Earnings Call to be held 7:30 am CT on
Thursday, February 24, 2022
Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or
"TPL") today announced its financial and operating results for the
fourth quarter and full year of 2021.
Fourth Quarter 2021 Highlights
- Net income of $79.0 million, or $10.21 per share (both basic
and diluted)
- Revenues of $147.2 million
- Adjusted EBITDA(1) of $130.3 million
- Royalty production of 22.0 thousand barrels of oil equivalent
per day
- Quarterly cash dividend of $2.75 per share paid on December 15,
2021
Full Year 2021 Highlights
- Net income of $270.0 million, or $34.83 per share (both basic
and diluted)
- Revenues of $451.0 million
- Adjusted EBITDA(1) of $388.0 million
- Royalty production of 18.6 thousand barrels of oil equivalent
per day
- Total cash dividends of $11.00 per share paid during 2021
- Completed corporate reorganization from a business trust to a
Delaware corporation effective January 11, 2021 (the “Corporate
Reorganization”)
- Released inaugural Environmental, Social and Governance ("ESG")
disclosure
(1) Reconciliations of Non-GAAP measures are provided in the
tables below.
“We produced strong operating results across our vertically
integrated business as the positive momentum from the prior quarter
continued into the fourth quarter of 2021,” said Tyler Glover,
Chief Executive Officer of the Company. “For the fourth quarter of
2021, TPL achieved record consolidated adjusted EBITDA and royalty
production amid robust activity levels on our royalty acreage and
supportive commodity prices. In addition, our source water sales
had another strong quarter, with revenues now approaching
pre-pandemic levels. The consistency of our performance throughout
commodity cycles reflects the quality of our underlying assets, the
benefits of our active management approach, and the advantages of a
vertically integrated business model. Looking forward to 2022, as
the US domestic energy industry continues to advance and with
recent oil prices at levels we have not seen in almost a decade,
TPL is well positioned to capture value across multiple
high-margin, high-quality revenue streams.”
Financial Results for the Fourth Quarter of 2021
The Company reported net income of $79.0 million for the fourth
quarter of 2021, an increase of 76.5% compared to net income of
$44.8 million for the fourth quarter of 2020.
Our total revenues increased $72.9 million for the fourth
quarter of 2021 compared to the same period of 2020, largely driven
by the $56.3 million increase in oil and gas royalty revenue. Our
share of production was approximately 22.0 thousand barrels of oil
equivalent ("Boe") per day for the fourth quarter of 2021 compared
to 17.0 thousand Boe per day for the same period of 2020. The
average realized price was $51.53 per Boe for the fourth quarter of
2021, compared to $29.09 per Boe for the comparable period of 2020.
Water sales increased $15.4 million for the fourth quarter of 2021
compared to the fourth quarter of 2020 principally due to a 21%
increase in the number of barrels of sourced and treated water.
Additionally, the fourth quarter of 2020 had been impacted by an
approximately $7.0 million deferral of water sales revenue related
to take or pay contracts. Our revenue streams are directly impacted
by development and operating decisions in the Permian Basin made by
our customers and by commodity prices, among other factors.
Our total operating expenses of $21.3 million for the fourth
quarter of 2021 increased $2.2 million compared to the same period
of 2020. The increase is principally due to a $3.3 million increase
in salaries and related employee benefits. Additionally, income tax
expense for the fourth quarter of 2021 includes a $19.4 million
out-of-period tax adjustment related to incorrect tax treatment of
depletion related to our oil and gas royalty interests in
historical annual prior periods and current year quarterly
periods.
Financial Results for the Year Ended December 31,
2021
The Company reported net income of $270.0 million for the year
ended December 31, 2021, an increase of 53.4% compared to net
income of $176.0 million for the year ended December 31, 2020.
Our total revenues increased $148.4 million for the year ended
December 31, 2021 compared to the same period of 2020, largely
driven by the $148.5 million increase in oil and gas royalty
revenue. Our share of production was approximately 18.6 thousand
Boe per day for the year ended December 31, 2021 compared to 16.2
thousand Boe per day for the same period of 2020. The average
realized price was $44.14 per Boe for the year ended December 31,
2021 compared to $24.29 per Boe for the comparable period of 2020.
Our revenue streams are directly impacted by commodity prices and
development and operating decisions made by our customers and vary
as the pace of development and oil demand varies.
Our total operating expenses of $88.6 million for the year ended
December 31, 2021 increased 3.8% compared to the same period of
2020. The increase was principally due to increased salaries and
related employee expenses which, for the year ended December 31,
2021, included $6.7 million of expense related to severance costs.
