TPL Texas Pacific Land Corporation

Earnings Call to be held 7:30 am CT on Thursday, August 4, 2022

Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or "TPL") today announced its financial and operating results for the second quarter of 2022.

Second Quarter 2022 Highlights

• Net income of $118.9 million, or $15.37 per share (basic) and $15.37 per share (diluted)

• Revenues of $176.3 million

• Adjusted EBITDA(1) of $158.3 million

• Royalty production of 19.8 thousand barrels of oil equivalent per day

• $25.5 million of common stock repurchases

• At the end of the quarter, TPL's royalty acreage had an estimated 8.7 net well permits, 7.5 net drilled but uncompleted wells, 2.9 net completed wells, and 52.1 net producing wells.

• Published annual update of Environmental, Social and Governance ("ESG") disclosure including metrics for 2021

• Executed new agreements for bitcoin mining with Mawson Infrastructure Group Inc. ("Mawson") and JAI Energy ("JAI") and carbon capture and sequestration studies with Milestone Carbon, LLC ("Milestone Carbon").

Year-to-Date 2022 Highlights

• Net income of $216.8 million, or $28.02 per share (basic) and $28.01 per share (diluted)

• Revenues of $323.6 million

• Adjusted EBITDA(1) of $288.1 million

• Royalty production of 20.3 thousand barrels of oil equivalent per day

• $201.0 million of total dividends paid during 2022 (comprised of a $20.00 per share special dividend and $6.00 per share in regular dividends)

(1) Reconciliations of Non-GAAP measures are provided in the tables below.

“TPL continues to reap the rewards of strong oil and gas prices and supportive Permian Basin activity, with record quarter revenues from oil and gas royalties,” said Tyler Glover, Chief Executive Officer of the Company. “Beyond just oil and gas royalties, the Company’s other major surface-related revenue streams – easements and other surface-related income, water sales, and produced water royalties – all generated significant sequential quarterly revenue growth and contributed meaningful incremental cash flow. In addition, TPL continues to have numerous constructive conversations on a wide array of next-generation opportunities, and we were pleased to share updates on some of that progress during the quarter. We announced new ventures for TPL surface with a new alliance with Mawson and JAI to develop bitcoin mining and an agreement with Milestone Carbon to evaluate potential carbon sequestration. We look forward to advancing these and other projects as we strive to maximize the value of TPL’s unique, expansive surface footprint.”

Financial Results for the Second Quarter of 2022

The Company reported net income of $118.9 million for the second quarter of 2022, an increase of 108.4% compared to net income of $57.0 million for the second quarter of 2021.

Our total revenues increased $80.3 million for the second quarter of 2022 compared to the same period of 2021, largely driven by the $63.1 million increase in oil and gas royalty revenue and the $13.0 million combined increase in water sales and produced water royalties. Our share of production was approximately 19.8 thousand barrels of oil equivalent ("Boe") per day for the second quarter of 2022 compared to 16.4 thousand Boe per day for the same period of 2021. The average realized price was $70.36 per Boe for the second quarter of 2022, compared to $40.83 per Boe for the comparable period of 2021. Water sales increased $9.8 million for the second quarter of 2022 compared to the second quarter of 2021 principally due to a 55.0% increase in the number of barrels of sourced and treated water sold. 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 $24.6 million for the second quarter of 2022 decreased slightly compared to the same period of 2021. Salaries and related employee expenses for the second quarter of 2022 compared to the same period of 2021 decreased approximately $3.7 million as expenses for 2021 included severance costs. Additionally, we are beginning to recognize the benefits of our ongoing investment in electrifying our water sourcing infrastructure through the reduction of certain expenses, principally fuel and equipment rental. Partially offsetting this decrease, the accrual for ad valorem taxes increased $2.0 million for the second quarter of 2022 compared to the same period of 2021.

Financial Results for the Six Months Ended June 30, 2022

The Company reported net income of $216.8 million for the six months ended June 30, 2022, an increase of 102.4% compared to net income of $107.1 million for the six months ended June 30, 2021.

