Land Corporation's second quarter 2022 earnings conference call. This conference call is being recorded. I would now like to introduce your host for today's call, Shawn Amini, Vice President, Finance and Investor Relations. Please go ahead. Good morning. Thank you for joining us today for Texas Pacific Land Corporation's second quarter 2022 earnings conference call. Yesterday afternoon, the company released its financial results and filed its Form 10-Q with the Securities and Exchange Commission, which is available on the investors 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 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 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 stock ticker, TPL. This morning's conference call is hosted by TPL Chief Executive Officer, Tyler Glover, and Chief Financial Officer, Chris Steddum. Management will make some prepared comments, after which we'll open the call for questions. Now I will turn the call over to Ty. Thank you, Shawn. 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% growth on a sequential quarter-over-quarter basis, with 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 margin. 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 SWIM, were up 52%. SWIM 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, frac, 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 million-$20 million. In particular, demand from the Midland Basin in 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 DUC 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 planned completion. On the produced water side, increased revenues were largely driven by higher volumes from new tie-ins and overall increased injection demand. Now turning to SWIM, the large percentage increase in revenues this quarter was particularly encouraging. Over the last couple years, performance in that business had been flat as operators generally concentrated development around existing infrastructure. However, in second quarter, we saw broad strength in SWIM 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, and 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 JAI Energy to develop a 60 MW 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 among 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. 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 one and scope two emissions by 6% year-over-year. 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. We 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 19,800 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 quarter-over-quarter, which we fully benefited from as we are still completely unhedged. As Ty alluded, the strong performance in water and SWIM 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. With that, operator, we will now take questions. Thank you. We do welcome all questions or comments. To register, please press one four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered or you would like to withdraw a registration, please press one three. Again, we do welcome all questions or comments. To register, please press one four on your telephone. One moment, please, for the first question. Our first question comes from the line of Derrick Whitfield of Stifel. Please proceed with your question. Hey, good morning, guys, and congrats on a strong update. Morning. Can you- Morning. Morning. Can you provide some additional detail on SWIM strength this quarter? As you mentioned in your prepared remarks, that business has been flat for a while. Is there anything you can share on the outlook? Yeah. Look, I would just say that's very promising. Usually, when we see, you know, a ramp in SWIM, that's operators getting prepared for additional development in those areas. I would also say that, you know, the additional revenue we saw this quarter in that business line was spread out kind of over, you know, surface, subsurface, well bore easements, pipeline easements, electric easements, material sales. It kinda hits across the entire business segment. I think that's, you know, that's good news. That kinda signals to us that maybe it's, you know, more of a durable trend than just spotty activity. The land team's been really busy lately, working on a lot of projects. I think we're gonna continue to see some strength in that area of the business. Got it. Under the next-gen opportunities, can you share how those came about and any initial thoughts on revenue potential and timing for those things? Yeah. Look, we've got a team, part of our BD team internally is dedicated to just seeking out next-gen opportunities. Those opportunities came through, you know, the team just reaching out within the different industries and kinda trying to track down different opportunities for us to expand the use of our surface. You know, with the Bitcoin mining deal with Mawson and JAI Energy, I think Mawson recently put out a press release back in May that facility would be operational by Q4 of 2022. That's very promising. On the carbon capture side, we're having some really good conversations there. We announced the deal, the letter of intent we signed with Milestone Carbon. They're gonna do some studies on some of our property to see if it's viable for carbon sequestration. I think, you know, we'll continue to see some promising conversations regarding that area of the business. Got it. Thanks for taking my questions. Thank you. Thank