Additionally, general and administrative expenses increased $2.0
million related to increased board of director fees resulting from
our Corporate Reorganization in January 2021. These increases were
partially offset by a $4.0 million decrease in land sales expenses
and a $3.5 million decrease in legal and professional fees as the
Corporate Reorganization was completed in January 2021.
Total income tax expense was $93.0 million and $43.6 million for
the years ended December 31, 2021 and 2020, respectively. Income
tax expense for the year ended December 31, 2021 includes an out of
period tax adjustment of $19.4 million recorded during the fourth
quarter of 2021 to current income tax expense and income taxes
payable, $13.0 million of which related to historical annual
periods and $6.4 million of which related to current year quarterly
periods.
COVID-19 Pandemic and Global Oil Market Impact in
2021
The uncertainty caused by the global spread of COVID-19
commencing in 2020, among other factors, led to a significant
reduction in global oil demand and prices. These events generally
led to production curtailments and capital investment reductions by
the operators of the oil and gas wells to which the Company’s
royalty interests relate. This slowdown in well development has
negatively affected the Company’s business and operations.
Production and activity curtailments were generally most pronounced
in 2020 as many nations around the world implemented economic and
social interventions in response to COVID-19. Development activity
in the Permian Basin was likewise reduced, and our operations were
commensurately negatively impacted. In 2021, oil market
fundamentals improved as economic and social interventions subsided
in some nations and as Organization of the Petroleum Exporting
Countries (“OPEC”) and Russia (collectively referred to as “OPEC+”)
enacted and maintained oil supply cuts. With current oil, natural
gas, and NGL prices higher than the comparable period in 2020,
development activities in the Permian Basin have rebounded from the
lows in 2020 and producer activity has increased, albeit at a pace
still below pre-pandemic levels. Development activity on our
royalty and surface acreage likewise significantly improved in 2021
compared to the prior year. More recently, development activity has
also been impacted by shortages in labor and certain equipment as
well as escalating costs. While labor and resource shortages and
rising costs have not directly impacted us thus far, these
shortages and rising costs could potentially impact our future
operating activity. Future production and development activity will
continue to be influenced by changes in commodity prices and by the
evolving economic and health impact of COVID-19. However, COVID-19
continues to impact certain regions domestically and globally, and
any additional containment measures, now or in the future, could
impede a recovery. Although our revenues are directly and
indirectly impacted by changes in oil prices, we believe our
royalty interests (which require no capital expenditures or
operating expense burden from us for well development), strong
balance sheet, and liquidity position will help us navigate through
potential oil price volatility.
In 2020, we implemented certain cost reduction measures to
manage costs with an initial focus on negotiating price reductions
and discounts with certain vendors and reducing our usage of
independent contract service providers. In 2021, we continued to
identify additional cost reduction opportunities. As part of our
longer-term water business strategy, we have invested in
electrifying our water sourcing infrastructure. The use of
electricity instead of fuel-powered generators to source and
transport water is anticipated to further reduce our dependence on
fuel, equipment rentals, and repairs and maintenance. Additionally,
our investment in automation has allowed us to curtail our reliance
on independent contract service providers to support our field
operations.
Our business model and disciplined approach to capital resource
allocation have helped us maintain our strong financial position
while navigating the uncertainty of the current environment.
Further, we continue to prioritize maintaining a safe and healthy
work environment for our employees. Our information technology
infrastructure allowed our corporate employees to transition to a
remote work environment starting in March 2020 and we were able to
deploy additional safety and sanitation measures for our field
employees. As vaccination rates in the United States have risen, we
have taken a phased-in approach to returning employees to the
office and continue to monitor guidance provided by the Centers for
Disease Control and Prevention as new information becomes
available. We continue to provide safety and sanitation measures
for all employees and maintain communication with employees
regarding any concerns they may have during the transition.
Quarterly Dividend Declared
On February 11, 2022, our board of directors declared a
quarterly cash dividend of $3.00 per share payable on March 15,
2022 to stockholders of record at the close of business on March 8,
2022.
Stock Repurchase Program
The Company repurchased $8.7 million and $19.9 million of shares
of our common stock during the three months and year ended December
31, 2021, respectively.
Conference Call and Webcast Information
The Company will hold a conference call on Thursday, February
24, 2022 at 7:30 a.m. Central Time to discuss fourth quarter
results. A live webcast of the conference call will be available on
the Investors section of the Company’s website at
http://www.TexasPacific.com. To listen to the live broadcast, go to
the site at least 15 minutes prior to the scheduled start time in
order to register and install any necessary audio software.
