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美國
證券交易委員會
華盛頓特區20549

表格 10-Q
(標記一個)

☒ 根據1934年證券交易法第13或15(d)條款的季度報告。
截至2024年6月30日季度結束 2024年9月30日
或
☐ 根據1934年證券交易法第13或15(d)條款的過渡報告
過渡期從______到_____。

委員會檔案編號： 1-39804

依其章程所述的註冊人確切名稱：
德克薩斯太平洋土地公司

成立或组织的州或其他管辖区:國稅局雇主身分識別號碼：
特拉華州75-0279735

主要行政办公地址:
太平洋大道1700號, 2900套房 Dallas, 德克薩斯州 75201

註冊人電話號碼（包括區號）：
(214) 969-5530

根據法案第12(b)條規定註冊的證券：
每種類別的名稱交易標的（s）每個註冊交易所的名稱
普通股
（每股標的標價 $.01）		TPL紐約證券交易所


請標示勾選項，以表示以下事項：（1）本登記申請人在過去12個月內（或在本申請人必須提交此類報告的較短期間內）已提交證券交易所法案第13或15（d）條所要求提交的所有報表，和（2）本申請人在過去90天內一直受到此類提交要求的限制。 是 ☑ ☐

在前12個月內（或公司需要提交這些文件的較短時間內），公司是否已通過選中標記表明已閱讀並提交了應根據S-t法規第405條規定（本章第232.405條）提交的所有互動式數據文件？ 是 ☑    沒有 ☐

請在方框內打勾，以指示報名人是否為大型高速遞交人、高速遞交人、非高速遞交人、較小的報告公司或新興增長公司。 請參見《交易所法》第120億2條中有關“大型高速遞交人”、“高速遞交人”、“較小的報告公司”和“新興增長公司”的定義。
 
大型加速歸檔人☑加速檔案製造者☐
非加速歸檔人☐較小的報告公司☐
新興成長型企業☐
 
如果是新兴成长型公司，请勾选标记，以表明注册人已选择不使用根据《交易法》第13(a)条规定提供的任何新的或修订的财务会计准则的延期过渡期来遵守。☐



勾選表示申報人是否為外殼公司（定義於交易所法規第1202條）。
是 ☐ 否 ☑

截至2024年10月31日，申報人持有 22,974,914 股普通股，面值$0.01，已發行。



德克薩斯太平洋土地公司
10-Q基本報表
2024年9月30日結束的季度
目錄
頁碼
截至 2024年9月30日 和 2023年12月31日
收入綜合表和截至的三個月和九個月的總綜合收入 截至期三個月和九個月的經過摘要的綜合收入 2024年9月30日 和 2023
合併現金流量表为 九個月結束了 2024年9月30日 和 2023

目錄
第一部分財務資料
项目1。基本報表
德克薩斯太平洋土地公司
縮短的綜合資產表 資產負債表
(以千為單位，除股份和每股金額外)
(未經查核)
 九月三十日，
2024		12月31日，
2023
資產  
現金及現金等價物$533,914 $725,169 
應收帳款和應計帳款，淨額122,627 128,971 
預付費用及其他流動資產48,426 2,944 
類似稅收交換存款管制— 5,380 
預付所得稅4,002 — 
全部流動資產708,969 862,464 
房地產業已取得142,727 130,024 
不動產、廠房及設備淨值119,108 89,587 
已取得的權利金利益，淨值 164,028 46,609 
無形資產，扣除累計攤銷35,773 21,025 
透過信託書指定的房地產和權利金利益，未指定價值：  
土地（地面權利） — — 
1/16非參與永久性權利金利益— — 
佔1/128的非參與永久性權利金利息 — — 
其他資產4,964 6,689 
資產總額$1,175,569 $1,156,398 
負債和權益  
應付帳款和應計費用$40,560 $22,501 
併進稅及其他應付稅款7,860 10,761 
應納所得稅款2,217 4,795 
未來收入6,694 6,330 
流動負債合計57,331 44,387 
递延所得税负债44,528 42,365 
未來收入-非流動20,625 25,006 
应计负债-非流动953 1,444 
總負債123,437 113,202 
合約和可能負債— — 
股權：  
優先股，面額$0.01，授權股數為5,000,000股，發行且流通股數為截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。0.01 面額為0.0001； 1,000,000 股份已授權 無 截至2024年9月30日和2023年12月31日的未清債務
— — 
0.010.01 面額為0.0001； 46,536,936 和 7,756,156 於2024年9月30日和2023年12月31日分別授權的股份數為 22,977,125 和 23,007,681 (經股票分拆後)截至2024年9月30日和2023年12月31日分別為億股和億股
231 78 
庫藏股股數，成本法； 108,951 和 86,929 億股和億股分別截至2024年9月30日和2023年12月31日
(162,416)(144,998)
資本公積額額外增資16,391 14,613 
其他綜合收益累計額1,768 1,831 
保留收益1,196,158 1,171,672 
總股本1,052,132 1,043,196 
負債加股東權益總額$1,175,569 $1,156,398 

請參閱簡明合併基本報表附註。
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目錄
德克薩斯太平洋土地公司
縮短的綜合資產表 收入及綜合收入表
(以千為單位，除股份和每股金額外)
(未經查核)

 結束於三個月的期間
九月三十日，		九個月結束了
九月三十日，
 2024202320242023
收入：   
石油和天然氣的版稅$94,444 $87,102 $276,377 $258,644 
售水36,211 26,422 113,987 85,799 
生產水的版稅27,727 20,849 76,034 61,824 
設施使用權和其他表面相關收入14,280 18,188 51,496 51,865 
土地銷售901 5,406 2,145 6,806 
總收益173,563 157,967 520,039 464,938 
費用：  
薪酬及其他相關員工費用14,030 11,499 39,262 32,688 
水務相關費用11,731 8,553 36,767 24,496 
總部及行政費用4,029 3,859 12,626 10,738 
法律和專業費用8,316 1,689 14,680 28,471 
按值和其他稅款2,189 1,781 5,990 5,425 
土地銷售費用175 44 425 49 
折舊、減損及攤提5,762 3,584 13,695 10,881 
營業費用總計46,232 31,009 123,445 112,748 
營收127,331 126,958 396,594 352,190 
其他收益，淨額8,086 7,979 31,249 20,239 
稅前收入135,417 134,937 427,843 372,429 
所得稅開支 28,823 29,363 92,243 79,894 
凈利潤$106,594 $105,574 $335,600 $292,535 
其他綜合損失-截至2024年9月30日和2023年9月30日的定期養老金成本，扣除所得稅後為$6, $7, $17。21，分別為
(21)(26)(63)(77)
累計綜合收益$106,573 $105,548 $335,537 $292,458 
每股普通股的凈利潤
基礎$4.64 $4.58 $14.60 $12.69 
稀釋$4.63 $4.58 $14.58 $12.68 
普通股權重平均數量
基礎22,979,781 23,026,563 22,990,213 23,054,073 
稀釋23,012,169 23,045,323 23,016,733 23,072,955 
普通股的每股現金股息$11.17 $1.08 $13.51 $3.24 

請參閱附註事項的簡明合併財務報表。
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德克薩斯太平洋土地公司
簡明綜合 現金流量表
 （以千爲單位）
（未經審計）
 九個月結束
September 30,
 20242023
經營活動現金流量：
淨利潤$335,600 $292,535 
調整淨利潤以計入經營活動現金流量:
折舊、減值和攤銷13,695 10,881 
基於股份的報酬8,989 8,112 
遞延所得稅
2,163 (1,034)
經營性資產和負債變動:
經營資產，不包括所得稅5,806 (19,554)
經營負債，不包括所得稅4,423 9,995 
應付所得稅
(2,578)1,114 
預付所得稅(4,002)4,809 
經營活動產生的現金流量364,096 306,858 
投資活動現金流量：
購買版權利益，扣除關門後調整(120,334)(3,566)
業務收購(45,000)— 
用於收購的存入資金(42,952)— 
購置無形資產— (21,403)
房地產業收購(1,026)(20,320)
購買固定資產
(16,451)(10,630)
固定資產出售收益— 5 
投資活動使用的現金
(225,763)(55,914)
籌集資金的現金流量：
分紅派息(310,550)(74,979)
普通股回購結算(22,795)(32,325)
股份用於代扣稅款交換(1,623)(1,284)
融資活動使用的現金
(334,968)(108,588)
現金，現金等價物和受限制現金的淨增加額(196,635)142,356 
期初現金、現金等價物及受限制的現金730,549 517,182 
期末現金、現金等價物及受限制的現金$533,914 $659,538 
現金流量補充披露：
所得稅已付款項$96,648 $74,984 
補充非現金投資和融資信息:
與資本支出相關的應付帳款增加$5,543 $(243)

請參閱簡明合併基本報表附註。
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德克薩斯太平洋土地公司
基本報表附註
(未經查核)

1.    業務部門的組織和描述

texas pacific land公司（在某些情況下，將一同的子公司稱為“TPL”，“公司”，“我們”或“我們”）是特拉華州的一家公司，也是德克薩斯州最大的地產擁有者之一，擁有約燃料幣燃料幣的土地。 873,000 表面英畝的土地，主要集中在Permian盆地。此外，我們擁有約燃料幣的1/128非參與永久油氣賦稅權益（“NPRI”）下的土地，約燃料幣的1/16 NPRI下的土地，以及約燃料幣的額外淨賦稅英畝（歸一化為1/8）（“NRA”），總計約燃料幣的NRA，主要集中在Permian盆地。 85,000 土地英畝的土地下，總計約約燃料幣的1/16 NPRI，約燃料幣的和約燃料幣的NRA，主要集中在Permian盆地。 371,000 土地英畝上的1/8的額外淨賦稅英畝（歸一化為1/8）（“NRA”），總計約燃料幣的NRA，主要集中在Permian盆地。 8,000 額外的淨油氣賦稅英畝（歸一化為1/8）（“NRA”），總計約燃料幣的NRA，主要集中在Permian盆地。 199,000 NRA，主要集中在Permian盆地。

我們的收入來自石油和燃料幣的版稅、售水、生產水的版稅、地役權和其他與地表有關的收入以及土地銷售。

2021年1月11日，我們從一個業務信託texas pacific land trust（“Trust”）進行了重新組織，依據1888年2月1日生效的信託宣言（“Declaration of Trust”）成立的底拉瓦州法律下的德州太平洋地產股份有限公司（“Corporate Reorganization”）。

