Texas Pacific Land Trust (NYSE: TPL) (the “Trust”) today
announced financial and operating results for the third quarter
ended September 30, 2020.
Results for the third quarter of 2020:
- Net income of $46.3 million, or $5.97 per Sub-share
Certificate, for the third quarter ended September 30, 2020
compared with $60.0 million, or $7.74 per Sub-share Certificate,
for the third quarter ended September 30, 2019.
- Revenues of $74.4 million for the third quarter ended September
30, 2020, compared with $98.5 million for the third quarter ended
September 30, 2019.
- Decreases of 17.0% in oil and gas royalty revenue, 44.2% in
easements and other surface-related income and 43.9% in water sales
and royalty revenue for the third quarter ended September 30, 2020
compared with the third quarter ended September 30, 2019.
- EBITDA of $61.8 million for the third quarter ended September
30, 2020, compared with $77.4 million for the third quarter ended
September 30, 2019.
Results for the nine months ended September 30, 2020:
- Net income of $131.3 million, or $16.92 per Sub-share
Certificate, for the nine months ended September 30, 2020 compared
with $249.6 million (which included a $100 million land sale), or
$32.18 per Sub-share Certificate, for the nine months ended
September 30, 2019.
- Revenues of $228.3 million for the nine months ended September
30, 2020, compared with $377.2 million for the nine months ended
September 30, 2019 (which included a $100 million land sale).
- Decreases of 14.8% in oil and gas royalty revenue, 20.2% in
easements and other surface-related income and 27.0% in water sales
and royalty revenue for the nine months ended September 30, 2020
compared with the nine months ended September 30, 2019.
- EBITDA of $175.1 million for the nine months ended September
30, 2020, compared with $318.5 million for the nine months ended
September 30, 2019 (which included a $100 million land sale).
“While our third quarter results have improved over the second
quarter of 2020, uncertainty in the current environment remains and
continues to present challenges for the oil and gas industry,” said
Tyler Glover, Chief Executive Officer of the Trust. “However, we
remain confident that the Trust is financially and operationally
well-equipped to continue navigating these challenges and are
committed to maintaining our track record of capital discipline and
optimal liquidity while ensuring the health and safety of our
employees.”
Further details for the third quarter of 2020:
The Trust reported net income of $46.3 million for the third
quarter ended September 30, 2020, a decrease of 22.9% compared to
net income of $60.0 million for the third quarter ended September
30, 2019.
Oil and gas royalty revenue was $31.8 million for the third
quarter ended September 30, 2020, compared with $38.3 million for
the third quarter ended September 30, 2019, a decrease of 17.0%.
Prices received for crude oil production decreased 31.9% while
crude oil production subject to the Trust’s royalty interests
increased 7.3% for the third quarter ended September 30, 2020
compared to the same period of 2019. Prices received for gas
production increased 61.0% while gas production subject to the
Trust’s royalty interests decreased 2.5% for the third quarter
ended September 30, 2020 compared to the same period of 2019.
Easements and other surface-related income was $18.9 million for
the third quarter ended September 30, 2020, a decrease of 44.2%
compared with the third quarter ended September 30, 2019 when
easements and other surface-related income was $33.9 million. The
decrease in easements and other surface-related income was largely
driven by decreases of $10.0 million in pipeline easement income
and $2.0 million in permit income for the third quarter ended
September 30, 2020 compared to the same period of 2019.
Water sales and royalty revenue was $12.1 million for the third
quarter ended September 30, 2020, a decrease of 43.9% compared with
the third quarter ended September 30, 2019 when water sales and
royalty revenue was $21.7 million. This decrease was principally
due to a 27.6% decrease in the number of barrels of sourced and
treated water sold and a $0.8 million decrease in water royalties
in the third quarter of 2020 compared to the same period of
2019.
The Trust recognized land sales revenue of $11.5 million for the
third quarter ended September 30, 2020 and $4.6 million for the
comparable period of 2019.
Further details for the nine months ended September 30,
2020:
The Trust reported net income of $131.3 million for the nine
months ended September 30, 2020, a decrease of 47.4% compared to
net income of $249.6 million for the nine months ended September
30, 2019, which included a $100 million land sale. Excluding the
impact of the 2019 land sale (net of income tax), net income for
the nine months ended September 30, 2019 was $170.6 million.
Oil and gas royalty revenue was $94.6 million for the nine
months ended September 30, 2020, compared with $111.1 million for
the nine months ended September 30, 2019, a decrease of 14.8%.
