TPL Texas Pacific Land Corporation

Earnings Call to be held 7:30 am CT on Thursday, February 22, 2024

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

Fourth Quarter 2023 Highlights

• Net income of $113.1 million, or $14.73 per share (diluted)

• Revenues of $166.7 million

• Adjusted EBITDA(1) of $150.9 million

• Free cash flow (1) of $116.3 million

• Royalty production of 26.3 thousand barrels of oil equivalent per day, the highest quarterly royalty production level in TPL history

• $10.2 million of common stock repurchases

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

• As of December 31, 2023, TPL’s royalty acreage had an estimated 4.5 net well permits, 9.7 net drilled but uncompleted wells, 2.8 net completed wells, and 67.2 net producing wells.

Full Year 2023 Highlights

• Net income of $405.6 million, or $52.77 per share (diluted)

• Revenues of $631.6 million

• Adjusted EBITDA(1) of $541.4 million

• Free cash flow(1) of $415.5 million

• Royalty production of 23.5 thousand barrels of oil equivalent per day

• $42.4 million of common stock repurchases

• $100.0 million of total cash dividends paid during 2023 (comprised of $13.00 per share in regular dividends)

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

“Fourth quarter 2023 capped off a strong year for TPL,” said Tyler Glover, Chief Executive Officer of the Company. “Driven by robust oil and gas royalty production and continued growth of our water and surface businesses, total consolidated revenues and free cash flow for this most recent quarter were the highest of any quarter in 2023. For the full year 2023, TPL generated record revenues from our Water segment, while revenues from our easements and other surface-related income grew nearly 50% year-over-year. This growth of our surface-related businesses helped to substantially offset lower commodity prices. Looking ahead to 2024, we continue to see strong activity on our royalty and surface acreage. With an unmatched Permian asset footprint, high free cash flow margins, a resilient business mix, and a large net cash balance, TPL is well-positioned in 2024 to seize on opportunities for value-added growth and shareholder return of capital.”

Financial Results for the Fourth Quarter of 2023

The Company reported net income of $113.1 million for the fourth quarter of 2023 compared to net income of $99.7 million for the fourth quarter of 2022.

Total revenues for the fourth quarter of 2023 were $166.7 million compared to $152.7 million for the fourth quarter of 2022. The increase in revenue was principally due to a combined increase of $10.1 million in water sales and produced water royalties and an increase of $8.3 million in easements and other surface-related income. Oil and gas royalty revenue increased $2.1 million due to higher production volumes in the fourth quarter of 2023 compared to the fourth quarter of 2022 partially offset by lower average commodity prices over the same period. The Company’s share of production was 26.3 thousand barrels of oil equivalent (“Boe”) per day for the fourth quarter of 2023 versus 21.3 thousand Boe per day for the same period of 2022. The average realized price was $42.81 per Boe in the fourth quarter of 2023 versus $51.57 per Boe in the fourth quarter of 2022. TPL’s revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.

Total operating expenses of $32.8 million for the fourth quarter of 2023 increased $4.3 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 fourth quarter of 2023 compared to the same period of 2022.

Financial Results for the Year Ended December 31, 2023

The Company reported net income of $405.6 million for the year ended December 31, 2023, a decrease of 9.1% compared to net income of $446.4 million for the year ended December 31, 2022.

Total revenues decreased $35.8 million for the year ended December 31, 2023 compared to the same period of 2022. Oil and gas royalty revenue of $357.4 million for the year ended December 31, 2023 includes an $8.7 million recovery, as discussed below. As part of 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 production periods before and through June 2023, the operator agreed to pay $10.1 million to TPL, comprised of $8.7 million of unpaid oil and gas royalties, $0.9 million of interest and $0.5 million of damages (the "O&G Settlement"). Excluding the impact of the $8.7 million recovery, oil and gas royalty revenue decreased $103.7 million compared to the same period of 2022. The Company’s share of production was approximately 23.5 thousand Boe per day for the year ended December 31, 2023 versus 21.3 thousand Boe per day for the same period of 2022. The average realized price was $42.58 per Boe for the year ended December 31, 2023 versus $60.81 per Boe for the same period of 2022. The decrease in oil and gas royalty revenue was partially offset by a combined increase of $39.5 million in water sales and produced water royalties and an increase of $22.9 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.

Total operating expenses of $145.5 million for the year ended December 31, 2023 increased $40.4 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 year ended December 31, 2023 compared to the same period of 2022. During 2023, the Company made the operational decision to incur higher water service-related expenses in order to meet increased customer demand for water within shorter time commitments. This decision, in turn, resulted in higher water sales revenue and operating income during 2023 over 2022.

