University Lands FY22 Annual Report

UL AT-A-GLANCE

University Lands (UL) manages the surface and mineral interests of 2.1 million acres of land across 19 counties in West Texas for the benefit of the Permanent University Fund (PUF). 2.1 MILLION ACRES

The PUF is the largest public university endowment in the U.S. and benefits educational and health institutions across both The University of Texas System and The Texas A&M University System.

PRINCIPAL BUSINESS LINES

EMERGING ENERGY

WATER SUPPLY & LOGISTICS

OIL & GAS ROYALTY

GRAZING

2.1M Livestock grazing on PUF Lands could provide 68.5 million protein-rich meals 1

Output from renewable energy projects on PUF Lands can provide enough

Acres of grazing lands

electricity to sustain 312,600 households 2

95K

Acres of solar & wind energy leases & pre-leases

The 6,763 miles of roads on PUF Lands are equivalent to driving from the east coast to the west coast of the U.S. 2.5X

26.5K oil & gas wells drilled to-date

10.2K producing oil & gas wells

23K miles of pipeline & powerline easements

If pipelines and powerlines on PUF Lands were laid end-to-end, they would almost circle the globe

1.24M

2 million football fields could fit on PUF Lands

18K acres of surface leases

acres leased for mineral development

1 Based on the head count of cattle, sheep & goats grazing on University Lands as of January 2023 and average carcass yields with each meal containing 0.25 lbs. of protein. 2 Based on the installed megawatts (MW) of renewable energy projects operating on University Lands multiplied by the Electric Reliability Council of Texas (ERCOT) estimate that each MW of renewable power generation will supply 200 households.

TABLE OF CONTENTS

1 5

UL At-A-Glance

CEO message

7 8

FY22 Highlights

FY22 net Performance

9 11 12

Governance

executive leadership team

management

17 19 23 24 25 27 31

financials

Oil & Gas Management

water supply & logistics

renewable energy

grazing & agriculture

Environmental Stewardship

understanding The PUF

CEO MESSAGE

At University Lands, 2022 was a banner year. Not only did we end the fiscal year with our highest production and revenue ever, which you can read more about in the pages that follow, we also received national attention thanks to a certain buzzworthy article. Last fall, Bloomberg published an extensive article on The University of Texas System endowment and the lands that have helped make it the second largest in the country, close on the heals of top contender, Harvard University. The article highlighted the many natural resources these lands hold and opined that it is more than oil and gas that will generate returns over the next few decades. While I’m proud of these accolades and achievements, none of it happened overnight. Our continued growth and success are a culmination of well-designed strategies implemented at University Lands well before my time at the helm. University Lands and its employees are committed to our mission: to maximize the revenue from the PUF Lands, protect the interests of The University of Texas System, and promote awareness and sensitivity for the environment. This mission—the connective tissue that holds us together and focuses our collective efforts—is important enough to discus in more detail in this letter. First, when it comes to maximizing revenue from PUF lands, we know that currently our revenue is dominated by oil and gas royalties. We embrace this and work with operators every day to help grow this royalty revenue. We also know that University Lands generates revenue from many other diverse sources that require and deserve our focus. The University

William R. “Billy” Murphy, Jr., University Lands CEO (left) with Harold G. Hamm, Founder of Continental Resources (right)

