Texas Pacific Land Corporation Announces Second Quarter Results
Earnings Call to be held 7:30 am CT on Thursday, August 4, 2022
DALLAS–(BUSINESS WIRE)–Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or “TPL”) today announced its financial and operating results for the second quarter of 2022.
Second Quarter 2022 Highlights
- Net income of $118.9 million, or $15.37 per share (basic) and $15.37 per share (diluted)
- Revenues of $176.3 million
- Adjusted EBITDA(1) of $158.3 million
- Royalty production of 19.8 thousand barrels of oil equivalent per day
- $25.5 million of common stock repurchases
- At the end of the quarter, TPL’s royalty acreage had an estimated 8.7 net well permits, 7.5 net drilled but uncompleted wells, 2.9 net completed wells, and 52.1 net producing wells.
- Published annual update of Environmental, Social and Governance (“ESG”) disclosure including metrics for 2021
- Executed new agreements for bitcoin mining with Mawson Infrastructure Group Inc. (“Mawson”) and JAI Energy (“JAI”) and carbon capture and sequestration studies with Milestone Carbon, LLC (“Milestone Carbon”).
Year-to-Date 2022 Highlights
- Net income of $216.8 million, or $28.02 per share (basic) and $28.01 per share (diluted)
- Revenues of $323.6 million
- Adjusted EBITDA(1) of $288.1 million
- Royalty production of 20.3 thousand barrels of oil equivalent per day
- $201.0 million of total dividends paid during 2022 (comprised of a $20.00 per share special dividend and $6.00 per share in regular dividends)
(1) Reconciliations of Non-GAAP measures are provided in the tables below.
“TPL continues to reap the rewards of strong oil and gas prices and supportive Permian Basin activity, with record quarter revenues from oil and gas royalties,” said Tyler Glover, Chief Executive Officer of the Company. “Beyond just oil and gas royalties, the Company’s other major surface-related revenue streams – easements and other surface-related income, water sales, and produced water royalties – all generated significant sequential quarterly revenue growth and contributed meaningful incremental cash flow. In addition, TPL continues to have numerous constructive conversations on a wide array of next-generation opportunities, and we were pleased to share updates on some of that progress during the quarter. We announced new ventures for TPL surface with a new alliance with Mawson and JAI to develop bitcoin mining and an agreement with Milestone Carbon to evaluate potential carbon sequestration. We look forward to advancing these and other projects as we strive to maximize the value of TPL’s unique, expansive surface footprint.”
Financial Results for the Second Quarter of 2022
The Company reported net income of $118.9 million for the second quarter of 2022, an increase of 108.4% compared to net income of $57.0 million for the second quarter of 2021.
Our total revenues increased $80.3 million for the second quarter of 2022 compared to the same period of 2021, largely driven by the $63.1 million increase in oil and gas royalty revenue and the $13.0 million combined increase in water sales and produced water royalties. Our share of production was approximately 19.8 thousand barrels of oil equivalent (“Boe”) per day for the second quarter of 2022 compared to 16.4 thousand Boe per day for the same period of 2021. The average realized price was $70.36 per Boe for the second quarter of 2022, compared to $40.83 per Boe for the comparable period of 2021. Water sales increased $9.8 million for the second quarter of 2022 compared to the second quarter of 2021 principally due to a 55.0% increase in the number of barrels of sourced and treated water sold. Our 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 $24.6 million for the second quarter of 2022 decreased slightly compared to the same period of 2021. Salaries and related employee expenses for the second quarter of 2022 compared to the same period of 2021 decreased approximately $3.7 million as expenses for 2021 included severance costs. Additionally, we are beginning to recognize the benefits of our ongoing investment in electrifying our water sourcing infrastructure through the reduction of certain expenses, principally fuel and equipment rental. Partially offsetting this decrease, the accrual for ad valorem taxes increased $2.0 million for the second quarter of 2022 compared to the same period of 2021.
Financial Results for the Six Months Ended June 30, 2022
The Company reported net income of $216.8 million for the six months ended June 30, 2022, an increase of 102.4% compared to net income of $107.1 million for the six months ended June 30, 2021.