Quarterly Dividend Declared

On February 13, 2024, the Board declared a quarterly cash dividend of $3.50 per share, payable on March 15, 2024 to stockholders of record at the close of business on March 1, 2024.

Update on Consideration of Stockholder Proposal from the 2023 Annual Meeting

The Company also announced that on February 12, 2024, the Nominating and Corporate Governance Committee recommended to the full Board that the Board consider including in the 2024 proxy materials a proposal granting stockholders the right to call a special meeting for approval at the Company’s 2024 Annual Meeting. Pursuant to the recommendation of the Nominating and Corporate Governance Committee, the Company is currently evaluating the appropriate parameters for such right, with the intent to make a final recommendation to the full Board prior to the release of the proxy materials for the Company’s 2024 Annual Meeting of Stockholders.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, February 22, 2024 at 7:30 a.m. Central Time to discuss fourth quarter and year end 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# 13742748. The telephone replay will be available starting shortly after the call through March 7, 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 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

December 31,

 

Years Ended

December 31,

 

 

2023

 

2022

 

2023

 

2022

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

 

 

 

 

 

 

 

 

Oil (MBbls)

 

 

1,059

 

 

864

 

 

3,701

 

 

3,401

Natural gas (MMcf)

 

 

4,124

 

 

3,313

 

 

14,528

 

 

13,086

NGL (MBbls)

 

 

669

 

 

548

 

 

2,453

 

 

2,208

Equivalents (MBoe)

 

 

2,416

 

 

1,964

 

 

8,575

 

 

7,791

Equivalents per day (MBoe/d)

 

 

26.3

 

 

21.3

 

 

23.5

 

 

21.3

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Oil royalties

 

$

79,335

 

$

68,585

 

$

273,304

 

$

307,606

Natural gas royalties

 

 

6,705

 

 

14,679

 

 

29,915

 

 

74,866

NGL royalties

 

 

12,710

 

 

13,432

 

 

45,510

 

 

69,962

Total oil and gas royalties

 

$

98,750

 

$

96,696

 

$

348,729

 

$

452,434

 

 

 

 

 

 

 

 

 

Realized prices (1) (2):

 

 

 

 

 

 

 

 

Oil ($/Bbl)

 

$

78.46

 

$

83.16

 

$

77.33

 

$

94.69

Natural gas ($/Mcf)

 

$

1.76

 

$

4.79

 

$

2.23

 

$

6.19

NGL ($/Bbl)

 

$

20.53

 

$

26.51

 

$

20.05

 

$

34.25

Equivalents ($/Boe)

 

$

42.81

 

$

51.57

 

$

42.58

 

$

60.81

(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 of oil and gas royalties from the O&G Settlement discussed above.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

98,750

 

$

96,696

 

$

357,394

 

$

452,434

Water sales

 

 

26,404

 

 

19,207

 

 

112,203

 

 

84,725

Produced water royalties

 

 

22,436

 

 

19,566

 

 

84,260

 

 

72,234

Easements and other surface-related income

 

 

19,067

 

 

10,746

 

 

70,932

 

 

48,057

Land sales and other operating revenue

 

 

—

 

 

6,491

 

 

6,806

 

 

9,972

Total revenues

 

 

166,657

 

 

152,706

 

 

631,595

 

 

667,422

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Salaries and related employee expenses

 

 

10,696

 

 

11,732

 

 

43,384

 

 

41,402

Water service-related expenses

 

 

9,070

 

 

4,418

 

 

33,566

 

 

17,463

General and administrative expenses

 

 

4,141

 

 

3,524

 

 

14,928

 

 

13,285

Legal and professional fees

 

 

3,051

 

 

3,747

 

 

31,522

 

 

8,735

Ad valorem and other taxes

 

 

1,960

 

 

1,901

 

 

7,385

 

 

8,854

Depreciation, depletion and amortization

 

 

3,876

 

 

3,153

 

 

14,757

 

 

15,376

Total operating expenses

 

 

32,794

 

 

28,475

 

 

145,542

 

 

105,115

 

 

 

 

 

 

 

 

 

Operating income

 

 

133,863

 

 

124,231

 

 

486,053

 

 

562,307

 

 

 

 

 

 

 

 

 

Other income, net

 

 

11,269

 

 

3,922

 

 

31,508

 

 

