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Texas Pacific Land Corporation Announces First Quarter Results and Record Water Segment Revenues
First Quarter 2024 Highlights
The Company announces today 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 Net income of $114.4 million, or $4.97 per share (diluted) Revenues of $174.1 million, including record water segment revenues of $62.7 million Adjusted EBITDA(1) of $152.0 million Free cash flow (1) of $114.5 million Royalty production of 24.8 thousand barrels of oil equivalent ("Boe") per day $10.3 million of common stock repurchases Quarterly cash dividend of $1.17 per share paid on March 15, 2024 as adjusted for the three-for-one stock split As of March 31, 2024, TPL's royalty acreage had an estimated 5.1 net well permits, 10.3 net drilled but uncompleted wells, 2.2 net completed wells, and 70.2 net producing wells. Net producing wells added during the quarter had an average lateral length of approximately 9,529 ft.
(1) Reconciliations of Non-GAAP measures are provided in the tables below.
"Driven by the continued strength of our surface-derived cash flows, our first quarter 2024 results are a great start to the year," said Tyler Glover, Chief Executive Officer of the Company. "Water Sales, Produced Water Royalties, and Easements and Other Surface-Related Income each generated significant sequential quarter-over-quarter revenue growth, with their aggregate revenue contribution increasing 19% during the period. Each of these revenue streams is derived from the efforts of our dedicated team of employees who have worked diligently to take our ownership of raw surface acreage and commercialize it into sizable cash flows. Activity in the Permian remains robust, and TPL is well-positioned to capture revenues from supportive fundamentals across multiple elements of oil and gas development. We continue to make strategic investments in people, technology, and assets as we seek to extract maximum value from our legacy asset base while also exploiting unique opportunities where we have considerable advantages.
"We are also excited to announce today our progress with developing innovative solutions for produced water in the Permian Basin. Over the last few years, we have been working with a leading industrial technology and manufacturing firm to develop an energy-efficient desalination and treatment process and associated equipment that can recycle produced water into fresh water with quality standards appropriate for surface discharge and beneficial reuse. With the Permian generating approximately 18 million barrels of produced water per day, this technology would provide an attractive and critical alternative to subsurface injection. TPL has successfully tested a pilot program in our research and development lab, and we are now working towards the next phase of constructing a facility with an initial capacity of 10,000 barrels of water per day. TPL filed an application patent for the desalination and treatment process and has secured exclusive use-rights for the equipment towards produced water applications. We are also in commercial discussions with blue-chip oil and gas upstream operators as we look to provide critical, technology driven solutions while also optimizing TPL's economic interests and limiting capital expense. In addition, TPL continues to make significant progress with beneficial reuse initiatives."
Financial Results for the First Quarter of 2024 - Sequential
The Company reported net income of $114.4 million for the first quarter of 2024 compared to net income of $113.1 million for the fourth quarter of 2023.
Total revenues for the first quarter of 2024 were $174.1 million compared to $166.7 million for the fourth quarter of 2023. The increase in revenue was principally due to an increase of $10.7 million in water sales. The growth in water sales is principally due to an increase of 31.3% in water sales volumes for the first quarter of 2024 compared to the fourth quarter of 2023. Oil and gas royalty revenue decreased $6.6 million principally due to lower production volumes in the first quarter of 2024 compared to the fourth quarter of 2023. The Company's share of production was 24.8 thousand Boe per day for the first quarter of 2024 versus 26.3 thousand Boe per day for the fourth quarter of 2023. The average realized price was $42.71 per Boe in the first quarter of 2024 versus $42.81 per Boe in the fourth quarter 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 $38.1 million for the first quarter of 2024 compared to $32.8 million for the fourth quarter of 2023. The change in operating expenses is principally related to an increase in salaries and related employee expenses resulting from regular annual market compensation adjustments for employees and higher water service-related expenses related to the growth in water sales.
