Earnings Call to be held 7:30 am CT on
Friday, November 5, 2021
Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or
"TPL") today announced its financial and operating results for the
third quarter of 2021.
Third Quarter 2021 Highlights
- Net income of $83.8 million, or $10.82 per Common Share
- Revenues of $123.7 million
- EBITDA and adjusted EBITDA(1) of $107.6 million each
- Royalty production of 19.5 thousand barrels of oil equivalent
per day
- Quarterly cash dividend of $2.75 per Common Share paid on
September 15, 2021
- Released inaugural Environmental, Social and Governance (“ESG”)
disclosure
Year-to-Date 2021 Highlights
- Net income of $190.9 million, or $24.62 per Common Share
- Revenues of $303.8 million
- EBITDA of $249.0 million and adjusted EBITDA of $257.7 million
(1)
- Royalty production of 17.5 thousand barrels of oil equivalent
per day
- Total cash dividends of $8.25 per Common Share paid through
September 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.
“We produced strong operating results across our vertically
integrated business, and, along with a supportive commodity price
backdrop, we believe it was the best quarter in our over 100-year
history,” said Tyler Glover, Chief Executive Officer of the
Company. “TPL achieved record consolidated EBITDA and royalty
production amid healthy activity levels on our royalty acreage in
the Permian Basin. The consistency of our performance throughout
commodity cycles reflects the benefits of our active management
approach and vertically integrated business model. Over the past
several years we have focused on enhancing our business by
leveraging our vast surface footprint and making strategic
investments into our water business that we can then deploy to
enable and accelerate development activity onto TPL’s royalty
acreage. Our active management efforts have resulted in multiple
high-margin, high-quality cash flows streams, and we continue to
strive towards unlocking the tremendous embedded value in our asset
base.”
Financial Results for the Third Quarter of 2021
The Company reported net income of $83.8 million for the third
quarter ended September 30, 2021, an increase of 81.2% compared to
net income of $46.3 million for the quarter ended September 30,
2020.
Our total revenues increased $49.3 million for the third quarter
of 2021 compared to the same period of 2020, largely driven by the
$47.3 million increase in oil and gas royalty revenue. Our share of
production was approximately 19.5 thousand barrels of oil
equivalent ("Boe") per day for the third quarter of 2021 compared
to 15.7 thousand Boe per day for the same period of 2020. The
average realized price was $46.07 per Boe for the third quarter of
2021, compared to $23.02 per Boe for the comparable period of 2020.
Water sales increased $7.4 million for the third quarter of 2021
compared to the third quarter of 2020 principally due to a 60.4%
increase in the number of barrels of sourced and treated water.
These revenue streams are directly impacted by development and
operating decisions in the Permian Basin made by our customers and
by commodity prices, among other factors.
Our total operating expenses of $20.5 million for the third
quarter of 2021 increased $2.8 million compared to the same period
of 2020. The increase is principally due to a $1.4 million increase
in water service-related expenses and a $1.0 million increase in
general and administrative expenses.
Financial Results for the Nine Months Ended September 30,
2021
The Company reported net income of $190.9 million for the nine
months ended September 30, 2021, an increase of 45.5% compared to
net income of $131.3 million for the nine months ended September
30, 2020.
Our total revenues increased $75.5 million for the nine months
ended September 30, 2021 compared to the same period of 2020,
largely driven by the $92.2 million increase in oil and gas royalty
revenue. Our share of production was approximately 17.5 thousand
Boe per day for the nine months ended September 30, 2021 compared
to 16.0 thousand Boe per day for the same period of 2020. The
average realized price was $41.01 per Boe for the nine months ended
September 30, 2021 compared to $22.59 per Boe for the comparable
period of 2020. The increase in oil and gas royalty revenue was
partially offset by a $15.1 million decrease in land sales due to
fewer land sales for the nine months ended September 30, 2021
compared to the same period of 2020. These 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 $67.2 million for the nine
months ended September 30, 2021 increased 1.5% compared to the same
period of 2020. The increase was principally due to increased
salaries and related employee expenses which, for the nine months
ended September 30, 2021, included $6.7 million of expense related
to severance costs. These increases were partially offset by a $2.8
million decrease in land sales expenses and a $2.1 million decrease
in legal and professional fees as the Corporate Reorganization was
completed in January 2021.
COVID-19 Pandemic and Global Oil Market Impact in
2021
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 which have generally impacted operators
in the Permian Basin. While labor and resource shortages and rising
costs have not directly impacted us yet, these shortages and rising
costs could potentially impact our future operating activity. 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 increased, 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, COVID-19 continues to impact
certain regions domestically and globally, and any additional
containment measures, now or in the future, could impede a
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+”). 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
from us 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 further 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 starting 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 October 28, 2021, our board of directors declared a quarterly
cash dividend of $2.75 per share payable on December 15, 2021 to
stockholders of record at the close of business on December 8,
2021.
Stock Repurchase Program
The Company repurchased $8.7 million and $11.2 million of shares
of our common stock during the three and nine months ended
September 30, 2021, respectively.
