TPL Texas Pacific Land Corporation

Earnings Call to be held 7:30 am CT on Thursday, August 3, 2023

Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or "TPL") today announced its financial and operating results for the second quarter of 2023.

Second Quarter 2023 Highlights

• Net income of $100.4 million, or $13.06 per share (basic) and $13.05 per share (diluted)

• Revenues of $160.6 million

• Adjusted EBITDA(1) of $133.6 million

• Free cash flow (1) of $105.1 million

• Royalty production of 24.9 thousand barrels of oil equivalent per day

• $19.5 million of common stock repurchases

• Quarterly cash dividend of $3.25 per share paid on June 15, 2023

• As of June 30, 2023, TPL's royalty acreage had an estimated 4.9 net well permits, 8.2 net drilled but uncompleted wells, 2.3 net completed wells, and 62.6 net producing wells.

Six Months Ended June 30, 2023 Highlights

• Net income of $187.0 million, or $24.31 per share (basic) and $24.30 per share (diluted)

• Revenues of $307.0 million

• Adjusted EBITDA(1) of $249.5 million

• Free Cash Flow(1) of $193.2 million

• Royalty production of 22.9 thousand barrels of oil equivalent per day

• $26.2 million of common stock repurchases

• $50.0 million of total cash dividends paid during 2023 (comprised of $6.50 per share in regular dividends)

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

“For the second quarter of 2023, TPL achieved new records across a number of key metrics,” said Tyler Glover, Chief Executive Officer of the Company. “Oil and gas royalty production, source water revenues and volumes, and produced water royalties all set new Company quarterly records. Easements and surface-related income continued a strong year generating its largest quarterly revenue since 2019. Although commodity prices were lower this quarter on a sequential quarter basis, our other revenue streams outside of oil and gas royalties attained impressive growth. With continued strong operator activity levels across our Permian royalty and surface acreage, TPL is well-positioned to capture these growing opportunities and to extract maximum value from our unique and expansive asset base.”

Financial Results for the Second Quarter of 2023

The Company reported net income of $100.4 million for the second quarter of 2023 compared to net income of $118.9 million for the second quarter of 2022.

Total revenues for the second quarter of 2023 were $160.6 million compared to $176.3 million for the second quarter of 2022. Oil and gas royalty revenue decreased $38.9 million due to lower average commodity prices in the second quarter of 2023 compared to the second quarter of 2022. The average realized price declined 45.9% to $38.04 per barrel of oil equivalent (“Boe”) in the second quarter of 2023 from $70.36 per Boe in the second quarter of 2022. Our share of production increased to 24.9 thousand Boe per day for the second quarter of 2023 from 19.8 thousand Boe per day for the same period of 2022. The decrease in oil and gas royalty revenue was partially offset by a combined increase of $17.5 million in water sales and produced water royalties and an increase of $4.7 million in easements and other surface-related income. 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 $40.3 million for the second quarter of 2023 increased $15.8 million compared to the same period of 2022. The increase in operating expenses is principally related to increases in legal and professional fees and water service-related expenses during the second quarter of 2023 compared to the same period of 2022.

Financial Results for the Six Months Ended June 30, 2023

The Company reported net income of $187.0 million for the six months ended June 30, 2023, a decrease of 13.8% compared to net income of $216.8 million for the six months ended June 30, 2022.

Our total revenues decreased $16.6 million for the six months ended June 30, 2023 compared to the same period of 2022. Oil and gas royalty revenue of $171.5 million for the six months ended June 30, 2023 include approximately $8.7 million related to an ongoing arbitration between TPL and an operator with respect to underpayment of oil and gas royalties resulting from improper deductions of post-production costs for periods before and through April 2022 (the “$8.7 Million Stipulation”). Excluding the impact of the $8.7 Million Stipulation, oil and gas royalty revenue decreased $62.6 million compared to the same period of 2022. Our share of production was approximately 22.9 thousand Boe per day for the six months ended June 30, 2023 compared to 20.3 thousand Boe per day for the same period of 2022. The average realized price was $41.08 per Boe for the six months ended June 30, 2023 compared to $64.22 per Boe for the same period of 2022. The decrease in oil and gas royalty revenue was partially offset by an $18.3 million increase in water sales and a $7.4 million increase in produced water royalties. 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 $81.7 million for the six months ended June 30, 2023 increased $34.2 million compared to the same period of 2022. The increase in operating expenses is principally related to increases in legal and professional fees and water service-related expenses during the six months ended June 30, 2023 compared to the same period of 2022.