Lands staff knows this and provides the time and attention required to make the best decision, in each case, that balances the desire for revenue with the best interests of the UT System and stewardship of the land. The second part of our mission—to protect the interests of The University of Texas System—is all about our people. Without great people, we cannot do this job. We cannot judge what is in or is not in the best interest of the UT System without trusting our people and knowing they are well trained and have this interest in the forefront of their minds. I am proud of our team and the job they do, day in and day out, to manage such an important resource and to do so knowing that they are protecting a world-class institution with each thoughtful decision made in their daily work. But it’s more than the University Lands team. Each of us at University Lands relies on colleagues at the UT System and consultants to get our work done. Because of strong relationships, aligned goals, and focused dedication to the Lands, the UT System’s interests continue to remain safe and protected. Lastly, to promote awareness and sensitivity for the environment, it is important that University Lands continues to focus on restoration of these lands when operations have ceased, improving the resource when and where we can, and requiring operators to use best practices in their operations. That is why we’re proud to work with operators who reach and achieve environmentally-focused goals, including recycling 100 percent of their produced water and reducing—and even eliminating— known methane emissions. At University Lands, we know that decades after the last drop of oil has been pulled from the Permian Basin, the land will still be there and we will still be charged with its environmental stewardship. That is why we care. We will still be there. As we look forward and think hard about all the future opportunities in emerging and renewable energies, it reminds me that University Lands and the Permian Basin are not just in the oil and gas business, but in the energy business. Today, we are leaders in the oil and gas space and will continue to work hard to maintain that position. But as society transitions to a low-carbon future over the next several decades, University Lands expects to also become a leader in the production of emerging energy for the benefit of Texas and beyond. In the new year, we look forward to celebrating the 100th anniversary of the Santa Rita No. 1 well, which was discovered on May 28, 1923. This well not only launched oil and gas development on the PUF Lands, but was the spark that lit the fire that became the Permian Basin. The impacts of that well and the wildcatters who discovered it can be felt in every corner of our great state. So thank you to those visionaries who first saw the Land’s potential, to our employees who protect the Lands day in and day out, and to the UT System for giving me and everyone here at University Lands the opportunity to make a difference in our daily work. Here’s to the next 100 years!

FY22 HIGHLIGHTS

Annual expenses were 13% below budget at $19.1 million and represented 0.86% of gross revenue or $0.72 per barrel of equivalent production unit cost. Expenses

Revenue Gross revenues totaled $2.22 billion, with PUF revenue at $2.12 billion and AUF revenue at $96 million. Oil and gas royalty income increased by 27% over FY21.

Asset value

Production

The FY22 total value of proved reserves was up 46% year-over-year primarily due to higher commodity prices, resulting in more active development activities. On a price neutral basis, the value-per-acre of proved reserves is up 44% year-over-year.

Production rates averaged 329,000 gross barrels of oil equivalent (BOE) per day. UL’s mineral royalty averaged 22% for both oil & gas, equaling a cumulative net royalty volume of 26.5 million BOE.

Environment

Renewable energy

Our renewable energy portfolio was expanded with one new wind project across 12,000 acres, putting our current portfolio at a total of 10 clean energy projects across 80,600 acres of PUF Lands.

UL performed 178 optical gas imaging (OGI) camera inspections (90 facility fugitive emission inspections and 88 flare inspections) and approximately 1,160 oil & gas lease inspections. A total of 242 unproductive oil & gas wells were plugged and have either been returned or are in the process of being returned to pastureland.

FY22 NET PERFORMANCE

$2.22B

Gross Revenue

$2.12B Permanent University Fund Revenue (Minerals) $96M Available University Fund Revenue (Surface)

1,941 MMBOE

Net Total Resource

356 MMBOE Net Proved Reserves

$19.1M

Expenses

0.86% of Gross Revenue $0.72 Expenses/BOE

2.04MM

Lateral Feet Put-on-Production

229 Wells Put-on-Production

26,500 MBOE

Net Royalty Production

MMBOE - millions of barrels of oil equivalent; MBOE - thousands of barrels of oil equivalent

GOVERNANCE

UT SYSTEM BOARD OF REGENTS

The University of Texas System Board of Regents manages the strategic direction, development activities and stewardship of the Permanent University Fund (PUF) Lands.

UT SYSTEM ADMINISTRATION

The University of Texas System Administration is responsible for operations at all UT educational and health institutions. University Lands is a part of the UT System Administration Business Affairs division.

BOARD FOR LEASE OF UNIVERSITY LANDS

BFL 2 UT Regents 1 Texas A&M Regent Texas Land Commissioner

The Board for Lease of University Lands, chaired by the Commissioner of the Texas General Land Office, provides statutory oversight and governance for agreements to develop oil and gas minerals located under PUF Lands.

UNIVERSITY LANDS ADVISORY BOARD

ULAB 5 UT Representatives 3 Texas A&M Representatives Texas Land Commissioner UT System Business Affairs Executive Vice Chancellor

The University Lands Advisory Board (ULAB) is charged with providing guidance to the University Lands leadership team to help determine strategy and provide guidance and recommendations to the UT System Board of Regents to ensure responsible stewardship of PUF Lands. ULAB members are appointed by both the University of Texas and Texas A&M University Systems and includes a standing position for the Texas Land Commissioner and the University of Texas System Executive Vice Chancellor of Business Affairs.

