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Texas Pacific Land Corporation Announces Fourth Quarter and Full Year Results

Earnings Call to be held 7:30 am CT on Thursday, February 23, 2023

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 2022.

Fourth Quarter 2022 Highlights

  • Net income of $99.7 million, or $12.95 per share (basic) and $12.94 per share (diluted)
  • Revenues of $152.7 million
  • Adjusted EBITDA(1) of $133.9 million
  • Royalty production of 21.3 thousand barrels of oil equivalent per day
  • $29.5 million of common stock repurchases
  • Quarterly cash dividend of $3.00 per share paid on December 15, 2022
  • As of December 31, 2022, TPL's royalty acreage had an estimated 5.0 net well permits, 7.4 net drilled but uncompleted wells, 2.3 net completed wells, and 57.7 net producing wells.

Full Year 2022 Highlights

  • Net income of $446.4 million, or $57.80 per share (basic) and $57.77 per share (diluted)
  • Revenues of $667.4 million
  • Adjusted EBITDA(1) of $591.8 million
  • Royalty production of 21.3 thousand barrels of oil equivalent per day
  • $87.9 million of common stock repurchases
  • $247.3 million of total cash dividends paid during 2022 (comprised of a $20.00 per share special dividend and $12.00 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.

“For the full year 2022, TPL achieved record results across both of our operating segments, record consolidated adjusted EBITDA, and record earnings per share,” said Tyler Glover, Chief Executive Officer of the Company. “The strong performance reflects the high quality of our underlying assets, the benefits of our active management approach, and the advantages of a vertically integrated business model. We also continue to make progress towards extracting value beyond our legacy revenue streams with opportunities such as carbon capture, grid batteries, renewables, and beneficial water reuse. Looking forward to 2023, although recent commodity prices have experienced some volatility, development activity in the Permian will remain robust. TPL is well positioned to capture value and generate free cash flow, and we look forward to sustaining our positive momentum into the new year.”

Financial Results for the Fourth Quarter of 2022

The Company reported net income of $99.7 million for the fourth quarter of 2022, an increase of 26.2% compared to net income of $79.0 million for the fourth quarter of 2021.

Our total revenues increased $5.5 million for the fourth quarter of 2022 compared to the same period of 2021, largely driven by a $6.4 million land sale of 6,263 acres and a $4.6 million increase in produced water royalties, principally related to increased volumes. These increases were partially offset by a decrease of $3.6 million in water sales, principally due to a 15.2% decrease in the number of barrels of sourced and treated water sold, and a decrease of $2.9 million in oil and gas royalties. Our share of production was approximately 21.3 thousand barrels of oil equivalent ("Boe") per day for the fourth quarter of 2022 compared to 22.0 thousand Boe per day for the same period of 2021. The average realized price was $51.57 per Boe for the fourth quarter of 2022, compared to $51.53 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 $28.5 million for the fourth quarter of 2022 increased $7.2 million compared to the same period of 2021. The increase in operating expenses is principally related to an increase in share-based compensation expense driven by the graded-vesting accounting method and an increase in ad valorem taxes during the fourth quarter of 2022 compared to the same period of 2021.

Financial Results for the Year Ended December 31, 2022

The Company reported net income of $446.4 million for the year ended December 31, 2022, an increase of 65.3% compared to net income of $270.0 million for the year ended December 31, 2021.

Our total revenues increased $216.5 million for the year ended December 31, 2022 compared to the same period of 2021, largely driven by a $166.0 million increase in oil and gas royalties, a $17.0 million increase in water sales, and a $14.2 million increase in produced water royalties. Our share of production was approximately 21.3 thousand Boe per day for the year ended December 31, 2022 compared to 18.6 thousand Boe per day for the same period of 2021. The average realized price was $60.81 per Boe for the year ended December 31, 2022 compared to $44.14 per Boe for the comparable period of 2021. The increases in water sales and produced water royalties are principally due to increased volumes. 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 $105.1 million for the year ended December 31, 2022 increased $16.6 million compared to the same period of 2021. Operating expenses for 2022 increased principally as a result of the Company recording an expense of $8.7 million for ad valorem taxes. Additionally, transfer and treatment expenses have increased as water sales revenue has increased 25.0% during the year ended December 31, 2022 compared to the same period of 2021.

