SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 1-39804

Exact name of registrant as specified in its charter:


State or other jurisdiction of incorporation or organization:						IRS Employer Identification No.:
Delaware						75-0279735

Address of principal executive offices:

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock
(par value $.01 per share)

TPL

New York Stock Exchange

Non-accelerated filer (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~April 30,~~October 29, 2021, the Registrant had ~~7,756,156~~7,746,141 shares of ~~common stock,~~Common Stock, $0.01 par value, outstanding.

TEXAS PACIFIC LAND CORPORATION

Quarter Ended ~~March 31,~~September 30, 2021

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

March 31, 2021 December 31, 2020
ASSETS
Cash and cash equivalents $ 310,655 $ 281,046
Accrued receivables, net 61,392 48,216
Prepaid expenses and other current assets 1,822 2,778
Tax like-kind exchange escrow 1,978 1,978
Total current assets 375,847 334,018
Property, plant and equipment, net 78,395 79,267
Real estate acquired 108,536 108,536
Royalty interests acquired, net 45,435 45,646
Operating lease right-of-use assets 2,314 2,473
Other assets 3,275 1,695
Real estate and royalty interests assigned through the Declaration of Trust, no value assigned:
Land (surface rights) 0 0
1/16th nonparticipating perpetual royalty interest 0 0
1/128th nonparticipating perpetual royalty interest 0 0
Total assets $ 613,802 $ 571,635
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 12,367 $ 12,530
Unearned revenue 5,298 3,997
Income taxes payable 16,183 4,054
Total current liabilities 33,848 20,581
Deferred taxes payable 38,581 38,728
Unearned revenue - non-current 21,891 22,171
Accrued liabilities 2,893 2,150
Operating lease liabilities 2,654 2,821
Total liabilities 99,867 86,451
Commitments and contingencies 0 0
Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, NaN outstanding as of March 31, 2021 0 —
Common stock, $0.01 par value; 7,756,156 shares authorized and outstanding as of March 31, 2021 78 —
Certificates of Proprietary Interest, par value $100 each; NaN outstanding as of December 31, 2020 — 0
Sub-share Certificates in Certificates of Proprietary Interest, par value $0.0333 each; outstanding 7,756,156 Sub-share Certificates as of December 31, 2020 — 0
Accumulated other comprehensive loss (2,665) (2,693)
Retained earnings 516,522 —
Net proceeds from all sources — 487,877
Total equity 513,935 485,184
Total liabilities and equity $ 613,802 $ 571,635


	September 30, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	372,761	$	281,046
Accrued receivables, net	82,897		48,216
Prepaid expenses and other current assets	2,450		2,778
Tax like-kind exchange escrow	—		1,978

Total current assets	458,108		334,018
Property, plant and equipment, net	79,204		79,267
Real estate acquired	108,546		108,536
Royalty interests acquired, net	45,151		45,646
Operating lease right-of-use assets	1,990		2,473
Other assets	2,618		1,695
Real estate and royalty interests assigned through the Declaration of Trust, no value assigned:
Land (surface rights)	—		—
1/16th nonparticipating perpetual royalty interest	—		—
1/128th nonparticipating perpetual royalty interest	—		—
Total assets	$	695,617	$	571,635

LIABILITIES AND EQUITY
Accounts payable and accrued expenses	$	18,020	$	12,530
Unearned revenue	3,965		3,997
Income taxes payable	7,117		4,054
Total current liabilities	29,102		20,581
Deferred taxes payable	38,096		38,728
Unearned revenue - noncurrent	20,707		22,171
Accrued liabilities	4,377		2,150
Operating lease liabilities	2,293		2,821
Total liabilities	94,575		86,451

Commitments and contingencies	—		—
Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none outstanding as of September 30, 2021	—		—
Common stock, $0.01 par value; 7,756,156 shares authorized and 7,748,344 outstanding as of September 30, 2021	78		—
Treasury stock, at cost; 7,812 shares as of September 30, 2021 and none outstanding as of December 31, 2020	(11,193)		—
Certificates of Proprietary Interest, par value $100 each; none outstanding as of December 31, 2020	—		—
Sub-share Certificates in Certificates of Proprietary Interest, par value $0.0333 each; outstanding 7,756,156 Sub-share Certificates as of December 31, 2020	—		—
Accumulated other comprehensive loss	(2,607)		(2,693)
Retained earnings	614,764		—
Net proceeds from all sources	—		487,877
Total equity	601,042		485,184
Total liabilities and equity	$	695,617	$	571,635

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND TOTAL COMPREHENSIVE INCOME

(in thousands, except shares and per share amounts)

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS PACIFIC LAND CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

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 a Delaware corporation and one of the largest landowners in the State of Texas with approximately 880,000 acres of land in West Texas, 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 4,000 additional net royalty acres (normalized to 1/8th) in the western part of Texas.

TPL’s income is derived primarily from oil, gas and produced water royalties, sales of water and land, easements and commercial leases of the land.

On January 11, 2021, we completed our reorganization from a business trust, organized under a Declaration of Trust dated February 1, 1888 (the “Declaration of Trust”), to a corporation (the “Corporate Reorganization”) and changed our name from Texas Pacific Land Trust (the “Trust”) to Texas Pacific Land Corporation. See further discussion of the Corporate Reorganization and its impact on our equity structure in Note 7, “~~Cha~~n ~~ges~~“Changes in Equity.” Any references in these condensed consolidated financial statements and notes to the Company, TPL, our, we, or us with respect to periods prior to January 11, 2021 ~~will be~~are in reference to the Trust, and references to periods on that date and thereafter ~~will be~~are in reference to Texas Pacific Land Corporation or TPL Corporation.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on the same basis as the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. The condensed consolidated financial statements herein include all adjustments which are, in the opinion of management, necessary to fairly state the financial position of the Company as of ~~March 31,~~September 30, 2021 and the results of its operations for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and its cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Such adjustments are of a normal nature and all intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, and accordingly these interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in our Form 10-K for the year ended December 31, 2020. The results for the interim periods shown in this report are not necessarily indicative of future financial results.

We operate our business in 2 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 strategies and objectives of TPL and provide a framework for timely and rational allocation of resources within businesses. See Note 8. “Business Segment Reporting” for further information regarding our segments.

2. Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent ~~asset~~assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):


	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	372,761	$	281,046
Tax like-kind exchange escrow	—		1,978
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	372,761	$	283,024

March 31, 2021 December 31, 2020
Cash and cash equivalents $ 310,655 $ 281,046
Tax like-kind exchange escrow 1,978 1,978
Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 312,633 $ 283,024
Treasury Stock

Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock and reported as a separate line item on our condensed consolidated balance sheets.

Certain financial information on the condensed consolidated statements of income for the three and nine months ended ~~March 31,~~September 30, 2020 have been revised to conform to the current year presentation. These revisions include (i) a reclassification of ~~$12.5~~$12.2 million and $37.9 million of produced water royalties revenue for the three and nine months ended ~~March 31,~~September 30, 2020, respectively, previously included in easements and other surface-related income to a separate financial statement line item within ~~revenues.~~revenues and (ii) a reclassification of approximately $0.1 million and $2.8 million of land sales expenses for the three and nine months ended September 30, 2020, respectively, previously included in land sales to a separate financial statement line item within operating expenses. Land sales expenses include cost basis and closing costs associated with land sales.

