TPL Texas Pacific Land Corporation

Earnings Call to be held 7:30 am CT on Thursday, August 8, 2024

Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or “TPL”) today announced its financial and operating results for the second quarter of 2024.

Second Quarter 2024 Highlights

• Water Service and Operations segment achieved record performance for the following:
  • Water sales revenue of $40.7 million
  • Produced water royalties revenue of $25.3 million
  • Total segment revenues of $68.3 million
  • Total segment net income of $34.5 million
• Announced a target cash and cash equivalents balance of approximately $700 million. Above this targeted level, TPL will seek to deploy the majority of its free cash flow towards share repurchases and dividends. In conjunction with this announcement, the Company declared a special cash dividend of $10.00 per share, which was paid on July 15, 2024
• Consolidated net income of $114.6 million, or $4.98 per share (diluted)
• Consolidated revenues of $172.3 million
• Adjusted EBITDA(1) of $153.2 million
• Free cash flow (1) of $116.0 million
• Royalty production of 24.9 thousand barrels of oil equivalent (“Boe”) per day
• $6.3 million of common stock repurchases
• Quarterly cash dividend of $1.17 per share paid on June 17, 2024
• As of June 30, 2024, TPL’s royalty acreage had an estimated 6.3 net well permits, 9.5 net drilled but uncompleted wells, 4.0 net completed wells, and 73.3 net producing wells. Net producing wells added during the quarter had an average lateral length of approximately 10,366 ft.

Six Months Ended June 30, 2024 Highlights

• The Company announced the development of a new energy-efficient method of produced water desalination and treatment. The Company has successfully conducted a technology pilot and is progressing towards the construction of a larger test facility with an initial capacity of 10,000 barrels of produced water per day.
• Three-for-one stock split effective March 26, 2024
• Consolidated net income of $229.0 million, or $9.95 per share (diluted)
• Consolidated revenues of $346.5 million, including record water segment revenues of $131.0 million
• Adjusted EBITDA(1) of $305.3 million
• Free cash flow (1) of $230.5 million
• Royalty production of 24.9 thousand Boe per day
• $16.6 million of common stock repurchases
• $53.8 million of total cash dividends paid through June 30, 2024

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

“This quarter’s strong results highlight the meaningful contribution derived from investments we have made in the water business since its inception in 2017,” said Tyler Glover, Chief Executive Officer of the Company. “The substantial investment into hiring personnel and developing targeted infrastructure over several years was a pivotal moment in the Company’s history, purposefully positioning TPL to be at the forefront of the Permian Basin’s emergence as a world-class resource. This most recent quarter represents corporate records for each of water sales and produced water royalties revenues, which is a testament to the water segment’s continued success and relevance to TPL overall. The Permian Basin, with its enormous size and excellent resource quality, provides TPL a long growth runway, and we remain focused on extracting maximum value where we can leverage our superb people, technology, and asset footprint.”

Financial Results for the Second Quarter of 2024 - Sequential

The Company reported net income of $114.6 million for the second quarter of 2024 compared to net income of $114.4 million for the first quarter of 2024.

Total revenues for the second quarter of 2024 were $172.3 million compared to $174.1 million for the first quarter of 2024. The slight decrease in revenues is primarily due to a decrease of $4.1 million in easements and other surface-related income and a $2.3 million decrease in oil and gas royalty revenue compared to the first quarter of 2024. While the Company’s share of production was 24.9 thousand Boe per day for the second quarter of 2024 versus 24.8 thousand Boe per day for the first quarter of 2024, the average realized price decreased 3% to $41.44 per Boe in the second quarter of 2024 compared to $42.71 per Boe in the first quarter of 2024. These decreases in revenue were partially offset by increases of $3.5 million in water sales and $2.3 million in produced water royalties over the same period. The growth in water sales is principally due to an increase of 16.5% in water sales volumes for the second quarter of 2024 compared to the first quarter of 2024. Our revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.