Our total revenues increased $143.5 million for the six months ended June 30, 2022 compared to the same period of 2021, largely driven by the $117.7 million increase in oil and gas royalty revenue and the $21.2 million combined increase in water sales and produced water royalties. Our share of production was approximately 20.3 thousand Boe per day for the six months ended June 30, 2022 compared to 16.4 thousand Boe per day for the same period of 2021. The average realized price was $64.22 per Boe for the six months ended June 30, 2022 compared to $37.94 per Boe for the comparable period of 2021. Our 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 $47.6 million for the six months ended June 30, 2022 increased $0.8 million compared to the same period of 2021. Operating expenses for 2022 increased principally as a result of the Company recording a $4.0 million accrual for ad valorem taxes and contributing $250,000 to the Permian Basin Area Foundation in support of the initiative to renovate Hogan Park in Midland, Texas. Partially offsetting these increases, salaries and related employee expenses decreased due to the absence of severance costs in 2022. Additionally, we are beginning to recognize the benefits of our ongoing investment in electrifying our water sourcing infrastructure through the reduction of certain expenses, principally fuel and equipment rental.
Update on the Evaluation of the Board Declassification Process
On August 2, 2022, the Board of Directors, after consideration of a recommendation from the Nominating and Corporate Governance Committee, resolved to include a proposal to amend the Company’s charter to declassify the Board of Directors in its proxy materials for the Company’s 2022 annual meeting of stockholders.
Quarterly Dividend Declared
On August 2, 2022, the Board declared a quarterly cash dividend of $3.00 per share, payable on September 15, 2022 to stockholders of record at the close of business on September 8, 2022.
Conference Call and Webcast Information
The Company will hold a conference call on Thursday, August 4, 2022 at 7:30 a.m. Central 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 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 1-800-950-1454 or 1-212-231-2924. The telephone replay can be accessed by dialing 1-844-512-2921 or 1-412-317-6671 and providing the conference ID# 22019661. The telephone replay will be available starting shortly after the call through August 18, 2022.
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 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 potential future impact 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 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 (dollars in thousands) (unaudited) |
||||||||||||
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Our share of production volumes(1): |
|
|
|
|
|
|
|
|
||||
|
Oil (MBbls) |
|
|
813 |
|
|
683 |
|
|
1,609 |
|
|
1,328 |
|
Natural gas (MMcf) |
|
|
2,912 |
|
|
2,807 |
|
|
6,191 |
|
|
5,516 |
|
NGL (MBbls) |
|
|
507 |
|
|
342 |
|
|
1,035 |
|
|
725 |
|
Equivalents (MBoe) |
|
|
1,805 |
|
|
1,493 |
|
|
3,676 |
|
|
2,973 |
|
Equivalents per day (MBoe/d) |
|
|
19.8 |
|
|
16.4 |
|
|
20.3 |
|
|
16.4 |
|
|
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalty revenue: |
|
|
|
|
|
|
|
|
||||
|
Oil royalties |
|
$ |
83,966 |
|
$ |
42,577 |
|
$ |
155,647 |
|
$ |
76,826 |
|
Natural gas royalties |
|
|
17,650 |
|
|
7,512 |
|
|
33,825 |
|
|
14,872 |
|
