NYSE:TPL Texas Pacific Land Q3 2023 Earnings Report $1,331.79 +10.18 (+0.77%) As of 10:02 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Texas Pacific Land EPS ResultsActual EPS$4.58Consensus EPS $4.84Beat/MissMissed by -$0.26One Year Ago EPSN/ATexas Pacific Land Revenue ResultsActual Revenue$157.97 millionExpected Revenue$173.84 millionBeat/MissMissed by -$15.87 millionYoY Revenue GrowthN/ATexas Pacific Land Announcement DetailsQuarterQ3 2023Date11/1/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time8:30AM ETUpcoming EarningsTexas Pacific Land's Q1 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled on Thursday, May 8, 2025 at 10:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Texas Pacific Land Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Greetings and welcome to Texas Pacific Land Corporation Third Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Amini, Finance and Investor Relations. Operator00:00:33Thank you, Mr. Amini. You may begin. Speaker 100:00:37Thank you for joining us today for Texas Specifically, LAND Corporation's Q3 2023 earnings conference call. Yesterday afternoon, the company released its financial results and filed its Form 10 Q with the Securities and and Exchange Commission, which is available on the Investors section of the company's website at www.exaspecific.com. As a reminder, remarks made on today's conference call may include forward looking statements. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those yesterday. We do not undertake any obligation to update our forward looking statements in light of new information or future events. Speaker 100:01:12For a more detailed discussion of the factors that may affect For today's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will also be discussing certain non GAAP financial measures. More information and reconciliations about these non GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may have time to refer to our company by stock ticker, TPL. This morning's conference call is hosted by TPL's Chief Executive Officer, Ty Glover and Chief Financial Officer, Chris Gutten. Speaker 100:01:43Management will make some prepared comments, after which we will open the call for questions. Now I will turn the call over to Ty. Speaker 200:01:50Good morning, everyone, and thank you for joining us today. TPL delivered another strong quarter driven by improving commodity prices and Continued performance Speaker 300:01:58of our surface and water Speaker 200:01:59assets. Starting with oil and gas royalties, revenues increased 6% Sequential quarter over quarter as lower royalty production was more than offset by higher oil, natural gas and NGL prices. This past quarter, we've heard from operators that development activities were negatively impacted by infrastructure downtime and electricity challenges during the summer heat waves. With those issues having subsided and with some additional natural gas takeaway capacity coming online, we think infrastructure and logistics will be less of constraint for development in the near term. For our surface leases, easements and materials segment, which we refer to as SLIM, We continue to benefit from broad strength across our various endeavors there. Speaker 200:02:43In particular, pipeline easements have been robust driven by expanding infrastructure development in the Permian. For Source Water, year to date revenues have already eclipsed what we did in all of 2022, Though down from our record sales volumes off the prior sequential quarter, Q3 2023 source water sales volumes Approximately 545,000 barrels per day represent high utilization across our system. In particular demand for treated water remains elevated with this past quarter representing record revenues and volumes. On the produced water side, volumes have grown steadily and quarterly revenues are up 9% year over year. Produced water volumes continue to grow across the Permian, which TPL continues to capture a significant portion through our large AMI agreements across our surface. Speaker 200:03:33To give some additional visibility on PPL's production outlook, I wanted to take some time this morning to provide recent well development trends on our royalty acreage. Starting with our near term well inventory, at the end of the Q3 2023, TPL had 6.7 net permits, 7.9 net drilled but uncompleted wells also referred to as DUCs and 5.2 net completed wells. This near term inventory totals 19.9 net wells, which represents a 29% increase from Q2 2023 levels. Although we had relatively lower net new producing wells added in this most recent quarter, the higher balance of Completed wells represents a level much higher than what we've generally seen historically, which gives some visibility into near term production trends as those get turned to sales soon. For wells already turned to sales in 2023, the timing of completion to initial production has averaged around 20 days, which is significantly longer than prior year averages of approximately 3 to 5 days. Speaker 200:04:39We believe this timing delay is in large part attributable to more operators utilizing co development