Post below will be amended. I was doing more digging on cash and realized I was dead wrong. $8MM interest on cash in a quarter sounds nice. Though the cash shouldn’t be there, but that’s a different story.
Other income, net. Other income, net was $8.0 million and $1.9 million for the three months ended September 30, 2023 and 2022, respectively. The increase in other income, net is primarily related to increased interest income earned on our cash balances for the three months ended September 30, 2023 compared to the same period of 2022. Higher cash balances and interest yields during this period contributed to the increase in interest income.
Other income, net. Other income, net was $20.2 million and $2.6 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in other income, net is primarily related to increased interest income earned on our cash balances during 2023. Higher cash balances and interest yields during this period contributed to the increase in interest income.
The Texas Pacific Land Trust Investor 
Each quarter that passes I am more convinced they are building the cash position to make a large acquisition in all cash.
They didn’t get their way with the share dilution for acquisitions, and this is now their alternative way of sticking it to shareholders. I don’t know what the other explanation could be for this massive cash position and minimal buybacks.
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From the latest 10Q. I would point out ” Company intends to purchase stock under the repurchase program opportunistically with funds generated by cash from operations.” Do you suppose that is why they aren’t tapping the 600+ million for buybacks?
“Stock Repurchase Program
On November 1, 2022, our board of directors approved a stock repurchase program, which became effective January 1, 2023, to purchase up to an
aggregate of $250 million of our outstanding Common Stock.
The Company intends to purchase stock under the repurchase program opportunistically with funds generated by cash from operations. This
repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. Purchases under the stock
repurchase program may be made through a combination of open market repurchases in compliance with Rule 10b-18 promulgated under the Securities
Exchange Act of 1934, as amended, privately negotiated transactions, and/or other transactions at the Company’s discretion, including under a Rule 10b5-1
trading plan implemented by the Company, and will be subject to market conditions, applicable legal requirements and other factors.
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Not sure what you are trying to say here. Yes, they have a buyback authorization. The problem is they aren’t using it.
The prop 4 litigation unveiled management apparently always thinks its own company is perpetually overvalued. They don’t understand the value of the business model, and would rather dilute shareholders and reduce margins instead of return capital (as has been the proven, successful model for over 100 years).
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there are always things to worry about is my take from all of this… the business model at its core is still solid and robust. These management peeps need to understand what shareholders want… buybacks and divs are the way to go, not acquiring random assets… as Peter Lynch puts it “Diworstification”
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In case if anyone is interested in a transcript for the earnings call with Q&A from two analysts at the end, sourced from BBG.
Operator
Greetings and welcome to Texas Pacific Land Corporation Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)
It is now my pleasure to introduce your host, Shawn Amini, Finance and Investor Relations. Thank you, Mr. Amini. You may begin.
Shawn Amini
Thank you for joining us today for Texas Pacific Land Corporation’s Third Quarter 2023 Earnings Conference Call. Yesterday afternoon, the company released its financial results and filed its Form 10-Q with the Securities and Exchange Commission, which is available on the Investors section of the company’s website at http://www.texaspacific.com.
As a reminder, remarks made in today’s conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company’s results, please refer to our earnings release for this quarter and to our most recent SEC filings.
During this call, we will also be discussing certain non-GAAP financial measures. More information and reconciliations about these non-GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may at times refer to our company by stock ticker, TPL.
This morning’s conference call is hosted by TPL’s Chief Executive Officer, Ty Glover; and Chief Financial Officer, Chris Steddum. Management will make some prepared comments, after which we will open the call for questions.
Now, I will turn the call over to Ty.
Tyler Glover
Good morning, everyone, and thank you for joining us today. TPL delivered another strong quarter, driven by improving commodity prices and continued performance of our surface and water assets.
