Texas Pacific Land (TPL) 3 Aug 232023 Q2 Earnings call transcript

Good day, and welcome to the Texas Pacific Land Corporation Second Quarter 2023 Earnings Call. All participants are in a listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Shawn Amini, Vice President of Finance and Investor Relations. Please go ahead.

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

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

update discussed statements our future any to differ results are cause may actual undertake light in subject Forward-looking statements events. not from forward-looking to today. those of that obligation or do risks to and uncertainties information We materially new

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

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

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

Now call I the to over will Ty. turn

you impressive new by Thank and water us everyone. morning, production, water quarterly royalty opportunities source records delivered robust revenues. an revenues oil produced joining Good for TPL quarter, Permian today. company activity. for set underpinned capturing We and gas

That other royalty lease oil ownership SLEM, quarterly water perpetual from state, had and Easements gas, our are unique compared and performance best companies. carved derived and to which as gas XXXX. which interest its originate oil predominantly mineral to public income, our royalty from is and Unlike of interest revenues, estate. royalty the surface-related surface refer ownership we revenues surface mineral since and a revenue SLEM our from

also business flow maintain gas incremental philosophy surface-derived Combining capital light, management, been extracts oil streams. margin to commercialized ownership to high our contributes cash the development substantial cash royalty our with free active entity of thoughtfully multiple TPL flow accelerating have while our which interest. ultimately These surface opportunities overall and

is the built-in during example This hedges most prices. periods great that TPL volatile of commodity recent quarter protect of a

royalty and royalty XX% quarter and revenues respectively. XX% increased approximately were down production gas and natural that this WTI due crude our XX% oil gas XX% gas declined still year-over-year, oil and Although Henry Hub prices oil to

water However, for quarterly that comparison, XX%. revenues XX% were our same SLEM were and water produced up source year-over-year revenues up revenues XX%, up

comprise of last revenue During flow this aggregate XX% revenue prices. consolidated consolidated and TPL's earnings and lower in helped overall maintain despite quarter, streams strong cash these surface-derived much commodity free

SLEM, development we're each areas. broad specifically, subcategory. electric broader caliche line across been and have push Pipeline across easements especially seeing strength duct and deplete inventory For good easements, operators as sales

Our have team their specialists agents procure accommodate job tremendous to a operators midstream working revenue done of development and for and our land upstream, opportunities surface. other with GIS and needs

through of volumes brokered second volumes total during the treated, XX% water robust brackish Year-to-date, treated water driven year-over-year. averaged quarter, are XXX,XXX and by Turning quarter source day and to per barrels water, up sales water demand. over we XXXX, source,

and For X.X of of used during barrels day. million on million royalty many sold those the Produced the months, gas and volumes complete barrels nearly quarter water XX barrels last water, to approximately per we've were TPL oil XXX acreage. wells averaged

produced contracted fee parties with produced other for operators contracts use TPL for third disposal wells, our we barrels. for generate and reminder, a surface a facilities, as water including Just water of

the than revenue water water flow high million second best under Produced less of in only margin are performance XX% just our up XXXX by contributing quarterly while cash revenue CapEx. and for spending for year-over-year. business, quarter $XX volumes was far This free $X ever million

commercial because water and paying investments have over with is of capital and dedicated our prior source throughout the negotiated of TPL dividends exclusive feature many operators, This XXXX in-house substantial in back offtake our holistic provides negotiations are In of efforts of across to contracts produced water today. going water cumulative our water we it business both inception across mutual and of produced large control the important an areas basin surface. interest. The

It us treat and completion allows and also brackish us providing for water to upside to continue while activities. water reuse sales of produced incremental opportunities

at never deserves demonstrate its credit before. also for TPL tremendous done continues of for to volume team reliable and customers water ability offer operations we've water procuring moving full services. Our spectrum our to levels a

approximately spent County quarter, surface footprint in This commercialize. pursue XX,XXX surface we with current acreage and our our will Line. State acres acquire opportunities Texas incremental During nicely New the to $XX and teams Mexico million Andrews for provide to last the along fits

