Speaker 1:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House, our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business.
For over 230 years, the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ICE exchanges around the world. Now let's go inside the ICE House. Here's your host, Lance Glinn.
Lance Glinn:
The Permian Basin located in West Texas and southeastern New Mexico is one of the most prolific oil and natural gas-producing regions in the United States. Named after the Permian geologic period, the basin was formed millions of years ago and has since become a crucial part of the global energy landscape.
The discovery of oil in the Permian dates back to the 1920s, but it wasn't until after World War II that the area began to experience significant boom in production. Texas Pacific Land Corporation, that's NYSE ticker symbol, TPL, has played a significant role in the development and management of the Permian Basin's vast resources. Established in 1888 as a land trust, TPL originally received land from the Texas and Pacific Railway as part of a reorganization plan. This land, much of it located in the Permian Basin, became an asset as oil and gas exploration intensified in the region.
Over the years, TPL's Land Holdings have positioned it as a key player in the basin, earning revenue from oil and gas royalties, easements, and surface land management among other avenues. TPL's impact in the Permian Basin has been multifaceted. The company has not only benefited from the region's rich resources, but has also contributed to its economic development. By leasing land to oil and gas companies, Texas Pacific Land has facilitated the extraction of millions of barrels of oil helping to fuel the US energy industry.
Additionally, Texas Pacific has invested in water resource management and environmental initiatives recognizing the importance of sustainable practices. Leading Texas Pacific Land, one of the longest-listed companies on the New York Stock Exchange, is our guest today, president and CEO Tyler Glover. In his role since 2016, Tyler has modernized the company, increasing value for all stakeholders involved.
On today's episode, we are going to discuss his tenure at TPL, the launch of Texas Pacific Water Resources, the company's recent 2024 Q2 earnings, and so much more. Our conversation with Tyler Glover, president and CEO of Texas Pacific Land Corporation is coming up right after this.
Speaker 3:
To prove that there is such a thing as free money, we gave people a little sample of Ibotta.
Speaker 4:
Hi, could I interest you in a sample from Ibotta?
Speaker 3:
What's going on?
Speaker 5:
It's just money?
Speaker 4:
Ibotta is an app that gives you cash back every time you shop.
Speaker 6:
What is it?
Speaker 4:
It's money.
Speaker 7:
I can just take this?
Speaker 8:
This is real?
Speaker 9:
This is insane.
Speaker 5:
What's the catch?
Speaker 4:
There's no catch. It's just cash.
Speaker 3:
Get cash back every time you shop with Ibotta.
Lance Glinn:
Welcome back. Remember to subscribe wherever you listen, and rate and review us on Apple Podcasts so that others know where to find us. Tyler Glover is the president and CEO of Texas Pacific Land. That's NYC ticker symbol, TPL, as well as a member of the corporation's Board of Directors. Originally joining Texas Pacific in 2011, Tyler has led the company since 2016.
Tyler, thanks so much for joining us Inside the ICE House. Welcome to the New York Stock Exchange.
Tyler Glover:
Thank you very much. Pleasure to be here.
Lance Glinn:
So you are fresh off a bell ringing. What was it like being up on that podium, ringing the bell, representing Texas Pacific Land, one of the longest-listed companies here at the NYC?
Tyler Glover:
It was quite an honor, really a unique experience, especially with the history between TPL and NYC. So a lot of energy on the floor.
Lance Glinn:
As I was preparing for our discussion, I watched the video on the Texas Pacific website where you and members of the team discussed the past, present, and future of the company. In the video, one of your project development managers, when discussing TPL said, "We're not just a mineral company, we're not a water services company, we're not just a landowner."
So if you're more than just any one of those things, what exactly is Texas Pacific Land Corporation?
Tyler Glover:
Well, it's hard to explain. We truly are a unique company. The way we operate, the assets that we own, there's really no one else out there like us, at least not from a public perspective. And that statement's very true. We're not just a landowner, we're not just a water service company. We're not just a mineral company.