Quarterly Dividend Declared

On August 1, 2023, the Board declared a quarterly cash dividend of $3.25 per share, payable on September 15, 2023 to stockholders of record at the close of business on September 1, 2023.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, August 3, 2023 at 7:30 a.m. Central Time to discuss second quarter 2023 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# 10180419. The telephone replay will be available starting shortly after the call through August 17, 2023.

About Texas Pacific Land Corporation

Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 886,000 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 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

(unaudited)

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Our share of production volumes(1) (2):

 

 

 

 

 

 

 

 

Oil (MBbls)

 

1,000

 

813

 

1,792

 

1,609

Natural gas (MMcf)

 

3,782

 

2,912

 

7,088

 

6,191

NGL (MBbls)

 

638

 

507

 

1,177

 

1,035

Equivalents (MBoe)

 

2,269

 

1,805

 

4,151

 

3,676

Equivalents per day (MBoe/d)

 

24.9

 

19.8

 

22.9

 

20.3

 

 

 

 

 

 

 

 

 

Oil and gas royalties (in thousands) (2):

 

 

 

 

 

 

 

 

Oil royalties

 

$ 70,183

 

$ 83,966

 

$ 127,077

 

$ 155,647

Natural gas royalties

 

3,775

 

17,650

 

14,731

 

33,825

NGL royalties

 

8,454

 

19,652

 

21,069

 

35,968

Total oil and gas royalties

 

$ 82,412

 

$ 121,268

 

$ 162,877

 

$ 225,440

 

 

 

 

 

 

 

 

 

Realized prices (2):

 

 

 

 

 

 

 

 

Oil ($/Bbl)

 

$ 73.46

 

$ 108.16

 

$ 74.24

 

$ 101.27

Natural gas ($/Mcf)

 

$ 1.08

 

$ 6.55

 

$ 2.25

 

$ 5.91

NGL ($/Bbl)

 

$ 14.33

 

$ 41.93

 

$ 19.34

 

$ 37.59

Equivalents ($/Boe)

 

$ 38.04

 

$ 70.36

 

$ 41.08

 

$ 64.22

(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 provided exclude the impact of the $8.7 Million Stipulation discussed above.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$ 82,412

 

$ 121,268

 

$ 171,542

 

$ 225,440

Water sales

 

37,648

 

22,272

 

59,377

 

41,092

Produced water royalties

 

20,841

 

18,669

 

40,975

 

33,539

Easements and other surface-related income

 

18,708

 

13,990

 

33,677

 

23,182

Land sales and other operating revenue

 

1,000

 

71

 

1,400

 

352

Total revenues

 

160,609

 

176,270

 

306,971

 

323,605

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Salaries and related employee expenses

 

10,596

 

9,588

 

21,189

 

18,973

Water service-related expenses

 

10,287

 

3,915

 

15,943

 

6,697

General and administrative expenses

 

3,329

 

3,674

 

6,884

 

6,641

Legal and professional fees

 

10,154

 

1,163

 

26,782

 

2,882

Ad valorem and other taxes

 

2,070

 

2,042

 

3,644

 

4,085

Depreciation, depletion and amortization

 

3,893

 

4,180

 

7,297

 

8,306

Total operating expenses

 

40,329

 

24,562

 

81,739

 

47,584

 

 

 

 

 

 

 

 

 

Operating income

 

120,280

 

151,708

 

225,232

 

276,021

 

 

 

 

 

 

 

 

 

Other income, net

 

6,871

 

630

 

12,260

 

706

Income before income taxes

 

127,151

 

152,338

 

237,492

 

276,727

Income tax expense

 

26,758

 

