NYSE:TPL Texas Pacific Land Q2 2023 Earnings Report $1,340.09 +5.95 (+0.45%) Closing price 03:59 PM EasternExtended Trading$1,285.14 -54.96 (-4.10%) As of 06:26 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Texas Pacific Land EPS ResultsActual EPS$4.35Consensus EPS $3.70Beat/MissBeat by +$0.65One Year Ago EPSN/ATexas Pacific Land Revenue ResultsActual Revenue$160.61 millionExpected Revenue$143.24 millionBeat/MissBeat by +$17.37 millionYoY Revenue GrowthN/ATexas Pacific Land Announcement DetailsQuarterQ2 2023Date8/2/2023TimeN/AConference Call DateThursday, August 3, 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 Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good day, and welcome to the Texas Pacific Land Corporation Second Quarter 2023 Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Sean Eminy, Vice President, Finance and Investor Relations, please go ahead. Speaker 100:00:38Thank you for joining us today for Commission, which is available on the Investors section of the company's website at www.sexospacific.com. As a reminder, remarks made on today's conference call may include forward looking Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company'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. Speaker 100:01:24More information and reconciliations about these non GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may at times 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 Dunn. Management will make some prepared comments, after which we will open the call for questions. Now, I will turn the call over to Ty. Speaker 200:01:49Good morning, everyone. Thank you for joining us today. PBL delivered an impressive quarter, capturing opportunities underpinned by robust Permian activity. We set new company records for quarterly oil and gas royalty production, source water revenues and produced water revenues. Easements and surface related income, which we refer to as SLIM, had its best quarterly revenue performance since 2019. Speaker 200:02:12Unlike our oil and gas royalty revenues, which are predominantly derived from our perpetual royalty interest carved from a mineral estate, Water and swim revenues originate from our ownership of the surface estate. That surface ownership is unique compared to other public oil and gas mineral royalty and lease Combining our surface ownership with active management, TPL extracts multiple incremental cash flow streams. These surface derived opportunities have been thoughtfully commercialized to maintain our capital light, high margin business philosophy, which ultimately contribute substantial Free cash flow to the overall entity, while also accelerating development of our oil and gas royalty interest. This most recent quarter is a great example of the built in hedges That protect TPL during periods of volatile commodity prices. Although oil and gas royalty production this quarter increased 26% year over year, Our oil and gas royalty revenues were still down 32% due to WTI Crude Oil and Henry Hub Natural Gas Prices They declined approximately 32% and 71% respectively. Speaker 200:03:17However, for that same quarterly year over year comparison, our Source water revenues were up 69%, produced water revenues up 12% and swim revenues were up 34%. During this last quarter, these surface derived revenue streams and aggregate comprised 48% of TPL's overall consolidated revenue And help to maintain strong consolidated earnings and free cash flow despite much lower commodity prices. For Slim specifically, we're seeing broad across each subcategory. Pipeline easements, electrifying easements and caliche sales have been especially good as operators Our team of land agents and GIS specialists Turning to water. During the quarter, we averaged over 700,000 barrels per day of source water sales volumes, driven by robust brackish and treated water demand. Speaker 200:04:18Year to date through Q2 2023, total source treated and brokered water volumes are up 31% year over year. For the last 12 months, we've sold nearly 200,000,000 barrels of water and many of those barrels were used to complete oil and gas wells on TPL royalty acreage. Produced water volumes during the quarter averaged approximately 2,300,000 barrels per day. Just as a reminder, TPL contracts with operators and other third parties for use of our surface for produced water facilities, including disposal wells, we generate a contracted fee for produced water barrels. Produced water volumes for Q2 2023 are up 15% year over year. Speaker 200:04:57This was by far our best ever Quarterly revenue and free cash flow performance for the Water business, contributing just under $60,000,000 of high margin revenue, while only spending less than $2,000,000 in CapEx. The cumulative efforts of prior capital investments and commercial negotiations going back to the inception of our dedicated in house water business in 2017 Are paying substantial dividends today. In many of our water contracts with operators, we have negotiated exclusive offtake to produce water