普通股授權股份增加

截至2023年12月31日，公司已授權股份共 1,000,000 優先股股票，每股面值為$擁有0.01 每股的“優先股”，以及 7,756,156 每股$ 的普通股 。0.01 每股的“普通股”。在2024年3月1日，我們向德拉瓦州州書記提交了公司第二次修訂和重述公司組織章程（“組織章程”）的修訂證書，根據該修訂章程被修正和重述，以增加公司授權股本股份的總數為 47,536,936 股，包括 1,000,000 優先股股份和 46,536,936 普通股股份。

普通股股份劃分

於2024年3月26日，我們實施了一次股票分拆。 三股東記錄日期為2024年3月18日，我們以股票股利形式，每個現有在外流通的普通股股票拆分為 兩個 股票分拆後，所有股份、股票獎勵、限制性股票獎勵（RSA）、限制性股票單位（RSU）、績效股票單位（PSU）和每股資訊均已按比例進行調整。 三這次一比一的股票分拆不適用於作為庫藏股的股份。0.01 每股普通股保留面值為＄的該金額。因此，由於股票拆分所增加的股份的面值已從“資本公積金”重新分類至“普通股”中。

報告基礎

附帶的簡明合併基本報表已按照美國公認會計原則（“GAAP”）編製，並與包括於截至2023年12月31日年結的Form 10-k上的審核基本報表採用相同基準。 此處的簡明合併基本報表包括管理層認為必要的所有調整，以公允陳述公司截至2024年9月30日財務狀況和2024年和2023年9月30日結束的三個月和九個月期間的營運結果，以及截至2024年和2023年9月30日的九個月期間現金流量。 這些調整屬正常性質，所有公司內部帳戶和交易均已在合併中予以消除。 一些按照GAAP編制的財務報表通常包含的資訊和附註披露已被縮短或從本季度報告中省略，這些中期財務報表和附註應與包含於我們年度報告的Form 10-k的審核財務報表和附註一同閱讀。 本季度報告中顯示的中期數據並不一定代表未來財務結果。

我們在地理區域經營我們的業務。 兩個 業務：土地和資源管理及水務服務和業務。 我們的業務為管理層提供了對我們主要業務的全面財務視角。 這些業務協助TPL的戰略和目標進行對齊，並為業務內資源的及時和合理分配提供了框架。 見附註14“業務分部報告”以瞭解更多關於我們業務範疇的資訊。
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目錄

2.    重要會計政策摘要

財務報表的編制符合美國一般公認的會計原則，要求管理層進行估計和假設，這些估計和假設影響資產和負債的報告金額和變動以及潛在的資產和負債的披露。實際結果可能與估計的結果不一致。
 
按照公認會計原則編制的壓縮合並基本報表要求管理層做出估計和假設，這些估計和假設會影響報告的資產和負債金額、在基本報表日期揭示的或有資產和負債以及報告期內收入和費用的報告金額。實際結果可能與這些估計不同。如果估計和/或假設與實際金額不同，則會在後續期間進行調整，以反映更準確的信息。

現金, 現金 等值和受限現金
 
我們考慮投資於銀行存款、貨幣市場基金和其他高流動性現金投資，如美國國債和商業票據，其原始到期日不超過三個月，被視爲等同現金。我們的等同現金被視爲公允價值等級層次中的一級資產。

下表提供了在截止到2024年9月30日和2023年12月31日的合併資產負債表中報告的現金、現金等價物和受限現金的對賬，與合併現金流量表中顯示的相應金額相對應（單位：千）:
9月30日,
2024		2023年12月31日,
2023
現金及現金等價物$533,914 $725,169 
稅收類似交換託管— 5,380 
現金及現金等價物和受限制的現金總額列示於現金流量表中$533,914 $730,549 

業務組合和資產收購

我們評估一個交易是否符合業務的定義。我們首先應用一個篩選測試，以確定所取得的全部賬面資產的公允價值是否集中在單一可識別資產或類似可識別資產組中。如果通過了篩選測試，則將該交易記錄爲資產獲取。 如果未通過篩選測試，我們進一步考慮所取得的資產集合是否至少具有能夠創造營業收入形式產出的輸入和流程。如果所取得的資產符合此標準，則將該交易記錄爲業務合併。

Acquisitions that qualify as an asset acquisition are accounted for using a cost accumulation model where the purchase price of the acquisition is allocated to the assets acquired on a relative fair value basis on the date of acquisition. We generally account for acquisitions of mineral and royalty interests as asset acquisitions. Inputs used to determine such fair values are primarily based upon internally-developed models, publicly-available drilling information, a risk-adjusted discount rate and publicly-available data regarding mineral transactions consummated by other buyers and sellers, as applicable. These fair values are considered Level 3 assets in the fair value hierarchy. Any associated acquisition costs are capitalized.

Acquisitions that qualify as a business combination are accounted for using the acquisition method of accounting. The fair value of consideration transferred for an acquisition is allocated to the assets acquired and liabilities assumed based on their fair value on a nonrecurring basis on the acquisition date and are subject to fair value adjustments under certain circumstances. The excess of the consideration transferred over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Conversely, in the event the fair value of assets acquired and liabilities assumed is greater than the consideration transferred, a bargain purchase gain is recognized.

Determining the fair value of assets acquired and liabilities assumed requires judgment and often involves the use of significant estimates and assumptions as fair values are not always readily determinable. Different techniques may be used to determine fair values, including market prices (where available), comparisons to transactions for similar assets and liabilities and the discounted net present value of estimated future cash flows, among others. We engage third-party valuation firms when appropriate to assist in the fair value determination of assets acquired and liabilities assumed. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred. We may adjust the amounts recognized in an
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acquisition during a measurement period not to exceed one year from the date of acquisition, as a result of subsequently obtaining additional information that existed at the acquisition date.

3.    Assets Acquired in a Business Combination

On August 20, 2024, we acquired 4,120 acres of land along with other surface-related tangible and intangible assets (collectively referred to as the “Acquired Assets”) from an unaffiliated seller for total consideration of $45.0 million, in an all-cash transaction. There were no liabilities assumed by the Company in this transaction. The Acquired Assets generate revenue streams across water sales, produced water royalties, and SLEM revenue, and provide additional commercial growth opportunities for the Company to expand water sourcing and produced water opportunities to both new and existing customers. The Acquired Assets are located in the Midland Basin.

The Acquired Assets included the following:

Acquired AssetsBalance Sheet ClassificationBusiness Segment
4,120 acres of land
Real estate acquiredLand and Resource Management
Water sourcing assets, including water pits, water wells, pipes and electrical infrastructureProperty, plant and equipmentWater Services and Operations
A 25% non-operating working interest in an existing saltwater disposal (“SWD”) system
Property, plant and equipmentWater Services and Operations
Contractual right to a 10% royalty on produced water revenue generated from the SWD system
Intangible assetsWater Services and Operations
Contractual right to a 7.5% royalty on revenue generated from nonhazardous oilfield solids waste disposal site
Intangible assetsLand and Resource Management

The combination of the 25% non-operating working interest and the 10% royalty interest from the SWD system entitles the Company to 32.5% of produced water revenues generated from the SWD system. As a 25% non-operating working interest owner, the Company is also responsible for its 25% share of operating expenses associated with the SWD system. The operator of the SWD system is responsible for the day-to-day management and operations. Of the 4,120 acres of land acquired, approximately 392 acres are leased to, and operated by, an environmental solution (“ES”) company that operates a nonhazardous oilfield solids waste disposal site. The ES company pays a 7.5% royalty, on revenue generated, to the Company. The Company reports this as SLEM revenue.

The acquisition was accounted for as a business combination using the acquisition method, and therefore, the Acquired Assets were recorded based on their fair value on a nonrecurring basis on the date of acquisition and are subject to fair value adjustments under certain circumstances. When determining the fair values of assets acquired, management made estimates, judgements and assumptions. Inputs used to determine fair values of assets included internally-developed models, risk-adjusted discount rates by asset class, publicly available data on land sales comparisons and other costs analysis. These fair values are considered Level 3 assets in the fair value hierarchy. There was no goodwill recorded on this acquisition.

The Company’s determination of the fair value attributable to the Acquired Assets based on the fair value at the acquisition date is preliminary. Certain data necessary to complete the purchase price allocation is subject to change. We expect to complete the purchase price allocation prior to December 31, 2024, during which time the value of the assets may be revised as appropriate. The following table presents the allocation of fair value by asset class as of August 20, 2024 (in thousands):
Real estate acquired$12,100 
Property, plant and equipment17,200 
Intangible assets15,700 
Total consideration and fair value$45,000 

The Company incurred $0.1 million of transaction-related costs related to this asset acquisition during the nine months ended September 30, 2024 and such costs are included in general and administrative expenses in the condensed consolidated statements of income.
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From August 20, 2024 through September 30, 2024, revenues and operating expenses from the business combination were approximately $0.7 million and $0.1 million, respectively, and are included in our condensed consolidated statements of income. Pro forma financial information is not disclosed as the acquisition was deemed not to have a material impact on our results of operations.

4.    Real Estate Activity

As of September 30, 2024 and December 31, 2023, TPL owned the following land and real estate (in thousands, except number of acres):
September 30,
2024		December 31,
2023
Number of AcresNet Book ValueNumber of AcresNet Book Value
Land (surface rights) (1)
798,991 $— 798,999 $— 
Real estate acquired74,124 142,727 69,447 130,024 
Total real estate873,115 $142,727 868,446 $130,024 
(1)Real estate assigned through the Declaration of Trust.

Land Acquisitions

During the nine months ended September 30, 2024, we acquired 4,120 acres in a business combination with a fair value of $12.1 million and 640 acres of land for an aggregate purchase price of $1.0 million. See further discussion of the business combination at Note 3, “Assets Acquired in a Business Combination.” During the nine months ended September 30, 2023, we acquired 12,141 acres of land for an aggregate purchase price of $20.0 million.

Land Sales

For the nine months ended September 30, 2024, we sold 91 acres of land for an aggregate sales price of $2.1 million. For the nine months ended September 30, 2023, we sold 18,061 acres of land for an aggregate sales price of $6.8 million.