And I think that's where a lot of the value comes, and a major part of the value proposition for TPL is the integrated nature of all of those assets and how combined you truly are involved in the entire lifecycle of an oil and gas well drilled in the Permian.
Lance Glinn:
So we've all heard stories or perhaps even experienced ourselves, the challenges of a difficult lessor-lessee sort of relationship. And look, I can recall a few instances from my off-campus housing days as a college student at Rutgers for this difficulty in the lessor-lessee relationship, whether it's a home rental, a product lease, or a land agreement, there's obviously tensions often between the parties involved.
But how does Texas Pacific land as the lessor work as a partner instead of an adversary with the company that it leases the land to?
Tyler Glover:
Well, it's a great question and there's definitely a fine line between extracting as much value for your shareholders as is possible without hindering development. And so I think the team that we've built at TPL has done a very good job of finding that line and creating opportunities to be a solution for problems that the energy industry is facing in the Permian.
And like I said, we're involved in the entire life cycle of a well. So you're able to extract value along the way and not extract too much value at any certain point, which makes wells less economic for the operators. And so being able to provide source water for completions and drilling operations, being able to take, produce water into infrastructure that we own a royalty on, providing access for roads, infrastructure easements, things like that on the surface, selling caliche for projects like roads and facilities, pads and well pads.
And then obviously everything that you do on the surface and providing those water solutions enhances the development of your minerals and royalties.
Lance Glinn:
Let's pivot to the evolution of TPL management and the transition to what you guys refer to as the active management approach. Over the last decade, the style has helped increase the number of horizontal wells from hundreds to thousands. The increase in wells alone signals growth in multiple facets.
But how has this active management over the last decade helped strengthen the company and set it up for present and future success?
Tyler Glover:
From '54 to probably 2010, there wasn't a ton going on, on these assets. And so there wasn't as much need for being proactive and keeping a better eye on the surface of mineral estate. And around 2010, horizontal drilling really kicked off, and a few years later, especially on the Delaware side where we own a lot of our higher interest. And so with that onset of activity, keeping a better eye on what was going on out there was a must.
And I came to the company in 2011, we had a management change in late 2016, and really from '11 to '16 just saw that we weren't capturing all the value that we should have been. We weren't extracting everything that we could out of those assets. And so listening to operators, listening to what their needs were, trying to be a solution to the problems they faced, and looking at our assets and how do we use these assets that we own to be a solution, create new revenue streams. And then the main goal is just to get our minerals and royalties developed.
Lance Glinn:
How do you use these assets that you own to be a solution? Is that a question that is continuously being worked on? Is there really an answer to that question or are there new innovations that sort of keep the answer progressing and developing into new answers later on?
Tyler Glover:
Yeah, it's definitely fluid. It's evolving every day. So as technology advances in the industry, so does our thought process around how TPL's involvement can create more value. Oil and gas is a very material part of our business, but someday that could be different.
And so we've got a team that's devoted entirely to next-gen opportunities like solar and wind and carbon sequestration and things like that. And so we've been around for 136 years. Our goal is to be around at least another 136 years. And what that looks like, I don't know, but it changes every day. And so every day we're looking for new opportunities to make sure that happens.
Lance Glinn:
And now current surface assets sit at about 1 million acres of land ranging from Abilene in central Texas to El Paso in west Texas. That's about a seven-hour drive and close to 500 miles of land that separate the two cities.
What's the process in overseeing the almost million acres and monitoring the thousands of wells that TPL has interest in?
Tyler Glover:
It's quite a process, and if you think about our land position, we're just under 900,000 acres, but most of that is checkerboarded, so we own every other square mile, which means you're really keeping an eye on twice that number.
West Texas is very remote, it's not super populated. So oil and gas activity is really in some areas the only thing going on. But we've built out a lot of technology, a lot of data management systems to manage the oil and gas royalties and our interest in those wells and make sure that we're being paid correctly.
On the surface side, we do use field personnel to keep an eye on operations, a lot of contract management, making sure that we enforce the covenants of those contracts. We use satellite imagery, drones, aerial photography, change detection software. So we've really leveraged technology over the last seven or eight years to make sure that we're keeping a better eye on those assets and on those interests that we own.
