Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or
"TPL") today announced its financial and operating results for the
fourth quarter and full year of 2020.
Conversion of the Trust
As previously announced, on January 11, 2021, we completed our
reorganization from a business trust, Texas Pacific Land Trust,
into Texas Pacific Land Corporation (the “Corporate
Reorganization”), a corporation formed and existing under the laws
of the State of Delaware. Any references herein to the Company,
TPL, our, we or us with respect to periods prior to January 11,
2021 will be in reference to Texas Pacific Land Trust, and
references to periods on that date and thereafter will be in
reference to Texas Pacific Land Corporation. Any reference to
Sub-share Certificates or Sub-shares are to the Sub-share
Certificates of Proprietary Interest of Texas Pacific Land
Trust.
Quarterly Dividend Declared
The board of directors (the "Board") has determined to pay
dividends quarterly going forward in March, June, September and
December of each year, subject to the discretion of the Board. On
February 17, 2021, the Board declared a quarterly cash dividend of
$2.75 per share payable on March 15, 2021 to stockholders of record
at the close of business on March 8, 2021.
Share Repurchases
The Board has also decided that the Company will begin the
repurchase of the Company's common stock consistent with TPL's long
history of repurchasing Sub-shares. The timing and amount of share
repurchases is subject to the discretion of the Board.
Fourth Quarter 2020 Highlights:
- Net income of $44.8 million, or $5.77 per Sub-share Certificate
("Sub-share")
- Revenues of $74.3 million
- EBITDA of $59.0 million (1)
- Cash flows of $45.6 million from operating activities
- Special cash dividend of $10.00 per Sub-share on December 17,
2020, the Company's second special cash dividend in 2020
Full Year 2020 Highlights:
- Net income of $176.0 million, or $22.70 per Sub-share
- Revenues of $302.6 million, the second largest year in our
history
- EBITDA of $234.1 million (1)
- Cash flows of $207.0 million from operating activities
- Total dividends of $26.00 per Sub-share, consisting of a
regular cash dividend of $10.00 per Sub-share in March 2020, a
special cash dividend of $6.00 per Sub-share in March 2020 and a
special cash dividend of $10.00 per Sub-share in December
2020.
(1) Reconciliations of Non-GAAP measures are
provided in the tables below.
“Despite the challenges presented during 2020, particularly with
respect to the oil and gas industry, we continued to generate
positive operating results and reported our second largest revenue
year in the Company's history,” said Tyler Glover, President and
Chief Executive Officer of the Company. “With the completion of our
Corporate Reorganization in January 2021, we are eager to begin the
next chapter of history as a corporation and anticipate the
benefits our new structure affords us.”
Financial Results for the Fourth Quarter of 2020:
The Company reported net income of $44.8 million for the fourth
quarter ended December 31, 2020, a decrease of 35.2% compared to
net income of $69.1 million for the fourth quarter ended December
31, 2019. Net income for the fourth quarter of 2020 was impacted by
decreased revenues, largely driven by a $20.5 million decrease in
land sales and a $12.5 million decrease in water sales and
royalties. The decrease in revenue was partially offset by a $6.1
million decrease in operating expenses over the same time
period.
Revenues across all revenue streams were lower for the fourth
quarter of 2020 compared to the same period of 2019. Land sales for
the fourth quarter of 2019 included a $22.0 million land exchange.
There were no significant land transactions during the fourth
quarter of 2020. Our revenues from land sales are subject to
substantial fluctuation and vary from year to year. The decrease in
water sales for the fourth quarter of 2020 compared to 2019 is
principally due to a 22.8% decrease in the average sales price per
barrel of water over the same time period. Additionally, the fourth
quarter of 2020 was impacted by an approximately $7.0 million
deferral of water sales revenue related to take or pay
contracts.
Operating expenses decreased approximately $6.1 million during
the fourth quarter of 2020 compared to the same period of 2019. The
decreases were principally related to a $4.9 million decrease in
incentive compensation expense, a $2.4 million decrease in water
service-related expenses resulting from cost savings measures
implemented during 2020 and a $1.8 million reduction in contract
labor expense. These decreases were partially offset by a $2.6
million increase in legal and professional fees, primarily
resulting from our Corporate Reorganization.
Financial Results for the Year Ended December 31,
2020:
The Company reported net income of $176.0 million for the year
ended December 31, 2020, a decrease of 44.8% compared to net income
of $318.7 million for the year ended December 31, 2019, which
included a $100 million land sale. Net income for the year ended
December 31, 2020 was principally impacted by decreased land sales
and decreased water sales and royalties. Excluding the impact of
the 2019 land sale (net of income tax), net income for the year
ended December 31, 2019 was $239.7 million.