5.    Property, Plant and Equipment
 
Property, plant and equipment, net consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):
 September 30,
2024		December 31,
2023
Property, plant and equipment, at cost:  
Water service-related assets (1)
$175,269 $136,340 
Furniture, fixtures and equipment10,018 9,801 
Other598 598 
Total property, plant and equipment, at cost185,885 146,739 
Less: accumulated depreciation(66,777)(57,152)
Property, plant and equipment, net$119,108 $89,587 
(1)Includes $17.2 million of assets acquired in a business combination. For further information, see Note 3, “Assets Acquired in a Business Combination.”

Depreciation expense was $3.4 million and $3.0 million for the three months ended September 30, 2024 and 2023, respectively. Depreciation expense was $9.7 million and $9.3 million for the nine months ended September 30, 2024 and 2023, respectively.

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6.    Oil and Gas Royalty Interests

As of September 30, 2024 and December 31, 2023, we owned the following oil and gas royalty interests (in thousands):
September 30,
2024		December 31,
2023
Oil and gas royalty interests:
1/16th nonparticipating perpetual royalty interests (1)
$— $— 
1/128th nonparticipating perpetual royalty interests (1)
— — 
Royalty interests acquired, at cost171,828 51,494 
Total royalty interests171,828 51,494 
Less: accumulated depletion(7,800)(4,885)
Royalty interests, net$164,028 $46,609 
(1)Royalty interests assigned through the Declaration of Trust.

During the nine months ended September 30, 2024, we acquired oil and gas royalty interests in 4,106 NRA in Culberson County, Texas for a purchase price of approximately $120.3 million, net of post-close adjustments, in an all-cash transaction. The acquisition was completed in conjunction with another entity that assigned a share of its interest in a purchase and sales agreement with an unaffiliated seller to the Company. Each party paid a pro-rata share of the purchase price and closing costs to the seller.

During the nine months ended September 30, 2023, we acquired oil and gas royalty interests in 119 NRA for an aggregate purchase price of approximately $3.6 million. There were no sales of oil and gas royalty interests during the nine months ended September 30, 2024 and 2023, respectively.

Depletion expense was $1.9 million and $0.5 million for the three months ended September 30, 2024 and 2023, respectively. Depletion expense was $2.9 million and $1.4 million for the nine months ended September 30, 2024 and 2023, respectively.

7.    Intangible Assets

Intangible assets, net consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):

 September 30,
2024		December 31,
2023
Intangible assets, at cost:  
Saltwater disposal easement$17,557 $17,557 
Contracts acquired in a business combination (1)
15,700 — 
Groundwater rights acquired3,846 3,846 
Total intangible assets, at cost (2)
37,103 21,403 
Less: accumulated amortization(1,330)(378)
Intangible assets, net$35,773 $21,025 
(1)See further discussion in Note 3, “Assets Acquired in a Business Combination.”
(2)The remaining weighted average amortization period for total intangible assets was 15.8 years as of September 30, 2024.

Amortization of intangible assets was $0.4 million and $1.0 million for the three and nine months ended September 30, 2024, respectively. Amortization of intangible assets was $0.1 million for the three and nine months ended September 30, 2023. The estimated future annual amortization expense of intangible assets is $0.6 million for the remainder of 2024, $2.3 million for each year of 2025 through 2029, and $23.7 million thereafter.

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8.    Share-Based Compensation

The Company grants share-based compensation to employees under the Texas Pacific Land Corporation 2021 Incentive Plan (the “2021 Plan”) and to its non-employee directors under the 2021 Non-Employee Director Stock and Deferred Compensation Plan (the “2021 Directors Plan” and, with the 2021 Plan, collectively referred to herein as the “Plans”). In conjunction with the three-for-one stock split effected on March 26, 2024, the Plans were adjusted to increase the authorized number of shares that may be issued under the Plans. As of September 30, 2024, share-based compensation granted under the Plans has included these award types: stock awards, RSAs, RSUs and PSUs. Currently, all awards granted under the plans are entitled to receive dividends (which are accrued and distributed to award recipients upon vesting) or have dividend equivalent rights. Dividends and dividend equivalent rights are subject to the same vesting conditions as the awards to which they relate and are forfeitable if the related awards are forfeited. RSUs granted under the 2021 Plan vest in one-third increments and PSUs granted under the 2021 Plan cliff vest at the end of three years if the performance metrics are achieved (as discussed further below). RSAs granted prior to October 31, 2023 under the 2021 Directors Plan vested on the first anniversary of the award. Effective October 31, 2023, the 2021 Directors Plan was amended such that stock awards granted vest in full on the date of grant.

Incentive Plan for Employees

The maximum aggregate number of shares of the Company’s Common Stock that may be issued under the 2021 Plan is 225,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of September 30, 2024, 136,238 shares of Common Stock remained available under the 2021 Plan for future grants.

The following table summarizes activity related to RSAs and RSUs under the 2021 Plan for the nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30,
20242023
Restricted Stock AwardsRestricted Stock UnitsRestricted Stock AwardsRestricted Stock Units
Number of RSAsWeighted-Average Grant-Date Fair Value per ShareNumber of RSUsWeighted-Average Grant-Date Fair Value per ShareNumber of RSAsWeighted-Average Grant-Date Fair Value per ShareNumber of RSUsWeighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period (1)
— $— 18,675 $527 4,011 $417 16,836 $441 
Granted (2)
— — 12,655 481 — — 8,544 641 
Vested (3)
— — (7,812)507 — — (5,592)441 
Cancelled and forfeited— — (306)528 — — — — 
Nonvested at end of period— $— 23,212 $509 4,011 $417 19,788 $528 
(1)There were 4,011 RSAs unvested as of September 30, 2023. As of December 31, 2023, the 4,011 RSAs had either vested or had been forfeited. No additional RSAs have been granted under the 2021 plan.
(2)RSUs vest in one-third increments over a three-year period.
(3)Of the 7,812 RSUs that vested during the nine months ended September 30, 2024, 2,948 RSUs were surrendered by employees to the Company upon vesting to settle tax withholdings.

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The following table summarizes activity related to PSUs for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,
20242023
Number of Target PSUsWeighted-Average Grant-Date Fair Value per ShareNumber of Target PSUsWeighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period (1)
12,738 $595 7,182 $452 
Granted (2)
8,340 538 5,556 781 
Vested— — — — 
Cancelled and forfeited— — — — 
Nonvested at end of period21,078 $573 12,738 $595 
(1)Nonvested PSUs as of January 1, 2024 include 6,369 RTSR (as defined below) PSUs and 6,369 FCF (as defined below) PSUs. If the maximum amount of the performance metrics described in the PSU agreements are achieved, the actual number of shares that will ultimately be awarded under the PSU agreements will exceed target PSUs by 100% (i.e., a collective 12,738 additional shares would be issued).
(2)The PSUs were granted on February 13, 2024 and include 4,170 RTSR PSUs (based on target) with a grant date fair value of $602 per share and 4,170 FCF PSUs (based on target) with a grant date fair value of $475 per share. If the maximum amount of the performance metrics described in the PSU agreements are achieved, the actual number of shares that will ultimately be awarded under the PSU agreements will exceed target PSUs by 100% (i.e., a collective 8,340 additional shares would be issued).

Each PSU has a value equal to one share of Common Stock. The PSUs will vest three years after grant if certain performance metrics are met, as follows: 50% of the PSUs may be earned based on the Company’s relative total stockholder return (“RTSR”) over the applicable three-year measurement period compared to the SPDR® S&P® Oil & Gas Exploration & Production ETF (“XOP Index”), and 50% of the PSUs may be earned based on the cumulative free cash flow per share (“FCF”) over the three-year vesting period. Because the RTSR PSU is a market-based award, its grant date fair value was determined using a Monte Carlo simulation model that uses the same input assumptions as the Black-Scholes model to determine the expected potential ranking of the Company against the XOP Index (i.e., the probability of satisfying the market condition defined in the award). Expected volatility in the model was estimated based on the volatility of historical stock prices over a period matching the expected term of the award. The risk-free interest rate was based on U.S. Treasury yield constant maturities for a term matching the expected term of the award. The inputs for the Monte Carlo simulation model are designated as Level 2 within the fair value hierarchy.

Equity Plan for Non-Employee Directors

The maximum aggregate number of shares of Common Stock that may be issued under the 2021 Directors Plan is 30,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of September 30, 2024, 24,219 shares of Common Stock remained available under the 2021 Directors Plan for future grants.

The following table summarizes activity related to the RSAs under the 2021 Directors Plan for the nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30,
20242023
Number of RSAsWeighted-Average Grant-Date Fair Value per ShareNumber of RSAsWeighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period1,134 $781 2,097 $427 
Granted (1)
— — 1,458 781 
Vested(1,134)781 (2,097)427 
Cancelled and forfeited— — — — 
Nonvested at end of period
— $— 1,458 $781 
(1)RSAs granted prior to October 31, 2023 vest on the first anniversary of the grant date.
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In January 2024, the Company granted a total of 2,160 shares of Common Stock with a grant date fair value of $524 per share, which was the closing price of its Common Stock on the date of grant, to the members of the Company’s board of directors (the “Board”). The stock awards were vested in full on the date of grant.

Share-Based Compensation Expense

The following table summarizes our share-based compensation expense by line item in the condensed consolidated statements of income (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Salaries and related employee expenses (employee awards)$2,935 $2,502 $7,855 $7,217 
General and administrative expenses (director awards)— 287 1,134 895 
Total share-based compensation expense (1)
$2,935 $2,789 $8,989 $8,112 
(1)The Company recognized a tax benefit of $0.6 million related to share-based compensation for each of the three months ended September 30, 2024 and 2023. The Company recognized a tax benefit of $1.9 million and $1.7 million related to share-based compensation for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, there was $11.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under existing share-based plans expected to be recognized over a weighted average period of 1.3 years.

9.    Other Income, Net

Other income, net, includes interest earned on our cash balances and miscellaneous income (expense).

Other income, net for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

Three Months Ended
September 30,		Nine Months Ended
September 30,
 2024202320242023
Other income, net:
Interest earned on cash and cash equivalents, net$7,913 $7,850 $28,475 $19,849 
Miscellaneous income (expense), net (1)
173 129 2,774 390 
Total other income, net$8,086 $7,979 $31,249 $20,239 
(1)During the nine months ended September 30, 2024, miscellaneous income (expense), net includes $1.9 million of proceeds from a settlement with a title company regarding a defect in title to property acquired in a prior year.