Financial Results for the First Quarter of 2024 - Year Over Year
Total revenues for the first quarter of 2024 were $174.1 million compared to $146.4 million for the first quarter of 2023. All revenue streams increased year over year with the $15.4 million increase in water sales being the biggest contributor. The growth in water sales is principally due to an increase of 51.3% in water sales volumes. Oil and gas royalty revenue increased $3.0 million due to higher production volumes in the first quarter of 2024 compared to the first quarter of 2023. Oil and gas royalty revenue for the first quarter of 2023 included an $8.7 million settlement with an operator with respect to unpaid oil and gas royalties for older production periods. Excluding the $8.7 million settlement, oil and gas royalties increased $11.7 million principally due to higher production volumes in the first quarter of 2024. The Company's share of production was 24.8 thousand Boe per day for the first quarter of 2024 versus 20.9 thousand Boe per day for the first quarter of 2023. The average realized price was $42.71 per Boe in the first quarter of 2024 versus $44.76 per Boe in the first quarter 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 $38.1 million for the first quarter of 2024 compared to $41.4 million for the first quarter of 2023. The change in operating expenses is principally related to a decrease in legal and professional fees during the first quarter of 2024 compared to the first quarter of 2023, partially offset by higher water service-related expenses due to the 51.3% increase in water sales volumes.
Quarterly Dividend Declared
On May 6, 2024, the Company's Board of Directors (the "Board") declared a quarterly cash dividend of $1.17 per share, payable on June 17, 2024 to stockholders of record at the close of business on June 3, 2024.
Board of Directors Formalize Strategic Acquisition Committee
On May 6, 2024, the Board formalized the Strategic Acquisitions Committee as a standing committee of the Board and has appointed the following Board members to serve on the committee: Karl F. Kurz (Chair), Murray Stahl, Robert Roosa and Barbara J. Duganier.
Conference Call and Webcast Information
The Company will hold a conference call on Thursday, May 9, 2024 at 7:30 a.m. Central Time to discuss first 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# 13745172. The telephone replay will be available starting shortly after the call through May 23, 2024.
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 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
----------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
2024 2023 2023(2)
------------------------------ ------------------------------ ------------------------------
Company's share of production volumes(1):
990 1,059 792
Oil (MBbls)
3,806 4,124 3,306
Natural gas (MMcf)
633 669 539
NGL (MBbls)
-------------------- ---------- -------------------- ---------- -------------------- ----------
2,258 2,416 1,882
Equivalents (MBoe)
24.8 26.3 20.9
Equivalents per day (MBoe/d)
Oil and gas royalty revenue (in thousands):
$ 72,614 $ 79,335 $ 56,894
Oil royalties
7,062 6,705 10,956
Natural gas royalties
12,444 12,710 12,615
NGL royalties
-------------------- ---------- -------------------- ---------- -------------------- ----------
$ 92,120 $ 98,750 $ 80,465
Total oil and gas royalties
==================== ========== ==================== ========== ==================== ==========
Realized prices (1):
$ 76.77 $ 78.46 $ 75.23
Oil ($/Bbl)
$ 2.01 $ 1.76 $ 3.58
Natural gas ($/Mcf)
$ 21.24 $ 20.53 $ 25.28
NGL ($/Bbl)
(1) Term Term Definition
-------------------- -------------------- -----------------------------------------------------------------------------------------------------------------------------
Bbl Bbl One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate or NGLs.
MBbls MBbls One thousand barrels of crude oil, condensate or NGLs.
MBoe MBoe One thousand Boe.
MBoe/d MBoe/d One thousand Boe per day.
Mcf Mcf One thousand cubic feet of natural gas.
MMcf MMcf One million cubic feet of natural gas.