Revenues for the year ended December 31, 2020 were $302.6
million compared to $490.5 million for the comparable period of
2019. All revenue streams for the year ended December 31, 2020 were
lower than for the same period of 2019. Revenues were negatively
impacted by the economic impacts related to the COVID-19 pandemic
and the declines in demand and crude oil prices that occurred
during 2020. Many of our revenue streams are impacted by the
capital decisions made by companies that operate in the areas where
we own land. The most significant impact on our revenues related to
decreased land sales for the year ended December 31, 2020 compared
to 2019. Revenues for 2019 included a $100 million land sale. We
had no comparable land sales in 2020. Water sales decreased $23.7
million for the year ended December 31, 2020 compared to 2019,
principally due to an 18.7% decrease in the average sales price per
barrel of water, a 6.8% decrease in the number of barrels sold and
a $7.0 million deferral of water sales revenue during the fourth
quarter related to take or pay contracts. Additionally, water
royalties decreased $6.4 million over the same time period.
Operating expenses for the year ended December 31, 2020 were
approximately $5.6 million lower than the same period of 2019. The
decrease is principally the result of a decrease of $6.6 million of
water-related expenses resulting from cost savings measures
implemented during 2020 and decreased legal and professional
fees.
COVID-19 Pandemic and Market Conditions Update
The increased supply of oil and gas by member nations of OPEC+
and the uncertainty caused by the global spread of COVID 19 led to
declines in crude oil prices and a reduction in global demand for
oil and gas in 2020. The full impact of these events, which
resulted in production curtailments and/or conservation of capital
by the owners and operators of the oil and gas wells to which the
Company’s royalty interests relate, is unknown at this time. These
events have negatively affected the Company’s business and results
of operations for the year ended December 31, 2020.
During these uncertain times, we have continued to generate
positive operating results and remain focused on meeting the
operational needs of our customers while maintaining a safe and
healthy work environment for our employees. Our existing
information technology infrastructure has afforded us the
opportunity to allow our corporate employees to work remotely. We
have deployed additional safety and sanitization measures,
including quarantine facilities for our field employees, if
needed.
In an effort to decrease ongoing operational costs, we have
implemented certain cost reduction measures which include, but are
not limited to, a reduction in contract labor, conversion of
portions of our water sourcing infrastructure to electric power and
negotiated price reductions and discounts with certain vendors. We
continue to monitor our customer base and outstanding accounts
receivable balances as a means of minimizing any potential
collection issues. As a royalty owner, we have no capital
expenditure or operating expense burden for development of wells.
Furthermore, our water operations currently have limited capital
expenditure requirements, the amount and timing of which are
entirely within our control.
About Texas Pacific Land Corporation
Texas Pacific Land Corporation is one of the largest landowners
in the State of Texas with approximately 880,000 acres of land in
West Texas. The Company is not an oil and gas producer, but its
surface and royalty ownership allow revenue generation through the
entire value chain of oil and gas development, including through
fixed fee payments for use of our land, revenue for sales of
materials (caliche) used in the construction of infrastructure,
providing sourced water and treated produced water, revenue from
our oil and gas royalty interests, and revenues related to
saltwater disposal on our land. The Company also generates revenue
from pipeline, power line and utility easements, commercial leases,
material sales and seismic and temporary permits related to a
variety of land uses including midstream infrastructure projects
and hydrocarbon processing facilities.
Visit TPL at www.texaspacific.com.
Cautionary Statement Regarding Forward-Looking
Statements
This news release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on TPL’s beliefs, as well as assumptions
made by, and information currently available to, TPL, and therefore
involve risks and uncertainties that are difficult to predict.
Generally, future or conditional verbs such as “will,” “would,”
“should,” “could,” or “may” and the words “believe,” “anticipate,”
“continue,” “intend,” “expect” and similar expressions identify
forward-looking statements. Forward-looking statements include, but
are not limited to, statements regarding the Corporate
Reorganization and other references to strategies, plans,
objectives, expectations, intentions, assumptions, future
operations and prospects and other statements that are not
historical facts. You should not place undue reliance on
forward-looking statements. Although TPL believes that plans,
intentions and expectations, including those regarding the
Corporate Reorganization, reflected in or suggested by any
forward-looking statements made herein are reasonable, TPL may be
unable to achieve such plans, intentions or expectations and actual
results, and performance or achievements may vary materially and
adversely from those envisaged in this news release due to a number
of factors including, but not limited to: an inability to achieve
some or all of the expected benefits of the Corporate
Reorganization and distribution; potential adverse reactions or
changes to business relationships resulting from the announcement
or completion of the Corporate Reorganization; the potential
impacts of COVID-19 on the global and U.S. economies as well as on
TPL’s financial condition and business operations; the initiation
or outcome of potential litigation; and any changes in general
economic and/or industry specific conditions. These risks, as well
as other risks associated with TPL and the Corporate Reorganization
are also more fully discussed in a Current Report on Form 8-K filed
by TPL with the SEC on December 31, 2020, which includes an
information statement describing the Corporate Reorganization and
the distribution in more detail. You can access TPL’s filings with
the SEC through the SEC website at www.sec.gov and TPL strongly
encourages you to do so. Except as required by applicable law, TPL
undertakes no obligation to update any forward-looking statements
or other statements herein for revisions or changes after this
communication is made.
