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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Texas Pacific Land Corporation | NYSE:TPL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
3.06 | 0.55% | 561.62 | 566.84 | 559.3132 | 562.10 | 44,029 | 01:00:00 |
Texas Pacific Land Trust (NYSE: TPL) today announced financial and operating results for the second quarter ended June 30, 2020.
Results for the second quarter of 2020:
Results for the six months ended June 30, 2020:
“Despite continued record low oil prices and COVID-19’s persistent effects on the oil & gas industry, the Trust continues to generate positive operating results and believes it is well positioned to navigate continued challenges in the industry driven by COVID-19 in the second half of 2020,” said Tyler Glover, Chief Executive Officer of the Trust. “While uncertainties stemming from the pandemic are expected to remain, our top priorities continue to be the health and safety of our employees and maintaining our capital resource allocation discipline through this downturn while focusing on liquidity and cash preservation.”
Further details for the second quarter of 2020:
The Trust reported net income of $27.6 million for the second quarter ended June 30, 2020, a decrease of 44.4% compared to net income of $49.6 million for the second quarter ended June 30, 2019.
Oil and gas royalty revenue was $20.5 million for the second quarter ended June 30, 2020, compared with $39.6 million for the second quarter ended June 30, 2019, a decrease of 48.3%. Prices received for crude oil and gas production decreased 54.0% and 53.7%, respectively, in the second quarter ended June 30, 2020 compared to the same period of 2019. The decrease in prices received was partially offset by increased crude oil and gas production subject to the Trust’s royalty interests, which increased 10.6% and 49.6%, respectively, in the second quarter ended June 30, 2020 compared to the second quarter ended June 30, 2019.
Easements and other surface-related income was $24.8 million for the second quarter ended June 30, 2020, an increase of 10.8% compared with the second quarter ended June 30, 2019 when easements and other surface-related income was $22.4 million. The increase in easements and other surface-related income was largely driven by an increase of $3.6 million in commercial lease revenue (largely due to an increase in saltwater disposal royalties) partially offset by a decrease of $1.2 million in pipeline easement income for the second quarter ended June 30, 2020 compared to the same period of 2019.
Water sales and royalty revenue was $8.4 million for the second quarter ended June 30, 2020, a decrease of 58.8% compared with the second quarter ended June 30, 2019 when water sales and royalty revenue was $20.4 million. This decrease was principally due to a 48.0% decrease in the number of barrels of sourced and treated water sold and a $2.9 million decrease in water royalties in the second quarter of 2020 compared to the same period in 2019.
Further details for the six months ended June 30, 2020:
The Trust reported net income of $85.0 million for the six months ended June 30, 2020, a decrease of 55.2% compared to net income of $189.6 million for the six months ended June 30, 2019, which included a $100 million land sale. Excluding the impact of the 2019 land sale (net of income tax), net income for the six months ended June 30, 2019 was $110.6 million.
Oil and gas royalty revenue was $62.9 million for the six months ended June 30, 2020, compared with $72.9 million for the six months ended June 30, 2019, a decrease of 13.7%. Prices received for crude oil and gas production decreased 19.9% and 34.2%, respectively, in the six months ended June 30, 2020 compared to the same period of 2019. The decrease in prices received was partially offset by increased crude oil and gas production subject to the Trust’s royalty interests, which increased 10.9% and 30.1%, respectively, in the six months ended June 30, 2020 compared to the same period of 2019.
Easements and other surface-related income was $51.0 million for the six months ended June 30, 2020, a decrease of 5.0% compared with the six months ended June 30, 2019 when easements and other surface-related income was $53.7 million. The decrease in easements and other surface-related income was largely driven by a decrease of $9.6 million in pipeline easement income partially offset by an increase of $6.1 million in commercial lease revenue (largely due to an increase in saltwater disposal royalties) for the six months ended June 30, 2020 compared to the same period of 2019.
Water sales and royalty revenue was $35.4 million for the six months ended June 30, 2020, a decrease of 18.5% compared with the six months ended June 30, 2019 when water sales and royalty revenue was $43.4 million. This decrease was principally due to a $5.1 million decrease in water royalties for the six months ended June 30, 2020 compared to the same period in 2019.
The Trust recognized land sales revenue of $1.7 million for the six months ended June 30, 2020 and $108.4 million for the comparable period of 2019. Land sales revenue for the six months ended June 30, 2019, included a $100 million land sale consummated in January 2019.
COVID-19 Pandemic and Market Conditions Update
The uncertainty surrounding the severity and duration of the COVID-19 pandemic, as well as dramatic declines in crude oil prices due in part to the global spread of COVID-19, continued to cause volatility in the global financial markets during the second quarter of 2020. Significant mitigation measures, such as shelter-in place orders, travel bans and restrictions, among other things, established to reduce the global, state and local spread of COVID-19, have further affected the supply and demand for crude oil.