10.    Income Taxes

The calculation of our effective tax rate was as follows for the three and nine months ended September 30, 2024 and 2023 (in thousands, except percentages):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Income before income taxes$135,417 $134,937 $427,843 $372,429 
Income tax expense$28,823 $29,363 $92,243 $79,894 
Effective tax rate21.3 %21.8 %21.6 %21.5 %

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For interim periods, our income tax expense and resulting effective tax rate are based upon an estimated annual effective tax rate adjusted for the effects of items required to be treated as discrete to the period, including changes in tax laws, changes in estimated exposures for uncertain tax positions, and other items.

11.    Earnings Per Share

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares outstanding during the period. Diluted EPS is computed based upon the weighted average number of shares outstanding during the period plus unvested restricted stock and other unvested awards granted pursuant to our incentive and equity compensation plans. The computation of diluted EPS reflects the potential dilution that could occur if all outstanding awards under the incentive and equity compensation plans were converted into shares of Common Stock or resulted in the issuance of shares of Common Stock that would then share in the earnings of the Company. The number of dilutive securities is computed using the treasury stock method.

The following table sets forth the computation of EPS for the three and nine months ended September 30, 2024 and 2023 (in thousands, except number of shares and per share data):
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2024202320242023
Net income$106,594 $105,574 $335,600 $292,535 
Basic earnings per share:
Weighted average shares outstanding for basic earnings per share22,979,781 23,026,563 22,990,213 23,054,073 
Basic earnings per share$4.64 $4.58 $14.60 $12.69 
Diluted earnings per share:
Weighted average shares outstanding for basic earnings per share22,979,781 23,026,563 22,990,213 23,054,073 
Effect of dilutive securities:
Incentive and equity compensation plans32,388 18,760 26,520 18,882 
Weighted average shares outstanding for diluted earnings per share23,012,169 23,045,323 23,016,733 23,072,955 
Diluted earnings per share$4.63 $4.58 $14.58 $12.68 

Restricted stock, if any, is included in the number of shares of Common Stock issued and outstanding, but omitted from the basic EPS calculation until such time as the shares of restricted stock vest. Certain stock awards granted are not included in the dilutive securities in the table above as they were anti-dilutive for the three and nine months ended September 30, 2023. There were no anti-dilutive securities for the three and nine months ended September 30, 2024.

12.    Commitments and Contingencies

Litigation

Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the Company’s financial condition, results of operations or liquidity as of September 30, 2024, other than as described below.

Prior to January 1, 2022, ad valorem taxes with respect to our historical royalty interests were paid directly by third parties pursuant to an existing arrangement. After the completion of our Corporate Reorganization, we received notice from a third party that it no longer intended to pay the ad valorem taxes related to such historical royalty interests. In order to protect the historical royalty interests from any potential tax liens for non-payment of ad valorem taxes, we have accrued and/or paid such ad valorem taxes since January 1, 2022. While we intend to seek reimbursement from the third party for such taxes, we are unable to estimate the amount and/or likelihood of such reimbursement, and accordingly, no loss recovery receivable has been recorded as of September 30, 2024.
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13.    Changes in Equity

The following tables present changes in our equity for the nine months ended September 30, 2024 and 2023 (in thousands, except shares and per share amounts):
Common StockTreasury StockAdditional Paid-in CapitalAccum.
Other
Comp.
Income (Loss)		Retained EarningsTotal
Equity
SharesAmount
For the nine months ended September 30, 2024:
Balances as of December 31, 2023
23,007,681 $78 $(144,998)$14,613 $1,831 $1,171,672 $1,043,196 
Net income— — — — — 114,417 114,417 
Issuance of common stock related to stock split— 153 — (153)— — — 
Dividends paid — $1.17 per share of common stock
— — — — — (26,907)(26,907)
Share-based compensation, net of forfeitures8,373 — 4,698 (1,297)— 15 3,416 
Repurchases of common stock and related excise taxes(20,106)— (10,445)— — — (10,445)
Shares exchanged for tax withholdings(2,469)— (1,207)— — — (1,207)
Periodic pension costs, net of income taxes of $6
— — — — (21)— (21)
Balances as of March 31, 2024
22,993,479 231 (151,952)13,163 1,810 1,259,197 1,122,449 
Net income— — — — — 114,589 114,589 
Dividends paid — $1.17 per share of common stock
— — — — — (26,894)(26,894)
Share-based compensation, net of forfeitures— — — 2,700 — (58)2,642 
Repurchases of common stock and related excise taxes(10,087)— (6,344)— — — (6,344)
Periodic pension costs, net of income taxes of $5
— — — — (21)— (21)
Balances as of June 30, 2024
22,983,392 231 (158,296)15,863 1,789 1,346,834 1,206,421 
Net income— — — — — 106,594 106,594 
Dividends paid — $1.17 per share of common stock
— — — — — (26,915)(26,915)
Special dividends paid — $10.00 per share of common stock
— — — — — (229,834)(229,834)
Share-based compensation, net of forfeitures1,599 — 2,430 528 — (521)2,437 
Repurchases of common stock and related excise taxes(7,387)— (6,134)— — — (6,134)
Shares exchanged for tax withholdings(479)— (416)— — — (416)
Periodic pension costs, net of income taxes of $6
— — — — (21)— (21)
Balances as of September 30, 2024
22,977,125 $231 $(162,416)$16,391 $1,768 $1,196,158 $1,052,132 
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Common StockTreasury StockAdditional Paid-in CapitalAccum.
Other
Comp.
Income (Loss)		Retained EarningsTotal
Equity
SharesAmount
For the nine months ended September 30, 2023:
Balances as of December 31, 2022
23,087,037 $78 $(104,139)$8,293 $2,516 $866,139 $772,887 
Net income— — — — — 86,568 86,568 
Dividends paid — $1.08 per share of common stock
— — — — — (25,061)(25,061)
Share-based compensation, net of forfeitures5,268 — 3,033 (560)— (103)2,370 
Repurchases of common stock and related excise taxes(10,881)— (6,749)— — — (6,749)
Shares exchanged for tax withholdings(1,464)— (939)— — — (939)
Periodic pension costs, net of income taxes of $6
— — — — (25)— (25)
Balances as of March 31, 2023
23,079,960 78 (108,794)7,733 2,491 927,543 829,051 
Net income— — — — — 100,393 100,393 
Dividends paid — $1.08 per share of common stock
— — — — — (24,966)(24,966)
Share-based compensation, net of forfeitures— — — 2,849 — (43)2,806 
Repurchases of common stock and related excise taxes(42,525)— (19,708)— — — (19,708)
Periodic pension costs, net of income taxes of $8
— — — — (26)— (26)
Balances as of June 30, 2023
23,037,435 78 (128,502)10,582 2,465 1,002,927 887,550 
Net income— — — — — 105,574 105,574 
Dividends paid — $1.08 per share of common stock
— — — — — (24,952)(24,952)
Share-based compensation, net of forfeitures1,782 — 990 1,800 — (38)2,752 
Repurchases of common stock and related excise taxes(10,692)— (5,995)— — — (5,995)
Shares exchanged for tax withholdings(543)— (345)— — — (345)
Periodic pension costs, net of income taxes of $7
— — — — (26)— (26)
Balances as of September 30, 2023
23,027,982 $78 $(133,852)$12,382 $2,439 $1,083,511 $964,558 

Increase in Authorized Shares of Common Stock

On March 1, 2024, the Company increased its authorized shares of capital stock to 47,536,936, consisting of 1,000,000 shares of Preferred Stock and 46,536,936 shares of Common Stock. For further information see Note 1, “Organization and Description of Business Segments.”

Stock Repurchase Program

On November 1, 2022, our Board approved a stock repurchase program, which became effective January 1, 2023, to purchase up to an aggregate of $250.0 million of our outstanding Common Stock.

The Company opportunistically repurchases stock under the stock repurchase program with funds generated by cash from operations. This stock repurchase program may be suspended from time to time, modified, extended or discontinued by the Board at any time. Purchases under the stock repurchase program may be made through a combination of open market repurchases in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, privately negotiated transactions, and/or other transactions at the Company’s discretion, including under a Rule 10b5-1 trading plan implemented by the Company, and are subject to market conditions, applicable legal requirements and other factors.

For the nine months ended September 30, 2024 and 2023, we repurchased shares of our Common Stock in amounts totaling $22.7 million and $32.2 million, respectively.

14.    Business Segment Reporting
 
During the periods presented, we reported our financial performance based on the following segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of our strategies and objectives and provide a framework for timely and rational allocation of resources within businesses. We eliminate any inter-segment revenues and expenses upon consolidation.
 
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The Land and Resource Management segment encompasses the business of managing our approximately 873,000 surface acres of land and our approximately 199,000 NRA of oil and gas royalty interests, principally concentrated in the Permian Basin. The revenue streams of this segment consist primarily of royalties from oil and gas, revenues from easements and commercial leases, and land and material sales.

The Water Services and Operations segment encompasses the business of providing a full-service water offering to operators in the Permian Basin. The revenue streams of this segment primarily consist of revenue generated from sales of sourced and treated water as well as revenue from produced water royalties.
 
The following table presents segment financial results for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Revenues:
Land and resource management$106,648 $109,933 $322,165 $315,276 
Water services and operations66,915 48,034 197,874 149,662 
Total consolidated revenues$173,563 $157,967 $520,039 $464,938 
Net income:
Land and resource management$71,870 $82,884 $232,970 $217,860 
Water services and operations34,724 22,690 102,630 74,675 
Total consolidated net income$106,594 $105,574 $335,600 $292,535 
Capital expenditures:
Land and resource management$66 $47 $210 $191 
Water services and operations9,767 5,196 21,784 10,196 
Total capital expenditures$9,833 $5,243 $21,994 $10,387 
Depreciation, depletion and amortization:
Land and resource management$2,135 $703 $3,641 $2,233 
Water services and operations3,627 2,881 10,054 8,648 
Total depreciation, depletion and amortization$5,762 $3,584 $13,695 $10,881 

The following table presents total assets and property, plant and equipment, net by segment as of September 30, 2024 and December 31, 2023 (in thousands):
 September 30,
2024		December 31,
2023
Assets:  
Land and resource management$954,411 $975,136 
Water services and operations221,158 181,262 
Total consolidated assets$1,175,569 $1,156,398 
Property, plant and equipment, net:  
Land and resource management$4,937 $5,322 
Water services and operations114,171 84,265 
Total consolidated property, plant and equipment, net$119,108 $89,587 

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15.    Oil and Gas Producing Activities
 
We measure our share of oil and gas produced in barrels of oil equivalent (“Boe”). One Boe equals one barrel of crude oil, condensate, NGLs (natural gas liquids) or approximately 6,000 cubic feet of gas. For each of the three months ended September 30, 2024 and 2023, our share of oil and gas produced was approximately 28.3 and 21.8 thousand Boe per day, respectively. For the nine months ended September 30, 2024 and 2023, our share of oil and gas produced was approximately 26.0 and 22.6 thousand Boe per day, respectively. Reserves related to our royalty interests are not presented because the information is unavailable.