33,444

 

50,531

 

59,933

Net income

 

$ 100,393

 

$ 118,894

 

$ 186,961

 

$ 216,794

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

 

 

 

 

 

 

 

Basic

 

$ 13.06

 

$ 15.37

 

$ 24.31

 

$ 28.02

Diluted

 

$ 13.05

 

$ 15.37

 

$ 24.30

 

$ 28.01

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding

 

 

 

 

 

 

 

 

Basic

 

7,685,662

 

7,733,730

 

7,689,352

 

7,737,527

Diluted

 

7,690,950

 

7,737,112

 

7,694,548

 

7,739,859

 

SEGMENT OPERATING RESULTS

(dollars in thousands) (unaudited)

 

 

 

Three Months Ended

June 30,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$ 82,412

 

51 %

 

$ 121,268

 

68 %

Easements and other surface-related income

 

17,908

 

11 %

 

12,046

 

7 %

Land sales and other operating revenue

 

1,000

 

1 %

 

71

 

— %

Total land and resource management revenue

 

101,320

 

63 %

 

133,385

 

75 %

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

37,648

 

24 %

 

22,272

 

13 %

Produced water royalties

 

20,841

 

13 %

 

18,669

 

11 %

Easements and other surface-related income

 

800

 

— %

 

1,944

 

1 %

Total water services and operations revenue

 

59,289

 

37 %

 

42,885

 

25 %

Total consolidated revenues

 

$ 160,609

 

100 %

 

$ 176,270

 

100 %

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$ 69,633

 

69 %

 

$ 96,074

 

81 %

Water services and operations

 

30,760

 

31 %

 

22,820

 

19 %

Total consolidated net income

 

$ 100,393

 

100 %

 

$ 118,894

 

100 %

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

June 30,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$ 171,542

 

56 %

 

$ 225,440

 

70 %

Easements and other surface-related income

 

32,401

 

11 %

 

20,940

 

6 %

Land sales and other operating revenue

 

1,400

 

— %

 

352

 

— %

Total land and resource management revenue

 

205,343

 

67 %

 

246,732

 

76 %

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

59,377

 

20 %

 

41,092

 

13 %

Produced water royalties

 

40,975

 

13 %

 

33,539

 

10 %

Easements and other surface-related income

 

1,276

 

— %

 

2,242

 

1 %

Total water services and operations revenue

 

101,628

 

33 %

 

76,873

 

24 %

Total consolidated revenues

 

$ 306,971

 

100 %

 

$ 323,605

 

100 %

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$ 134,976

 

72 %

 

$ 177,230

 

82 %

Water services and operations

 

51,985

 

28 %

 

39,564

 

18 %

Total consolidated net income

 

$ 186,961

 

100 %

 

$ 216,794

 

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, 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 employee share-based compensation. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and/or other non-recurring or unusual items. 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 and six months ended June 30, 2023 and 2022 (in thousands):

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2023

 

2022

 

2023

 

2022

 Net income

 

$      100,393

 

$      118,894

 

$      186,961

 

$      216,794

 Add:

 

 

 

 

 

 

 

 

Income tax expense

 

          26,758

 

          33,444

 

          50,531

 

          59,933

Depreciation, depletion and amortization

 

            3,893

 

            4,180

 

            7,297

 

            8,306

 EBITDA

 

        131,044

 

        156,518

 

        244,789

 

        285,033

 Add:

 

 

 

 

 

 

 

 

Employee share-based compensation

 

            2,559

 

            1,760

 

            4,715

 

            3,079

Adjusted EBITDA

 

        133,603

 

        158,278

 

        249,504

 

        288,112

Less:

 

 

 

 

 

 

 

 

Current income tax expense

 

        (27,125)

 

        (33,992)

 

        (51,204)

 

        (60,887)

Capital expenditures

 

          (1,371)

 

          (7,342)

 

          (5,144)

 

        (10,347)

Free Cash Flow

 

$      105,107

 

$      116,944

 

$      193,156

 

$      216,878

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230802054652/en/

Investor Relations IR@TexasPacific.com