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    Texas Pacific Land (TPL)

    Q4 2024 Earnings Summary

    Reported on Apr 24, 2025 (After Market Close)
    Pre-Earnings Price$1431.01Last close (Feb 20, 2025)
    Post-Earnings Price$1411.08Open (Feb 21, 2025)
    Price Change
    $-19.93(-1.39%)
    • Robust Production Pipeline: The Q&A highlighted a strong turn-in-line inventory with an estimated 14 to 15 net wells coming online in 2025, supported by a high conversion rate from DUCs and completed wells, indicating healthy near-term production growth.
    • Compelling Asset Consolidation Opportunities: Executives discussed attractive prospects in acquiring high-quality, fragmented assets across royalties, surface, and mineral spaces—suggesting enhanced intrinsic value and growth potential as opportunities emerge in the market.
    • Innovative Next-Generation Diversification: There is significant emphasis on leveraging synergies between produced water desalination, behind-the-grid power generation, and data centers, indicating potential for transformational growth in non-traditional energy segments.
    • Reliance on oil prices and activity levels: The Q&A highlighted that the robust well activation (“14 to 15 net wells turned in-line”) is highly dependent on oil prices and activity levels, meaning a decline could materially reduce production and royalty revenues.
    • High disposal costs and regulatory uncertainty: Discussion pointed out that deeper disposal costs are over 50% more expensive, and potential regulatory changes—especially in New Mexico—could further complicate water disposal issues, negatively impacting the business.
    • Desalination cost and efficiency challenges: Management's target to achieve a treatment cost of $0.75 per barrel hinges on scaling technology and energy cost reductions, with uncertainties about consistently meeting these technical targets posing a downside risk.
    MetricYoY ChangeReason

    Total Revenue

    +11% YoY

    Total Revenue rose to $185.79M in Q4 2024, up 11% from $166.66M in Q4 2023. This increase was driven by strong performance in water-related revenue streams—particularly the robust growth in water sales and produced water royalties—which built on momentum seen in earlier periods (see Q3 2024 increases in water sales of $9.8M and royalty improvements).

    Water Services and Operations

    +35% YoY

    Water Services and Operations revenue surged to $67.15M in Q4 2024 from $49.84M in Q4 2023 (+35%). This notable jump reflects further gains in water sales and produced water royalties that built on the already improved figures in Q3, indicating that operational scaling and increased customer activity in the Permian Basin were key drivers.

    Water Sales

    +39% YoY

    Water Sales grew from $26.40M in Q4 2023 to $36.74M in Q4 2024 (+39%). The growth was largely due to a 32.1% increase in water sales volumes, supported by substantial investments in water infrastructure and heightened customer demand—continuing the trend observed in Q3 2024.

    Produced Water Royalties

    +25% YoY

    Produced Water Royalties increased from $22.48M in Q4 2023 to $28.09M in Q4 2024 (+25%). This improvement is attributed to higher produced water volumes and expanded commercial arrangements in the Permian Basin, following the momentum from Q3 2024 where increased volumes delivered similar positive outcomes.

    Operating Income

    +6% YoY

    Operating Income in Q4 2024 reached $142.54M, up 6% from $133.86M in Q4 2023. Despite higher operating expenses—including increases in legal, employee, and depreciation costs—the overall revenue mix, with its enhanced water services and royalty streams, helped offset these costs, building on the slight improvements observed in Q3 2024.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Dividend

    FY 2025

    no prior guidance

    $1.60 per share, 37% year-over-year increase

    no prior guidance

    Capital Expenditures (CapEx)

    FY 2025

    no prior guidance

    $65 million to $75 million

    no prior guidance

    Oil and Gas Royalties

    FY 2025

    no prior guidance

    14 to 15 net wells

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Consistent Water Business Growth

    Mentioned consistently across Q1 to Q3 with strong produced water royalties, water sales volume increases, and tailwinds from simul fracs and infrastructure investments (e.g. Q1: strong water sales revenue, ; Q2: robust water and produced water sales, ; Q3: record produced water royalties and water sales, ).

    Q4 emphasized record growth in produced water (44% Y/Y) and water sales volumes with additional capital allocated to the water business, reinforcing the growth story ( ).

    Recurring and increasingly positive – The discussion remains robust with incremental improvements in performance metrics and heightened capital investments.

    Desalination Innovation

    Introduced in Q1 as a promising fractional freezing technology for produced water reuse ( ), further developed in Q2 with progress on the 10,000 barrel per day test facility ( ) and in Q3 with evaluation of gas-to-electric integration ( ).

    Q4 provided enhanced details on the Phase 2b test facility, increased capital commitment, and expanded beneficial reuse initiatives with clear cost and efficiency targets, indicating sharper focus ( ).

    Steady progression with growing commitment – Continued innovation with greater capital investment and additional initiatives, reinforcing its strategic importance.

    Robust Production Pipeline

    Q1 showed a solid inventory of permitted and drilled wells ( ); Q2 noted incremental increases in oil and gas royalty production ( ); Q3 highlighted a record pipeline with strong sequential growth and expanding line‐of-sight inventory ( ).

    Q4 reported even higher production numbers and increased well inventory from strategic acquisitions, demonstrating an 11% increase in production and improved pipeline metrics ( ).

