Q - TXO Partners, L.P.

Previous wording

We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas and natural gas liquid reserves in North America. Our properties are predominately located in the Permian Basin of New Mexico and Texas, the San Juan Basin of New Mexico and Coloradoand the Williston Basin of Montana and North Dakota.

Current wording

We are an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas and natural gas liquid reserves in North America. Our properties are predominately located in the Permian Basin of New Mexico and Texas, the San Juan Basin of New Mexico and Colorado and the Williston Basin of Montana and North Dakota.

Previous wording

On August 30, 2024, we entered into Amendment No. 4 and Borrowing Base Agreement (“Amendment No. 4”) 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. 4 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.

Current wording

On July 31, 2025, we entered into Amendment No. 5 to our 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.

Previous wording

The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2024 through March 31, 2025, NYMEX prices for crude oil and natural gas reached a high of $86.91 per Bbl and $4.49 per MMBtu, respectively, and a low of $65.75 per Bbl and $1.58 per MMBtu, respectively. Oil prices increased in the first half of 2024 due to hostilities in the Middle East and higher global consumption. However, increased supply led to lower prices in the second half of 2024 and into 2025. These declines accelerated in April due to the tariff announcement and the increased expectation for a global recession. WTI crude oil prices have been volatile reaching a high of $86.91 per Bbl in April 2024 before declining to $61.50 per Bbl as of April 11, 2025. Natural gas prices reached a high of $4.49 per MMbtu in March 2025 before declining to $3.53 per MMbtu as of April 11, 2025.

Current wording

The oil and natural gas industry is cyclical and commodity prices are highly volatile. For example, during the period from January 1, 2024 through June 30, 2025, NYMEX prices for crude oil and natural gas reached a high of $86.91 per Bbl and $4.49 per MMBtu, respectively, and a low of $57.13 per Bbl and $1.58 per MMBtu, respectively. Oil prices increased in the first half of 2024 due to hostilities in the Middle East and higher global consumption. However, increased supply led to lower prices in the second half of 2024 and into 2025. These declines accelerated in April due to the tariff announcement, the increased expectation for a global recession and additional supply. WTI crude oil prices have been volatile reaching a high of $86.91 per Bbl in April 2024 before declining to $67.34 per Bbl as of July 18, 2025. Natural gas prices reached a high of $4.49 per MMbtu in March 2025 before declining to $3.57 per MMbtu as of July 18, 2025.

Previous wording

Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial markets and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy. Rising inflation has been pervasive for the last several years, increasing the cost of salaries, wages, supplies, material, freight, and energy. While we have seen inflation moderate, inflation continues to run higher than the Federal Reserve target, resulting in higher costs. We continue to undertake actions and implement plans to address these pressures and protect the requisite access to commodities and services, however, these mitigation efforts may not succeed or be insufficient. Nevertheless, we expect for the foreseeable future to experience inflationary pressure on our cost structure. Principally, commodity costs for steel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs. We do not expect these cost increases to reverse in the short term. Typically, as prices for oil and natural gas increase, so do associated costs.

Current wording

Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, tariffs, the availability and cost of credit and the United States financial markets and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy. Rising inflation has been pervasive for the last several years, increasing the cost of salaries, wages, supplies, material, freight, and energy. While we have seen inflation moderate, inflation continues to run higher than the Federal Reserve target, resulting in higher costs. We continue to undertake actions and implement plans to address these pressures and protect the requisite access to commodities and services, however, these mitigation efforts may not succeed or be insufficient. Nevertheless, we expect for the foreseeable future to experience inflationary pressure on our cost structure. Principally, commodity costs for steel and chemicals required for drilling, higher transportation and fuel costs and wage increases have increased our operating costs. We do not expect these cost increases to reverse in the short term. Typically, as prices for oil and natural gas increase, so do associated costs. Conversely, in a period of declining prices, associated cost declines are likely to lag and may not adjust downward in proportion to prices. We cannot predict the future inflation rate but to the extent these higher costs do not begin to reverse or start to increase again, we may experience a higher cost environment going forward. If we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted.

Previous wording

(1)Oil and condensate prices include both realized losses and unrealized gains and losses from derivatives. The unrealized gains were $3.1 million for the three months ended March 31, 2025 and the unrealized losses were $0.3 million for the three months ended March 31, 2024. The realized gains were $0.1 million for the three months ended March 31, 2025 and the realized losses were $2.5 million for the three months ended March 31, 2024.

