Earnings Call to be held 7:30 am CT on Thursday, February 22, 2024
DALLAS–(BUSINESS WIRE)–Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or “TPL”) today announced its financial and operating results for the fourth quarter and full year of 2023.
Fourth Quarter 2023 Highlights
- Net income of $113.1 million, or $14.73 per share (diluted)
- Revenues of $166.7 million
- Adjusted EBITDA(1) of $150.9 million
- Free cash flow (1) of $116.3 million
- Royalty production of 26.3 thousand barrels of oil equivalent per day, the highest quarterly royalty production level in TPL history
- $10.2 million of common stock repurchases
- Quarterly cash dividend of $3.25 per share paid on December 15, 2023
- As of December 31, 2023, TPL’s royalty acreage had an estimated 4.5 net well permits, 9.7 net drilled but uncompleted wells, 2.8 net completed wells, and 67.2 net producing wells.
Full Year 2023 Highlights
- Net income of $405.6 million, or $52.77 per share (diluted)
- Revenues of $631.6 million
- Adjusted EBITDA(1) of $541.4 million
- Free cash flow(1) of $415.5 million
- Royalty production of 23.5 thousand barrels of oil equivalent per day
- $42.4 million of common stock repurchases
- $100.0 million of total cash dividends paid during 2023 (comprised of $13.00 per share in regular dividends)
(1) Reconciliations of Non-GAAP measures are provided in the tables below.
“Fourth quarter 2023 capped off a strong year for TPL,” said Tyler Glover, Chief Executive Officer of the Company. “Driven by robust oil and gas royalty production and continued growth of our water and surface businesses, total consolidated revenues and free cash flow for this most recent quarter were the highest of any quarter in 2023. For the full year 2023, TPL generated record revenues from our Water segment, while revenues from our easements and other surface-related income grew nearly 50% year-over-year. This growth of our surface-related businesses helped to substantially offset lower commodity prices. Looking ahead to 2024, we continue to see strong activity on our royalty and surface acreage. With an unmatched Permian asset footprint, high free cash flow margins, a resilient business mix, and a large net cash balance, TPL is well-positioned in 2024 to seize on opportunities for value-added growth and shareholder return of capital.”
Financial Results for the Fourth Quarter of 2023
The Company reported net income of $113.1 million for the fourth quarter of 2023 compared to net income of $99.7 million for the fourth quarter of 2022.
Total revenues for the fourth quarter of 2023 were $166.7 million compared to $152.7 million for the fourth quarter of 2022. The increase in revenue was principally due to a combined increase of $10.1 million in water sales and produced water royalties and an increase of $8.3 million in easements and other surface-related income. Oil and gas royalty revenue increased $2.1 million due to higher production volumes in the fourth quarter of 2023 compared to the fourth quarter of 2022 partially offset by lower average commodity prices over the same period. The Company’s share of production was 26.3 thousand barrels of oil equivalent (“Boe”) per day for the fourth quarter of 2023 versus 21.3 thousand Boe per day for the same period of 2022. The average realized price was $42.81 per Boe in the fourth quarter of 2023 versus $51.57 per Boe in the fourth quarter of 2022. TPL’s revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.
Total operating expenses of $32.8 million for the fourth quarter of 2023 increased $4.3 million compared to the same period of 2022. The change in operating expenses is principally related to an increase in water service-related expenses resulting from increased water sales activity during the fourth quarter of 2023 compared to the same period of 2022.
Financial Results for the Year Ended December 31, 2023
The Company reported net income of $405.6 million for the year ended December 31, 2023, a decrease of 9.1% compared to net income of $446.4 million for the year ended December 31, 2022.
Total revenues decreased $35.8 million for the year ended December 31, 2023 compared to the same period of 2022. Oil and gas royalty revenue of $357.4 million for the year ended December 31, 2023 includes an $8.7 million recovery, as discussed below. As part of an ongoing arbitration between TPL and an operator with respect to underpayment of oil and gas royalties resulting from improper deductions of post-production costs by the operator for production periods before and through June 2023, the operator agreed to pay $10.1 million to TPL, comprised of $8.7 million of unpaid oil and gas royalties, $0.9 million of interest and $0.5 million of damages (the “O&G Settlement”). Excluding the impact of the $8.7 million recovery, oil and gas royalty revenue decreased $103.7 million compared to the same period of 2022. The Company’s share of production was approximately 23.5 thousand Boe per day for the year ended December 31, 2023 versus 21.3 thousand Boe per day for the same period of 2022. The average realized price was $42.58 per Boe for the year ended December 31, 2023 versus $60.81 per Boe for the same period of 2022. The decrease in oil and gas royalty revenue was partially offset by a combined increase of $39.5 million in water sales and produced water royalties and an increase of $22.9 million in easements and other surface-related income. TPL’s revenue streams are directly impacted by commodity prices and development and operating decisions made by our customers.
