Texas Pacific Land (TPL) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flow statements, and related notes Condensed Consolidated Balance Sheets | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (vs. Dec 31, 2022) | | :-------------------------------- | :----------------------------- | :------------------------------- | :------------------------ | | Cash and cash equivalents | $609,252 | $510,834 | +$98,418 | | Total current assets | $737,530 | $633,401 | +$104,129 | | Total assets | $1,001,324 | $877,427 | +$123,897 | | Total current liabilities | $44,884 | $39,595 | +$5,289 | | Total liabilities | $113,774 | $104,540 | +$9,234 | | Total equity | $887,550 | $772,887 | +$114,663 | - Total assets increased by $123.9 million, or 14.1%, from $877.4 million at December 31, 2022, to $1,001.3 million at June 30, 2023, primarily driven by an increase in cash and cash equivalents[14] - Total equity increased by $114.7 million, or 14.8%, from $772.9 million at December 31, 2022, to $887.6 million at June 30, 2023[14] Condensed Consolidated Statements of Income and Total Comprehensive Income | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change (YoY) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (YoY) | | :---------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $160,609 | $176,270 | -8.9% | $306,971 | $323,605 | -5.1% | | Operating income | $120,280 | $151,708 | -20.8% | $225,232 | $276,021 | -18.4% | | Net income | $100,393 | $118,894 | -15.6% | $186,961 | $216,794 | -13.8% | | Basic EPS | $13.06 | $15.37 | -15.1% | $24.31 | $28.02 | -13.3% | | Diluted EPS | $13.05 | $15.37 | -15.1% | $24.30 | $28.01 | -13.2% | | Cash dividends per share | $3.25 | $23.00 | -85.9% | $6.50 | $26.00 | -75.0% | - Oil and gas royalties decreased significantly, by 32.0% for the three months and 23.9% for the six months ended June 30, 2023, primarily due to lower commodity prices[15] - Water sales and produced water royalties showed strong growth, increasing by 69.9% and 11.6% respectively for the three months, and 44.5% and 22.2% for the six months ended June 30, 2023[15] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (YoY) | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Net cash provided by operating activities | $199,264 | $195,405 | +2.0% | | Net cash used in investing activities | $(27,654) | $(8,263) | +234.7% | | Net cash used in financing activities | $(77,345) | $(225,590) | -65.7% | | Net increase (decrease) in cash | $94,265 | $(38,448) | N/A | - Cash provided by operating activities increased slightly by $3.9 million, or 2.0%, primarily due to decreases in income tax payments and working capital requirements[17] - Cash used in investing activities significantly increased by $19.4 million, or 234.7%, mainly due to higher land acquisitions ($20.3 million in 2023 vs. $12 thousand in 2022)[17] - Cash used in financing activities decreased by $148.2 million, or 65.7%, primarily due to a substantial reduction in dividends paid ($50.0 million in 2023 vs. $201.0 million in 2022, which included a special dividend)[17] Notes to Condensed Consolidated Financial Statements Note 1. Organization and Description of Business Segments - Texas Pacific Land Corporation (TPL) is a Delaware corporation and one of the largest landowners in Texas, holding approximately 886,000 surface acres, primarily in the Permian Basin, along with various nonparticipating perpetual oil and gas royalty interests[19] - TPL's income is primarily derived from oil, gas, and produced water royalties, land and water sales, easements, and commercial leases[20] - The company operates in two segments: Land and Resource Management, and Water Services and Operations[22] Note 2. Summary of Significant Accounting Policies - The financial statements are prepared in accordance with GAAP, requiring management estimates and assumptions[23] - Cash equivalents include bank deposits, money market funds, U.S. Treasury bills, and commercial paper with original maturities of three months or less, classified as Level 1 assets[24] | Item (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------ | :------------ | :---------------- | | Cash and cash equivalents | $609,252 | $510,834 | | Tax like-kind exchange escrow | $2,195 | $6,348 | | Total cash, cash equivalents and restricted cash | $611,447 | $517,182 | Note 3. Real Estate Activity | Real Estate (in thousands, except acres) | June 30, 2023 | December 31, 2022 | | :--------------------------------------- | :------------ | :---------------- | | Land (surface rights) - Number of Acres | 817,017 | 817,060 | | Real estate acquired - Number of Acres | 69,447 | 57,306 | | Total real estate situated in Texas - Number of Acres | 886,464 | 874,366 | | Real estate acquired - Net Book Value | $130,024 | $109,704 | - For the six months ended June 30, 2023, TPL sold 43 acres of land for $1.4 million and acquired 12,141 acres for $20.0 million, significantly increasing land acquisitions compared to the prior year[28][29] Note 4. Property, Plant and Equipment | Property, Plant and Equipment (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------------- | :------------ | :---------------- | | Water service-related assets | $130,106 | $125,166 | | Total property, plant and equipment, at