REPORT OF OPERATIONS
(in thousands, except share and
per share amounts) (unaudited)
Three Months Ended
December 31,
Years Ended December
31,
2020
2019
2020
2019
Revenues:
Oil and gas royalties
$
43,317
$
43,616
$
137,948
$
154,729
Easements and other surface-related
income
22,068
27,727
92,038
115,362
Water sales and royalties
7,337
19,882
54,862
84,949
Land sales
1,528
22,000
17,383
135,020
Other operating revenue
54
107
323
436
Total revenues
74,304
113,332
302,554
490,496
Expenses:
Salaries and related employee expenses
4,938
12,299
32,173
35,041
Water service-related expenses
3,028
5,385
14,233
20,808
General and administrative expenses
2,461
2,663
9,751
9,540
Legal and professional fees
3,823
1,205
10,778
16,403
Land sales expenses
1,200
—
3,973
225
Depreciation, depletion and
amortization
3,622
3,620
14,395
8,906
Total operating expenses
19,072
25,172
85,303
90,923
Operating income
55,232
88,160
217,251
399,573
Other income, net
105
911
2,411
2,682
Income before income taxes
55,337
89,071
219,662
402,255
Income tax expense (benefit):
Current
12,849
14,007
46,002
57,492
Deferred
(2,303)
5,942
(2,389)
26,035
Total income tax expense
10,546
19,949
43,613
83,527
Net income
$
44,791
$
69,122
$
176,049
$
318,728
Net income per Sub-share Certificate -
basic and diluted
$
5.77
$
8.91
$
22.70
$
41.09
Weighted average number of Sub-share
Certificates outstanding
7,756,156
7,756,156
7,756,156
7,756,437
SEGMENT OPERATING
RESULTS
(in thousands) (unaudited)
Three Months Ended
December 31,
2020
2019
Revenues:
Land and resource management:
Oil and gas royalties
$
43,317
58
%
$
43,616
38
%
Easements and other surface-related
income
8,092
11
%
13,382
12
%
Land sales and other operating revenue
1,582
2
%
22,107
19
%
52,991
71
%
79,105
69
%
Water services and operations:
Water sales and royalties
7,337
10
%
19,882
18
%
Easements and other surface-related
income
13,976
19
%
14,345
13
%
21,313
29
%
34,227
31
%
Total consolidated revenues
$
74,304
100
%
$
113,332
100
%
Net income:
Land and resource management
$
35,780
80
%
$
54,144
78
%
Water services and operations
9,011
20
%
14,978
22
%
Total consolidated net income
$
44,791
100
%
$
69,122
100
%
Years Ended December
31,
2020
2019
Revenues:
Land and resource management:
Oil and gas royalties
$
137,948
46
%
$
154,729
31
%
Easements and other surface-related
income
39,478
13
%
73,143
15
%
Land sales and other operating revenue
17,706
6
%
135,456
28
%
195,132
65
%
363,328
74
%
Water services and operations:
Water sales and royalties
54,862
18
%
84,949
17
%
Easements and other surface-related
income
52,560
17
%
42,219
9
%
107,422
35
%
127,168
26
%
Total consolidated revenues
$
302,554
100
%
$
490,496
100
%
Net income:
Land and resource management
$
127,977
73
%
$
258,366
81
%
Water services and operations
48,072
27
%
60,362
19
%
Total consolidated net income
$
176,049
100
%
$
318,728
100
%
NON-GAAP PERFORMANCE MEASURES AND DEFINITIONS
In addition to amounts presented in accordance with generally
accepted accounting principles in the United States of America
(“GAAP”), we also present certain supplemental non-GAAP
measurements. These measurements are not to be considered more
relevant or accurate than the measurements presented in accordance
with GAAP. In compliance with requirements of the Securities and
Exchange Commission (“SEC”), our non-GAAP measurements are
reconciled to net income, the most directly comparable GAAP
performance measure. For all non-GAAP measurements, neither the SEC
nor any other regulatory body has passed judgment on these non-GAAP
measurements.
EBITDA
EBITDA is a non-GAAP financial measurement of earnings before
interest, taxes, depreciation, depletion and amortization. Its
purpose is to highlight earnings without finance, taxes, and
depreciation, depletion and amortization expense, and its use is
limited to specialized analysis. We have presented EBITDA because
we believe that it is a useful supplement to net income as an
indicator of operating performance.
The following table presents a reconciliation of net income to
EBITDA for the three months and years ended December 31, 2020 and
2019 (in thousands):
Three Months Ended
December 31,
Years Ended December
31,
2020
2019
2020
2019
Net income
$
44,791
$
69,122
$
176,049
$
318,728
Add:
Income tax expense
10,546
19,949
43,613
83,527
Depreciation, depletion and
amortization
3,622
3,620
14,395
8,906
EBITDA
$
58,959
$
92,691
$
234,057
$
411,161
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210225005976/en/
Chris Steddum Vice President, Finance and Investor Relations
(214) 969-5530
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