Texas Pacific Land (TPL) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited statements detail the company's financial position, performance, and cash flows for the period Condensed Consolidated Balance Sheets Total assets grew to $1.176 billion, driven by acquisitions of real estate and royalty interests Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,175,569 | $1,156,398 | | Cash and cash equivalents | $533,914 | $725,169 | | Real estate acquired | $142,727 | $130,024 | | Royalty interests acquired, net | $164,028 | $46,609 | | Total Liabilities | $123,437 | $113,202 | | Total Equity | $1,052,132 | $1,043,196 | Condensed Consolidated Statements of Income and Total Comprehensive Income Revenue and net income grew for the nine-month period, driven by higher royalties and water sales Q3 2024 vs Q3 2023 Performance (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Total Revenues | $173,563 | $157,967 | | Operating Income | $127,331 | $126,958 | | Net Income | $106,594 | $105,574 | | Diluted EPS | $4.63 | $4.58 | Nine Months 2024 vs 2023 Performance (in thousands, except per share data) | Metric | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Total Revenues | $520,039 | $464,938 | | Operating Income | $396,594 | $352,190 | | Net Income | $335,600 | $292,535 | | Diluted EPS | $14.58 | $12.68 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased, while significant acquisitions and dividends drove higher investing and financing cash use Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $364,096 | $306,858 | | Cash used in investing activities | ($225,763) | ($55,914) | | Cash used in financing activities | ($334,968) | ($108,588) | | Net change in cash | ($196,635) | $142,356 | Notes to Condensed Consolidated Financial Statements Key disclosures include a stock split, significant acquisitions, segment performance, and subsequent events - The company operates in two segments: Land and Resource Management (managing ~873,000 surface acres and ~199,000 net royalty acres) and Water Services and Operations[10][15] - On March 26, 2024, the company effected a three-for-one stock split, with all share and per-share data retroactively adjusted[13] - On August 20, 2024, the company acquired 4,120 acres of land and other surface-related assets for $45.0 million in a business combination[24] - During the first nine months of 2024, the company acquired 4,106 net royalty acres (NRA) for approximately $120.3 million[35] - Subsequent to the quarter end, on October 2, 2024, the company acquired an additional 7,490 NRA for $276.4 million[73] - On November 4, 2024, the Board declared a quarterly cash dividend of $1.60 per share[74] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth, capital allocation, key investments, and operating expense trends Market Conditions and Permian Basin Activity Despite volatile commodity prices, robust Permian Basin activity supports royalty and surface revenues Permian Basin Market Metrics | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | WTI Cushing avg price/bbl | $76.43 | $82.25 | | Waha Hub avg price/mmbtu | $(0.50) | $2.04 | | Avg weekly horizontal rig count | 294 | 314 | Liquidity and Capital Resources The company details its strong operating cash flow, capital allocation priorities, and key investments - The company has a target cash and cash equivalents balance of approximately $700 million[89] - Return of capital in the first nine months of 2024 included $310.6 million in dividends ($10.00 special dividend per share) and $22.7 million in share repurchases[90] - Completed two acquisitions in August 2024: 4,106 NRA for $120.3 million and a business combination (4,120 surface acres and other assets) for $45.0 million[91] - Investing in an innovative desalination process for produced water, with a pilot program successfully tested and plans for a 10,000 barrel-per-day facility[92] Results of Operations - Consolidated Consolidated revenue and net income increased for the nine-month period, driven by water and royalty segments Consolidated Revenue Comparison (in thousands) | Revenue Source | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Oil and gas royalties | $276,377 | $258,644 | | Water sales | $113,987 | $85,799 | | Produced water royalties | $76,034 | $61,824 | | Total revenues | $520,039 | $464,938 | - Legal and professional fees were $8.3 million in Q3 2024, up from $1.7 million in Q3 2023, due to costs associated with the 2024 annual meeting of stockholders[105] - For the nine months ended Sep 30, 2024, legal and professional fees decreased to $14.7 million from $28.5 million in the prior year period, which had higher expenses related to stockholder matters[110] Segment Results of Operations Both the Land and Resource Management and Water Services segments reported significant net income growth Segment Net Income for Nine Months Ended Sep 30 (in thousands) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Land and resource management | $232,970 | $217,860 | | Water services and operations | $102,630 | $74,675 | | Total consolidated net income | $335,600 | $292,535 | - Land and Resource Management: Oil and gas royalty revenue for Q3 2024 increased to $94.4 million from $87.1 million YoY, as a 29.8% increase in production volume (28.3 vs 21.8 MBoe/d) offset a 16.2% decrease in realized price per Boe[120] - Water Services and Operations: Q3 2024 revenue increased 39.3% YoY to $66.9 million, driven by a $9.8 million increase in water sales and a $6.9 million increase in produced water royalties[125] Non-GAAP Performance Measures Adjusted EBITDA and Free Cash Flow increased year-over-year, reflecting strong operational performance Non-GAAP Reconciliation Summary (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Net Income | $335,600 | $292,535 | | EBITDA | $441,538 | $383,310 | | Adjusted EBITDA | $449,393 | $390,527 | | Free Cash Flow | $337,319 | $299,212 | Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported since the 2023 annual report - There have been no material changes in the information related to market risk since the 2023 Annual Report[150] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of September 30, 2024[151] - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2024[152] PART II OTHER INFORMATION Legal Proceedings The company reports no material pending legal proceedings - There are no material pending legal proceedings[154] Risk Factors No material changes to risk factors were reported since the 2023 annual report - No material changes in risk factors have occurred since the 2023 Annual Report[155] Unregistered Sales of Equity Securities and Use of Proceeds The company details Q3 2024 share repurchase activity and the remaining program authorization Share Repurchases for Q3 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2024 | 2,772 | $791 | | August 2024 | 2,656 | $824 | | September 2024 | 1,959 | $864 | | Total | 7,387 | $822 | - As of September 30, 2024, $184,886,976 remained available under the stock repurchase program[156] Defaults Upon Senior Securities This item is reported as not applicable to the company - Not applicable[158] Mine Safety Disclosures This item is reported as not applicable to the company - Not applicable[158] Other Information The company reports no other material information for this item - None[158] Exhibits This section lists all exhibits filed, including required certifications and interactive data files - Exhibits filed include CEO and CFO certifications and iXBRL data files[160]