Texas Pacific Land Corporation ((TPL)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Texas Pacific Land Corporation (TPL) painted a picture of robust growth and strategic foresight. Despite challenges posed by weak commodity prices, the company showcased record-setting financial performance, strategic acquisitions, and a strong focus on long-term growth and shareholder returns. The sentiment expressed during the call was overwhelmingly positive, highlighting TPL’s resilience and strategic planning.
Record Revenue and Volume Performance
TPL achieved a historic milestone by surpassing $200 million in revenue for the first time. This achievement was driven by significant growth in oil and gas royalty production, which saw a 28% year-over-year increase, and water sales, which grew by 23% year-over-year. These figures underscore the company’s ability to capitalize on its assets and market conditions effectively.
Significant Royalty Acquisition
In a strategic move, TPL acquired approximately 17,300 net royalty acres for $474 million. This acquisition is expected to yield a double-digit pretax cash flow at $60 per barrel of oil and $2 per 1,000 cubic feet of natural gas, highlighting the company’s focus on enhancing its asset base and future cash flows.
Strong Free Cash Flow and EBITDA
TPL reported a strong free cash flow of $123 million, marking a 15% increase year-over-year. The company’s adjusted EBITDA margin stood at an impressive 85%, reflecting efficient operations and a strong financial position.
Water Segment Growth
The water segment of TPL’s business also saw significant growth, with water sales revenue hitting a record $45 million. Produced water royalty revenues increased by 16% year-over-year, demonstrating the company’s successful expansion in this segment.
Credit Facility Enhancing Liquidity
To support its growth initiatives, TPL closed on a $500 million credit facility. This move enhances the company’s liquidity and provides the financial flexibility needed to pursue further growth opportunities at attractive interest rates.
Commodity Price Challenges
Despite facing some of the weakest benchmark oil and gas prices since the COVID pandemic, TPL managed to maintain strong oil and gas royalty revenues. This resilience speaks to the company’s strategic asset management and operational efficiency.
Volatility in Water Sales
The earnings call noted some volatility in water sales over the last two quarters, attributed to consolidation and diverse acreage positions. This highlights the dynamic nature of the water market and TPL’s ability to navigate these changes.
Forward-Looking Guidance
Looking ahead, TPL anticipates continued growth in its oil and gas royalty production, with a 9% sequential increase and a 28% increase year-over-year. The company also expects its water sales to maintain their upward trajectory, supported by investments in brackish and treated water infrastructure. The strategic acquisition of royalty acres in the Midland Basin is poised to generate significant cash flow, reinforcing TPL’s commitment to long-term value creation and shareholder returns.
In summary, Texas Pacific Land Corporation’s earnings call highlighted a period of record performance and strategic growth initiatives. Despite facing challenges from weak commodity prices, the company demonstrated resilience and a clear focus on long-term growth. With strategic acquisitions and a strong financial position, TPL is well-positioned to continue delivering value to its shareholders.