BOARD FOR LEASE OF UNIVERSITY LANDS

George P. Bush Commissioner, Texas General Land Office

Michael A. Hernandez III Regent, Texas A&M University System

Nolan Perez Regent, The University of Texas System

Christina Melton Crain Regent, The University of Texas System

UNIVERSITY LANDS ADVISORY BOARD

George P. Bush Commissioner, Texas General Land Office

Dee J. Kelly Law Partner, Kelly Hart & Hallman

Thomas L. Carter, Jr. President, CEO & Chairman, Black Stone Minerals

Jonathan Pruitt Executive Vice Chancellor for Business Affairs, The University of Texas System

Stuart Stedman Regent, The University of Texas System President of Stedman West Interests, Inc.

Jay C. Graham CEO & Chairman, Spur Energy Partners

Eli Jones Professor of Marketing, Mays Business School, Texas A&M University

James C. Weaver, Chair Regent, The University of Texas System CEO and Chairman of CW Interests

Janeen Judah Independent Director, Patterson-UTI, Crestwood Equity Partners & Aethon

John L. zogg, jr. Managing Director, Crescent Real Estate, LLC

EXECUTIVE LEADERSHIP TEAM

Richard Brantley Senior Vice President, Operations

Kate Champion Senior Vice President, Legal & Chief Legal Officer

billy Murphy Chief Executive Officer

Brian Owen Senior Vice President, Land

Maryam Schellstede Senior Vice President, Planning & Development

Sonya csaszar-kirgan Vice President, Legal

MANAGEMENT

Shabnam Azizian Vice President, Business Intelligence & IT Services

James Buice Manager, Sustainability

jeff hanson Manager, Financial Marketing

antonia Jones Manager, Marketing & Communications

Corey Means Manager, IT Infrastructure & Operations

Amber Jackson Manager, Budget & Revenue

Wil Vark Manager, Business Solutions & App Development

John Tackett Geoscience Manager & Chief Geologist

Jeff White Manager, Surface Interests

Santa Rita No. 1 Well May 28, 1923

Oil from the Santa Rita No. 1 well came bubbling to the surface before roaring to life on this fateful morning, forever changing the fortunes of West Texas and the University of Texas and Texas A&M Systems.

100 y

In 2023 University Lands is celebrating this important milestone – the 100-year anniversary of the Santa Rita No. 1 well – the well that started it all!

The Santa Rita No. 1 well was the first oil well discovered on PUF Lands.

Its discovery launched the Permian oil exploration boom.

Since its discovery, the Permian has become the largest and most productive basin in the U.S. Since 1923, over $10.7B in oil & gas revenue has been generated on PUF Lands that has gone to benefit over 21 universities and state agencies in the University of Texas and Texas A & M University Systems.

years

SCAN TO LEARN MORE

UT HEALTH RIO GRAND VALLEY CANCER AND SURGERY CENTER Funded with $49.5M from the Permanent University Fund The puf a

The UT Health Rio Grande Valley Cancer and Surgery Center will support the campus expansion to provide multidisciplinary education, research, and clinical missions of U.T. Rio Grande Valley and the UT Rio Grande Valley School of Medicine. To further serve students and patients in the region, this center will increase access to clinical services. This center will allow for the provision of comprehensive cancer and surgical services that are on the leading edge of medicine by serving as an incubator to train the physicians and scientist leaders of the future. The three-story, 145,000-square-foot facility will include a radiation oncology clinic, medical oncology clinic, diagnostic imaging suite, rehabilitation therapy, ambulatory surgery center, orthopedics clinic, and support service space for these modalities. Construction is slated for completion in late 2024, with the center opening to patients in early 2025.

The latest addition to Texas A&M University’s west campus skyline is the state-of-the-art Instructional Laboratory & Innovative Learning Building. The five-story, 140,000-square-foot facility will open its door to students for the spring 2023 semester. The facility provides new hands-on learning spaces for chemists, artists, and creators of all kinds, offering over 36 new classroom and laboratory spaces to support STEM and interdisciplinary learning at the undergraduate level, and providing the much-needed space to properly prepare students for advanced learning in many academic disciplines The ground floor has assorted maker spaces, including a wood shop and a 3D-printing lab. The general chemistry laboratories on the lower floors are equipped to host entry- and lower-level undergraduate chemistry labs. The third floor houses more labs, along with group study spaces and a chemistry help desk offering additional assistance to students. The fourth and fifth floors have organic chemistry laboratories for upper-level lab courses, where each station boasts its own fume hood and tools for advanced lab work. at work