you. Our next question comes from the line of Hamed Khorsand of BWS Financial. Please proceed with your question. Hey, good morning. First off, I just wanna ask about the easement revenue bumping up. Were there any one-time revenue in that number, or was this purely because of increased activity? Yeah. What we saw was it was really just increased activity. I mean, obviously like a material sale is a one-time event, but we continue to see strong material sales. As far as the pipeline easements and stuff, most of those, you know, were term easements, a lot of well connects, you know, gathering lines being put in place. Rather than like a big one-time long-haul perpetual easement like we've seen in the past, most of this has been recurring revenue. The commentary around the increase in CapEx to support the water business, is that because you have, you know, clarity as far as how much demand you're expecting over the next year? Yeah. If you look at, like, our original budget, it was kind of in that $12-$14 million range. We continue to see a lot of demand in the water business. You know, the water team has done a fantastic job of signing additional contracts this year. We're gonna have to spend some additional capital on infrastructure to kinda support those new contracts as well as you know, additional demand from existing customers. That additional capital is gonna go towards things like pumps, frac ponds, some treatment tanks, some additional pipe, you know, to accommodate that demand. Not just 2022 demand, but also, you know, just kind of in preparation for 2023 demand. You know, we're also seeing some supply chain issues like pumps that, you know, used to take 6-8 weeks are now taking 10-12 months to procure. You know, we're trying to stay ahead of those bottlenecks and just make sure that we're ready to support the ramp development from our operators. My last question was on that topic, the supply chain. Is there any kind of timeline or estimates when these bottlenecks could smooth out for you and the operators on your land? No, I mean, I don't know exactly what that timeline looks like. It seems like things are starting to ease a little bit, but as far as what that timeline looks like, I don't have a good answer for you there. Okay. All right. Appreciate it. Thank you. You're welcome. Thank you. Again, as a final reminder, to register questions or comments, please press the one followed by the four on your telephone. Our next question comes from the line of Baker of Credit Suisse. Please proceed with your question. Hey, good morning, guys. Morning. Congrats on the strong water services results. Great to see those investments in electrification start to pay off in the margin profile. My question was just around whether or not you still see the company as a natural consolidator of minerals longer term. You know, just given the recent Reuters report around Brigham Minerals potentially, you know, pursuing a sale of the company. Look, I would say, you know, we continue to look at ways to add value for our shareholders. Part of that, you know, part of that strategy is evaluating potential acquisitions, not only on the minerals side. We continue to look at potential surface and water acquisitions as well. Great. It makes sense. You know, just could you remind us, you know, obviously there's no debt today, but any guidelines in terms of doing a larger scale deal, you know, just around sort of net debt leverage you would be comfortable with for the company? Yeah, Chris, I mean, a lot of that depends on the nature of the assets that you're buying. I think, you know, we've been pretty clear in the past that, you know, very low to zero leverage is what we think is appropriate for this type of business. That's likely what you should expect, you know, were we to do something like that. Okay. Below, sorry, just to clarify, sort of like sub 1x or 1.5x? Is there like a ballpark number that you've talked about in the past perhaps? Yeah, I don't think we've specifically talked about a number, but I'm not sure I'd be comfortable giving exact guidance on that 'cause when you're talking about theoretical things, it's always difficult. I think we would be on the lowest end of what you would see out there, which is kind of where we sit today anyway, so. Sure. Just if I could squeeze in one more. You know, obviously some great announcements in terms of CCS study and Bitcoin mining, et cetera. As you think about these, alternative surface uses, any guideposts or goalposts, I guess, you could share in terms of what the aggregate cash flows could be from those efforts over the next few years? Thanks. I mean, Chris, that's a difficult thing to say. I mean, as we've said, like even just on the carbon capture, they're evaluating the viability right now. Until some of those studies are completed, I think that's a pretty difficult thing to project. You know, look, I would say stay tuned. We'll deliver more information as it becomes available. You know, the team is working very hard to procure new revenue streams on the surface, and we think they're gonna bear fruit. Great. Thanks, Chris. Thank you. There are no further questions in the queue. That does conclude today's question and answer session as well as today's presentation. We do thank you for your participation. That does conclude today's call. Have a great rest of the day, everyone.