NGL royalties |
|
|
19,652 |
|
|
8,115 |
|
|
35,968 |
|
|
16,039 |
|
Total oil and gas royalties |
|
$ |
121,268 |
|
$ |
58,204 |
|
$ |
225,440 |
|
$ |
107,737 |
|
|
|
|
|
|
|
|
|
|
||||
|
Realized prices: |
|
|
|
|
|
|
|
|
||||
|
Oil ($/Bbl) |
|
$ |
108.16 |
|
$ |
65.30 |
|
$ |
101.27 |
|
$ |
60.55 |
|
Natural gas ($/Mcf) |
|
$ |
6.55 |
|
$ |
2.89 |
|
$ |
5.91 |
|
$ |
2.91 |
|
NGL ($/Bbl) |
|
$ |
41.93 |
|
$ |
25.64 |
|
$ |
37.59 |
|
$ |
23.91 |
|
Equivalents ($/Boe) |
|
$ |
70.36 |
|
$ |
40.83 |
|
$ |
64.22 |
|
$ |
37.94 |
|
(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. |
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share amounts) (unaudited) |
||||||||||||
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalties |
|
$ |
121,268 |
|
$ |
58,204 |
|
$ |
225,440 |
|
$ |
107,737 |
|
Water sales |
|
|
22,272 |
|
|
12,473 |
|
|
41,092 |
|
|
25,429 |
|
Produced water royalties |
|
|
18,669 |
|
|
15,458 |
|
|
33,539 |
|
|
28,007 |
|
Easements and other surface-related income |
|
|
13,990 |
|
|
8,977 |
|
|
23,182 |
|
|
18,024 |
|
Land sales and other operating revenue |
|
|
71 |
|
|
820 |
|
|
352 |
|
|
890 |
|
Total revenues |
|
|
176,270 |
|
|
95,932 |
|
|
323,605 |
|
|
180,087 |
|
|
|
|
|
|
|
|
|
|
||||
|
Expenses: |
|
|
|
|
|
|
|
|
||||
|
Salaries and related employee expenses |
|
|
9,588 |
|
|
13,271 |
|
|
18,973 |
|
|
23,250 |
|
Water service-related expenses |
|
|
3,915 |
|
|
3,551 |
|
|
6,697 |
|
|
6,849 |
|
General and administrative expenses |
|
|
3,705 |
|
|
2,841 |
|
|
6,705 |
|
|
5,647 |
|
Legal and professional fees |
|
|
1,163 |
|
|
1,141 |
|
|
2,882 |
|
|
3,353 |
|
Ad valorem taxes |
|
|
2,011 |
|
|
— |
|
|
4,021 |
|
|
— |
|
Depreciation, depletion and amortization |
|
|
4,180 |
|
|
3,858 |
|
|
8,306 |
|
|
7,696 |
|
Total operating expenses |
|
|
24,562 |
|
|
24,662 |
|
|
47,584 |
|
|
46,795 |
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income |
|
|
151,708 |
|
|
71,270 |
|
|
276,021 |
|
|
133,292 |
|
|
|
|
|
|
|
|
|
|
||||
|
Other income, net |
|
|
630 |
|
|
406 |
|
|
706 |
|
|
411 |
|
Income before income taxes |
|
|
152,338 |
|
|
71,676 |
|
|
276,727 |
|
|
133,703 |
|
Income tax expense |
|
|
33,444 |
|
|
14,630 |
|
|
59,933 |
|
|
26,605 |
|
Net income |
|
$ |
118,894 |
|
$ |
57,046 |
|
$ |
216,794 |
|
$ |
107,098 |
|
|
|
|
|
|
|
|
|
|
||||
|
Net income per share of common stock |
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
15.37 |
|
$ |
7.36 |
|
$ |
28.02 |
|
$ |
13.81 |
|
Diluted |
|
$ |
15.37 |
|
$ |
7.36 |
|
$ |
28.01 |
|
$ |
13.81 |
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average number of shares of common stock outstanding |
|
|
|
|
|
|
|
|
||||
|
Basic |
|
|
7,733,730 |
|
|
7,755,886 |
|
|
7,737,527 |
|
|
7,756,020 |
|
Diluted |
|
|
7,737,112 |
|
|
7,755,886 |
|
|
7,739,859 |
|
|
7,756,020 |
|
SEGMENT OPERATING RESULTS (in thousands) (unaudited) |
||||||||||||
|
|
|
Three Months Ended June 30, |
||||||||||
|
|
|
2022 |
|
2021 |
||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management: |
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalty revenue |
|
$ |
121,268 |
|
68 |
% |
|
$ |
58,204 |
|
60 |
% |
|
Easements and other surface-related income |
|
|
12,046 |
|
7 |
% |
|
|
8,217 |
|
9 |
% |
|
Land sales and other operating revenue |
|
|
71 |
|
— |
% |
|
|
820 |
|
1 |
% |
|
Total land and resource management revenue |
|
|
133,385 |
|
75 |
% |
|
|
67,241 |
|
70 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Water services and operations: |
