Texas Pacific Land Corporation

Greetings and welcome to the Texas Pacific Land Corporation first quarter 2023 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Amini of Investor Relations. Thank you, and you may proceed, sir.

Thank you for joining us today for Texas Pacific Land Corporation's first quarter 2023 earnings conference call. Yesterday afternoon, the company released its financial results and filed this form 10-Q with the Securities and Exchange Commission, which is available on the investor section of the company's website at www.texaspacific.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risk 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 a 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 filings. Please also note, we may at times refer to our company by its top ticker, TPL. This morning's conference call is hosted by TPL's Chief Executive Officer, Ty Glover, and Chief Financial Officer, Chris Dettel. Management will make some prepared comments, after which we will open the call for questions. Now, I will turn the call over to Ty.

Good morning, everyone, and thank you for joining us today. TPL delivered another strong quarter as our non-oil and gas royalty businesses helped to mitigate the impact of lower oil and gas prices. During first quarter 2023, WTI Cushing Oil and Henry Hub Natural Gas prices were down 19% and 43%, respectively. Compared to the same time period last year, and as a result of that direct exposure to prices, our oil and gas royalty revenues were down 14%. However, on a year-over-year basis, for first quarter 2023, our source water sales were up 15%, produce water royalties were up 35%, and our easement and other surface-related income was up 63%. When commodity prices come under pressure, these non-oil and gas royalty revenue streams are especially valuable as they provide the company built-in hedges and counter-cyclical revenues. This quarter, nearly 40% of our revenues were outside of oil and gas royalties. As many of you know, TPL has not historically hedged our commodity price exposure related to royalties. For us, the non-oil and gas royalty cash flow streams in our debt-free balance sheet are the hedge. Even during a long period of severely depressed prices, TPL has shown it can generate substantial positive free cash flow. 2020 was a great example of that. And when the cycle inevitably turns, as it did last year, our hedge-free position ensures that we capture maximum upside. Despite some recent turbulence with oil and gas prices, the long-term outlook for TPL remains strong. Underpinned by the Permian is arguably the best resource play in North America. We remain optimistic based on our conversations with our customers across surface and water. From our internal data, leading indicators such as new permitting and drilling activity remain at historically strong levels. As we've said in the past, quarter-to-quarter performance may fluctuate, but we continue to expect royalty production and overall activity to trend upwards over the long term. As previously disclosed, on November 22, 2022, the company filed a complaint in Delaware Chancery Court to resolve a disagreement with Horizon Kinetics LLC, Horizon Kinetics Asset Management LLC, SoftFest Advisors LLC, and SoftFest LP, over their voting commitments pursuant to a stockholder's agreement with the company. The Delaware Court of Chancery held a one-day trial on April 17, 2023. Following post-trial briefing, the company anticipates the court to issue a decision. With that, I'll turn the call over to Chris.