Total operating expenses of $145.5 million for the year ended December 31, 2023 increased $40.4 million compared to the same period of 2022. The change in operating expenses is principally related to increases in legal and professional fees and water service-related expenses during the year ended December 31, 2023 compared to the same period of 2022. During 2023, the Company made the operational decision to incur higher water service-related expenses in order to meet increased customer demand for water within shorter time commitments. This decision, in turn, resulted in higher water sales revenue and operating income during 2023 over 2022.
Quarterly Dividend Declared
On February 13, 2024, the Board declared a quarterly cash dividend of $3.50 per share, payable on March 15, 2024 to stockholders of record at the close of business on March 1, 2024.
Update on Consideration of Stockholder Proposal from the 2023 Annual Meeting
The Company also announced that on February 12, 2024, the Nominating and Corporate Governance Committee recommended to the full Board that the Board consider including in the 2024 proxy materials a proposal granting stockholders the right to call a special meeting for approval at the Company’s 2024 Annual Meeting. Pursuant to the recommendation of the Nominating and Corporate Governance Committee, the Company is currently evaluating the appropriate parameters for such right, with the intent to make a final recommendation to the full Board prior to the release of the proxy materials for the Company’s 2024 Annual Meeting of Stockholders.
Conference Call and Webcast Information
The Company will hold a conference call on Thursday, February 22, 2024 at 7:30 a.m. Central Time to discuss fourth quarter and year end 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# 13742748. The telephone replay will be available starting shortly after the call through March 7, 2024.
About Texas Pacific Land Corporation
Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 868,000 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 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 |
||||||||||||
|
(unaudited) |
||||||||||||
|
|
|
Three Months Ended December 31, |
|
Years Ended December 31, |
||||||||
|
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
Company’s share of production volumes(1) (2): |
|
|
|
|
|
|
|
|
||||
|
Oil (MBbls) |
|
|
1,059 |
|
|
864 |
|
|
3,701 |
|
|
3,401 |
|
Natural gas (MMcf) |
|
|
4,124 |
|
|
3,313 |
|
|
14,528 |
|
|
13,086 |
|
NGL (MBbls) |
|
|
669 |
|
|
548 |
|
|
2,453 |
|
|
2,208 |
|
Equivalents (MBoe) |
|
|
2,416 |
|
|
1,964 |
|
|
8,575 |
|
|
7,791 |
|
Equivalents per day (MBoe/d) |
|
|
26.3 |
|
|
21.3 |
|
|
23.5 |
|
|
21.3 |
|
|
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalty revenue (in thousands) (2): |
|
|
|
|
|
|
|
|
||||
|
Oil royalties |
|
$ |
79,335 |
|
$ |
68,585 |
|
$ |
273,304 |
|
$ |
307,606 |
|
Natural gas royalties |
|
|
6,705 |
|
|
14,679 |
|
|
29,915 |
|
|
74,866 |
|
NGL royalties |
|
|
12,710 |
|
|
13,432 |
|
|
45,510 |
|
|
69,962 |
|
Total oil and gas royalties |
|
$ |
98,750 |
|
$ |
96,696 |
|
$ |
348,729 |
|
$ |
452,434 |
|
|
|
|
|
|
|
|
|
|
||||
|
Realized prices (1) (2): |
|
|
|
|
|
|
|
|
||||
|
Oil ($/Bbl) |
|
$ |
78.46 |
|
$ |
83.16 |
|
$ |
77.33 |
|
$ |
94.69 |
|
Natural gas ($/Mcf) |
|
$ |
1.76 |
|
$ |
4.79 |
|
$ |
2.23 |
|
$ |
6.19 |
|
NGL ($/Bbl) |
|
$ |
20.53 |
|
$ |
26.51 |
|
$ |
20.05 |
|
$ |
34.25 |
|
Equivalents ($/Boe) |
