Texas Pacific Land (TPL) 4 May 232023 Q1 Earnings call transcript

Greetings and welcome to Texas Pacific Land Corporation First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Shawn Amini of Investor Relations. may you and you proceed sir. Thank

its for Corporation's at first you the Commission, released and which joining and on the call. of us Land Pacific company the filed results financial Investors Texas is for its XX-Q quarter Exchange www.texaspacific.com. afternoon, with Securities today Yesterday Thank Form the XXXX section available conference earnings website company's

made forward-looking remarks reminder, on statements. a call include today's As may conference

to differ that Forward-looking results statements may risks today. uncertainties subject from are cause materially to and discussed those actual

do statements not information events. undertake our We any obligation in or update to forward-looking new light of future

For filings. a for detailed of release our this please results, may the factors to more the company's affect earnings discussion to quarter SEC our recent refer and that most

be contained company to in also earnings filings. call, non-GAAP reconciliations note, at will certain we and information SEC refer stock this financial our are these our More we non-GAAP measures may by TPL. Please about its also discussing ticker, release and financial measures. During times

conference for is which, Chris Ty Officer, TPL's and by make Glover; call the hosted Chief Financial Officer, Management open call prepared will Executive comments, Chief we will some after questions. Steddum. morning's This

to Ty. I will turn the call Now, over

oil Good gas delivered gas as lower us our the prices. and royalty mitigate you non-oil businesses today. morning and everyone another for of joining impact and thank TPL strong quarter helped to

our were gas a oil same prices, first revenues XX% Oil time During natural as direct year, Henry XX%, prices last down and XX%. royalty that gas result exposure down Cushing respectively, quarter XXXX were to period WTI and and Hub of compared to the and

XX%, quarter up were Produced XX%. water sourced sales XX%. and income on water up year-over-year easement our However, XXXX, our surface-related up basis, other first was royalties a for and were

built-in non-oil these pressure, under provide company the are as revenue come streams gas and and prices commodity countercyclical hedges especially valuable royalty they When revenues.

and of of royalties. revenues were gas XX% nearly quarter, outside our oil This

not has royalties. TPL you exposure of historically As many price related to hedged commodity know, our

balance For the cash non-oil royalty debt-free are sheet and our and us, hedge. the gas flow streams

severely shown cycle TPL great position did flow. has a during maximum turns, that. can our the upside. last when as XXXX capture long substantial period of year, free Even it ensures that generate depressed cash And was inevitably a example positive prices, of it we hedge-free

gas Despite some oil is the recent Permian underpinned play long-term for the resource turbulence strong, best with TPL the and remains outlook prices, North arguably America. in by

activity water. based permitting customers our optimistic new We on surface and such internal as our and across remain remain drilling with our historically From at strong leading indicators, conversations levels. data,

the trend expect in fluctuate, over said we've we overall to but As past, upwards activity and production to may long-term. quarter-to-quarter the performance royalty continue

LLC, a As Advisors with on trial XXXX. filed SoftVest pursuant XXth, voting Kinetics a Kinetics previously held Court to commitments a November Delaware Chancery and LLC, a and XX, Horizon company complaint XXXX, Horizon LLC, agreement on resolve disagreement company. Delaware to one-day The Court of disclosed with L.P. April the Management Asset SoftVest, Chancery the their stockholders' over

anticipates briefing, to issue post-trial a the company court decision. Following the

call the Chris. over turn I'll to that, With

income. and by million, X% gas and Thanks lower the and Ty. other revenues. from a volumes were production, decline prices for water XXXX and Total royalty revenues easements by oil were Revenues sales, $XXX of though quarter impacted sequentially sourced quarter XXXX fourth offset water produced surface-related representing higher

$XXX the and ended million Adjusted We million and sheet. of the cash free respectively. $XXX quarter with cash quarter flow on balance were $XX EBITDA for the million

net net strong approximately with of remains quarter. DUCs, the net near-term end and five inventory outlook permits, at wells X.X completed TPL's X.X the

for second new quarter feet a first shows ever XXXX As best the quarter basis. Ty net referenced earlier, our on preliminary permits data as lateral

higher both spuds drilled feet XXXX first longer on quarter lateral on driven record spuds, basis, would a lateral a by feet nearly net and approaching average. lengths now new XX,XXX new gross which also be For is

industry company evaluate allocation as priorities evolve. fundamentals capital continue our We to and

we For have quarter, $X.XX maintained this our per share dividend.

previously heavily of room and that year, authorization of announced period, we to move blackout we out $XXX have on began this lean a on as Our January million Xst buyback more program.

large zero a as maximize be that and of debt a ample generate With business shareholder cash look free amount flexibility we retain to to continues cash flow, value. balance, opportunistic to tremendous we

And now take with will questions. operator, we that,

very much. you Thank

question now question-and-answer Stifel. comes be question Instructions] proceed Please with from will from We Whitfield a [Operator session. Derrick Derrick. first conducting The your

Chris. Ty and morning Good

Good morning Derrick.