Prices received for crude oil and gas production decreased 23.8%
and 9.0%, respectively, in the nine months ended September 30, 2020
compared to the same period of 2019. The decrease in prices
received was partially offset by increased crude oil and gas
production subject to the Trust’s royalty interests, which
increased 9.3% and 16.4%, respectively, in the nine months ended
September 30, 2020 compared to the same period of 2019.
Easements and other surface-related income was $70.0 million for
the nine months ended September 30, 2020, a decrease of 20.2%
compared with the nine months ended September 30, 2019 when
easements and other surface-related income was $87.6 million. The
decrease in easements and other surface-related income was largely
driven by a decrease of $19.6 million in pipeline easement income
partially offset by an increase of $5.7 million in commercial lease
revenue (largely due to an increase in saltwater disposal
royalties) for the nine months ended September 30, 2020 compared to
the same period of 2019.
Water sales and royalty revenue was $47.5 million for the nine
months ended September 30, 2020, a decrease of 27.0% compared with
the nine months ended September 30, 2019 when water sales and
royalty revenue was $65.1 million. This decrease was principally
due to a 10.5% decrease in the number of barrels of sourced and
treated water sold and a $5.8 million decrease in water royalties
for the nine months ended September 30, 2020 compared to the same
period in 2019.
The Trust recognized land sales revenue of $15.9 million for the
nine months ended September 30, 2020 and $113.0 million for the
comparable period of 2019. Land sales revenue for the nine months
ended September 30, 2019, included a $100 million land sale
consummated in January 2019.
COVID-19 Pandemic and Market Conditions Update
The uncertainty surrounding the severity and duration of the
COVID-19 pandemic, as well as dramatic declines in crude oil prices
due in part to the global spread of COVID-19, has caused volatility
in the global financial markets including the oil and gas industry.
Significant mitigation measures, such as shelter-in place orders,
travel bans and business restrictions, among other things,
established to reduce the global, national and local spread of
COVID-19, have further affected the supply and demand for crude
oil. While uncertainty remains around COVID-19 mitigation measures
and re-opening efforts, we believe demand is beginning to
recover.
These events have negatively affected, and are expected to
continue to negatively affect, the Trust’s business and results of
operations. Should additional oil and gas wells be shut in,
production continue to be curtailed or the owners and operators of
the oil and gas wells to which the Trust’s royalty interests relate
continue to decrease investment in response to lower commodity
prices and conservation of capital, we would expect the Trust’s
royalty income and demand for our water services to remain at the
reduced levels that the Trust has experienced during the second and
third quarters of 2020 and may decline further.
Given the dynamic nature of these events, we cannot reasonably
estimate the period of time that the COVID-19 pandemic and related
market conditions will persist, or the extent of the impact they
will have on the Trust’s business or results of operations and
financial condition.
Conversion of the Trust
As previously announced on March 23, 2020, our Trustees approved
a plan to reorganize the Trust from its current structure to a
corporation formed under the laws of the State of Delaware. We
continue to progress towards the conversion. On June 15, 2020, the
Trust announced the new corporation will be named Texas Pacific
Land Corporation (“TPL Corp”) and the persons selected to serve as
directors on the Board of Directors of TPL Corp. Additionally, a
draft registration statement on Form 10 has been submitted to the
Securities and Exchange Commission for review, on a non-public
basis. The Trust continues to make progress toward effecting its
planned corporate reorganization into a Delaware corporation and,
currently anticipates to be in a position to move forward with the
reorganization by the end of the fourth quarter of 2020.
About Texas Pacific Land Trust
Texas Pacific Land Trust is one of the largest landowners in the
State of Texas with approximately 880,000 acres of land in West
Texas. The Trust was organized under a Declaration of Trust to
receive and hold title to extensive tracts of land in the State of
Texas, previously the property of the Texas and Pacific Railway
Company, and to issue transferable Certificates of Proprietary
Interest pro rata to the holders of certain debt securities of the
Texas and Pacific Railway Company. Texas Pacific Land Trust’s
trustees are empowered under the Declaration of Trust to manage the
lands with all the powers of an absolute owner. Texas Pacific Land
Trust is not a REIT.
Forward-Looking Statements
This news release may contain forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements regarding the Trust’s
future operations and prospects, the severity and duration of the
COVID-19 pandemic and related economic repercussions, the markets
for real estate in the areas in which the Trust owns real estate,
applicable zoning regulations, the markets for oil and gas, the
proposed reorganization of the Trust into a corporation, production
limits on prorated oil and gas wells authorized by the Railroad
Commission of Texas, expected competition, management’s intent,
beliefs or current expectations with respect to the Trust’s future
financial performance and other matters. We assume no
responsibility to update any such forward-looking statements.