Total operating expenses were $39.1 million for the second quarter of 2024 compared to $38.1 million for the first quarter of 2024. The change in operating expenses is principally related to an increase in water service-related expenses over the same time period.

Financial Results for the Second Quarter of 2024 - Year Over Year

Total revenues for the six months ended June 30, 2024 were $346.5 million compared to $307.0 million for the same period of 2023. All revenue streams, except land sales, increased for the six months ended June 30, 2024 with the $18.4 million increase in water sales being the biggest contributor. The growth in water sales is principally due to an increase of 25.5% in water sales volumes. Additionally, oil and gas royalty revenue increased $10.4 million primarily due to higher production volumes for the six months ended June 30, 2024 compared to the same period of 2023. Oil and gas royalty revenue for the six months ended June 30, 2023 included an $8.7 million settlement with an operator with respect to unpaid oil and gas royalties for older production periods. Excluding the impact of the $8.7 million settlement on 2023 revenues, oil and gas royalty revenue for the six months ended June 30, 2024 increased $19.1 million over the six months ended June 30, 2023. The Company’s share of production was 24.9 thousand Boe per day for the six months ended June 30, 2024 versus 22.9 thousand Boe per day for the same period of 2023. The average realized price was $42.07 per Boe for the six months ended June 30, 2024 versus $41.08 per Boe for the same period of 2023. TPL’s revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.

Total operating expenses were $77.2 million for the six months ended June 30, 2024 compared to $81.7 million for the same period of 2023. The change in operating expenses is principally related to a decrease in legal and professional fees for the six months ended June 30, 2024 compared to the same period of 2023, partially offset by higher water service-related expenses due to the 25.5% increase in water sales volumes.

Special Cash Dividend Declared

On June 13, 2024, the Company’s Board of Directors (the “Board”) declared a special cash dividend of $10.00 per share which was paid on July 15, 2024 to stockholders of record at the close of business on July 1, 2024.

Quarterly Dividend Declared

On August 6, 2024, the Company's Board declared a quarterly cash dividend of $1.17 per share, payable on September 17, 2024 to stockholders of record at the close of business on September 3, 2024.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, August 8, 2024 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 1-877-407-4018 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# 13745173. The telephone replay will be available starting shortly after the call through August 22, 2024.

About Texas Pacific Land Corporation

Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 869,000 acres of land, 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 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 Securities and Exchange Commission (“SEC”) through the SEC's 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

(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

2024

 

March 31,

2024

 

June 30,

2024

 

June 30,

2023(2)

Company’s share of production volumes(1):

 

 

 

 

 

 

 

 

Oil (MBbls)

 

 

967

 

 

990

 

 

1,958

 

 

1,792

Natural gas (MMcf)

 

 

3,851

 

 

3,806

 

 

7,658

 

 

7,088

NGL (MBbls)

 

 

661

 

 

633

 

 

1,294

 

 

1,177

Equivalents (MBoe)

 

 

2,270

 

 

2,258

 

 

4,528

 

 

4,151

Equivalents per day (MBoe/d)

 

 

24.9

 

 

24.8

 

 

24.9

 

 

22.9

 

 

 

 

 

 

 

 

 

Oil and gas royalty revenue (in thousands):

 

 

 

 

 

 

 

 

Oil royalties

 

$

74,747

 

$

72,614

 

$

147,361

 

$

127,077

Natural gas royalties

 

 

2,367

 

 

7,062

 

 

9,429

 

 

14,731

NGL royalties

 

 

12,699

 

 

12,444

 

 

25,143

 

 

21,069

Total oil and gas royalties

 

$

89,813

 

$

92,120

 

$

181,933

 

$

162,877

 

 

 

 

 

 

 

 

 

Realized prices (1):

 

 

 

 

 

 

 

 

Oil ($/Bbl)

 

$

80.93

 

$

76.77

 

$

78.82

 

$

74.24

Natural gas ($/Mcf)

 

$

0.66

 

$

2.01

 

$

1.33

 

$

2.25

NGL ($/Bbl)

 

$

20.78

 

$

21.24

 

$

21.00

 

$

19.34

Equivalents ($/Boe)

 

$

41.44

 

$

42.71

 

$

42.07

 

$

41.08

_________________________

(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.

