Texas Pacific Land Trust Announces Fourth Quarter and Full Year 2019 Results

DALLAS--()--Texas Pacific Land Trust (NYSE:TPL) today announced financial and operating results for the fourth quarter and year ended December 31, 2019.

Results for the fourth quarter of 2019:

  • Net income of $71.3 million, or $9.20 per Sub-share Certificate, for the fourth quarter ended December 31, 2019 compared with $62.7 million, or $8.06 per Sub-share Certificate, for the fourth quarter ended December 31, 2018.
  • Revenues of $113.3 million for the fourth quarter ended December 31, 2019, compared with $93.2 million for the fourth quarter ended December 31, 2018.
  • Increases of 26.6% in easements and other surface-related income, 22.0% in oil and gas royalty revenue and 20.6% in water sales and royalty revenue for the fourth quarter ended December 31, 2019 compared with the fourth quarter ended December 31, 2018.
  • EBITDA of $94.9 million for the fourth quarter ended December 31, 2019, compared with $79.3 million for the fourth quarter of 2018, an increase of 19.6%.

Results for the year ended December 31, 2019:

  • Net income of $320.9 million, or $41.38 per Sub-share Certificate, for the year ended December 31, 2019 compared with $209.7 million, or $26.93 per Sub-share Certificate, for the year ended December 31, 2018.
  • Revenues of $490.5 million for the year ended December 31, 2019, compared with $300.2 million for the year ended December 31, 2018.
  • Increases of 32.9% in water sales and royalty revenue, 30.0% in easements and other surface-related income and 24.9% in oil and gas royalty revenue for the year ended December 31, 2019 compared with the year ended December 31, 2018.
  • EBITDA of $413.4 million for the year ended December 31, 2019, compared with $264.3 million for the year ended December 31, 2018, an increase of 56.4%.

Further details for the fourth quarter of 2019:

The Trust reported net income of $71.3 million for the fourth quarter ended December 31, 2019, an increase of 13.8% over net income of $62.7 million for the fourth quarter ended December 31, 2018. The increase was principally related to increased oil and gas royalties, easements and other surface-related income and water sales.

Oil and gas royalty revenue was $43.6 million for the fourth quarter ended December 31, 2019, compared with $35.8 million for the fourth quarter ended December 31, 2018, an increase of 22.0%. Crude oil and gas production subject to the Trust’s royalty interests increased 45.6% and 33.4%, respectively, in the fourth quarter ended December 31, 2019 compared to the fourth quarter ended December 31, 2018. While crude oil and gas production increased in the fourth quarter ended December 31, 2019 compared to the same period of 2018, the prices received for crude oil and gas production decreased 3.6% and 41.1%, respectively, over the same time period.

Easements and other surface-related income was $27.7 million for the fourth quarter ended December 31, 2019, an increase of 26.6% compared with the fourth quarter ended December 31, 2018 when easements and other surface-related income was $21.9 million. The increase in easements and other surface-related income was largely driven by increases of $3.1 million in commercial lease revenue (largely due to an increase in saltwater disposal royalties) and $2.0 million in pipeline easement income for the fourth quarter ended December 31, 2019 compared to the same period of 2018.

Water sales and royalty revenue was $19.9 million for the fourth quarter ended December 31, 2019, an increase of 20.6% compared with the fourth quarter ended December 31, 2018 when water sales and royalty revenue was $16.5 million. This increase was principally due to a 50.4% increase in the number of barrels of sourced and treated water sold in the fourth quarter of 2019 over the same period in 2018, partially offset by decreased water royalties.

In an exchange transaction, the Trust conveyed approximately 5,620 acres of land in exchange for approximately 5,545 acres of land, all in Culberson County. As the Trust had no cost basis in the land conveyed, the Trust recognized land sales revenue of $22.0 million for the fourth quarter ended December 31, 2019.

Further details for the year ended December 31, 2019:

The Trust reported net income of $320.9 million for the year ended December 31, 2019, an increase of 53.0% over net income of $209.7 million for the year ended December 31, 2018. Net income for the year ended December 31, 2019 included a $100 million land sale. Excluding the impact of the land sale, net of income tax, for the year ended December 31, 2019, net income was $241.9 million, a 15.3% increase over net income for the year ended December 31, 2018. The 15.3% increase was principally related to increased oil and gas royalties, easements and other surface-related income and water sales.

Oil and gas royalty revenue was $154.7 million for the year ended December 31, 2019, compared with $123.8 million for the year ended December 31, 2018, an increase of 24.9%. Crude oil and gas production subject to the Trust’s royalty interests increased 48.3% and 89.3%, respectively, in the year ended December 31, 2019 compared to the year ended December 31, 2018. While crude oil and gas production increased in the year ended December 31, 2019 compared to December 31, 2018, the prices received for crude oil and gas production decreased 8.0% and 49.3%, respectively, over the same time period.

