Earnings Call to be held 8:30 am ET on
Friday, August 6, 2021
Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or
"TPL") today announced its financial and operating results for the
second quarter of 2021.
“We achieved strong operating results across our core business
lines, driven by improved commodity prices and steady development
activity throughout the Permian Basin,” said Tyler Glover,
President and Chief Executive Officer of the Company. “Having
maintained a strong balance sheet during the uncertainty of the
last eighteen months, we are now well positioned to capitalize on
today’s commodity prices and the highly productive Permian Basin
acreage that underpins our royalties. Our high-margin business
profile, low capital spending needs, and pristine balance sheet
provide us flexibility to choose between multiple capital
allocation and investment strategies to provide superior
shareholder value creation.”
Second Quarter 2021 Highlights
- Net income of $57.0 million, or $7.36 per Common Share
- Revenues of $95.9 million
- EBITDA of $75.5 million and adjusted EBITDA of $80.3 million
(1)
- Cash flows from operating activities of $44.1 million
- Quarterly cash dividend of $2.75 per Common Share paid on June
15, 2021
Year-to-Date 2021 Highlights
- Net income of $107.1 million, or $13.81 per Common Share
- Revenues of $180.1 million
- EBITDA of $141.4 million and adjusted EBITDA of $150.1 million
(1)
- Cash flows from operating activities of $96.5 million
- Total cash dividends of $5.50 per Common Share paid through
June 30, 2021
- Completed corporate reorganization from a business trust to a
Delaware corporation effective January 11, 2021 (the "Corporate
Reorganization").
(1)
Reconciliations of Non-GAAP measures are
provided in the tables below.
Financial Results for the Second Quarter of 2021
The Company reported net income of $57.0 million for the second
quarter ended June 30, 2021, an increase of 106.8% compared to net
income of $27.6 million for the second quarter ended June 30,
2020.
Our total revenues increased $38.6 million for the second
quarter of 2021 compared to the same period of 2020, largely driven
by the $37.7 million increase in oil and gas royalty revenue. Our
share of production was approximately 16.4 thousand barrels of oil
equivalent ("Boe") per day for the second quarter of 2021 compared
to 15.7 thousand Boe per day for the same period of 2020. The
average realized price was $40.83 per Boe for the second quarter of
2021, compared to $15.02 per Boe for the comparable period of 2020.
Water sales and produced water royalties increased $4.1 million and
$2.3 million, respectively, for the second quarter of 2021 compared
to the second quarter of 2020. The increase in water sales for the
second quarter of 2021 compared to the same period of 2020 is
principally due to a 70.8% increase in the number of barrels of
sourced and treated water sold. These increases in revenue were
partially offset by easements and other surface-related income,
which decreased $2.7 million for the second quarter of 2021
compared to the same period of 2020. These revenue streams are
directly impacted by development and operating decisions in the
Permian Basin made by our customers and commodity prices, among
other factors.
Our total operating expenses of $24.7 million for the second
quarter of 2021 increased approximately $2.1 million compared to
the same period of 2020. Operating expenses for the second quarter
of 2021 included approximately $4.7 million of expense related to
severance costs. This increase was partially offset by a $2.7
million decrease in land sales expenses for the second quarter of
2021 compared to the same period of 2020.
Financial Results for the Six Months Ended June 30,
2021
The Company reported net income of $107.1 million for the six
months ended June 30, 2021, an increase of 26.0% compared to net
income of $85.0 million for the six months ended June 30, 2020.
Our total revenues increased $26.2 million for the six months
ended June 30, 2021 compared to the same period of 2020, largely
driven by the $44.9 million increase in oil and gas royalty
revenue. Our share of production was approximately 16.4 thousand
Boe per day for the six months ended June 30, 2021 compared to 16.2
thousand Boe per day for the same period of 2020. The average
realized price was $37.94 per Boe for the six months ended June 30,
2021, compared to $22.38 per Boe for the comparable period of 2020.
Water sales and easements and other surface-related income
decreased $10.0 million and $7.4 million, respectively, for the six
months ended June 30, 2021 compared to the six months ended June
30, 2020. The $10.0 million decrease in water sales for the six
months ended June 30, 2021 compared to 2020 is principally due to a
16.5% decrease in the number of barrels of sourced and treated
water sold. These revenue streams are directly impacted by
development and operating decisions made by our customers and vary
as the pace of development and oil demand varies.
Our total operating expenses of $46.8 million for the six months
ended June 30, 2021 decreased approximately $1.8 million compared
to the same period of 2020. The decrease was principally due to a
$2.7 million decrease in land sales expenses and a $2.1 million
decrease in water service-related expenses primarily related to
decreased equipment rental, fuel and ongoing cost savings measures.
Additionally, legal and professional fees decreased $1.6 million as
the Corporate Reorganization was completed in January 2021. These
decreases were partially offset by increased salaries and related
employee expenses which, for the six months ended June 30, 2021,
included $6.7 million of expense related to severance costs.