Lance Glinn:
And you mentioned all this modern technology. What was the challenge like when you take the reins in 2016 to change over from potentially old technology used to monitor hundreds of wells to now this modern technology to monitor thousands of wells?
I'm sure there was a lot going into and a long process to change everything over and to make it so that you can oversee with the team the size that you have to oversee all the land that is in your interest.
Tyler Glover:
Yeah, it was quite a drastic change in 2011 when I got to TPL. Typewriters were still being used. All the maps were on old parchment paper. Really no data management system technology being used. And so when you think about almost a million acres and 136 years of history, it's a lot of contracts, a lot of different types of contracts.
And so trying to keep up with that level of paperwork and then seeing what was coming, we knew we had to make a change. So a pretty drastic change.
I think in 2016 we had nine employees before management change. We've got just over a hundred today. And so really along with the technology, the most important thing that we've done is we started to hire industry professionals, people that understood both land management, but also how to drill and complete an oil and gas well, understood reserves and minerals and logistics of moving water across the basin.
And so we really started to professionalize the business overall. And when you go from typewriters to the technology that we have today, that's a really drastic change and it really changed the way the industry viewed our company. And I think it's made the industry more efficient from an operator to landowner type relationship. And I do think the evolution of land management has changed because of that.
Lance Glinn:
The history of TPL is a long one. But before we look back at the company's past, let's look back at yours. You have over a decade of experience in energy services and land management. What got you interested in these areas and really introduce you to Texas Pacific Land back in 2011?
Tyler Glover:
Yeah, I get the question of how I got involved in oil and gas, and the answer is I grew up in Midland and you don't really have a choice because that's the only thing in Midland. So grew up in west Texas. After college, got into the energy service part of the business and did that for a while and really wanted to get into land management. Love real property, love the history, love maps, and so got into land management. And I was working as a contract landman for Devon through Ellis Gray out in west Texas. And the trust at the time with the onset of additional activity on their surface decided that they needed a full-time staff landman. And so I went to work in September of 2011 at TPL as a landman, and it was quite a transition coming from an operator and being involved in the actual drilling, completing production of an oil and gas well to transitioning to a landowner that had been around for so long.
But I remember interviewing and was semi-familiar with the company. I was dealing with them in negotiations for easements and things like that, but did not realize the expanse of their assets. And I just remember during the interview we pulled out some of those old parchment maps and saw the full extent of what they owned and was utterly impressed by the location and the scale of their assets.
Between that and the history of the company, it was a really interesting opportunity. And so moved to Dallas, went to work for them, and it's been an interesting ride.
Lance Glinn:
It's been an interesting ride, a decade plus. TPL dates back to the 1800s when the Texas Pacific Railway was granted acreage for every mile of track they were able to lay. It was then in 1888 that the company began trading on the New York Stock Exchange. It's over 150 years of history, 136 here on the New York Stock Exchange.
We've spoken a lot about the evolution and modernization of the company, but how do you try to blend the new while still paying homage to obviously where the company's been and all the history that's behind it?
Tyler Glover:
Yeah, there's a lot of respect paid for the history, like coming here and reflecting on the history between TPL and the NYC. And our goal is to be good stewards of the company, good stewards of the assets. And I think there's a way to do that to modernize the business aspect of the business, but still be good stewards of the history and the legacy and the assets.
Lance Glinn:
And speaking to that history, in that video I mentioned earlier I saw you described Texas Pacific Land in the current day as the oldest startup that anyone's ever heard of. I mentioned 136 years here at the NYC, dates back over 150 years. But where does that proclamation come from among you and other leadership?
Tyler Glover:
I don't remember who said it first around the office, but when we were really transitioning from passive management to active management and building the water company, we joked that, as I said, "It's the oldest startup that anyone's ever heard of." Because prior to 2017, no one had really ever heard of TPL. I mean, even people in the actual industry that were involved in didn't know who TPL was.
