Texas Pacific Land Corporation · NYSE:TPL
Texas Pacific Land — Investor Presentation (March 2024)
39 slides from Texas Pacific Land's investor presentation, Mar 28, 2024
Slide 1: Texas Pacific Land Corporation Investor Presentation – March 2024
Texas Pacific Land Corporation (NYSE: TPL) Investor Presentation – March 2024
Slide 2: Disclaimers
Disclaimers This presentation has been designed to provide general information about Texas Pacific Land Corporation and its subsidiaries (“TPL” or the “Company”). Any information contained or referenced herein is suitable only as an introduction to the Company. The recipient is strongly encouraged t
Slide 3: Unique Permian Basin Pure-Play
Unique Permian Basin Pure - Play Positioned to capture $ upside $541 Million 2023 Adjusted EBITDA Efficient conversion of revenues to cash $ $415 Million 2023 Free Cash Flow Balance Sheet Strength No Debt Cash Balance of $725 Million 100% Texas Permian Exposure Diversified Revenue Streams: Royalties
Slide 4: TPL by the Numbers
Texas Pacific Land Corporation (NYSE: TPL) TPL by the Numbers 1 Market Value ($MM) $13 ,225 Cash & Equivalents ($MM) $7 25 Debt ($MM) $0 Net Royalty Acres (100% net basis) ~ 2 3 , 7 00 Normalized to 1/8 th ~1 9 5 ,000 Surface Acres ~ 868,000 2023 Adj. EBITDA Margin 86% 2023 FCF Margin 66% Average da
Slide 5: TPL History and Evolution
TPL History and Evolution Bankrupt Railroad to Liquidating Trust (1871 - 2009) Modern Enterprise 1888 Texas & Pacific Railway bankruptcy leads to the formation of Texas Pacific Land Trust, where land grant assets were placed. Trust certificates are listed on NYSE Texas and Pacific Abrams #1 becomes
Slide 6: Unmatched Permian Footprint Combined With Premier Operators
Unmatched Permian Footprint Combined With Premier Operators Royalty Acreage Surface and Easement Acreage Combined Royalty & Surface Revenue Contribution 1 (FY 2023) 6 37% Super - m a jo r s 38% Large - cap i n d ep e n d e n t s 25% Oth e r (1) Permian supermajors include Chevron, Exxon, ConocoPhill
Slide 7: Permian Basin is a World-Class Resource
~7 9 , 000 ~ 2 3 , 000 ~ 2 1 , 000 ~ 7 , 000 ~ 6 , 000 ~ 3 , 000 P e r m i an M o t n e y Eagle Ford Bakken DJ SCOOP | Stack Permian Basin is a World - Class Resource Source: US EIA, OPEC, Baker Hughes, Enverus and Company data. Production figures represent 4Q 2023 averages. Estimated Remaining Well
Slide 8: Capital Allocation Framework Focused on Maximizing Shareholder Value
2015 $ 31 2014 $25 2013 $25 2012 $24 2011 $ 1 8 2010 $ 1 3 $ 36 $ 4 5 $ 7 0 $ 51 $2 0 2 $ 1 0 5 $ 335 $ 1 43 2 0 16 2 0 17 2 0 18 2 0 19 2 0 20 2 0 21 2 0 22 2 0 23 Dividends Share repurchases Capital Allocation Framework Focused on Maximizing Shareholder Value R ETURN C APITAL Return substantial am
Slide 9: Focused on Allocating Capital Towards Highest Returns
Focused on Allocating Capital Towards Highest Returns Growing Free Cash Flow per Share the Key to Generating Value Growing free cash flow per share would further expand TPL’s capacity to return more capital to shareholders via buybacks and dividends 1 4% 2 4% 1 0% 5 1 % Investing Activities Regular
Slide 10: TPL's Combined Surface and Royalties Is Unique
1 7 % 32 % ( 1 8 %) (6 1 % ) S LEM P ro d u c e d Water Water Sales W T I Oil Henry Hub Natural Gas TPL’s Combined Surface and Royalties Is Unique S U RF A C E W A T E R R OYALTIES FY 2023 Performance (YOY) 48% TPL Revenue Spot Prices — ― ― ― ― — ― ― ― — ― Comparison of Significant Revenue Generatio
Slide 11: TPL Maintains Top Tier Profitability Margins
TPL Maintains Top Tier Profitability Margins 12% 13 % 21% 15 % C o n s o li d a t e d TPL 64% TPL Water Services & O p e r a t i o n s 50% Oilfield S e r v i c es (OIH) Mi d s t r e a m (AMLP) S&P O&G (XOP) S&P 500 TPL Water Services & O p e r a t i o n s TPL consolidated Net Income Margin Compariso
Slide 12: Permian Activity Overview
Permian Activity Overview 12 3 , 0 5 8 2 6 5 3 1 6 3 , 464 2 33 491 2 ,9 9 2 465 66 7 ≤ 1 year 1 year < x ≤ 2 years 2 year < x ≤ 4 years DUCs as of December 31, 2023 2022 2021 - 1 .0 2 .0 3 .0 4 .0 5 .0 6 .0 1,093 1 , 2 7 1 1,309 1,282 1,429 1,377 1 , 6 0 5 1 , 4 77 1 , 5 66 1 , 6 8 5 1 , 6 0 2 1 ,
