Texas Pacific Land Corporation · NYSE:TPL
Texas Pacific Land — Q2 2024 Earnings Presentation
43 slides from Texas Pacific Land's earnings presentation, Aug 7, 2024
Slide 1: Texas Pacific Land Corporation Investor Presentation – August 2024
Texas Pacific Land Corporation (NYSE: TPL) Investor Presentation – August 2024 Exhibit 99.2
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: 2Q 2024 Summary Financial and Operating Update
$73.46 $82.45 $78.46 $76.77 $80.93 60.0 65.0 70.0 75.0 80.0 85.0 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 11.0 9.2 11.5 10.9 10.6 6.9 6.0 7.5 7.0 7.1 7.0 6.6 7.3 7.0 7.3 24.9 21.8 26.3 24.8 24.9 - 5.0 10.0 15.0 20.0 25.0 30.0 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 Oil Gas NGL 731 545 517 687 800 0 2
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Slide 5: Value Creation Culture and Proven Performance
(1%) 4% 13% 17% 29% -10% 0% 10% 20% 30% WTI SPY Nasdaq TPL fsfsdfsfs 5 $37 $78 $160 $258 $128 $209 $365 $307 2016 2017 2018 2019 2020 2021 2022 2023 $5 $19 $50 $60 $48 $61 $81 $99 2016 2017 2018 2019 2020 2021 2022 2023 Value Creation Culture and Proven Performance Land & Resource Management Net Inc
Slide 6: Unique Permian Basin Pure-Play
Unique Permian Basin Pure-Play $ $ Positioned to capture upside $541 Million 2023 Adjusted EBITDA Balance Sheet Strength No Debt Cash Balance of $895 Million ~23,700 Core Permian Net Royalty Acres ~869,000 Surface Acres Diversified Revenue Streams: Royalties, Water, and Surface 100% Texas Permian Ex
Slide 7: TPL by the Numbers
Texas Pacific Land Corporation (NYSE: TPL) TPL by the Numbers1 Market Value ($MM) $18,256 Cash & Equivalents ($MM) $895 Debt ($MM) $0 Net Royalty Acres (100% net basis) ~23,700 Normalized to 1/8th ~195,000 Surface Acres ~869,000 2023 Adj. EBITDA Margin 86% 2023 FCF Margin 66% Average daily trading v
Slide 8: TPL History and Evolution
TPL History and Evolution Bankrupt Railroad to Liquidating Trust (1871-2009) Modern Enterprise 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 1888 Texas and Pacific Abrams #1 becomes th
Slide 9: Unmatched Permian Footprint Combined With Premier Operators
Unmatched Permian Footprint Combined With Premier Operators Royalty Acreage Combined Royalty & Surface Surface and Easement Acreage 37% 38% 25% Revenue Contribution1 (FY 2023) Super- majors Large-cap independents Other (1) Permian supermajors include Chevron, Exxon, ConocoPhillips, BP and their resp
Slide 10: Permian Basin is a World-Class Resource
~79,000 ~23,000 ~21,000 ~7,000 ~6,000 ~3,000 Permian Motney 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 Locations with <$55/bbl Breakev
Slide 11: Capital Allocation Framework Focused on Maximizing Shareholder Value
$13 $18 $24 $25 $25 $31 $36 $45 $70 $51 $202 $105 $335 $143 $300 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 2024 Dividends Share repurchases Capital Allocation Framework Focused on Maximizing Shareholder Value RETURN CAPITAL Return substantial amounts of capital throug
Slide 12: Focused on Allocating Capital Towards Highest Returns
Focused on Allocating Capital Towards Highest Returns Growing Free Cash Flow per Share is 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 14% 24% 10% 51% Other Regular Dividend Share Re
Slide 13: TPL's Combined Surface and Royalties Is Unique
48% 17% 32% (18%) (61%) SLEM Produced Water Water Sales WTI Oil Henry Hub Natural Gas TPL’s Combined Surface and Royalties Is Unique SURFACE WATER ROYALTIES FY 2023 Performance (YOY) TPL Revenue Spot Prices 13 ― ― ― ― ― ― ― ― ― ― ― Comparison of Significant Revenue Generation by Asset Type Effective