INSTRUCTIONAL LABORATORY & INNOVATIVE LEARNING BUILDING Funded with $20M from the Permanent University Fund

FINANCIALS

FY22

FY20

FY21

Variance

Actuals

FY21 vs FY22

$ millions, subject to rounding

Net Annual Volumes Oil (MBBL) Gas + NGLs (MMCF)

14,854 50,042 23,194

15,362 47,753 23,321

17,505 54,453 26,581

14% 14% 14%

Million Barrels of Oil Equivalent (MBOE)

Commodity Pricing West Texas Intermediate (WTI)

$46.86 $45.22

$51.98 $52.61

$87.81 $88.60

69% 68%

Avg. Oil Price Received

Avg. Gas Price Received (including NGLs)

$1.68

$3.49

$7.43

113%

Permanent University Fund (Minerals) Oil Revenue

677

808 167

1,556

93%

Gas Revenue

421 147

153%

Bonuses, Unitization Payments

3256%

Total

$771

$979

$2,125

117%

Available University Fund (Surface) Water, Caliche, Damages

32% 51% 66% -44% 50%

Grazing

Easements, Renewables & Salt Water Interest, Penalty, Assignment Fees

Total

$78

$64

$96

Total Revenue (Gross)

$849

$1,043

$2,220

113%

Expenses General & Administrative + Operating $/Barrel of Oil Equivalent Production

-7%

0.94

0.89

0.72

-19%

Net Revenue

$827

$1,023

$2,201

115%

FY22 Permanent University Fund Revenue $2.12B

Oil

87.8%

11.7%

0.5%

Gas

Lease Bonus

FY22 Available University Fund Revenue $96M

Surface Leases & Easements

Grazing

7.5%

64.4%

26.5%

1.6%

Damages, Water & Caliche

Interest & Penalty

OIL & GAS MANAGEMENT

The University Lands Mineral and Surface Land team and the Natural Resource Development team are made up of experienced land, geoscience, engineering, and data professionals who have a deep technical understanding of resources and effective contracting strategies. Together, the teams strategically focus on maximizing development of oil and gas minerals on PUF Lands.

They do this by:

Identifying best practices in completion designs, landing depth and development strategies Working with operators towards continuous and well- paced development Performing comprehensive subsurface studies to understand recoverable resource potential Improving compliance and accuracy of data retrieval and the application of innovative data analytics Working with operators where opportunities exist for growth and/or improved economics, including the testing of new formations and the piloting of varying well spacing and completions methods Negotiating agreements and other contracts that maximize the development value of the minerals Ensuring rights under existing contracts and state statutes are being met

Identifying opportunities to repatriate acreage

Initiating and helping direct acreage swaps between operators to maximize horizontal development opportunities

University Lands’ top oil & gas operators represent ~90% of production volumes on PUF Lands. 2022 TOP PRODUCERS

Largest Producers ~ 48% of total volume produced

Substantial Producers ~ 45% of total volume produced

KEY OIL & GAS DEVELOPMENT ACTIVITY The PUF Lands span the Delaware Basin, Northern Midland Basin, Southern Midland Basin, and the Central Basin Platform with more than 200 companies operating 10,170 producing wells. New development in FY22 saw a total of 229 wells come online, of which 206 were horizontal wells with a cumulative 2.04 million lateral feet. Production from PUF Lands hit 337,000 barrels of oil equivalent per day, and UL’s cumulative net royalty production for the fiscal year was 26.5 million barrels of oil equivalent. To ensure continued development and value creation, University Lands negotiated two development agreements on approximately 15,000 acres, adding approximately 160,000 lateral feet obligation a year of drilling commitment.