Starting with oil and gas royalties, revenues increased 6% sequential quarter-over-quarter, as lower royalty production was more than offset by higher oil, natural gas and NGL prices. This past quarter, we’ve heard from operators that development activities were negatively impacted by infrastructure downtime and electricity challenges during the summer heat waves. With those issues having subsided and with some additional natural gas takeaway capacity coming online, we think infrastructure and logistics will be less of a constraint for development in the near term.
For our surface leases, easements and materials segment, which we refer to as SLEM, we continue to benefit from broad strength across our various endeavors there. In particular, pipeline easements have been robust, driven by expanding infrastructure development in the Permian.
For source water, year-to-date revenues have already eclipsed what we did in all of 2022. Though down from our record sales volumes of the prior sequential quarter, third quarter 2023 source water sales volumes of approximately 545,000 barrels per day, represent high utilization across our system. In particular, demand for treated water remains elevated, with this past quarter representing record revenues and volumes. On the produced water side, volumes have grown steadily and quarterly revenues were up 19% year-over-year. Produced water volumes continue to grow across the Permian of which TPL continues to capture a significant portion through our large AMI agreements across our surface.
To give some additional visibility on TPL’s production outlook, I wanted to take some time this morning to provide recent well development trends on our royalty acreage. Starting with our near-term well inventory, at the end of the third quarter 2023, TPL had 6.7 net permits, 7.9 net drilled but uncompleted wells, also referred to as DUCs, and 5.2 net completed wells. This near-term inventory totals 19.9 net wells, which represents a 29% increase from second quarter 2023 levels. Although we had relatively lower net-new producing wells added in this most recent quarter, the higher balance of completed wells represents a level much higher than what we’ve generally seen historically, which gives some visibility into near-term production trends as those get turned to sales then.
For wells already turned to sales in 2023, the timing of completion to initial production has averaged around 20 days, which is significantly longer than prior year averages of approximately three to five days. We believe this timing delay is in large part attributable to more operators utilizing co-development strategies as more wells are fraced together within a pad and then those group of wells are collectively not turned to sales until after the last well is completed. All else being equal, the effect of this is that the production contribution from new wells becomes lumpier in the short term.
It’s also worth noting the timing of permit to spud and spud to completion has compressed considerably in 2023 versus prior years. In total, for wells turned to sales in 2023, the average permit to production timing is approximately 10 months, whereas in ’22 it’s approximately 11 months, and 2021, it was approximately 13 months.
With respect to rigs, although rig counts in the overall Permian have declined by approximately 10% compared to last year, we’ve recently seen more rigs operating on TPL acreage. Last year at this time, we estimated that there were approximately 42 rigs operating on TPL acreage, whereas today we estimate we currently have more than 50 rigs. These rig totals align with our well data with third quarter 2023 new spud activity right around record levels on a gross and net basis. In addition, new permit activity on our acreage is elevated, as third quarter 2023 represents a record for new permits, both on a gross and net basis.
With a strong backlog of completed wells in inventory, high levels of ongoing new permits accelerated development timing of converting permit to sales and currently is supportive [ph] oil and natural gas prices. Those fundamentals in aggregate underpin what we believe to be constructive backdrop for development on TPL royalty acreage and the Permian more broadly. Of course, commodity prices can change and development schedules can evolve. But as we’ve shown before, TPL is well-positioned to succeed through most any environment.
Before concluding my remarks, I also wanted to mention that next week TPL will be hosting its 2023 Annual Meeting in Dallas. I want to remind and encourage shareholders to review the proxy materials, which you can find on our website and on the SEC website and to submit votes. If anyone needs any assistance, please reach out to Investor Relations.
With that, I will turn the call over to Chris.
Chris Steddum
Thanks, Ty. Third quarter of 2023 total consolidated revenue and net income were $158 million and $106 million, respectively. Total adjusted EBITDA was $141 million, which is 6% higher compared to the prior sequential quarter, and adjusted EBITDA margin was approximately 89%. During the quarter, the company benefited from higher commodity prices and lower operating expenses, though, partially offset by lower royalty production and lower source water sales. Free cash flow was approximately $106 million and we exited the quarter with approximately $660 [ph] million of cash on the balance sheet.
