Texas Pacific Land (TPL) - 2023 Q4 - Annual Results

Texas Pacific Land Corporation Fourth Quarter and Full Year 2023 Results Financial & Operational Highlights The company achieved record quarterly royalty production in Q4 2023, driving the year's strongest revenue and free cash flow Q4 2023 Key Metrics | Metric | Value | | :--- | :--- | | Net Income | $113.1 million | | Revenues | $166.7 million | | Adjusted EBITDA | $150.9 million | | Free Cash Flow | $116.3 million | | Royalty Production | 26.3k Boe/day (Record High) | | Stock Repurchases | $10.2 million | Full Year 2023 Key Metrics | Metric | Value | | :--- | :--- | | Net Income | $405.6 million | | Revenues | $631.6 million | | Adjusted EBITDA | $541.4 million | | Free Cash Flow | $415.5 million | | Royalty Production | 23.5k Boe/day | | Stock Repurchases | $42.4 million | | Total Cash Dividends | $100.0 million | Management Commentary Management highlighted Q4's record performance and noted that full-year business diversification offset lower commodity prices - Q4 2023 was the strongest quarter of the year, with the highest consolidated revenues and free cash flow, driven by robust oil and gas royalty production[5] - For the full year 2023, record revenues from the Water segment and nearly 50% year-over-year growth in easements substantially offset lower commodity prices[5] - The company is well-positioned for 2024 to capitalize on growth opportunities, supported by its Permian footprint and large net cash balance[7] Financial Results Financial results reflect a contrast between higher production volumes and the negative impact of lower commodity prices Fourth Quarter 2023 Financial Results Q4 net income and revenue grew year-over-year, driven by increased water income, easements, and production volumes Q4 2023 vs Q4 2022 Financials | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net Income | $113.1 million | $99.7 million | | Total Revenues | $166.7 million | $152.7 million | | Operating Expenses | $32.8 million | $28.5 million | - The increase in revenue was principally due to a combined $10.1 million increase in water sales and royalties and an $8.3 million increase in easements[8] - Royalty production increased to 26.3k Boe/d from 21.3k Boe/d YoY, while the average realized price per Boe fell from $51.57 to $42.81[8] Full Year 2023 Financial Results Full-year net income and revenue declined due to a significant drop in oil and gas royalty revenue from lower prices Full Year 2023 vs 2022 Financials | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Income | $405.6 million | $446.4 million | | Total Revenues | $631.6 million | $667.4 million | | Operating Expenses | $145.5 million | $105.1 million | - Excluding an $8.7 million settlement, oil and gas royalty revenue decreased by $103.7 million compared to 2022, as the average realized price per Boe fell to $42.58[11] - The revenue decline was partially offset by a combined $39.5 million increase in water-related income and a $22.9 million increase in easements[11] - The $40.4 million increase in total operating expenses was principally related to increases in legal and water service-related expenses[12] Shareholder Returns and Corporate Governance The company declared a quarterly dividend and is actively considering a stockholder proposal regarding special meetings - On February 13, 2024, the Board declared a quarterly cash dividend of $3.50 per share[13] - The Board is evaluating a stockholder proposal to grant stockholders the right to call a special meeting, with a final recommendation pending[14] - During the full year 2023, TPL returned capital to shareholders via $100.0 million in total cash dividends and $42.4 million in stock repurchases[5] Segment Operating Results The Water Services segment grew significantly in 2023, increasing its contribution to total revenue and net income Full Year Segment Revenue (in thousands) | Segment | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Land and Resource Management | $432,105 | $506,975 | | Water Services and Operations | $199,490 | $160,447 | | Total Consolidated Revenues | $631,595 | $667,422 | Full Year Segment Net Income (in thousands) | Segment | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Land and Resource Management | $306,706 | $365,041 | | Water Services and Operations | $98,939 | $81,321 | | Total Consolidated Net Income | $405,645 | $446,362 | - The Water Services and Operations segment's share of total revenue grew from 24% in 2022 to 31% in 2023, while its share of total net income grew from 18% to 24%[28] Financial Statements and Reconciliations Detailed statements show increased production volumes offset by lower commodity prices, impacting full-year profitability Financial and Operational Results (Detailed Tables) Higher production volumes in 2023 were insufficient to overcome a sharp decline in realized prices for oil and gas Production and Price Comparison (Full Year) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Equivalents per day (MBoe/d) | 23.5 | 21.3 | | Realized Oil Price ($/Bbl) | $77.33 | $94.69 | | Realized Gas Price ($/Mcf) | $2.23 | $6.19 | | Realized Equivalents ($/Boe) | $42.58 | $60.81 | Condensed Consolidated Statements of Income Full-year revenues and net income decreased, driven by lower oil and gas royalties and higher operating expenses Income Statement Summary (Full Year, in thousands) | Line Item | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Total Revenues | $631,595 | $667,422 | | Total Operating Expenses | $145,542 | $105,115 | | Operating Income | $486,053 | $562,307 | | Net Income | $405,645 | $446,362 | | Diluted EPS | $52.77 | $57.77 | Non-GAAP Performance Measures Non-GAAP metrics like Adjusted EBITDA and Free Cash Flow declined in 2023, consistent with lower net income - The company defines Free Cash Flow as Adjusted EBITDA less current income tax expense and capital expenditures[31] Non-GAAP Reconciliation Summary (Full Year, in thousands) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Income | $405,645 | $446,362 | | Adjusted EBITDA | $541,442 | $591,814 | | Free Cash Flow | $415,494 | $451,617 | Company Overview TPL is a major Texas landowner that monetizes its Permian-focused surface and royalty assets without producing oil and gas - TPL is a major landowner in Texas with approximately 868,000 acres, primarily in the Permian Basin[17] - The company is not an oil and gas producer but generates revenue from its surface and royalty ownership[17] - Key revenue streams include land use payments, material sales, water services, oil and gas royalties, and infrastructure easements[17]