01—Abstract
Summary
Summary of the 8-K filed August 27, 2024. Cited figures are marked; the original filing is the authoritative source.
Texas Pacific Land Corporation (NYSE: TPL) announced on August 27, 2024 that it closed two Permian Basin acquisitions for an aggregate $169 milliona in cash, per Exhibit 99.1.
The first is a mineral interest acquisition of approximately 4,106 net royalty acres in Culberson County, Texas, for $124 millionb in cash. These interests overlap existing TPL royalty acreage in current and anticipated Drilling and Spacing Units and overlap TPL surface acreage. The acreage is leased to and operated by Coterra Energy (NYSE: CTRA).
The second is a surface asset of approximately 4,120 acres in Martin County, Texas, in the core of the Midland Basin. The filing says this asset generates revenue from water supply, produced water disposal, and other surface-related activities, including royalties from a solids waste landfill operated by Waste Connections, Inc. (NYSE: WCN). CEO Tyler Glover stated the combined purchase price implies a greater than 13%c 2025 free cash flow yield at current strip prices, crediting only existing production and line-of-sight wells and opportunities.
The filing also discloses a related-party element. The mineral interest acquisitions were completed with Brigham Royalties Fund I Holdco, L.L.C., a subsidiary of Brigham Royalties, LLC, whose CEO, Robert Roosa, is a TPL board member. A 55.4%d interest in each acquisition was assigned to a TPL subsidiary.
TPL paid $275 per net mineral acre in commissions to certain Brigham Royalties employees, which the company states was significantly less than what it would pay third parties. The Audit Committee and full Board approved the transactions, with Mr. Roosa abstaining.
02—Key points
Key Highlights
- Aggregate cash consideration of $169 million for two Permian Basin acquisitions, announced August 27, 2024.
- Mineral interest acquisition of approximately 4,106 net royalty acres in Culberson County, Texas, for $124 million in cash, leased to and operated by Coterra Energy.
- Surface acreage of approximately 4,120 acres in Martin County, Texas, in the core of the Midland Basin, with water, produced water disposal, and landfill royalty revenue streams.
- CEO Tyler Glover stated the combined asset purchase price implies a greater than 13% 2025 free cash flow yield at current strip prices.
- The mineral interests overlap existing TPL royalty acreage and surface acreage, which management says can enhance net revenue interests and accelerate development.
- Related-party transaction: Brigham Royalties, whose CEO Robert Roosa is a TPL director, originated the opportunity and co-acquired the mineral interests; TPL holds a 55.4% interest.
- Board and Audit Committee approved the transactions, with Mr. Roosa abstaining; TPL states it performed its own diligence and valuation.
03—Questions
Frequently Asked Questions
What did Texas Pacific Land acquire and for how much?
TPL announced the closing of two acquisitions totaling $169 million in cash: mineral interests covering approximately 4,106 net royalty acres in Culberson County, Texas, for $124 million, and a surface asset of approximately 4,120 acres in Martin County, Texas.
What free cash flow return does management expect from these acquisitions?
CEO Tyler Glover said the combined purchase price implies a greater than 13% 2025 free cash flow yield at current strip prices, giving credit only to existing production and line-of-sight wells and opportunities.
Why is this transaction a related-party matter?
The mineral interest acquisitions were completed with Brigham Royalties Fund I Holdco, L.L.C., a subsidiary of Brigham Royalties, LLC, where TPL director Robert Roosa is a partner and CEO. A 55.4% interest in each acquisition was assigned to a TPL subsidiary, and TPL paid $275 per net mineral acre in commissions to certain Brigham Royalties employees, which the company says was significantly less than what it would pay third parties.
How were the transactions approved and what safeguards were used?
The Audit Committee and full Board of Directors approved the Mineral Interest Acquisitions, with Mr. Roosa abstaining. The company states it performed its own diligence and valuation and paid no fees or commissions to Brigham Royalties or Mr. Roosa.
How do these assets fit into TPL's existing business?
The mineral interests overlap existing TPL royalty acreage and surface acreage, which the company says can enhance net revenue interests in existing and future wells. The Martin County surface asset adds water supply, produced water disposal, and landfill royalty revenue in the Midland Basin.
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