Texas Pacific Land Corporation Announces Second Quarter Results and Another Record Performance From Water Segment

Rhea-AI Summary

Texas Pacific Land (NYSE: TPL) announced its Q2 2024 financial and operating results. Highlights include record performance from the Water Service and Operations segment, with water sales revenue of $40.7M, produced water royalties of $25.3M, and total segment revenues of $68.3M. Net income was $114.6M, or $4.98 per share, on consolidated revenues of $172.3M. The company also declared a special cash dividend of $10.00 per share, which was paid on July 15, 2024, and a quarterly cash dividend of $1.17 per share, payable on September 17, 2024.

For the six months ended June 30, 2024, TPL reported net income of $229.0M, consolidated revenues of $346.5M, and record water segment revenues of $131.0M. Additionally, the company implemented a new energy-efficient water desalination method and completed a three-for-one stock split effective March 26, 2024. TPL aims to maintain a cash balance of $700M and deploy excess cash for share repurchases and dividends.

Positive

• Record water sales revenue of $40.7M in Q2 2024
• Produced water royalties revenue reached $25.3M
• Q2 2024 net income of $114.6M
• Special cash dividend of $10.00 per share paid
• Quarterly cash dividend of $1.17 per share declared
• Consolidated net income of $229.0M for H1 2024
• Record water segment revenues of $131.0M for H1 2024
• New energy-efficient water desalination method developed
• Three-for-one stock split effective March 26, 2024

Negative

• None.

Financial Analyst

Texas Pacific Land 's Q2 2024 results demonstrate strong performance, particularly in its Water Service and Operations segment. The company achieved record revenues of $68.3 million and net income of $34.5 million in this segment. This growth underscores TPL's strategic positioning in the Permian Basin's water management sector.

The company's overall financial health remains robust, with consolidated net income of $114.6 million ($4.98 per diluted share) and free cash flow of $116.0 million. TPL's decision to target a cash balance of $700 million and deploy excess free cash flow towards share repurchases and dividends signals confidence in its financial stability and commitment to shareholder returns.

However, investors should note the slight sequential decrease in total revenues from Q1 to Q2 2024, primarily due to lower easements income and oil and gas royalty revenue. This highlights the company's exposure to commodity price fluctuations and customer activity levels.

Oil & Gas Industry Expert

TPL's Q2 results reflect the ongoing strength of the Permian Basin as a world-class oil and gas resource. The company's royalty production remained steady at 24.9 thousand Boe per day, with new wells added during the quarter featuring impressive average lateral lengths of 10,366 ft. This indicates continued efficiency gains in drilling and completion techniques by operators on TPL's acreage.

The company's land position, with 6.3 net well permits and 9.5 net drilled but uncompleted wells, suggests a healthy pipeline of future production. However, the 3% decrease in average realized price per Boe from Q1 to Q2 2024 highlights the ongoing volatility in commodity markets.

TPL's development of a new energy-efficient method for produced water desalination and treatment is a significant move. If successful, this could provide a competitive advantage in water management services, a critical aspect of Permian Basin operations.

Environmental Sustainability Analyst

TPL's focus on water management in the Permian Basin is not just a revenue driver but also addresses a critical environmental concern in oil and gas operations. The company's record performance in water sales and produced water royalties indicates growing demand for efficient water management solutions in a water-stressed region.

The development of a new energy-efficient method for produced water desalination and treatment is particularly noteworthy. This initiative could significantly reduce the environmental footprint of oil and gas operations by enabling water reuse and reducing freshwater consumption. The planned 10,000 barrels per day test facility will be a important step in proving the technology's scalability and effectiveness.

However, investors should monitor the energy intensity and potential emissions associated with this new treatment method, as these factors will be important for its long-term sustainability and regulatory compliance in an increasingly carbon-conscious industry.

Earnings Call to be held 7:30 am CT on Thursday, August 8, 2024

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 2024.

