Texas Pacific Land Trust Announces Third Quarter 2020 Results
Texas Pacific Land Trust (NYSE: TPL) has reported its financial results for Q3 2020, showing a net income of $46.3 million, down 22.9% from $60.0 million in Q3 2019. Revenues decreased to $74.4 million, a 24.4% decline from $98.5 million last year. Key revenue drops include 17.0% in oil and gas royalties and 44.2% in easements income. For the nine months ended September 30, 2020, net income fell 47.4% to $131.3 million, with significant decreases in oil and gas royalties and water sales. The company is progressing towards its reorganization to a corporation by Q4 2020.
- Net income for Q3 2020 was $46.3 million, showing operational profitability.
- Land sales revenue increased to $11.5 million compared to $4.6 million in Q3 2019.
- Crude oil production subject to royalty interests increased by 7.3%, indicating higher output.
- Net income decreased by 22.9% in Q3 2020 compared to Q3 2019.
- Total revenues dropped by 24.4% year-over-year for Q3 2020.
- Significant decreases in oil and gas royalty revenue (17.0%), easements income (44.2%), and water sales (43.9%) compared to Q3 2019.
- For the nine months ended September 30, 2020, net income fell by 47.4% from the prior year.
DALLAS--(BUSINESS WIRE)--Texas Pacific Land Trust (NYSE: TPL) (the “Trust”) today announced financial and operating results for the third quarter ended September 30, 2020.
Results for the third quarter of 2020:
-
Net income of
$46.3 million , or$5.97 per Sub-share Certificate, for the third quarter ended September 30, 2020 compared with$60.0 million , or$7.74 per Sub-share Certificate, for the third quarter ended September 30, 2019.
-
Revenues of
$74.4 million for the third quarter ended September 30, 2020, compared with$98.5 million for the third quarter ended September 30, 2019.
-
Decreases of
17.0% in oil and gas royalty revenue,44.2% in easements and other surface-related income and43.9% in water sales and royalty revenue for the third quarter ended September 30, 2020 compared with the third quarter ended September 30, 2019.
-
EBITDA of
$61.8 million for the third quarter ended September 30, 2020, compared with$77.4 million for the third quarter ended September 30, 2019.
Results for the nine months ended September 30, 2020:
-
Net income of
$131.3 million , or$16.92 per Sub-share Certificate, for the nine months ended September 30, 2020 compared with$249.6 million (which included a$100 million land sale), or$32.18 per Sub-share Certificate, for the nine months ended September 30, 2019.
-
Revenues of
$228.3 million for the nine months ended September 30, 2020, compared with$377.2 million for the nine months ended September 30, 2019 (which included a$100 million land sale).
-
Decreases of
14.8% in oil and gas royalty revenue,20.2% in easements and other surface-related income and27.0% in water sales and royalty revenue for the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019.
-
EBITDA of
$175.1 million for the nine months ended September 30, 2020, compared with$318.5 million for the nine months ended September 30, 2019 (which included a$100 million land sale).
“While our third quarter results have improved over the second quarter of 2020, uncertainty in the current environment remains and continues to present challenges for the oil and gas industry,” said Tyler Glover, Chief Executive Officer of the Trust. “However, we remain confident that the Trust is financially and operationally well-equipped to continue navigating these challenges and are committed to maintaining our track record of capital discipline and optimal liquidity while ensuring the health and safety of our employees.”
Further details for the third quarter of 2020:
The Trust reported net income of
Oil and gas royalty revenue was
Easements and other surface-related income was
Water sales and royalty revenue was
The Trust recognized land sales revenue of
Further details for the nine months ended September 30, 2020:
The Trust reported net income of
Oil and gas royalty revenue was
Easements and other surface-related income was
Water sales and royalty revenue was
The Trust recognized land sales revenue of
COVID-19 Pandemic and Market Conditions Update
The uncertainty surrounding the severity and duration of the COVID-19 pandemic, as well as dramatic declines in crude oil prices due in part to the global spread of COVID-19, has caused volatility in the global financial markets including the oil and gas industry. Significant mitigation measures, such as shelter-in place orders, travel bans and business restrictions, among other things, established to reduce the global, national and local spread of COVID-19, have further affected the supply and demand for crude oil. While uncertainty remains around COVID-19 mitigation measures and re-opening efforts, we believe demand is beginning to recover.
These events have negatively affected, and are expected to continue to negatively affect, the Trust’s business and results of operations. Should additional oil and gas wells be shut in, production continue to be curtailed or the owners and operators of the oil and gas wells to which the Trust’s royalty interests relate continue to decrease investment in response to lower commodity prices and conservation of capital, we would expect the Trust’s royalty income and demand for our water services to remain at the reduced levels that the Trust has experienced during the second and third quarters of 2020 and may decline further.
Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist, or the extent of the impact they will have on the Trust’s business or results of operations and financial condition.