strategies as more wells are fracked together within a pad and then those group of wells are collectively not turned to sales until after the last well has been completed. All else being equal, the effect of this is that the production contribution from new wells becomes lumpier in the short term. It's also worth noting the timing of permit to spud and spud to completion have compressed considerably in 2023 versus prior years. In total, for wells turned to sales in 2023, the average permit to production timing is approximately 10 months, Whereas in 2022 is approximately 11 months and 2021 it was approximately 13 months. With respect to rigs, although rig counts in the overall Permian have declined by approximately 10% compared to last year, We've recently seen more rigs operating on TPL acreage. Speaker 200:05:36Last year at this time, we estimated that there were approximately 42 rigs operating on TPL acreage, Whereas today we estimate we currently have more than 50 rigs. These rig totals align with our well data with Q3 2023 new spot represents a record for new permits both on a gross and net basis. With a strong backlog of completed wells and inventory, High levels of ongoing new permits, accelerated development timing of converting permit to sales and currently supportive oil and natural gas prices, Those fundamentals in aggregate underpinned what we believe to be constructive backdrop for development on TPL royalty acreage and the Permian more broadly. Of course, commodity prices can change and development schedules can evolve. But as we've shown before, TPL is well positioned to succeed through most any environment. Speaker 200:06:37Before concluding my remarks, I also wanted to mention that next week TPL will be hosting its 2023 Annual Meeting in Dallas. I want to remind and encourage shareholders to review the proxy materials, which you can find on our website and on the SEC website and to submit votes. If anyone needs any assistance, please reach out to Investor Relations. With that, I'll turn the call over to Chris. Speaker 300:07:02Thanks, Ty. 3rd quarter 2023 total consolidated revenue and net income were $158,000,000 $106,000,000 respectively. Total adjusted EBITDA was $141,000,000 which is 6% higher compared to the prior sequential quarter and adjusted EBITDA margin was approximately 89%. During the quarter, the company benefited from higher commodity prices and lower operating expenses, though partially offset by lower royalty production and lower source water sales. Free cash flow was approximately $106,000,000 And we exited the quarter with approximately $660,000,000 of cash on the balance sheet, royalty production of approximately 21,800 barrels of oil equivalent per day represented a 12% decrease on a sequential quarter basis. Speaker 300:07:55Our realized price per barrel of oil equivalent increased 19% to approximately $45 Benchmark prices for each oil, gas and NGLs each rose over the prior sequential quarter and our realizations We also spent approximately $6,000,000 to repurchase approximately 3,600 shares of our common stock. And with that, operator, we will now take questions. Operator00:08:31Thank you. We will now be conducting a question and answer The first question comes from the line of Derrick Whitfield with Stifel. Please go ahead. Speaker 400:09:09Good morning, all. Speaker 200:09:12Good morning, Derek. Hey, Speaker 300:09:13good morning, Derek. Speaker 400:09:15For my first question, I wanted to on your Q3 production and your 6 to 12 month production trajectory. Regarding the quarter, Hi, do you have a sense on the production impact split between elevated temperatures and brownouts versus delayed tills Due to larger pad development? And secondarily, with the record amount of completion in line of sight inventory, well as you have exiting the quarter, How should we think about the trajectory as we exit this year and into next? Speaker 200:09:47Hey, Derek, will you repeat the first part of your question? Speaker 400:09:52Sure. Just on the production impacts for the quarter, you talked about in your prepared remarks, There were elevated temperatures and brownouts and then you also talked about some delayed hills due to larger pad development. I wanted to get a sense from you if you have a view on the split between those two categories? Speaker 200:10:15I don't have the exact split, but I think we were probably more heavily impacted by the delay in TILs just because we had a lot of Mega Pads this last quarter, where we had quite a few wells being drilled from the same pad. And so like I mentioned in my prepared remarks, what happens there is they wait till all of those wells are completed to bring them online. And so That makes the near term production a little bit lumpier and that's what we saw this quarter. We did see Some effects of the heat waves with some problems with electricities and some compressor stations going down. And I think you'll see some midstream operators talk about those issues as well this quarter. Speaker 200:11:01For the second part of that question, Chris, you want to take that? Yes. Speaker 300:11:05So Derek to