across large areas of mutual interest. This is an important feature because it provides TPL holistic control over both source And produced water throughout the basin and across our surface. It allows us to continue sales of brackish water while also providing us incremental upside and opportunities to reuse and treat produced water for completion activities. Speaker 200:05:49Our operations team also deserves tremendous credit for During and moving water for our customers at volume levels we've never done before. TPL continues to demonstrate its ability to offer a full spectrum of reliable water During the last quarter, we spent approximately $20,000,000 to acquire 12,000 surface acres in Andrews County along the Texas, New Mexico State line. This acreage fits nicely with our current surface footprint and will provide incremental opportunities for our teams to pursue and commercialize. As previously disclosed on November 22, 2022, the company filed a complaint to Delaware Chancery Court to resolve the disagreement with Horizon Kinetics LLC, Horizon Kinetics Asset Management LLC, Softvest Advisors LLC and Softvest LT Over their voting commitment pursuant to a stockholders agreement with the company. We recently concluded the trial and we're now waiting for the court to issue its opinion. Speaker 200:06:46We expect that to happen in due course and we will update our stockholders when we have more to share. Also the company recently announced It has nominated Marguerite Wong Chapman and Robert Russa as 2 independent director nominees for election at the upcoming 2023 Annual Meeting with Stockholders. Both candidates bring a strong mix of industry skills and experience. Current directors and co chairs of the Board, David Barry and John Norris I've decided to retire and not stand for reelection at the 2023 Annual Meeting. Dave and John have been involved with The company for decades back to its days as a trust. Speaker 200:07:25They have always been great stewards for the company and have played a pivotal role in helping the company achieve the Success it enjoys today. Without their support, TPL would not have a water or surface business or the professional administration anywhere near the scale and They saw and understood the potential that TPL's unique assets possess and they took a chance to support a pivot to active management. On behalf of the entire management team here at TPO, we are thankful for their service, guidance, leadership and friendship over the years And they will leave behind an exceptional legacy at TPL. With that, I'll turn the call over to Chris. Speaker 300:08:05Thanks, Ty. Total revenues for the Q2 of 2023 were $161,000,000 representing a 10% increase From the Q1 2023 revenues, as previously discussed, revenues benefited from higher royalty production, source water sales, Produced water royalties and SLIM revenues, though partially offset by lower oil and gas prices. Adjusted EBITDA And free cash flow for the quarter were $134,000,000 $105,000,000 respectively. Consolidated CapEx was $1,400,000 With most of the spend related to the water business, we ended the quarter with $609,000,000 of cash on the balance sheet, Royalty production of approximately 24,900 barrels of oil equivalent per day represents a 19% increase on a sequential quarter basis. Although we continue to maintain that individual quarterly production figures can be lumpy, the underlying production on our royalty acreage continues to trend upward. Speaker 300:09:07This is further supported by new well data as recent permits, spuds and completions remain high across both our Midland and Delaware footprints. In particular, activity in Central Midland, Loving, Reeves and Culberson Counties are especially strong. Our oil price realizations remain high With Q2 2023 average realized oil price of $73 per barrel, which represents 100% realization relative to WTI Cushing price per barrel. However, our natural gas And natural gas liquids realizations weakened this quarter relative to prior quarter realizations. Infrastructure constraints and downtime among other factors Continued to suppress local West Texas price realizations for many operators. Speaker 300:09:55For TPL, this is somewhat mitigated As we benefit from additional infrastructure build out through our SLIM business as new pipelines, processing facilities And other logistics assets generate easement and lease opportunities. In addition, our royalty acreage is dominated by super majors and large Independent E and Ps that tend to own and or commit to new infrastructure, which generally provides them better netbacks compared to smaller public and private operators. As more infrastructure is developed and completed, we would expect our realizations to improve. For this quarter, we have Our $3.25 per share dividend, we also spent approximately $20,000,000 to repurchase approximately 14,000 shares. And with that operator, we will now take questions. Operator00:10:46We will now begin the question and answer At this time, I will announce