Texas Pacific Land (TPL) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, for the periods ended June 30, 2025 Condensed Consolidated Balance Sheets Total assets increased to $1.40 billion by June 30, 2025, driven by higher cash, with total equity reaching $1.29 billion Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :--- | :--- | :--- | | Total Current Assets | 667,500 | 503,369 | | Cash and cash equivalents | 543,930 | 369,835 | | Total Assets | 1,404,664 | 1,248,020 | | Total Liabilities | 115,720 | 115,555 | | Total Equity | 1,288,944 | 1,132,465 | Condensed Consolidated Statements of Income Total revenues for the six months ended June 30, 2025, increased to $383.5 million, resulting in $236.8 million net income and $10.29 diluted EPS Financial Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $187,543 | $172,334 | $383,526 | $346,476 | | Oil and gas royalties | $95,006 | $89,813 | $206,251 | $181,933 | | Water sales | $25,577 | $40,650 | $64,390 | $77,776 | | Operating Income | $143,751 | $133,222 | $293,824 | $269,263 | | Net Income | $116,140 | $114,589 | $236,792 | $229,006 | | Diluted EPS | $5.05 | $4.98 | $10.29 | $9.95 | - Cash dividends per share increased significantly to $1.60 in Q2 2025 from $1.17 in Q2 2024, and to $3.20 for the first six months of 2025 from $2.34 in the same period of 2024[15] Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $277.6 million for the six months ended June 30, 2025, with cash used in financing activities rising due to higher dividends Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $277,626 | $245,533 | | Cash used in investing activities | ($16,450) | ($9,648) | | Cash used in financing activities | ($88,627) | ($71,730) | | Dividends paid | ($74,216) | ($53,801) | | Net increase in cash | $172,549 | $164,155 | | Cash, end of period | $543,930 | $894,704 | Notes to Condensed Consolidated Financial Statements These notes detail the company's business segments, accounting policies, segment performance, and subsequent dividend declarations, including its Permian Basin land holdings - The company operates two reportable segments: Land and Resource Management (LRM) and Water Services and Operations (WSO). The CEO, as the chief operating decision maker, uses net income to evaluate segment performance and allocate resources[22] Segment Net Income (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Land and Resource Management | $172,113 | $161,100 | | Water Services and Operations | $64,679 | $67,906 | | Consolidated Net Income | $236,792 | $229,006 | - On August 5, 2025, the Board declared a quarterly cash dividend of $1.60 per share, payable on September 16, 2025[69] - For the six months ended June 30, 2025, the company's share of oil and gas production was approximately 32.2 thousand barrels of oil equivalent (Boe) per day, an increase from 24.9 thousand Boe per day in the same period of 2024[67] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, market conditions, and liquidity, highlighting revenue growth despite lower oil prices, a strong balance sheet, and plans for shareholder returns - Average WTI oil prices for the first six months of 2025 were down approximately 15% YoY, while average Henry Hub natural gas prices increased by about 74%[77] - The company has set a target cash and cash equivalents balance of approximately $700 million. Free cash flow generated above this target will primarily be deployed towards special dividends and share repurchases[83] - The company is developing a patented, energy-efficient desalination process to recycle produced water. Construction of a 10,000 barrel-per-day facility is underway, with $15.7 million spent on the project cumulatively through June 30, 2025[85] Non-GAAP Reconciliation (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $236,792 | $229,006 | | EBITDA | $329,025 | $300,359 | | Adjusted EBITDA | $335,593 | $305,279 | | Free cash flow | $256,613 | $230,454 | Market Conditions and Permian Basin Activity WTI oil prices decreased 15% while Henry Hub natural gas prices rose 74% in H1 2025, with Permian Basin activity remaining robust despite slight declines in permits and rig counts Permian Basin Activity Metrics (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | WTI Cushing oil average price per bbl | $68.12 | $79.69 | | Henry Hub natural gas average price per mmbtu | $3.66 | $2.11 | | Average monthly horizontal permits | 606 | 641 | | Average weekly horizontal rig count | 281 | 302 | Liquidity and Capital Resources The company maintains strong liquidity with $543.9 million cash and no debt, targeting a $700 million cash balance for shareholder returns and investing in water desalination - The company had no debt, credit facilities, or off-balance sheet arrangements as of June 30, 2025[82] - During the first six months of 2025, the company paid $74.2 million in dividends and did not repurchase any common stock[84] Results of Operations This section details segment-wise financial results, showing Land and Resource Management revenue growth from increased production and easements, while Water Services saw decreased sales but higher produced water royalties - Land & Resource Management (Q2 2025 vs Q2 2024): Oil and gas royalty revenue increased to $95.0 million from $89.8 million, driven by a production increase to 33.2 thousand Boe/day from 24.9 thousand Boe/day, which offset a 20.5% decrease in the average realized price per Boe[100] - Land & Resource Management (Q2 2025 vs Q2 2024): Easements and other surface-related income surged by $19.3 million to $33.5 million, primarily due to a $15.7 million increase in pipeline easements[102] - Water Services & Operations (Q2 2025 vs Q2 2024): Water sales revenue decreased by $15.1 million to $25.6 million due to a 39.7% drop in sales volumes[105] - Water Services & Operations (Q2 2025 vs Q2 2024): Produced water royalties increased to $30.7 million from $25.3 million, driven by higher produced water volumes[106] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes have occurred in the company's market risk disclosures since the 2024 Annual Report on Form 10-K - There have been no material changes in the information related to the market risk of the Company as disclosed in the 2024 Annual Report[131] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[132] - There were no changes during the quarter ended June 30, 2025, in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal controls[133] PART II OTHER INFORMATION Item 1. Legal Proceedings The company reports no material pending legal proceedings involving itself or its property - There are no material pending legal proceedings involving the company[135] Item 1A. Risk Factors No material changes have occurred in the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - No material changes have occurred in the risk factors previously disclosed in the 2024 Annual Report[136] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during the three months ended June 30, 2025 - The Company did not repurchase any shares of Common Stock during the three months ended June 30, 2025[137] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and iXBRL financial data