Easements and other surface-related income was $115.4 million for the year ended December 31, 2019, an increase of 30.0% compared with the year ended December 31, 2018 when easements and other surface-related income was $88.7 million. The increase in easements and other surface-related income was principally related to increases of $19.0 million in pipeline easement income and $10.6 million in commercial lease revenue (largely due to an increase in saltwater disposal royalties), for the year ended December 31, 2019 compared to the same period of 2018. These increases were partially offset by a $3.7 million decrease in temporary permit income over the same time period.

Water sales and royalty revenue was $84.9 million for the year ended December 31, 2019, an increase of 32.9% compared with the year ended December 31, 2018 when water sales and royalty revenue was $63.9 million. This increase was principally due to a 44.0% increase in the number of barrels of sourced and treated water sold during the year ended December 31, 2019 over the same period in 2018, partially offset by decreased water royalties.

The Trust recognized land sales revenue of $135.0 million for the year ended December 31, 2019 and $4.4 million for the comparable period of 2018. The increase in land sales revenue is principally related to a $100 million land sale in January 2019 and land sales revenue of $22.0 million related to a land exchange transaction in December 2019.

About Texas Pacific Land Trust

Texas Pacific Land Trust is one of the largest landowners in the State of Texas with approximately 900,000 acres of land in West Texas. The Trust was organized under a Declaration of Trust to receive and hold title to extensive tracts of land in the State of Texas, previously the property of the Texas and Pacific Railway Company, and to issue transferable Certificates of Proprietary Interest pro rata to the holders of certain debt securities of the Texas and Pacific Railway Company. Texas Pacific Land Trust’s trustees are empowered under the Declaration of Trust to manage the lands with all the powers of an absolute owner. Texas Pacific Land Trust is not a REIT.

Forward-Looking Statements

This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the Trust’s future operations and prospects, the markets for real estate in the areas in which the Trust owns real estate, applicable zoning regulations, the markets for oil and gas, production limits on prorated oil and gas wells authorized by the Railroad Commission of Texas, expected competitions, management’s intent, beliefs or current expectations with respect to the Trust’s future financial performance and other matters. We assume no responsibility to update any such forward-looking statements.

 

REPORT OF OPERATIONS

(in thousands, except share and per share amounts) (unaudited)

 

 

Three Months Ended
December 31,

 

Years Ended
December 31,

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

Oil and gas royalties

$

43,616

 

 

$

35,756

 

 

$

154,729

 

 

$

123,834

 

Easements and other surface-related income

27,727

 

 

21,894

 

 

115,362

 

 

88,739

 

Water sales and royalties

19,882

 

 

16,485

 

 

84,949

 

 

63,913

 

Sale of oil and gas royalty interests

 

 

18,875

 

 

 

 

18,875

 

Land sales

22,000

 

 

74

 

 

135,020

 

 

4,367

 

Other operating revenue

107

 

 

117

 

 

436

 

 

492

 

Total revenues

113,332

 

 

93,201

 

 

490,496

 

 

300,220

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Salaries and related employee expenses

10,099

 

 

7,984

 

 

32,841

 

 

18,433

 

Water service-related expenses

5,385

 

 

3,567

 

 

20,808

 

 

11,168

 

General and administrative expenses

2,663

 

 

1,822

 

 

9,765

 

 

4,704

 

Legal and professional fees

1,205

 

 

875

 

 

16,403

 

 

2,498

 

Depreciation, depletion and amortization

3,620

 

 

1,064

 

 

8,906

 

 

2,583

 

Total operating expenses

22,972

 

 

15,312

 

 

88,723

 

 

39,386

 

 

 

 

 

 

 

 

 

Operating income

90,360

 

 

77,889

 

 

401,773

 

 

260,834

 

 

 

 

 

 

 

 

 

Other income

911

 

 

390

 

 

2,682

 

 

916

 

Income before income taxes

91,271

 

 

78,279

 

 

404,455

 

 

261,750

 

Income tax expense (benefit):

 

 

 

 

 

 

 

Current

14,007

 

 

15,599

 

 

57,492

 

 

37,200

 

Deferred

5,942

 

 

 

 

26,035

 

 

14,814

 

Total income tax expense

19,949

 

 

15,599

 

 

83,527

 

 

52,014

 

Net income

$

71,322

 

 

$

62,680

 

 

$

320,928

 

 

$

209,736

 

 

 

 

 

 

 

