Texas Pacific Land Corporation Announces Fourth Quarter and Full Year 2023 Results

Earnings Call to be held 7:30 am CT on Thursday, February 22, 2024

DALLAS, February 21, 2024--(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

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Contacts

Investor Relations
IR@TexasPacific.com