Our total revenues increased $143.5 million for the six months ended June 30, 2022 compared to the same period of 2021, largely driven by the $117.7 million increase in oil and gas royalty revenue and the $21.2 million combined increase in water sales and produced water royalties. Our share of production was approximately 20.3 thousand Boe per day for the six months ended June 30, 2022 compared to 16.4 thousand Boe per day for the same period of 2021. The average realized price was $64.22 per Boe for the six months ended June 30, 2022 compared to $37.94 per Boe for the comparable period of 2021. 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 $47.6 million for the six months ended June 30, 2022 increased $0.8 million compared to the same period of 2021. Operating expenses for 2022 increased principally as a result of the Company recording a $4.0 million accrual for ad valorem taxes and contributing $250,000 to the Permian Basin Area Foundation in support of the initiative to renovate Hogan Park in Midland, Texas. Partially offsetting these increases, salaries and related employee expenses decreased due to the absence of severance costs in 2022. Additionally, we are beginning to recognize the benefits of our ongoing investment in electrifying our water sourcing infrastructure through the reduction of certain expenses, principally fuel and equipment rental.

Update on the Evaluation of the Board Declassification Process

On August 2, 2022, the Board of Directors, after consideration of a recommendation from the Nominating and Corporate Governance Committee, resolved to include a proposal to amend the Company’s charter to declassify the Board of Directors in its proxy materials for the Company's 2022 annual meeting of stockholders.

Quarterly Dividend Declared

On August 2, 2022, the Board declared a quarterly cash dividend of $3.00 per share, payable on September 15, 2022 to stockholders of record at the close of business on September 8, 2022.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, August 4, 2022 at 7:30 a.m. Central Time to discuss second 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 1-800-950-1454 or 1-212-231-2924. The telephone replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing the conference ID# 22019661. The telephone replay will be available starting shortly after the call through August 18, 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 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: the potential future impact 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 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 June 30,

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Our share of production volumes(1):

 

 

 

 

 

 

 

 

Oil (MBbls)

 

 

813

 

 

683

 

 

1,609

 

 

1,328

Natural gas (MMcf)

 

 

2,912

 

 

2,807

 

 

6,191

 

 

5,516

NGL (MBbls)

 

 

507

 

 

342

 

 

1,035

 

 

725

Equivalents (MBoe)

 

 

1,805

 

 

1,493

 

 

3,676

 

 

2,973

Equivalents per day (MBoe/d)

 

 

19.8

 

 

16.4

 

 

20.3

 

 

16.4

 

 

 

 

 

 

 

 

 

Oil and gas royalty revenue:

 

 

 

 

 

 

 

 

Oil royalties

 

$

83,966

 

$

42,577

 

$

155,647

 

$

76,826

Natural gas royalties

 

 

17,650

 

 

7,512

 

 

33,825

 

 

14,872

NGL royalties

 

 

19,652

 

 

8,115

 

 

35,968

 

 

16,039

Total oil and gas royalties

 

$

121,268

 

$

58,204

 

$

225,440

 

$

107,737

 

 

 

 

 

 

 

 

 

Realized prices:

 

 

 

 

 

 

 

 

Oil ($/Bbl)

 

$

108.16

 

$

65.30

 

$

101.27

 

$

60.55

Natural gas ($/Mcf)

 

$

6.55

 

$

2.89

 

$

5.91

 

$

2.91

NGL ($/Bbl)

 

$

41.93

 

$

25.64

 

$

37.59

 

$

23.91

Equivalents ($/Boe)

 

$

70.36

 

$

40.83

 

$

64.22

 

$

37.94

(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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts) (unaudited)

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Revenues:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

121,268

 

$

58,204

 

$

225,440

 

$

107,737

Water sales

 

 

22,272

 

 

12,473

 

 

41,092

 

 

25,429

Produced water royalties

 

 

18,669

 

 

15,458

 

 

33,539

 

 

28,007

Easements and other surface-related income

 

 

13,990

 

 

8,977

 

 

23,182

 

 

18,024

Land sales and other operating revenue

 

 

71

 

 

820

 

 

352

 

 

890

Total revenues

 

 

176,270

 

 

95,932

 

 

323,605

 

 

180,087

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Salaries and related employee expenses

 

 

9,588

 

 

13,271

 

 

18,973

 

 

23,250

Water service-related expenses

 

 

3,915

 

 

3,551

 

 

6,697

 

 

6,849

General and administrative expenses

 

 

3,705

 

 

2,841

 

 

6,705

 

 

5,647

Legal and professional fees

 

 

1,163

 

 

1,141

 

 

2,882

 

 

3,353

Ad valorem taxes

 

 

2,011

 

 

—

 

 

4,021

 

 

—

Depreciation, depletion and amortization

 

 

4,180

 

 

3,858

 

 

8,306

 

 

