Texas Pacific Land Corp (TPL) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered consolidated revenue of $185.8M (+7% q/q) and diluted EPS of $5.14, with Adjusted EBITDA of $161.3M and an 87% Adjusted EBITDA margin; royalty production reached a company-record 29.1k Boe/d .
• Surface and water businesses remained strong: easements and other surface-related income rose by $7.5M sequentially, while produced water royalties increased to $28.1M; water sales were $36.7M .
• Regular dividend increased to $1.60 per share (37% YoY), and management guided FY 2025 capex of $65–$75M, including approximately $28M for produced water desalination and co-located gas generation; cash remains robust with zero debt .
• Management emphasized next‑gen opportunities (data centers, behind‑the‑grid power, grid infrastructure) and progress toward a mid‑2025 completion of the Phase 2b desalination test facility (10,000 bpd) with optional $10M gas-to-electric generation investment .
• Wall Street consensus (S&P Global) for Q4 2024 EPS/Revenue was unavailable at time of this analysis due to a data limit; estimate comparisons are not included [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

• Record royalty production of 29.1k Boe/d coupled with strong water and surface revenues; management: “2024 set records across nearly every major performance metric… including oil and gas royalty production, water sales volumes and revenues, produced water royalty volumes and revenues, net income and free cash flow per share” .
• Sequential strength in surface: easements and other surface-related income rose by $7.5M q/q, supporting total revenue growth to $185.8M .
• Strategic momentum in next‑gen initiatives: construction underway for Phase 2b desalination (mid‑2025 completion target), with optional behind‑the‑grid generation to reduce energy cost and improve desal economics .

What Went Wrong

• Commodity price headwinds: realized price per Boe fell to $37.93 in Q4 (vs $38.04 in Q3 and $42.81 in Q4 2023), pressuring royalty monetization despite volume records .
• Natural gas royalties remained subdued at $4.88M in Q4 (vs $4.20M in Q3 and $6.71M in Q4 2023), reflecting weak gas pricing and basin differentials prior to recent takeaway improvements .
• Operating expenses increased year-over-year: $43.2M in Q4 2024 versus $32.8M in Q4 2023, driven in part by higher depreciation and salaries as the company scaled operations and investments .

Financial Results

Core P&L and Cash Metrics

Year-over-Year Comparison

Segment Breakdown (Sequential Q3 → Q4)

KPIs and Operating Drivers

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Fourth quarter closed a remarkable year as TPL set records across nearly every key operating driver despite sideways crude oil and natural gas prices… surface and water revenues were collectively up 23% year-over-year” .
• “We acquired over $400 million of high-quality Permian mineral, royalty, water and surface assets, providing TPL with additional growth levers… returned $376 million via dividends and buybacks” .
• “We have begun construction of our 10,000 barrel per day test facility… expect completion… in the middle of this year… total cost… approximately $25 million… optional behind‑the‑grid gas‑to‑electric generation… ~ $10 million” .
• “We see a constructive outlook for the Permian… permits up ~20% YoY… Matterhorn pipeline… should help reduce basin differentials and improve price realizations” .

Q&A Highlights

• Data center and desal synergies: “Behind‑the‑grid generation… waste heat capture for use in desal… tying… produced water… and data center demand… is truly a tremendous opportunity” (Robert Crain) .
• Desal cost targets: “Trending toward 75% volume reduction and analyte removal… $0.75 per barrel treatment cost is 100% achievable… energy consumption is the bulk of that cost; behind‑the‑grid gas can reduce kWh costs” .
• M&A pipeline: “Landscape for ‘25 looks very good… opportunities both on the surface and mineral side… larger, higher‑quality packages starting to come available” .
• Regulatory constraints: “Deeper disposals are significantly more expensive… overall disposal capacity in New Mexico [has] declined… need for alternatives outside of disposal” .
• 2025 well turn‑in‑line cadence: “Somewhere in the 14–15 net wells would get turned in line during 2025… inventory available very strong” (CFO) .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 2024 (EPS, Revenue, EBITDA) was unavailable due to a data limit at the time of retrieval. As a result, we cannot present vs‑estimate beats/misses in this recap and will update once consensus data is accessible [GetEstimates error].

Key Takeaways for Investors

• Volume strength offsets price headwinds: Record 29.1k Boe/d royalty production drove Q4 revenue/EPS growth despite lower realized $/Boe; sustained production trajectory is supported by strong line‑of‑sight well inventory .
• Surface/water momentum: Sequential increases in surface income and produced water royalties underpin diversified cash generation; water sales remained elevated at $36.7M .
• Capital return visibility: Regular dividend at $1.60 (+37% YoY) and flexible allocation policy (target ~$700M cash) signal continued shareholder distributions with 0 debt .
• Capex ramp and strategic optionality: FY 2025 capex of $65–$75M, including ~$28M for desal/generation, positions TPL to monetize next‑gen opportunities (data centers, grid infra) and reduce desal energy costs .
• M&A as a growth lever: October minerals acquisition ($275.2M) plus an active pipeline across minerals, surface, and water assets could further lift volumes and near‑term well inventory .
• Macro tailwinds: Permian permits up ~20% YoY; Matterhorn pipeline easing gas takeaway should support improved gas/NGL realizations through 2025 .
• Watch regulatory dynamics: Disposal constraints (especially deep disposal costs in New Mexico) reinforce TPL’s desal strategy; successful Phase 2b execution is a catalyst for broader water commercialization .