Recently Adopted Accounting Guidance

In December 2019, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes.” The ASU simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The Company adopted the guidance effective January 1, 2021. The adoption had minimal impact on the Company’s consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

In July 2021, the FASB issued ASU 2021-05, “Leases (Topic 842) Lessors – Certain Leases with Variable Lease Payments.” Under the ASU, a lessor would classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or direct financing lease under ASC 842 classification criteria and the lessor would have otherwise recognized a day one loss. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The ASU is anticipated to have minimal to no impact on our consolidated financial statements and disclosures upon adoption.

3. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):

Water service-related assets (1)

(1) Water service-related assets reflect assets related to water sourcing and water treatment projects.

Depreciation expense was ~~$3.6~~$3.7 million and ~~$3.2~~$3.5 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Depreciation expense was $10.9 million and $10.3 million for the nine months ended September 30, 2021 and 2020, respectively.

4. Real Estate Activity

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company owned the following land and real estate (in thousands, except number of acres):

Land (surface rights) (1)

(1) Real estate originally assigned through the Declaration of Trust.

~~There were 0 land sales during~~For the ~~three~~nine months ended ~~March 31, 2021. For the three months ended March 31, 2020,~~September 30, 2021, we sold 30 acres of land in Texas for an aggregate sales price of ~~$0.9~~$0.7 million, an average of approximately ~~$30,000~~$25,000 per acre. For the nine months ended September 30, 2020, we sold 21,347 acres of land in Texas for an aggregate sales price of $14.5 million, an average of approximately $676 per acre. The aggregate sales price excludes a reduction of $2.7 million in land basis. Additionally, we recognized land sales revenue of $1.4 million for the nine months ended September 30, 2020 related to land exchanges where we had no cost basis in the land conveyed.

~~There were 0 land acquisitions during~~For the ~~three~~nine months ended ~~March 31, 2021.~~September 30, 2021, we acquired 8 acres of land in Texas for an aggregate purchase price of less than $0.1 million, an average of approximately $1,266 per acre. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we acquired 756 acres of land in Texas for an aggregate purchase price of approximately $3.9 million, an average of approximately $5,134 per acre.

5. Royalty Interests

As of ~~March 31,~~September 30, 2021 and December 31, 2020, we owned the following oil and gas royalty interests (in thousands):

There were no oil and gas royalty interest transactions for the ~~three~~nine months ended ~~March 31,~~September 30, 2021. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we acquired oil and gas royalty interests in 1,017 net royalty acres (normalized to 1/8th) for an aggregate purchase price of $16.9 million, an average price of approximately ~~$16,659~~$16,668 per net royalty acre.

The calculation of our effective tax rate is as follows for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands, except percentages):

The effective tax rates were lower than the U.S. federal statutory rate of 21% primarily due ~~primarily~~ to statutory depletion allowed on mineral royalty income.

7. Changes in Equity

The following tables present changes in our equity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands, except shares and per share amounts):

Corporate Reorganization

On January 11, 2021, TPL completed its Corporate Reorganization, officially changing its name to Texas Pacific Land Corporation. To implement the Corporate Reorganization, the Trust and TPL Corporation entered into agreements and undertook and caused to be undertaken a series of transactions to effect the transfer to TPL Corporation of all of the Trust’s assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the Corporate Reorganization. The agreements entered into include a contribution agreement between the Trust and TPL Corporation. The Corporate Reorganization iswas a tax-free reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended.

Prior to the market opening on January 11, 2021, the Trust distributed all of the shares of ~~common stock,~~Common Stock, par value $0.01, of TPL Corporation (the “Common Stock”) to holders of sub-share certificates (“Sub-shares”), par value of $0.03-1/3, of the Trust, on a pro rata, one-for-one, basis in accordance with their interests in the Trust (the “Distribution”). As a result of the Distribution, TPL Corporation is now an independent public company and its Common Stock is listed under the symbol “TPL” on the New York Stock Exchange.

The Corporate Reorganization only affected our equity structure in that Sub-shares were replaced with shares of Common Stock and net proceeds from all sources were replaced with retained earnings on the condensed consolidated balance sheet.

Stock Repurchase Program

On May 3, 2021, our board of directors approved a stock repurchase program to purchase up to an aggregate of $20.0 million of shares of our outstanding Common Stock. In connection with the stock repurchase program, the Company entered into a Rule 10b5-1 trading plan that generally permits the Company to repurchase shares at times when it might otherwise be prevented from doing so under securities laws. The stock repurchase program will expire on December 31, 2021 unless otherwise modified or earlier terminated by our board of directors at any time in its sole discretion. Repurchased shares will be held in treasury. For the nine months ended September 30, 2021, we repurchased 7,812 shares at an average per share amount of $1,433.

8. 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.

The Land and Resource Management segment encompasses the business of managing our approximately 880,000 acres of land and our oil and gas royalty interests in West Texas, 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.

Segment financial results were as follows for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):

The following table presents total assets and property, plant and equipment, net by segment as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):

9. Oil and Gas Producing Activities

We measure our share of oil and gas produced in barrels of ~~equivalency~~oil equivalent (“~~BOEs”~~Boe”). One ~~BOE~~Boe equals one barrel of crude oil, condensate, NGLs (natural gas liquids) or approximately 6,000 cubic feet of gas. ~~As of March 31,~~For three months ended September 30, 2021 and ~~March 31,~~ 2020, our share of oil and gas produced was approximately ~~16.4~~19.5 and ~~16.5~~15.7 thousand ~~BOEs~~Boe per day, respectively. For the nine months ended September 30, 2021 and September 30, 2020, our share of oil and gas produced was approximately 17.5 and 16.0 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 that have been drilled but are not yet completed (“DUC”) where we have a royalty interest. The number of DUC wells is determined using uniform drilling spacing units with pooled interests for all wells awaiting completion. We have identified ~~541~~508 and 531 DUC wells subject to our royalty interest as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

10. 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:

On ~~May 3,~~October 28, 2021, the board of directors declared a quarterly cash dividend of $2.75 per share payable on ~~June~~December 15, 2021 to stockholders of record at the close of business on ~~June~~December 8, 2021.

~~Stock Repurchase Program~~

On May 3, 2021, our board of directors approved a stock repurchase program to purchase up to an aggregate of $20.0 million of shares of our outstanding common stock. Acquisitions pursuant to 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. In connection with the stock repurchase program, the Company intends to enter into a Rule 10b5-1 trading plan that would generally permit the Company to repurchase shares at times when it might otherwise be prevented from doing so under securities laws. The stock repurchase program will expire on December 31, 2021 unless otherwise modified or earlier terminated by our board of directors at any time in its sole discretion. Repurchased shares will be held in treasury.