And so as we built that water company and became more of a presence in the industry, people really started to reflect on how important those assets are to the overall development of the Permian Basin. And so we've done a lot to modernize, professionalize, but also build a story. We've got a great team. We've got a lot of amazing people that have done a really good job building that story. Even though we're 136 years old, we feel like most of the story is still in front of us.
Lance Glinn:
So it was in 1920 that Texas and Pacific Abrams No. 1 became the first well to produce oil from the Permian Basin. A few years later, the first oil pipeline was built in the basin. What makes the Permian such a desired area for drilling and oil extraction and how would production compare to other regions around the world?
Tyler Glover:
The Permian has become a premier resource. It's one of the most economic basins in the world, especially in the US. And shale's been a really important part of US oil and gas production growth over the last decade, decade and a half.
If you look at total US production today, it's a little over 13 million barrels a day, and almost half of that comes from the Permian. It's a fantastic resource. It's got low break-evens, it's unpopulated. It's not particularly pretty. And so it's a great place for oil and gas to be developed.
And when you look at gas production, I think the Permian is something like 20% of overall US gas production. And so I don't know what oil and gas prices would be without the Permian, but they would certainly be different. I mean, if you look at who's operating in the Permian, it's the Chevrons, Exxons, Conicos, BPs of the world, which is, to me, a signal that that basin is one of the premier assets in the world, and it's going to be around for a long time.
Lance Glinn:
Now, obviously a lot's changed since that first well went into the basin over a century ago, but as you look over the course of your time leading Texas Pacific land, how has the landscape of oil and gas production both in the region and in the United States changed? And how has TPL adapted to obviously these changes over the last 10-plus years?
Tyler Glover:
I think the industry is a lot more sustainable in the way that it goes about oil and gas development now versus the boom and bust cycles of the past. The basin's matured. There's been a lot of consolidation. And so with that consolidation, you've got the Chevrons and Exxons of the world owning more acreage, more leasehold.
And for us, looking at the balance sheet of those companies, it really changes the way we look at the future and how we think the basin will be developed. But from the early days of exploration, horizontal drilling, to where it's at today, like somebody mentioned in our video with the style of development that operators are deploying in the basin today, they truly are building small cities on our acreage to drill a multi-well pad.
And so it's been pretty interesting to see just the level of development and how it's changed. Ten or 12 years ago, we might've had a couple of hundred wells on us. Today, I think we've got over 4,000 wells on our properties. And so that's a lot to manage, and the way that completion technology has evolved over the last 10 years has really put us in a position where we've got a competitive advantage over other water providers just because the scale that we operate. So it's been really interesting, and I think, like I said earlier, we've got more left in front of us than we have behind us.
Lance Glinn:
In August, you released your 2024 second quarter earnings, and during the presentation you touched on the topic of M&A, and I'm going to quote you here. You said, "We can remain selective. We don't need to acquire anything to grow."
But if a time arises where M&A is necessary, what criteria do you use to evaluate potential acquisitions, making sure they're obviously a fit for what you guys have built at Texas Pacific Land?
Tyler Glover:
We're in a unique position where there's still a lot of growth left in the assets that we already own today. And as we become more efficient and development activity increases in the Permian, we're set up to continue to grow the business organically. But we also feel like there's a lot of opportunity out there for us to make acquisitions and acquire property that looks very similar to what we own today.
The business is in a good place now with the staff that we have in place, the data management systems, the technology that we have to be able to acquire and ingest those assets without adding any real incremental cost to the business. And so I think that's a very interesting proposition for our shareholders to be able to grow the business without adding additional costs. And when we look at assets, and I've talked a little bit about this in our last couple of earnings calls, we're looking at every opportunity just on a returns basis.
And so you've got acquisitions competing with buybacks and other opportunities to deploy capital, but very focused on quality, sticking within our wheelhouse. Like I said, the goal is to acquire more assets that look like what we own today. And there's a ton of opportunity, being checkerboarded, having interest in over 500,000 gross acres on the mineral and royalty side, there's a lot of opportunity to acquire additional interest in the same drilling spacing units that we own today, the same wells that we're already managing, and add bolt-on surface acquisitions within that checkerboard as well as in other parts of the basin.