Quarterly Dividend Declared

On February 10, 2023, the Board declared a quarterly cash dividend of $3.25 per share, payable on March 15, 2023 to stockholders of record at the close of business on March 8, 2023.

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 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, February 23, 2023 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# 13734727. The telephone replay will be available starting shortly after the call through March 9, 2023.

About Texas Pacific Land Corporation

Texas Pacific Land Corporation is one of the largest landowners in the State of Texas with approximately 874,000 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 potential future impact of COVID-19 on the global and U.S. economies as well as on TPL’s financial condition and business operations; 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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Our share of production volumes(1):

 

 

 

 

 

 

 

 

Oil (MBbls)

 

 

864

 

 

938

 

 

3,401

 

 

3,076

Natural gas (MMcf)

 

 

3,313

 

 

3,455

 

 

13,086

 

 

12,082

NGL (MBbls)

 

 

548

 

 

511

 

 

2,208

 

 

1,705

Equivalents (MBoe)

 

 

1,964

 

 

2,024

 

 

7,791

 

 

6,795

Equivalents per day (MBoe/d)

 

 

21.3

 

 

22.0

 

 

21.3

 

 

18.6

 

 

 

 

 

 

 

 

 

Oil and gas royalties (in thousands):

 

 

 

 

 

 

 

 

Oil royalties

 

$

68,585

 

$

66,803

 

$

307,606

 

$

195,710

Natural gas royalties

 

 

14,679

 

 

14,564

 

 

74,866

 

 

40,964

NGL royalties

 

 

13,432

 

 

18,266

 

 

69,962

 

 

49,794

Total oil and gas royalties

 

$

96,696

 

$

99,633

 

$

452,434

 

$

286,468

 

 

 

 

 

 

 

 

 

Realized prices:

 

 

 

 

 

 

 

 

Oil ($/Bbl)

 

$

83.16

 

$

74.60

 

$

94.69

 

$

66.62

Natural gas ($/Mcf)

 

$

4.79

 

$

4.56

 

$

6.19

 

$

3.67

NGL ($/Bbl)

 

$

26.51

 

$

38.64

 

$

34.25

 

$

31.56

Equivalents ($/Boe)

 

$

51.57

 

$

51.53

 

$

60.81

 

$

44.14

(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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts) (unaudited)

 

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

Revenues:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

96,696

 

$

99,633

 

 

$

452,434

 

$

286,468

Water sales

 

 

19,207

 

 

22,783

 

 

 

84,725

 

 

67,766

Produced water royalties

 

 

19,566

 

 

14,934

 

 

 

72,234

 

 

58,081

Easements and other surface-related income

 

 

10,746

 

 

9,760

 

 

 

48,057

 

 

37,616

Land sales and other operating revenue

 

 

6,491

 

 

68

 

 

 

9,972

 

 

1,027

Total revenues

 

 

152,706

 

 

147,178

 

 

 

667,422

 

 

450,958

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Salaries and related employee expenses

 

 

11,732

 

 

8,220

 

 

 

41,402

 

 

40,012

Water service-related expenses

 

 

4,418

 

 

2,734

 

 

 

17,463

 

 

13,233

General and administrative expenses

 

 

3,492

 

 

3,291

 

 

 

13,350

 

 

11,782

Legal and professional fees

 

 

3,747

 

 

2,377

 

 

 

8,735

 

 

7,281

Ad valorem taxes

 

 

1,878

 

 

 

 

 

8,734

 

 

Land sales expenses

 

 

55

 

 

 

 

 

55

 

 

Depreciation, depletion and amortization

 

 

3,153

 

 

4,695

 

 

 

15,376

 

 

16,257

Total operating expenses

 

 

28,475

 

 

21,317

 

 

 

105,115

 

 

88,565

 

 

 

 

 

 

 

 

 

Operating income

 

 

124,231

 

 

125,861

 

 

 

562,307

 

 

362,393

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

3,922

 

 

(300

)

 

 

6,548

 

 

624

Income before income taxes

 

 

128,153

 

 

125,561

 

 

 

568,855

 

 

363,017

Income tax expense

 

 

28,422

 

 

46,516

 

 

 

122,493

 

 

93,037

Net income

 

$

99,731

 

$

79,045

 

 