 

 

Net income per Sub-share Certificate - basic and diluted

$

9.20

 

 

$

8.06

 

 

$

41.38

 

 

$

26.93

 

 

 

 

 

 

 

 

 

Weighted average number of Sub-share Certificates outstanding

7,756,156

 

 

7,771,950

 

 

7,756,437

 

 

7,787,407

 

SEGMENT OPERATING RESULTS

(in thousands) (unaudited)

 

 

Three Months Ended
December 31,

 

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

43,616

 

 

38

%

 

$

35,756

 

 

39

%

Easements and other surface-related income

 

13,382

 

 

12

%

 

14,012

 

 

15

%

Sale of oil and gas royalty interests

 

 

 

%

 

18,875

 

 

20

%

Land sales and other operating revenue

 

22,107

 

 

19

%

 

191

 

 

%

 

 

79,105

 

 

69

%

 

68,834

 

 

74

%

Water services and operations:

 

 

 

 

 

 

 

 

Water sales and royalties

 

19,882

 

 

18

%

 

16,485

 

 

18

%

Easements and other surface-related income

 

14,345

 

 

13

%

 

7,882

 

 

8

%

 

 

34,227

 

 

31

%

 

24,367

 

 

26

%

Total consolidated revenues

 

$

113,332

 

 

100

%

 

$

93,201

 

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

56,344

 

 

79

%

 

$

49,911

 

 

80

%

Water services and operations

 

14,978

 

 

21

%

 

12,769

 

 

20

%

Total consolidated net income

 

$

71,322

 

 

100

%

 

$

62,680

 

 

100

%

 

 

Years Ended
December 31,

 

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Land and resource management:

 

 

 

 

 

 

 

 

Oil and gas royalties

 

$

154,729

 

 

31

%

 

$

123,834

 

 

41

%

Easements and other surface-related income

 

73,143

 

 

15

%

 

63,908

 

 

21

%

Sale of oil and gas royalty interests

 

 

 

%

 

18,875

 

 

6

%

Land sales and other operating revenue

 

135,456

 

 

28

%

 

4,859

 

 

2

%

 

 

363,328

 

 

74

%

 

211,476

 

 

70

%

Water services and operations:

 

 

 

 

 

 

 

 

Water sales and royalties

 

84,949

 

 

17

%

 

63,913

 

 

21

%

Easements and other surface-related income

 

42,219

 

 

9

%

 

24,831

 

 

9

%

 

 

127,168

 

 

26

%

 

88,744

 

 

30

%

Total consolidated revenues

 

$

490,496

 

 

100

%

 

$

300,220

 

 

100

%

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

Land and resource management

 

$

260,566

 

 

81

%

 

$

159,611

 

 

76

%

Water services and operations

 

60,362

 

 

19

%

 

50,125

 

 

24

%

Total consolidated net income

 

$

320,928

 

 

100

%

 

$

209,736

 

 

100

%

NON-GAAP PERFORMANCE MEASURES AND DEFINITIONS

In addition to amounts presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we also present certain supplemental non-GAAP measurements. These measurements are not to be considered more relevant or accurate than the measurements presented in accordance with GAAP. In compliance with requirements of the Securities and Exchange Commission (“SEC”), our non-GAAP measurements are reconciled to net income, the most directly comparable GAAP performance measure. For all non-GAAP measurements, neither the SEC nor any other regulatory body has passed judgment on these non-GAAP measurements.

EBITDA

EBITDA is a non-GAAP financial measurement of earnings before interest, taxes, depreciation, depletion and amortization. Its purpose is to highlight earnings without finance, taxes, and depreciation, depletion and amortization expense, and its use is limited to specialized analysis. We have presented EBITDA because we believe that it is a useful supplement to net income as an indicator of operating performance.

The following table presents a reconciliation of net income to EBITDA for the three months and years ended December 31, 2019 and 2018 (in thousands):

 

 

Three Months Ended
December 31,

 

Years Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Net income

 

$

71,322

 

 

$

62,680

 

 

$

320,928

 

 

$

209,736

 

Add:

 

 

 

 

 

 

 

 

Income tax expense

 

19,949

 

 

15,599

 

 

83,527

 

 

52,014

 

Depreciation, depletion and amortization

 

3,620

 

 

1,064

 

 

8,906

 

 

2,583

 

EBITDA

 

$

94,891

 

 

$

79,343

 

 

$

413,361

 

 

$

264,333

 

 

 

 

 

 

 

 

 

 

 

Contacts

Robert Packer
(214) 969-5530
Robert@tpltrust.com

Contacts

Robert Packer
(214) 969-5530
Robert@tpltrust.com