Good morning.

segment. My royalty your oil I on of first question, wanted to the growth and outlook gas focus

the provide should How line in the negatively impacted your in near-term of of light sight quarterly that by With increased guidance which you trajectory we think about spills. was sequentially? activity, QX understanding don't less production

long-sitting one-time you be separately, by on appears its depletion guys But that and appreciated. again, offer Analyst you And could Day. QX issues greatly color degree any experienced comment It were the to DUCs, appear Chevron in impacted but after outlined be the earnings you at further was higher-than-expected there a effects could nature. during would does

part tackle might the question. I first of Derrick. the Hey

term. think our past kind we is the said basin I expect that the we outlook, about the still when of production TPL to over in So, we've think and near outperform what medium

those net And we we all feel normalized case. so look the think be permits, are And right at at will that kind your of I the to all-time now. numbers highs of DUCs effectively when still point, that,

inventory perspective, a so is like certainly, feel now. great in near-term we TPL a from right spot And

certainly there's positive production give plenty near-term a to outlook inventory of rest so And the for year. of the

DUCs that part going predict. what we've difficult far as looks as to the the strong. But which to it got the out there, great. look It inventory, looks look, Now, at take down are pace always that's great. operators

happens is day, be that quarter-to-quarter and the amount fourth And turned I volatile say, short-term. to end data the think just at the right, we've in as we somewhat line in of wells like was as it bit gotten the have kind the of the quarter, what little of in we a seen lower going

in don't you if our think the long-term, still wanted and basin. any to we to outlook talk think I of Ty, continue remains strong, know, operator? we'll But about And some outpace the the I

I'll a take there. part of second the at your stab Yes, question

you're owns is while or to what would say minerals well that that under out a most some the has Chevron I that referring portion the our had of think of been results Chevron leased I position, farmed out. large of

what fairly percentage to And we position. as actually if operations have a Chevron exposure so at of operate look our a you entire overall, they small

if So, sure that's I'm helpful. not

you the XXXX. It is. Thanks Ty. business, SLEM guys one of the And shifting over quarters to since experienced maybe then strongest

other drivers that are be should there In we thinking about? addition activity, noticeable to record

would an the in increase Yes, say pipeline SLEM the drivers easements. I ramp on main has in been

requests As we're for infrastructure. we've seen to see gathering starting tighten, gas more take away

Our good in field team job sales. has a really rock the with done

sales So, We've we've some pits. opened New up new expanded into crushing rock Mexico. caliche now. We're

sales the seen in ramp well. quarter. a rock bit we've nice had so And little royalty a end sand as of We the of towards

in to expect near as well here ramp So, future. the that up

perhaps last could. I And if one

X, you Just post-trial your to asking assuming an should with we allow approval? you advance a briefing Proposal does the outcome, versus to but outcome I'm respect trial expect a you have not favorable shareholder Horizon meaning project what schedule, to Kinetics, from

Derrick, more question that of one part last the sorry. time, Say

Sure.

Kinetics, decision you that, not to that? we outcome favorable I And with So, but have to what approval? advance Proposal you shareholder of expect trial, should of assuming with project asking by the X, outcome the comes post-trial mean, I'm out the does respect that allow from Horizon a an briefing you schedule to

that's correct. Yes,

guys. me terrific. That’s Thanks. all for Hey,

Derrick. Thanks

question next The comes Hamed. you. Thank Khorsand with from proceed BWS from Financial. Please your question Hamed

morning. Good

on had quite in And excessive. it line. should a legal I question The an accrued that number? I normal just expense expense? QX? seems Is that first was we the What mean expect is

that accrued can't really spend future. of expense. we be the Hamed, expectations an Hey is may on in comment what look, the And

right at so of that's kind And now. where it's

you Okay. would this from on talk about side, if disclosed in is sparked be there And what the then future it could your what that was revenue this revenue the revenue and Q, any one-time arbitration? just

we The was, a expenses on felt effectively, past. guess, deducting it over was that -- stipulation in that Yes. Chevron I what -- based the some

period the the some So, all associated side. where of had revenue overcharged with on NGL of past and on they that expenses gas is probably

I it it's is, effectively kind way so right a rectify about think of to payment to that. the one-time think a And

Okay.

million So, I another a assume normalized that $X then? the on basis down oil revenue have would been

even Yes, commodity price as guess, last right board, And about and way it. across we quarter, said think bit quite our weakness. prepared I that's of a the just the to seen to of we've again, year last -- some remarks compared in it's

business Resource that my itself you that there is then was in And that also Water business. positive was last put was Q, into cash Okay. for? And free the the disclosed a flow? $X.X What generating million question the

Yes.

capital probably with The spend continued capital the some in for it's about is basically think $XX the electrification the each Usually, we quarter. to is million most of our right spend been of is about way that So operations. it years. line capital a

are of process. that So, end electrification we the approaching

capital, be purchasing that to need think right? is would hoses future lay-flat business maintenance spend those of dollars you equipment different is more that day-to-day. continue of maintain the to our So, a And and like operating Some the probably we we and would equipment. like that that type could stuff in of

the chains we've past, is, that items key probably supply you down to then the of think And some have operate. of I it some slowed said for in need the

hoses so have in customer some tanks to in key the and we going purchased And also at to advance we infrastructure normally least or further need advance orders. of and know the probably than gone in we're would items, we that out future fulfill

business to the kind the net look free And flow -- number income $XX about quarter. And and also financials, way you if positive is million flow. it. free what cash this that of think so And that's positive cash that at right of had

Thank it. you. appreciate I

Thanks Hamed.

Hamed. Thanks

gentlemen, as final much. that concludes today. That Q&A and thank well for your participation, the Thank you lines. now very as for you teleconference the very disconnect Ladies was and your session question much our may you and