|
$ |
42.81 |
|
$ |
51.57 |
|
$ |
42.58 |
|
$ |
60.81 |
|
(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 provided exclude the impact of the $8.7 million of oil and gas royalties from the O&G Settlement discussed above. |
|||
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||
|
(in thousands, except share and per share amounts) (unaudited) |
||||||||||||
|
|
|
Three Months Ended December 31, |
|
Years Ended December 31, |
||||||||
|
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalties |
|
$ |
98,750 |
|
$ |
96,696 |
|
$ |
357,394 |
|
$ |
452,434 |
|
Water sales |
|
|
26,404 |
|
|
19,207 |
|
|
112,203 |
|
|
84,725 |
|
Produced water royalties |
|
|
22,436 |
|
|
19,566 |
|
|
84,260 |
|
|
72,234 |
|
Easements and other surface-related income |
|
|
19,067 |
|
|
10,746 |
|
|
70,932 |
|
|
48,057 |
|
Land sales and other operating revenue |
|
|
— |
|
|
6,491 |
|
|
6,806 |
|
|
9,972 |
|
Total revenues |
|
|
166,657 |
|
|
152,706 |
|
|
631,595 |
|
|
667,422 |
|
|
|
|
|
|
|
|
|
|
||||
|
Expenses: |
|
|
|
|
|
|
|
|
||||
|
Salaries and related employee expenses |
|
|
10,696 |
|
|
11,732 |
|
|
43,384 |
|
|
41,402 |
|
Water service-related expenses |
|
|
9,070 |
|
|
4,418 |
|
|
33,566 |
|
|
17,463 |
|
General and administrative expenses |
|
|
4,141 |
|
|
3,524 |
|
|
14,928 |
|
|
13,285 |
|
Legal and professional fees |
|
|
3,051 |
|
|
3,747 |
|
|
31,522 |
|
|
8,735 |
|
Ad valorem and other taxes |
|
|
1,960 |
|
|
1,901 |
|
|
7,385 |
|
|
8,854 |
|
Depreciation, depletion and amortization |
|
|
3,876 |
|
|
3,153 |
|
|
14,757 |
|
|
15,376 |
|
Total operating expenses |
|
|
32,794 |
|
|
28,475 |
|
|
145,542 |
|
|
105,115 |
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income |
|
|
133,863 |
|
|
124,231 |
|
|
486,053 |
|
|
562,307 |
|
|
|
|
|
|
|
|
|
|
||||
|
Other income, net |
|
|
11,269 |
|
|
3,922 |
|
|
31,508 |
|
|
6,548 |
|
Income before income taxes |
|
|
145,132 |
|
|
128,153 |
|
|
517,561 |
|
|
568,855 |
|
Income tax expense |
|
|
32,022 |
|
|
28,422 |
|
|
111,916 |
|
|
122,493 |
|
Net income |
|
$ |
113,110 |
|
$ |
99,731 |
|
$ |
405,645 |
|
$ |
446,362 |
|
|
|
|
|
|
|
|
|
|
||||
|
Net income per share of common stock |
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
14.74 |
|
$ |
12.95 |
|
$ |
52.81 |
|
$ |
57.80 |
|
Diluted |
|
$ |
14.73 |
|
$ |
12.94 |
|
$ |
52.77 |
|
$ |
57.77 |
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average number of shares of common stock outstanding |
|
|
|
|
|
|
|
|
||||
|
Basic |
|
|
7,671,773 |
|
|
7,698,487 |
|
|
7,681,435 |
|
|
7,721,957 |
|
Diluted |
|
|
7,678,182 |
|
|
7,705,116 |
|
|
7,686,615 |
|
|
7,726,809 |
|
SEGMENT OPERATING RESULTS |
||||||||||||
|
(dollars in thousands) (unaudited) |
||||||||||||
|
|
|
Three Months Ended December 31, |
||||||||||
|
|
|
2023 |
|
2022 |
||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management: |
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalties |
|
$ |
98,750 |
|
59 |
% |
|
$ |
96,696 |
|
64 |
% |
|
Easements and other surface-related income |
|
|
18,079 |
|
11 |
% |
|
|
9,841 |
|
6 |
% |
|
Land sales and other operating revenue |
|
|
— |
|
— |
% |
|
|
6,491 |
|
4 |
% |
|
Total land and resource management revenue |
|
|
116,829 |
|
70 |
% |
|
|
113,028 |
|
74 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Water services and operations: |
|
|
|
|
|
|
|
|
||||
|
Water sales |
|
|
26,404 |
|
16 |
% |
|
|
19,207 |
|
13 |
% |
|
Produced water royalties |
|
|
22,436 |
|
13 |