the first questioner, which is Derek Weisel from Stifel. Please go ahead. Speaker 400:11:11Good morning all and congrats on a strong quarter. Speaker 200:11:15Thanks Derek. Good morning. Thanks Derek. Speaker 400:11:18For my first question, I wanted to focus on the substantial strength in water resources this quarter With the understanding that source water is activity driven and this is the best quarter you posted in the history of the business, I wanted to ask if you could elaborate on some of the drivers underpinning the strength To allow us to better assess sustainability post Q2? Speaker 200:11:41Yes. Look, the water team did a phenomenal job this past quarter. We saw strength across brackish water sales, treatment volumes As well as produced water. The team really pushed the limits of our system delivering over 700,000 barrels a day. And there's a couple of reasons for that increase in volume this quarter. Speaker 200:12:05One is increased activity in Contracted areas of mutual interest. So we've talked about those type of agreements in the past, where we contract a big area of mutual interest with our operators and they're obligated to purchase water from us. The team also did a fantastic job of selling water outside of our footprint. So this quarter over 60% of our water sales were off of TPL acreage. And that's purely from our business development And water team expanding our reach beyond our footprint. Speaker 200:12:42So I think we'll continue to see Strong activity levels throughout the year. This quarter may be a high watermark for the year, but When we look at our backlog of sales, we continue to see some strength in the near term. Speaker 400:13:00That's great. And maybe along the same lines, how should we think about your production trajectory given the strength of Q2 production and your line of sight activity? Speaker 300:13:11Hey, Derek, I'll take that one. When we look at the underlying production data On kind of a production day basis, it supports what we're seeing. And like we said, Any given quarter can always be a little bit lumpy. But when we kind of look at the average of the first half of twenty twenty three, we think that's probably a pretty good reflection Of where the business is at. And as we've kind of stated when we look at some of the near term inventory DUCs completions that are occurring, we feel good that the trajectory for the rest of the year should include some continued growth. Speaker 300:13:52So that's how we're kind of thinking about it right now. Speaker 400:13:57Chris, maybe ask slightly differently from my side. When we look at your line of sight activity, How many of those net wells would be required to maintain production? Speaker 300:14:08Yes, Derek, it's a good question. And those numbers always move around as production grows. But when we think about it, I think something probably in the neighborhood of like 8 net wells, Give or take, that's probably about the level we would need for flat production and maintenance. Speaker 400:14:27All right. That's very helpful. And maybe just one final follow-up from my side. Regarding the Surface acquisition you announced in Q2, Could you briefly touch on the strategic importance of that area? And perhaps more broadly also just touch on the competitive landscape for surface and royalty opportunities across the basin? Speaker 200:14:48Yes. That particular acquisition, it was a little over 12,000 acres In Andrews County along the state line. So non marketed deal that we source through internal relationships here and the team. But really when we buy surface, we're thinking about how does that potential acquisition fit into our current footprint and then Also just our broader asset portfolio. And then really what are the commercial opportunities that we see to take a raw piece Land like that and commercialize it. Speaker 200:15:21So what kind of surface opportunities, source water, produce water, other next gen opportunities we think we could commercialize Call? Both in near term and long term. But we really like the optionality that that state line acreage gives us. If you look at some of our past surface Acquisitions, they've been along the state line. Those have been great investments. Speaker 200:15:45And with all of the activity that crosses the state line from New Mexico into Texas, we just feel like that's a really good option for us. I think the As far as the overall market, it's very competitive on the royalty side right now. On the surface side, probably A little less competitive, but maybe fewer opportunities out there to take an asset that's been underutilized and Realize some additional value through commercialization. But we do think there's still a lot of opportunity left. Speaker 400:16:21That's great. Terrific color. Thanks for your time. Speaker 200:16:25Thanks, Derek. Operator00:16:36The next question comes from Hamed Khorsand from BWS Financial. Please go ahead. Speaker 500:16:42Good morning. So my first question was on the water side, what would the hindrance