Conversion of the Trust
As previously announced on March 23, 2020, our Trustees approved a plan to reorganize the Trust from its current structure to a corporation formed under the laws of the State of Delaware. We continue to progress towards the conversion. On June 15, 2020, the Trust announced the new corporation will be named Texas Pacific Land Corporation (“TPL Corp”) and the persons selected to serve as directors on the Board of Directors of TPL Corp. Additionally, a draft registration statement on Form 10 has been submitted to the Securities and Exchange Commission for review, on a non-public basis. The Trust continues to make progress toward effecting its planned corporate reorganization into a Delaware corporation and, currently anticipates to be in a position to move forward with the reorganization by the end of the fourth quarter of 2020.
About Texas Pacific Land Trust
Texas Pacific Land Trust is one of the largest landowners in the State of Texas with approximately 880,000 acres of land in West Texas. The Trust was organized under a Declaration of Trust to receive and hold title to extensive tracts of land in the State of Texas, previously the property of the Texas and Pacific Railway Company, and to issue transferable Certificates of Proprietary Interest pro rata to the holders of certain debt securities of the Texas and Pacific Railway Company. Texas Pacific Land Trust’s trustees are empowered under the Declaration of Trust to manage the lands with all the powers of an absolute owner. Texas Pacific Land Trust is not a REIT.
Forward-Looking Statements
This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the Trust’s future operations and prospects, the severity and duration of the COVID-19 pandemic and related economic repercussions, the markets for real estate in the areas in which the Trust owns real estate, applicable zoning regulations, the markets for oil and gas, the proposed reorganization of the Trust into a corporation, production limits on prorated oil and gas wells authorized by the Railroad Commission of Texas, expected competition, management’s intent, beliefs or current expectations with respect to the Trust’s future financial performance and other matters. We assume no responsibility to update any such forward-looking statements.
REPORT OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) |
|||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
Revenues: |
|
|
|
|
|
|
|
|
|||||||||
Oil and gas royalties |
|
$ |
31,758 |
|
|
$ |
38,259 |
|
|
$ |
94,631 |
|
|
|
$ |
111,113 |
|
Easements and other surface-related income |
|
18,936 |
|
|
33,911 |
|
|
69,970 |
|
|
|
87,635 |
|
||||
Water sales and royalties |
|
12,139 |
|
|
21,654 |
|
|
47,525 |
|
|
|
65,067 |
|
||||
Land sales |
|
11,463 |
|
|
4,621 |
|
|
15,855 |
|
|
|
113,020 |
|
||||
Other operating revenue |
|
87 |
|
|
85 |
|
|
269 |
|
|
|
329 |
|
||||
Total revenues |
|
74,383 |
|
|
98,530 |
|
|
228,250 |
|
|
|
377,164 |
|
||||
|
|
|
|
|
|
|
|
|
|||||||||
Expenses: |
|
|
|
|
|
|
|
|
|||||||||
Salaries and related employee expenses |
|
7,678 |
|
|
8,537 |
|
|
27,235 |
|
|
|
22,742 |
|
||||
Water service-related expenses |
|
2,260 |
|
|
5,122 |
|
|
11,205 |
|
|
|
15,423 |
|
||||
General and administrative expenses |
|
1,883 |
|
|
2,864 |
|
|
7,290 |
|
|
|
6,877 |
|
||||
Legal and professional fees |
|
1,987 |
|
|
5,558 |
|
|
6,955 |
|
|
|
15,198 |
|
||||
Land sales expenses |
|
67 |
|
|
— |
|
|
2,773 |
|
|
|
225 |
|
||||
Depreciation, depletion and amortization |
|
3,760 |
|
|
2,631 |
|
|
10,773 |
|
|
|
5,286 |
|
||||
Total operating expenses |
|
17,635 |
|
|
24,712 |
|
|
66,231 |
|
|
|
65,751 |
|
||||
|
|
|
|
|
|
|
|
|
|||||||||
Operating income |
|
56,748 |
|
|
73,818 |
|
|
162,019 |
|
|
|
311,413 |
|
||||
|
|
|
|
|
|
|
|
|
|||||||||
Other income, net |
|
1,287 |
|
|
941 |
|
|
2,306 |
|
|
|
1,771 |
|
||||
Income before income taxes |
|
58,035 |
|
|
74,759 |
|
|
164,325 |
|
|
|
313,184 |
|
||||
Income tax expense (benefit): |
|
|
|
|
|
|
|
|
|||||||||
Current |
|
11,146 |
|
|