Conference Call and Webcast Information
The Company will hold a conference call on Friday, November 5,
2021 at 7:30 a.m. Central Time to discuss third 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# 13723039. The telephone replay will be available
starting shortly after the call through November 19, 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 September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Our share of production volumes(1):
Oil (MBbls)
810
658
2,139
2,081
Natural gas (MMcf)
3,111
2,477
8,627
6,983
NGL (MBbls)
469
374
1,194
1,142
Equivalents (MBoe)
1,798
1,445
4,771
4,387
Equivalents per day (MBoe/d)
19.5
15.7
17.5
16.0
Oil and gas royalty revenue:
Oil royalties
$
52,081
$
24,111
$
128,907
$
76,794
Natural gas royalties
11,528
3,286
26,400
6,804
NGL royalties
15,489
4,361
31,528
11,033
Total oil and gas royalties
$
79,098
$
31,758
$
186,835
$
94,631
Realized prices:
Oil ($/Bbl)
$
67.32
$
38.35
$
63.12
$
38.64
Natural gas ($/Mcf)
$
4.01
$
1.43
$
3.31
$
1.05
NGL ($/Bbl)
$
35.69
$
12.62
$
28.54
$
10.45
Equivalents ($/Boe)
$
46.07
$
23.02
$
41.01
$
22.59
_________________________
(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
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenues:
Oil and gas royalties
$
79,098
$
31,758
$
186,835
$
94,631
Water sales
19,554
12,139
44,983
47,525
Produced water royalties
15,140
12,246
43,147
37,863
Easements and other surface-related
income
9,832
6,690
27,856
32,107
Land sales
—
11,463
746
15,855
Other operating revenue
69
87
213
279
Total revenues
123,693
74,383
303,780
228,260
Expenses:
Salaries and related employee expenses
8,542
7,678
31,792
27,235
Water service-related expenses
3,650
2,260
10,499
11,205
General and administrative expenses
2,844
1,883
8,491
7,290
Legal and professional fees
1,551
1,987
4,904
6,955
Land sales expenses
—
67
—
2,773
Depreciation, depletion and
amortization
3,866
3,760
11,562
10,773
Total operating expenses
20,453
17,635
67,248
66,231
Operating income
103,240
56,748
236,532
162,029
Other income, net
513
1,287
924
2,296
Income before income taxes
103,753
58,035
237,456
164,325
Income tax expense
19,916
11,760
46,521
33,067
Net income
$
83,837
$
46,275
$
190,935
$
131,258
Net income per Common Share/Sub-share
Certificate — basic and diluted
$
10.82
$
5.97
$
24.62
$
16.92
Weighted average number of Common
Shares/Sub-share Certificates outstanding
7,751,329
7,756,156
7,754,439
7,756,156
SEGMENT OPERATING
RESULTS
(in thousands) (unaudited)
Three Months Ended
September 30,
2021
2020
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
79,098
64
%
$
31,758
43
%
Easements and other surface-related
income
7,625
6
%
6,588
9
%
Land sales and other operating revenue
69
—
%
11,550
15
%
Total land and resource management
revenue
86,792
70
%
49,896
67
%
Water services and operations:
Water sales
19,554
16
%
12,139
16
%
Produced water royalties
15,140
12
%
12,246
17
%
Easements and other surface-related
income
2,207
2
%
102
—
%
Total water services and operations
revenue
36,901
30
%
24,487
33
%
Total consolidated revenues
$
123,693
100
%
$
74,383
100
%
Net income:
Land and resource management
$
65,292
78
%
$
34,359
74
%
Water services and operations
18,545
22
%
11,916
26
%
Total consolidated net income
$
83,837
100
%
$
46,275
100
%
Nine Months Ended
September 30,
2021
2020
Revenues:
Land and resource management:
Oil and gas royalty revenue
$
186,835
62
%
$
94,631
41
%
Easements and other surface-related
income
24,029
8
%
31,385
14
%
Land sales and other operating revenue
959
—
%
16,134
7
%
Total land and resource management
revenue
211,823
70
%
142,150
62
%
Water services and operations:
Water sales
44,983
15
%
47,525
21
%
Produced water royalties
43,147
14
%
37,863
17
%
Easements and other surface-related
income
3,827
1
%
722
—
%
Total water services and operations
revenue
91,957
30
%
86,110
38
%
Total consolidated revenues
$
303,780
100
%
$
228,260
100
%
Net income:
Land and resource management
$
150,248
79
%
$
92,197
70
%
Water services and operations
40,687
21
%
39,061
30
%
Total consolidated net income
$
190,935
100
%
$
131,258
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 nine months ended
September 30, 2021 and 2020 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net income
$
83,837
$
46,275
$
190,935
$
131,258
Add:
Income tax expense
19,916
11,760
46,521
33,067
Depreciation, depletion and
amortization
3,866
3,760
11,562
10,773
EBITDA
107,619
61,795
249,018
175,098
Add:
Corporate reorganization costs
—
504
2,026
2,831
Severance costs
—
—
6,680
—
Adjusted EBITDA
$
107,619
$
62,299
$
257,724
$
177,929
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211104006219/en/
Investor Relations IR@TexasPacific.com
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