TPL Texas Pacific Land Corporation

Earnings Call to be held 7:30 am CT on Thursday, November 2, 2023

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

Third Quarter 2023 Highlights

• Net income of $105.6 million, or $13.74 per share (diluted)

• Revenues of $158.0 million

• Adjusted EBITDA(1) of $141.0 million

• Free cash flow (1) of $106.1 million

• Royalty production of 21.8 thousand barrels of oil equivalent per day

• $5.9 million of common stock repurchases

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

• As of September 30, 2023, TPL's royalty acreage had an estimated 6.7 net well permits, 7.9 net drilled but uncompleted wells, 5.2 net completed wells, and 62.8 net producing wells.

Nine Months Ended September 30, 2023 Highlights

• Net income of $292.5 million, or $38.04 per share (diluted)

• Revenues of $464.9 million

• Adjusted EBITDA(1) of $390.5 million

• Free Cash Flow(1) of $299.2 million

• Royalty production of 22.6 thousand barrels of oil equivalent per day

• $32.2 million of common stock repurchases

• $75.0 million of total cash dividends paid during 2023 (comprised of $9.75 per share in regular dividends)

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

“With improving oil and gas prices and continued performance across our surface and water assets, third quarter 2023 represents another period of strong free cash flow generation,” said Tyler Glover, Chief Executive Officer of the Company. “Although recent oil and gas production volumes may have been impacted by reports of infrastructure challenges over the summer and turned-to-sales timing from greater co-completion developments, our outlook remains robust for Permian development. For this most recent quarter, new permit and new spud activity increased materially from the prior sequential quarter. With a strong well inventory backlog, over 50 rigs operating on TPL royalty acreage, and a supportive commodity price backdrop in the current environment, we continue to believe that underlying fundamentals reinforce a very positive trajectory for TPL’s business.”

Financial Results for the Third Quarter of 2023

The Company reported net income of $105.6 million for the third quarter of 2023 compared to net income of $129.8 million for the third quarter of 2022.

Total revenues for the third quarter of 2023 were $158.0 million compared to $191.1 million for the third quarter of 2022. Oil and gas royalty revenue decreased $43.2 million due to lower average commodity prices and lower production volumes in the third quarter of 2023 compared to the third quarter of 2022. The average realized price was $45.41 per barrel of oil equivalent (“Boe”) in the third quarter of 2023 versus $63.42 per Boe in the third quarter of 2022. The Company's share of production was 21.8 thousand Boe per day for the third quarter of 2023 versus 23.4 thousand Boe per day for the same period of 2022. The decrease in oil and gas royalty revenue was partially offset by an increase of $4.1 million in easements and other surface-related income and a combined increase of $3.7 million in water sales and produced water royalties. TPL's 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.

Total operating expenses of $31.0 million for the third quarter of 2023 increased $2.0 million compared to the same period of 2022. The change in operating expenses is principally related to an increase in water service-related expenses resulting from increased water sales activity during the third quarter of 2023 compared to the same period of 2022.

Financial Results for the Nine Months Ended September 30, 2023

The Company reported net income of $292.5 million for the nine months ended September 30, 2023, a decrease of 15.6% compared to net income of $346.6 million for the nine months ended September 30, 2022.

Total revenues decreased $49.8 million for the nine months ended September 30, 2023 compared to the same period of 2022. Oil and gas royalty revenue of $258.6 million for the nine months ended September 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 by the operator 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 $105.8 million compared to the same period of 2022. The Company's share of production was approximately 22.6 thousand Boe per day for the nine months ended September 30, 2023 versus 21.3 thousand Boe per day for the same period of 2022. The average realized price was $42.49 per Boe for the nine months ended September 30, 2023 versus $63.93 per Boe for the same period of 2022. The decrease in oil and gas royalty revenue was partially offset by a combined increase of $29.4 million in water sales and produced water royalties and an increase of $14.6 million in easements and other surface-related income. TPL's 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.

Total operating expenses of $112.7 million for the nine months ended September 30, 2023 increased $36.1 million compared to the same period of 2022. The change in operating expenses is principally related to increases in legal and professional fees and water service-related expenses during the nine months ended September 30, 2023 compared to the same period of 2022.