your point, I think we have had a little bit of lumpiness in our production over the last couple of quarters, Really strong last quarter, down a little bit this quarter. And I think as we always say, I mean, our view is we want to look toward the long term Trend because as Tay has mentioned, I think especially as you see some of these operators move these large pads, it's going to introduce A little more volatility in the production quarter to quarter. But I think in our view nothing has really changed And how we think about long term or let's say medium term production, everything still looks good. I think we still expect overall to see production growth In the coming year, again, like we said that really high amount of permits, the quicker turnaround of permits and DUCs, All of those things continue to be positive indicators. And I think as some of these big pads get brought online And we get through some of those temperature issues and pipeline constraint issues. Speaker 300:12:12We're going to see that production come to market to the benefit of TPL. Speaker 400:12:18Terrific. And then maybe shifting over to capital, could you comment on the surface Acreage you sold and the importance of disposal and groundwater rights you purchased? Speaker 200:12:33Yes. I'll take that one. The surface that we sold, so that acreage was In Culberson County, so this is way out like oil and gas fairway. Rangeland That one big issue that it had was it had a conservation easement on it. So this is acreage that wasn't part of the original land grant, but that the company's owned for A while. Speaker 200:13:06And so because of that conservation easement and because of the remoteness, we just didn't see any commercial opportunities and so we had the opportunity to sell it to a local rancher. And so that's kind of where we were at on that. So moving on to the pore space that we purchased, We feel like pore space is just becoming more and more valuable as we see produced water volumes continue to grow in the basin. And then also looking at other uses of pore space, carbon sequestration, things like that. We just feel like any time that we can add to our pore space inventory at attractive prices, then that's a really good opportunity and really good use for our capital. Speaker 400:14:00That makes sense. And one last if I could. During Q2 that was really a banner quarter for you guys in the water business based on the amount of Off lease activity you experienced, could you offer any perspective on how much off lease or how off lease performed this quarter? Speaker 200:14:19So really, I mean, right there in line with Last quarter definitely over half of our sales were off of our footprint. We also continue to see Increases in our treatment and so 3rd quarter was no different. I think as far as volumes on the treatment side was a And I would just mention too that I've talked about this a little bit in the past, but Most of the produced water gathering infrastructure on our land, we have the exclusive right to take water off of that system, treat it and resell it. Through good contract structure, we're very well positioned to keep providing brackish water and or Ramp up our treatment based on each operator's needs and we continue to grow further and further out of our footprint. The water team has done a really good job of contracting additional sales and expanding our footprint. Speaker 400:15:26Very helpful. Thanks for your time. Speaker 200:15:29Thanks, Derek. Thanks, Derek. Operator00:15:32Thank you. Next question comes from the line of Hamed Khorsand with BWS Financials. Please go ahead. Speaker 500:15:41Hey, good morning. Just a follow-up on this water topic. Given production having declined this past quarter And how your customers or the land of leases are operating, Would that imply that water sales could actually ramp up as you see these wells come online, it was just a delay factor? Speaker 200:16:12So water sales is typically paralleled with Completions activity. But I think like Chris mentioned earlier, when you look at The wells that have been recently spud in this last quarter and our permit count being up so high, I think that is definitely an indicator that there will be a lot of completions activity in the coming quarters, which is really good for water sales Both on the brackish and treatment side as well as the produced water side of the business because once you get that flow back that water has got to go somewhere. And so to answer your question, the things that we've talked about on the call here are good indicators for future water revenue. Okay. And then Speaker 500:17:00what's been the big contributor to the easement revenue line this year? And How tangible is it that it will continue to stay with the business? Speaker 200:17:14So probably the biggest contributors this year, especially over the last couple of quarters have been pipeline easements and material sales. So we're seeing a lot of infrastructure build out, a lot of Gas gathering lines, we've had a nice ramp in transmission lines as well as new gas Connects and facilities, compressor stations, things like