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    Texas Pacific Land (TPL)

    Q2 2024 Earnings Summary

    Reported on Apr 24, 2025 (After Market Close)
    Pre-Earnings Price$827.78Last close (Aug 8, 2024)
    Post-Earnings Price$826.16Open (Aug 9, 2024)
    Price Change
    $-1.62(-0.20%)
    • Expanding water sales and infrastructure network: The company is successfully increasing water sales volumes off its own footprint (growing from 50% to 73% off-footprint sales), supported by additional storage and infrastructure investments, which could drive revenue growth.
    • Robust royalty production pipeline: With a strong net well inventory, high permit activity, and a stable mid‐40% oil cut, TPL is set to benefit from future well completions and associated royalty revenue, suggesting near-term growth potential.
    • Attractive opportunistic asset acquisition strategy: TPL’s access to off-market deals in the premier Permian Basin, combined with its disciplined focus on quality acquisitions, positions it to further enhance its asset portfolio and long-term cash flow generation.
    • Risk of lower-than-expected conversion of near-term inventory: While active permits and DUCs appear encouraging, delays in converting these into production could lead to lower-than-expected revenue growth in the near term.
    • Potential slowdown in water sales volumes: Although current water sales have been robust, management cautioned that the back half of the year might be softer, which could pressure overall revenue performance.
    • Seismic activity concerns: Recent earthquakes, even if not currently affecting operations, introduce uncertainty regarding potential future disruptions or increased regulatory scrutiny.
    1. Capital Allocation
      Q: How deploy $700M cash balance?
      A: Management detailed targeting a $700 million cash reserve for opportunistic use in share repurchases, dividends, or strategic M&A—deploying cash where the best risk-adjusted returns exist, ensuring robust shareholder value ( ).

    2. Production Outlook
      Q: How will net inventory and oil cuts trend?
      A: The team expects strong conversion of near-term inventory with oil cuts stabilizing around the mid-40% range, where new wells start higher before settling over time ( ).

    3. Operational Sustainability
      Q: Are water and produced water volumes sustainable?
      A: Management emphasized that robust water sales—73% now coming from off-footprint transactions—and consistent produced water volumes through new tie-ins and existing contracts support sustainable performance ( ).

    4. Minerals & M&A
      Q: What is the ideal deal size?
      A: They focus on deal quality rather than size, targeting acquisitions that enhance intrinsic value and complement their asset portfolio without diluting margins ( ).

    5. Asset Consolidation
      Q: Can TPL acquire more loyalty interest?
      A: TPL sees fragmented opportunities within its core footprint to purchase additional high-quality assets, leveraging off-market deals and its strategic insights for consolidation ( ).

    6. Geological Risks
      Q: Do recent earthquakes affect operations?
      A: A recent 5.0 event occurred far from core operations, with any potential impacts being minor and under review by regulators, posing no significant threat ( ).

    7. Water Competition
      Q: Is competition affecting water sales?
      A: The company is broadening its market by expanding infrastructure and reaching new off-footprint customers, thereby effectively countering competitive pressures ( ).

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