Royalty production of approximately 21,800 barrels of oil equivalent per day, represented a 12% decrease on a sequential quarter basis. Our realized price per barrel of oil equivalent increased 19% to approximately $45. Benchmark prices for each, oil, gas and NGLs, each rose over the prior sequential quarter and our realizations relative to the benchmark prices also improved. For this quarter, we have maintained our $3.25 per share dividend. We also spent approximately $6 million to repurchase approximately 3,600 shares of our common stock.
And with that, operator, we will now take questions.
Questions And Answers
Operator
Thank you. We will now be conducting a question-and-answer session (Operator Instructions) The first question comes from the line of Derrick Whitfield with Stifel please go ahead.
Q – Derrick Whitfield
Good morning, all.
A – Tyler Glover
Morning, Derrick.
A – Chris Steddum
Hey, good morning, Derrick.
Q – Derrick Whitfield
For my first question, I wanted to focus on your Q3 production and your six to 12-month production trajectory. Regarding the quarter, Ty, do you have a sense on the production impact split between elevated temperatures and brownouts versus delayed TILs due to larger pad development? And secondarily, with the record amount of completion and line-of-sight inventory wells you have exiting the quarter, how should we think about the trajectory as we exit this year and into next?
A – Tyler Glover
Hey, Derrick, will you repeat the first part of your question?
Q – Derrick Whitfield
Sure. Just on the production impact for the quarter, you talked about in your prepared remarks there were elevated temperatures and brown-outs, and then you also talked about some delayed TILs due to larger pad development. So wanted to get a sense from you, if you have a view on the split between those two categories.
A – Tyler Glover
You know, I don’t have the exact split, but I think we were probably more heavily impacted by the delay in TIL just because we had a lot of mega pads. This last quarter, you know, where we had quite a few wells being drilled from the same pad. And so, like I’ve mentioned in my prepared remarks, what happens there is, you know, they wait till all of those wells are completed to bring them online. And so that makes the near-term production a little bit lumpier. And that’s what we saw this quarter. You know, we did see, you know, some effects of the heat waves with some problems with electricities and so compressor stations going down. And I think you’ll see some midstream operators talk about those issues as well this quarter.
For the second part of that question, Chris, you want to take that?
A – Chris Steddum
Yeah. So, Derrick, to your point, I think we have had a little bit of lumpiness in our production over the last couple of quarters. Really strong last quarter, down a little bit this quarter. And I think as we always say, I mean, our view is, you know, we want to look towards the long-term trend because as Ty has mentioned, I think especially as you see some of these operators move these large pads, it’s going to introduce a little more volatility in the production quarter-to-quarter, but I think, you know, in our view nothing has really changed in how we think about long term, let’s say, medium-term production. Everything still looks good. I think we still expect overall to see production growth in the coming year. You know, again, like we said that really high amount of permits, the quicker turnaround of permits and DUCs, all of those things continue to be positive indicators. And I think as some of these big pads get brought online and we get through some of those, you know, temperature issues and pipeline constraint issues, we’re going to see that production come to market to the benefit of TPL.
Q – Derrick Whitfield
Terrific. And then maybe shifting over to capital, could you comment on the surface acreage you sold and the importance of this proposal [ph] on groundwater rights purchase?
A – Tyler Glover
Yeah. I’ll take that one. The surface that we sold, so that acreage was in Culberson County, you know, so this is why I like oil and gas fairway. Rangelands that, you know — one big issue that it had, was it had a conservation easement on it. So this is acreage that wasn’t part of the original land grant but — that the company has owned for a while. And so because of that conservation easement and because of the remoteness, we just didn’t see any commercial opportunities, and so we had the opportunity to sell it to a local rancher. And so that’s kind of where we were at on that. So, moving on to the core space that we purchased. You know, we feel like core space is just becoming more and more valuable as, you know, we see produced water volumes continue to grow in the base and then also looking at other uses of core space, you know, carbon sequestration, things like that, we just feel like any time that we can add to our core space inventory at attractive prices, then, you know, that’s a really good opportunity and really good use of our capital.