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 and Section 21E of the Securities Exchange Act of 1934, including statements regarding management’s expectations, hopes, intentions or strategies regarding the future. Words or phrases such as “expects” and “believes”, or similar expressions, when used in this 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 severity and duration of the COVID-19 pandemic and related economic repercussions, 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 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 Report are based on information available to us as of the date this Report is filed with the ~~Securities and Exchange Commission(the“SEC”),~~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, 2020, 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 together with (i) 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, 2020, (ii) the factors discussed in Part II, Item 1A. “Risk Factors,” if any, of this Quarterly Report on Form 10-Q and (iii) the Financial Statements, including the Notes thereto, and the other financial information appearing elsewhere in this Report. 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.

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 880,000 acres of land, comprised of a number of separate tracts, located in 19 counties in West Texas, 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 and a 1/16th NPRI under approximately 371,000 acres of land in the western part of Texas, as well as approximately 4,000 additional net royalty acres (normalized to 1/8th).

We completed our reorganization from a business trust to a corporation (the “Corporate Reorganization”) on January 11, 2021, changing our name from Texas Pacific Land Trust (the “Trust”) to Texas Pacific Land Corporation. Any references in this Quarterly Report on Form 10-Q to the Company, TPL, our, we, or us with respect to periods prior to January 11, 2021 ~~will be~~are in reference to the Trust, and references to periods on that date and thereafter ~~will be~~are in reference to Texas Pacific Land Corporation or TPL Corporation. For further information on the Corporate Reorganization, see Note 7, “~~Changes~~“Changes in Equity” in the notes to the condensed consolidated financial statements.

Our surface and royalty ownership allow steady revenue generation through the entire value chain of oil and gas development. While we are not an oil and gas producer, we benefit from various revenue sources throughout the life cycle of a well. During the initial development phase where infrastructure for oil and gas development is constructed, we receive fixed fee payments for use of our land and revenue for sales of materials (caliche) used in the construction of the infrastructure. During the drilling and completion phase, we generate revenue for providing sourced water and/or treated produced water in addition to fixed fee payments for use of our land. During the production phase, we receive revenue from our oil and gas royalty interests and also revenues related to saltwater disposal on our land. In addition, we generate revenue from pipeline, power line and utility easements, commercial leases ~~material sales~~ and seismic and temporary permits principally related to a variety of land uses, including midstream infrastructure projects and processing facilities as hydrocarbons are processed and transported to market.

A significant portion of our revenues is generated from our business activity in the Permian Basin and derived primarily from oil, gas and produced water royalties, sales of water and land, easements and commercial leases. Due to the nature of our operations, our revenue is subject to substantial fluctuations from quarter to quarter and year to year. The demand

for, and sale price of, particular tracts of land are influenced by many factors beyond our control, including general economic conditions, the rate of development in nearby areas and the suitability of the particular tract for commercial uses prevalent in western Texas.

As our oil and gas revenue is derived from our oil and gas royalty interests, in addition to fluctuating in response to the market prices for oil and gas, our oil and gas royalty revenues are also subject to decisions made by the owners and operators of the oil and gas wells to which our royalty interests relate as to investments in and production from those wells.

Our revenue from easements is primarily generated from pipelines transporting oil, gas and related hydrocarbons, power line and utility easements and subsurface wellbore easements. The majority of our easements have a thirty-plus year term ~~but~~and subsequently renew every ten years with an additional payment. Commercial lease revenue is derived primarily from processing, storage and compression facilities and roads.

Texas Pacific Water Resources LLC (“TPWR”), a single member Texas limited liability company owned by the Company, provides full-service water offerings to operators in the Permian Basin. These services include, but are not limited to, water sourcing, produced-water gathering/treatment, infrastructure development, disposal solutions, water tracking, analytics and well testing services. TPWR's revenue streams principally consist of revenue generated from sales of sourced and treated water as well as revenues from produced water royalties. We are committed to sustainable water development. Our significant surface ownership in the Permian Basin provides TPWR with a unique opportunity to provide multiple full-service water offerings to operators.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we invested approximately ~~$2.7~~$7.0 million in TPWR projects to maintain and/or enhance water sourcing ~~assets.~~assets, of which $3.9 million related to electrifying our water sourcing infrastructure.

COVID-19 Pandemic and Global Oil Market Impact ~~of Increased Supply by OPEC+~~in 2021

The uncertainty caused by the global spread of COVID-19 ~~together with the increased supply of oil and gas by member nations of OPEC+,~~commencing in 2020, among other factors, led to ~~declines in crude oil prices and~~ a significant reduction in global demand and prices for ~~oil and gas beginning in the first quarter of 2020.~~oil. These events generally led to production curtailments ~~and/or conservation of~~and capital investment reductions by the ~~owners and~~ operators of the oil and gas wells to which the Company’s royalty interests relate. ~~These events~~This slowdown in well development has negatively affected the Company’s business and operations for ~~2020. The lingering~~2020 and 2021. More recently, development activity has also been impacted by shortages in labor and certain equipment as well as escalating costs which have generally impacted operators in the Permian Basin. While labor and resource shortages and rising costs have not directly impacted us yet, these shortages and rising costs could potentially impact our future operating activity. With current oil, natural gas, and NGL prices broadly higher than the comparable period in 2020, development activities in the Permian Basin have rebounded from the lows in 2020, and producer activity has increased, albeit at a pace still below pre-pandemic levels. Future production and development activity will continue to be influenced by changes in commodity prices and by the evolving economic and health impact of ~~these events continues to reduce~~COVID-19.

Though the global spread of COVID-19 and the associated economic impact are still uncertain, COVID-19 containment measures have eased in certain regions globally, and as a result, demand for oil and gas has begun to recover. However, COVID-19 continues to impact certain regions domestically and globally, and any additional containment measures, now or in the future, could impede a recovery. In addition, oil prices in 2021 have been supported by oil supply cuts by the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively referred to as “OPEC+”). Although our revenues are directly and indirectly impacted by changes in oil prices, we ~~expect that these events~~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 ~~continue to affect our financial results in 2021.~~help us navigate through potential oil price volatility.

In ~~response to these events,~~2020, we implemented certain cost reduction measures ~~during 2020 and continue~~ to ~~identify additional cost reduction opportunities in 2021, thus reducing our operating expenses. Our immediate~~manage costs with an initial focus ~~was~~on negotiating price reductions and discounts with certain vendors and reducing our usage of independent contract service providers. In 2021, we continue to identify additional cost reduction opportunities. As part of our longer-term water business strategy, we have invested in electrifying our water sourcing infrastructure. The use of electricity instead of fuel-powered generators to source and transport water ~~translates into reduced~~is anticipated to further reduce our dependence on fuel, equipment ~~rental~~rentals, and repairs and ~~maintenance costs. This strategy not only reduces our current expenses but affords us the ability to continue cost savings in the future.~~maintenance. Additionally, our investment in automation has allowed us to curtail our reliance on independent contract service providers to support our field operations.

Our ~~primary focus has always been,~~business model and ~~will~~disciplined approach to capital resource allocation have helped us maintain our strong financial position while navigating the uncertainty of the current environment. Further, we continue to ~~be, on~~prioritize maintaining a

safe and healthy work environment for our employees. Our information technology infrastructure ~~has afforded us the opportunity to allow~~allowed our corporate employees to transition to a remote work ~~remotely~~environment starting in March 2020 and we ~~have deployed~~were able to deploy additional safety and sanitation measures for our field employees.