Current wording

(1)Oil and condensate prices include both realized gains and losses and unrealized gains from derivatives. Unrealized gains were $3.3 million for the three months ended June 30, 2025 and $3.4 million for the three months ended June 30, 2024. Realized gains were $2.0 million for the three months ended June 30, 2025 and realized losses were $3.1 million for the three months ended June 30, 2024.

Previous wording

(2)Natural gas liquids prices include both realized and unrealized gains and losses from derivatives. The unrealized losses were $0.0 million for the three months ended March 31, 2025 and $0.2 million for the three months ended March 31, 2024. There were no realized gains for the three months ended March 31, 2025 and $0.2 million for the three months ended March 31, 2024.

Current wording

(2)Natural gas liquids prices include both realized gains and unrealized gains and losses from derivatives. Unrealized gains were $12 thousand for the three months ended June 30, 2025 and unrealized losses were $0.3 million for the three months ended June 30, 2024. There were no realized gains for the three months ended June 30, 2025 and $0.2 million for the three months ended June 30, 2024.

Previous wording

(3)Natural gas prices include both realized losses and unrealized gains and losses from derivatives. The unrealized losses were $10.6 million for the three months ended March 31, 2025 and $0.2 million for the three months ended March 31, 2024. The realized losses were $2.0 million for the three months ended March 31, 2025 and the realized gains were $1.9 million for the three months ended March 31, 2024.

Current wording

(3)Natural gas prices include both realized gains and unrealized gains and losses from derivatives. Unrealized gains were $4.1 million for the three months ended June 30, 2025 and unrealized losses were $5.5 million for the three months ended June 30, 2024. Realized gains were $5.4 million for the three months ended June 30, 2025 and $5.6 million for the three months ended June 30, 2024.

Previous wording

Production expenses increased $9.2 million, or 28%, from $33.1 million for thethree months ended March 31, 2024 to $42.3 million for thethree months ended March 31, 2025. Of this increase, $8.5 million is attributable to production fromthe Williston Basin acquisitions. The remaining increase is primarily related to increased labor, main tenance and energy costs.

Current wording

Production expenses increased $6.9 million, or 19%, from $36.4 million for the three months ended June 30, 2024 to $43.3 million for the three months ended June 30, 2025. Of this increase,$7.1 million is attributable to production from the Williston Basin acquisitions.

Previous wording

On a per unit basis, taxes, transportation, and other increased from $7.61 per Boe sold for thethree months ended March 31, 2024 to $7.68 per Boe sold for thethree months ended March 31, 2025. The increase is primarily related to the higher natural gas and NGLs prices and change in production mix.

Current wording

On a per unit basis, taxes, transportation, and other decreased from $6.73 per Boe sold for the three months ended June 30, 2024 to $6.43 per Boe sold for the three months ended June 30, 2025. The decrease is primarily attributable to a change in production mix.

Previous wording

On a per unit basis, depreciation, depletion, and amortization increased from $5.14 per Boe sold for thethree months ended March 31, 2024 to $9.20 per Boe sold for thethree months ended March 31, 2025. The increase is primarily related to the production associated withthe Williston Basin acquisitions which has a higher rate than the historical properties.

Current wording

On a per unit basis, depreciation, depletion, and amortization increased from $5.27 per Boe sold for the three months ended June 30, 2024 to $9.16 per Boe sold for the three months ended June 30, 2025. The increase is primarily related to the production associated with the Williston Basin acquisitions, which has a higher rate than the historical properties.

Previous wording

On a per unit basis, G&A expense decreased from $1.30 per Boe sold for thethree months ended March 31, 2024 to $1.05 per Boe sold for thethree months ended March 31, 2025. The decrease is related to increased production and lower costs.

Current wording

On a per unit basis, G&A expense increased from $2.34 per Boe sold for the three months ended June 30, 2024 to $3.99 per Boe sold for the three months ended June 30, 2025. The increase is primarily related to increased costs partially offset by increased production.

Previous wording

Other income increased $1.1 million, or 13%, from $8.4 million for thethree months ended March 31, 2024 to $9.5 million for thethree months ended March 31, 2025. The increase is primarily attributable to a $2.4 million increase in bonus receipts on term assignments partially offset by lower CO 2 and plant income of $1.1 million and a $0.3 million decrease in marketing income. The CO 2 and plant income is ancillary to the operations of the gas processing plant in the Permian Basin in New Mexico and CO 2 assets in Colorado.