be to grow further? I mean, if you're Doing record pace now. You obviously have a greater capacity than you first thought. So why do you think Q2 was the high watermark? Speaker 200:17:06Well, look, I don't know that it necessarily will be the high watermark. But when you have a quarter like this, looking at the back half of the year, our water sales usually taper off towards the end of the year just Because there's less activity in the 4th quarter. But to have a quarter like this deliver these kind of volumes is fantastic. The team continues to work hard to source additional barrels off of our footprint. We're also seeing increased activity On our footprint. Speaker 200:17:38So I think sales will continue to be strong. Speaker 500:17:44And on the easement side of the business, I saw in the Q that you had an increase related to pipeline easement. Will that be recurring The $2,400,000 Speaker 200:17:59So most of our pipeline easements are on term agreements that will Recur? I assume that's what you're asking if those are recurring agreements. The majority of those are, yes. Speaker 500:18:11Okay. And then what's the appetite to do more of these land acquisitions? And What's the attractiveness that you need to do something like this again? Speaker 200:18:27Well, our appetite is strong. We're always looking. Like I said earlier, we're looking for assets that have maybe yet To be commercialized or maybe that's just been unrealized. Looking for something that We feel like the expertise that we have here on our team can add some additional value through commercialization, whether that's On the water side of the business, the swim side of the business, just anything that we feel like the knowledge That we have in house could create some additional value or the relationships that we have throughout the industry could create some additional value. That's what we're looking Speaker 500:19:13Okay, great. Thank you. Speaker 200:19:16Thanks, Ahmad. Thanks, Ahmad. Operator00:19:22This concludes our question and answer session. The conference has now concluded. Thank youRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallTexas Pacific Land Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Texas Pacific Land Earnings HeadlinesTexas Pacific Land Corporation Announces First Quarter ResultsMay 7 at 4:15 PM | businesswire.comAre Strong Financial Prospects The Force That Is Driving The Momentum In Texas Pacific Land Corporation's NYSE:TPL) Stock?May 7 at 10:47 AM | uk.finance.yahoo.comThink NVDA’s run was epic? You ain’t seen nothin’ yetAsk most investors and they’ll probably tell you Nvidia is the undisputed AI stock of the decade. In 2023, it surged 239%. And in 2024, it soared another 171% on the year… But what if I told you there was a way to target those types of “peak Nvidia” profit opportunities in 24 hours or less?May 7, 2025 | Timothy Sykes (Ad)Texas Pacific Land's (NYSE:TPL) investors will be pleased with their enviable 732% return over the last five yearsMay 3, 2025 | 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.comTexas Pacific Land Corp. stock underperforms Wednesday when compared to competitorsApril 30, 2025 | marketwatch.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 Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? Upcoming Earnings Monster Beverage (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Shopify (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025)Simon Property Group (5/12/2025) 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. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 6 speakers on the call. Operator00:00:00Good day, and welcome to the Texas Pacific Land Corporation Second Quarter 2023 Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Sean Eminy, Vice President, Finance and Investor Relations, please go ahead. Speaker 100:00:38Thank you for joining us today for Commission, which is available on the Investors section of the company's website at www.sexospacific.com. As a reminder, remarks made on today's conference call may include forward looking Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company'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. Speaker 100:01:24More information and reconciliations about these non GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may at times 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 Dunn. Management will make some prepared comments, after which we will open the call for questions. Now, I will turn the call over to Ty. Speaker 200:01:49Good morning, everyone. Thank you for joining us today. PBL delivered an impressive quarter, capturing opportunities underpinned by robust Permian activity. We set new company records for quarterly oil and gas royalty production, source water revenues and produced water revenues. Easements and surface related income, which we refer to as SLIM, had its best quarterly revenue performance since 2019. Speaker 200:02:12Unlike our oil and gas royalty revenues, which are predominantly derived from our perpetual