 

 

 

 

(2)

The metrics and dollars provided for the six months ended June 30, 2023 exclude the impact of an $8.7 million settlement with an operator with respect to unpaid oil and gas royalties.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

2024

 

March 31,

2024

 

June 30,

2024

 

June 30,

2023

Revenues:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

89,813

 

$

92,120

 

$

181,933

 

$

171,542

Water sales

 

 

40,650

 

 

37,126

 

 

77,776

 

 

59,377

Produced water royalties

 

 

25,301

 

 

23,006

 

 

48,307

 

 

40,975

Easements and other surface-related income

 

 

16,570

 

 

20,646

 

 

37,216

 

 

33,677

Land sales

 

 

—

 

 

1,244

 

 

1,244

 

 

1,400

Total revenues

 

 

172,334

 

 

174,142

 

 

346,476

 

 

306,971

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Salaries and related employee expenses

 

 

12,771

 

 

12,461

 

 

25,232

 

 

21,189

Water service-related expenses

 

 

14,824

 

 

10,212

 

 

25,036

 

 

15,943

General and administrative expenses

 

 

3,673

 

 

4,924

 

 

8,597

 

 

6,879

Legal and professional fees

 

 

2,307

 

 

4,057

 

 

6,364

 

 

26,782

Ad valorem and other taxes

 

 

1,444

 

 

2,357

 

 

3,801

 

 

3,644

Land sales expenses

 

 

—

 

 

250

 

 

250

 

 

5

Depreciation, depletion and amortization

 

 

4,093

 

 

3,840

 

 

7,933

 

 

7,297

Total operating expenses

 

 

39,112

 

 

38,101

 

 

77,213

 

 

81,739

 

 

 

 

 

 

 

 

 

Operating income

 

 

133,222

 

 

136,041

 

 

269,263

 

 

225,232

 

 

 

 

 

 

 

 

 

Other income, net

 

 

13,220

 

 

9,943

 

 

23,163

 

 

12,260

Income before income taxes

 

 

146,442

 

 

145,984

 

 

292,426

 

 

237,492

Income tax expense

 

 

31,853

 

 

31,567

 

 

63,420

 

 

50,531

Net income

 

$

114,589

 

$

114,417

 

$

229,006

 

$

186,961

 

 

 

 

 

 

 

 

 

Net income per share of common stock (1)

 

 

 

 

 

 

 

 

Basic

 

$

4.99

 

$

4.97

 

$

9.96

 

$

8.10

Diluted

 

$

4.98

 

$

4.97

 

$

9.95

 

$

8.10

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding (1)

 

 

 

 

 

 

 

 

Basic

 

 

22,987,971

 

 

23,003,001

 

 

22,995,486

 

 

23,068,056

Diluted

 

 

23,013,793

 

 

23,020,249

 

 

23,018,313

 

 

23,083,643

_________________________

(1)

 

All share and share price amounts reflect the three-for-one stock split effected on March 26, 2024.