Q – Derrick Whitfield
That makes sense. And one last if I could. During Q2, that was really a banner quarter for you guys on the water business based on the amount of off-lease activity you experienced. Could you offer any perspective on how much off-lease — or how off-lease performed this quarter?
A – Tyler Glover
So really, I mean right there, you know, in line with last quarter, definitely over half of our sales, you know, were off of our footprint. We also, you know, continue to see increases in our treatment. And so, third quarter was no different, I think, as far as volumes on the treatment side was a record quarter for us. And, you know, I would just mention too that I’ve talked about this a little bit in the past, but most of the produced water gathering infrastructure on our land, we have the exclusive right to take water off of that system, treat it and resell it. So, through good contract structure, we’re very well-positioned to keep providing brackish water and/or ramp up our treatment, based on each operator’s needs, and, you know, we continue to grow further and further outside of our footprint. The water team has done a really good job of contracting additional sales and expanding our footprint. So…
Q – Derrick Whitfield
Very helpful. Thanks for your time.
A – Chris Steddum
Thanks, Derrick.
A – Tyler Glover
Thanks, Derrick.
Operator
Thank you. Next question comes from the line of Hamed Khorsand with BWS Financial. Please go ahead.
Q – Hamed Khorsand
Hey, good morning. Just a follow-up on this water topic. Given production having declined this past quarter, and how your customers or the land leasers are operating, would that imply that, you know, like, water sales could actually ramp up as you see these wells come online, it was just the delay factor?
A – Tyler Glover
So water sales is typically paralleled with completions activity. But I think, you know, like Chris mentioned earlier, when you look at, you know, the wells that have been recently spud in this last quarter and our permit count being up so high, I think that is definitely an indicator that there will be a lot of completions activity in the coming quarters, which is really good for water sales, you know, both on the brackish and treatment side, as well as the produced water side of the business, because once you get that flow-back that water has got to go somewhere. And so, to answer your question, you know, the things that we’ve talked about on the call here are good indicators for future water revenue.
Q – Hamed Khorsand
Okay. And then what’s been the big contributor to the easement revenue line this year and how, you know, tangible is it that it will continue to stay with the business?
A – Tyler Glover
So probably the biggest contributors this year, especially over the last couple of quarters, have been pipeline easements and material sales. So we’re seeing a lot of infrastructure build-out, you know, a lot of gas-gathering lines. You know, we’ve had a nice ramp in transmission lines, as well as, you know, new gas connects and facilities, compressor stations, things like that. And I think that’s going to continue. We are seeing operators move further away from existing infrastructure, you know, into new areas where there are requirements for new roads and gathering infrastructure and facilities. And that was one thing that we saw a little bit of a bottleneck on last quarter was there were some areas where wells were not turned in line because of a lack of infrastructure. And so the same operators that we talk to, that, you know, gave us that feedback were the same operators that had a big ramp in easements for, you know, say, like gas takeaway.
And then on the material sales side, we’ve expanded (inaudible) up into New Mexico which has been a really nice bump for us. We’ve also got to the sand mines that, you know, we signed towards the end of last year. They are actually active now. And we’ve seen a nice bump in the sand royalties. I think we were just under $1 million for sand royalties this last quarter. So that’s progressing well. You know, we’ve got a couple of other sand leases that should be operational soon. And as we continue to expand our rock-crushing activities and things like that, I think we’ll continue to see strong SLEM activity in the future.
Q – Hamed Khorsand
Okay, great. Thank you.
A – Tyler Glover
Thanks, Hamed.
Operator
Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
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“you know”, “you know”, “you know” – i do know management still has no skin in the game as required & has made no progress in share buy back.
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