What did Texas Pacific Land acquire and what did it cost?

TPL acquired oil and gas royalty interests covering approximately 7,490 net royalty acres, primarily in the Midland Basin, for $286 million in cash. The transaction had an effective date of April 1, 2024, subject to customary adjustments.

How much production comes with the acquired assets?

The acquired assets currently produce approximately 1,300 barrels of oil equivalent per day, about 78% of which is liquids, as of June 2024. The presentation expects production to grow to over 2,000 boe/d next year.

Who operates the acquired acreage?

ExxonMobil accounts for about 45% of total NRAs and Diamondback for about 21%. Occidental, Vital, Ovintiv and ConocoPhillips are also listed among the operators, and twelve rigs are currently running on the footprint.

What cash flow return does management expect?

Management expects a double-digit cash flow yield over the next twelve months (October 2024 to September 2025) based on commodity strip pricing as of September 25, 2024. It also cites additional growth potential because over half of the Drilling and Spacing Units have minimal development.

Will the acquisition add costs to TPL's operations?

The company states it does not anticipate adding headcount or G&A as a result of the acquisition. Management says the deal enhances free cash flow per share and offers flexibility to sustainably increase shareholder return of capital.

TPL 8-K: Regulation FD

01—Abstract

Summary

Summary of the 8-K filed October 2, 2024. Cited figures are marked; the original filing is the authoritative source.

On October 2, 2024, Texas Pacific Land Corporation (NYSE: TPL) announced the closing of an all-cash acquisition of oil and gas royalty interests for $286 million^a, covering approximately 7,490 net royalty acres (NRA), primarily in the Midland Basin.

The Midland Basin NRAs are concentrated in Martin (~2,220 NRA), Midland (~2,080 NRA) and other counties, with 6,942 NRAs in the Midland Basin (93%^b) and 548 NRAs in the Delaware Basin (7%). The company states that over 80% of the acquired interests are adjacent to or overlap existing TPL surface and royalty acreage, and that the assets currently produce approximately 1,300 barrels of oil equivalent per day (about 78% liquids). The presentation expects production to grow to over 2,000 boe/d next year and notes the transaction had an effective date of April 1, 2024.

Management, led by CEO Tyler Glover, says the acquisition high-grades the legacy royalty footprint, increases cash flow and earnings per share, and strengthens the growth profile. It anticipates a double-digit cash flow yield over the next twelve months based on current strip pricing, with additional upside because over half of the Drilling and Spacing Units have seen little or no development. Major operators include ExxonMobil (about 45%^c of NRAs) and Diamondback (about 21%), and twelve rigs are currently running on the footprint.

The company states it does not expect to add headcount or G&A as a result of the deal. The filing is a Regulation FD disclosure under Item 7.01.

The press release and investor presentation are furnished rather than filed, so they are not subject to Section 18 liability. The presentation is intended for use in investor and analyst meetings.

02—Key points

Key Highlights

Acquired approximately 7,490 net royalty acres for $286 million in cash, with the acquisition closing as announced on October 2, 2024.
Acreage is 93% Midland Basin (6,942 NRA) and 7% Delaware Basin (548 NRA), with major Midland Basin holdings in Martin (32%) and Midland (30%) counties.
Over 80% of acquired interests directly overlap with or sit adjacent to existing TPL royalty and surface acreage.
Current production is approximately 1,300 boe/d (about 78% liquids), expected to grow to over 2,000 boe/d next year.
Management expects a double-digit cash flow yield over October 2024 to September 2025 based on commodity strip pricing as of September 25, 2024.
ExxonMobil (about 45% of NRAs) and Diamondback (about 21%) are the top operators, with twelve rigs currently running on the acquired footprint.
Over half of the Drilling and Spacing Units have minimal existing development, and the company states it does not expect added headcount or G&A from the deal.

03—Questions

Frequently Asked Questions

What did Texas Pacific Land acquire and what did it cost?
TPL acquired oil and gas royalty interests covering approximately 7,490 net royalty acres, primarily in the Midland Basin, for $286 million in cash. The transaction had an effective date of April 1, 2024, subject to customary adjustments.
How much production comes with the acquired assets?
The acquired assets currently produce approximately 1,300 barrels of oil equivalent per day, about 78% of which is liquids, as of June 2024. The presentation expects production to grow to over 2,000 boe/d next year.
Who operates the acquired acreage?
ExxonMobil accounts for about 45% of total NRAs and Diamondback for about 21%. Occidental, Vital, Ovintiv and ConocoPhillips are also listed among the operators, and twelve rigs are currently running on the footprint.
What cash flow return does management expect?
Management expects a double-digit cash flow yield over the next twelve months (October 2024 to September 2025) based on commodity strip pricing as of September 25, 2024. It also cites additional growth potential because over half of the Drilling and Spacing Units have minimal development.
Will the acquisition add costs to TPL's operations?
The company states it does not anticipate adding headcount or G&A as a result of the acquisition. Management says the deal enhances free cash flow per share and offers flexibility to sustainably increase shareholder return of capital.

04—Continue

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