Current wording

Other income decreased $8.0 million, or 58%, from $13.8 million for the three months ended June 30, 2024 to $5.9 million for the three months ended June 30, 2025. The decrease is primarily attributable to the absence of $5.7 million in bonus payments on term assignment of leases and lower CO 2 and plant income of $2.4 million. The CO 2 and plant income is ancillary to the operations of the gas processing plant in the Permian Basin in New Mexico and CO 2 assets in Colorado.

Previous wording

Interest expense increased $2.6 million, or 271%, from $1.0 million for thethree months ended March 31, 2024 to $3.6 million for thethree months ended March 31, 2025. The increase is primarily attributable to the increased borrowings partially offset by a lower interest rate.

Current wording

Interest expense increased $1.5 million, or 145%, from $1.0 million for the three months ended June 30, 2024 to $2.6 million for the three months ended June 30, 2025. The increase is primarily attributable to increased borrowings partially offset by a lower interest rate.

Previous wording

Revenues increased $16.9 million, or 25%, from $67.4 million for thethree months ended March 31, 2024 to $84.3 million for thethree months ended March 31, 2025. The increase was primarily attributable to a 282 MBoe increase in production which resulted in a $23.2 million increase in revenue primarily as a result of the acquisition of producing assets in the Williston Basin being offset by natural declines in San Juan Basin and Permian Basin. Additionally, a 19% increase in the average selling price of natural gas, excluding the effects of derivatives, resulting in an increase in revenue of $4.1 million and an increase in the average selling price on NGLs of 27%, excluding the effects of derivatives, resulting in an increase in revenue of $1.8 million. These increases were partially offset by net losses on our hedging activity of $8.4 million, of which $6.9 million were unrealized losses and $1.5 million were realized losses, as well as a decrease in the average selling price, excluding the effects of derivatives, on oil of 9% resulting in a decrease in revenue of $3.7 million.

Current wording

Revenues increased $49.5 million, or 40%, from $124.7 million for the six months ended June 30, 2024 to $174.2 million for the six months ended June 30, 2025. The increase was primarily attributable to a 689 MBoe increase in production which resulted in a $46.1 million increase in revenue primarily as a result of the acquisition of producing assets in the Williston Basin being offset by natural declines in San Juan Basin and Permian Basin. Additionally, a 32% increase in the average selling price of natural gas, excluding the effects of derivatives, resulted in an increase in revenue of $9.4 million and on NGLs of 9% resulted in an increase in revenue of $1.2 million. Finally, we recognized net gains on our hedging activity of $6.1 million, of which $2.8 million were unrealized gains and $3.2 million were realized gains. These increases were partially offset by a decrease in the average selling price, excluding the effects of derivatives, on oil of 16% which resulted in a decrease in revenue of $13.3 million.

Previous wording

On a per unit basis, production expenses increased from $16.17 per Boe sold for thethree months ended March 31, 2024 to $18.15 per Boe sold for thethree months ended March 31, 2025. The increase is primarily related to the increased costs per Boe from our historical properties as decreased production and increased labor, main tenance and energy in these properties resulted in higher costs per Boe.

Current wording

On a per unit basis, production expenses increased from $17.35 per Boe sold for the six months ended June 30, 2024 to $18.23 per Boe sold for the six months ended June 30, 2025. The increase is primarily related to the increased costs per Boe from our historical properties as decreased production and increased maintenance, labor and chemical costs in these properties resulted in higher costs per Boe.

Previous wording

Taxes, transportation, and other increased $2.3 million, or 15%, from $15.6 million for thethree months ended March 31, 2024 to $17.9 million for thethree months ended March 31, 2025. The increase is primarily attributable to the increase in natural gas and NGLs prices and increase in oil and NGLs production partially offset by decreased oil prices and natural gas production.

Current wording

Taxes, transportation, and other increased $4.3 million, or 15%, from $28.8 million for the six months ended June 30, 2024 to $33.1 million for the six months ended June 30, 2025. The increase is primarily attributable to the increase in production and natural gas and NGLs prices partially offset by decreased oil prices.

