Energy Sector Ideas

[gfp927z]

Texas Pacific Land (TPL) - >>> A passive company packed with passive income potential

https://finance.yahoo.com/news/think-crude-oil-going-100-094500311.html

Daniel Foelber (Texas Pacific Land): Formed out of the bankruptcy of Pacific Railroad in the 19th century, Texas Pacific Land owns around 880,000 acres of land in West Texas. If you've ever been to West Texas, you know the terrain can be inhospitable to human settlement. But it is gushing with oil reserves.

Texas Pacific makes money from its land through royalties, water sales, and other factors. It typically makes more money when oil and gas prices are higher, but it isn't as correlated to the price of fossil fuels as an exploration and production company.

For example, it reported significantly lower realized oil, natural gas, and natural gas liquids (NGLs) prices in 2023 compared to 2022. The price per barrel of oil equivalent, which is basically a weighted average for oil, natural gas, and NGLs, was 30% lower in 2023 than in 2022. Yet overall revenue was down less than 6%, and net income was down a little over 9% thanks to higher water royalties.

Category

2022

2023

Oil and gas royalties

$452.43 million

$357.39 million

Water sales

$84.73 million

$112.20 million

Produced water royalties

$72.23 million

$84.26 million

Easements and other surface-related income

$48.06 million

$70.93 million

Land sales and other operating revenue

$9.97 million

$6.81 million

Total Revenue

$667.42 million

$631.6 million

In the following chart, you can see that Texas Pacific Land consistently makes a profit no matter the cycle due to its low cost and passive business model. It also converts a majority of revenue to net income.

Texas Pacific rewards its shareholders with quarterly dividends, which vary in size based on its earnings. For example, the company paid $32 per share in 2022 dividends but just $13 per share in 2023.

Texas Pacific isn't the ideal company if you're looking for predictable passive income or to supplement income in retirement. Still, it is a good choice if you want to invest in oil and gas but avoid the volatility that comes with severe downturns.

<<<



---