NGL 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
--------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
2024 2023 2023
------------------------------ ---------------------------------- ------------------------------
Revenues:
$ 92,120 $ 98,750 $ 89,130
Oil and gas royalties
37,126 26,404 21,729
Water sales
23,006 22,436 20,134
Produced water royalties
20,646 19,067 14,969
Easements and other surface-related income
1,244 -- 400
Land sales
-------------------- ---------- -------------------- -------------- -------------------- ----------
Total revenues 174,142 166,657 146,362
-------------------- ---------- -------------------- -------------- -------------------- ----------
Expenses:
12,461 10,696 10,593
Salaries and related employee expenses
10,212 9,070 5,656
Water service-related expenses
4,924 4,141 3,552
General and administrative expenses
4,057 3,051 16,628
Legal and professional fees
2,357 1,960 1,574
Ad valorem and other taxes
250 -- 3
Land sales expenses
3,840 3,876 3,404
Depreciation, depletion and amortization
-------------------- ---------- -------------------- -------------- -------------------- ----------
Total operating expenses 38,101 32,794 41,410
-------------------- ---------- -------------------- -------------- -------------------- ----------
Operating income 136,041 133,863 104,952
9,943 11,269 5,389
Other income, net
-------------------- ---------- -------------------- -------------- -------------------- ----------
Income before income taxes 145,984 145,132 110,341
31,567 32,022 23,773
Income tax expense
-------------------- ---------- -------------------- -------------- -------------------- -------------------- ----------
Net income $ 114,417 $ 113,110 $ 86,568
==================== ========== ==================== ============== ==================== ==========
Net income per share of common stock (1)
$ 4.97 $ 4.91 $ 3.75
Basic
==================== ========== ==================== ============== ==================== ==========
$ 4.97 $ 4.91 $ 3.75
Diluted
==================== ========== ==================== ============== ==================== ==========
Weighted average number of shares of common stock outstanding (1)
23,003,001 23,015,319 23,079,251
Basic
==================== ========== ==================== ============== ==================== ==========
(1)All share and share price amounts reflect the three-for-one stock split effected on March 26, 2024. 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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
2024 2023 2023
--------------------------------------------------------------------- ------------------------------------------------------------------------- ---------------------------------------------------------------------
Revenues:
Land and resource management:
$ 92,120 53 % $ 98,750 59 % $ 89,130 61 %
Oil and gas royalties
18,121 10 % 18,079 11 % 14,493 10 %
Easements and other surface-related income
1,244 1 % -- -- % 400 -- %
Land sales
-------------------- ---------- ---------- --------- -------------------- -------------- -------------- ----- -------------------- ---------- -------------- -----
111,485 64 % 116,829 70 % 104,023 71 %
Total land and resource management revenue
-------------------- ---------- ---------- --------- -------------------- -------------- -------------- ----- -------------------- ---------- -------------- -----
Water services and operations:
37,126 21 % 26,404 16 % 21,729 15 %
Water sales
23,006 13 % 22,436 13 % 20,134 14 %
Produced water royalties
2,525 2 % 988 1 % 476 -- %
Easements and other surface-related income
-------------------- ---------- ---------- --------- -------------------- -------------- -------------- ----- -------------------- ---------- -------------- -----
62,657 36 % 49,828 30 % 42,339 29 %
Total water services and operations revenue
-------------------- ---------- ---------- --------- -------------------- -------------- -------------- ----- -------------------- ---------- -------------- -----
Total consolidated revenues $ 174,142 100 % $ 166,657 100 % $ 146,362 100 %
==================== ========== ========== ========= ==================== ============== ============== ===== ==================== ========== ============== =====
Net income:
$ 80,971 71 % $ 88,846 79 % $ 65,343 75 %
Land and resource management
33,446 29 % 24,264 21 % 21,225 25 %
Water services and operations
-------------------- ---------- ---------- --------- -------------------- -------------- -------------- ----- -------------------- ---------- -------------- -----
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 March 31, 2024, December 31, 2023 and March 31, 2023 (in thousands):
Three Months Ended
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31, March 31,
2024 2023 2023
----------------------------------------------- ----------------------------------------------- -----------------------------------------------
Net income $ 114,417 $ 113,110 $ 86,568
Add:
31,567 32,022 23,773
Income tax expense
3,840 3,876 3,404
Depreciation, depletion and amortization
-------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- --------------------
EBITDA 149,824 149,008 113,745
Add:
2,220 1,907 2,156
Employee share-based compensation
-------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- --------------------
Adjusted EBITDA 152,044 150,915 115,901
Less:
(31,898 ) (29,589 ) (24,079 )
Current income tax expense
(5,662 ) (5,044 ) (3,773 )
Capital expenditures
-------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- --------------------
View source version on businesswire.com: https://www.businesswire.com/news/home/20240508005919/en/
SOURCE: Texas Pacific Land Corporation
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Investor Relations IR@TexasPacific.com
COMTEX_452080551/1006/2024-05-08T16:15:05