Earnings Call to be held 7:30 am CT on
Thursday, November 3, 2022
Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or
"TPL") today announced its financial and operating results for the
third quarter of 2022.
Third Quarter 2022 Highlights
- Net income of $129.8 million, or $16.83 per share (basic) and
$16.82 per share (diluted)
- Revenues of $191.1 million
- Adjusted EBITDA(1) of $169.8 million
- Royalty production of 23.4 thousand barrels of oil equivalent
per day
- $32.9 million of common stock repurchases
- Quarterly cash dividend of $3.00 per share paid on September
15, 2022
- At the end of the quarter, TPL's royalty acreage had an
estimated 5.6 net well permits, 6.9 net drilled but uncompleted
wells, 2.9 net completed wells, and 55.0 net producing wells.
- Signed agreement with Samsung Solar Energy 2, LLC to begin
evaluating the siting of grid-connected batteries located on TPL
surface. Samsung Solar Energy 2, LLC is a renewables development
arm of Samsung C&T America, Inc. Preliminary work is underway
on a number of potential locations for the projects, and completed
studies and related pre-development work for the sites will likely
take a year or more.
Nine Months Ended September 30, 2022 Highlights
- Net income of $346.6 million, or $44.84 per share (basic) and
$44.82 per share (diluted)
- Revenues of $514.7 million
- Adjusted EBITDA(1) of $457.9 million
- Royalty production of 21.3 thousand barrels of oil equivalent
per day
- $58.4 million of common stock repurchases
- $224.1 million of total dividends paid during 2022 (comprised
of a $20.00 per share special dividend and $9.00 per share in
regular dividends)
- Published annual update of Environmental, Social and Governance
("ESG") disclosure including metrics for 2021
(1) Reconciliations of Non-GAAP measures are provided in the
tables below.
“TPL continues to perform at a high level as each of our
business segments benefit directly and indirectly from strong
commodity prices and operator development activity in the Permian
Basin,” said Tyler Glover, Chief Executive Officer of the Company.
“In addition, we continue to pursue new and innovative ways to
utilize and monetize our vast surface footprint. As an example, in
September, TPL signed an agreement with Samsung Solar Energy 2, LLC
to begin evaluating the siting of grid-connected batteries located
on TPL surface. These potential battery projects could enhance grid
reliability and encourage further renewables development. TPL is
thrilled that Samsung Solar Energy 2, LLC is looking to develop
these next generation projects on our surface, and we look forward
to collaborating to bring these projects to fruition.”
Financial Results for the Third Quarter of 2022
The Company reported net income of $129.8 million for the third
quarter of 2022, an increase of 54.9% compared to net income of
$83.8 million for the third quarter of 2021.
Our total revenues increased $67.4 million for the third quarter
of 2022 compared to the same period of 2021, largely driven by the
$51.2 million increase in oil and gas royalty revenue and the $8.9
million combined increase in water sales and produced water
royalties. Our share of production was approximately 23.4 thousand
barrels of oil equivalent ("Boe") per day for the third quarter of
2022 compared to 19.5 thousand Boe per day for the same period of
2021. The average realized price was $63.42 per Boe for the third
quarter of 2022, compared to $46.07 per Boe for the comparable
period of 2021. Water sales increased $4.9 million for the third
quarter of 2022 compared to the third quarter of 2021 principally
due to a 10.3% increase in the number of barrels of sourced and
treated water sold. Produced water royalties increased $4.0 million
for the third quarter of 2022 compared to the same period of 2021,
principally due to increased produced water volumes. 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 $29.1 million for the third
quarter of 2022 increased $8.6 million compared to the same period
of 2021. The increase in operating expenses during the third
quarter of 2022 is principally related to increases in ad valorem
taxes, share-based compensation expense, and transfer and treatment
expenses related to the 24.9% increase in water sales revenue over
the comparable period of 2021.
Financial Results for the Nine Months Ended September 30,
2022
The Company reported net income of $346.6 million for the nine
months ended September 30, 2022, an increase of 81.5% compared to
net income of $190.9 million for the nine months ended September
30, 2021.
Our total revenues increased $210.9 million for the nine months
ended September 30, 2022 compared to the same period of 2021,
largely driven by the $168.9 million increase in oil and gas
royalty revenue and the $30.1 million combined increase in water
sales and produced water royalties. Our share of production was
approximately 21.3 thousand Boe per day for the nine months ended
September 30, 2022 compared to 17.5 thousand Boe per day for the
same period of 2021. The average realized price was $63.93 per Boe
for the nine months ended September 30, 2022 compared to $41.01 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 $76.6 million for the nine
months ended September 30, 2022 increased $9.4 million compared to
the same period of 2021. Operating expenses for 2022 increased
principally as a result of the Company recording a $6.9 million
accrual for ad valorem taxes. Additionally, transfer and treatment
expenses have increased as water sales revenue has increased 45.7%
during 2022 compared to 2021. Partially offsetting these increases,
salaries and related employee expenses decreased due to the absence
of severance costs in 2022. Further, we have benefited from our
ongoing investments towards electrifying our water sourcing
infrastructure through the reduction of certain expenses,
principally fuel and equipment rental.
Quarterly Dividend Declared
On November 1, 2022, the Board declared a quarterly cash
dividend of $3.00 per share, payable on December 15, 2022 to
stockholders of record at the close of business on December 8,
2022.
Stock Repurchase Program
On November 1, 2022, our board of directors approved a stock
repurchase program to purchase up to an aggregate of $250 million
of our outstanding common stock to be effective beginning January
1, 2023.