~~Despite the uncertainty caused by these events, we believe our longevity~~ As vaccination rates in the ~~industry, strong financial position~~United States have risen, we have taken a phased-in approach to returning employees to the office and ~~our capital resource allocation discipline~~continue to monitor guidance provided by the Centers for Disease Control and Prevention as new information becomes available. We continue to provide safety and sanitation measures for all employees and maintain communication with employees regarding any concerns they may have ~~equipped us with~~during the ~~tools necessary to continue navigating through the uncertainty.~~transition.

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 ~~and~~in 52 counties across southeastern New Mexico and western Texas. All of our assets are located in West Texas.

With 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 ~~March 31,~~September 30, 2021 and 2020:

Oil and Gas Pricing Metrics:(1)

Activity Metrics specific to the Permian Basin:(1)(2)

Total Average US weekly horizontal rig count (2)

(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. DUCs ~~represents~~represent drilled but uncompleted wells.

(2) Permian Basin specific information per Enverus analytics. US weekly horizontal rig counts per Baker Hughes United States Rotary Rig Count for horizontal rigs.

The metrics above demonstrate the shifts in activity in the Permian Basin ~~from~~for the ~~first quarter of 2020 to the first quarter of 2021.~~three and nine months ended September 30, 2021 and 2020. While oil and gas prices, which began declining in the first quarter of 2020 (prior to oil reaching record lows in the second quarter of 2020), have rebounded inthrough the first ~~quarter~~nine months of 2021, development, drilling and completion and production activities broadly across the Permian have not returned to their ~~previous~~pre-pandemic levels. Operators ~~are cautiously managing~~continue to manage their capital allocations by deploying at a decreased pace of development while oil demand ~~begins~~continues to recover. 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 not only our production and produced water disposal volumes but also directly impact our surface-related income and water sales.

~~Winter Storm Uri, in February 2021, created operational issues in the Permian Basin which impacted not only production from existing wells, but development and completion~~

Table of new wells. As discussed above, we generate revenue through each phase of the life cycle of a well. While Winter Storm Uri directly impacted production and produced water disposal volumes, the effects on our results were tempered by increased oil and gas prices during the first quarter of 2021.

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Liquidity and Capital Resources

Our principal sources of liquidity are revenues from oil, gas and produced water royalties, easements and other surface-related income and water and land sales. 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 liquidity and capital resources. If market conditions were to change and our ~~revenue was~~revenues were to decline significantly or operating costs were to increase significantly, our cash flows and liquidity could be reduced. Should this occur, we could seek alternative sources of ~~funding, including potential future borrowing under a credit facility or other financing options.~~funding. We have no debt or credit facilities as of ~~March 31, 2021 and have no immediate plans to enter into such arrangements.~~September 30, 2021.

As of ~~March 31,~~September 30, 2021, we had cash and cash equivalents of ~~$310.7~~$372.8 million that we expect to utilize, along with cash flow from operations, to provide capital to support the growth of our business, ~~particularly the growth of TPWR,~~ to repurchase our ~~Common Stock~~common stock, par value $0.01 (the “Common Stock”) subject to market conditions, to pay dividends subject to the discretion of ~~the~~our board of directors and for

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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. For 2021, our board of directors has approved repurchases of our Common Stock up to $20.0 million of shares, and through September 30, 2021, we have repurchased $11.2 million of shares.

Results of Operations

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

We analyze financial results for each of our reportable segments. The reportable segments presented are consistent with our reportable segments discussed in Note 8. “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”).

~~As previously discussed above under “Market Conditions,” our~~Our results of operations for the three and nine months ended ~~March 31,~~September 30, 2021, have ~~been negatively~~continued to be impacted by oil and gas activity in the Permian Basin not returning to pre-pandemic levels. While our oil and gas royalty revenues have benefited from increased oil prices during this time period, our water sales and surface-related income continue to be impacted by the lingering reduction in demand for oil and Winter Storm Uri. These combined circumstances have affected not only our production and produced water volumes, but also directly impacted our surface-related income and water sales as discussed further below.decreased pace of activity.

For the three months ended ~~March 31,~~September 30, 2021 as compared to the three months ended ~~March 31,~~September 30, 2020

Revenues. Revenues ~~decreased $12.4~~increased $49.3 million, or ~~12.9%~~66.3%, to ~~$84.2~~$123.7 million for the three months ended ~~March 31,~~September 30, 2021 compared to ~~$96.6~~$74.4 million for the three months ended ~~March 31,~~September 30, 2020. Net income ~~decreased $7.3 million, or 12.8%,~~increased 81.2% to ~~$50.1~~$83.8 million for the three months ended ~~March 31,~~September 30, 2021 compared to ~~$57.4~~$46.3 million for the three months ended ~~March 31,~~September 30, 2020.

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


	Three Months Ended September 30,
	2021				2020
Revenues:
Land and resource management:




Oil and gas royalty revenue	$	79,098	64	%	$	31,758	43	%
Easements and other surface-related income	7,625		6	%	6,588		9	%
Land sales and other operating revenue	69		—	%	11,550		15	%
Total land and resource management revenue	86,792		70	%	49,896		67	%

Water services and operations:
Water sales	19,554		16	%	12,139		16	%
Produced water royalties	15,140		12	%	12,246		17	%
Easements and other surface-related income	2,207		2	%	102		—	%
Total water services and operations revenue	36,901		30	%	24,487		33	%
Total consolidated revenues	$	123,693	100	%	$	74,383	100	%

Net income:
Land and resource management	$	65,292	78	%	$	34,359	74	%
Water services and operations	18,545		22	%	11,916		26	%
Total consolidated net income	$	83,837	100	%	$	46,275	100	%

Land and Resource Management

Land and Resource Management segment revenues increased $36.9 million to $86.8 million for the three months ended September 30, 2021 as compared with $49.9 million for the comparable period of 2020. The increase in Land and Resource Management segment revenues is principally due to an increase in oil and gas royalty revenue, as discussed further below.

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Oil and gas royalties. Oil and gas royalty revenue was $79.1 million for the three months ended September 30, 2021 compared to $31.8 million for the three months ended September 30, 2020. The table below provides financial and operational data by royalty stream for the three months ended September 30, 2021 and 2020:


	Three Months Ended September 30,
	2021		2020
Our share of production volumes(1):
Oil (MBbls)	810		658
Natural gas (MMcf)	3,111		2,477
NGL (MBbls)	469		374
Equivalents (MBoe)	1,798		1,445
Equivalents per day (MBoe/d)	19.5		15.7

Oil and gas royalty revenue (in thousands):
Oil royalties	$	52,081	$	24,111
Natural gas royalties	11,528		3,286
NGL royalties	15,489		4,361
Total oil and gas royalties	$	79,098	$	31,758

Realized prices:
Oil ($/Bbl)	$	67.32	$	38.35
Natural gas ($/Mcf)	$	4.01	$	1.43
NGL ($/Bbl)	$	35.69	$	12.62
Equivalents ($/Boe)	$	46.07	$	23.02

(1) Commonly used definitions in the oil and gas industry not previously defined: Boe represents barrels of oil equivalent. 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.