And so I think when you compare us to some of the other... We don't really have any peers because we're so unique. But if you look at other mineral companies or water companies, it's such a unique proposition that TPL has to be able to grow the business in that manner.
Lance Glinn:
So in 2017, Texas Pacific Water Resources was launched along previously untapped parts of the Permian Basin, now to be drilled.
For those like me with very little knowledge of drilling and oil production, what's the role of water in the process and how has Texas Pacific Water helped accelerate the company's growth?
Tyler Glover:
So we formed Texas Pacific Water Resources and June of 2017, and if you look at the growth trajectory of the company, you can see it up and to the right from that point on. So it's definitely been a catalyst for overall growth of the enterprise.
The water volumes used today are so much higher than what we saw in 2017. And with Simulfrac and Trimulfrac and co-completions coming on as frac technology and strategy evolves, the sheer volume of water needed on a daily basis delivered to a well pad is just enormous. And we've gone from, I think $25 million worth of revenue in 2017 to about $200 million last year just in the water business.
And that doesn't include the ancillary development on the mineral and royalty acreage because we've been able to supply those completions with water. So it's been huge for the business. It's been great for the industry. Like I said earlier, I think we've opened up acreage that wouldn't have otherwise been developed because of the water company, but it's been a pretty wild ride. And going from a passive mailbox structure really where you're just collecting royalty checks to an actual operation where you're extracting that resource, moving it across the basin, and delivering it to customers has been pretty interesting. I think it's been a good value-add for our shareholders.
Lance Glinn:
So take us then behind the technology, you have an operator who wants to drill in the middle of the basin, it's dry, there's really no water anywhere around. How do you then get water to where they want to drill so that they can obviously use it for the process?
Tyler Glover:
So groundwater is pretty spotty in the Permian. And so sometimes that water has to be moved 70, 80 miles from its source. And so with the surface acreage that we own... In some areas, we own every other square mile for maybe 50, 60, 100 miles. We were able to go in '17, '18, '19, buy additional right of way across those offset landowners.
And so now we have the ability to move water essentially across the entire northern Delaware, especially on the Texas side. So we produce about 600,000 barrels a day of water. We've roughly 24 million barrels of above ground storage and almost 400 miles of pipeline laid. And so every day we're moving water all across the basin and delivering it to clients and customers.
Lance Glinn:
And I know you mentioned two sort of different segments of water. You had produced water and source water. How do these two categories differ and what are their different functions within the drilling process?
Tyler Glover:
Yeah, so source water is where it's actually operated by us. We drilled those wells, we pumped that water, we moved that water. On the produced water side, what we've done is partner with water midstream companies and operators to allow infrastructure and disposal wells to be built out on our land. And for providing access to that pore space, we've reserved a royalty on those wells and that infrastructure.
And so as produced water that comes up out of those formations as a waste product is moved across our land or disposed of on our land, we charge a royalty for that. So we don't actually own or operate any of that infrastructure. And then we've got the treatment arm as well, which is operated by us where we're actually taking that produced water, treating it, and giving it back to operators to use in future completions.
And so I think when you look at water evolution in the Permian Basin for the industry to be sustainable, it really takes all three of those.
So we want to make sure that we're involved in the entire water cycle out there and make sure that we're extracting as much value as we can for our shareholders, but also providing those services and doing it in a more sustainable way than others might.
Lance Glinn:
And you mentioned water as a waste product. Now, Texas Pacific Land is working to change the way water has been used before, make it more sustainable, recycle water, reuse it. What's the process in doing that?
I know you sort of touched on it in your last answer, but how important is that reuse and that recycling of water to Texas Pacific Land, and what's the process in taking water that's already been used and repurposing it for other operators?
Tyler Glover:
Yeah, it's a big part of how the industry is moving, and I think it's going to be a bigger part in the future. A couple of reasons why it's so important is, like I said, it's a very arid region, and so there's only a certain amount of groundwater available to be used for those operations. And also there's just such a high water-to-oil ratio in the Permian, especially on the Delaware side, that you've got massive amounts of water coming up, three, four or five barrels of water for every barrel of oil that's coming up out of the ground.