6,548

Income before income taxes

 

 

145,132

 

 

128,153

 

 

517,561

 

 

568,855

Income tax expense

 

 

32,022

 

 

28,422

 

 

111,916

 

 

122,493

Net income

 

$

113,110

 

$

99,731

 

$

405,645

 

$

446,362

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

 

 

 

 

 

 

 

Basic

 

$

14.74

 

$

12.95

 

$

52.81

 

$

57.80

Diluted

 

$

14.73

 

$

12.94

 

$

52.77

 

$

57.77

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding

 

 

 

 

 

 

 

 

Basic

 

 

7,671,773

 

 

7,698,487

 

 

7,681,435

 

 

7,721,957

Diluted

 

 

7,678,182

 

 

7,705,116

 

 

7,686,615

 

 

7,726,809

 

SEGMENT OPERATING RESULTS

(dollars in thousands) (unaudited)

 

 

 

Three Months Ended

December 31,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

98,750

 

59

%

 

$

96,696

 

64

%

Easements and other surface-related income

 

 

18,079

 

11

%

 

 

9,841

 

6

%

Land sales and other operating revenue

 

 

—

 

—

%

 

 

6,491

 

4

%

Total land and resource management revenue

 

 

116,829

 

70

%

 

 

113,028

 

74

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

26,404

 

16

%

 

 

19,207

 

13

%

Produced water royalties

 

 

22,436

 

13

%

 

 

19,566

 

13

%

Easements and other surface-related income

 

 

988

 

1

%

 

 

905

 

—

%

Total water services and operations revenue

 

 

49,828

 

30

%

 

 

39,678

 

26

%

Total consolidated revenues

 

$

166,657

 

100

%

 

$

152,706

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

88,846

 

79

%

 

$

79,623

 

80

%

Water services and operations

 

 

24,264

 

21

%

 

 

20,108

 

20

%

Total consolidated net income

 

$

113,110

 

100

%

 

$

99,731

 

100

%

 

 

Years Ended

December 31,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

357,394

 

57

%

 

$

452,434

 

68

%

Easements and other surface-related income

 

 

67,905

 

11

%

 

 

44,569

 

7

%

Land sales and other operating revenue

 

 

6,806

 

1

%

 

 

9,972

 

1

%

Total land and resource management revenue

 

 

432,105

 

69

%

 

 

506,975

 

76

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

112,203

 

18

%

 

 

84,725

 

13

%

Produced water royalties

 

 

84,260

 

13

%

 

 

72,234

 

11

%

Easements and other surface-related income

 

 

3,027

 

—

%

 

 

3,488

 

—

%

Total water services and operations revenue

 

 

199,490

 

31

%

 

 

160,447

 

24

%

Total consolidated revenues

 

$

631,595

 

100

%

 

$

667,422

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

306,706

 

76

%

 

$

365,041

 

82

%

Water services and operations

 

 

98,939

 

24

%

 

 

81,321

 

18

%

Total consolidated net income

 

$

405,645

 

100

%

 

$

446,362

 

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 months and years ended December 31, 2023 and 2022 (in thousands):

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

2023

 

2022

 

2023

 

2022

Net income

 

$

113,110

 

 

$

99,731

 

 

$

405,645

 

 

$

446,362

 

Add:

 

 

 

 

 

 

 

 

Income tax expense

 

 

32,022

 

 

 

28,422

 

 

 

111,916

 

 

 

122,493

 

Depreciation, depletion and amortization

 

 

3,876

 

 

 

3,153

 

 

 

14,757

 

 

 

15,376

 

EBITDA

 

 

149,008

 

 

 

131,306

 

 

 

532,318

 

 

 

584,231

 

Add:

 

 

 

 

 

 

 

 

Employee share-based compensation

 

 

1,907

 

 

 

2,594

 

 

 

9,124

 

 

 

7,583

 

Adjusted EBITDA

 

 

150,915

 

 

 

133,900

 

 

 

541,442

 

 

 

591,814

 

Less:

 

 

 

 

 

 

 

 

Current income tax expense

 

 

(29,589

)

 

 

(26,319

)

 

 

(110,517

)

 

 

(121,230

)

Capital expenditures

 

 

(5,044

)

 

 

(6,812

)

 

 

(15,431

)

 

 

(18,967

)

Free Cash Flow

 

$

116,282

 

 

$

100,769

 

 

$

415,494

 

 

$

451,617

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240221094108/en/

Investor Relations IR@TexasPacific.com