Our share of crude oil, natural gas and NGL production volumes was 19.5 thousand Boe per day for the three months ended September 30, 2021 compared to 15.7 thousand Boe per day for the same period of 2020. The average realized prices were $67.32 per barrel of oil, $4.01 per Mcf of natural gas, and $35.69 per barrel of NGL, for a total equivalent price of $46.07 per Boe for the three months ended September 30, 2021, doubling the total equivalent price of $23.02 per Boe for the same period of 2020.

Easements and other surface-related income. Easements and other surface-related income was $7.6 million for the three months ended September 30, 2021, an increase of 15.7% compared to $6.6 million for the three months ended September 30, 2020. Easements and other surface-related income includes pipeline, power line and utility easements, commercial leases and seismic and temporary permits. The increase in easements and other surface-related income is principally related to increases in well bore easements and material sales for the three months ended September 30, 2021 compared to the same period of 2020. 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, 2021 relative to the same time period of 2020.

Land sales and other operating revenue. Land sales and other operating revenue includes revenue generated from land sales and grazing leases. There were no land sales for the three months ended September 30, 2021. Land sales were $11.5 million for the three months ended September 30, 2020. For the three months ended September 30, 2020, we sold approximately 20,820 acres of land for an aggregate sales price of approximately $10.1 million, or approximately $483 per

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acre. Additionally, we recognized land sales revenue of $1.4 million for the three months ended September 30, 2020 related to land exchanges where we had no cost basis in the land conveyed.

Net income. Net income for the Land and Resource Management segment was $65.3 million for the three months ended September 30, 2021 compared to $34.4 million for the three months ended September 30, 2020. The increase in net income is principally due to the $36.9 million increase in segment revenues, partially offset by an increase in segment expenses, including income tax expense. Total segment expenses were $21.5 million and $15.5 million for the three months ended September 30, 2021 and 2020, respectively. The overall increase in segment expenses was principally related to increased income tax expense for the three months ended September 30, 2021. Expenses are discussed further below under “Other Financial Data — Consolidated.”

Water Services and Operations

Water Services and Operations segment revenues increased 50.7% to $36.9 million for the three months ended September 30, 2021 as compared with $24.5 million for the comparable period of 2020. The increase in Water Services and Operations segment revenues is principally due to an increase 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, will fluctuate from period to period based upon those decisions and activity levels.

Water sales. Water sales revenue was $19.6 million for the three months ended September 30, 2021, an increase of 61.1%, compared with the three months ended September 30, 2020 when water sales revenue was $12.1 million. This increase was principally due to a 60.4% increase in the number of barrels of sourced and treated water for the three months ended September 30, 2021 compared to the same period in 2020.

Produced water royalties. Produced water royalties are royalties received from the transportation or disposal of produced water on our land. We do not operate any salt water disposal wells. Produced water royalties were $15.1 million for the three months ended September 30, 2021 compared to $12.2 million compared to the same period in 2020. This increase is principally due to increased produced water volumes for the three months ended September 30, 2021 compared to the same period of 2020.

Easements and other surface-related income. Easements and other surface-related income was $2.2 million for the three months ended September 30, 2021, an increase of $2.1 million compared to $0.1 million for the three months ended September 30, 2020. The increase in easements and other surface-related income related to an increase in temporary permits for sourced water lines for the three months ended September 30, 2021 compared to the same period in 2020.

Net income. Net income for the Water Services and Operations segment was $18.5 million for the three months ended September 30, 2021 compared to $11.9 million for the three months ended September 30, 2020. As discussed above, segment revenues increased 50.7% for the three months ended September 30, 2021 compared to the same period of 2020. Total segment expenses, including income tax expense, were $18.4 million for the three months ended September 30, 2021 as compared to $12.6 million for the three months ended September 30, 2020. The overall increase in segment expenses during 2021 is principally related to increased income tax expense and water service-related expenses, primarily fuel, equipment rental and repairs and maintenance. Expenses are discussed further below under “Other Financial Data — Consolidated.”

Other Financial Data — Consolidated

Salaries and related employee expenses. Salaries and related employee expenses were $8.5 million and $7.7 million for the three months ended September 30, 2021 and 2020, respectively. The increase in salaries and related employee expenses for the three months ended September 30, 2021 compared to the same period of 2020 is principally due to an increase in contract labor expenses.

Water service-related expenses. Water service-related expenses were $3.7 million for the three months ended September 30, 2021 compared to $2.3 million for the comparable period of 2020. The increase in expenses during 2021 is primarily due to increased fuel, equipment rental and repairs and maintenance expenses related to higher water sales volume, as discussed above.

General and administrative expenses. General and administrative expenses were $2.8 million for the three months ended September 30, 2021 compared to $1.9 million for the comparable period of 2020. The increase in general and

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administrative expenses during the three months ended September 30, 2021 compared to the same period of 2020 is principally related to increases in board of director fees resulting from our Corporate Reorganization in January 2021.

Other income, net. Other income, net was $0.5 million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively. Other income, net for the three months ended September 30, 2020, includes a $1.2 million accrued insurance reimbursement related to legal fees incurred in 2019 associated with the proxy contest.

For the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020

Revenues. Revenues increased $75.5 million, or 33.1%, to $303.8 million for the nine months ended September 30, 2021 compared to $228.3 million for the nine months ended September 30, 2020. Net income increased 45.5% to $190.9 million for the nine months ended September 30, 2021 compared to $131.3 million for the nine months ended September 30, 2020.

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

Three Months Ended March 31,
2021 2020
Revenues:
Land and resource management:
Oil and gas royalties $ 49,533 59 % $ 42,360 44 %
Easements and other surface-related income 8,187 10 % 13,298 14 %
Land sales and other operating revenue 70 — % 1,000 1 %
57,790 69 % 56,658 59 %
Water services and operations:
Water sales 12,956 15 % 26,967 28 %
Produced water royalties 12,549 15 % 12,506 13 %
Easements and other surface-related income 860 1 % 463 — %
26,365 31 % 39,936 41 %
Total consolidated revenues $ 84,155 100 % $ 96,594 100 %
Net income:
Land and resource management $ 39,513 79 % $ 39,118 68 %
Water services and operations 10,539 21 % 18,283 32 %
Total consolidated net income $ 50,052 100 % $ 57,401 100 %


	Nine Months Ended September 30,
	2021				2020
Revenues:
Land and resource management:




Oil and gas royalty revenue	$	186,835	62	%	$	94,631	41	%
Easements and other surface-related income	24,029		8	%	31,385		14	%
Land sales and other operating revenue	959		—	%	16,134		7	%
Total land and resource management revenue	211,823		70	%	142,150		62	%

Water services and operations:
Water sales	44,983		15	%	47,525		21	%
Produced water royalties	43,147		14	%	37,863		17	%
Easements and other surface-related income	3,827		1	%	722		—	%
Total water services and operations revenue	91,957		30	%	86,110		38	%
Total consolidated revenues	$	303,780	100	%	$	228,260	100	%

Net income:
Land and resource management	$	150,248	79	%	$	92,197	70	%
Water services and operations	40,687		21	%	39,061		30	%
Total consolidated net income	$	190,935	100	%	$	131,258	100	%

Land and Resource Management

Land and Resource Management segment revenues increased ~~$1.1 million, or 2.0%,~~49.0% to ~~$57.8~~$211.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared with ~~$56.7~~$142.2 million for the comparable period of 2020. The increase in Land and Resource Management segment revenues is principally due to an increase in oil and gas royalty revenue, partially offset by decreases in land sales and easements and other surface-related income, ~~and, to a lesser extent, oil royalty revenue~~ as discussed further below.

