Texas Pacific Land Corporation Acquires Permian Oil and Gas Mineral and Royalty Interests in Cash Transaction

Rhea-AI Summary

Texas Pacific Land (NYSE: TPL) has announced the acquisition of Permian oil and gas mineral and royalty interests for $286 million in cash. The acquisition spans approximately 7,490 net royalty acres (NRA), primarily in the Midland Basin, with over 80% adjacent to or overlapping existing TPL surface and royalty acreage. The assets have a current production of about 1,300 barrels of oil equivalent per day (78% liquids).

Key points:

• Exxon Mobil and Diamondback Energy operate approximately 66% of the acreage
• Twelve rigs currently running on the footprint
• Expected to generate a double-digit cash flow yield in the next twelve months
• Over half of the Drilling and Spacing Units have development, offering growth potential
• Acquisition aims to enhance TPL's free cash flow per share and increase shareholder return of capital

Positive

• Acquisition of 7,490 net royalty acres for $286 million, expanding TPL's presence in the Midland Basin
• Current production of 1,300 barrels of oil equivalent per day (78% liquids) from acquired assets
• Over 80% of acquired interests adjacent to or overlapping existing TPL acreage, enhancing operational synergies
• Expected double-digit cash flow yield in the next twelve months from the acquisition
• Potential for production growth with over half of Drilling and Spacing Units having development
• Enhancement of TPL's free cash flow per share, offering increased flexibility for shareholder returns

Negative

• Significant cash outlay of $286 million for the acquisition, potentially impacting short-term liquidity

Insights

Financial Analyst

This acquisition marks a significant expansion for TPL, adding 7,490 net royalty acres primarily in the Midland Basin for $286 million. The deal is strategically sound, with 80% of the new acreage adjacent to or overlapping existing TPL holdings, enhancing operational synergies. The current production of 1,300 barrels of oil equivalent per day provides immediate cash flow, while the underdeveloped nature of over half the Drilling and Spacing Units suggests substantial growth potential.

The transaction is expected to be accretive, with management projecting a double-digit cash flow yield in the next twelve months. This should positively impact TPL's financial metrics, including earnings per share and free cash flow. The high-quality operators on the acreage, including Exxon Mobil and Diamondback Energy, further de-risk the investment and provide confidence in future development.

For investors, this move signals TPL's commitment to growth and value creation. The increased free cash flow could lead to enhanced shareholder returns, either through dividends or share buybacks. However, investors should monitor how quickly the undeveloped acreage is brought online to fully realize the acquisition's potential.

Oil & Gas Industry Expert

TPL's acquisition strategically positions the company in the heart of the Permian Basin, particularly the Midland Basin, known for its prolific oil and gas production. The deal's structure as a pure mineral and royalty interest play is noteworthy, as it allows TPL to benefit from production without the capital expenditure and operational risks associated with drilling.

The 78% liquids content in current production is favorable, given the higher value of oil compared to natural gas. The presence of twelve active rigs on the acreage indicates strong ongoing development activity. The involvement of major operators like Exxon, Diamondback, Occidental and ConocoPhillips suggests access to advanced technologies and efficient operations, potentially leading to increased production and reserves over time.

The underdeveloped nature of much of the acreage, including numerous permits and drilled-but-uncompleted wells, represents significant upside potential. This acquisition not only boosts TPL's current production but also provides a robust pipeline for future growth, aligning well with the long-term trends in Permian Basin development.

Acquisition of High-Quality Acreage in Core Regions of the Permian to Generate Accretive Growth

DALLAS--(BUSINESS WIRE)-- Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or “TPL”) today announced the closing of an acquisition of Permian oil and gas mineral and royalty interests for $286 million in cash.

Asset Map (Graphic: Business Wire)

The interests span across approximately 7,490 net royalty acres (“NRA”) located primarily in the Midland Basin in Martin (~2,220 NRA), Midland (~2,080 NRA), and other counties, with over 80% of the acquired interests adjacent to or overlapping existing TPL surface and royalty acreage. Exxon Mobil Corporation (NYSE: XOM) and Diamondback Energy Inc (NYSE: FANG) operate approximately 66% of the acreage. The acquired assets have current production of approximately 1,300 barrels of oil equivalent per day (~78% liquids), with strong line of sight to near-term development and production growth.

“These acquired assets simultaneously high-grade our legacy oil and gas royalty footprint, increase cash flow and earnings per share, and strengthen our growth profile,” said Tyler Glover, Chief Executive Officer of the Company. “This acquisition significantly expands TPL’s net royalty acreage in the Midland Basin, with the acquired assets located in some of the highest quality subregions prospective for multiple proven formations. The acreage is predominately operated by premier upstream companies such as Exxon, Diamondback, Occidental, and ConocoPhillips, with twelve rigs currently running on the footprint. We anticipate next-twelve-months production to generate a double-digit cash flow yield, with additional growth potential as over half of the Drilling and Spacing Units have seen limited, if any, development and contain numerous permits and recently drilled-but-uncompleted wells. Our recent acquisitions meaningfully enhance TPL’s free cash flow per share, offering incremental flexibility to sustainably increase shareholder return of capital.”

About Texas Pacific Land Corporation

Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 873,000 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241002719080/en/

Investor Relations

IR@TexasPacific.com

Source: Texas Pacific Land Corporation

FAQ

What is the value of Texas Pacific Land 's recent acquisition?

Texas Pacific Land (TPL) acquired Permian oil and gas mineral and royalty interests for $286 million in cash.

How many net royalty acres did TPL acquire in the Permian Basin?

TPL acquired approximately 7,490 net royalty acres (NRA), primarily located in the Midland Basin.

What is the current production from the newly acquired assets by TPL?

The acquired assets have a current production of approximately 1,300 barrels of oil equivalent per day, with 78% being liquids.

Which major companies operate on the newly acquired TPL acreage?

Exxon Mobil (XOM) and Diamondback Energy Inc (FANG) operate approximately 66% of the acquired acreage.

How does this acquisition impact TPL's cash flow and earnings?

The acquisition is expected to increase TPL's cash flow and earnings per share, with anticipated double-digit cash flow yield in the next twelve months.