Texas Pacific Land (TPL) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2021, net income was $50.1 million or$6.45 per common share, down from $57.4 million or$7.40 per sub-share certificate in the same quarter of the prior year, a decrease of $7.3 million or$0.95 per share [35] - Total revenue for Q1 2021 was $84.2 million, compared to$96.6 million for the same quarter last year, reflecting a decline [37] - Oil and gas royalty revenue increased by 16.9% to $49.5 million compared to the prior year, driven by an$8.8 million increase in gas royalty revenue due to a 121% increase in average realized price [37][38] Business Line Data and Key Metrics Changes - Oil and gas royalties accounted for 59% of revenues in Q1 2021, with an average royalty per acre of 4.4% [10] - SLEM (surface leases, easements, and material sales) accounted for 10% of revenues in Q1 2021, with renewable energy revenue increasing by $2 million from Q4 2020 due to higher pricing [18] - Water solutions business represented 31$60 per barrel, positioning the company to capitalize on the recovery [24][26] - The impact of the February winter storm resulted in an estimated five to six days of production loss, approximately 6% of the quarter [28] Other Important Information - The company declared a cash dividend of $2.75 per common share for Q1, payable on June 15 [45] - A stock repurchase program was approved to buy up to$20 million of outstanding stock through December 31, 2021 [46] Q&A Session Summary Question: Return of capital strategy and balance between stock repurchases and dividends - Management emphasized a consistent increase in dividends over the past 17 years and a focus on making the best capital allocation decisions for shareholders [54] Question: Appetite for acquisitions and parameters for assessing opportunities - The company is focused on evaluating assets across all revenue streams and remains opportunistic without needing to chase acquisitions for growth [55] Question: Production visibility and impact of permits on rig activity - Current DUC inventory and permit count provide good visibility for continued production pace through the end of the year [56] Question: Production split by product and winter storm impact on royalty production - Oil production was approximately 43% to 44% of total production, with a five to seven-day downtime expected due to the winter storm [57][58] Question: Performance of different portfolio pieces in 2020 - The produced water royalty side of the business saw a 30% increase, serving as a hedge for other businesses that did not perform as well [61] Question: ESG considerations and opportunities - The company views ESG as a significant opportunity, particularly in reducing flaring and enhancing relationships with operators [63]