 

SEGMENT OPERATING RESULTS

(dollars in thousands) (unaudited)

 

 

 

Three Months Ended

 

 

June 30,

2024

 

March 31,

2024

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

89,813

 

52

%

 

$

92,120

 

53

%

Easements and other surface-related income

 

 

14,219

 

8

%

 

 

18,121

 

10

%

Land sales

 

 

—

 

—

%

 

 

1,244

 

1

%

Total land and resource management revenue

 

 

104,032

 

60

%

 

 

111,485

 

64

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

40,650

 

24

%

 

 

37,126

 

21

%

Produced water royalties

 

 

25,301

 

15

%

 

 

23,006

 

13

%

Easements and other surface-related income

 

 

2,351

 

1

%

 

 

2,525

 

2

%

Total water services and operations revenue

 

 

68,302

 

40

%

 

 

62,657

 

36

%

Total consolidated revenues

 

$

172,334

 

100

%

 

$

174,142

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

80,129

 

70

%

 

$

80,971

 

71

%

Water services and operations

 

 

34,460

 

30

%

 

 

33,446

 

29

%

Total consolidated net income

 

$

114,589

 

100

%

 

$

114,417

 

100

%

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

2024

 

June 30,

2023

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

181,933

 

53

%

 

$

171,542

 

56

%

Easements and other surface-related income

 

 

32,340

 

9

%

 

 

32,401

 

11

%

Land sales

 

 

1,244

 

—

%

 

 

1,400

 

—

%

Total land and resource management revenue

 

 

215,517

 

62

%

 

 

205,343

 

67

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

77,776

 

22

%

 

 

59,377

 

20

%

Produced water royalties

 

 

48,307

 

14

%

 

 

40,975

 

13

%

Easements and other surface-related income

 

 

4,876

 

2

%

 

 

1,276

 

—

%

Total water services and operations revenue

 

 

130,959

 

38

%

 

 

101,628

 

33

%

Total consolidated revenues

 

$

346,476

 

100

%

 

$

306,971

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

161,100

 

70

%

 

$

134,976

 

72

%

Water services and operations

 

 

67,906

 

30

%

 

 

51,985

 

28

%

Total consolidated net income

 

$

229,006

 

100

%

 

$

186,961

 

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 performance 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, Adjusted EBITDA and Free Cash Flow

EBITDA is a non-GAAP financial measurement of earnings before interest expense, 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 plus employee share-based compensation. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and other non-recurring or unusual items, if applicable. We calculate Free Cash Flow as Adjusted EBITDA less current income tax expense and capital expenditures. Its purpose is to provide an additional measure of operating performance. We have presented EBITDA, Adjusted EBITDA and Free Cash Flow because we believe that these metrics are useful supplements to net income in analyzing the Company’s operating performance. Our definitions of Adjusted EBITDA and Free Cash Flow may differ from computations of similarly titled measures of other companies.

The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and Free Cash Flow for the three months ended June 30, 2024 and March 31, 2024 and for the six months ended June 30, 2024 and June 30, 2023 (in thousands):

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

2024

 

March 31,

2024

 

June 30,

2024

 

June 30,

2023

Net income

 

$

114,589

 

 

$

114,417

 

 

$

229,006

 

 

$

186,961

 

Add:

 

 

 

 

 

 

 

 

Income tax expense

 

 

31,853

 

 

 

31,567

 

 

 

63,420

 

 

 

50,531

 

Depreciation, depletion and amortization

 

 

4,093

 

 

 

3,840

 

 

 

7,933

 

 

 

7,297

 

EBITDA

 

 

150,535

 

 

 

149,824

 

 

 

300,359

 

 

 

244,789

 

Add:

 

 

 

 

 

 

 

 

Employee share-based compensation

 

 

2,700

 

 

 

2,220

 

 

 

4,920

 

 

 

4,715

 

Adjusted EBITDA

 

 

153,235

 

 

 

152,044

 

 

 

305,279

 

 

 

249,504

 

Less:

 

 

 

 

 

 

 

 

Current income tax expense

 

 

(30,766

)

 

 

(31,898

)

 

 

(62,664

)

 

 

(51,204

)

Capital expenditures

 

 

(6,499

)

 

 

(5,662

)

 

 

(12,161

)

 

 

(5,144

)

Free Cash Flow

 

$

115,970

 

 

$

114,484

 

 

$

230,454

 

 

$

193,156

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807669797/en/

Investor Relations IR@TexasPacific.com