royalty interest carved from a mineral estate, Water and swim revenues originate from our ownership of the surface estate. That surface ownership is unique compared to other public oil and gas mineral royalty and lease Combining our surface ownership with active management, TPL extracts multiple incremental cash flow streams. These surface derived opportunities have been thoughtfully commercialized to maintain our capital light, high margin business philosophy, which ultimately contribute substantial Free cash flow to the overall entity, while also accelerating development of our oil and gas royalty interest. This most recent quarter is a great example of the built in hedges That protect TPL during periods of volatile commodity prices. Although oil and gas royalty production this quarter increased 26% year over year, Our oil and gas royalty revenues were still down 32% due to WTI Crude Oil and Henry Hub Natural Gas Prices They declined approximately 32% and 71% respectively. Speaker 200:03:17However, for that same quarterly year over year comparison, our Source water revenues were up 69%, produced water revenues up 12% and swim revenues were up 34%. During this last quarter, these surface derived revenue streams and aggregate comprised 48% of TPL's overall consolidated revenue And help to maintain strong consolidated earnings and free cash flow despite much lower commodity prices. For Slim specifically, we're seeing broad across each subcategory. Pipeline easements, electrifying easements and caliche sales have been especially good as operators Our team of land agents and GIS specialists Turning to water. During the quarter, we averaged over 700,000 barrels per day of source water sales volumes, driven by robust brackish and treated water demand. Speaker 200:04:18Year to date through Q2 2023, total source treated and brokered water volumes are up 31% year over year. For the last 12 months, we've sold nearly 200,000,000 barrels of water and many of those barrels were used to complete oil and gas wells on TPL royalty acreage. Produced water volumes during the quarter averaged approximately 2,300,000 barrels per day. Just as a reminder, TPL contracts with operators and other third parties for use of our surface for produced water facilities, including disposal wells, we generate a contracted fee for produced water barrels. Produced water volumes for Q2 2023 are up 15% year over year. Speaker 200:04:57This was by far our best ever Quarterly revenue and free cash flow performance for the Water business, contributing just under $60,000,000 of high margin revenue, while only spending less than $2,000,000 in CapEx. The cumulative efforts of prior capital investments and commercial negotiations going back to the inception of our dedicated in house water business in 2017 Are paying substantial dividends today. In many of our water contracts with operators, we have negotiated exclusive offtake to produce water across large areas of mutual interest. This is an important feature because it provides TPL holistic control over both source And produced water throughout the basin and across our surface. It allows us to continue sales of brackish water while also providing us incremental upside and opportunities to reuse and treat produced water for completion activities. Speaker 200:05:49Our operations team also deserves tremendous credit for During and moving water for our customers at volume levels we've never done before. TPL continues to demonstrate its ability to offer a full spectrum of reliable water During the last quarter, we spent approximately $20,000,000 to acquire 12,000 surface acres in Andrews County along the Texas, New Mexico State line. This acreage fits nicely with our current surface footprint and will provide incremental opportunities for our teams to pursue and commercialize. As previously disclosed on November 22, 2022, the company filed a complaint to Delaware Chancery Court to resolve the disagreement with Horizon Kinetics LLC, Horizon Kinetics Asset Management LLC, Softvest Advisors LLC and Softvest LT Over their voting commitment pursuant to a stockholders agreement with the company. We recently concluded the trial and we're now waiting for the court to issue its opinion. Speaker 200:06:46We expect that to happen in due course and we will update our stockholders when we have more to share. Also the company recently announced It has nominated Marguerite Wong Chapman and Robert Russa as 2 independent director nominees for election at the upcoming 2023 Annual Meeting with Stockholders. Both candidates bring a strong mix of industry skills and experience. Current directors and co chairs of the Board, David Barry and John Norris I've decided to retire and not stand for reelection at the 2023 Annual Meeting. Dave and John have been involved with The company for decades back to its days as a trust. Speaker 200:07:25They have always been great stewards for the company and have played a pivotal role in helping the company achieve the Success it enjoys today. Without