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Oil and gas royalties. Oil and gas royalty revenue was ~~$49.5~~$186.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$42.4~~$94.6 million for the ~~three~~nine months ended ~~March 31, 2020. Oil~~September 30, 2020, an increase of $92.2 million. The table below provides financial and operational data by royalty ~~revenue was $34.2 million~~stream for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~a decrease~~and 2020:


	Nine Months Ended September 30,
	2021		2020
Our share of production volumes:
Oil (MBbls)	2,139		2,081
Natural gas (MMcf)	8,627		6,983
NGL (MBbls)	1,194		1,142
Equivalents (MBoe)	4,771		4,387
Equivalents per day (MBoe/d)	17.5		16.0

Oil and gas royalty revenue (in thousands):
Oil royalties	$	128,907	$	76,794
Natural gas royalties	26,400		6,804
NGL royalties	31,528		11,033
Total oil and gas royalties	$	186,835	$	94,631

Realized prices:
Oil ($/Bbl)	$	63.12	$	38.64
Natural gas ($/Mcf)	$	3.31	$	1.05
NGL ($/Bbl)	$	28.54	$	10.45
Equivalents ($/Boe)	$	41.01	$	22.59

Our share of ~~4.6% compared to~~crude oil, natural gas and NGL production volumes was 17.5 thousand Boe per day for the ~~three~~nine months ended March 31, 2020 when oil royalty revenue was $35.9 million. This decrease in oil royalty revenue is principally due to a 10.6% decrease in crude oil production subject to our royalty interests, partially offset by a 6.7% increase in our average realized price per royalty barrel during the three months ended March 31,September 30, 2021 compared to 16.0 thousand Boe per day for the same period inof 2020. ~~Gas royalty revenue was $15.3 million~~The average realized prices were $63.12 per barrel of oil, $3.31 per Mcf of natural gas, and $28.54 per barrel of NGL, for a total equivalent price of $41.01 per Boe for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, an increase of ~~136.8% compared to the three months ended March 31, 2020 when gas royalty revenue was $6.5 million. This increase in gas royalty revenue is principally due to~~81.5% over a ~~121.1% increase in our average realized~~total equivalent price of $22.59 per Boe for ~~gas production and, to a lesser extent, a 7.1% increase in gas production subject to our royalty interests during the three months ended March 31, 2021 compared to~~ the same period inof 2020.

Easements and other surface-related income. Easements and other surface-related income was ~~$8.2~~$24.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, a decrease of ~~38.4%~~23.4% compared to ~~$13.3~~$31.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Easements and other surface-related income includes pipeline, power line and utility easements, commercial leases ~~material sales~~ and seismic and temporary permits. The decrease in easements and other surface-related income is principally related to a decrease of ~~$4.9~~$9.7 million in pipeline easement income to ~~$1.2~~$5.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 from ~~$6.1~~$15.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The amount of income derived from pipeline easements is a function of the term of the easement, the size of the easement and the number of easements entered into for any given period. 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 ~~decreased~~ development activity in the Permian Basin during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 relative to the same time period of 2020.

Land sales and other operating revenue. Land sales and other operating revenue includes revenue generated from land sales and grazing leases. Land sales were $0.7 million and $15.9 million for the nine months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021, we sold 30 acres of land for an aggregate sales price of $0.7 million or approximately $25,000 per acre. For the nine months ended September 30, 2020, we sold approximately 21,347 acres of land for an aggregate sales price of approximately $14.5 million, or approximately $676 per acre. Additionally, we recognized land sales revenue of $1.4 million for the nine months ended September 30, 2020 related to land exchanges where we had no cost basis in the land conveyed.

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Net income. Net income for the Land and Resource Management segment ~~was $39.5~~increased 63.0% to $150.2 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$39.1~~$92.2 million for the ~~three months ended March 31,~~comparable period in 2020. The increase in net income is principally due to the ~~$1.1~~$69.7 million increase in segment revenues, partially offset by ~~a slight~~an increase in segment expenses, including income tax expense. The increase in segment revenues is principally due to an increase in oil and gas royalty revenue, partially offset by decreases in land sales and easements and other surface-related income, ~~and oil royalty revenues,~~ as discussed above. Total segment expenses were ~~$18.3~~$61.6 million and ~~$17.6~~$50.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. The overall increase in segment expenses was principally ~~related~~due to increased income tax expense ~~depletion expense~~ related to ~~our royalty interests and~~ increased ~~board of director expenses associated with our Corporate Reorganization.~~operating income. Expenses are discussed further below under “Other Financial Data — Consolidated.”

Water Services and Operations

Water Services and Operations segment revenues ~~decreased 34.0%~~increased 6.8% to ~~$26.4~~$92.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared with ~~$39.9~~$86.1 million for the comparable period of 2020. The ~~decrease~~increase in Water Services and Operations segment revenues is principally due to increases in produced water royalties and easements and other surface-related income, partially offset by a decrease in water sales revenue, which is 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, will fluctuate from period to period based upon those decisions and activity levels.

Water sales. Water sales revenue ~~was $13.0~~decreased $2.5 million to $45.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~a decrease~~compared to the same period of $14.0 million or 52.0%, compared with the three months ended March 31, 2020 when water sales revenue was $27.0 million. This decrease was principally due to a 40.7% decrease in the number of barrels of2020. While sourced and treated water ~~sold and,~~sales volumes have increased approximately 12.5% for the nine months ended September 30, 2021 compared to ~~a lesser extent, a 20.4% decrease in~~the nine months ended September 30, 2020, the average sales price per barrel of water ~~for the three months ended March 31,~~in 2021 ~~compared to the same period in 2020.~~is still below pre-pandemic pricing.

Produced water royalties. Produced water royalties are royalties received from the transportation or disposal of produced water on our land. We do not operate any salt water disposal wells. Produced water royalties were ~~$12.5~~$43.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to $37.9 million compared to the same period in 2020. This increase is principally due to increased produced water volumes for the nine months ended September 30, 2021 compared to the same period of 2020.

Easements and other surface-related income. Easements and other surface-related income was $3.8 million for the nine months ended September 30, 2021, an increase of $3.1 million compared to $0.7 million for the nine months ended September 30, 2020. The increase in easements and other surface-related income relates to an increase in temporary permits for sourced water lines for the nine months ended September 30, 2021 compared to the same period in 2020.

Net income. Net income for the Water Services and Operations segment was ~~$10.5~~$40.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$18.3~~$39.1 million for the ~~three months ended March 31,~~same period in 2020. As discussed above, segment revenues ~~decreased 34.0%~~increased 6.8% for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the same period of 2020. Total segment expenses, including income tax expense, were ~~$15.8~~$51.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to ~~$21.6~~$47.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The overall ~~decrease~~increase in segment expenses during 2021 is principally related to ~~decreased water service-related expenses, primarily equipment rental, fuel and repairs and maintenance and income tax expense.~~increased corporate overhead allocations related to our Corporate Reorganization. Expenses are discussed further below under “Other Financial Data — Consolidated.”

