TXO Partners announces $175 million public offering

FORT WORTH, Texas - TXO Partners, L.P. (NYSE: TXO), a North American energy partnership currently trading at $17.68 per share with a market capitalization of $724 million, has launched an underwritten public offering of $175 million of its common units representing limited partner interests. According to InvestingPro analysis, the company is currently trading near its Fair Value, while maintaining an attractive dividend yield of ~14%. The company also plans to offer the underwriters a 30-day option to purchase up to an additional $26.25 million of common units at the public offering price, less underwriting discounts and commissions.

The proceeds from this offering are intended to partially fund the acquisition of assets from White Rock Energy, LLC, which is owned by Quantum Capital Group. However, the public offering is not dependent on the completion of the acquisition. If the acquisition does not proceed, TXO will use the proceeds to repay outstanding borrowings under its revolving credit facility and for other general partnership purposes. This capital raising effort comes as InvestingPro data shows the company is quickly burning through cash, with a negative free cash flow yield, though it maintains a moderate debt-to-equity ratio of 0.28.

Raymond James and Stifel are serving as joint book-running managers for the offering, with Capital One Securities, Mizuho, and Texas Capital Securities also acting as joint book-running managers. The offering is made through a combined prospectus supplement and accompanying base prospectus as per the Securities Act of 1933.

TXO Partners specializes in the acquisition, development, optimization, and exploitation of oil and natural gas reserves, with a focus on areas such as the Permian Basin, the San Juan Basin, and the Williston Basin. The company maintains a healthy gross profit margin of ~47% and has demonstrated revenue growth of 3.4% over the last twelve months. InvestingPro subscribers can access 8 additional key insights about TXO’s financial health and growth prospects.

This announcement is based on a press release statement and does not constitute an offer to sell or a solicitation of an offer to buy securities. The offering is subject to market conditions and other factors, and there is no assurance that the offering or the planned acquisition will be completed as described.

Investors are advised that forward-looking statements in the press release are subject to various risks and uncertainties, which could cause actual results to differ materially from those anticipated. These statements include plans for the offering and the acquisition, and are based on current expectations, which may change due to factors such as market conditions, the company’s ability to complete the acquisition, and other risks detailed in the company’s SEC filings. Notably, analyst price targets for TXO range from $20 to $23, suggesting potential upside, though two analysts have recently revised their earnings expectations downward for the upcoming period.

In other recent news, TXO Energy Partners has seen several noteworthy developments. Stifel analysts reinstated coverage of the company with a Buy rating and set a price target of $20 per share, citing the company’s experienced leadership and low debt as positive factors. The firm’s analysis highlighted TXO Energy’s conservative capital expenditure and distribution strategy, which aims to allocate all available cash to unitholders. Additionally, TXO Partners announced a change in its executive leadership, with Bob R. Simpson set to retire as CEO in April 2025. Gary D. Simpson and Brent W. Clum have been promoted to Co-CEOs, bringing extensive experience to their new roles. The company also appointed Lawrence S. Massaro to its Board of Directors, enhancing its governance with his 40 years of energy sector experience. Moreover, TXO Partners granted executive awards under the 2023 Long-Term Incentive Plan to its newly named Co-CEOs. These strategic changes reflect TXO Partners’ ongoing efforts to strengthen its leadership and operations.

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