Interview

Came across this on Twitter last night. Technology, optimism, and progress abound.

https://www.retailbull.co.uk/blog/tpl-an-employees-insights

Companies that constructed pad sites designed for one to three wells have been expanding their existing drill pads to add six to 10 more.

This shows that they have seen good production on their existing wells. By drilling more wells in the same leaseholds, they aim to hit different intervals to get all the production they can out of a specific location. 

Over the next couple of years, TPL is likely to be more aggressive in looking for acquisitions on the minerals side.

2Q21 Earnings

Texas Pacific Land Corporation Announces Second Quarter Results :: Texas Pacific Land Corporation (TPL)

Production pretty flat but prices up. $330MM in cash on the sheet.

Our total revenues increased $38.6 million for the second quarter of 2021 compared to the same period of 2020, largely driven by the $37.7 million increase in oil and gas royalty revenue. Our share of production was approximately 16.4 thousand barrels of oil equivalent (“Boe”) per day for the second quarter of 2021 compared to 15.7 thousand Boe per day for the same period of 2020. The average realized price was $40.83 per Boe for the second quarter of 2021, compared to $15.02 per Boe for the comparable period of 2020. Water sales and produced water royalties increased $4.1 million and $2.3 million, respectively, for the second quarter of 2021 compared to the second quarter of 2020. The increase in water sales for the second quarter of 2021 compared to the same period of 2020 is principally due to a 70.8% increase in the number of barrels of sourced and treated water sold. These increases in revenue were partially offset by easements and other surface-related income, which decreased $2.7 million for the second quarter of 2021 compared to the same period of 2020. These revenue streams are directly impacted by development and operating decisions in the Permian Basin made by our customers and commodity prices, among other factors.

Russel 3000

Now with TPL!

https://content.ftserussell.com/sites/default/files/russell_3000_index_additions_-_2021.pdf

Good read below (from last year) on 3K reconstitution.

https://www.nasdaq.com/articles/what-small-caps-should-know-about-the-russell-rebalance-2020-06-22

Does it make the 1000 or the 2000?  Looks like 1000 to me.

https://www.ftserussell.com/research-insights/russell-reconstitution/market-capitalization-ranges

https://www.bloomberg.com/news/articles/2021-06-06/how-to-tell-whether-amc-and-gamestop-will-make-the-russell-1000?sref=QaCYRngK

russ

Earnings Call

Transcript

My favorite part:

At March 31, 2021, Texas Pacific at a robust inventory of 541 drill but uncompleted wells wells or DUCs and 488 permits providing clear visibility in the future royalty earnings. New DUCs grew from 91 in the fourth quarter to a 152 new ducks in the first quarter providing line of sight into future production. New permits grew from a 139 in the fourth quarter to a 176 in the first quarter. As of March 31, 17% of all Permian rigs were located on TPL drilling spacing units or DSU’s up from 11% of Permian rigs as of December 31. In terms of spuds, TPL DSU’s accounted for 18% of total spuds across the Permian during the first quarter. 14% of all permits approved by the Texas Railroad Commission in the first quarter intersect TPL DSU’s Importantly, most of our net royalty acres are concentrated within the Northern Delaware region and core of the – Basin. This diverse exposure represents a significant competitive advantage for TPL Overall, our oil and gas royalties are only 10% developed with the Delaware Basin being less developed than the Midland Basin. Within the Texas portion of the Delaware, TPL accounted for 49% of all spuds during the first quarter.We believe this gives us more runway to grow our royalties over time compared to our peers, as the Delaware should continue to support a high pace of growth in production. In addition to our oil and gas royalties, we also have surface ownership of our land. Over the past decade, technological advances in exploration and development have unlocked a tremendous amount of additional reserves contributing to a rapid build out of oil and gas infrastructure across the basin. These activities and others provide TPL enormous optionality to generate additional cash flows utilizing our surface assets.

I could have used more Q&A but overall I’d call this first call a win. Presenters were impressive and well prepared. Confidence building. I get the sense that cash is being kept on the balance sheet for opportunistic lifts. The little engine that was in the business of going out of business appears to be going the other way.

1Q21 Earnings

10-Q

Press Release

I was coaching first base when I heard my phone whistle its notifcation for the earnings press release.  During a pitching change I quickly skimmed the document.  When the batter stepped in I got so distracted thinking about the $20MM buyback number that I sent my runner to steal 2nd with a runner already on that bag.  Thankfully the third base coach, who probably owns BSM, saw my folly and called his runner.  Some bad thows later and it all ended up ok.  But $20MM?

My expectations for the quarter were pretty light due to the tough winter conditions and pandemic hangover but I expected more from the buy back.  Is this management telling us the price is too high?

The quarter ended with $310MM (~$40/share) in cash on the balance sheet.  Do I get a dividend?  M&A inbound?

Water was challenging.  What’s the plan there?

 

Mutual Funds

Open End:

VTSMX, NAESX, VEXMX, PRDSX, and FSMAX are all recent (as of 3/31) buyers of 30k+ shares (each) of TPL.

VTSMX alone bought 131,880 shares. That is 1.7% of total outstanding shares if you are keeping score at home.

Though not a recent buyer, PRPFX owns 70K. TPL is the second largest position in the portfolio.

ETF:

VB, VTI, VDE, VXF, and INFL all hold greater than 10k shares

Some of the portfolios above are benchmarked to indicies maintained by CRSP, MSCI, S&P, Dow Jones, and Wilshire. Mostly extended market and complete market benchmarks.

Earnings Call

Yes. You read that right.

Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or “TPL”) announced today that the Company will release first quarter 2021 financial results after the market closes on Thursday, May 6, 2021. A conference call will be held on Friday, May 7, 2021 at 8:30 a.m. Eastern Time.

New CFO and New Auditor

Texas Pacific Land Corporation Announces Chris Steddum to Succeed Robert Packer as Chief Financial Officer :: Texas Pacific Land Corporation (TPL)

Texas Pacific Land Corporation (NYSE: TPL) (the “Company” or “TPL”) today announced that, effective May 31, 2021, Chief Financial Officer Robert Packer will retire after a distinguished 10-year career with the Company. Chris Steddum, TPL’s current Vice President, Finance and Investor Relations, will succeed Mr. Packer as the Company’s Chief Financial Officer. The Company has also appointed Stephanie Buffington, TPL’s current Vice President, Accounting, to the newly created role of Chief Accounting Officer. Both appointments will become effective on June 1, 2021. Mr. Packer will serve as an advisor to the Company through the end of the year to ensure a smooth transition.

In addition to these leadership changes, TPL also announced that it has retained Deloitte & Touche LLP (“Deloitte”) to serve as its Independent Registered Public Accounting Firm for the calendar year ending in 2021. The Company’s long time auditors Lane Gorman Trubitt, LLC informed the Company that the firm would not stand for re-election. The Company’s Audit Committee conducted an extensive selection process which included evaluating factors such as: audit quality, technical competency, industry expertise, use of technology and methods of communication. The Audit Committee selected Deloitte from several other well qualified candidates.

Several readers have emailed me with wishes for a Big Four accounting firm. Here it is.

Congratulations Mr. Steddum! No debt or options, thanks!