Slide 13: Investment Highlights
Investment Highlights 13 Permian Basin is a world class resource – Midland and Delaware Basins each possess tens of thousands of future undrilled well inventory Unique combination of surface and royalty ownership generates revenue throughout the entire lifecycle of a well Disciplined, value - creati
Slide 14: Jay Gould Founder - Texas and Pacific Railway TPL Gryffindor source water pit
Jay Gould Founder - Texas and Pacific Railway 14 TPL Gryffindor source water pit
Slide 15: TPL Currently Has Four Primary Revenue Streams
TPL Currently Has Four Primary Revenue Streams ▪ Primarily own Non - Participating Royalty Interests (NPRI), which represents a real property right and is entitled to a fixed percentage of oil and gas production on a property ▪ Royalties are not burdened by capital expenditures ( e.g., drilling and
Slide 16: Oil and Gas Royalties Overview and Management
Oil and Gas Royalties Overview and Management - 5 00 1 , 000 1,500 2 , 0 00 2 , 5 00 3 , 000 3 , 5 00 4 , 000 Producing Horizontal Wells (Gross) on TPL Oil and Gas Royalty Acreage 4 , 5 0 0 By interfacing directly with operators across SLEM and Water, TPL incentivizes operators to accelerate develop
Slide 17: TPL Royalty Production and Inventory Detail
TPL Royalty Production and Inventory Detail 20% 0% 40% 140 % 12 0 % 100% 8 0% 6 0 % 1Q 2 0 22 2Q 2 0 22 3Q 2 0 22 4Q 2 0 22 1Q 2 0 23 2Q 2 0 23 3Q 4Q 2 0 23 2 0 23 Oil as % of WTI Gas as % of Henry Hub NGLs as % of WTI 7 . 4 8 .7 5 .6 5 . 0 5 . 0 4 .9 6 .7 4. 5 7. 7 7 .5 6 .9 7 . 4 7 .8 8 .2 7 . 9 9
Slide 18: TPL source water infrastructure
TPL source water infrastructure 18
Slide 19: Raw Land Does Not Monetize Itself
R AW LAND DOES NOT MONETIZE ITSELF (i) Operational and legal expertise of surface estate ownership within the oil and gas industry and (ii) proactive execution are requisite towards extracting substantial cash flow from raw land Surface Estate Ownership Leveraging Ownership of Raw Surface into Cash
Slide 20: Surface, Leases, Easements and Materials (SLEM) Overview and Management
3 5% 1 3% 1 6 % 1 0 % 2 6% $ 1 00, 000 Illustrative Easement Renewal Payment Easement contracts generally have two 10 - year renewal payments at greater of 115% or CPI - escalation amount $115,000 $ 13 2 , 25 0 Year 0 Year 10 Year 20 Surface, Leases, Easements and Materials (SLEM) Overview and Manag
Slide 21: Water Sales Overview and Management
TPL has developed the largest source water infrastructure network in the northern Delaware Basin TPL deploys professional hydrologists, advanced sensors, and monitoring systems to ensure aquifers are managed sustainably Sales team competes actively throughout the basin to leverage TPL water capabili
Slide 22: Water Sales Asset Map
Water Sales Asset Map 24.5 storage capacity mmbbl 6 00+ m bb l/d source water pipelines 335 m ile s 3 54 327 3 88 4 1 0 4 12 Average Fluid Used per Delaware Well Completion (mbbls) 448 4 78 2 0 1 7 2 0 1 8 2 0 1 9 2 0 20 2 0 21 2 0 22 2 0 23 Average O&G well in the Delaware requires an increasing vo
Slide 23: Produced Water Royalties Overview and Management
Intentionally commercialized to generate high - quality, high - margin cash flow stream Facilitating produced water solutions allows operators to execute on upstream O&G development plans TPL undertakes conservative approach to siting produced water infrastructure on TPL land; focus on sustainable m
Slide 24: Delaware Upstream Activity and High Water-Cuts to Drive Produced Water Volume Growth
~ 6 8 0 ~1 8 0 ~ 29 0 7 . 2 1 0 . 4 1 2. 9 1 3 . 5 1 4 . 5 1 8. 8 16.1 2 0 1 7 2 0 1 8 2 0 1 9 2 0 20 2 0 21 2 0 22 2 0 23 Produced Water Royalties Permian Produced Water (mmbbl/d) ~70% of overall Permian produced water comes from the Delaware Continued O&G development and growth in Delaware will dr
Slide 25: TPL Captures Revenue Over the Well Lifecycle