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Other Financial Data — Consolidated

Salaries and related employee expenses. Salaries and related employee expenses were ~~$10.0~~$31.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$10.6~~$27.2 million for the comparable period of 2020. The ~~decrease~~increase in salaries and related employee expenses during 2021 as compared to the same period of 2020 is principally due to $6.7 million of severance costs, partially offset by decreased usage of contract labor by our Water Services and Operations segment.

Water service-related expenses. Water service-related expenses were ~~$3.3~~$10.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$6.8~~$11.2 million for the comparable period of 2020. The decrease in expenses during 2021 is primarily related to decreased field logistical expenses and equipment rental fuel and repairs and maintenance expenses related to the 40.7% decrease in the number of barrels of sourced and treated water sold and ongoing cost saving measures as discussed above in “Market Conditions.”expenses.

General and administrative ~~expenses~~expenses.. General and administrative expenses ~~decreased $0.2~~increased $1.2 million to ~~$2.8~~$8.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 from ~~$3.0~~$7.3 million for the same period of 2020. The ~~decrease~~increase in general and administrative expenses during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the same period of 2020 ~~is primarily~~was principally related to ~~decreases associated with independent contract service providers and travel expenses, partially offset by~~ increased board of director fees resulting from our Corporate Reorganization in January 2021.

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Legal and professional expenses. Legal and professional fees were ~~$2.2~~$4.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$2.4~~$7.0 million for the comparable period of 2020. Legal and professional fees for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 were principally higher due to legal expenses associated with our Corporate Reorganization.

Land sales expenses. There were no land sales expenses for the nine months ended September 30, 2021 ~~principally~~compared to $2.8 million for the comparable period of 2020. Land sales expenses represent expenses related to ~~the completion of our Corporate Reorganization effective January 11, 2021. Legal~~land sales and ~~professional fees~~include cost basis and closing costs associated with land sales. Land sales expenses for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 ~~principally related to the conversion exploration committee and planning and preparation for the Corporate Reorganization.~~include $2.7 million of cost basis.

Depreciation, depletion and amortization. Depreciation, depletion and amortization was ~~$3.8~~$11.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$3.3~~$10.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The increase in depreciation, depletion and amortization is principally related to our investment in water service-related assets placed in service in 2021 and, ~~2020 and,~~ to a lesser extent, increased depletion related to our oil and gas royalty interests.

Other income, net. Other income, net was $0.9 million and $2.3 million for the nine months ended September 30, 2021 and 2020, respectively. Other income, net for the nine months ended September 30, 2020, includes a $1.2 million accrued insurance reimbursement related to legal fees incurred in 2019 associated with the proxy contest.

Cash Flow Analysis

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020

Cash flows provided by operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 were ~~$52.4~~$174.5 million and ~~$68.6~~$161.9 million, respectively. The ~~decrease~~increase in cash flows provided by operating activities was primarily related to ~~decreased proceeds~~increased prices and volumes of oil and gas production and the associated working capital resulting from ~~water sales and easements and other surface-related payments received~~such activity during the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

Cash flows used in investing activities were ~~$1.4~~$10.0 million compared to ~~$24.4~~$25.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Acquisitions of land and royalty interests were ~~$20.8~~nominal for the nine months ended September 30, 2021 compared to $20.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. ~~There were no~~This decline in land and royalty acquisitions was partially offset by an increase in purchases of ~~land or royalty interests during the three months ended March 31, 2021.~~fixed assets.

Cash flows used in financing activities were ~~$21.3~~$74.8 million compared to $124.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we paid total dividends of ~~$21.3~~$64.0 million consisting of ~~a quarterly~~cumulative paid cash ~~dividend~~dividends of ~~$2.75~~$8.25 per share. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we paid total dividends of $124.1 million consisting of an annual cash dividend of $10.00 per Sub-share and a special dividend of $6.00 per Sub-share.

Off-Balance Sheet Arrangements

The Company has not engaged in any off-balance sheet arrangements.

~~Table of Contents~~

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our 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 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021. Our most critical accounting policies and estimates include our accrual of oil and gas royalties. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, historical experience and other factors that we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2020 Annual Report on Form 10-K.

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New Accounting Pronouncements

For further information regarding recently issued accounting pronouncements, see Note 2, “Summary of Significant Accounting Policies” in the notes to the 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 since December 31, 2020.

Item 4. Controls and Procedures

Pursuant to Rule 13a-15 under the Exchange Act, management of the Company under the supervision and with the participation of Tyler Glover, the Company’s Chief Executive Officer, and ~~Robert J. Packer,~~Chris Steddum, the Company’s Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the Company’s fiscal quarter covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, Mr. Glover and Mr. ~~Packer~~Steddum concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

There have been no changes in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

1624

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is not involved in any material pending legal proceedings.

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 Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021.

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

~~The Company did not repurchase any Sub-shares or any shares of Common Stock during~~During the three months ended ~~March~~September 30, 2021, the Company repurchased shares as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total 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
July 1 through July 31, 2021	2,059	$	1,489	2,059
August 1 through August 31, 2021	2,350	1,433		2,350
September 1 through September 30, 2021	1,770	1,273		1,770
Total(1)	6,179	$	1,406	6,179	$	8,807,130

(1) Repurchases were made pursuant to a stock repurchase program, approved by our board of directors on May 3, 2021, to purchase up to an aggregate of $20.0 million of shares of our outstanding Common Stock. In connection with the stock repurchase program, the Company entered into a Rule 10b5-1 trading plan that generally permits the Company to repurchase shares at times when it might otherwise be prevented from doing so under securities laws. The stock repurchase program will expire on December 31, ~~2021.~~2021 unless otherwise modified or earlier terminated by our board of directors at any time in its sole discretion. Repurchased shares will be held in treasury.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

1725

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Item 6. Exhibits

EXHIBIT INDEX


EXHIBIT NUMBER						DESCRIPTION

31.1*						Rule 13a-14(a) Certification of Chief Executive Officer.
31.2*						Rule 13a-14(a) Certification of Chief Financial Officer.
32.1*						Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*						The following information from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2021 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 ~~March 31,~~September 30, 2021, formatted in iXBRL.

* Filed or furnished herewith.