And so trying to figure out what you're going to do with all of that wastewater, some of it can be injected back into the ground for permanent storage, but a lot of that water needs to be reused. And so as we think about the future, we've started an R&D project that we've been working on for a couple of years for beneficial reuse, which is actually taking that treatment process a step further and cleaning that water up where it could be used to maybe recharge aquifers or discharged into waterways or used to irrigate crops.
And so working on that technology has been very interesting, and I think it's going to be increasingly important to be able to beneficially reuse that wastewater in the future.
Lance Glinn:
And in that 2024 Q2 earnings I referenced previously you highlighted record numbers across water performance, water sales revenue, volume, among many other things. What do you believe drove this record growth and how do you now maintain and sort of increase this progress throughout the rest of the year and obviously years to follow?
Tyler Glover:
I think the biggest reason was our water team and business development team has done a fantastic job in increasing our footprint across the basin. I think the beginning of 2023, we sold something like half of our water off of our footprint.
So if you think about our checkerboarded footprint, this last quarter, it was 73%. So the team's just done an outstanding job of increasing our footprint, moving water further and further across the basin, and delivering to customers. Treatment has increased, so treatment volumes are up. And the team continues to do a really good job of tying in new customers to that produced water infrastructure that we own a royalty on. And so every time they tie in a new customer, that's additional water.
And we've also seen a really good pace of development in areas where we've got long-term contracts, that the team has done a great job in the past of contracting large areas and getting that water dedicated for future production.
Lance Glinn:
So besides oil and gas and of course water, which we just spoke to, Texas Pacific Land is actively investing in solar, wind, carbon, Bitcoin mining, other next gen developments, how do these factor into TPL's future and what opportunities arise as the focus on these initiatives increase?
Tyler Glover:
Yeah, so there's a lot of interesting opportunities, and like I mentioned earlier, we formed a next gen team that's devoted to looking at what those future opportunities could be and should be. And we're looking at it more from the standpoint like the produced water royalties where we may not actually invest in solar farms or wind farms, but we want to package the land up and go to a producer and sell them that option.
And so the team's done a great job developing new solar contracts. I think we were up 300% as far as contracting megawatts last year over the previous year. We do have some active wind farms on the properties. And when you think about the proposition of TPL today, we're really an oil and gas company. We're not an oil gas producer, but in the future, we want to be an energy company, whether that's oil and gas or solar and wind or whatever that looks like.
So is it a material part of our business today? No, but the hope is that as you add solar contracts and wind contracts and carbon sequestration contracts and Bitcoin mining, and there's an opportunity for data centers on those properties, it becomes material at some point in the future. And like I said earlier, we want to make sure that we're around for another 136 years and don't know what that looks like, but I think there is the same opportunity for us to be a partner for those industries as there has been to be a partner for the oil and gas industry.
Lance Glinn:
So Tyler, as we begin to wrap up, Texas Pacific Land, one of the longest listed companies here at the NYSE, grown from a single well in 1920 to now thousands across Texas and in the Permian Basin. And like you said, you've been around for 136 years, you want to make sure you're around for at least the next 136 years. So as you plot that future to be around for the next 136, how are you positioning the company for the decades to come?
Tyler Glover:
The main focus for us is to make sure that we're a good partner for the oil and gas industry right now while looking at other industries that we could use our assets to partner with and create value. And I think that's the interesting thing about TPL is with almost a million acres of land, the option value there is just unlimited thinking about all the different ways that land could be used in the future, and especially in Texas where it's a very friendly regulatory environment.
And so I think, like I said earlier, we've been around for 136 years, but we're just getting started.
Lance Glinn:
Tyler, thanks so much for joining us Inside the ICE House.
Tyler Glover:
Thanks for having me.
Speaker 1:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X at ICE House podcast. From the New York Stock Exchange, we'll talk to you again next week Inside the ICE House.
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein. All of which is presented solely for informational and educational purposes.
Nothing herein constitutes an offer to sell a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