% |
|
|
19,566 |
|
13 |
% |
|
Easements and other surface-related income |
|
|
988 |
|
1 |
% |
|
|
905 |
|
— |
% |
|
Total water services and operations revenue |
|
|
49,828 |
|
30 |
% |
|
|
39,678 |
|
26 |
% |
|
Total consolidated revenues |
|
$ |
166,657 |
|
100 |
% |
|
$ |
152,706 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Net income: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management |
|
$ |
88,846 |
|
79 |
% |
|
$ |
79,623 |
|
80 |
% |
|
Water services and operations |
|
|
24,264 |
|
21 |
% |
|
|
20,108 |
|
20 |
% |
|
Total consolidated net income |
|
$ |
113,110 |
|
100 |
% |
|
$ |
99,731 |
|
100 |
% |
|
|
|
Years Ended December 31, |
||||||||||
|
|
|
2023 |
|
2022 |
||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management: |
|
|
|
|
|
|
|
|
||||
|
Oil and gas royalties |
|
$ |
357,394 |
|
57 |
% |
|
$ |
452,434 |
|
68 |
% |
|
Easements and other surface-related income |
|
|
67,905 |
|
11 |
% |
|
|
44,569 |
|
7 |
% |
|
Land sales and other operating revenue |
|
|
6,806 |
|
1 |
% |
|
|
9,972 |
|
1 |
% |
|
Total land and resource management revenue |
|
|
432,105 |
|
69 |
% |
|
|
506,975 |
|
76 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Water services and operations: |
|
|
|
|
|
|
|
|
||||
|
Water sales |
|
|
112,203 |
|
18 |
% |
|
|
84,725 |
|
13 |
% |
|
Produced water royalties |
|
|
84,260 |
|
13 |
% |
|
|
72,234 |
|
11 |
% |
|
Easements and other surface-related income |
|
|
3,027 |
|
— |
% |
|
|
3,488 |
|
— |
% |
|
Total water services and operations revenue |
|
|
199,490 |
|
31 |
% |
|
|
160,447 |
|
24 |
% |
|
Total consolidated revenues |
|
$ |
631,595 |
|
100 |
% |
|
$ |
667,422 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
||||
|
Net income: |
|
|
|
|
|
|
|
|
||||
|
Land and resource management |
|
$ |
306,706 |
|
76 |
% |
|
$ |
365,041 |
|
82 |
% |
|
Water services and operations |
|
|
98,939 |
|
24 |
% |
|
|
81,321 |
|
18 |
% |
|
Total consolidated net income |
|
$ |
405,645 |
|
100 |
% |
|
$ |
446,362 |
|
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, 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 employee share-based compensation. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and/or other non-recurring or unusual items. 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 and years ended December 31, 2023 and 2022 (in thousands):
|
|
|
Three Months Ended December 31, |
|
Years Ended December 31, |
||||||||||||
|
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
Net income |
|
$ |
113,110 |
|
|
$ |
99,731 |
|
|
$ |
405,645 |
|
|
$ |
446,362 |
|
|
Add: |
|
|
|
|
|
|
|
|
||||||||
|
Income tax expense |
|
|
32,022 |
|
|
|
28,422 |
|
|
|
111,916 |
|
|
|
122,493 |
|
|
Depreciation, depletion and amortization |
|
|
3,876 |
|
|
|
3,153 |
|
|
|
14,757 |
|
|
|
15,376 |
|
|
EBITDA |
|
|
149,008 |
|
|
|
131,306 |
|
|
|
532,318 |
|
|
|
584,231 |
|
|
Add: |
|
|
|
|
|
|
|
|
||||||||
|
Employee share-based compensation |
|
|
1,907 |
|
|
|
2,594 |
|
|
|
9,124 |
|
|
|
7,583 |
|
|
Adjusted EBITDA |
|
|
150,915 |
|
|
|
133,900 |
|
|
|
541,442 |
|
|
|
591,814 |
|
|
Less: |
|
|
|
|
|
|
|
|
||||||||
|
Current income tax expense |
|
|
(29,589 |
) |
|
|
(26,319 |
) |
|
|
(110,517 |
) |
|
|
(121,230 |
) |
|
Capital expenditures |
|
|
(5,044 |
) |
|
|
(6,812 |
) |
|
|
(15,431 |
) |
|
|
(18,967 |
) |
|
Free Cash Flow |
|
$ |
116,282 |
|
|
$ |
100,769 |
|
|
$ |
415,494 |
|
|
$ |
451,617 |
|
Contacts
Investor Relations
IR@TexasPacific.com