that. And I think that's going to continue. We're seeing operators move Further away from existing infrastructure and into new areas where there are requirements for new roads and gathering infrastructure and facilities. And that was one thing that we saw a little bit of a bottleneck on last quarter was there were some areas where Wells were not turned in line because of a lack of infrastructure. Speaker 200:18:08And so the same operators that we talked to that Gave us that feedback with the same operators that had a big ramp in easements for say like gas takeaway. And then on the material sales side, we've expanded caliche sales up into New Mexico, which has been a really nice bump for us. We've also got 2 of the sand mines that we signed towards the end of the last year that are actually active now and we've seen a nice And sand royalties, I think we were just under $1,000,000 for sand royalties this last quarter. So that's Progressing well. We've got a couple of other sand leases that should be operational soon. Speaker 200:18:51And as we continue to expand our rock crushing Activities and things like that. I think we'll continue to see a strong slim activity in the future. Okay, great. Thank you. Thanks, Matt. Speaker 200:19:05Thanks, Matt. Operator00:19:08Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTexas Pacific Land Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Texas Pacific Land Earnings HeadlinesTexas Pacific Land's (NYSE:TPL) investors will be pleased with their enviable 732% return over the last five yearsMay 3 at 7:23 PM | finance.yahoo.comJim Cramer on Texas Pacific Land Corporation (TPL): ‘It’s A Great Business, But It’s Not Necessarily One That I Want To Recommend’May 2, 2025 | msn.comREVEALED: Elon’s Secret Master Plan “AGENDA X”REVEALED: Elon's Secret Master Plan "AGENDA X" For almost 30 years, Elon worked on his master plan in secret. Now, leaked computer code confirms Elon is moments away from launching a revolutionary financial technology… And Silicon Valley insider Jeff Brown says it could hand early investors who missed Tesla, "the ultimate second chance" to get rich.May 6, 2025 | Brownstone Research (Ad)Texas Pacific Land Corp. stock underperforms Wednesday when compared to competitorsApril 30, 2025 | marketwatch.comTexas Pacific Land Corporation (TPL): Among Large-Cap Stocks Insiders Were Buying in Q1 2025 Before Trump’s Tariff ShockwaveApril 29, 2025 | msn.comWith 71% ownership in Texas Pacific Land Corporation (NYSE:TPL), institutional investors have a lot riding on the businessApril 28, 2025 | finance.yahoo.comSee More Texas Pacific Land Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Texas Pacific Land? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Texas Pacific Land and other key companies, straight to your email. Email Address About Texas Pacific LandTexas Pacific Land (NYSE:TPL) engages in the land and resource management, and water services and operations businesses. The company owns a 1/128th nonparticipating perpetual oil and gas royalty interest (NPRI) under approximately 85,000 acres of land; a 1/16th NPRI under approximately 371,000 acres of land; and approximately 4,000 additional net royalty acres, total of approximately 195,000 NRA located in the western part of Texas. The Land and Resource Management segment manages surface acres of land, and oil and gas royalty interest in West Texas. This segment also engages in easements, such as transporting oil, gas and related hydrocarbons, power line and utility, and subsurface wellbore easements. In addition, this segment leases its land for processing, storage, and compression facilities and roads; and is involved in sale of materials, such as caliche, sand, and other material, as well as sells land. The Water Services and Operations segment provides full-service water offerings, including water sourcing, produced-water treatment, infrastructure development, and disposal solutions to operators in the Permian Basin. This segment also holds produced water royalties. Texas Pacific Land Corporation was founded in 1888 and is headquartered in Dallas, Texas.View Texas Pacific Land ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings Fortinet (5/7/2025)ARM (5/7/2025)AppLovin (5/7/2025)MercadoLibre (5/7/2025)Lloyds Banking Group (5/7/2025)Manulife Financial (5/7/2025)Novo Nordisk A/S (5/7/2025)Uber Technologies (5/7/2025)Johnson Controls International (5/7/2025)Walt Disney (5/7/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Greetings and welcome to Texas Pacific Land Corporation Third Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Amini, Finance and Investor Relations. Operator00:00:33Thank you, Mr. Amini. You may begin. Speaker 100:00:37Thank you for joining us today for Texas Specifically, LAND Corporation's Q3 2023 earnings conference call. Yesterday afternoon, the company released its financial results and filed its Form 10 Q with the Securities and and Exchange Commission, which is available on the Investors section of the company's website at www.exaspecific.com. As a reminder, remarks made on today's conference call may include forward looking statements. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those yesterday. We do not undertake any obligation to update our forward looking statements in light of new information or future events. Speaker 100:01:12For a more detailed discussion of the factors that may affect For today's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will also be discussing certain non GAAP financial measures. More information and reconciliations about these non GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may have time to refer to our company by stock ticker, TPL. This morning's conference call is hosted by TPL's Chief Executive Officer, Ty Glover and Chief Financial Officer, Chris Gutten. Speaker 100:01:43Management will make some prepared comments, after which we will open the call for questions. Now I will turn the call over to Ty. Speaker 200:01:50Good morning, everyone, and thank you for joining us today. TPL delivered another strong quarter driven by improving commodity prices and Continued performance Speaker 300:01:58of our surface and water Speaker 200:01:59assets. Starting with oil and gas royalties, revenues increased 6% Sequential quarter over quarter as lower royalty production was more than offset by higher oil, natural gas and NGL prices. This past quarter, we've heard from operators that development activities were negatively impacted by infrastructure downtime and electricity challenges during the summer heat waves. With those issues having subsided and with some additional natural gas takeaway capacity coming online, we think infrastructure and logistics will be less of constraint for development in the near term. For our surface leases, easements and materials segment, which we refer to as SLIM, We continue to benefit from broad strength across our various endeavors there. Speaker 200:02:43In particular, pipeline easements have been robust driven by expanding infrastructure development in the Permian. For Source Water, year to date revenues have already eclipsed what we did in all of 2022, Though down from our record sales volumes off the prior sequential quarter, Q3 2023 source water sales volumes Approximately 545,000 barrels per day represent high utilization across our system. In particular demand for treated water remains elevated with this past quarter representing record revenues and volumes. On the produced water side, volumes have grown steadily and quarterly revenues are up 9% year over year. Produced water volumes continue to grow across the Permian, which TPL continues to capture a significant portion through our large AMI agreements across our surface. Speaker 200:03:33To give some additional visibility on PPL's production outlook, I wanted to take some time this morning to provide recent well development trends on our royalty acreage. Starting with our near term well inventory, at the end of the Q3 2023, TPL had 6.7 net permits, 7.9 net drilled but uncompleted wells also referred to as DUCs and 5.2 net completed wells. This near term inventory totals 19.9 net wells, which represents a 29% increase from Q2 2023 levels. Although we had relatively lower net new producing wells added in this most recent quarter, the higher balance of Completed wells represents a level much higher than what we've generally seen historically, which gives some visibility into near term production trends as those get turned to sales soon. For wells already turned to sales in 2023, the timing of completion to initial production has averaged around 20 days, which is significantly longer than prior year averages of approximately 3 to 5 days. Speaker 200:04:39We believe this timing delay is in large part attributable to more operators utilizing co development strategies as more wells are fracked together within a pad and then those group of wells are collectively not turned to sales until after the last well has been completed. All else being equal, the effect of this is that the production contribution from new wells becomes lumpier in the short term. It's also worth noting the timing of permit to spud and spud to completion have compressed considerably in 2023 versus prior years. In total, for wells turned to sales in 2023, the average permit to production timing is approximately 10 months, Whereas in 2022 is approximately 11 months and 2021 it was approximately 13 months. With respect to rigs, although rig counts in the overall Permian have declined by approximately 10% compared to last year, We've recently seen more rigs operating on TPL acreage. Speaker 200:05:36Last year at this time, we estimated that there were approximately 42 rigs operating on TPL acreage, Whereas today we estimate we currently have more than 50 rigs. These rig totals align with our well data with Q3 2023 new spot represents a record for new permits both on a gross and net basis. With a strong backlog of completed wells and inventory, High levels of ongoing new permits, accelerated development timing of converting permit to sales and currently supportive oil and natural gas prices, Those fundamentals in aggregate underpinned what we believe to be constructive backdrop for development