The conference call can also be accessed by dialing
1-844-826-3035 or 1-412-317-5195. The telephone replay can be
accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing
the conference ID# 10163813. The telephone replay will be available
starting shortly after the call through March 10, 2022.
About Texas Pacific Land Corporation
Texas Pacific Land Corporation is one of the largest landowners
in the State of Texas with approximately 880,000 acres of land in
West Texas, with the majority of its ownership concentrated in the
Permian Basin. The Company is not an oil and gas producer, but its
surface and royalty ownership provide revenue opportunities
throughout the life cycle of a well. These revenue opportunities
include fixed fee payments for use of our land, revenue for sales
of materials (caliche) used in the construction of infrastructure,
providing sourced water and/or treated produced water, revenue from
our oil and gas royalty interests, and revenues related to
saltwater disposal on our land. The Company also generates revenue
from pipeline, power line and utility easements, commercial leases
and seismic and temporary permits related to a variety of land uses
including midstream infrastructure projects and hydrocarbon
processing facilities.
Visit TPL at http://www.TexasPacific.com.
Cautionary Statement Regarding Forward-Looking
Statements
This news release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on TPL’s beliefs, as well as assumptions
made by, and information currently available to, TPL, and therefore
involve risks and uncertainties that are difficult to predict.
Generally, future or conditional verbs such as “will,” “would,”
“should,” “could,” or “may” and the words “believe,” “anticipate,”
“continue,” “intend,” “expect” and similar expressions identify
forward-looking statements. Forward-looking statements include, but
are not limited to, references to strategies, plans, objectives,
expectations, intentions, assumptions, future operations and
prospects and other statements that are not historical facts. You
should not place undue reliance on forward-looking statements.
Although TPL believes that plans, intentions and expectations
reflected in or suggested by any forward-looking statements made
herein are reasonable, TPL may be unable to achieve such plans,
intentions or expectations and actual results, and performance or
achievements may vary materially and adversely from those envisaged
in this news release due to a number of factors including, but not
limited to: an inability to achieve some or all of the expected
benefits of the Corporate Reorganization; potential adverse
reactions or changes to business relationships resulting from the
completion of the Corporate Reorganization; the potential impacts
of COVID-19 on the global and U.S. economies as well as on TPL’s
financial condition and business operations; the initiation or
outcome of potential litigation; and any changes in general
economic and/or industry specific conditions. These risks, as well
as other risks associated with TPL and the Corporate Reorganization
are also more fully discussed in our Annual Report on Form 10-K and
our Quarterly Reports on Form 10-Q. You can access TPL’s filings
with the SEC through the SEC website at http://www.sec.gov and TPL
strongly encourages you to do so. Except as required by applicable
law, TPL undertakes no obligation to update any forward-looking
statements or other statements herein for revisions or changes
after this communication is made.
FINANCIAL AND OPERATIONAL RESULTS
(dollars in thousands) (unaudited)
Three Months Ended
December 31,
Years Ended
December 31,
2021
2020
2021
2020
Our share of production volumes(1):
Oil (MBbls)
938
697
3,076
2,778
Natural gas (MMcf)
3,455
2,660
12,082
9,643
NGL (MBbls)
511
419
1,705
1,561
Equivalents (MBoe)
2,024
1,559
6,795
5,946
Equivalents per day (MBoe/d)
22.0
17.0
18.6
16.2
Oil and gas royalty revenue:
Oil royalties
$
66,803
$
32,312
$
195,710
$
109,106
Natural gas royalties
14,564
4,293
40,964
11,097
NGL royalties
18,266
6,712
49,794
17,745
Total oil and gas royalties
$
99,633
$
43,317
$
286,468
$
137,948
Realized prices:
Oil ($/Bbl)
$
74.60
$
48.56
$
66.62
$
41.13
Natural gas ($/Mcf)
$
4.56
$
1.74
$
3.67
$
1.24
NGL ($/Bbl)
$
38.64
$
17.30
$
31.56
$
12.29
Equivalents ($/Boe)
$
51.53
$
29.09
$
44.14
$
24.29
(1)
Term
Definition
Bbl
One stock tank barrel of 42 U.S. gallons
liquid volume used herein in reference to crude oil, condensate or
NGLs.
MBbls
One thousand barrels of crude oil,
condensate or NGLs.
MBoe
One thousand Boe.
MBoe/d
One thousand Boe per day.
Mcf
One thousand cubic feet of natural
gas.
MMcf
One million cubic feet of natural gas.
NGL
Natural gas liquids. Hydrocarbons found in
natural gas that may be extracted as liquefied petroleum gas and
natural gasoline.
