01—Abstract
Summary
Summary of the 10-K filed February 21, 2024. Cited figures are marked; the original filing is the authoritative source.
Texas Pacific Land Corporation (TPL) reported 2023 total revenues of $631.6 milliona and net income of $405.6 million, or $52.77 per diluted share, compared with $667.4 million and $446.4 million in 2022.
The decline was principally driven by a $95.0 millionb decrease in oil and gas royalty revenue, which fell to $357.4 million as the average realized price declined 30.0% to $42.58 per Boe. Partial offsets came from the Water Services and Operations segment, whose revenues rose to $199.5 million, and from easements and other surface-related income, which increased to $70.9 million. Operating expenses rose to $145.5 million, principally due to legal and professional fees of $31.5 million tied to stockholder matters, while other income, net increased to $31.5 million on higher interest income.
The company ended 2023 with cash and cash equivalents of $725.2 millionc, no debt or credit facilities, and total equity of $1.04 billion. Cash provided by operating activities was $418.3 million, and free cash flow was $415.5 million. During 2023, TPL paid $100.0 million in dividends ($13.00 per share) and repurchased $42.4 million of common stock.
On February 13, 2024, the board declared a quarterly dividend of $3.50d per share. The company owns approximately 868,000 surface acres in West Texas and about 195,000 net royalty acres, and it states that it is not an oil and gas producer, so its royalty revenue depends on operator decisions.
The filing also flags several risks: an unresolved dispute over stockholder voting that is on appeal, an obligor that has indicated it will stop paying ad valorem taxes on certain royalty interests (which TPL has been paying and intends to seek reimbursement for, with no receivable recorded), and the potential effect of Seismic Response Areas on produced water royalties. The Permian Basin concentration means results are subject to substantial quarter-to-quarter and year-to-year fluctuations.
02—Key points
Key Highlights
- Total revenues fell 5.4% to $631.6 million in 2023, principally due to a $95.0 million decline in oil and gas royalty revenue as the average realized price dropped 30.0% to $42.58 per Boe.
- Water Services and Operations revenue rose 24.3% to $199.5 million, driven by a 21.8% increase in water sales volumes.
- Net income was $405.6 million ($52.77 per diluted share), versus $446.4 million in 2022; legal and professional fees rose to $31.5 million from $8.7 million, principally related to stockholder matters.
- The company carries no debt and held $725.2 million in cash and cash equivalents at December 31, 2023.
- Free cash flow was $415.5 million, and TPL returned $100.0 million in dividends and $42.4 million in share repurchases during 2023.
- Quarterly dividend of $3.50 per share declared February 13, 2024, following $13.00 per share paid in 2023.
- Three customers accounted for 42.5% of 2023 total revenues, and the company flags ad valorem tax payment and Seismic Response Area risks.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 21, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $631.60M$667.42M | −5.4% |
| Operating Expenses | $145.54M$105.11M | +38.5% |
| Operating Income | $486.05M$562.31M | −13.6% |
| Net Income | $405.64M$446.36M | −9.1% |
| EPS (Basic) | $5.87$19.27 | −69.5% |
| EPS (Diluted) | $5.86$19.26 | −69.6% |
| Shares Outstanding (Basic) | 69.13M23.17M | +198.4% |
| Shares Outstanding (Diluted) | 69.18M23.18M | +198.4% |
05—Questions
Frequently Asked Questions
Why did revenue decline in 2023?
Revenue decreased $35.8 million, or 5.4%, to $631.6 million, principally because oil and gas royalty revenue fell $95.0 million as average realized prices declined 30.0% to $42.58 per Boe. Growth in water sales, produced water royalties and easements partially offset this decline.
How is the company's capital being returned to stockholders?
In 2023 TPL paid $100.0 million in dividends, or $13.00 per share, and repurchased $42.4 million of common stock. The board has determined to pay dividends quarterly, and a $250 million repurchase program became effective January 1, 2023.
What are the main legal and governance matters?
Legal and professional fees were $31.5 million in 2023 and are principally related to stockholder matters. A Delaware Chancery Court ruling on the 2022 annual meeting proposal to increase authorized shares is on appeal, and a Cooperation Agreement with the Investor Group was entered into in July 2023.
What risks does the filing highlight for the royalty business?
The filing notes that TPL is not an oil and gas producer, so royalty revenue depends on decisions by third-party operators. It also notes that one obligor has indicated it will stop paying certain ad valorem taxes, which TPL is paying to protect its royalty interests while seeking reimbursement with no receivable recorded.
06—Continue