There are a number of oil and gas wells where we have a royalty interest that have been permitted but are still awaiting drilling and completion activity. In addition, we have also identified oil and gas wells where we have a royalty interest that have been drilled but are not yet completed (“DUC”). These permitted and DUC wells represent potential near-term candidates for further development by operators towards ultimately being placed into production. We have identified 496 permitted gross wells (an estimated 6.9 net wells) and 673 DUC wells (an estimated 11.8 net wells) subject to our royalty interest as of September 30, 2024. The number of permitted and DUC wells is determined using uniform drilling spacing units with pooled interests for all wells awaiting completion.

16.    Subsequent Events
 
We evaluated events that occurred after the balance sheet date through the date these financial statements were issued, and the following events that met recognition or disclosure criteria were identified:

Royalty Interest Acquisition

On October 2, 2024, we acquired approximately 7,490 NRA located primarily in the Midland Basin in Martin, Midland and other counties, with over 80% of the acquired interests adjacent to or overlapping existing TPL surface and royalty acreage for total cash consideration of $276.4 million, $43.0 million of which represented a deposit held in escrow as of September 30, 2024 and recorded in prepaid expenses and other current assets on the condensed consolidated balance sheet and reported as a cash outflow in the investing section of the condensed consolidated statements of cash flows.

Dividends Declared

On November 4, 2024, our Board declared a quarterly cash dividend of $1.60 per share, payable on December 16, 2024 to stockholders of record at the close of business on December 2, 2024.


*****
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) including statements regarding management’s expectations, hopes, intentions or strategies regarding the future. Words or phrases such as “expects,” “anticipates,” “could,” “will,” “intends,” “may,” “might,” “plan,” “potential,” “should,” “would,” and “believes”, or similar expressions, when used in this Quarterly Report on Form 10-Q or other filings with the Securities and Exchange Commission (the “SEC”), are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the Company’s future operations and prospects, the markets for real estate in the areas in which the Company owns real estate, applicable zoning regulations, the markets for oil and gas including actions of other oil and gas producers or consortiums worldwide such as the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively referred to as “OPEC+”), expected competition, management’s intent, beliefs or current expectations with respect to the Company’s future financial performance and other matters. All forward-looking statements in this Quarterly Report are based on information available to us as of the date this Quarterly Report is filed with the SEC, and we assume no responsibility to update any such forward-looking statements, except as required by law. All forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the factors discussed in Item 1A. “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), and in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in conjunction with our 2023 Annual Report filed with the SEC on February 21, 2024 and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Period-to-period comparisons of financial data are not necessarily indicative, and therefore, should not be relied upon as indicators, of the Company’s future performance.

Overview
 
Texas Pacific Land Corporation (which, together with its subsidiaries as the context requires, may be referred to as “TPL”, the “Company”, “our”, “we” or “us”) is one of the largest landowners in the State of Texas with approximately 873,000 surface acres of land, with the majority of our ownership concentrated in the Permian Basin. Additionally, we own a 1/128th nonparticipating perpetual oil and gas royalty interest (“NPRI”) under approximately 85,000 acres of land, a 1/16th NPRI under approximately 371,000 acres of land, and approximately 8,000 additional net royalty acres (normalized to 1/8th) (“NRA”), for a collective total of approximately 199,000 NRA, principally concentrated in the Permian Basin.

The Company was originally organized under a Declaration of Trust, dated February 1, 1888, to receive and hold title to extensive tracts of land in the State of Texas that were previously the property of the Texas and Pacific Railway Company. We completed our reorganization on January 11, 2021 from a business trust, Texas Pacific Land Trust, into Texas Pacific Land Corporation, a corporation formed and existing under the laws of the State of Delaware.

We are not an oil and gas producer. Our business activity is generated from surface and royalty interest ownership, primarily in the Permian Basin. Our revenues are derived from oil and gas royalties, water sales, produced water royalties, easements and other surface-related income and land sales. Due to the nature of our operations and concentration of our ownership in one geographic location, our revenue and net income are subject to substantial fluctuations from quarter to quarter and year to year. In addition to fluctuations in response to changes in the market price for oil and gas, our financial results are also subject to decisions by not only the owners and operators of the oil and gas wells to which our oil and gas royalty interests relate, but also to other owners and operators in the Permian Basin as it relates to our other revenue streams, principally water sales, produced water royalties, easements, and other surface-related revenue.

For a detailed overview of our business and business segments, see Part I, Item 1. “Business — General” in our 2023 Annual Report.

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Market Conditions

While average oil prices for the nine months ended September 30, 2024 have increased slightly compared to average oil prices during the same period last year, average oil prices for the three months ended September 30, 2024 have decreased compared to the same period of 2023. Oil prices continue to be impacted by certain actions by OPEC+, geopolitics, and evolving global supply and demand trends, among other factors. Average natural gas prices during 2024 have decreased compared to average prior year natural gas prices. Global and domestic natural gas markets have experienced volatility due to macroeconomic conditions, infrastructure and logistical constraints, weather, and geopolitics, among other factors. Since mid-2022, the Waha Hub located in Pecos County, Texas has at times experienced significant negative price differentials relative to Henry Hub, located in Erath, Louisiana, due in part to growing local Permian natural gas production and limited natural gas pipeline takeaway capacity with 2024 having experienced negative Waha natural gas prices throughout much of the year. Midstream infrastructure is currently being developed by operators to provide additional takeaway capacity, though the impact on future basis differentials will be dependent on future natural gas production and other factors. Changes in global and domestic macro-economic conditions could result in additional shifts in oil and gas supply and demand in future periods. Although our revenues are directly and indirectly impacted by changes in oil and natural gas prices, we believe our royalty interests (which require no capital expenditures or operating expense burden from us for well development), strong balance sheet, and liquidity position will help us navigate through potential commodity price volatility.

Permian Basin Activity

The Permian Basin is one of the oldest and most well-known hydrocarbon-producing areas and currently accounts for a substantial portion of oil and gas production in the United States, covering approximately 86,000 square miles across southeastern New Mexico and western Texas. Exploration and production (“E&P”) companies operating in the Permian Basin continue to maintain robust drilling and development activity. Per the U.S. Energy Information Administration, Permian production is currently in excess of 6.0 million barrels per day, which is higher than the average daily production in this region for any year prior to 2024.

Due to our ownership concentration in the Permian Basin, our revenues are directly impacted by oil and gas pricing and drilling activity in the Permian Basin. Below are metrics for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Oil and Gas Pricing Metrics:(1)
WTI Cushing average price per bbl$76.43 $82.25 $78.58 $77.27 
Henry Hub average price per mmbtu$2.11 $2.59 $2.11 $2.46 
Waha Hub natural gas average price per mmbtu$(0.50)$2.04 $(0.02)$1.73 
Activity Metrics specific to the Permian Basin:(1)(2)
Average monthly horizontal permits683640655641
Average monthly horizontal wells drilled492514506536
Average weekly horizontal rig count294314299330
DUCs as of September 30 for each applicable year
4,4914,8574,4914,857
Total Average US weekly horizontal rig count (2)
521578560642
(1) Commonly used definitions in the oil and gas industry provided in the table above are defined as follows: WTI Cushing represents West Texas Intermediate. Bbl represents one barrel of 42 U.S. gallons of oil. Mmbtu represents one million British thermal units, a measurement used for natural gas. Waha Hub natural gas pricing data per Bloomberg. DUCs represent drilled but uncompleted wells. DUC classification is based on well data and date stamps provided by Enverus. DUCs are based on wells that have a drilled/spud date stamp but do not have a completed or first production date stamp. Excludes wells that have been labeled plugged and abandoned or permit expired and wells drilled/spud more than five years ago.

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(2) Permian Basin specific information per Enverus analytics. US weekly horizontal rig counts per Baker Hughes United States Rotary Rig Count for horizontal rigs. Statistics for similar data are also available from other sources. The comparability between these other sources and the sources used by the Company may differ.

The metrics above show selected domestic benchmark oil and natural gas prices and approximate activity levels in the Permian Basin for the three and nine months ended September 30, 2024 and 2023. While average oil prices for the nine months ended September 30, 2024 have increased slightly compared to the same period in 2023, average oil prices for the three months ended September 30, 2024 have decreased compared to the same period of 2023. Natural gas prices for the three and nine months ended September 30, 2024 have declined compared to the same period last year. E&P companies broadly continue to deploy capital at a measured pace as drilling and development activities across the Permian Basin have remained strong overall. As we are a significant landowner in the Permian Basin and not an oil and gas producer, our revenue is affected by the development decisions made by companies that operate in the areas where we own royalty interests and land. Accordingly, these decisions made by others affect, both directly and indirectly, our oil and gas royalties, produced water royalties, water sales, and other surface-related income.

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash and cash flows generated from our operations. Our primary liquidity and capital requirements are for capital expenditures related to our Water Services and Operations segment (the extent and timing of which are under our control), working capital and general corporate needs.

We continuously review our levels of liquidity and capital resources. If market conditions were to change and our revenues were to decline significantly or our operating costs were to increase significantly, our cash flows and liquidity could be reduced. Should this occur, we could seek alternative sources of funding. We had no debt, credit facilities or any off-balance sheet arrangements, as of September 30, 2024.