|
|
|
|
|
|
|
|
||||
|
Water sales |
|
|
22,272 |
|
13 |
% |
|
|
12,473 |
|
13 |
% |
|
Produced water royalties |
|
|
18,669 |
|
11 |
% |
|
|
15,458 |
|
16 |
% |
|
Easements and other surface-related income |
|
|
1,944 |
|
1 |
% |
|
|
760 |
|
1 |
% |
|
Total water services and operations revenue |
|
|
42,885 |
|
25 |
% |
|
|
28,691 |
|
30 |
% |
|
Total consolidated revenues |
|
$ |
176,270 |
|
100 |
% |
|
$ |
95,932 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Net income: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management |
|
$ |
96,074 |
|
81 |
% |
|
$ |
45,443 |
|
80 |
% |
|
Water services and operations |
|
|
22,820 |
|
19 |
% |
|
|
11,603 |
|
20 |
% |
|
Total consolidated net income |
|
$ |
118,894 |
|
100 |
% |
|
$ |
57,046 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
Six Months Ended June 30, |
||||||||||
|
|
|
2022 |
|
2021 |
||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management: |
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalty revenue |
|
$ |
225,440 |
|
70 |
% |
|
$ |
107,737 |
|
60 |
% |
|
Easements and other surface-related income |
|
|
20,940 |
|
6 |
% |
|
|
16,404 |
|
9 |
% |
|
Land sales and other operating revenue |
|
|
352 |
|
— |
% |
|
|
890 |
|
— |
% |
|
Total land and resource management revenue |
|
|
246,732 |
|
76 |
% |
|
|
125,031 |
|
69 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Water services and operations: |
|
|
|
|
|
|
|
|
||||
|
Water sales |
|
|
41,092 |
|
13 |
% |
|
|
25,429 |
|
14 |
% |
|
Produced water royalties |
|
|
33,539 |
|
10 |
% |
|
|
28,007 |
|
16 |
% |
|
Easements and other surface-related income |
|
|
2,242 |
|
1 |
% |
|
|
1,620 |
|
1 |
% |
|
Total water services and operations revenue |
|
|
76,873 |
|
24 |
% |
|
|
55,056 |
|
31 |
% |
|
Total consolidated revenues |
|
$ |
323,605 |
|
100 |
% |
|
$ |
180,087 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Net income: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management |
|
$ |
177,230 |
|
82 |
% |
|
$ |
84,956 |
|
79 |
% |
|
Water services and operations |
|
|
39,564 |
|
18 |
% |
|
|
22,142 |
|
21 |
% |
|
Total consolidated net income |
|
$ |
216,794 |
|
100 |
% |
|
$ |
107,098 |
|
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 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 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: employee share-based compensation, conversion costs related to our Corporate Reorganization, and severance costs. We have presented EBITDA and Adjusted EBITDA because we believe that both are useful supplements to net income in analyzing 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, 2022 and 2021 (in thousands):
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income |
|
$ |
118,894 |
|
$ |
57,046 |
|
$ |
216,794 |
|
$ |
107,098 |
|
Add: |
|
|
|
|
|
|
|
|
||||
|
Income tax expense |
|
|
33,444 |
|
|
14,630 |
|
|
59,933 |
|
|
26,605 |
|
Depreciation, depletion and amortization |
|
|
4,180 |
|
|
3,858 |
|
|
8,306 |
|
|
7,696 |
|
EBITDA |
|
|
156,518 |
|
|
75,534 |
|
|
285,033 |
|
|
141,399 |
|
Add: |
|
|
|
|
|
|
|
|
||||
|
Employee share-based compensation |
|
|
1,760 |
|
|
— |
|
|
3,079 |
|
|
— |
|
Conversion costs related to our corporate reorganization |
|
|
— |
|
|
53 |
|
|
— |
|
|
2,026 |
|
Severance costs |
|
|
— |
|
|
4,680 |
|
|
— |
|
|
6,680 |
|
Adjusted EBITDA |
|
$ |
158,278 |
|
$ |
80,267 |
|
$ |
288,112 |
|
$ |
150,105 |
Contacts
Investor Relations
IR@TexasPacific.com