Slide 14: TPL Maintains Top Tier Profitability Margins
TPL Maintains Top Tier Profitability Margins 12% 13% 21% 15% 50% 64% Oilfield Services (OIH) Midstream (AMLP) S&P O&G (XOP) S&P 500 TPL Water Services & Operations TPL consolidated Net Income Margin Comparison Source: Bloomberg and Company data. Note: OIH, AMLP, XOP, and S&P 500 data reflects last-t
Slide 15: Permian Activity Overview
Permian Activity Overview 15 3,248 287 268 3,119 245 411 2,848 196 697 ≤ 1 year 1 year < x ≤ 2 years 2 year < x ≤ 4 years 2024 2023 2022 - 1.0 2.0 3.0 4.0 5.0 6.0 1,047 1,224 1,269 1,226 1,386 1,317 1,549 1,384 1,495 1,582 1,533 1,642 1,388 1Q 2021 2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q
Slide 16: Investment Highlights
Investment Highlights 16 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-creation
Slide 17: Jay Gould Founder - Texas and Pacific Railway TPL Gryffindor source water pit
Jay Gould Founder - Texas and Pacific Railway 17 TPL Gryffindor source water pit
Slide 18: TPL Currently Has Four Primary Revenue Streams
TPL Currently Has Four Primary Revenue Streams O&G Royalties Revenue 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 (
Slide 19: Oil and Gas Royalties Overview and Management
Oil and Gas Royalties Overview and Management - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Producing Horizontal Wells (Gross) on TPL Oil and Gas Royalty Acreage Revenue Mechanics and Management By interfacing directly with operators across SLEM and Water, TPL incentivizes operators to accel
Slide 20: TPL Royalty Production and Inventory Detail
38.2 39.2 41.6 43.7 45.0 47.1 47.8 50.1 52.4 54.5 11.6 12.0 12.5 13.0 13.4 14.5 14.0 16.2 16.8 17.7 50.7 52.1 55.0 57.7 59.4 62.6 62.8 67.2 70.2 73.3 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3Q 2023 4Q 2023 1Q 2024 2Q 2024 Delaware Midland Permi
Slide 21: TPL source water infrastructure
21 TPL source water infrastructure
Slide 22: Raw Land Does Not Monetize Itself
RAW 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 F
Slide 23: Surface, Leases, Easements and Materials (SLEM) Overview and Management
35% 13%16% 10% 26% $100,000 $115,000 $132,250 Year 0 Year 10 Year 20 Surface, Leases, Easements and Materials (SLEM) Overview and Management $71MM Pipeline easements Caliche / materials Commercial leases Wellbore easements Other Provide operators/customers access-to or use- of TPL surface for infras
Slide 24: 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 25: Water Sales Asset Map
Water Sales Asset Map storage capacity 600+ mbbl/d 24.5 mmbbl source water pipelines335 miles 327 354 388 410 412 448 478 2017 2018 2019 2020 2021 2022 2023 Average Fluid Used per Delaware Well Completion Average O&G well in the Delaware requires an increasing volume of water (~500k bbl water per we
Slide 26: 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 mana
Slide 27: Delaware Upstream Activity + High Water-Cuts to Drive Produced Water Volume Growth
~680 ~1,220 ~180 ~290 First 12 months production First 36 months production 7.2 10.4 12.9 13.5 14.5 16.1 18.8 2017 2018 2019 2020 2021 2022 2023 Produced Water Royalties Delaware Upstream Activity + High Water-Cuts to Drive Produced Water Volume Growth Water vs Oil Production – Average Well in Delaw
Slide 28: TPL Captures Revenue Over the Well Lifecycle
TPL Captures Revenue Over the Well Lifecycle 28 Permit Development Production 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
Slide 29: Permian's Massive Resource Potential