their support, TPL would not have a water or surface business or the professional administration anywhere near the scale and They saw and understood the potential that TPL's unique assets possess and they took a chance to support a pivot to active management. On behalf of the entire management team here at TPO, we are thankful for their service, guidance, leadership and friendship over the years And they will leave behind an exceptional legacy at TPL. With that, I'll turn the call over to Chris. Speaker 300:08:05Thanks, Ty. Total revenues for the Q2 of 2023 were $161,000,000 representing a 10% increase From the Q1 2023 revenues, as previously discussed, revenues benefited from higher royalty production, source water sales, Produced water royalties and SLIM revenues, though partially offset by lower oil and gas prices. Adjusted EBITDA And free cash flow for the quarter were $134,000,000 $105,000,000 respectively. Consolidated CapEx was $1,400,000 With most of the spend related to the water business, we ended the quarter with $609,000,000 of cash on the balance sheet, Royalty production of approximately 24,900 barrels of oil equivalent per day represents a 19% increase on a sequential quarter basis. Although we continue to maintain that individual quarterly production figures can be lumpy, the underlying production on our royalty acreage continues to trend upward. Speaker 300:09:07This is further supported by new well data as recent permits, spuds and completions remain high across both our Midland and Delaware footprints. In particular, activity in Central Midland, Loving, Reeves and Culberson Counties are especially strong. Our oil price realizations remain high With Q2 2023 average realized oil price of $73 per barrel, which represents 100% realization relative to WTI Cushing price per barrel. However, our natural gas And natural gas liquids realizations weakened this quarter relative to prior quarter realizations. Infrastructure constraints and downtime among other factors Continued to suppress local West Texas price realizations for many operators. Speaker 300:09:55For TPL, this is somewhat mitigated As we benefit from additional infrastructure build out through our SLIM business as new pipelines, processing facilities And other logistics assets generate easement and lease opportunities. In addition, our royalty acreage is dominated by super majors and large Independent E and Ps that tend to own and or commit to new infrastructure, which generally provides them better netbacks compared to smaller public and private operators. As more infrastructure is developed and completed, we would expect our realizations to improve. For this quarter, we have Our $3.25 per share dividend, we also spent approximately $20,000,000 to repurchase approximately 14,000 shares. And with that operator, we will now take questions. Operator00:10:46We will now begin the question and answer At this time, I will announce the first questioner, which is Derek Weisel from Stifel. Please go ahead. Speaker 400:11:11Good morning all and congrats on a strong quarter. Speaker 200:11:15Thanks Derek. Good morning. Thanks Derek. Speaker 400:11:18For my first question, I wanted to focus on the substantial strength in water resources this quarter With the understanding that source water is activity driven and this is the best quarter you posted in the history of the business, I wanted to ask if you could elaborate on some of the drivers underpinning the strength To allow us to better assess sustainability post Q2? Speaker 200:11:41Yes. Look, the water team did a phenomenal job this past quarter. We saw strength across brackish water sales, treatment volumes As well as produced water. The team really pushed the limits of our system delivering over 700,000 barrels a day. And there's a couple of reasons for that increase in volume this quarter. Speaker 200:12:05One is increased activity in Contracted areas of mutual interest. So we've talked about those type of agreements in the past, where we contract a big area of mutual interest with our operators and they're obligated to purchase water from us. The team also did a fantastic job of selling water outside of our footprint. So this quarter over 60% of our water sales were off of TPL acreage. And that's purely from our business development And water team expanding our reach beyond our footprint. Speaker 200:12:42So I think we'll continue to see Strong activity levels throughout the year. This quarter may be a high watermark for the year, but When we look at our backlog of sales, we continue to see some strength in the near term. Speaker 400:13:00That's great. And maybe along the same lines, how should we think about your production trajectory given the strength of Q2 production and your line of sight activity? Speaker 300:13:11Hey, Derek, I'll take that one. When we look at the underlying production data On kind of a production day basis, it supports what we're seeing. And like we said, Any given quarter can always be a little bit lumpy. But when we kind of