Northern Midland Basin & Central Basin Platform

Southern Midland Basin, Pecos Basin & Val Verde Basin

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ACTIVITY SUMMARY

UL DEVELOPMENT

2 oil and gas development agreements adding approximately 160,000 lateral feet obligation over the next 5 years 15,000 acres on leasehold in the Southern Midland Basin One agreement under negotiation on approximately 5,000 acres, potential lateral feet obligation increase of 450,000 over three years 229 wells began producing 2.04 million lateral feet drilled put on production

~36% in Delaware Basin ~40% Northern Midland Basin ~20% in Southern Midland Basin ~4% Central Basin Platform

OIL & GAS LEASE SALE #131

~22,000 acres leased $54MM in lease bonus

~$2,460 per acre average bonus Leases sold as “blocks” to promote horizontal development

UL ACTIVITY BY BASIN

SOUTHERN MIDLAND BASIN

NORTHERN MIDLAND BASIN

Wells Spud

104

Wells Spud

Producing Wells

Producing Lateral Ft

660,870

Producing Lateral Ft

823,845

Average Lateral Length

10,326

Average Lateral Length

10,840

CENTRAL BASIN PLATFORM

DELAWARE BASIN Wells Spud

Wells Spud

Producing Wells

Producing Lateral Ft

408,708

Producing Lateral Ft

151,374

Average Lateral Length

8,885

Average Lateral Length

7,568

WATER SUPPLY & LOGISTICS

The PUF Lands are geographically positioned over several of the region’s major and minor aquifers, so managing the groundwater in the Permian Basin is vital to the Lands’ continued health. Promoting prudent commercial opportunities and supporting the success of water-related commercial ventures on PUF Lands is critical to UL. Finding the balance between conserving the land and increasing revenue is the key to long-term success.

In FY22, UL continued to promote stewardship through its Groundwater Management Plan. UL monitors groundwater utilization by requiring all mineral developers to meter and report water sources from PUF Lands and imported water. Collectively, 568 operator-owned water meters and nine water import meters are reported monthly. UL also continued to promote and advocate for producers to recycle their produced water for well completion fluid need by enabling installation of produced water recycling facilities and produced water pits, and efficient water transfer via lay flat pipe.

61,867,800 Barrels of produced water were used for oil and gas well completions in FY22 That translates to the amount of groundwater conserved throughout the year.

groundwater management plan goals:

Determine water use, supply and demand

Develop best practices for efficient use and waste minimization of groundwater

Develop a monitor well network and water well inventory

Continue development of the Dockum (Santa Rosa) aquifer Continue development and refinement of water well drilling and production Evaluate opportunities to provide information for water planning Create web-based groundwater database to allow users to access and upload water well and groundwater use data Perform hydrological studies to define the groundwater resources on University Lands

RENEWABLE ENERGY

The evolving energy and environmental landscape offers new opportunities for resource development and management on University Lands. In FY22, a new wind facility came online positioned on 12,309 acres in the Southern Midland Basin; additionally, a new wind project encompassing 19,809 acres is in development in Culberson County, Texas.

When the Build Back Better Act passed late in 2021, which put $555 billion toward building a clean energy economy in the United States, UL received triple the amount of inquiries for renewable energy opportunities than the previous year. With the increased interest and in order to protect the Lands, University Lands is committed to carefully and diligently evaluating potential new entrants on the Lands. In FY22, University Lands launched a major research project with the Bureau of Economic Geology at the University of Texas at Austin. The purpose is to assess emerging energy resource opportunities and their fiscal and environmental impacts on University Lands acreage in West Texas. Studies of the resource potential and usages for emerging opportunities across the University Lands acreage will help inform valuation of these resources, and importantly, guide strategies to prioritize and optimize their usage in line with University Lands’ mission of responsible stewardship.

Renewable Projects

Solar 5 Leases 8.6K Acres ~1,328 MW Capacity Wind 4 Leases 54.7K Acres ~375 MW Capacity 2 Pre-Leases 31.4K Acres ~387 MW Capacity

The multi-phase research project is expected to be complete by March 2024.

GRAZING & AGRICULTURE

All University Lands teams share a common goal: to be stewards of the land so that its resources and benefits are available for generations to come. This is why range and wildlife management has been an integral part of UL since its inception.

Not only have generations of ranchers settled the area and raised families on the land, it is also home to an array of wildlife and livestock, all of which requires management and protection.