Second Quarter 2024 Highlights

• Water Service and Operations segment achieved record performance for the following:
  • Water sales revenue of $40.7 million
  • Produced water royalties revenue of $25.3 million
  • Total segment revenues of $68.3 million
  • Total segment net income of $34.5 million
• Announced a target cash and cash equivalents balance of approximately $700 million. Above this targeted level, TPL will seek to deploy the majority of its free cash flow towards share repurchases and dividends. In conjunction with this announcement, the Company declared a special cash dividend of $10.00 per share, which was paid on July 15, 2024
• Consolidated net income of $114.6 million, or $4.98 per share (diluted)
• Consolidated revenues of $172.3 million
• Adjusted EBITDA⁽¹⁾ of $153.2 million
• Free cash flow ⁽¹⁾ of $116.0 million
• Royalty production of 24.9 thousand barrels of oil equivalent (“Boe”) per day
• $6.3 million of common stock repurchases
• Quarterly cash dividend of $1.17 per share paid on June 17, 2024
• As of June 30, 2024, TPL’s royalty acreage had an estimated 6.3 net well permits, 9.5 net drilled but uncompleted wells, 4.0 net completed wells, and 73.3 net producing wells. Net producing wells added during the quarter had an average lateral length of approximately 10,366 ft.

Six Months Ended June 30, 2024 Highlights

• The Company announced the development of a new energy-efficient method of produced water desalination and treatment. The Company has successfully conducted a technology pilot and is progressing towards the construction of a larger test facility with an initial capacity of 10,000 barrels of produced water per day.
• Three-for-one stock split effective March 26, 2024
• Consolidated net income of $229.0 million, or $9.95 per share (diluted)
• Consolidated revenues of $346.5 million, including record water segment revenues of $131.0 million
• Adjusted EBITDA⁽¹⁾ of $305.3 million
• Free cash flow ⁽¹⁾ of $230.5 million
• Royalty production of 24.9 thousand Boe per day
• $16.6 million of common stock repurchases
• $53.8 million of total cash dividends paid through June 30, 2024

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

“This quarter’s strong results highlight the meaningful contribution derived from investments we have made in the water business since its inception in 2017,” said Tyler Glover, Chief Executive Officer of the Company. “The substantial investment into hiring personnel and developing targeted infrastructure over several years was a pivotal moment in the Company’s history, purposefully positioning TPL to be at the forefront of the Permian Basin’s emergence as a world-class resource. This most recent quarter represents corporate records for each of water sales and produced water royalties revenues, which is a testament to the water segment’s continued success and relevance to TPL overall. The Permian Basin, with its enormous size and excellent resource quality, provides TPL a long growth runway, and we remain focused on extracting maximum value where we can leverage our superb people, technology, and asset footprint.”

Financial Results for the Second Quarter of 2024 - Sequential

The Company reported net income of $114.6 million for the second quarter of 2024 compared to net income of $114.4 million for the first quarter of 2024.

Total revenues for the second quarter of 2024 were $172.3 million compared to $174.1 million for the first quarter of 2024. The slight decrease in revenues is primarily due to a decrease of $4.1 million in easements and other surface-related income and a $2.3 million decrease in oil and gas royalty revenue compared to the first quarter of 2024. While the Company’s share of production was 24.9 thousand Boe per day for the second quarter of 2024 versus 24.8 thousand Boe per day for the first quarter of 2024, the average realized price decreased 3% to $41.44 per Boe in the second quarter of 2024 compared to $42.71 per Boe in the first quarter of 2024. These decreases in revenue were partially offset by increases of $3.5 million in water sales and $2.3 million in produced water royalties over the same period. The growth in water sales is principally due to an increase of 16.5% in water sales volumes for the second quarter of 2024 compared to the first quarter of 2024. Our revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.

Total operating expenses were $39.1 million for the second quarter of 2024 compared to $38.1 million for the first quarter of 2024. The change in operating expenses is principally related to an increase in water service-related expenses over the same time period.

Financial Results for the Second Quarter of 2024 - Year Over Year

Total revenues for the six months ended June 30, 2024 were $346.5 million compared to $307.0 million for the same period of 2023. All revenue streams, except land sales, increased for the six months ended June 30, 2024 with the $18.4 million increase in water sales being the biggest contributor. The growth in water sales is principally due to an increase of 25.5% in water sales volumes. Additionally, oil and gas royalty revenue increased $10.4 million primarily due to higher production volumes for the six months ended June 30, 2024 compared to the same period of 2023. Oil and gas royalty revenue for the six months ended June 30, 2023 included an $8.7 million settlement with an operator with respect to unpaid oil and gas royalties for older production periods. Excluding the impact of the $8.7 million settlement on 2023 revenues, oil and gas royalty revenue for the six months ended June 30, 2024 increased $19.1 million over the six months ended June 30, 2023. The Company’s share of production was 24.9 thousand Boe per day for the six months ended June 30, 2024 versus 22.9 thousand Boe per day for the same period of 2023. The average realized price was $42.07 per Boe for the six months ended June 30, 2024 versus $41.08 per Boe for the same period of 2023. TPL’s revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.

