On August 7, 2024, Texas Pacific Land Corp (TPL, Financial) released its 8-K filing detailing its financial results for the second quarter of 2024. Texas Pacific Land Corp is primarily engaged in the sales and leases of land owned, retaining oil and gas royalties, and the overall management of the land owned. The company operates in two segments: Land and Resource Management and Water Service and Operations. The majority of its revenue is generated from the Land and Resource Management segment.
Performance Overview
Texas Pacific Land Corp reported consolidated revenues of $172.3 million for Q2 2024, falling short of the analyst estimate of $191.96 million. This represents a slight decrease from the $174.1 million reported in Q1 2024. The company's net income for the quarter was $114.6 million, or $14.98 per diluted share, compared to $114.4 million in the previous quarter.
The Water Service and Operations segment achieved record performance with total segment revenues of $68.3 million, driven by water sales revenue of $40.7 million and produced water royalties revenue of $25.3 million. The segment's net income was $34.5 million.
Financial Achievements and Challenges
Despite the slight decline in overall revenue, Texas Pacific Land Corp's Water Service and Operations segment demonstrated significant growth. The company announced a target cash and cash equivalents balance of approximately $700 million, with plans to deploy excess free cash flow towards share repurchases and dividends. A special cash dividend of $10.00 per share was paid on July 15, 2024.
However, the company faced challenges with a decrease of $4.1 million in easements and other surface-related income and a $2.3 million decrease in oil and gas royalty revenue compared to Q1 2024. The average realized price per barrel of oil equivalent (Boe) decreased by 3% to $41.44 in Q2 2024 from $42.71 in Q1 2024.
Key Financial Metrics
| Metric | Q2 2024 | Q1 2024 | Q2 2023 |
|---|---|---|---|
| Consolidated Revenues | $172.3 million | $174.1 million | $153.5 million |
| Net Income | $114.6 million | $114.4 million | $93.5 million |
| Adjusted EBITDA | $153.2 million | $154.1 million | $128.7 million |
| Free Cash Flow | $116.0 million | $117.5 million | $98.2 million |
Income Statement Highlights
For the six months ended June 30, 2024, Texas Pacific Land Corp reported consolidated revenues of $346.5 million, up from $307.0 million for the same period in 2023. The increase was primarily driven by a $18.4 million rise in water sales and a $10.4 million increase in oil and gas royalty revenue. The company's share of production was 24.9 thousand Boe per day, with an average realized price of $42.07 per Boe.
Commentary
"This quarter’s strong results highlight the meaningful contribution derived from investments we have made in the water business since its inception in 2017," said Tyler Glover, Chief Executive Officer of the Company. "The substantial investment into hiring personnel and developing targeted infrastructure over several years was a pivotal moment in the Company’s history, purposefully positioning TPL to be at the forefront of the Permian Basin’s emergence as a world-class resource."
Analysis
Texas Pacific Land Corp's performance in Q2 2024 underscores the importance of its Water Service and Operations segment, which continues to show robust growth. The company's strategic investments in this segment have paid off, contributing significantly to its overall financial health. However, the slight decline in overall revenue and challenges in the Land and Resource Management segment highlight the volatility and dependency on commodity prices and customer decisions.
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Explore the complete 8-K earnings release (here) from Texas Pacific Land Corp for further details.