UL monitors livestock stocking rates to ensure grazing leases maintain good range conditions. Proactive grazing management helps maintain other natural processes, including groundwater management and recharging aquifers for future consumption. UL also conducts aerial surveys to monitor the wildlife population to determine the overall health of each species and to provide harvest recommendations to ensure the resource will be there for generations to come. Additionally, UL encourages and enforces conservative management of PUF Lands wildlife. There are many huntable species on PUF Lands, including white-tailed and mule deer, pronghorn antelope, dove and quail. UL invests in these natural resources by putting money back into the Lands. Various projects are completed annually, such as installation of new fencing to protect our boundaries and new interior fencing to promote proper livestock grazing management. New water wells, pipelines, storage tanks and troughs are installed to increase water for livestock and grazing management. Different methods of brush control are implemented on the land to encourage more grass production, which also increases the water quantity and quality that is captured. Water improvements, along with brush control, aid in distributing livestock to all areas of a lease, maximizing the full potential of all 2.1 million acres and increasing stocking capacity.

research project launched:

In FY22, UL launched a research project in conjunction with BCarbon, a non-profit group and part of the Center for Energy Studies at Rice University’s Baker Institute for Public Policy. The study aims to measure how much carbon the grazing land can store over a three-year period using current principles and management. The project will be complete at the end of 2024.

$2.6M

12.7K

Invested back into PUF Lands

Acres of brush control employed

(by University Lands, grazing lessees, United States Department of Agriculture - Natural Resources Conservation Service and Texas Parks and Wildlife)

33 2

Ranch water improvements

Miles of fencing installed

Miles of water pipeline installed

Ranch water wells plugged

Brush control practices:

Brush control practices through mechanical treatment (using excavators) improves habitat on PUF Lands by increasing grass production and productivity and increases water infiltration from a land management standpoint. This is one of several methods UL employs to improve rangeland and stewardship of the resource.

ENVIRONMENTAL STEWARDSHIP

In order to fulfill University Lands’ mission to manage the resources of the PUF Lands for the long-term benefit of Texans, UL must employ assertive and proactive environmental management.

UL assesses and evaluates the risks of all commercial activity occurring on the Lands, including oil and gas development, renewable energy development, pipeline construction, ranching, retail, and industrial processes. The staff works to identify best practices and requires that these best practices be implemented by the companies doing business on PUF Lands. UL continues to facilitate communications and compliance through its relationships with regulatory agencies that include the Texas Commission on Environmental Quality, Railroad Commission of Texas, Environmental Protection Agency, Texas Parks and Wildlife, Natural Resources Conservation Service, and U.S. Fish & Wildlife Service. UL staff coordinates and monitors the multiple uses of the Lands by performing inspections and overseeing prescribed corrective actions. All construction was and continues to be monitored to ensure cooperative co-existence for all users of acreage.

WELL PLUGGING

SOIL & GROUNDWATER

Oil & Gas Well Plugging UL terminates unproductive oil and gas leases and issues lease restoration requirements described in restoration demand letters to the lessee. UL ensures oil and gas wells on the terminated leases are plugged and abandoned in a timely manner according to regulations of the Railroad Commission of Texas. Proper plugging procedures ensure protection of usable quality groundwater resources on UL. Water Well Plugging UL maintains a water-well inventory of all water wells owned by our O&G and grazing lessees. UL ensures that water wells no longer beneficial to the well owner are plugged in compliance with the technical requirements of the Texas Administrative Code by a water well driller licensed by the State of Texas. Proper plugging procedures ensure protection of usable quality groundwater resources on UL.

All spills, leaks or releases of crude oil, condensate, or produced water are reported to UL and to regulatory agencies. Our staff geologists provide remedial guidance and field oversight, ensuring remediation is completed in a thorough and timely manner. UL staff geologists require remedial standards exceeding or equivalent to regulatory requirements and provide final determination of completed remediation. UL range management specialists reclaim abandoned caliche (borrow) pits by grading pit walls to an erosion-resistant gentle slope, reseeding, and returning to pastureland. UL issues restoration demand letters for surface leases that have expired or terminated and monitors clean-up activity to ensure the lease premises are reclaimed and returned to pastureland.

34K Oil & gas lease acres returned to inventory

1,160 Oil & gas lease inspections

BY THE NUMBERS

242 Oil & gas production wells plugged

305 Commercial lease & easement inspections

568 Oil & gas wells metered daily

6 Grazing lease inspections

85 Low or no production leases terminated

36 Oil & gas water wells plugged

AIR

Flaring University Lands supports the goal of minimizing overall flaring on the Lands and industry-wide. Through regular communications with operators and regulatory bodies, UL encourages best practices to safely reduce routine flaring. These include bringing wells online only when adequate takeaway capacity is connected and shutting production during prolonged upsets. UL monitors a real-time (based on production reporting deadlines) graphical interface of flared volumes by lease and operator. UL contacts operators reporting atypical flared volumes to discuss contributing factors and corrective actions. Operators owe royalty payments to UL for all gas produced on PUF Lands, even if flared or combusted for lease fuel. As a result, the frequency of flaring on UL has been lower than that of the total Permian Basin for six consecutive years.