Previous wording

Depreciation, depletion, and amortization increased $10.9 million, or 104%, from $10.5 million for thethree months ended March 31, 2024 to $21.4 million for thethree months ended March 31, 2025. The increase is primarily attributable to the increased production associated withthe Williston Basin acquisitions of $10.0 million which has a higher rate than the historical properties, and a higher rate on our historical properties partially offset by decreased production.

Current wording

Depreciation, depletion, and amortization increased $22.3 million, or 107%, from $20.8 million for the six months ended June 30, 2024 to $43.1 million for the six months ended June 30, 2025. The increase is attributable to the DD&A from increased production associated with the Williston Basin acquisitions of $19.8 million which has a higher rate than the historical properties, and a higher rate on our historical properties partially offset by decreased production.

Previous wording

General and administrative (“G&A”) expenses decreased $0.2 million, or (8)%, from $2.7 million for thethree months ended March 31, 2024 to $2.4 million for thethree months ended March 31, 2025. The decrease is primarily attributable to lower personnel costs of $0.8 million partially offset by higher professional costs related to being public.

Current wording

General and administrative (“G&A”) expenses increased $4.7 million, or 64%, from $7.2 million for the six months ended June 30, 2024 to $11.9 million for the six months ended June 30, 2025. The increase is primarily attributable to higher personnel costs of $3.2 million due primarily to amortization of unit awards, additional expenses related to being a public company and increased acquisition expenses.

Previous wording

Our primary sources of liquidity and capital will be cash flows generated by operating activities and borrowings under our Credit Facility. Outstanding borrowings under our Credit Facility were $155.0 million at March 31, 2025 and $150.0 million at December 31, 2024, and the remaining availability under our Credit Facility was $120.0 million at March 31, 2025 and$125.0 million at December 31, 2024. Additionally, we had positive net working capital (including cash and excluding the effects of derivative instruments) of $6.4 million at March 31, 2025 and negative net working capital of$2.5 million at December 31, 2024.

Current wording

Our primary sources of liquidity and capital will be cash flows generated by operating activities and borrowings under our Credit Facility. Outstanding borrowings under our Credit Facility were $12.0 million at June 30, 2025 and$150.0 million at December 31, 2024, and the remaining availability under our Credit Facility was $263.0 million at June 30, 2025 and $125.0 million at December 31, 2024. Additionally, we had positive net working capital (including cash and excluding the effects of derivative instruments) of $1.4 million at June 30, 2025 andnegative net working capital of $2.5 million at December 31, 2024.

Previous wording

Our partnership agreement requires that we distribute all of our available cash (as defined in the partnership agreement) to our unitholders. Our quarterly cash distributions may vary from quarter to quarter as a direct result of variations in the performance of our business, including those caused by fluctuations in the prices of oil and natural gas. Such variations may be significant and quarterly distributions paid to our unitholders may be zero. The first quarter distribution of $0.61 per unit with respect to cash available for distribution for the three months ended March 31, 2025, was declared on May 1, 2025 and will be paid May 23, 2025 to unitholders of record on May 16, 2025.

Current wording

Our partnership agreement requires that we distribute all of our available cash (as defined in the partnership agreement) to our unitholders. Our quarterly cash distributions may vary from quarter to quarter as a direct result of variations in the performance of our business, including those caused by fluctuations in the prices of oil and natural gas. Such variations may be significant and quarterly distributions paid to our unitholders may be zero. Our second quarter distribution of $0.45 per unit with respect to cash available for distribution for the three months ended June 30, 2025, was declared on August 5, 2025 and will be paid on August 22, 2025 to unitholders of record on August 15, 2025.

Previous wording

Our acquisition and development expenditures consist of acquisitions of unproved and other property and development expenditures partially offset by final settlement on previous acquisition of proved property. Our capital expenditures including acquisitions were $6.8 million for thethree months ended March 31, 2025 and $3.0 million for thethree months ended March 31, 2024.

Current wording

Our acquisition and development expenditures consist of acquisitions of proved, unproved and other property and development expenditures. Our capital expenditures including acquisitions were $49.6 million for the six months ended June 30, 2025 and $38.5 million for the six months ended June 30, 2024.

Previous wording

We incurred costs of approximately $6.9 million for drilling, completion and recompletion activities and facilities costs in thethree months ended March 31, 2025 and we have budgeted approximately $30.0 - $50.0 million for such costs in 2025.