COVID-19 Pandemic and Impact of Increased Supply by
OPEC+
The uncertainty caused by the global spread of COVID-19
commencing in 2020, among other factors, led to a significant
reduction in global demand and prices for oil. These events
generally led to production curtailments and capital investment
reductions by the operators of the oil and gas wells to which the
Company’s royalty interests relate. This slowdown in well
development has negatively affected the Company’s business and
operations for 2020 and 2021. More recently, development activity
has also been impacted by shortages in labor and certain equipment
as well as escalating costs. With current oil, natural gas, and NGL
prices broadly higher than the comparable period in 2020,
development activities in the Permian Basin have rebounded from the
lows in 2020, and producer activity has improved, albeit at a pace
still below pre-pandemic levels. Future production and development
activity will continue to be influenced by changes in commodity
prices and by the evolving economic and health impact of
COVID-19.
Though the global spread of COVID-19 and the associated economic
impact are still uncertain, COVID-19 containment measures have
eased in certain regions globally, and as a result, demand for oil
and gas has begun to recover. However, given recent increases in
COVID-19 cases, any additional shut-downs could impact this
recovery. In addition, oil prices in 2021 have been supported by
oil supply cuts by the Organization of the Petroleum Exporting
Countries (“OPEC”) and Russia (collectively referred to as
“OPEC+”). Oil prices will continue to be impacted by global oil
demand trends, particularly with COVID-19 and potential containment
measures, and the oil market support provided by OPEC+. Although
our revenues are directly and indirectly impacted by changes in oil
prices, we believe our royalty interests (which require no capital
expenditures or operating expense burden for well development),
strong balance sheet, and liquidity position will help us navigate
through potential oil price volatility.
In 2020, we implemented certain cost reduction measures to
manage costs with an initial focus on negotiating price reductions
and discounts with certain vendors and reducing our usage of
independent contract service providers. In 2021, we continue to
identify additional cost reduction opportunities. As part of our
longer-term water business strategy, we have invested in
electrifying our water sourcing infrastructure. The use of
electricity instead of fuel-powered generators to source and
transport water is anticipated to reduce our dependence on fuel,
equipment rentals and repairs and maintenance. Additionally, our
investment in automation has allowed us to curtail our reliance on
independent contract service providers to support our field
operations.
Our business model and disciplined approach to capital resource
allocation have helped us maintain our strong financial position
while navigating the uncertainty of the current environment.
Further, we continue to prioritize maintaining a safe and healthy
work environment for our employees. Our information technology
infrastructure allowed our corporate employees to transition to a
remote work environment in March 2020 and we were able to deploy
additional safety and sanitation measures for our field employees.
As vaccination rates in the United States have risen, we have taken
a phased-in approach to returning employees to the office and
continue to monitor guidance provided by the Centers for Disease
Control and Prevention as new information becomes available. We
continue to provide safety and sanitation measures for all
employees and maintain communication with employees regarding any
concerns they may have during the transition.
Quarterly Dividend Declared
On August 3, 2021, our board of directors declared a quarterly
cash dividend of $2.75 per share payable on September 15, 2021 to
stockholders of record at the close of business on September 8,
2021.
Stock Repurchase Program
In May 2021, our board of directors approved a stock repurchase
program to purchase up to an aggregate of $20.0 million of shares
of our outstanding common stock. In connection with the stock
repurchase program, the Company entered into a Rule 10b5-1 trading
plan that generally permits the Company to repurchase shares at
times when it might otherwise be prevented from doing so under
securities laws. The stock repurchase program will expire on
December 31, 2021 unless otherwise modified or earlier terminated
by our board of directors at any time in its sole discretion.
Repurchased shares will be held in treasury. The Company
repurchased $2.5 million of shares during the six months ended June
30, 2021.
Conference Call and Webcast Information
The Company will hold a conference call on Friday, August 6,
2021 at 8:30 a.m. Eastern 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 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# 13721185. The telephone replay will be available
starting shortly after the call through August 20, 2021.
About Texas Pacific Land Corporation
Texas Pacific Land Corporation is one of the largest landowners
in the State of Texas with approximately 880,000 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 allow revenue generation through the
entire value chain of oil and gas development, including through
fixed fee payments for use of our land, revenue for sales of
materials (caliche) used in the construction of infrastructure,
providing sourced water and 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 seismic and temporary permits related to a variety of land uses
including midstream infrastructure projects and hydrocarbon
processing facilities.
Visit TPL at 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: an inability to achieve some or all of the expected
benefits of the Corporate Reorganization and distribution;
potential adverse reactions or changes to business relationships
resulting from the completion of the Corporate Reorganization; the
potential impacts of COVID-19 on the global and U.S. economies as
well as on TPL’s financial condition and business operations; 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 and the Corporate
Reorganization are also more fully discussed in a Current Report on
Form 8-K filed by TPL with the Securities and Exchange Commission
("SEC") on December 31, 2020, which includes an information
statement describing the Corporate Reorganization and the
distribution in more detail. You can access TPL’s filings with the
SEC through the SEC website at 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
(dollars in thousands)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Our share of production volumes(1):
Oil (MBbls)
683
700
1,328
1,423
Natural gas (MMcf)
2,807
2,108
5,516
4,506
NGL (MBbls)
342
379
725
768
Equivalents (MBoe)
1,493
1,430
2,973
2,942
Equivalents per day (MBoe/d)
16.4
15.7
16.4
16.2
Oil and gas royalty revenue:
Oil royalties
$
42,577
$
16,777
$
76,826
$
52,683
Natural gas royalties
7,512
1,062
14,872
3,518
NGL royalties
8,115
2,674
16,039
6,672
Total oil and gas royalties
$
58,204
$
20,513
$
107,737
$
62,873
Realized prices:
Oil ($/Bbl)
$
65.30
$
25.09
$
60.55
$
38.78
Natural gas ($/Mcf)
$
2.89
$
0.54
$
2.91
$
0.84
NGL ($/Bbl)
$
25.64
$
7.63
$
23.91
$
9.39
Equivalents ($/Boe)
$
40.83
$
15.02
$
37.94
$
22.38
_____________________________
(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.