on TPL royalty acreage and the Permian more broadly. Of course, commodity prices can change and development schedules can evolve. But as we've shown before, TPL is well positioned to succeed through most any environment. Speaker 200:06:37Before concluding my remarks, I also wanted to mention that next week TPL will be hosting its 2023 Annual Meeting in Dallas. I want to remind and encourage shareholders to review the proxy materials, which you can find on our website and on the SEC website and to submit votes. If anyone needs any assistance, please reach out to Investor Relations. With that, I'll turn the call over to Chris. Speaker 300:07:02Thanks, Ty. 3rd quarter 2023 total consolidated revenue and net income were $158,000,000 $106,000,000 respectively. Total adjusted EBITDA was $141,000,000 which is 6% higher compared to the prior sequential quarter and adjusted EBITDA margin was approximately 89%. During the quarter, the company benefited from higher commodity prices and lower operating expenses, though partially offset by lower royalty production and lower source water sales. Free cash flow was approximately $106,000,000 And we exited the quarter with approximately $660,000,000 of cash on the balance sheet, royalty production of approximately 21,800 barrels of oil equivalent per day represented a 12% decrease on a sequential quarter basis. Speaker 300:07:55Our realized price per barrel of oil equivalent increased 19% to approximately $45 Benchmark prices for each oil, gas and NGLs each rose over the prior sequential quarter and our realizations We also spent approximately $6,000,000 to repurchase approximately 3,600 shares of our common stock. And with that, operator, we will now take questions. Operator00:08:31Thank you. We will now be conducting a question and answer The first question comes from the line of Derrick Whitfield with Stifel. Please go ahead. Speaker 400:09:09Good morning, all. Speaker 200:09:12Good morning, Derek. Hey, Speaker 300:09:13good morning, Derek. Speaker 400:09:15For my first question, I wanted to on your Q3 production and your 6 to 12 month production trajectory. Regarding the quarter, Hi, do you have a sense on the production impact split between elevated temperatures and brownouts versus delayed tills Due to larger pad development? And secondarily, with the record amount of completion in line of sight inventory, well as you have exiting the quarter, How should we think about the trajectory as we exit this year and into next? Speaker 200:09:47Hey, Derek, will you repeat the first part of your question? Speaker 400:09:52Sure. Just on the production impacts for the quarter, you talked about in your prepared remarks, There were elevated temperatures and brownouts and then you also talked about some delayed hills due to larger pad development. I wanted to get a sense from you if you have a view on the split between those two categories? Speaker 200:10:15I don't have the exact split, but I think we were probably more heavily impacted by the delay in TILs just because we had a lot of Mega Pads this last quarter, where we had quite a few wells being drilled from the same pad. And so like I mentioned in my prepared remarks, what happens there is they wait till all of those wells are completed to bring them online. And so That makes the near term production a little bit lumpier and that's what we saw this quarter. We did see Some effects of the heat waves with some problems with electricities and some compressor stations going down. And I think you'll see some midstream operators talk about those issues as well this quarter. Speaker 200:11:01For the second part of that question, Chris, you want to take that? Yes. Speaker 300:11:05So Derek to your point, I think we have had a little bit of lumpiness in our production over the last couple of quarters, Really strong last quarter, down a little bit this quarter. And I think as we always say, I mean, our view is we want to look toward the long term Trend because as Tay has mentioned, I think especially as you see some of these operators move these large pads, it's going to introduce A little more volatility in the production quarter to quarter. But I think in our view nothing has really changed And how we think about long term or let's say medium term production, everything still looks good. I think we still expect overall to see production growth In the coming year, again, like we said that really high amount of permits, the quicker turnaround of permits and DUCs, All of those things continue to be positive indicators. And I think as some of these big pads get brought online And we get through some of those temperature issues and pipeline constraint issues. Speaker 300:12:12We're going to see that production come to market to the benefit of TPL. Speaker 400:12:18Terrific. And then maybe shifting over to capital, could you comment on the surface Acreage you sold and the importance of disposal and groundwater rights you purchased? Speaker 200:12:33Yes. I'll take that one. The surface that we sold, so that acreage was In Culberson County, so this is way out like oil and gas fairway. Rangeland That