Greenhouse Gas Emissions (GHG) Management Optical Gas Imaging (OGI) Inspections Approximately 56% of production from University Lands is managed by public companies which have articulated specific goals for reducing the methane intensity of their operations. University Lands is in continuing dialogue with these companies and other producers on the Lands regarding facility modifications, leak detection and repair, and goals for emissions reduction University Lands supports our operators’ objectives and strives to lead the Permian Basin in overall emission reduction through the continuous performance of air inspections performed by University Lands staff.

OGI emission compliance inspections conducted 90

OGI flare inspections conducted

2.1%

Gas flared/MCF produced

What We Are Doing

Contractual requirements and state and federal law Oil & gas operators on PUF Lands are required by contract to comply with all state and federal laws and regulations. UL also requires use of best operating practices to minimize releases to the environment. Fugitive emission and flare inspections UL performs routine leak detection facility and flare inspections using an optical gas imaging camera and ensures appropriate corrective actions are performed when emissions are observed .

Non-productive/marginal well initiative UL’s routine inspections of oil & gas operations ensures marginal wells are properly plugged and any associated emissions are eliminated.

Royalty payments required on all gas Royalty is due and payable on flared gas, incentivizing operators to minimize the practice.

Collaboration with experts and industry UL engages in regular dialogue, collaboration and sharing of best practices with scientists and engineers and industry associations and shares these learnings with operators.

Commitment to best practices and technology UL encourages operators’ adoption of reliable control technologies and proactive inspection and repair.

Commitment to research UL seeks opportunities to support and/or participate in government, industry, and academic collaborative research projects.

Best practices UL requires best operating practices to help ensure reductions

UNDERSTANDING

PUF LANDS MANAGER

CONSTITUTION STATE OF TEXAS

2.1 million acres that produce two income streams: mineral income, which comes mainly from oil and gas bonuses, rentals and royalties, and surface income such as income from grazing leases, easements and wind power generation.

PERMANENT UNIVERSITY FUND

UTSYSTEM.EDU/PUF

A constitutional permanent endowment that supports excellence in the The University of Texas and Texas A&M University Systems.

Established in the Texas Constitution of 1876 through the appropriation of land.

KEY FACTS Constitution gives management to UT System Board of Regents; Grows from oil and gas production and investment income; Supports construction and capital expenses at institutions of UT and TAMU Systems; Corpus is not spent except for expenses of managing the land and the investment assets; Constitution allows UT Austin and UT System to benet from AUF for operational expenses.

The constitution permits the UT System and Texas A&M University System to each sell a limited amount of bonds (a type of borrowing) to fund construction and other capital expenses at system institutions. The bonds are secured by the AUF, which gives the systems the lowest interest rates available, saving the state money. Bond proceeds may not be used for operational expenses.

MINERAL INCOME

SURFACE INCOME

AUF

The Available University Fund is PUF surface income plus an annual distribution from the total return on PUF investments, constitutionally allocated 2/3 to UT System and 1/3 to Texas A&M University System.

PUF income and investment assets are managed by UTIMCO, a nonprot corporation operating under the authority of the UT System Board of Regents.

TEXAS A&M UNIVERSITY SYSTEM

THE UNIVERSITY OF TEXAS SYSTEM

The Texas A&M University System has similar constitutional restrictions on use of AUF. Some Texas A&M institutions are not eligible for PUF bonds.

CONSTITUTIONAL USES OF AUF:

Support and maintenance of UT System Administration

Support and maintenance of UT Austin

Payment of principal and interest on PUF bonds

LOOKING AHEAD | 2023

University Lands has some exciting things happening in 2023. A few highlights include:

» Commemorating the 100th anniversary of the Santa Rita No. 1 well

» Research on emerging energy sources and potential on PUF Lands

» Research on the amount of carbon grazing lands can store

» Expanded summer internship program

We look forward to sharing these highlights in our FY23 annual report! 2023 » Lease Sale #132 » 2023 Energy Forum

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