TPL Captures Revenue Over the Well Lifecycle 1 P er m i t E&P/upstream operators procure regulatory permits; prepare future well site and develop infrastructure ■ Fixed fees for use of TPL’s surface for the construction and operation of infrastructure ( e.g., well sites, wellbores, pipelines) ■ Sale
Slide 26: Permian's Massive Resource Potential
Permian’s Massive Resource Potential Enormous Acreage Extent and Stacked Pay Potential square miles ~26,000 ~17,000,000 a c r es 10 + geologic formations for each Midland and Delaware Enormous Acreage Extent Midland and Delaware Basin Greater Permian Basin Extent Combined Midland and Delaware Footpr
Slide 27: Treatment/recycling infrastructure on TPL land rd party SWD infrastructure
27 Treatment/recycling infrastructure on TPL land 3 rd party SWD infrastructure
Slide 28: Appendix
Appendix
Slide 29: Summary of Highest-Visibility Inventory
Summary of Highest - Visibility Inventory N o t e s: Per Company data. Permian Basin horizontal locations as of 12/31/23. Permitted well conversion rate based on wells permitted from 1/1/22 through 12/31/22 and then drilled through 12/31/23. DUC well conversion rate based on wells drilled from 1/1/2
Slide 30: The Basics of Royalties Ownership
The Basics of Royalties Ownership 100% Lease Operator ( i.e. , E&P) Mineral/Royalties Capital Costs and Most Operating Expenses Revenue / P ro d u c t i o n Illustrative Economic Model – Minerals/Royalties vs Lease Interest Key Terms and Comparison: Royalties/Minerals vs Lease Interest P ARTICIPANTS
Slide 31: Water Sales – Operated vs Royalty/Non-Operated Business Model
Why doesn’t TPL have non - operated Water Sales commercial model where it extracts a royalty from allowing 3 rd parties access to TPL’s water aquifers? Why does TPL need to spend capital and employ personnel? Water Sales – Operated vs Royalty/Non - Operated Business Model S u s t a in a b le Extract
Slide 32: Compensation Incentives Aligned With Shareholder Value Creation
Compensation Incentives Aligned With Shareholder Value Creation Fixed (16%) 1 Variable (84%) 1 Mix (% of Total) 1 Base Salary 16% ▪ Deliver compensation performance Annual I n c ent i ve Plan 18% ▪ Incentivize important operational ▪ Reward performance Performance - Based Restricted Stock Units (PSU
Slide 33: Sustainability is Embedded in Our Strategy
Sustainability is Embedded in Our Strategy 33 Key Opportunities Carbon Management ▪ Government policies incentivize sustainable energy projects (e.g., carbon capture, utilization and storage) and TPL can reposition its business to take advantage of the opportunities created by these policies Water M
Slide 34: Our Environmental Management Initiatives
Our Environmental Management Initiatives Incidents and Spill Prevention Control ▪ Implementation of Spill Prevention, Control, and Countermeasure plan and protocol for water assets, which are equipped with tech / containment protections ▪ Thorough tracking and monitoring of all spills; information i
Slide 35: oS =
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Slide 36: Royalty Key Terms
Royalty Key Terms Gross Royalty Acres Net Royalty Acres (Normalized to 1/8) Net Royalty Acres Drilling Spacing Units (“DSUs”) Implied Average Net Revenue Interest per Well ■ An undivided ownership of the oil, gas, and minerals underneath one acre of land ■ Total Texas Pacific Land Corporation acreag
Slide 37: EBITDA Reconciliation
Land and Resource Water Services and Total 2018 2019 2020 2021 2022 2023 1Q23 2Q23 3Q23 4Q23 Management Operations Net income Adjustments: Income tax expense Depreciation, depletion and amortization $ 209.7 $ 318.7 $ 176.1 $ 270.0 $ 446.4 $ 405.6 52.0 83.6 43.6 93.0 122.5 111.9 2.6 8.9 14.4 16.3 15.
Slide 38: Historical Financial Summary
Historical Financial Summary Year ended December 31, Three months ended, ($ in millions) 2022 2 0 23 December 31, 2022 December 31, 2023 Total Acres 874,366 8 6 8 , 44 6 874,366 8 6 8 , 44 6 Revenues: Oil and gas royalties $452.4 $ 3 5 7 . 4 $96.7 $ 9 8 . 8 Water sales 84.7 11 2 . 2 19.2 2 6 . 4 Pro
Slide 39: Texas Pacific Land Corporation
Texas Pacific Land Corporation 1700 Pacific Avenue, Suite 2900 Dallas, Texas 75201
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