Texas Pacific Land (US:TPL)2023-02-23 18:12Financial Data and Key Metrics Changes - Full year 2022 revenue reached $667 million, a 48% year-over-year increase, exceeding the previous record by over $170 million [4][15] - Net income for fiscal year 2022 was $446 million, representing a 65% increase compared to the prior year [15] - Consolidated adjusted EBITDA margin for the full year was 89%, indicating efficient conversion of revenue into cash flow [4] - The company returned $335 million to shareholders through dividends and buybacks, and exited the year with zero debt and over $500 million in cash [4] Business Line Data and Key Metrics Changes - Revenue from oil and gas royalties contributed to record revenues, while combined water sales, produced water royalties, and easements generated over $200 million [4] - Source water revenue increased by 25%, produced water royalties rose by 24%, and easements and other surface-related income grew by 28% year-over-year [15] - Royalty production for the full year was approximately 21,300 barrels of oil equivalent per day, with a 15% year-over-year growth [16] Market Data and Key Metrics Changes - The company observed a trend of declining well productivity among operators, with many moving towards co-development of multiple zones [8] - Natural gas pricing realizations weakened, particularly among smaller independent producers, due to tight pipeline capacity out of the Permian [10][17] - The company noted that insufficient takeaway capacity presents opportunities for pipeline easement development [10] Company Strategy and Development Direction - The company is expanding revenue opportunities beyond its legacy business, including contracts for carbon capture, battery storage, and bitcoin mining facilities [5] - The company has executed contracts for in-basin wet sand mines, which are expected to generate revenue and reduce truck congestion and emissions [6][27] - A new agreement with bpx, a subsidiary of BP, was announced to provide comprehensive source water and produced water offtake across approximately 270,000 acres [7][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining positive momentum despite commodity price volatility, emphasizing the quality of their resource base [13] - The company is focused on sustainability and safety, achieving zero spills and reportable safety incidents in 2022 [13] - Management highlighted the importance of their robust cash position, which allows for flexibility in capital allocation [20] Other Important Information - The company plans to repurchase shares under a newly expanded $250 million share repurchase plan [19] - The company has a strong focus on next-generation opportunities while maintaining its legacy business [30] Q&A Session Summary Question: Growth outlook for business segments - Management acknowledged quarterly volatility but expressed confidence in outperforming the Permian as a whole due to a strong normalized DUC count [21] Question: Details on the bpx agreement - The agreement provides both parties with rights within the AMI, facilitating bpx's operations and increasing TPL's water offtake [28] Question: Potential of wet sand opportunity - Management expects to see revenue from contracted sand mines this year, potentially adding around $20 million in revenue within a couple of years [26][27] Question: Methodology for stock buyback program - The buyback program will be opportunistic, with capital deployment based on various market factors [32] Question: Preferred cash level - Management emphasized the importance of maintaining a robust cash balance to capitalize on future opportunities [33]