    Consistently strong and expanding – Production metrics continue to grow, buoyed by additional acquisitions and maintained high activity levels.

    Strategic Asset Acquisitions

    Q1 mentioned pore space acquisitions and expanding easements ( ); Q2 outlined an acquisition strategy focused on intrinsic value ( ); Q3 detailed multiple transactions adding significant acreage and production yield ( ).

    Q4 reinforced the impact of acquisitions by detailing record capital deployment, production uplifts from new assets, and increased near-term inventory ( ).

    Continuously prioritized and increasingly impactful – Acquisitions remain central to growth, with recent deals contributing more substantially to production and cash flow.

    Oil and Commodity Price Vulnerability

    Q1 noted weak natural gas prices but strong oil realizations ( ); Q2 discussed negative natural gas prices and the importance of pipeline developments ( ); Q3 described modest price declines with strong balance sheet buffers ( );

    Q4 highlighted modest declines in realized oil and natural gas prices (2% and 48% respectively) while underlying operational strength partially offsets these vulnerabilities ( ).

    Consistent caution with mitigating factors – The vulnerability remains a recurring concern across all periods, though diversified revenue streams and strategic positioning ease the impact.

    Emerging Diversification into Non-Oil Revenue Streams

    Not mentioned in Q1 and Q2; emerging in Q3 where solar projects, battery projects, Bitcoin mining, and data centers were introduced as new revenue initiatives ( ).

    Q4 continues the theme with an emphasis on integrating data centers, renewable projects, and power generation synergies with water resources, reinforcing the diversification narrative ( ).

    New and forward‑looking – Emerging in Q3 and reinforced in Q4, this theme signals a strategic expansion away from traditional oil/gas revenues, with a positive, high‑impact outlook for the future.

    Regulatory and Operational Execution Risks

    Q1 discussed early-stage challenges, including developing a commercial model and managing high energy costs ( ); Q2 addressed permitting progress and seismic-related disposal shifts ( ); Q3 emphasized robust indemnification and negotiation efforts in produced water commercialization ( );

    Q4 revisited evolving regulatory changes, cost challenges with deep disposal, and detailed permitting for beneficial reuse projects, underlining an attentive risk management stance ( ).

    Persistent yet proactively managed – Regulatory and operational risks are an ongoing concern, but proactive measures and evolving strategies demonstrate cautious optimism.

    Capital Expenditure Burdens and Technology Scaling Challenges

    Q1 noted a $20 million investment in desalination with significant energy consumption challenges (75‑80% of OpEx) ( ); Q3 reported detailed cost estimates for the test facility and potential additional investments ( ); Q2 had minimal reference aside from broader capital-light attributes ( ).

    Q4 provided comprehensive 2025 capex guidance ($65‑$75 million, including $28 million for desalination) and reiterated the scaling challenges related to energy consumption and efficiency targets, alongside synergy explorations ( ).

    Evolving concern with clearer roadmap – Capital commitments and scaling challenges persist, with increasing clarity on investment plans and strategies to improve energy efficiency indicating measured optimism.

    Seismic Activity Concerns

    Q1 discussed seismic risks linked to high-volume deep injection and regulatory safeguards ( ); Q2 mentioned a minor local quake and the shift toward shallow disposal, noting a historical decline due to collaborative mitigation ( ).

    Q4 briefly mentioned seismic concerns in the context of the high cost and risk profile of deeper disposal wells ( ).

    Sporadically highlighted – While not a constant headline, seismic issues surface based on recent events and technical challenges, suggesting intermittent focus based on operational context.

    1. Production Pipeline
      Q: What’s the turn-in-line rate for 2025 royalties?
      A: Management expects about 14 to 15 net wells (combining completed wells and most DUCs) to come online during 2025, reflecting a robust production pipeline if current activity levels persist.

    2. Desal Cost
      Q: Is the $0.75 per barrel target achievable?
      A: Management is on track with the first two 75% targets and anticipates scale efficiencies in energy usage will help reach the $0.75 per barrel treatment cost.

    3. Desal Synergies
      Q: How do desal projects synergize with power/data centers?
      A: They see strong transformational benefits by pairing behind-the-meter power generation with desal, leveraging waste heat capture and the abundant produced water for data centers.

    4. Asset Consolidation
      Q: Where are the best opportunities: royalties or surface assets?
      A: The company is targeting high-quality consolidation opportunities across both royalties and surface assets, with larger, attractive packages emerging in the current landscape.

    5. Mexico Well Costs
      Q: Are Mexican disposal wells notably more expensive?
      A: Management acknowledged that deeper disposal wells in Mexico can be over 50% more expensive, although recent market pullbacks have been observed.

    6. New Mexico Policy
      Q: Could federal policy changes boost New Mexico pore space?
      A: They do not foresee any imminent federal changes to expand pore space in New Mexico, keeping the current outlook steady.

    7. Mexico Regulation
      Q: Might federal policy alter access to Mexican federal lands?
      A: Management reiterated that no new federal policy changes are expected for Mexican federal lands, noting any changes would more likely be driven at the state level.

    Research analysts covering Texas Pacific Land.