As we evaluate our current capital structure, capital allocation priorities, business fundamentals, and investment opportunities, we have set a target cash and cash equivalents balance of approximately $700 million. Above this target, we will seek to deploy the majority of our free cash flow towards additional dividends and share repurchases. As of September 30, 2024, we had cash and cash equivalents of $533.9 million that we expect to utilize, along with cash flow from operations, to provide capital to support our business, to repurchase our common stock, par value $0.01 per share (the “Common Stock”), subject to market conditions, to pay dividends subject to the discretion of our board of directors (the “Board”), for potential acquisitions and for general corporate purposes. We believe that cash from operations, together with our cash and cash equivalents balances, will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future.

Return of Capital to Shareholders

During the nine months ended September 30, 2024, we paid total dividends to our stockholders of $310.6 million, consisting of special cash dividends of $10.00 per share of Common Stock and regular quarterly cash dividends of $1.17 per share of Common Stock. In addition, during the nine months ended September 30, 2024, we repurchased $22.7 million of our Common Stock (including share repurchases not settled at the end of the period).

Acquisition Activity

We completed two separate acquisitions in August 2024, each in an all-cash transaction. We acquired mineral interests across approximately 4,106 NRA located in Culberson County, Texas for a purchase price of $120.3 million, net of post-close adjustments. The acquisition was completed in conjunction with Brigham Royalties Fund I Holdco, L.L.C., a subsidiary of Brigham Royalties, in an arms-length transaction with an unaffiliated seller. See further discussion of this acquisition in Note 6, “Oil and Gas Royalty Interests.” The acquired mineral interests overlap with existing TPL royalty acreage. Additionally, we acquired 4,120 surface acres in Martin County, Texas along with other surface-related tangible and intangible assets in a business combination for total consideration of $45.0 million. See further discussion of this acquisition in Note 3, “Assets Acquired in a Business Combination.”

On October 2, 2024, we acquired approximately 7,490 NRA located primarily in the Midland Basin in Martin, Midland and other counties, with over 80% of the acquired interests adjacent to or overlapping existing TPL surface and royalty acreage for cash consideration of $276.4 million, $43.0 million of which was held in escrow as of September 30, 2024.
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Development of Innovative Solutions for Produced Water and Capital Expenditures

In May 2024, we announced our progress towards developing innovative solutions for produced water in the Permian Basin. Over the last few years, we have been working with a leading industrial technology and manufacturing firm to develop an energy-efficient desalination and treatment process and associated equipment that can recycle produced water into fresh water with quality standards appropriate for surface discharge and beneficial reuse. With the Permian Basin generating approximately 18 million barrels of produced water per day, we believe this technology would provide an attractive and critical alternative to subsurface injection. We have successfully tested a pilot program in our research and development lab, and we are now working towards the next phase of constructing a facility with an initial capacity of 10,000 barrels of water per day. We filed a patent application for the desalination and treatment process and have secured exclusive use-rights for the equipment towards produced water applications. We are also in commercial discussions with the some of the largest, most active oil and gas upstream operators as we look to provide critical, technology-driven solutions while also optimizing our economic interests and limiting capital expense. During the nine months ended September 30, 2024, we have spent $5.3 million on this new energy-efficient desalination and treatment process and equipment, of which $3.4 million was capitalized.

Additionally, during the nine months ended September 30, 2024, we invested approximately $18.4 million to maintain and/or enhance our water sourcing assets.

Cash Flows from Operating Activities

For the nine months ended September 30, 2024 and 2023, net cash provided by operating activities was $364.1 million and $306.9 million, respectively. Our cash flow provided by operating activities is primarily from oil, gas and produced water royalties, water and land sales, easements, and other surface-related income. Cash flows used in operations generally consist of operating expenses associated with our revenue streams, general and administrative expenses and income taxes.

The increase in cash flows provided by operating activities for the nine months ended September 30, 2024 compared to the same period of 2023 was primarily driven by an increase in operating income and changes in working capital requirements during 2024 as compared to 2023.
 
Cash Flows Used in Investing Activities

For the nine months ended September 30, 2024 and 2023, net cash used in investing activities was $225.8 million and $55.9 million, respectively. Our cash flows used in investing activities are primarily related to acquisitions and capital expenditures related to our water services and operations segment. Our acquisitions may include land, royalty interests and other similar tangible and intangible assets.

For the nine months ended September 30, 2024 and 2023, the cash flows used for acquisitions, including a deposit for an acquisition, totaled $209.3 million and $45.3 million, respectively. For further information regarding acquisitions during the three months ended September 30, 2024 and thereafter, see “Acquisition Activity” above. Capital expenditures for the nine months ended September 30, 2024 and 2023 were $22.0 million and $10.4 million, respectively.

Cash Flows Used in Financing Activities

For the nine months ended September 30, 2024 and 2023, net cash used in financing activities was $335.0 million and $108.6 million, respectively. Our cash flows used in financing activities primarily consist of activities that return capital to our stockholders, such as payments of dividends and repurchases of our Common Stock.

During the nine months ended September 30, 2024 and 2023, we paid total dividends of $310.6 million and $75.0 million, respectively. During the nine months ended September 30, 2024 and 2023, we repurchased $22.7 million and $32.2 million of our Common Stock, respectively (including share repurchases not settled at the end of the period).

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Results of Operations - Consolidated

The following table shows our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2024202320242023
Revenues:   
Oil and gas royalties$94,444 $87,102 $276,377 $258,644 
Water sales36,211 26,422 113,987 85,799 
Produced water royalties27,727 20,849 76,034 61,824 
Easements and other surface-related income14,280 18,188 51,496 51,865 
Land sales901 5,406 2,145 6,806 
Total revenues173,563 157,967 520,039 464,938 
Expenses:  
Salaries and related employee expenses14,030 11,499 39,262 32,688 
Water service-related expenses11,731 8,553 36,767 24,496 
General and administrative expenses4,029 3,859 12,626 10,738 
Legal and professional fees8,316 1,689 14,680 28,471 
Ad valorem and other taxes2,189 1,781 5,990 5,425 
Land sales expenses175 44 425 49 
Depreciation, depletion and amortization5,762 3,584 13,695 10,881 
Total operating expenses46,232 31,009 123,445 112,748 
Operating income127,331 126,958 396,594 352,190 
Other income, net8,086 7,979 31,249 20,239 
Income before income taxes135,417 134,937 427,843 372,429 
Income tax expense 28,823 29,363 92,243 79,894 
Net income$106,594 $105,574 $335,600 $292,535 

For the Three Months Ended September 30, 2024 as Compared to the Three Months Ended September 30, 2023

Consolidated Revenues and Net Income:

Total revenues increased 9.9%, to $173.6 million for the three months ended September 30, 2024 compared to $158.0 million for the three months ended September 30, 2023. This increase in total revenues was principally related to a $9.8 million increase in water sales, a $7.3 million increase in oil and gas royalty revenue, and a $6.9 million increase in produced water royalties, partially offset by a decrease in easements and other surface-related income and land sales over the same period. Individual revenue line items are discussed below under “Segment Results of Operations.” Net income of $106.6 million for the three months ended September 30, 2024 was slightly higher than the comparable period of 2023 as a result of an increase in total revenues, partially offset by an increase in operating expenses, as discussed below.

Consolidated Expenses:

Salaries and related employee expenses. Salaries and related employee expenses were $14.0 million for the three months ended September 30, 2024 compared to $11.5 million for the comparable period of 2023. The number of employees increased from 101 as of September 30, 2023 to 110 as of September 30, 2024, which, when coupled with market compensation adjustments effective at the beginning of 2024, resulted in increased salary and related employee expenses for the three months ended September 30, 2024 compared to the same period of 2023. Additionally, contract labor expense for the three months ended September 30, 2024 increased over the same period of 2023, principally as a result of the 37.0% increase in water sales over the same respective periods.

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Water service-related expenses. Water service-related expenses increased $3.2 million to $11.7 million for the three months ended September 30, 2024 compared to the same period of 2023. Certain types of water-related expenses, including, but not limited to, treatment, transfer, water purchases, repairs and maintenance, equipment rental, and fuel costs, vary from period to period as our customers’ needs and requirements change. Right of way and other expenses also vary from period to period depending upon location of customer delivery. The increase in water service-related expenses for the three months ended September 30, 2024 compared to the same period of 2023 was principally related to a 37.0% increase in water sales due to increased volumes.

Legal and professional fees. Legal and professional fees were $8.3 million for the three months ended September 30, 2024 compared to $1.7 million for the comparable period of 2023. During the three months ended September 30, 2024, the Company incurred additional consulting and legal fees related to the Company’s 2024 annual meeting of stockholders, including fees incurred in connection with the preparation of the related proxy statement and addressing stockholder proposals and director nominations from unaffiliated stockholders who ultimately determined to withdraw their director nominations shortly before the filing of the Company’s proxy statement for the Company’s 2024 annual meeting of stockholders.

Depreciation, depletion and amortization. Depreciation, depletion and amortization was $5.8 million for the three months ended September 30, 2024 compared to $3.6 million for the comparable period of 2023. The increase was principally due to depletion expense associated with royalty interests acquired in August 2024, as discussed further above under “Liquidity and Capital Resources — Acquisition Activity.”

For the Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023

Consolidated Revenues and Net Income:

Total revenues increased to $520.0 million for the nine months ended September 30, 2024 compared to $464.9 million for the nine months ended September 30, 2023. This increase in total revenues was principally due to a $28.2 million increase in water sales, a $17.7 million increase in oil and gas royalty revenue, and a $14.2 million increase in produced water royalties compared to the same period of 2023. These revenue increases were partially offset by a decrease of $4.7 million in land sales. Individual revenue line items are discussed below under “Segment Results of Operations.” Net income of $335.6 million for the nine months ended September 30, 2024 was 14.7% higher than the comparable period of 2023, principally as a result of the increase in revenues discussed above.

Consolidated Expenses:
 
Salaries and related employee expenses. Salaries and related employee expenses were $39.3 million for the nine months ended September 30, 2024 compared to $32.7 million for the same period of 2023. The number of employees increased from 101 as of September 30, 2023 to 110 as of September 30, 2024, which, when coupled with market compensation adjustments effective at the beginning of 2024, resulted in increased salary and related employee expenses for the nine months ended September 30, 2024 compared to the same period of 2023. Additionally, contract labor expenses for the nine months ended September 30, 2024 increased over the same period of 2023, principally as a result of the 32.9% increase in water sales over the same respective periods.