Quarterly Dividend Declared

On October 31, 2023, the Board declared a quarterly cash dividend of $3.25 per share, payable on December 15, 2023 to stockholders of record at the close of business on December 1, 2023.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, November 2, 2023 at 7:30 a.m. Central Time to discuss third 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 1-877-407-4018 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# 13741100. The telephone replay will be available starting shortly after the call through November 16, 2023.

About Texas Pacific Land Corporation

Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 868,000 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 September 30,

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

2023

 

2022

Company's share of production volumes(1) (2):

 

 

 

 

 

 

 

 

Oil (MBbls)

 

850

 

928

 

2,642

 

2,538

Natural gas (MMcf)

 

3,316

 

3,582

 

10,405

 

9,773

NGL (MBbls)

 

606

 

626

 

1,784

 

1,660

Equivalents (MBoe)

 

2,009

 

2,151

 

6,160

 

5,827

Equivalents per day (MBoe/d)

 

21.8

 

23.4

 

22.6

 

21.3

 

 

 

 

 

 

 

 

 

Oil and gas royalty revenue (in thousands) (2):

 

 

 

 

 

 

 

 

Oil royalties

 

$ 66,892

 

$ 83,374

 

$ 193,969

 

$ 239,021

Natural gas royalties

 

8,479

 

26,362

 

23,210

 

60,187

NGL royalties

 

11,731

 

20,562

 

32,800

 

56,530

Total oil and gas royalties

 

$ 87,102

 

$ 130,298

 

$ 249,979

 

$ 355,738

 

 

 

 

 

 

 

 

 

Realized prices (2):

 

 

 

 

 

 

 

 

Oil ($/Bbl)

 

$ 82.45

 

$ 94.03

 

$ 76.88

 

$ 98.62

Natural gas ($/Mcf)

 

$ 2.76

 

$ 7.96

 

$ 2.41

 

$ 6.66

NGL ($/Bbl)

 

$ 20.91

 

$ 35.51

 

$ 19.88

 

$ 36.81

Equivalents ($/Boe)

 

$ 45.41

 

$ 63.42

 

$ 42.49

 

$ 63.93

(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 September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Revenues:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

87,102

 

$

130,298

 

$

258,644

 

$

355,738

Water sales

 

 

26,422

 

 

24,426

 

 

85,799

 

 

65,518

Produced water royalties

 

 

20,849

 

 

19,129

 

 

61,824

 

 

52,668

Easements and other surface-related income

 

 

18,188

 

 

14,129

 

 

51,865

 

 

37,311

Land sales and other operating revenue

 

 

5,406

 

 

3,129

 

 

6,806

 

 

3,481

Total revenues

 

 

157,967

 

 

191,111

 

 

464,938

 

 

514,716

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Salaries and related employee expenses

 

 

11,499

 

 

10,697

 

 

32,688

 

 

29,670

Water service-related expenses

 

 

8,553

 

 

6,348

 

 

24,496

 

 

13,045

General and administrative expenses

 

 

3,903

 

 

3,120

 

 

10,787

 

 

9,761

Legal and professional fees

 

 

1,689

 

 

2,106

 

 

28,471

 

 

4,988

Ad valorem and other taxes

 

 

1,781

 

 

2,868

 

 

5,425

 

 

6,953

Depreciation, depletion and amortization

 

 

3,584

 

 

3,917

 

 

10,881

 

 

12,223

Total operating expenses

 

 

31,009

 

 

29,056

 

 

112,748

 

 

76,640

 

 

 

 

 

 

 

 

 

Operating income

 

 

126,958

 

 

162,055

 

 

352,190

 

 

438,076

 

 

 

 

 

 

 

 

 

Other income, net

 

 

7,979

 

 

1,920

 

 

20,239

 

 

2,626

Income before income taxes

 

 

134,937

 

 

163,975

 

 

372,429

 

 

440,702

Income tax expense

 

 

29,363

 

 

34,138

 

 

79,894

 

 

94,071

Net income

 

$

105,574

 

$

129,837

 

