basis swaps to hedge our exposure to price fluctuations on crude oil, natural gas liquids and natural gas sales (Note 10).

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Fair Value of Financial Instruments

Because of their short-term maturity, the fair value of cash and cash equivalents, accounts receivable and accounts payable approximates their carrying values at September 30, 2025 and December 31, 2024. The following are estimated fair values and carrying values of our other financial instruments at each of these dates:


	Asset (Liability)
	September 30, 2025				December 31, 2024
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Note receivable from related party	$	7,131	$	7,131	$	7,131	$	7,131
Long-term debt	$	(271,100)	$	(271,100)	$	(157,100)	$	(157,100)
Derivative asset	$	12,298	$	12,298	$	8,477	$	8,477
Derivative liability	$	(10,596)	$	(10,596)	$	(13,868)	$	(13,868)

The fair value of our note receivable from related party approximates the carrying amount because the interest rate is based on current market interest rates and can be called upon two business days’ notice (Note 6). The fair value of our long-term debt approximates the carrying amount because the interest rate is reset periodically at then current market rates (Note 5).

The fair value of our note receivable from related party (Note 6), derivative asset/(liability) (Note 10) and our long-term debt (Note 5) is measured using Level II inputs, and are determined by either market prices on an active market for similar assets or other market-corroborated prices. Counterparty credit risk is considered when determining the fair value of our note receivable and derivative asset (liability). Since our counterparty is highly rated, the fair value of our note receivable from related party does not require an adjustment to account for the risk of nonperformance by the counterparty, however, an adjustment for counterparty credit risk has been applied to the derivative asset (liability).

The following table summarizes our fair value measurements and the level within the fair value hierarchy in which the fair value measurements fall.


	Fair Value Measurements
	September 30, 2025				December 31, 2024
(in thousands)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Note receivable from related party	$	7,131	$	—	$	7,131	$	—
Long-term debt	$	(271,100)	$	—	$	(157,100)	$	—
Derivative asset	$	12,298	$	—	$	8,477	$	—
Derivative liability	$	(10,596)	$	—	$	(13,868)	$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments whenever events or circumstances indicate that the carrying value of those assets may not be recoverable and are based upon Level 3 inputs. These assets and liabilities can include assets and liabilities acquired in a business combination, proved and unproved oil and natural gas properties, asset retirement obligations and other long-lived assets that are written down to fair value when they are impaired. Such fair value estimates require assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments.

We periodically review our long-lived assets to be held and used, including proved oil and natural gas properties, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. We review our oil and natural gas properties by asset group. The estimated future net cash flows are based upon the underlying reserves and anticipated future pricing. An impairment loss is recognized if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. If the estimated undiscounted future net cash flows are less than the

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carrying amount of a particular asset, the Partnership recognizes an impairment loss for the amount by which the carrying amount of the asset exceeds the estimated fair value of such assets. The fair value of the proved properties is measured based on the income approach, which incorporates a number of assumptions involving expectations of future product prices, which the Partnership bases on the forward-price curves, estimates of oil and gas reserves, estimates of future expected operating and capital costs and a risk adjusted discount rate of 10%. These inputs are categorized as Level 3 in the fair value hierarchy.

Commodity Price Hedging Instruments

We periodically enter into futures contracts, energy swaps, swaptions, collars and basis swaps to hedge our exposure to price fluctuations on crude oil, natural gas and natural gas liquids sales. When actual commodity prices exceed the fixed price provided by these contracts we pay this excess to the counterparty, and when the commodity prices are below the contractually provided fixed price, we receive this difference from the counterparty. See Note 10.

The fair value of our derivatives contracts consists of the following:


	Asset Derivatives				Liability Derivatives
(in thousands)	September 30, 2025		December 31, 2024		September 30, 2025		December 31, 2024
Derivatives not designated as hedging instruments:
Crude oil futures and differential swaps	$	11,345	$	2,730	$	(1,984)	$	(52)
Natural gas liquids futures	$	14	$	—	$	—	$	—
Natural gas futures, collars and basis swaps	$	939	$	5,747	$	(8,612)	$	(13,816)
Total	$	12,298	$	8,477	$	(10,596)	$	(13,868)

Derivative fair value (gain) loss, included as part of the related revenue line on the consolidated income statements, comprises the following realized and unrealized components:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2025		2024		2025		2024
Net cash received from counterparties	$	(3,070)	$	(6)	$	(8,574)	$	(2,278)
Non-cash change in derivative fair value	$	(7,250)	$	549	$	(7,094)	$	3,547
Derivative fair value (gain) loss	$	(10,320)	$	543	$	(15,668)	$	1,269

Concentrations of Credit Risk

Our receivables are from a diverse group of companies including major energy companies, pipeline companies, marketing companies, local distribution companies and end-users in various industries. Letters of credit or other appropriate security are obtained as considered necessary to limit risk of loss from the other companies. We currently have greater concentrations of credit with several investment-grade (BBB- or better) rated companies.