Water service-related expenses. Water service-related expenses increased $12.3 million to $36.8 million for the nine months ended September 30, 2024 compared to the same period of 2023. Certain types of water-related expenses, including, but not limited to, treatment, transfer, water purchases, repairs and maintenance, equipment rental, and fuel costs, vary from period to period as our customers’ needs and requirements change. Right of way and other expenses also vary from period to period depending upon location of customer delivery. The increase in water service-related expenses for the nine months ended September 30, 2024 was principally related to a 32.9% increase in water sales over the same period of 2023, primarily as a result of increased customer volumes. Research and development expenses related to development of a new energy-efficient method of produced water desalination and treatment were $1.9 million and $0.8 million for the nine months ended September 30, 2024 and 2023, respectively. For further discussion of this new treatment method, see “Liquidity and Capital Resources — Development of Innovative Solutions for Produced Water and Capital Expenditures.”

General and administrative expenses. General and administrative expenses increased $1.9 million to $12.6 million for the nine months ended September 30, 2024 compared to the same period of 2023. During the nine months ended September 30, 2024, stock awards that were vested in full on the grant date were granted to members of the Board which resulted in immediate recognition of the fair value of the awards on the date of grant. See further discussion of this change in Note 8, “Share-Based Compensation” in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. The increased Board compensation expense for the nine months ended September 30, 2024 resulting from this policy change is a
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one-time event. Additionally, expenses for corporate insurance, resulting from increased coverages and insurance rates, and technology applications for the nine months ended September 30, 2024 increased over the same period of 2023.

Legal and professional fees. Legal and professional fees were $14.7 million for the nine months ended September 30, 2024 compared to $28.5 million for the same period of 2023. The decrease in legal and professional fees was principally related to a reduction in legal expenses associated with stockholder matters that occurred during the prior year.

Depreciation, depletion and amortization. Depreciation, depletion and amortization was $13.7 million for the nine months ended September 30, 2024 compared to $10.9 million for the nine months ended September 30, 2023. The increase is principally due to additional depletion expense associated with royalty interests acquired in August 2024 and additional amortization expense associated with intangible assets acquired in August 2023 and August 2024.

Other income, net. Other income, net was $31.2 million and $20.2 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in other income, net was primarily related to increased interest income earned on our cash balances during the nine months ended September 30, 2024 resulting from higher cash balances and interest rates during the period. Additionally, during the nine months ended September 30, 2024, we received $1.9 million of proceeds from a settlement with a title company regarding a defect in title to property acquired in a prior year.

Total income tax expense. Total income tax expense was $92.2 million and $79.9 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in income tax expense was primarily related to increased operating income resulting from increased consolidated revenues.

Segment Results of Operations

We operate our business in two reportable segments: Land and Resource Management and Water Services and Operations. We eliminate any inter-segment revenues and expenses upon consolidation.

We evaluate the performance of our operating segments separately to monitor the different factors affecting financial results. The reportable segments presented are consistent with our reportable segments discussed in Note 14, “Business Segment Reporting” in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. We monitor our reporting segments based upon revenue and net income calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Our results of operations for the three and nine months ended September 30, 2024 continued to benefit from activity in the Permian Basin. Our oil and gas royalty revenues increased for the three and nine months ended September 30, 2024 due to increased royalty production. Additionally, revenues derived from water sales and produced water royalties for the three and nine months ended September 30, 2024 were also positively impacted by our active management of our surface and royalty interests in recent years.

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For the Three Months Ended September 30, 2024 as Compared to the Three Months Ended September 30, 2023

The following is an analysis of our operating results for the comparable periods by reportable segment (in thousands):

Three Months Ended September 30,
20242023
Revenues:
Land and resource management:
Oil and gas royalties$94,444 54 %$87,102 56 %
Easements and other surface-related income11,303 7 %17,425 11 %
Land sales901 — %5,406 3 %
Total land and resource management revenue106,648 61 %109,933 70 %
Water services and operations:
Water sales36,211 21 %26,422 17 %
Produced water royalties27,727 16 %20,849 13 %
Easements and other surface-related income2,977 2 %763 — %
Total water services and operations revenue66,915 39 %48,034 30 %
Total consolidated revenues$173,563 100 %$157,967 100 %
Net income:
Land and resource management$71,870 67 %$82,884 79 %
Water services and operations34,724 33 %22,690 21 %
Total consolidated net income$106,594 100 %$105,574 100 %

Land and Resource Management

Land and Resource Management segment revenues decreased $3.3 million to $106.6 million for the three months ended September 30, 2024 as compared to the same period of 2023. The decrease in Land and Resource Management segment revenues was related to a $6.1 million decrease in easements and other surface-related income and a $4.5 million decrease in land sales, partially offset by a $7.3 million increase in oil and gas royalty revenue for the three months ended September 30, 2024 compared to the same period of 2023.

Oil and gas royalties. Oil and gas royalty revenue was $94.4 million for the three months ended September 30, 2024 compared to $87.1 million for the three months ended September 30, 2023, an increase of $7.3 million. Our share of production increased to 28.3 thousand barrels of oil equivalent (“Boe”) per day for the three months ended September 30, 2024 compared to 21.8 thousand Boe per day for the same period of 2023. The average realized price decreased 16.2% to $38.04 per Boe for the three months ended September 30, 2024 from $45.41 per Boe for the three months ended September 30, 2023.
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The financial and operational data by royalty stream is presented in the table below for the three months ended September 30, 2024 and 2023:
Three Months Ended
September 30,
20242023
Our share of production volumes (1):
Oil (MBbls)1,046 850 
Natural gas (MMcf)4,654 3,316 
NGL (MBbls)779 606 
Equivalents (MBoe)2,600 2,009 
Equivalents per day (MBoe/d)28.3 21.8 
Oil and gas royalty revenue (in thousands):
Oil royalties$75,427 $66,892 
Natural gas royalties4,201 8,479 
NGL royalties
14,816 11,731 
Total oil and gas royalties$94,444 $87,102 
Realized prices:
Oil ($/Bbl)$75.53 $82.45 
Natural gas ($/Mcf)$0.98 $2.76 
NGL ($/Bbl)$20.57 $20.91 
Equivalents ($/Boe)$38.04 $45.41 
(1)Commonly used definitions in the oil and gas industry not previously defined: MBbls represents one thousand barrels of crude oil, condensate or NGLs. Mcf represents one thousand cubic feet of natural gas. MMcf represents one million cubic feet of natural gas. MBoe represents one thousand Boe. MBoe/d represents one thousand Boe per day.

Easements and other surface-related income. Easements and other surface-related income was $11.3 million for the three months ended September 30, 2024, a decrease of $6.1 million compared to $17.4 million for the three months ended September 30, 2023. Easements and other surface-related income includes revenue related to the use and crossing of our land for oil and gas exploration and production, renewable energy, and agricultural operations. The decrease in easements and other surface-related income was principally related to decreases of $3.4 million in pipeline easements and $2.3 million in wellbore easements for the three months ended September 30, 2024 compared to the same period of 2023. Easements and other surface-related income is dependent on development decisions made by companies that operate in the areas where we own land and is, therefore, unpredictable and may vary significantly from period to period. See “Market Conditions” above for additional discussion of development activity in the Permian Basin during the three months ended September 30, 2024.
 
Net income. Net income for the Land and Resource Management segment decreased 13.3% to $71.9 million for the three months ended September 30, 2024 compared to $82.9 million for the three months ended September 30, 2023. Segment operating income decreased $13.1 million for the three months ended September 30, 2024 compared to the same period of 2023, driven by a $6.6 million increase in legal and professional fees and a $3.3 million decrease in segment revenues. Expenses are discussed further above under “Results of Operations - Consolidated.”

Water Services and Operations
 
Water Services and Operations segment revenues increased 39.3% to $66.9 million for the three months ended September 30, 2024 as compared to revenues of $48.0 million for the same period of 2023. The increase in Water Services and Operations segment revenues was principally due to an increase of $9.8 million in water sales revenue and $6.9 million in produced water royalties. As discussed in “Market Conditions” above, our segment revenues are directly influenced by development decisions made by our customers and the overall activity level in the Permian Basin. Accordingly, our segment revenues and sales volumes, as further discussed below, fluctuate from period to period based upon those decisions and activity levels.
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Water sales. Water sales revenue increased $9.8 million to $36.2 million for the three months ended September 30, 2024, compared to the same period of 2023. The growth in water sales was principally due to an increase of 32.1% in water sales volumes for the three months ended September 30, 2024, compared to the same period of 2023.

Produced water royalties. Produced water royalties are received from the transfer or disposal of produced water on our land. Produced water royalties are contractual and not paid as a matter of right. We do not operate any salt water disposal wells. Produced water royalties were $27.7 million for the three months ended September 30, 2024 compared to $20.8 million for the same period in 2023. This increase was principally due to increased produced water volumes for the three months ended September 30, 2024 compared to the same period of 2023.

Net income. Net income for the Water Services and Operations segment was $34.7 million for the three months ended September 30, 2024 compared to $22.7 million for the three months ended September 30, 2023. Segment operating income increased $13.5 million for the three months ended September 30, 2024 compared to the same period of 2023. The increase was principally due to the $18.9 million increase in segment revenues, partially offset by the $3.2 million increase in water service-related expenses. Expenses are discussed further above under “Results of Operations - Consolidated.”

For the Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023

The following is an analysis of our operating results for the comparable periods by reportable segment (in thousands):

Nine Months Ended September 30,
20242023
Revenues:
Land and resource management:
Oil and gas royalties$276,377 54 %$258,644 56 %
Easements and other surface-related income43,643 8 %49,826 11 %
Land sales2,145 — %6,806 1 %
Total land and resource management revenue322,165 62 %315,276 68 %
Water services and operations:
Water sales113,987 22 %85,799 19 %
Produced water royalties76,034 15 %61,824 13 %
Easements and other surface-related income7,853 1 %2,039 — %
Total water services and operations revenue197,874 38 %149,662 32 %
Total consolidated revenues$520,039 100 %$464,938 100 %
Net income:
Land and resource management$232,970 69 %$217,860 74 %
Water services and operations102,630 31 %74,675 26 %
Total consolidated net income$335,600 100 %$292,535 100 %

Land and Resource Management

Land and Resource Management segment revenues were $322.2 million for the nine months ended September 30, 2024 compared to $315.3 million for the comparable period of 2023. The increase in Land and Resource Management segment revenues was principally due to the $17.7 million increase in oil and gas royalty revenue, partially offset by decreases of $6.2 million and $4.7 million in easements and other surface-related income and land sales, respectively, for the nine months ended September 30, 2024 compared to the same period of 2023.