7,696

Total operating expenses

 

 

24,562

 

 

24,662

 

 

47,584

 

 

46,795

 

 

 

 

 

 

 

 

 

Operating income

 

 

151,708

 

 

71,270

 

 

276,021

 

 

133,292

 

 

 

 

 

 

 

 

 

Other income, net

 

 

630

 

 

406

 

 

706

 

 

411

Income before income taxes

 

 

152,338

 

 

71,676

 

 

276,727

 

 

133,703

Income tax expense

 

 

33,444

 

 

14,630

 

 

59,933

 

 

26,605

Net income

 

$

118,894

 

$

57,046

 

$

216,794

 

$

107,098

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

 

 

 

 

 

 

 

Basic

 

$

15.37

 

$

7.36

 

$

28.02

 

$

13.81

Diluted

 

$

15.37

 

$

7.36

 

$

28.01

 

$

13.81

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding

 

 

 

 

 

 

 

 

Basic

 

 

7,733,730

 

 

7,755,886

 

 

7,737,527

 

 

7,756,020

Diluted

 

 

7,737,112

 

 

7,755,886

 

 

7,739,859

 

 

7,756,020

SEGMENT OPERATING RESULTS

(in thousands) (unaudited)

 

 

 

Three Months Ended June 30,

 

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalty revenue

 

$

121,268

 

68

%

 

$

58,204

 

60

%

Easements and other surface-related income

 

 

12,046

 

7

%

 

 

8,217

 

9

%

Land sales and other operating revenue

 

 

71

 

—

%

 

 

820

 

1

%

Total land and resource management revenue

 

 

133,385

 

75

%

 

 

67,241

 

70

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

22,272

 

13

%

 

 

12,473

 

13

%

Produced water royalties

 

 

18,669

 

11

%

 

 

15,458

 

16

%

Easements and other surface-related income

 

 

1,944

 

1

%

 

 

760

 

1

%

Total water services and operations revenue

 

 

42,885

 

25

%

 

 

28,691

 

30

%

Total consolidated revenues

 

$

176,270

 

100

%

 

$

95,932

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

96,074

 

81

%

 

$

45,443

 

80

%

Water services and operations

 

 

22,820

 

19

%

 

 

11,603

 

20

%

Total consolidated net income

 

$

118,894

 

100

%

 

$

57,046

 

100

%

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalty revenue

 

$

225,440

 

70

%

 

$

107,737

 

60

%

Easements and other surface-related income

 

 

20,940

 

6

%

 

 

16,404

 

9

%

Land sales and other operating revenue

 

 

352

 

—

%

 

 

890

 

—

%

Total land and resource management revenue

 

 

246,732

 

76

%

 

 

125,031

 

69

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

41,092

 

13

%

 

 

25,429

 

14

%

Produced water royalties

 

 

33,539

 

10

%

 

 

28,007

 

16

%

Easements and other surface-related income

 

 

2,242

 

1

%

 

 

1,620

 

1

%

Total water services and operations revenue

 

 

76,873

 

24

%

 

 

55,056

 

31

%

Total consolidated revenues

 

$

323,605

 

100

%

 

$

180,087

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

177,230

 

82

%

 

$

84,956

 

79

%

Water services and operations

 

 

39,564

 

18

%

 

 

22,142

 

21

%

Total consolidated net income

 

$

216,794

 

100

%

 

$

107,098

 

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 the 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: employee share-based compensation, 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 and six months ended June 30, 2022 and 2021 (in thousands):

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Net income

 

$

118,894

 

$

57,046

 

$

216,794

 

$

107,098

Add:

 

 

 

 

 

 

 

 

Income tax expense

 

 

33,444

 

 

14,630

 

 

59,933

 

 

26,605

Depreciation, depletion and amortization

 

 

4,180

 

 

3,858

 

 

8,306

 

 

7,696

EBITDA

 

 

156,518

 

 

75,534

 

 

285,033

 

 

141,399

Add:

 

 

 

 

 

 

 

 

Employee share-based compensation

 

 

1,760

 

 

—

 

 

3,079

 

 

—

Conversion costs related to our corporate reorganization

 

 

—

 

 

53

 

 

—

 

 

2,026

Severance costs

 

 

—

 

 

4,680

 

 

—

 

 

6,680

Adjusted EBITDA

 

$

158,278

 

$

80,267

 

$

288,112

 

$

150,105

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005815/en/

Investor Relations IR@TexasPacific.com