Texas Pacific Land Trust Reports Record Earnings Amid Oil Price Challenges

Texas Pacific Land Trust ((TPL)) has held its Q2 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Texas Pacific Land Trust (TPL) expressed a mixed sentiment, showcasing significant achievements alongside challenges. The company reported record-breaking revenues across multiple streams, highlighting optimism about the Permian Basin’s long-term potential. However, weak oil prices posed challenges, impacting revenues and reducing activity. Despite these hurdles, TPL demonstrated strong financial performance and strategic progress, particularly in desalination efforts.

Record Performance Across Major Revenue Streams

TPL set new quarterly revenue records, particularly in produced water royalties and easements, alongside other surface-related income. The company also achieved a record in oil and gas royalty production, reaching 33,200 barrels of oil equivalent per day, underscoring its robust operational capabilities.

Strong Financial Metrics

The financial metrics for TPL were impressive, with an adjusted EBITDA margin of 89% and a 12% year-over-year increase in free cash flow. The company reported SLEM revenue of $36 million and produced water royalty revenues of $31 million, both setting new company records.

Permian Basin’s Long-term Potential

Despite recent slowdowns, TPL remains optimistic about the long-term potential of the Permian Basin. The company cited undeveloped resources upwards of 30 billion barrels of oil, indicating significant future opportunities for growth and development.

Desalination Facility Progress

TPL is on track to bring online the largest desalination facility in the Permian by the end of the year. This strategic move is expected to help manage produced water volumes more efficiently, showcasing TPL’s commitment to innovation and sustainability.

Oil Price Weakness

The average WTI Cushing oil price was $64 per barrel, the lowest since the first quarter of 2021. This price weakness negatively impacted oil price realizations by 21% year-over-year, posing challenges for the company’s revenue streams.

Reduced Activity Due to Commodity Prices

Lower oil prices led to a notable reduction in activity and deferments by operator customers. This impacted water sales, which were down by $13 million sequentially, reflecting the broader challenges faced by the industry.

Forward-looking Guidance

Looking ahead, TPL remains focused on maintaining its strategic position in the Permian Basin. The company emphasized its ability to adapt and innovate, particularly in water desalination and produced water management, to sustain robust financial health and operational efficiency. Despite the challenges posed by oil prices, TPL reported record performance in several key metrics, underscoring its resilience and strategic foresight.

In summary, the earnings call from Texas Pacific Land Trust highlighted a balanced narrative of achievement and challenge. The company demonstrated strong financial metrics and strategic progress, particularly in desalination efforts, while navigating the hurdles posed by weak oil prices. TPL’s optimism about the Permian Basin’s long-term potential and its strategic initiatives position it well for future growth.