Permian’s Massive Resource Potential Enormous Acreage Extent and Stacked Pay Potential 29 ~26,000 square miles ~17,000,000 acres 10+ geologic formations for each Midland and Delaware Enormous Acreage Extent Stacked Pay Reserves Midland and Delaware Basins Greater Permian Basin Extent Combined Midlan
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Slide 31: Appendix
Appendix
Slide 32: Summary of Highest-Visibility Inventory
Summary of Highest-Visibility Inventory Notes: Per Company data. Permian Basin horizontal locations as of 6/30/24. Permitted well conversion rate based on wells permitted from 7/1/22 through 6/30/23 and then drilled through 6/30/24. DUC well conversion rate based on wells drilled from 7/1/22 through
Slide 33: 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 / Production Illustrative Economic Model – Minerals/Royalties vs Lease Interest 33 Key Terms and Comparison: Royalties/Minerals vs Lease Interest PARTICIPANTS NOMENCL
Slide 34: 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 3rd 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 Sustainable Extraction Economic
Slide 35: Compensation Incentives Aligned With Shareholder Value Creation
Compensation Incentives Aligned With Shareholder Value Creation 35 Mix (% of Total)1 Intent Key Performance Dimensions Base Salary Deliver competitive fixed cash compensation for day-to-day job performance Based on individual role, level of experience and performance Annual Incentive Plan Ince
Slide 36: Sustainability is Embedded in Our Strategy
Sustainability is Embedded in Our Strategy 36 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 37: Our Environmental Management Initiatives
Our Environmental Management Initiatives 37 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; informatio
Slide 38: ESG Update
ESG Update Category 2020 2021 2022 2023 Emissions Scope 1 CO2 Emissions 18,987 16,159 10,590 13,819 Scope 2 CO2 Emissions 5,110 6,596 11,492 10,572 Total Scope 1 + Scope 2 24,097 22,755 22,082 24,391 Methane Emissions 0 0 0 0 $303 $451 $667 $632 24.1 22.8 22.1 24.4 0 10 20 30 40 50 60 70 80 $0 $100
Slide 39: Royalty Key Terms
Royalty Key Terms 39 Gross Royalty Acres Net Royalty Acres (Normalized to 1/8) Net Royalty Acres Drilling Spacing Units (“DSUs”) Implied Average Net Revenue Interest per Well ■ An undivided ownership of the oil, gas, and minerals underneath one acre of land ■ Total Texas Pacific Land Corporation acr
Slide 40: Adjusted EBITDA and Free Cash Flow Reconciliation
($ in millions) 2018 2019 2020 2021 2022 2023 2Q23 3Q23 4Q23 1Q24 2Q24 Net income $ 209.7 $ 318.7 $ 176.1 $ 270.0 $ 446.4 $ 405.6 $ 100.4 $ 105.6 $ 113.1 $ 114.4 $ 114.6 Income tax expense 52.0 83.6 43.6 93.0 122.5 111.9 26.8 29.4 32.0 31.6 31.9 Depreciation, depletion and amortization 2.6 8.9 14.4
Slide 41: Segment EBITDA Reconciliation
($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24 2022 2023 2Q23 3Q23 4Q23 1Q24 2Q24 2022 2023 Net income $ 69.6 $ 82.9 $ 88.8 $ 81.0 $ 80.1 $ 365.0 $ 306.7 $ 30.8 $ 22.7 $ 24.3 $ 33.4 $ 34.5 $ 81.3 $ 98.9 Income tax expense 18.5 22.9 25.0 22.3 22.2 100.3 84.3 8.3 6.4 7.0 9.3 9.7 22.2 27.6 Depreciation, depl
Slide 42: Historical Financial Summary
Historical Financial Summary 42 ($ in millions) 2022 2023 June 30, 2023 June 30, 2024 Total Acres 874,366 868,446 886,464 869,045 Revenues: Oil and gas royalties $452.4 $357.4 $82.4 $89.8 Water sales 84.7 112.2 37.6 40.7 Produced water royalties 72.2 84.3 20.8 25.3 Easements and other surface-relate
Slide 43: Texas Pacific Land Corporation
1700 Pacific Avenue, Suite 2900 Dallas, Texas 75201 Texas Pacific Land Corporation