Current wording

We incurred costs of approximately $15.2 million for drilling, completion and recompletion activities and facilities costs in the six months ended June 30, 2025 and we have budgeted approximately $65.0 million for such costs in 2025.

Previous wording

Net cash provided by operating activities increased $5.4 million for thethree months ended March 31, 2025 compared to thethree months ended March 31, 2024 due improved operating results, excluding the effects of derivatives, primarily due to improved revenues.

Current wording

Net cash provided by operating activities increased $9.4 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 due to improved operating results, excluding the effects of derivatives, primarily due to increased revenues.

Previous wording

Net cash used by investing activities increased $3.8 million for thethree months ended March 31, 2025 compared to thethree months ended March 31, 2024 due to an increase in development costs of $5.5 million and other asset additions of $0.1 million partially offset by final settlement of previous property acquisition of $1.8 million

Current wording

Net cash used by investing activities increased $11.1 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 due to increased development costs of $6.8 million and an increase in proved property acquisitions of $4.8 million partially offset by a decrease in other asset additions of $0.4 million.

Previous wording

Net cash used in financing activities decreased $1.9 million for thethree months ended March 31, 2025 compared to thethree months ended March 31, 2024 due to the increase in net borrowings under our credit facility of $7.0 million and an increase in net proceeds from sale of units to cover withholding tax payments on vesting of restricted units of $0.7 million partially offset by increased distributions of $5.8 million.

Current wording

Net cash provided by (used in) financing activities decreased $69.1 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to an increase in net repayments under our Credit Facility of $117.0 million and increased distributions to unitholders of $18.0 million partially offset by increased net proceeds from public offering of $67.0 million.

Previous wording

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). The weighted average interest rate on Credit Facility borrowings was 8.0% in thethree months ended March 31, 2025.

Current wording

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). The weighted average interest rate on Credit Facility borrowings was 8.0% in the six months ended June 30, 2025.

Previous wording

We are required to maintain (i) a current ratio (the ratio of current assets to current liabilities) greater than 1.0 to 1.0, which for purposes of this definition includes availability under the Credit Facility but excludes the fair value of derivative instruments, and (ii) a ratio of total net debt-to-EBITDAX of not greater than 3.0 to 1.0. For purposes of the total net debt- to-EBITDAX ratio, total net debt is 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 the 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. Under the terms of the Credit Facility, we were in compliance with all of our debt covenants as of March 31, 2025. 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.

Current wording

We are required to maintain (i) a current ratio (the ratio of current assets to current liabilities) greater than 1.0 to 1.0, which for purposes of this definition includes availability under the Credit Facility but excludes the fair value of derivative instruments, and (ii) a ratio of total net debt-to-EBITDAX of not greater than 3.0 to 1.0. For purposes of the total net debt- to-EBITDAX ratio, total net debt is 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 the 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. Under the terms

Previous wording

We had $155.0 million debt outstanding and $120.0 million available under our Credit Facility as of March 31, 2025.

Current wording

We had $12 million debt outstanding and $263 million available under our Credit Facility as of June 30, 2025.

Previous wording

We have entered into derivative instruments to hedge our exposure to commodity price fluctuations. If market prices are higher than the contract prices when the cash settlement amount is calculated, we are required to pay the contract counterparties. As of March 31, 2025, the current liability related to such contracts was $25.6 million and the long-term liability related to such contracts was $8.5 million. Such payments will generally be funded by higher prices received from the sale of oil, NGLs and natural gas. For further information on derivative contracts, see Note 10 in the financial statements included elsewhere in this Quarterly Report.

Current wording

We have entered into derivative instruments to hedge our exposure to commodity price fluctuations. If market prices are higher than the contract prices when the cash settlement amount is calculated, we are required to pay the contract counterparties. As of June 30, 2025, the current liability related to such contracts was $15.5 million and the long-term

Previous wording

At March 31, 2025, we had asset retirement obligations of $193.4 million inclusive of a current portion of $3.0 million. For further information on asset retirement obligations, see Note 7 in the financial statements included elsewhere in this Quarterly Report.

Current wording

At June 30, 2025, we had asset retirement obligations of $196.6 million inclusive of a current portion of $3.0 million. For further information on asset retirement obligations, see Note 7 in the financial statements included elsewhere in this Quarterly Report.