Total operating expenses were $77.2 million for the six months ended June 30, 2024 compared to $81.7 million for the same period of 2023. The change in operating expenses is principally related to a decrease in legal and professional fees for the six months ended June 30, 2024 compared to the same period of 2023, partially offset by higher water service-related expenses due to the 25.5% increase in water sales volumes.

Special Cash Dividend Declared

On June 13, 2024, the Company’s Board of Directors (the “Board”) declared a special cash dividend of $10.00 per share which was paid on July 15, 2024 to stockholders of record at the close of business on July 1, 2024.

Quarterly Dividend Declared

On August 6, 2024, the Company's Board declared a quarterly cash dividend of $1.17 per share, payable on September 17, 2024 to stockholders of record at the close of business on September 3, 2024.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, August 8, 2024 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 1-877-407-4018 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# 13745173. The telephone replay will be available starting shortly after the call through August 22, 2024.

About Texas Pacific Land Corporation

Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 869,000 acres of land, 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 Securities and Exchange Commission (“SEC”) through the SEC's 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						Six Months Ended
		June 30, 2024			March 31, 2024			June 30, 2024			June 30, 2023(2)
Company’s share of production volumes(1):
Oil (MBbls)			967			990			1,958			1,792
Natural gas (MMcf)			3,851			3,806			7,658			7,088
NGL (MBbls)			661			633			1,294			1,177
Equivalents (MBoe)			2,270			2,258			4,528			4,151
Equivalents per day (MBoe/d)			24.9			24.8			24.9			22.9
Oil and gas royalty revenue (in thousands):
Oil royalties		$	74,747		$	72,614		$	147,361		$	127,077
Natural gas royalties			2,367			7,062			9,429			14,731
NGL royalties			12,699			12,444			25,143			21,069
Total oil and gas royalties		$	89,813		$	92,120		$	181,933		$	162,877
Realized prices (1):
Oil ($/Bbl)		$	80.93		$	76.77		$	78.82		$	74.24
Natural gas ($/Mcf)		$	0.66		$	2.01		$	1.33		$	2.25
NGL ($/Bbl)		$	20.78		$	21.24		$	21.00		$	19.34
Equivalents ($/Boe)		$	41.44		$	42.71		$	42.07		$	41.08

_________________________
	(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 and dollars provided for the six months ended June 30, 2023 exclude the impact of an $8.7 million settlement with an operator with respect to unpaid oil and gas royalties.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts) (unaudited)
		Three Months Ended						Six Months Ended
		June 30, 2024			March 31, 2024			June 30, 2024			June 30, 2023
Revenues:
Oil and gas royalties		$	89,813		$	92,120		$	181,933		$	171,542
Water sales			40,650			37,126			77,776			59,377
Produced water royalties			25,301			23,006			48,307			40,975
Easements and other surface-related income			16,570			20,646			37,216			33,677
Land sales			—			1,244			1,244			1,400
Total revenues			172,334			174,142			346,476			306,971
Expenses:
Salaries and related employee expenses			12,771			12,461			25,232			21,189
Water service-related expenses			14,824			10,212			25,036			15,943
General and administrative expenses			3,673			4,924			8,597			6,879
Legal and professional fees			2,307			4,057			6,364			26,782
Ad valorem and other taxes			1,444			2,357			3,801			3,644
Land sales expenses			—			250			250			5
Depreciation, depletion and amortization			4,093			3,840			7,933			7,297
Total operating expenses			39,112			38,101			77,213			81,739
Operating income			133,222			136,041			269,263			225,232
Other income, net			13,220			9,943			23,163			12,260
Income before income taxes			146,442			145,984			292,426			237,492
Income tax expense			31,853			31,567			63,420			50,531
Net income		$	114,589		$	114,417		$	229,006		$	186,961
Net income per share of common stock (1)
Basic		$	4.99		$	4.97		$	9.96		$	8.10
Diluted		$	4.98		$	4.97		$	9.95		$	8.10
Weighted average number of shares of common stock outstanding (1)
Basic			22,987,971			23,003,001			22,995,486			23,068,056
Diluted			23,013,793			23,020,249			23,018,313			23,083,643

_________________________
	(1)		All share and share price amounts reflect the three-for-one stock split effected on March 26, 2024.