REPORT OF OPERATIONS (in thousands,
except share and per share amounts) (unaudited)
Three Months Ended
December 31,
Years Ended
December 31,
2021
2020
2021
2020
Revenues:
Oil and gas royalties
$
99,633
$
43,317
$
286,468
$
137,948
Water sales
22,783
7,337
67,766
54,862
Produced water royalties
14,934
12,777
58,081
50,640
Easements and other surface-related
income
9,760
9,291
37,616
41,398
Land sales and other operating revenue
68
1,582
1,027
17,716
Total revenues
147,178
74,304
450,958
302,564
Expenses:
Salaries and related employee expenses
8,220
4,938
40,012
32,173
Water service-related expenses
2,734
3,028
13,233
14,233
General and administrative expenses
3,291
2,461
11,782
9,751
Legal and professional fees
2,377
3,823
7,281
10,778
Land sales expenses
—
1,200
—
3,973
Depreciation, depletion and
amortization
4,695
3,622
16,257
14,395
Total operating expenses
21,317
19,072
88,565
85,303
Operating income
125,861
55,232
362,393
217,261
Other income, net
(300
)
105
624
2,401
Income before income taxes
125,561
55,337
363,017
219,662
Income tax expense
46,516
10,546
93,037
43,613
Net income
$
79,045
$
44,791
$
269,980
$
176,049
Net income per share
Basic
$
10.21
$
5.77
$
34.83
$
22.70
Diluted
$
10.21
$
5.77
$
34.83
$
22.70
Weighted average number of shares
outstanding
Basic
7,744,868
7,756,156
7,752,027
7,756,156
Diluted
7,744,977
7,756,156
7,752,054
7,756,156
SEGMENT OPERATING RESULTS (in thousands)
(unaudited)
Three Months Ended December
31,
2021
2020
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
99,633
68
%
$
43,317
58
%
Easements and other surface-related
income
8,863
6
%
8,092
11
%
Land sales and other operating revenue
68
—
%
1,582
2
%
Total land and resource management
revenue
108,564
74
%
52,991
71
%
Water services and operations:
Water sales
22,783
15
%
7,337
10
%
Produced water royalties
14,934
10
%
12,777
17
%
Easements and other surface-related
income
897
1
%
1,199
2
%
Total water services and operations
revenue
38,614
26
%
21,313
29
%
Total consolidated revenues
$
147,178
100
%
$
74,304
100
%
Net income:
Land and resource management
$
58,649
74
%
$
35,780
80
%
Water services and operations
20,396
26
%
9,011
20
%
Total consolidated net income
$
79,045
100
%
$
44,791
100
%
Years Ended December
31,
2021
2020
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
286,468
64
%
$
137,948
46
%
Easements and other surface-related
income
32,892
7
%
39,478
13
%
Land sales and other operating revenue
1,027
—
%
17,716
6
%
Total land and resource management
revenue
320,387
71
%
195,142
65
%
Water services and operations:
Water sales
67,766
15
%
54,862
18
%
Produced water royalties
58,081
13
%
50,640
16
%
Easements and other surface-related
income
4,724
1
%
1,920
1
%
Total water services and operations
revenue
130,571
29
%
107,422
35
%
Total consolidated revenues
$
450,958
100
%
$
302,564
100
%
Net income:
Land and resource management
$
208,897
77
%
$
127,977
73
%
Water services and operations
61,083
23
%
48,072
27
%
Total consolidated net income
$
269,980
100
%
$
176,049
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 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 and Adjusted 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 calculate Adjusted EBITDA as
EBITDA excluding the impact of certain non-cash, non-recurring
and/or unusual, non-operating items, including, but not limited to:
proxy and conversion costs related to our Corporate Reorganization
and severance costs. We have presented EBITDA and Adjusted EBITDA
because we believe that both are useful supplements to net income
in analyzing operating performance.
The following table presents a reconciliation of net income to
EBITDA and Adjusted EBITDA for the three months and years ended
December 31, 2021 and 2020 (in thousands):
Three Months Ended
December 31,
Years Ended
December 31,
2021
2020
2021
2020
Net income
$
79,045
$
44,791
$
269,980
$
176,049
Add:
Income tax expense
46,516
10,546
93,037
43,613
Depreciation, depletion and
amortization
4,695
3,622
16,257
14,395
EBITDA
130,256
58,959
379,274
234,057
Add:
Corporate Reorganization & conversion
committee costs
—
2,219
2,026
5,050
Severance costs
—
—
6,680
—
Adjusted EBITDA
$
130,256
$
61,178
$
387,980
$
239,107
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Investor Relations IR@TexasPacific.com
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