Texas Pacific Land Trust (NYSE:TPL)’s second quarter is finished now, and good riddance.
This article will not recap the proxy battle or the legal fights in any detail. Those battles are apparently over and both sides are now in negotiations to convert the Trust into a C corporation. At least one C Corporation will likely develop out of those talks, and perhaps a second one will come too, if the Trust’s water business is spun off into a separate corporation.
In the meantime, the second quarter results are out. At first glance, they are as nasty as the fights were. Total Consolidated Revenues for the second quarter were $87 million, down from $191 million in the first quarter. However, the numbers need more than a passing glance. The first quarter revenues included $103.6 million from the sale of 21,251 acres of land. As previously announced, those funds were marked to “acquire like kind properties,” and that is exactly how those funds were used. If the revenues from the land sale are backed out, Total Consolidated Revenues for the second quarter are almost the same as the first quarter.
So the question is, how well is the Trust doing, really? Putting governance issues aside for the moment, what does the future hold?
A Different Look at Financial Results
The Trust reports results in two segments. The first is Land and Resource Management. This is the portion of the Trust that has been in existence for more than a century. Revenues are derived from oil and gas royalties, not by drilling. A small amount of revenue for the segment is typically derived from land sales as well. The Trust’s second segment is Water Services and Operations. This is the new “water business” that has been developed for “drilling and completion activity”. In other words, the water business is directly linked to drilling. Each of the
