Q2-24

tpltblogger17 Comments

https://ir.stockpr.com/tpltrust/sec-filings-email/content/0001811074-24-000049/tpl-20240630.htm

Solid and could have been more so with higher nat gas prices (fully out of control of company).

I didn’t read the fine print in recent announcements. How often will cash be swept out via div to get to $700MM? Should the regular dividend be higher with FCF healthily in excess of $100MM?

Of course, I remain thankful for another quarter of no dilution.

17 thoughts on “Q2-24”

    • More detail From the Landbridge Earnings Announcement

      “Ongoing Commercial Progress

      On July 3, 2024, a subsidiary of the Company entered into the non-binding LOI regarding a long-term ground lease on our land in Reeves County, Texas, to facilitate the development of a data center and related facilities. The counterparty to the LOI is a to-be-formed joint venture between a third-party developer and funds affiliated with our financial sponsor, Five Point Energy LLC. The LOI contemplates, among other things, an $8.0 million fee that would become payable in January 2025 upon the execution of a mutually-acceptable long-term ground lease. We expect that the final terms and conditions of the lease will be submitted for approval to a Conflicts Committee of the Company’s Board of Directors to be formed in connection with the approval of such lease, although we can offer no assurance that we will be successful in negotiating and entering into such lease agreement.”

      Their Earnings call was today.

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  2. According to Simply WallSt website the top 10 shareholders of LandBridge own 63.14% of the company. Leading the parade is Horizon Kinetics Holding Corporation at 28.4% 4,941,621 shares worth $655.3m. Institutions at 51.3% General Public at 36.9%.

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  3. If we are getting dividends or buybacks when the cash balance goes above $700MM, I would expect that to happen pretty frequently. The 10Q said we have nearly $900M in cash and cash equivalents and this business gushes cash.

    Now, we need to get them to actually cancel the bought-back shares instead of just sitting them in a drawer to use on acquisitions later.

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    • Still disappointing they are holding so much cash. Just waiting for the dilutive acquisitions – either in share dilution or margin dilution.

      Enough with the dividends. Buybacks have been proven over decades as the most efficient use of capital for shareholders.

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      • From the 2Q 2024 Earnings call transcript wrt the “approximately” $700 million target cash balance.

        “…..Last June, we announced that we had set a target cash and cash equivalents balance of approximately $700 million. Above this targeted level, TPL will seek to deploy the majority of its free cash flow towards share repurchases and dividends. In conjunction with this announcement, we also declared a $10 per share special dividend.

        Our cash and cash equivalents balance at the end of the second quarter 2024 as of June 30 was approximately $895 million, though the $10 per share special dividend was paid in July with a total outlay of approximately $230 million. The target cash balance is intended to provide a framework and some predictability on how the company will allocate cash. The company continues to generate substantial free cash flow while maintaining a pristine balance sheet.

        Even beyond this most recent special dividend, the company still retains tremendous optionality to return additional capital to stockholders and to invest in attractive growth opportunities. We’re very much in a position of strength to maximize shareholder value, and we’re excited about the opportunities and option value our business can generate.”

        My interpretation of the above weasel words – to quote from the Pirates of the Caribbean movie scene discussing the Pirates Code “…well it is not a hard and fast rule, it’s more like a guideline”.

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        • You motivated me to look it up [Grin]. The actual line was “The code is more what you’d call guidelines than actual rules.”

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        • To round out the $700M discussion I just found this by reading thru the Questions and answers,

          “Nate Pendleton

          That’s really encouraging. Thanks for all that color. And then last one for me. Regarding your prior announcement to target cash position of $700 million on the balance sheet. Can you provide some perspective on how you arrived at that level and how the team makes the decision between using that cash for share buybacks or dividends for a given period?

          Chris Steddum

          Yes. Nate, this is Chris. I think the way that we’ve kind of targeted the absolute number is just thinking about opportunistically how much cash would you want to have to kind of be — to be effective in the market. And that could be both for potential buybacks as well as potential M&A. And we felt like that level of cash gave us a significant advantage in the market that if there were great opportunities out there, we would be in a position to act quickly on them.

          And then as far as like how it gets deployed, I think we’ve spent a lot of time talking about it, but it’s really just fundamentally return driven. We’re looking to see where we can get the best risk-adjusted returns. And if that’s buybacks, we’re going to put more of that money toward buybacks if that’s potentially adding third-party acreage, whether it’s surface, royalties, water related, we’re going to try to put more of that money there.

          And if we think that neither of those two opportunities are sufficiently attractive, then a lot of times that gets moved toward a dividend. So that’s kind of the framework that we’ve tried to always use is try to put it towards the best risk-adjusted returns. And again, like we said, once we feel like we kind of have that sufficient capital to be competitive and effective, then at that point, it just makes sense to return all the remaining excess cash flow, which continues to be very robust to our shareholders.

          Nate Pendleton

          Makes sense. Appreciate your time.”

          Liked by 1 person

  4. It was an amazing quarter and we’ve come a long way! Looking forward to have more shareholder friendly management some day. The $700M cash floor seems very interesting. The 10K shows basically $850M of cash, so we are likely $200M OVER this amount right now. Expect another special dividend, or more buybacks.

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  6. I agree with Richard Simmons.

    Also nice to see a new caller on the earnings call. Nate Pendleton, CFA from Texas Capital. Keep asking the questions that we the people want to hear!

    Never heard of Texas Capital ’til now btw.

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    • Also have to shout out Lawrence J. Goldstein from Santa Monica Partners for asking a few questions on the LandBridge earnings call!

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