REPORT OF OPERATIONS
(in thousands, except share and
per share amounts) (unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Revenues:
Oil and gas royalties
$
58,204
$
20,513
$
107,737
$
62,873
Produced water royalties
15,458
13,111
28,007
25,617
Water sales
12,473
8,419
25,429
35,386
Easements and other surface-related
income
8,977
11,656
18,024
25,417
Land sales
746
3,493
746
4,393
Other operating revenue
74
92
144
192
Total revenues
95,932
57,284
180,087
153,878
Expenses:
Salaries and related employee expenses
13,271
8,937
23,250
19,557
Water service-related expenses
3,551
2,165
6,849
8,945
General and administrative expenses
2,841
2,448
5,647
5,407
Legal and professional fees
1,141
2,610
3,353
4,968
Land sales expenses
—
2,706
—
2,706
Depreciation, depletion and
amortization
3,858
3,678
7,696
7,013
Total operating expenses
24,662
22,544
46,795
48,596
Operating income
71,270
34,740
133,292
105,282
Other income, net
406
183
411
1,009
Income before income taxes
71,676
34,923
133,703
106,291
Income tax expense
14,630
7,340
26,605
21,307
Net income
$
57,046
$
27,583
$
107,098
$
84,984
Net income per Common Share/Sub-share
Certificate — basic and diluted
$
7.36
$
3.56
$
13.81
$
10.96
Weighted average number of Common
Shares/Sub-share Certificates outstanding
7,755,886
7,756,156
7,756,020
7,756,156
SEGMENT OPERATING
RESULTS
(in thousands) (unaudited)
Three Months Ended June
30,
2021
2020
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
58,204
60
%
$
20,513
36
%
Easements and other surface-related
income
8,217
9
%
11,499
20
%
Land sales and other operating revenue
820
1
%
3,585
6
%
67,241
70
%
35,597
62
%
Water services and operations:
Produced water royalties
15,458
16
%
13,111
23
%
Water sales
12,473
13
%
8,419
15
%
Easements and other surface-related
income
760
1
%
157
—
%
28,691
30
%
21,687
38
%
Total consolidated revenues
$
95,932
100
%
$
57,284
100
%
Net income:
Land and resource management
$
45,443
80
%
$
18,721
68
%
Water services and operations
11,603
20
%
8,862
32
%
Total consolidated net income
$
57,046
100
%
$
27,583
100
%
Six Months Ended June
30,
2021
2020
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
107,737
60
%
$
62,873
40
%
Easements and other surface-related
income
16,404
9
%
24,797
16
%
Land sales and other operating revenue
890
—
%
4,585
3
%
125,031
69
%
92,255
59
%
Water services and operations:
Produced water royalties
28,007
16
%
25,617
17
%
Water sales
25,429
14
%
35,386
24
%
Easements and other surface-related
income
1,620
1
%
620
—
%
55,056
31
%
61,623
41
%
Total consolidated revenues
$
180,087
100
%
$
153,878
100
%
Net income:
Land and resource management
$
84,956
79
%
$
57,839
68
%
Water services and operations
22,142
21
%
27,145
32
%
Total consolidated net income
$
107,098
100
%
$
84,984
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
measurements. These measurements are not to be considered more
relevant or accurate than the measurements presented in accordance
with GAAP. In compliance with 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 and Adjusted EBITDA
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 the impact of certain non-cash, non-recurring
and/or unusual, non-operating items, including, but not limited to:
proxy and conversion costs and severance costs. We have presented
EBITDA and Adjusted EBITDA because we believe that both are useful
supplements to net income as indicators of operating
performance.
The following table presents a reconciliation of net income to
EBITDA and Adjusted EBITDA for the three and six months ended June
30, 2021 and 2020 (in thousands):
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net income
$
57,046
$
27,583
$
107,098
$
84,984
Add:
Income tax expense
14,630
7,340
26,605
21,307
Depreciation, depletion and
amortization
3,858
3,678
7,696
7,013
EBITDA
75,534
38,601
141,399
113,304
Add:
Proxy and conversion costs
53
1,986
2,026
2,327
Severance costs
4,680
—
6,680
—
Adjusted EBITDA
$
80,267
$
40,587
$
150,105
$
115,631
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210805005830/en/
Investor Relations IR@TexasPacific.com
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