LLC, As pursuant and commitments voting complaint disagreement November a stockholders SoftVest agreement their Horizon resolve Chancery previously over disclosed, with XXXX, XX, on Advisors, with SoftVest company L.P. to filed LLC, the LLC, the to a Court Horizon Kinetics Management, Delaware company. a Asset Kinetics,

recently We the to we're its the for opinion. issue waiting court and trial, concluded now

that course, we share. to in and will we due more update to expect have We happen when our stockholders

Barry the at recently experience. retire and to Directors two has strong decided Board, of Stockholders. the bring and Meeting. the stand upcoming Norris XXXX candidates Roosa a not of the David and XXXX mix company have John Annual that Robert announced for nominated it of Marguerite and as Independent Current industry Director Co-Chairs skills reelection Also, for election Both Annual nominees and Woung-Chapman at Meeting

company pivotal the achieve with John been for and decades, a in company played role success company as to been the have Dave stewards a always have helping the its They have days today. it enjoys the for involved and back great trust.

business scale management. possessed, and to support has that to took the support, not TPL's a or unique understood administration near or saw have potential it they TPL would assets their water surface pivot the Without expertise the a today. They and professional anywhere a and active chance

the here will they an we leave at TPL, and guidance, team are management years, thankful friendship and service, entire behind at their the TPL. exceptional of behalf for On over legacy leadership

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

representing Thanks, first quarter the XX% Ty. $XXX from for quarter were a increase million, XXXX XXXX revenues. Total the revenues second of

discussed, As from water offset prices. partially water benefited lower though sales, and and produced source by revenues, SLEM revenues gas higher production, oil royalty previously royalties

the water $XXX of with flow cash and Adjusted sequential $XXX represents with balance the on CapEx the per million million cash of quarter of Royalty EBITDA sheet. day the spend million, ended We quarter quarter barrels a million, equivalent XX,XXX XX% of and approximately a $XXX for $X.X the most were free increase respectively. related Consolidated to production basis. oil was business. on

quarterly spuds to royalty continue figures underlying the and trend Central our further Reeves Midland, Culberson we that continues activity data upward. to new across can remain Counties strong. is are production our lumpy, Loving, by especially completions on high in as be production supported and Delaware permits, particular, both individual Midland Although and footprints. recent well acreage maintain In This

of oil approximate barrel, Cushing realization realizations per represents high Our XXX% with relative second an oil to price $XX remain realized WTI per quarter average which price XXXX price barrel.

gas weakened realizations. However, and gas quarter quarter to relative prior this natural our liquids realizations natural

downtime, to operators. Texas factors, and many realizations among continued West constraints suppress for local Infrastructure other price

processing infrastructure build-out new this assets easement mitigated logistics is lease pipelines, facilities generate opportunities. from through our and benefit somewhat TPL, business and SLEM other we For additional as as

better In independent and new to large own compared them to addition, E&Ps and/or infrastructure, that super commit generally tend our to operators. royalty acreage and provides smaller is which private dominated netbacks majors by public

realizations As completed, would infrastructure our we and more developed is expect to improve.

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

$XX repurchase XX,XXX approximately shares. approximately spent also to million We

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

questioner, We which now [Operator Stifel. will At begin I question-and-answer Please Derrick the is Whitfield from time, the go this ahead. announce session. first Instructions]. will

Good and morning on all strong a congrats quarter.

Good Thanks, Derrick. morning.

Derrick. Thanks,

resources with in business. understanding activity the first the my of driven, substantial water I this the in quarter that quarter question, on you source the this For history to focus the and is wanted posted strength best water is

elaborate of the So I to post the if on underpinning could to wanted allow sustainability drivers better us QX? some you to assess strength ask

over in a areas mutual there's for interest. a system couple as pushed reasons strength treatment in water the quarter. team the volume past saw across our a this water. this day. barrels as contracted of We The that really phenomenal increase quarter. of team did One Look, Yes. limits produced activity well increased brackish job sales, XXX,XXX delivering volumes water And of is

of our operators So with in mutual the about water and to where agreements we've past, those types from we interest they're purchase area of talked obligated big contract a us.

