01—Abstract
Summary
Summary of the 10-K filed February 22, 2023. Cited figures are marked; the original filing is the authoritative source.
Texas Pacific Land Corporation (TPL) reported full-year 2022 revenues of $667.4 milliona, up from $451.0 million in 2021, and net income of $446.4 million, or $57.77 per diluted share, compared with $270.0 million in 2021.
Operating income rose to $562.3 millionb from $362.4 million. The Land and Resource Management segment generated $507.0 million of revenue, led by oil and gas royalties of $452.4 million, while the Water Services and Operations segment produced $160.4 million, including $84.7 million of water sales and $72.2 million of produced water royalties. The company has no debt or credit facilities and ended 2022 with $510.8 million in cash and cash equivalents.
Cash provided by operating activities was $447.1 millionc. Capital returns were substantial. TPL paid $247.3 million in dividends in 2022, including a $20.00 per share special dividend on top of $12.00 per share in regular dividends, and repurchased $87.9 million of stock.
The Board approved a new $250 milliond repurchase program effective January 1, 2023, and declared a quarterly dividend of $3.25 per share on February 10, 2023. Starting in 2023, repurchases will be subject to a 1% excise tax. Investors should note several items.
The company disclosed that one third-party obligor has indicated it will no longer pay ad valorem taxes on certain historical royalty interests, and TPL has accrued about $8.0 million for these taxes while pursuing reimbursement. TPL is also in litigation with Horizon Kinetics and SoftVest, affiliates of two directors, over voting commitments under the Stockholders' Agreement, with trial scheduled for April 17, 2023. Revenue concentration is high, with four customers accounting for 51.8% of 2022 revenues, and results depend heavily on oil and gas prices and operator activity in the Permian Basin.
02—Key points
Key Highlights
- Revenues rose to $667.4 million in 2022 from $451.0 million in 2021, with oil and gas royalties of $452.4 million making up the largest share.
- Net income was $446.4 million, or $57.80 basic and $57.77 diluted per share, compared with $270.0 million in 2021.
- The company reported no debt or credit facilities and $510.8 million in cash and cash equivalents as of December 31, 2022.
- Shareholder returns in 2022 totaled $247.3 million in dividends, including a $20.00 per share special dividend, plus $87.9 million in share repurchases.
- A new $250 million stock repurchase program takes effect January 1, 2023, and the Board declared a $3.25 per share quarterly dividend on February 10, 2023.
- Water Services and Operations revenue rose to $160.4 million, with sourced and treated water sales volumes up approximately 10.3%.
- Four customers represented 51.8% of total 2022 revenues, and a third-party obligor has said it will stop paying certain ad valorem taxes on historical royalty interests.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 22, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $667.42M$450.96M | +48.0% |
| Operating Expenses | $105.11M$88.56M | +18.7% |
| Operating Income | $562.31M$362.39M | +55.2% |
| Net Income | $446.36M$269.98M | +65.3% |
| EPS (Basic) | $19.27$34.83 | −44.7% |
| EPS (Diluted) | $19.26$34.83 | −44.7% |
| Shares Outstanding (Basic) | 23.17M7.75M | +198.8% |
| Shares Outstanding (Diluted) | 23.18M7.75M | +199.0% |
05—Questions
Frequently Asked Questions
What drove the increase in TPL's 2022 earnings?
Oil and gas royalties rose $166.0 million to $452.4 million, reflecting higher royalty production and higher commodity prices. The average realized price was $60.81 per Boe, compared with $44.14 per Boe in 2021, and production averaged 21.3 thousand Boe per day, compared with 18.6 thousand in 2021. Operating income grew to $562.3 million from $362.4 million.
How much did TPL return to stockholders in 2022?
TPL paid total dividends of $247.3 million, consisting of $12.00 per share in regular dividends and a $20.00 per share special dividend. It also repurchased $87.9 million of common stock, including share repurchases not yet settled, under its 2022 program, which expired on December 31, 2022.
What is the status of the litigation involving Horizon Kinetics and SoftVest?
On November 23, 2022, TPL filed a complaint in Delaware Chancery Court against Horizon Kinetics and SoftVest over their voting commitments under the Stockholders' Agreement. The filing states the action is in the discovery phase, with trial scheduled for April 17, 2023. Horizon Kinetics and SoftVest are affiliated with directors Murray Stahl and Eric Oliver, respectively.
What risks does the filing highlight regarding revenue concentration and royalty payments?
Four customers accounted for 51.8% of total 2022 revenues. TPL is not an oil and gas producer, so its royalty income depends on operators' decisions. The company also received notice that one third-party obligor no longer intends to pay certain ad valorem taxes on historical royalty interests. TPL has accrued about $8.0 million for these taxes, intends to seek reimbursement, and has not recorded a receivable for that recovery.
06—Continue