Texas Pacific Land Corporation

at www.techspecific.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will also be discussing certain non-GAAP financial measures. More information and reconciliations about these non-GAAP financial measures are contained in our earnings release and SEC filing. Please also note, we may at times refer to our company by its stock ticker, TPL. This morning's conference call is hosted by TPL Chief Executive Officer, Ty Glover, and Chief Financial Officer, Chris Bedham. Management will make some prepared comments, after which we will open the call for questions. Now, I will turn the call over to Ty.

Thank you, Sean. Good morning, everyone, and thank you for joining us today. Second quarter 2022 results demonstrate a business operating at a high level. All of TPL's major revenue streams reported double-digit percentage growth on a sequential quarter-over-quarter basis, the total consolidated revenue growing 20%. Adjusted EBITDA of $158 million represents a new corporate record, and our adjusted EBITDA margin of 90% demonstrates our continued focus on maintaining a lean cost structure and generating high margins. During this most recent quarter alone, we returned over $200 million back to our shareholders in the form of dividends and share buybacks, while still maintaining a balance sheet with zero debt and retaining nearly $400 million of cash. Although our royalty production came in slightly lower sequentially, this quarter is a great example of the resiliency and the numerous high-quality revenue streams the company benefits from beyond just oil and gas royalties. Source water revenues were up 18%, produced water royalty revenues were up 26%, and revenues for surface leases, easements, and materials, which we refer to as SLIM, were up 52%. SLIM and source water sales in particular are generally good leading indicators for royalty production with the increased business activity this quarter providing confidence that we'll continue to see strong development on our royalty acreage. On the source water side, sales volumes increased 40% sequentially, with increases across all the major channels, brackish, brokered, and treatment. Due to high water demand, we have increased our capex budget to accommodate new frac ponds, tanks, pipes, and pumps. We now expect full-year capex of approximately $18 to $20 million. In particular, demand from the Midland Basin and Reeves County is very strong. We're still observing some operator supply chain issues in the field, though they do seem to be easing slightly. However, excess duct balances appear close to depleting, and we're now seeing some friction and delays related to scheduling as operators try to manage quick turnaround timing and finishing new spuds in advance of plan completion. On the produce water side, increased revenues were largely driven by higher volumes from new tie-ins and overall increased injection demand. Now turning to SLIM, the large percentage increase in revenues this quarter was particularly encouraging. Over the last couple years, performance in that business has been flat as operators generally concentrated development around existing infrastructure. However, in second quarter, we saw broad strength in SLIM with meaningful higher demand for new surface, subsurface, wellbore easements, pipeline easements, and caliche. Swim activity is strong across both our Delaware and Midland surface positions, with demand from both upstream and midstream operators. All of this activity is broadly suggestive of continued strong development pacing on and around our royalty acreage. The outlook for the oil and gas industry remains promising, and our shareholders should continue to benefit from the free cash flow afforded by ongoing development in the Permian and high commodity prices. That said, at TPL, we're also excited about the future beyond just oil and gas. We continue to dedicate meaningful time and resources towards finding and executing on next-generation opportunities that can leverage our unique and expansive surface position in West Texas. During the quarter, we revealed a couple of projects that we've been working on for quite some time. We announced a Bitcoin mining venture with Mawson Infrastructure Group and J Energy to develop a 60-megawatt facility on TPL's surface. Once complete, the facility will generate a unique high-margin royalty stream for TPL. We also announced an agreement with Milestone Carbon to evaluate the potential to sequester captured CO2 on TPL acreage. The Milestone team is amongst the best in the industry, and we look forward to working with them and potentially bringing more carbon capture opportunities to the Permian. TPL continues to have numerous constructive conversations on a wide array of next-gen opportunities, and we look forward to advancing these projects as we strive to maximize the value of TPL's expansive surface footprint. On the ESG front, we have posted updated 2021 data on our website. We've reduced Scope 1 and Scope 2 emissions by 6% year-over-year, and we hope through our continued electrification and efficiency efforts we can improve that further. We continue to make progress across multiple ESG initiatives, and we encourage everyone to visit the ESG portion of our website for more disclosures. An update on the governance side. The board has approved a proposal to amend the company's charter to declassify the board, which will be included in the proxy materials for the company's 2022 annual meeting. We're pleased to see our board make progress on this item, and we look forward to hosting our annual meeting this upcoming November. Finally, I want to thank all the employees here at TPL. Without their dedication, hard work, and talent, this outstanding performance we've had across the entire business would not be possible. They ask a lot from our field and corporate employees and they consistently rise to the challenge. With that, I'll turn the call over to Chris to discuss our quarterly results.

Thanks, Ty. Total revenue for the second quarter of 2022 was $176 million, which was driven by double-digit percentage increases across all of our major revenue streams on a sequential quarter-over-quarter basis. Oil and gas royalty revenue was up 16% quarter-over-quarter primarily due to higher commodity prices, though partially offset by lower royalty production. Second quarter royalty production of 19.8 thousand barrels of oil equivalent per day did come in slightly lower compared to last quarter, though oil production was slightly higher at approximately 8,900 barrels of oil per day. Commodity price realizations continue to be excellent as each oil, natural gas, and NGL price realizations increased by double-digit percentages sequential quarter over quarter, which we fully benefited from as we were still completely unhedged. As Ty alluded, the strong performance in water and SLIM are encouraging data points as we look ahead to the second half of the year. To elaborate a bit more on the outlook, our well inventory data is also aligned in what we consider to be a positive trajectory for the overall business. We've seen a meaningful uptick in new permits during the first half of the year, with over 500 gross well permits through June, compared to approximately 750 gross well permits for all of 2021. We averaged approximately 70 gross spuds per month year-to-date through June, which represents an approximate 37% increase compared to the 2021 average of approximately 55 gross spuds per month. Our data suggests a bit of a slowdown during the first quarter of 2022 for new completions compared to the pacing during the second half of 2021. However, we do maintain a higher than normal inventory of completed but unproductive wells, and we expect these to turn to sales once those wells are tied in. Our 100 million buyback authorization was active during the quarter, and we repurchased approximately 17,000 shares for approximately $26 million. We intend for the buyback program to remain active through the end of the year. We continue to evaluate our capital allocation priorities And with a large cash balance and a business that continues to generate robust free cash flow, we retain a tremendous amount of flexibility as we look to maximize shareholder value.