of The water team also outside a selling of fantastic did job footprint. our

from footprint. So this sales reach and of XX% And TPL expanding business off water purely our that's team development water of our our over beyond quarter, team acreage. were our

strong continue we'll think the I So to activity year. levels throughout see

we some our continue the high quarter year. But strength when the near-term. in be of a This we backlog for see to sales, may look at watermark

QX the sight production how along given about trajectory, line and production maybe of your same strength the And That's great. think we of should your lines, activity?

of of be we where on like we the said, average first underlying But the look is of the Derrick, kind business when a the 'XX, seeing. good production a production supports a any we I'll probably And look take at one. that quarter at lumpy. data we're little kind given at. basis. that's bit half of always think pretty reflection we day what It can of When

year trajectory And completions of that near-term at for of should feel that of the DUCs we look the kind occurring as some rest we continued we've inventory include are stated the growth. when some good the

right it about now. thinking of kind we're how that's So

slightly maintain wells at of Chris, net maybe When look sight my those differently be from activity, required your would production? line asked how we side. many of to

production about think of something as give net question. the maintenance. Yes. production that's Derrick, those good around we always wells, a it's flat when need or the I think numbers would probably it, probably for level about move But like grows. eight in we take, And and neighborhood

right. just maybe one my All final helpful. follow-up from side. That's very And

acquisition perhaps the for broadly you that on could the QX, touch of announced the landscape area? importance competitive briefly and on royalty basin? And across just the opportunities Regarding also strategic surface surface touch you in more

line, that that it. then to piece Yes, commercial fit we that potential are sourced through deal take just internal acquisition buy our the a little see like also opportunities about does raw over we and XX,XXX really, portfolio. here current what thinking non-marketed really, the acquisition when But that the particular land we surface, footprint, our asset how commercialize and we're along of into And is County state so team. in acres Andrews a in then relationships that a broader

next-gen we think So in long-term. both and what water, source opportunities, surface produced commercialize could near-term of opportunities, kind water, we other

But that we the line that state really like us. gives optionality acreage

they've you have a into Mexico New at that Texas, been look us. along state great been surface crosses that's like the acquisitions, And line just of the we with investments. some from good our If activity all past line. state of Those option the really for feel

market, overall the royalty very the as far as -- it's competitive the now. think I side right on

On there's commercialization. additional there the we less left. probably maybe asset side, little opportunities competitive, value that's been fewer underutilized still But realize do a think through surface out an take to lot a of opportunity some and

your That's great. for Terrific time. Thanks color.

Thanks, Derrick.

from The next question go ahead. from comes Please Khorsand BWS Hamed Financial.

Good morning.

on the further? side. water doing So record What now, thought. if my greater mean, was than the question obviously would you're a to I have be first grow you first hindrance capacity you pace

think watermark? was you do why So high the QX

of like continues quarter kind also activity hard half our look, The quarter. a water year less off to activity don't because our have off the when year, the end looking high there's will the additional of this, towards the our barrels be deliver But that taper Well, a usually work sales it is source team I on seeing these in quarter We're footprint. of fourth increased have just like to volumes back footprint. you know necessarily this, To watermark. of the fantastic. at the

be So sales continue strong. will I think to

And $X.X saw that on be the to an that million? of in pipeline related Q the you easement. that easement business, the increase had Will I side recurring,

yes. So most recur. term if of are are agreements recurring easements pipeline those asking, that what on I our agreements. will are, those that's you're majority assume of The

Yes.

this like what's these land the attractiveness appetite what's Okay. to of And need the more to you do And that again? acquisitions? something do then

We're for looking. said assets to just have that always been our maybe or commercialized is appetite Like unrealized. that's Well, looking be maybe earlier, yet we're strong. I

have of or just water on we of the the like business, additional knowledge for team the create Looking value. we that add in-house have could can whether that value side side through on commercialization, some we something for. expertise that's create our that feel the we're some have the we business, some the the like SLEM That's that anything that value feel additional here what the industry additional we could relationships looking throughout

conference The session. question-and-answer has our now concludes concluded. attending This for presentation. Thank today's you

now disconnect. may You