look at the average of the first half of twenty twenty three, we think that's probably a pretty good reflection Of where the business is at. And as we've kind of stated when we look at some of the near term inventory DUCs completions that are occurring, we feel good that the trajectory for the rest of the year should include some continued growth. Speaker 300:13:52So that's how we're kind of thinking about it right now. Speaker 400:13:57Chris, maybe ask slightly differently from my side. When we look at your line of sight activity, How many of those net wells would be required to maintain production? Speaker 300:14:08Yes, Derek, it's a good question. And those numbers always move around as production grows. But when we think about it, I think something probably in the neighborhood of like 8 net wells, Give or take, that's probably about the level we would need for flat production and maintenance. Speaker 400:14:27All right. That's very helpful. And maybe just one final follow-up from my side. Regarding the Surface acquisition you announced in Q2, Could you briefly touch on the strategic importance of that area? And perhaps more broadly also just touch on the competitive landscape for surface and royalty opportunities across the basin? Speaker 200:14:48Yes. That particular acquisition, it was a little over 12,000 acres In Andrews County along the state line. So non marketed deal that we source through internal relationships here and the team. But really when we buy surface, we're thinking about how does that potential acquisition fit into our current footprint and then Also just our broader asset portfolio. And then really what are the commercial opportunities that we see to take a raw piece Land like that and commercialize it. Speaker 200:15:21So what kind of surface opportunities, source water, produce water, other next gen opportunities we think we could commercialize Call? Both in near term and long term. But we really like the optionality that that state line acreage gives us. If you look at some of our past surface Acquisitions, they've been along the state line. Those have been great investments. Speaker 200:15:45And with all of the activity that crosses the state line from New Mexico into Texas, we just feel like that's a really good option for us. I think the As far as the overall market, it's very competitive on the royalty side right now. On the surface side, probably A little less competitive, but maybe fewer opportunities out there to take an asset that's been underutilized and Realize some additional value through commercialization. But we do think there's still a lot of opportunity left. Speaker 400:16:21That's great. Terrific color. Thanks for your time. Speaker 200:16:25Thanks, Derek. Operator00:16:36The next question comes from Hamed Khorsand from BWS Financial. Please go ahead. Speaker 500:16:42Good morning. So my first question was on the water side, what would the hindrance be to grow further? I mean, if you're Doing record pace now. You obviously have a greater capacity than you first thought. So why do you think Q2 was the high watermark? Speaker 200:17:06Well, look, I don't know that it necessarily will be the high watermark. But when you have a quarter like this, looking at the back half of the year, our water sales usually taper off towards the end of the year just Because there's less activity in the 4th quarter. But to have a quarter like this deliver these kind of volumes is fantastic. The team continues to work hard to source additional barrels off of our footprint. We're also seeing increased activity On our footprint. Speaker 200:17:38So I think sales will continue to be strong. Speaker 500:17:44And on the easement side of the business, I saw in the Q that you had an increase related to pipeline easement. Will that be recurring The $2,400,000 Speaker 200:17:59So most of our pipeline easements are on term agreements that will Recur? I assume that's what you're asking if those are recurring agreements. The majority of those are, yes. Speaker 500:18:11Okay. And then what's the appetite to do more of these land acquisitions? And What's the attractiveness that you need to do something like this again? Speaker 200:18:27Well, our appetite is strong. We're always looking. Like I said earlier, we're looking for assets that have maybe yet To be commercialized or maybe that's just been unrealized. Looking for something that We feel like the expertise that we have here on our team can add some additional value through commercialization, whether that's On the water side of the business, the swim side of the business, just anything that we feel like the knowledge That we have in house could create some additional value or the relationships that we have throughout the industry could create some additional value. That's what we're looking Speaker 500:19:13Okay, great. Thank you. Speaker 200:19:16Thanks, Ahmad. Thanks, Ahmad. Operator00:19:22This concludes our question and answer session. The conference has now concluded. Thank youRead morePowered by