9,918 |
|
|
33,153 |
|
|
|
43,485 |
|
||||
Deferred |
|
614 |
|
|
4,819 |
|
|
(86 |
) |
|
|
20,093 |
|
||||
Total income tax expense |
|
11,760 |
|
|
14,737 |
|
|
33,067 |
|
|
|
63,578 |
|
||||
Net income |
|
$ |
46,275 |
|
|
$ |
60,022 |
|
|
$ |
131,258 |
|
|
|
$ |
249,606 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income per Sub-share Certificate - basic and diluted |
|
$ |
5.97 |
|
|
$ |
7.74 |
|
|
$ |
16.92 |
|
|
|
$ |
32.18 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of Sub-share Certificates outstanding |
|
7,756,156 |
|
|
7,756,156 |
|
|
7,756,156 |
|
|
|
7,756,643 |
|
||||
SEGMENT OPERATING RESULTS (in thousands) (unaudited) |
||||||||||||||
|
|
Three Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
||||||||||
Revenues: |
|
|
|
|
|
|
|
|
||||||
Land and resource management: |
|
|
|
|
|
|
|
|
||||||
Oil and gas royalties |
|
$ |
31,758 |
|
|
43 |
% |
|
$ |
38,259 |
|
|
39 |
% |
Easements and other surface-related income |
|
6,588 |
|
|
9 |
% |
|
22,111 |
|
|
22 |
% |
||
Land sales and other operating revenue |
|
11,550 |
|
|
15 |
% |
|
4,706 |
|
|
5 |
% |
||
|
|
49,896 |
|
|
67 |
% |
|
65,076 |
|
|
66 |
% |
||
Water services and operations: |
|
|
|
|
|
|
|
|
||||||
Water sales and royalties |
|
12,139 |
|
|
16 |
% |
|
21,654 |
|
|
22 |
% |
||
Easements and other surface-related income |
|
12,348 |
|
|
17 |
% |
|
11,800 |
|
|
12 |
% |
||
|
|
24,487 |
|
|
33 |
% |
|
33,454 |
|
|
34 |
% |
||
Total consolidated revenues |
|
$ |
74,383 |
|
|
100 |
% |
|
$ |
98,530 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
||||||
Net income: |
|
|
|
|
|
|
|
|
||||||
Land and resource management |
|
$ |
34,359 |
|
|
74 |
% |
|
$ |
43,911 |
|
|
73 |
% |
Water services and operations |
|
11,916 |
|
|
26 |
% |
|
16,111 |
|
|
27 |
% |
||
Total consolidated net income |
|
$ |
46,275 |
|
|
100 |
% |
|
$ |
60,022 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
||||||
|
|
Nine Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
||||||||||
Revenues: |
|
|
|
|
|
|
|
|
||||||
Land and resource management: |
|
|
|
|
|
|
|
|
||||||
Oil and gas royalties |
|
$ |
94,631 |
|
|
41 |
% |
|
$ |
111,113 |
|
|
29 |
% |
Easements and other surface-related income |
|
31,385 |
|
|
14 |
% |
|
59,761 |
|
|
16 |
% |
||
Land sales and other operating revenue |
|
16,124 |
|
|
7 |
% |
|
113,349 |
|
|
30 |
% |
||
|
|
142,140 |
|
|
62 |
% |
|
284,223 |
|
|
75 |
% |
||
Water services and operations: |
|
|
|
|
|
|
|
|
||||||
Water sales and royalties |
|
47,525 |
|
|
21 |
% |
|
65,067 |
|
|
17 |
% |
||
Easements and other surface-related income |
|
38,585 |
|
|
17 |
% |
|
27,874 |
|
|
8 |
% |
||
|
|
86,110 |
|
|
38 |
% |
|
92,941 |
|
|
25 |
% |
||
Total consolidated revenues |
|
$ |
228,250 |
|
|
100 |
% |
|
$ |
377,164 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
||||||
Net income: |
|
|
|
|
|
|
|
|
||||||
Land and resource management |
|
$ |
92,197 |
|
|
70 |
% |
|
$ |
204,222 |
|
|
82 |
% |
Water services and operations |
|
39,061 |
|
|
30 |
% |
|
45,384 |
|
|
18 |
% |
||
Total consolidated net income |
|
$ |
131,258 |
|
|
100 |
% |
|
$ |
249,606 |
|
|
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 Securities and Exchange Commission (“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
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 have presented EBITDA because we believe that it is a useful supplement to net income as an indicator of operating performance.
The following table presents a reconciliation of net income to EBITDA for the three and nine months ended September 30, 2020 and 2019 (in thousands):
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
Net income |
|
$ |
46,275 |
|
|
$ |
60,022 |
|
|
$ |
131,258 |
|
|
$ |
249,606 |
|
Add: |
|
|
|
|
|
|
|
|
||||||||
Income tax expense |
|
11,760 |
|
|
14,737 |
|
|
33,067 |
|
|
63,578 |
|
||||
Depreciation, depletion and amortization |
|
3,760 |
|
|
2,631 |
|
|
10,773 |
|
|
5,286 |
|
||||
EBITDA |
|
$ |
61,795 |
|
|
$ |
77,390 |
|
|
$ |
175,098 |
|
|
$ |
318,470 |
|
|
|
|
|
|
|
|
|
|
||||||||