The Company intends to purchase stock under the repurchase
program opportunistically with funds generated by cash from
operations. This repurchase program may be suspended from time to
time, modified, extended or discontinued by the board of directors
at any time. Purchases under the stock repurchase program may be
made through a combination of open market repurchases in compliance
with Rule 10b-18 promulgated under the Securities Exchange Act of
1934, as amended, privately negotiated transactions, and/or other
transactions at the Company’s discretion, including under a Rule
10b5-1 trading plan that may be implemented by the Company, and
will be subject to market conditions, applicable legal requirements
and other factors.
Conference Call and Webcast Information
The Company will hold a conference call on Thursday, November 3,
2022 at 7:30 a.m. Central Time to discuss third 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
1-877-407-4018 or 1-201-689-8471. The telephone replay can be
accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing
the conference ID# 13731406. The telephone replay will be available
starting shortly after the call through November 17, 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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Our share of production volumes(1):
Oil (MBbls)
928
810
2,538
2,139
Natural gas (MMcf)
3,582
3,111
9,773
8,627
NGL (MBbls)
626
469
1,660
1,194
Equivalents (MBoe)
2,151
1,798
5,827
4,771
Equivalents per day (MBoe/d)
23.4
19.5
21.3
17.5
Oil and gas royalty revenue:
Oil royalties
$
83,374
$
52,081
$
239,021
$
128,907
Natural gas royalties
26,362
11,528
60,187
26,400
NGL royalties
20,562
15,489
56,530
31,528
Total oil and gas royalties
$
130,298
$
79,098
$
355,738
$
186,835
Realized prices:
Oil ($/Bbl)
$
94.03
$
67.32
$
98.62
$
63.12
Natural gas ($/Mcf)
$
7.96
$
4.01
$
6.66
$
3.31
NGL ($/Bbl)
$
35.51
$
35.69
$
36.81
$
28.54
Equivalents ($/Boe)
$
63.42
$
46.07
$
63.93
$
41.01
(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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenues:
Oil and gas royalties
$
130,298
$
79,098
$
355,738
$
186,835
Water sales
24,426
19,554
65,518
44,983
Produced water royalties
19,129
15,140
52,668
43,147
Easements and other surface-related
income
14,129
9,832
37,311
27,856
Land sales and other operating revenue
3,129
69
3,481
959
Total revenues
191,111
123,693
514,716
303,780
Expenses:
Salaries and related employee expenses
10,697
8,542
29,670
31,792
Water service-related expenses
6,348
3,650
13,045
10,499
General and administrative expenses
3,153
2,844
9,858
8,491
Legal and professional fees
2,106
1,551
4,988
4,904
Ad valorem taxes
2,835
—
6,856
—
Depreciation, depletion and
amortization
3,917
3,866
12,223
11,562
Total operating expenses
29,056
20,453
76,640
67,248
Operating income
162,055
103,240
438,076
236,532
Other income, net
1,920
513
2,626
924
Income before income taxes
163,975
103,753
440,702
237,456
Income tax expense
34,138
19,916
94,071
46,521
Net income
$
129,837
$
83,837
$
346,631
$
190,935
Net income per share of common stock
Basic
$
16.83
$
10.82
$
44.84
$
24.62
Diluted
$
16.82
$
10.82
$
44.82
$
24.62
Weighted average number of shares of
common stock outstanding
Basic
7,714,796
7,751,329
7,729,866
7,754,439
Diluted
7,720,221
7,751,329
7,733,505
7,754,439
SEGMENT OPERATING
RESULTS
(in thousands) (unaudited)
Three Months Ended September
30,
2022
2021
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
130,298
68
%
$
79,098
64
%
Easements and other surface-related
income
13,788
7
%
7,625
6
%
Land sales and other operating revenue
3,129
2
%
69
—
%
Total land and resource management
revenue
147,215
77
%
86,792
70
%
Water services and operations:
Water sales
24,426
13
%
19,554
16
%
Produced water royalties
19,129
10
%
15,140
12
%
Easements and other surface-related
income
341
—
%
2,207
2
%
Total water services and operations
revenue
43,896
23
%
36,901
30
%
Total consolidated revenues
$
191,111
100
%
$
123,693
100
%
Net income:
Land and resource management
$
108,188
83
%
$
65,292
78
%
Water services and operations
21,649
17
%
18,545
22
%
Total consolidated net income
$
129,837
100
%
$
83,837
100
%
Nine Months Ended September
30,
2022
2021
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
355,738
69
%
$
186,835
62
%
Easements and other surface-related
income
34,728
7
%
24,029
8
%
Land sales and other operating revenue
3,481
1
%
959
—
%
Total land and resource management
revenue
393,947
77
%
211,823
70
%
Water services and operations:
Water sales
65,518
13
%
44,983
15
%
Produced water royalties
52,668
10
%
43,147
14
%
Easements and other surface-related
income
2,583
—
%
3,827
1
%
Total water services and operations
revenue
120,769
23
%
91,957
30
%
Total consolidated revenues
$
514,716
100
%
$
303,780
100
%
Net income:
Land and resource management
$
285,418
82
%
$
150,248
79
%
Water services and operations
61,213
18
%
40,687
21
%
Total consolidated net income
$
346,631
100
%
$
190,935
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 nine months ended
September 30, 2022 and 2021 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net income
$
129,837
$
83,837
$
346,631
$
190,935
Add:
Income tax expense
34,138
19,916
94,071
46,521
Depreciation, depletion and
amortization
3,917
3,866
12,223
11,562
EBITDA
167,892
107,619
452,925
249,018
Add:
Employee share-based compensation
1,910
—
4,989
—
Conversion costs related to our corporate
reorganization
—
—
—
2,026
Severance costs
—
—
—
6,680
Adjusted EBITDA
$
169,802
$
107,619
$
457,914
$
257,724
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Investor Relations IR@TexasPacific.com
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