SEGMENT OPERATING RESULTS
(dollars in thousands) (unaudited)
		Three Months Ended
		June 30, 2024						March 31, 2024
Revenues:
Land and resource management:
Oil and gas royalties		$	89,813		52	%		$	92,120		53	%
Easements and other surface-related income			14,219		8	%			18,121		10	%
Land sales			—		—	%			1,244		1	%
Total land and resource management revenue			104,032		60	%			111,485		64	%
Water services and operations:
Water sales			40,650		24	%			37,126		21	%
Produced water royalties			25,301		15	%			23,006		13	%
Easements and other surface-related income			2,351		1	%			2,525		2	%
Total water services and operations revenue			68,302		40	%			62,657		36	%
Total consolidated revenues		$	172,334		100	%		$	174,142		100	%
Net income:
Land and resource management		$	80,129		70	%		$	80,971		71	%
Water services and operations			34,460		30	%			33,446		29	%
Total consolidated net income		$	114,589		100	%		$	114,417		100	%

		Six Months Ended
		June 30, 2024						June 30, 2023
Revenues:
Land and resource management:
Oil and gas royalties		$	181,933		53	%		$	171,542		56	%
Easements and other surface-related income			32,340		9	%			32,401		11	%
Land sales			1,244		—	%			1,400		—	%
Total land and resource management revenue			215,517		62	%			205,343		67	%
Water services and operations:
Water sales			77,776		22	%			59,377		20	%
Produced water royalties			48,307		14	%			40,975		13	%
Easements and other surface-related income			4,876		2	%			1,276		—	%
Total water services and operations revenue			130,959		38	%			101,628		33	%
Total consolidated revenues		$	346,476		100	%		$	306,971		100	%
Net income:
Land and resource management		$	161,100		70	%		$	134,976		72	%
Water services and operations			67,906		30	%			51,985		28	%
Total consolidated net income		$	229,006		100	%		$	186,961		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 expense, 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 plus employee share-based compensation. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and other non-recurring or unusual items, if applicable. 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 ended June 30, 2024 and March 31, 2024 and for the six months ended June 30, 2024 and June 30, 2023 (in thousands):

		Three Months Ended								Six Months Ended
		June 30, 2024				March 31, 2024				June 30, 2024				June 30, 2023
Net income		$	114,589			$	114,417			$	229,006			$	186,961
Add:
Income tax expense			31,853				31,567				63,420				50,531
Depreciation, depletion and amortization			4,093				3,840				7,933				7,297
EBITDA			150,535				149,824				300,359				244,789
Add:
Employee share-based compensation			2,700				2,220				4,920				4,715
Adjusted EBITDA			153,235				152,044				305,279				249,504
Less:
Current income tax expense			(30,766	)			(31,898	)			(62,664	)			(51,204	)
Capital expenditures			(6,499	)			(5,662	)			(12,161	)			(5,144	)
Free Cash Flow		$	115,970			$	114,484			$	230,454			$	193,156

 

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Investor Relations

IR@TexasPacific.com

Source: Texas Pacific Land Corporation

FAQ

What were the Q2 2024 earnings for Texas Pacific Land (TPL)?

Net income was $114.6M, or $4.98 per share.

What was the water segment revenue for Texas Pacific Land (TPL) in Q2 2024?

The water segment revenue was $68.3M, with water sales revenue at $40.7M and produced water royalties at $25.3M.

What dividends were declared by Texas Pacific Land (TPL) in Q2 2024?

A special cash dividend of $10.00 per share paid on July 15, 2024, and a quarterly cash dividend of $1.17 per share payable on September 17, 2024, were declared.

What was the total revenue for Texas Pacific Land (TPL) in Q2 2024?

Total revenue was $172.3M.

What new technology did Texas Pacific Land (TPL) announce in H1 2024?

TPL announced the development of a new energy-efficient water desalination and treatment method.

When was Texas Pacific Land 's (TPL) three-for-one stock split effective?

The stock split was effective on March 26, 2024.