These events have negatively affected, and are expected to continue to negatively affect, the Trust’s business and results of operations. Should oil and gas wells be shut in, production be curtailed or the owners and operators of the oil and gas wells to which the Trust’s royalty interests relate decrease investment in response to lower commodity prices and conservation of capital, we would expect the Trust’s royalty income and demand for our water services to decline.
Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist, or the extent of the impact they will have on the Trust’s business or results of operations and financial condition.
Conversion of the Trust
As previously announced on March 23, 2020, our Trustees approved a plan to reorganize the Trust from its current structure to a corporation formed under the laws of the State of Delaware. We continue to progress towards the conversion. On June 15, 2020, the Trust announced the new corporation will be named Texas Pacific Land Corporation (“TPL Corp”) and the persons selected to serve as directors on the Board of Directors of TPL Corp. Additionally, a draft registration statement on Form 10 has been submitted to the Securities and Exchange Commission for review, on a non-public basis. It is currently anticipated that the corporate reorganization will be effective by the end of the third quarter of 2020, barring any unforeseen impacts of the COVID-19 pandemic or other developments, which could potentially extend this timeframe.
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 severity and duration of the COVID-19 pandemic and related economic repercussions, the markets for real estate in the areas in which the Trust owns real estate, applicable zoning regulations, the markets for oil and gas, the proposed reorganization of the Trust into a corporation, production limits on prorated oil and gas wells authorized by the Railroad Commission of Texas, expected competition, 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 June 30,
Six Months Ended June 30,
2020
2019
2020
2019
Revenues:
Oil and gas royalties
$
20,513
$
39,641
$
62,873
$
72,854
Easements and other surface-related income
24,767
22,357
51,034
53,724
Water sales and royalties
8,419
20,430
35,386
43,413
Land sales
787
4,774
1,687
108,399
Other operating revenue
82
108
182
244
Total revenues
54,568
87,310
151,162
278,634
Expenses:
Salaries and related employee expenses
8,937
7,741
19,557
14,205
Water service-related expenses
2,165
5,723
8,945
10,301
General and administrative expenses
2,448
2,095
5,407
4,237
Legal and professional fees
2,610
7,858
4,968
9,641
Depreciation, depletion and amortization
3,678
1,451
7,013
2,655
Total operating expenses
19,838
24,868
45,890
41,039
Operating income
34,730
62,442
105,272
237,595
Other income
193
437
1,019
830
Income before income taxes
34,923
62,879
106,291
238,425
Income tax expense (benefit):
Current
7,985
19,018
22,007
33,566
Deferred
(645
)
(5,725
)
(700
)
15,275
Total income tax expense
7,340
13,293
21,307
48,841
Net income
$
27,583
$
49,586
$
84,984
$
189,584
Net income per Sub-share Certificate - basic and diluted
$
3.56
$
6.39
$
10.96
$
24.44
Weighted average number of Sub-share Certificates outstanding
7,756,156
7,756,156
7,756,156
7,757,199
SEGMENT OPERATING RESULTS (in thousands) (unaudited)
Three Months Ended June 30,
2020
2019
Revenues:
Land and resource management:
Oil and gas royalties
$
20,513
37
%
$
39,641
46
%
Easements and other surface-related income
11,499
21
%
14,165
16
%
Land sales and other operating revenue
869
2
%
4,882
6
%
32,881
60
%
58,688
68
%
Water services and operations:
Water sales and royalties
8,419
16
%
20,430
23
%
Easements and other surface-related income
13,268
24
%
8,192
9
%
21,687
40
%
28,622
32
%
Total consolidated revenues
$
54,568
100
%
$
87,310
100
%
Net income:
Land and resource management
$
18,721
68
%
$
37,194
75
%
Water services and operations
8,862
32
%
12,392
25
%
Total consolidated net income
$
27,583
100
%
$
49,586
100
%
Six Months Ended June 30,
2020
2019
Revenues:
Land and resource management:
Oil and gas royalties
$
62,873
42
%
$
72,854
25
%
Easements and other surface-related income
24,797
16
%
37,650
14
%
Land sales and other operating revenue
1,869
1
%
108,643
39
%
89,539
59
%
219,147
78
%
Water services and operations:
Water sales and royalties
35,386
24
%
43,413
16
%
Easements and other surface-related income
26,237
17
%
16,074
6
%
61,623
41
%
59,487
22
%
Total consolidated revenues
$
151,162
100
%
$
278,634
100
%
Net income:
Land and resource management
$
57,839
68
%
$
160,311
85
%
Water services and operations
27,145
32
%
29,273
15
%
Total consolidated net income
$
84,984
100
%
$
189,584
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 and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2020
2019
2020
2019
Net income
$
27,583
$
49,586
$
84,984
$
189,584
Add:
Income tax expense
7,340
13,293
21,307
48,841
Depreciation, depletion and amortization
3,678
1,451
7,013
2,655
EBITDA
$
38,601
$
64,330
$
113,304
$
241,080
View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005135/en/
Chris Steddum Vice President, Finance and Investor Relations (214) 969-5530
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