Oil and gas royalties. Oil and gas royalty revenue was $276.4 million for the nine months ended September 30, 2024 compared to $258.6 million for the nine months ended September 30, 2023, an increase of $17.7 million. Oil and gas royalties
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for the nine months ended September 30, 2023 included an $8.7 million recovery with an operator with respect to unpaid oil and gas royalties for older production periods. Excluding the impact of the $8.7 million recovery on 2023 revenue, oil and gas royalties for the nine months ended September 30, 2024 increased $26.4 million over the nine months ended September 30, 2023 due to higher production volumes and average oil and NGL realized prices over the same periods. Our share of production increased to 26.0 thousand Boe per day for the nine months ended September 30, 2024 compared to 22.6 thousand Boe per day for the same period of 2023. The average realized prices decreased to $40.60 per Boe for the nine months ended September 30, 2024 from $42.49 per Boe for the same period of 2023.

The table below provides financial and operational data by royalty stream for the nine months ended September 30, 2024 and 2023:
Nine Months Ended
September 30,
2024
2023 (1)
Our share of production volumes:
Oil (MBbls)3,003 2,642 
Natural gas (MMcf)12,312 10,405 
NGL (MBbls)2,073 1,784 
Equivalents (MBoe)7,128 6,160 
Equivalents per day (MBoe/d)26.0 22.6 
Oil and gas royalty revenue (in thousands):
Oil royalties$222,788 $193,969 
Natural gas royalties13,630 $23,210 
NGL royalties39,959 $32,800 
Total oil and gas royalties$276,377 $249,979 
Realized prices:
Oil ($/Bbl)$77.68 $76.88 
Natural gas ($/Mcf)$1.20 $2.41 
NGL ($/Bbl)$20.84 $19.88 
Equivalents ($/Boe)$40.60 $42.49 
(1)The metrics and dollars provided for the nine months ended September 30, 2023 exclude the impact of the $8.7 million settlement of oil and gas royalties discussed above.

Easements and other surface-related income. Easements and other surface-related income was $43.6 million for the nine months ended September 30, 2024, a decrease of $6.2 million compared to $49.8 million for the nine months ended September 30, 2023. Easements and other surface-related income includes revenue related to the use and crossing of our land for oil and gas exploration and production, renewable energy, and agricultural operations. The decrease in easements and other surface-related income is principally related to a decrease of $4.7 million in wellbore easements for the nine months ended September 30, 2024 compared to the same period of 2023. Easements and other surface-related income is dependent on development decisions made by companies that operate in the areas where we own land and is, therefore, unpredictable and may vary significantly from period to period. See “Market Conditions” above for additional discussion of development activity in the Permian Basin during the nine months ended September 30, 2024.

Land sales. Land sales were $2.1 million and $6.8 million for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, we sold 91 acres of land for an aggregate sales price of $2.1 million. For the nine months ended September 30, 2023, we sold 18,061 acres of land for an aggregate sales price of $6.8 million.

Net income. Net income for the Land and Resource Management segment increased $15.1 million to $233.0 million for the nine months ended September 30, 2024 compared to $217.9 million for the nine months ended September 30, 2023.
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Segment operating income increased $14.3 million for the nine months ended September 30, 2024 compared to the same period of 2023, largely driven by a $13.7 million decrease in legal and professional fees. Expenses are discussed further above under “Results of Operations - Consolidated.”

Water Services and Operations

Water Services and Operations segment revenues increased 32.2% to $197.9 million for the nine months ended September 30, 2024 as compared to revenues of $149.7 million for the same period of 2023. The increase in Water Services and Operations segment revenues was principally due to increases in water sales revenue and produced water royalties, which are discussed below. As discussed in “Market Conditions” above, our segment revenues are directly influenced by development decisions made by our customers and the overall activity level in the Permian Basin. Accordingly, our segment revenues and sales volumes, as further discussed below, fluctuate from period to period based upon those decisions and activity levels.

Water sales. Water sales revenue increased $28.2 million, or 32.9% to $114.0 million for the nine months ended September 30, 2024 compared to the same period of 2023. The growth in water sales was principally due to an increase of 27.6% in water sales volumes for the nine months ended September 30, 2024 compared to the same period of 2023.

Produced water royalties. Produced water royalties are royalties received from the transfer or disposal of produced water on our land. Produced water royalties are contractual and not paid as a matter of right. We do not operate any salt water disposal wells. Produced water royalties were $76.0 million for the nine months ended September 30, 2024 compared to $61.8 million for the comparable period of 2023. This increase in produced water royalties was principally due to increased produced water volumes for the nine months ended September 30, 2024 compared to the same period of 2023.

Easements and other surface-related income. Easements and other surface-related income was $7.9 million for the nine months ended September 30, 2024, an increase of $5.8 million compared to $2.0 million for the nine months ended September 30, 2023. The increase in easements and other surface-related income primarily related to an increase in temporary permits for sourced water lines for the nine months ended September 30, 2024 compared to the same period in 2023.

Net income. Net income for the Water Services and Operations segment was $102.6 million for the nine months ended September 30, 2024 compared to $74.7 million for the nine months ended September 30, 2023. Segment operating income increased $30.1 million for the nine months ended September 30, 2024 compared to the same period of 2023. The increase was principally due to a $48.2 million increase in segment revenues, partially offset by a $12.3 million increase in water service-related expenses. Expenses are discussed further above under “Results of Operations - Consolidated.”

Non-GAAP Performance Measures
 
In addition to amounts presented in accordance with GAAP, we also present certain supplemental non-GAAP performance measurements. These measurements are not to be considered more relevant or accurate than the measurements presented in accordance with GAAP. In compliance with the requirements of the SEC, our non-GAAP measurements are reconciled to net income, the most directly comparable GAAP performance measure. For all non-GAAP measurements, neither the SEC nor any other regulatory body has passed judgment on these non-GAAP measurements.

EBITDA, Adjusted EBITDA and Free Cash Flow

EBITDA is a non-GAAP financial measurement of earnings before interest expense, taxes, depreciation, depletion and amortization. Its purpose is to highlight earnings without finance, taxes, and depreciation, depletion and amortization expense, and its use is limited to specialized analysis. We calculate Adjusted EBITDA as EBITDA plus employee share-based compensation. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and other non-recurring or unusual items, if applicable. We calculate Free Cash Flow as Adjusted EBITDA less current income tax expense and capital expenditures. Its purpose is to provide an additional measure of operating performance. We have presented EBITDA, Adjusted EBITDA and Free Cash Flow because we believe that these metrics are useful supplements to net income in analyzing the Company's operating performance. Our definitions of EBITDA, Adjusted EBITDA and Free Cash Flow may differ from computations of similarly titled measures of other companies.

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The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and Free Cash Flow for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
 Net income $106,594 $105,574 $335,600 $292,535 
 Add:
Income tax expense 28,823 29,363 92,243 79,894 
Depreciation, depletion and amortization5,762 3,584 13,695 10,881 
 EBITDA 141,179 138,521 441,538 383,310 
 Add:
Employee share-based compensation2,935 2,502 7,855 7,217 
Adjusted EBITDA144,114 141,023 449,393 390,527 
Less:
Current income tax expense(27,416)(29,724)(90,080)(80,928)
Capital expenditures(9,833)(5,243)(21,994)(10,387)
Free Cash Flow$106,865 $106,056 $337,319 $299,212 

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. For a full discussion of our accounting policies please refer to Note 2 to the Consolidated Financial Statements included in our 2023 Annual Report filed with the SEC on February 21, 2024.

There have been no material changes to our critical accounting policies or in the estimates and assumptions underlying those policies, from those provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Annual Report.

New Accounting Pronouncements

For further information regarding recently issued accounting pronouncements, see Note 2, “Summary of Significant Accounting Policies” in the notes to the condensed consolidated financial statements included in Item 1. “Financial Statements” in this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
There have been no material changes in the information related to market risk of the Company disclosed in Part II, Item 7A. “Quantitative and Qualitative Disclosure about Market Risk” set forth in the 2023 Annual Report.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2024.

Changes in Internal Control of Financial Reporting
 
There have been no changes during the quarter ended September 30, 2024 in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II
OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
There are no material pending legal proceedings to which we are a party or of which any of our property is the subject.
 
Item 1A. Risk Factors.

There have been no material changes in the risk factors previously disclosed in response to Part I, Item 1A. “Risk Factors” set forth in the 2023 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2024, the Company repurchased shares of its Common Stock as follows:

PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(1)
July 1 through July 31, 20242,772 $791 2,772 
August 1 through August 31, 20242,656 824 2,656 
September 1 through September 30, 20241,959 864 1,959 
Total7,387 $822 7,387 $184,886,976 
(1)On November 1, 2022, our Board approved a stock repurchase program to purchase up to an aggregate of $250.0 million of our outstanding Common Stock effective beginning January 1, 2023. The Company intends to purchase Common Stock under the repurchase program opportunistically with funds generated by cash from operations. This repurchase program may be suspended from time to time, modified, extended or discontinued by the Board at any time. Purchases under the stock repurchase program may be made through a combination of open market repurchases in compliance with Rule 10b-18 promulgated under the Exchange Act, privately negotiated transactions, and/or other transactions at the Company’s discretion, including under a Rule 10b5-1 trading plan implemented by the Company, and will be subject to market conditions, applicable legal requirements and other factors.
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Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures.
 
Not applicable.

Item 5. Other Information.
 
None.
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Item 6. Exhibits and Financial Statement Schedules.
EXHIBIT INDEX


EXHIBIT
NUMBER
DESCRIPTION
101*
The following information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income and Total Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) Notes to Condensed Consolidated Financial Statements.
104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted as Inline iXBRL.

*    Filed herewith.
**    Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  TEXAS PACIFIC LAND CORPORATION
(Registrant)
   
Date:
November 6, 2024
By:/s/ Tyler Glover
   Tyler Glover
President, Chief Executive Officer and Director
  
   
Date:
November 6, 2024
By:/s/ Chris Steddum
   Chris Steddum
Chief Financial Officer
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