Texas Pacific Land Corporation (TPL)

[Enterprising Investor]

Texas Pacific Land Corporation Announces Third Quarter 2022 Results (11/02/22)

Earnings Call to be held 7:30 am CT on Thursday, November 3, 2022

DALLAS--(BUSINESS WIRE)--Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or "TPL") today announced its financial and operating results for the third quarter of 2022.

Third Quarter 2022 Highlights

- Net income of $129.8 million, or $16.83 per share (basic) and $16.82 per share (diluted)

- Revenues of $191.1 million

- Adjusted EBITDA(1) of $169.8 million

- Royalty production of 23.4 thousand barrels of oil equivalent per day-

- $32.9 million of common stock repurchases

- Quarterly cash dividend of $3.00 per share paid on September 15, 2022

- At the end of the quarter, TPL's royalty acreage had an estimated 5.6 net well permits, 6.9 net drilled but uncompleted wells, 2.9 net completed wells, and 55.0 net producing wells.

- Signed agreement with Samsung Solar Energy 2, LLC to begin evaluating the siting of grid-connected batteries located on TPL surface. Samsung Solar Energy 2, LLC is a renewables development arm of Samsung C&T America, Inc.

- Preliminary work is underway on a number of potential locations for the projects, and completed studies and related pre-development work for the sites will likely take a year or more.

Nine Months Ended September 30, 2022 Highlights

- Net income of $346.6 million, or $44.84 per share (basic) and $44.82 per share (diluted)

- Revenues of $514.7 million

- Adjusted EBITDA(1) of $457.9 million

- Royalty production of 21.3 thousand barrels of oil equivalent per day

- $58.4 million of common stock repurchases

- $224.1 million of total dividends paid during 2022 (comprised of a $20.00 per share special dividend and $9.00 per share in regular dividends)

- Published annual update of Environmental, Social and Governance ("ESG") disclosure including metrics for 2021

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

“TPL continues to perform at a high level as each of our business segments benefit directly and indirectly from strong commodity prices and operator development activity in the Permian Basin,” said Tyler Glover, Chief Executive Officer of the Company. “In addition, we continue to pursue new and innovative ways to utilize and monetize our vast surface footprint. As an example, in September, TPL signed an agreement with Samsung Solar Energy 2, LLC to begin evaluating the siting of grid-connected batteries located on TPL surface. These potential battery projects could enhance grid reliability and encourage further renewables development. TPL is thrilled that Samsung Solar Energy 2, LLC is looking to develop these next generation projects on our surface, and we look forward to collaborating to bring these projects to fruition.”

Financial Results for the Third Quarter of 2022

The Company reported net income of $129.8 million for the third quarter of 2022, an increase of 54.9% compared to net income of $83.8 million for the third quarter of 2021.

Our total revenues increased $67.4 million for the third quarter of 2022 compared to the same period of 2021, largely driven by the $51.2 million increase in oil and gas royalty revenue and the $8.9 million combined increase in water sales and produced water royalties. Our share of production was approximately 23.4 thousand barrels of oil equivalent ("Boe") per day for the third quarter of 2022 compared to 19.5 thousand Boe per day for the same period of 2021. The average realized price was $63.42 per Boe for the third quarter of 2022, compared to $46.07 per Boe for the comparable period of 2021. Water sales increased $4.9 million for the third quarter of 2022 compared to the third quarter of 2021 principally due to a 10.3% increase in the number of barrels of sourced and treated water sold. Produced water royalties increased $4.0 million for the third quarter of 2022 compared to the same period of 2021, principally due to increased produced water volumes. 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 $29.1 million for the third quarter of 2022 increased $8.6 million compared to the same period of 2021. The increase in operating expenses during the third quarter of 2022 is principally related to increases in ad valorem taxes, share-based compensation expense, and transfer and treatment expenses related to the 24.9% increase in water sales revenue over the comparable period of 2021.

Financial Results for the Nine Months Ended September 30, 2022

The Company reported net income of $346.6 million for the nine months ended September 30, 2022, an increase of 81.5% compared to net income of $190.9 million for the nine months ended September 30, 2021.

Our total revenues increased $210.9 million for the nine months ended September 30, 2022 compared to the same period of 2021, largely driven by the $168.9 million increase in oil and gas royalty revenue and the $30.1 million combined increase in water sales and produced water royalties. Our share of production was approximately 21.3 thousand Boe per day for the nine months ended September 30, 2022 compared to 17.5 thousand Boe per day for the same period of 2021. The average realized price was $63.93 per Boe for the nine months ended September 30, 2022 compared to $41.01 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 $76.6 million for the nine months ended September 30, 2022 increased $9.4 million compared to the same period of 2021. Operating expenses for 2022 increased principally as a result of the Company recording a $6.9 million accrual for ad valorem taxes. Additionally, transfer and treatment expenses have increased as water sales revenue has increased 45.7% during 2022 compared to 2021. Partially offsetting these increases, salaries and related employee expenses decreased due to the absence of severance costs in 2022. Further, we have benefited from our ongoing investments towards electrifying our water sourcing infrastructure through the reduction of certain expenses, principally fuel and equipment rental.

Quarterly Dividend Declared

On November 1, 2022, the Board declared a quarterly cash dividend of $3.00 per share, payable on December 15, 2022 to stockholders of record at the close of business on December 8, 2022.

Stock Repurchase Program

On November 1, 2022, our board of directors approved a stock repurchase program to purchase up to an aggregate of $250 million of our outstanding common stock to be effective beginning January 1, 2023.

The Company intends to purchase stock under the repurchase program opportunistically with funds generated by cash from operations. This repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. Purchases under the stock repurchase program may be made through a combination of open market repurchases in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, privately negotiated transactions, and/or other transactions at the Company’s discretion, including under a Rule 10b5-1 trading plan that may be implemented by the Company, and will be subject to market conditions, applicable legal requirements and other factors.

Conference Call and Webcast Information

The Company will hold a conference call on Thursday, November 3, 2022 at 7:30 a.m. Central Time to discuss third 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# 13731406. The telephone replay will be available starting shortly after the call through November 17, 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.

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