$

446,362

 

$

269,980

 

 

 

 

 

 

 

 

 

Net income per share of common stock

 

 

 

 

 

 

 

 

Basic

 

$

12.95

 

$

10.21

 

 

$

57.80

 

$

34.83

Diluted

 

$

12.94

 

$

10.21

 

 

$

57.77

 

$

34.83

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding

 

 

 

 

 

 

 

 

Basic

 

 

7,698,487

 

 

7,744,868

 

 

 

7,721,957

 

 

7,752,027

Diluted

 

 

7,705,116

 

 

7,744,977

 

 

 

7,726,809

 

 

7,752,054

SEGMENT OPERATING RESULTS

(dollars in thousands) (unaudited)

 

 

 

Three Months Ended December 31,

 

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

96,696

 

64

%

 

$

99,633

 

68

%

Easements and other surface-related income

 

 

9,841

 

6

%

 

 

8,863

 

6

%

Land sales and other operating revenue

 

 

6,491

 

4

%

 

 

68

 

%

Total land and resource management revenue

 

 

113,028

 

74

%

 

 

108,564

 

74

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

19,207

 

13

%

 

 

22,783

 

15

%

Produced water royalties

 

 

19,566

 

13

%

 

 

14,934

 

10

%

Easements and other surface-related income

 

 

905

 

%

 

 

897

 

1

%

Total water services and operations revenue

 

 

39,678

 

26

%

 

 

38,614

 

26

%

Total consolidated revenues

 

$

152,706

 

100

%

 

$

147,178

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

79,623

 

80

%

 

$

58,649

 

74

%

Water services and operations

 

 

20,108

 

20

%

 

 

20,396

 

26

%

Total consolidated net income

 

$

99,731

 

100

%

 

$

79,045

 

100

%

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

452,434

 

68

%

 

$

286,468

 

64

%

Easements and other surface-related income

 

 

44,569

 

7

%

 

 

32,892

 

7

%

Land sales and other operating revenue

 

 

9,972

 

1

%

 

 

1,027

 

%

Total land and resource management revenue

 

 

506,975

 

76

%

 

 

320,387

 

71

%

 

 

 

 

 

 

 

 

 

Water services and operations:

 

 

 

 

 

 

 

 

Water sales

 

 

84,725

 

13

%

 

 

67,766

 

15

%

Produced water royalties

 

 

72,234

 

11

%

 

 

58,081

 

13

%

Easements and other surface-related income

 

 

3,488

 

%

 

 

4,724

 

1

%

Total water services and operations revenue

 

 

160,447

 

24

%

 

 

130,571

 

29

%

Total consolidated revenues

 

$

667,422

 

100

%

 

$

450,958

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

365,041

 

82

%

 

$

208,897

 

77

%

Water services and operations

 

 

81,321

 

18

%

 

 

61,083

 

23

%

Total consolidated net income

 

$

446,362

 

100

%

 

$

269,980

 

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 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 and Adjusted 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 calculate Adjusted EBITDA as EBITDA excluding employee share-based compensation, conversion costs related to our Corporate Reorganization, and severance costs. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and/or other non-recurring or unusual items such as conversion and severance costs. We have presented EBITDA and Adjusted EBITDA because we believe that both are useful supplements to net income in analyzing operating performance.

The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for the three months and years ended December 31, 2022 and 2021 (in thousands):

 

 

Three Months Ended

December 31,

 

Years Ended

December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Net income

 

$

99,731

 

$

79,045

 

$

446,362

 

$

269,980

Add:

 

 

 

 

 

 

 

 

Income tax expense

 

 

28,422

 

 

46,516

 

 

122,493

 

 

93,037

Depreciation, depletion and amortization

 

 

3,153

 

 

4,695

 

 

15,376

 

 

16,257

EBITDA

 

 

131,306

 

 

130,256

 

 

584,231

 

 

379,274

Add:

 

 

 

 

 

 

 

 

Employee share-based compensation

 

 

2,594

 

 

 

 

7,583

 

 

Conversion costs related to our corporate reorganization

 

 

 

 

 

 

 

 

2,026

Severance costs

 

 

 

 

 

 

 

 

6,680

Adjusted EBITDA

 

$

133,900

 

$

130,256

 

$

591,814

 

$

387,980

 

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