10.Commodity Sales Commitments

Our policy is to consider hedging a portion of our production at commodity prices the general partner deems attractive. While there is a risk we may not be able to realize the benefit of rising prices, the general partner may enter into hedging agreements because of the benefits of predictable, stable cash flows.

We periodically enter futures contracts, energy swaps, swaptions and basis swaps to hedge our exposure to price fluctuations on crude oil, natural gas liquids and natural gas sales. When actual commodity prices exceed the fixed price provided by these contracts we pay this excess to the counterparty, and when the commodity prices are below the contractually provided fixed price, we receive this difference from the counterparty. We also enter costless price collars, which set a ceiling and floor price to hedge our exposure to price fluctuations on commodity prices. When actual commodity prices exceed the ceiling price provided by these contracts we pay this excess to the counterparty, and when the commodity prices are below the floor price, we receive this difference from the counterparty. If the actual commodity price falls in between the ceiling and floor price, there is no cash settlement.

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Crude Oil

We have entered into crude oil futures contracts and swap agreements that effectively fix prices for the production

and periods shown below. Prices to be realized for hedged production may be less than these fixed prices because of

location, quality and other adjustments. See Note 9.


Production Period	Bbls per Day	Weighted Average NYMEX Price per Bbl
October 2025—December 2025	10,000	$	64.63
January 2026—June 2026	7,000	$	64.81
July 2026—September 2026	5,000	$	64.53
October 2026—December 2026	3,375	$	60.96
January 2027—December 2027	3,000	$	62.01

Net settlements on oil futures and sell basis swap contracts decreased oil revenues by $0.1 million in the three months ended September 30, 2025 and no impact in the three months ended September 30, 2024. Net settlements on oil futures and sell basis swap contracts increased oil revenues by $2.0 million in the nine months ended September 30, 2025 and decreased oil revenues by $5.6 million in the nine months ended September 30, 2024. An unrealized gain increased oil revenues by $0.3 million in the three months ended September 30, 2025 and $5.7 million in three months ended September 30, 2024. An unrealized gain increased oil revenues by $6.7 million in the nine months ended September 30, 2025 and $8.9 million in nine months ended September 30, 2024.

Natural Gas Liquids

We have entered into natural gas liquids futures contracts and swap agreements for ethane that effectively fix prices for the production and periods shown below. Prices to be realized for hedged production may be less than these fixed prices because of location, quality and other adjustments. See Note 9.


Production Period	Gallons per Day	Weighted Average NGL OPIS Price per Gallon
Ethane
January 2027—March 2027	14,700	$	0.29

Net settlements on NGL futures contracts had no impact on NGL revenues in the three months ended September 30, 2025 and increased NGL revenues by less than $1 thousand in the three months ended September 30, 2024. Net settlements on NGL futures contracts had no impact on NGL revenues in the nine months ended September 30, 2025 and increased NGL revenues by $0.5 million in the nine months ended September 30, 2024. An unrealized gain increased NGL revenues by $15 thousand in the three months ended September 30, 2025 and no impact in the three months ended September 30, 2024. An unrealized gain increased NGL revenues by $14 thousand in the nine months ended September 30, 2025 and an unrealized loss decreased NGL revenue by $0.5 million in the nine months ended September 30, 2024.

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Natural Gas

We have entered into natural gas futures contracts and swap agreements that effectively fix prices for the production and periods shown below. Prices to be realized for hedged production may be less than these fixed prices because of location, quality and other adjustments. See Note 9.


Production Period	MMBtu per Day	Weighted Average NYMEX Price per MMBtu
October 2025—March 2026	50,000	$	3.21
April 2026—September 2026	35,000	$	3.25
October 2026—December 2026	42,500	$	3.90
January 2027—March 2027	42,500	$	4.36
April 2027—December 2027	32,500	$	3.76

The price we receive for our gas production is generally less than the NYMEX price because of adjustments for delivery location (“basis”), relative quality and other factors. We have entered into sell basis swap agreements that effectively fix the basis adjustment for the San Juan Basin delivery location for the production and periods shown below.


Production Period	MMBtu per Day	Weighted Average Sell Basis Price per MMBtu(a)
October 2025—December 2025	50,000	$	(0.01)

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(a)Reductions to NYMEX gas price for delivery location

Net settlements on gas futures and sell basis swap contracts increased gas revenues by $3.1 million in the three months ended September 30, 2025 and $5 thousand in the three months ended September 30, 2024. Net settlements on gas futures and sell basis swap contracts increased gas revenues by $6.6 million in the nine months ended September 30, 2025 and $7.4 million in the nine months ended September 30, 2024. An unrealized gain to record the fair value of derivative contracts increased gas revenues by $6.9 million in the three months ended September 30, 2025 and an unrealized loss decreased gas revenues by $6.2 million in the three months ended September 30, 2024. An unrealized gain to record the fair value of derivative contracts increased gas revenues by $0.4 million in the nine months ended September 30, 2025 and an unrealized loss decreased gas revenues by $11.9 million in the nine months ended September 30, 2024.

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SEC Form 10-Q filed by TXO Partners L.P.