one big issue that it had was it had a conservation easement on it. So this is acreage that wasn't part of the original land grant, but that the company's owned for A while. Speaker 200:13:06And so because of that conservation easement and because of the remoteness, we just didn't see any commercial opportunities and so we had the opportunity to sell it to a local rancher. And so that's kind of where we were at on that. So moving on to the pore space that we purchased, We feel like pore space is just becoming more and more valuable as we see produced water volumes continue to grow in the basin. And then also looking at other uses of pore space, carbon sequestration, things like that. We just feel like any time that we can add to our pore space inventory at attractive prices, then that's a really good opportunity and really good use for our capital. Speaker 400:14:00That makes sense. And one last if I could. During Q2 that was really a banner quarter for you guys in the water business based on the amount of Off lease activity you experienced, could you offer any perspective on how much off lease or how off lease performed this quarter? Speaker 200:14:19So really, I mean, right there in line with Last quarter definitely over half of our sales were off of our footprint. We also continue to see Increases in our treatment and so 3rd quarter was no different. I think as far as volumes on the treatment side was a And I would just mention too that I've talked about this a little bit in the past, but Most of the produced water gathering infrastructure on our land, we have the exclusive right to take water off of that system, treat it and resell it. Through good contract structure, we're very well positioned to keep providing brackish water and or Ramp up our treatment based on each operator's needs and we continue to grow further and further out of our footprint. The water team has done a really good job of contracting additional sales and expanding our footprint. Speaker 400:15:26Very helpful. Thanks for your time. Speaker 200:15:29Thanks, Derek. Thanks, Derek. Operator00:15:32Thank you. Next question comes from the line of Hamed Khorsand with BWS Financials. Please go ahead. Speaker 500:15:41Hey, good morning. Just a follow-up on this water topic. Given production having declined this past quarter And how your customers or the land of leases are operating, Would that imply that water sales could actually ramp up as you see these wells come online, it was just a delay factor? Speaker 200:16:12So water sales is typically paralleled with Completions activity. But I think like Chris mentioned earlier, when you look at The wells that have been recently spud in this last quarter and our permit count being up so high, I think that is definitely an indicator that there will be a lot of completions activity in the coming quarters, which is really good for water sales Both on the brackish and treatment side as well as the produced water side of the business because once you get that flow back that water has got to go somewhere. And so to answer your question, the things that we've talked about on the call here are good indicators for future water revenue. Okay. And then Speaker 500:17:00what's been the big contributor to the easement revenue line this year? And How tangible is it that it will continue to stay with the business? Speaker 200:17:14So probably the biggest contributors this year, especially over the last couple of quarters have been pipeline easements and material sales. So we're seeing a lot of infrastructure build out, a lot of Gas gathering lines, we've had a nice ramp in transmission lines as well as new gas Connects and facilities, compressor stations, things like that. And I think that's going to continue. We're seeing operators move Further away from existing infrastructure and into new areas where there are requirements for new roads and gathering infrastructure and facilities. And that was one thing that we saw a little bit of a bottleneck on last quarter was there were some areas where Wells were not turned in line because of a lack of infrastructure. Speaker 200:18:08And so the same operators that we talked to that Gave us that feedback with the same operators that had a big ramp in easements for say like gas takeaway. And then on the material sales side, we've expanded caliche sales up into New Mexico, which has been a really nice bump for us. We've also got 2 of the sand mines that we signed towards the end of the last year that are actually active now and we've seen a nice And sand royalties, I think we were just under $1,000,000 for sand royalties this last quarter. So that's Progressing well. We've got a couple of other sand leases that should be operational soon. Speaker 200:18:51And as we continue to expand our rock crushing Activities and things like that. I think we'll continue to see a strong slim activity in the future. Okay, great. Thank you. Thanks, Matt. Speaker 200:19:05Thanks, Matt. Operator00:19:08Thank you. This concludes today's teleconference. You may disconnect your lines at this time. 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