$

292,535

 

$

346,631

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

 

 

 

 

 

 

 

Basic

 

$

13.75

 

$

16.83

 

$

38.07

 

$

44.84

Diluted

 

$

13.74

 

$

16.82

 

$

38.04

 

$

44.82

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding

 

 

 

 

 

 

 

 

Basic

 

 

7,675,521

 

 

7,714,796

 

 

7,684,691

 

 

7,729,866

Diluted

 

 

7,681,774

 

 

7,720,221

 

 

7,690,985

 

 

7,733,505

 

SEGMENT OPERATING RESULTS

(dollars in thousands) (unaudited)

 

 

 

Three Months Ended September 30,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

87,102

 

56

%

 

$

130,298

 

68

%

Easements and other surface-related income

 

 

17,425

 

11

%

 

 

13,788

 

7

%

Land sales and other operating revenue

 

 

5,406

 

3

%

 

 

3,129

 

2

%

Total land and resource management revenue

 

 

109,933

 

70

%

 

 

147,215

 

77

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

26,422

 

17

%

 

 

24,426

 

13

%

Produced water royalties

 

 

20,849

 

13

%

 

 

19,129

 

10

%

Easements and other surface-related income

 

 

763

 

—

%

 

 

341

 

—

%

Total water services and operations revenue

 

 

48,034

 

30

%

 

 

43,896

 

23

%

Total consolidated revenues

 

$

157,967

 

100

%

 

$

191,111

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

82,884

 

79

%

 

$

108,188

 

83

%

Water services and operations

 

 

22,690

 

21

%

 

 

21,649

 

17

%

Total consolidated net income

 

$

105,574

 

100

%

 

$

129,837

 

100

%

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

258,644

 

56

%

 

$

355,738

 

69

%

Easements and other surface-related income

 

 

49,826

 

11

%

 

 

34,728

 

7

%

Land sales and other operating revenue

 

 

6,806

 

1

%

 

 

3,481

 

1

%

Total land and resource management revenue

 

 

315,276

 

68

%

 

 

393,947

 

77

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

85,799

 

19

%

 

 

65,518

 

13

%

Produced water royalties

 

 

61,824

 

13

%

 

 

52,668

 

10

%

Easements and other surface-related income

 

 

2,039

 

—

%

 

 

2,583

 

—

%

Total water services and operations revenue

 

 

149,662

 

32

%

 

 

120,769

 

23

%

Total consolidated revenues

 

$

464,938

 

100

%

 

$

514,716

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

217,860

 

74

%

 

$

285,418

 

82

%

Water services and operations

 

 

74,675

 

26

%

 

 

61,213

 

18

%

Total consolidated net income

 

$

292,535

 

100

%

 

$

346,631

 

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 nine months ended September 30, 2023 and 2022 (in thousands):

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

 

$

105,574

 

 

$

129,837

 

 

$

292,535

 

 

$

346,631

 

Add:

 

 

 

 

 

 

 

 

Income tax expense

 

 

29,363

 

 

 

34,138

 

 

 

79,894

 

 

 

94,071

 

Depreciation, depletion and amortization

 

 

3,584

 

 

 

3,917

 

 

 

10,881

 

 

 

12,223

 

EBITDA

 

 

138,521

 

 

 

167,892

 

 

 

383,310

 

 

 

452,925

 

Add:

 

 

 

 

 

 

 

 

Employee share-based compensation

 

 

2,502

 

 

 

1,910

 

 

 

7,217

 

 

 

4,989

 

Adjusted EBITDA

 

 

141,023

 

 

 

169,802

 

 

 

390,527

 

 

 

457,914

 

Less:

 

 

 

 

 

 

 

 

Current income tax expense

 

 

(29,724

)

 

 

(34,024

)

 

 

(80,928

)

 

 

(94,911

)

Capital expenditures

 

 

(5,243

)

 

 

(1,808

)

 

 

(10,387

)

 

 

(12,155

)

Free Cash Flow

 

$

106,056

 

 

$

133,970

 

 

$

299,212

 

 

$

350,848

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231101325534/en/

Investor Relations IR@TexasPacific.com