Texas Pacific Land's Q4 2024: Unpacking Contradictions in Desalination Synergies, Cost Efficiencies, and Activity Levels

These are the key contradictions discussed in Texas Pacific Land's latest 2024Q4 earnings call, specifically including: Water Desalination Synergies, Water Treatment and Cost Efficiency, and Activity Levels and Well Inventory:



Record Financial Performance and Production Growth:
- Texas Pacific Land Corporation (TPL) reported record free cash flow of approximately $461 million for full year 2024, representing an 11% year-over-year increase.
- The growth was driven by a 14% year-over-year increase in oil and gas royalty production volumes, a 31% increase in water sales volumes, and a 37% increase in produced water royalty volumes.

Permian Basin Outlook and Development:
- Despite a decline in rigs throughout 2024, Permian oil and gas production exited the year at record highs, growing approximately mid-single-digit percentage exit to exit from Q4 2023 to Q4 2024.
- This growth was supported by efficiencies gained through innovations like longer laterals and multi-formation development, and an estimated healthy inventory of basin-wide drilled but uncompleted wells (DUCs).

Capital Allocation and Shareholder Returns:
- TPL returned approximately $376 million via dividends and buybacks in 2024, a record shareholder return of capital.
- This was facilitated by the company's strategic investments in people, technology, and infrastructure, and consolidation of high-quality Permian mineral, royalty, water, and surface assets.

Produced Water Desalination and Reuse Initiatives:
- TPL is advancing multiple beneficial reuse initiatives, including a land application project and a permit application for treated desalinated produced water discharge into the Pecos River.
- These initiatives aim to address water scarcity and environmental concerns, while also positioning TPL to participate in emerging next-gen industries and value chains.

Next-Generation Opportunities and Infrastructure Development:
- TPL is exploring opportunities in data centers, power generation, and grid infrastructure, leveraging its leading source water network, produced water desalination technology, and sizable oil and gas royalty position.
- These efforts are part of TPL's strategy to participate in the value chain as these industries emerge, creating durable incremental value and capturing commensurate returns.