REPORT OF OPERATIONS
(in thousands, except share and
per share amounts) (unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Revenues:
Oil and gas royalties
$
31,758
$
38,259
$
94,631
$
111,113
Easements and other surface-related
income
18,936
33,911
69,970
87,635
Water sales and royalties
12,139
21,654
47,525
65,067
Land sales
11,463
4,621
15,855
113,020
Other operating revenue
87
85
269
329
Total revenues
74,383
98,530
228,250
377,164
Expenses:
Salaries and related employee expenses
7,678
8,537
27,235
22,742
Water service-related expenses
2,260
5,122
11,205
15,423
General and administrative expenses
1,883
2,864
7,290
6,877
Legal and professional fees
1,987
5,558
6,955
15,198
Land sales expenses
67
—
2,773
225
Depreciation, depletion and
amortization
3,760
2,631
10,773
5,286
Total operating expenses
17,635
24,712
66,231
65,751
Operating income
56,748
73,818
162,019
311,413
Other income, net
1,287
941
2,306
1,771
Income before income taxes
58,035
74,759
164,325
313,184
Income tax expense (benefit):
Current
11,146
9,918
33,153
43,485
Deferred
614
4,819
(86
)
20,093
Total income tax expense
11,760
14,737
33,067
63,578
Net income
$
46,275
$
60,022
$
131,258
$
249,606
Net income per Sub-share Certificate -
basic and diluted
$
5.97
$
7.74
$
16.92
$
32.18
Weighted average number of Sub-share
Certificates outstanding
7,756,156
7,756,156
7,756,156
7,756,643
SEGMENT OPERATING
RESULTS
(in thousands) (unaudited)
Three Months Ended
September 30,
2020
2019
Revenues:
Land and resource management:
Oil and gas royalties
$
31,758
43
%
$
38,259
39
%
Easements and other surface-related
income
6,588
9
%
22,111
22
%
Land sales and other operating revenue
11,550
15
%
4,706
5
%
49,896
67
%
65,076
66
%
Water services and operations:
Water sales and royalties
12,139
16
%
21,654
22
%
Easements and other surface-related
income
12,348
17
%
11,800
12
%
24,487
33
%
33,454
34
%
Total consolidated revenues
$
74,383
100
%
$
98,530
100
%
Net income:
Land and resource management
$
34,359
74
%
$
43,911
73
%
Water services and operations
11,916
26
%
16,111
27
%
Total consolidated net income
$
46,275
100
%
$
60,022
100
%
Nine Months Ended
September 30,
2020
2019
Revenues:
Land and resource management:
Oil and gas royalties
$
94,631
41
%
$
111,113
29
%
Easements and other surface-related
income
31,385
14
%
59,761
16
%
Land sales and other operating revenue
16,124
7
%
113,349
30
%
142,140
62
%
284,223
75
%
Water services and operations:
Water sales and royalties
47,525
21
%
65,067
17
%
Easements and other surface-related
income
38,585
17
%
27,874
8
%
86,110
38
%
92,941
25
%
Total consolidated revenues
$
228,250
100
%
$
377,164
100
%
Net income:
Land and resource management
$
92,197
70
%
$
204,222
82
%
Water services and operations
39,061
30
%
45,384
18
%
Total consolidated net income
$
131,258
100
%
$
249,606
100
%
NON-GAAP PERFORMANCE MEASURES AND DEFINITIONS
In addition to amounts presented in accordance with generally
accepted accounting principles in the United States of America
(“GAAP”), we also present certain supplemental non-GAAP
measurements. These measurements are not to be considered more
relevant or accurate than the measurements presented in accordance
with GAAP. In compliance with requirements of the Securities and
Exchange Commission (“SEC”), our non-GAAP measurements are
reconciled to net income, the most directly comparable GAAP
performance measure. For all non-GAAP measurements, neither the SEC
nor any other regulatory body has passed judgment on these non-GAAP
measurements.
EBITDA
EBITDA is a non-GAAP financial measurement of earnings before
interest, taxes, depreciation, depletion and amortization. Its
purpose is to highlight earnings without finance, taxes, and
depreciation, depletion and amortization expense, and its use is
limited to specialized analysis. We have presented EBITDA because
we believe that it is a useful supplement to net income as an
indicator of operating performance.
The following table presents a reconciliation of net income to
EBITDA for the three and nine months ended September 30, 2020 and
2019 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net income
$
46,275
$
60,022
$
131,258
$
249,606
Add:
Income tax expense
11,760
14,737
33,067
63,578
Depreciation, depletion and
amortization
3,760
2,631
10,773
5,286
EBITDA
$
61,795
$
77,390
$
175,098
$
318,470
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201102005882/en/
Chris Steddum Vice President, Finance and Investor Relations
(214) 969-5530
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