1826

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, 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:

~~May 6,~~November 4, 2021

By:

/s/ Tyler Glover

Tyler Glover, President and

Chief Executive Officer

Date:

~~May 6,~~November 4, 2021

By:

/s/ ~~Robert J. Packer~~Chris Steddum

~~Robert J. Packer,~~Chris Steddum,

Chief Financial Officer

1927


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020				2021		2020		2021		2020
Revenues:	Revenues:						Revenues:
Oil and gas royalties	Oil and gas royalties	$	49,533	$	42,360		Oil and gas royalties	$	79,098	$	31,758	$	186,835	$	94,631
Water sales	Water sales	12,956		26,967			Water sales	19,554		12,139		44,983		47,525
Produced water royalties	Produced water royalties	12,549		12,506			Produced water royalties	15,140		12,246		43,147		37,863
Easements and other surface-related income	Easements and other surface-related income	9,047		13,761			Easements and other surface-related income	9,832		6,690		27,856		32,107
Land sales	Land sales	0		900			Land sales	—		11,463		746		15,855
Other operating revenue	Other operating revenue	70		100			Other operating revenue	69		87		213		279
Total revenues	Total revenues	84,155		96,594			Total revenues	123,693		74,383		303,780		228,260

Expenses:	Expenses:						Expenses:
Salaries and related employee expenses	Salaries and related employee expenses	9,979		10,620			Salaries and related employee expenses	8,542		7,678		31,792		27,235
Water service-related expenses	Water service-related expenses	3,298		6,780			Water service-related expenses	3,650		2,260		10,499		11,205
General and administrative expenses	General and administrative expenses	2,806		2,959			General and administrative expenses	2,844		1,883		8,491		7,290
Legal and professional fees	Legal and professional fees	2,212		2,358			Legal and professional fees	1,551		1,987		4,904		6,955

Land sales expenses							Land sales expenses	—		67		—		2,773
Depreciation, depletion and amortization	Depreciation, depletion and amortization	3,838		3,335			Depreciation, depletion and amortization	3,866		3,760		11,562		10,773
Total operating expenses	Total operating expenses	22,133		26,052			Total operating expenses	20,453		17,635		67,248		66,231

Operating income	Operating income	62,022		70,542			Operating income	103,240		56,748		236,532		162,029

Other income, net	Other income, net	5		826			Other income, net	513		1,287		924		2,296
Income before income taxes	Income before income taxes	62,027		71,368			Income before income taxes	103,753		58,035		237,456		164,325
Income tax expense (benefit):
Current		12,122		14,022
Deferred		(147)		(55)
Total income tax expense		11,975		13,967

Income tax expense							Income tax expense	19,916		11,760		46,521		33,067
Net income	Net income	$	50,052	$	57,401		Net income	$	83,837	$	46,275	$	190,935	$	131,258

Other comprehensive income — periodic pension costs, net of income taxes of $8 and $4, respectively		28		13
Other comprehensive income — periodic pension costs, net of income taxes of $8, $4, $23 and $11, respectively							Other comprehensive income — periodic pension costs, net of income taxes of $8, $4, $23 and $11, respectively	29		13		86		40
Total comprehensive income	Total comprehensive income	$	50,080	$	57,414		Total comprehensive income	$	83,866	$	46,288	$	191,021	$	131,298

Weighted average number of common shares/Sub-share Certificates outstanding	Weighted average number of common shares/Sub-share Certificates outstanding	7,756,156		7,756,156			Weighted average number of common shares/Sub-share Certificates outstanding	7,751,329		7,756,156		7,754,439		7,756,156

Net income per common share/Sub-share Certificate — basic and diluted	Net income per common share/Sub-share Certificate — basic and diluted	$	6.45	$	7.40		Net income per common share/Sub-share Certificate — basic and diluted	$	10.82	$	5.97	$	24.62	$	16.92

Cash dividends per common share/Sub-share Certificate	Cash dividends per common share/Sub-share Certificate	$	2.75	$	16.00		Cash dividends per common share/Sub-share Certificate	$	2.75	$	—	$	8.25	$	16.00


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	50,052	$	57,401	Net income	$	190,935	$	131,258
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	Deferred taxes	(147)		(55)		Deferred taxes	(632)		(86)
Depreciation, depletion and amortization	Depreciation, depletion and amortization	3,838		3,335		Depreciation, depletion and amortization	11,562		10,773

Land sales revenue recognized on land exchanges						Land sales revenue recognized on land exchanges	—		(1,415)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Operating assets, excluding income taxes	Operating assets, excluding income taxes	(13,657)		(5,377)		Operating assets, excluding income taxes	(35,377)		25,043

Operating liabilities, excluding income taxes	Operating liabilities, excluding income taxes	172		3,909		Operating liabilities, excluding income taxes	4,961		(1,159)
Income taxes payable	Income taxes payable	12,129		9,426		Income taxes payable	3,063		(2,555)
Cash provided by operating activities	Cash provided by operating activities	52,387		68,639		Cash provided by operating activities	174,512		161,859

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Proceeds from sales of fixed assets						Proceeds from sales of fixed assets	1,079		—
Acquisition of real estate	Acquisition of real estate	0		(3,890)		Acquisition of real estate	(10)		(3,966)
Acquisition of royalty interests	Acquisition of royalty interests	0		(16,936)		Acquisition of royalty interests	—		(16,945)
Purchase of fixed assets	Purchase of fixed assets	(1,449)		(3,617)		Purchase of fixed assets	(11,058)		(4,736)
Cash used in investing activities	Cash used in investing activities	(1,449)		(24,443)		Cash used in investing activities	(9,989)		(25,647)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Repurchases of common stock						Repurchases of common stock	(10,816)		—
Dividends paid	Dividends paid	(21,329)		(124,098)		Dividends paid	(63,970)		(124,098)
Cash used in financing activities	Cash used in financing activities	(21,329)		(124,098)		Cash used in financing activities	(74,786)		(124,098)

Net increase (decrease) in cash, cash equivalents and restricted cash		29,609		(79,902)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	89,737		12,114
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	283,024		303,645		Cash, cash equivalents and restricted cash, beginning of period	283,024		303,645
Cash, cash equivalents, and restricted cash, end of period	Cash, cash equivalents, and restricted cash, end of period	$	312,633	$	223,743	Cash, cash equivalents, and restricted cash, end of period	$	372,761	$	315,759

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Income taxes paid	Income taxes paid	$	0	$	4,600	Income taxes paid	$	44,113	$	35,719
Supplemental non-cash investing and financing information:	Supplemental non-cash investing and financing information:					Supplemental non-cash investing and financing information:
Capital expenditure additions		$	1,289	$	0
Fixed asset additions in accounts payable						Fixed asset additions in accounts payable	$	441	$	245
Share repurchases not yet settled						Share repurchases not yet settled	$	377	$	—
Issuance of common stock	Issuance of common stock	$	78	$	0	Issuance of common stock	$	78	$	—

Land exchange						Land exchange	$	—	$	1,415


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Property, plant and equipment, at cost:	Property, plant and equipment, at cost:					Property, plant and equipment, at cost:
Water service-related assets (1)	Water service-related assets (1)	$	100,399	$	97,699	Water service-related assets (1)	$	104,612	$	97,699
Furniture, fixtures and equipment	Furniture, fixtures and equipment	6,122		6,125		Furniture, fixtures and equipment	9,195		6,125
Other	Other	598		598		Other	598		598
Property, plant and equipment at cost	Property, plant and equipment at cost	107,119		104,422		Property, plant and equipment at cost	114,405		104,422
Less: accumulated depreciation	Less: accumulated depreciation	(28,724)		(25,155)		Less: accumulated depreciation	(35,201)		(25,155)
Property, plant and equipment, net	Property, plant and equipment, net	$	78,395	$	79,267	Property, plant and equipment, net	$	79,204	$	79,267


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
		Number of Acres	Net Book Value		Number of Acres	Net Book Value			Number of Acres	Net Book Value		Number of Acres	Net Book Value
Land (surface rights) (1)	Land (surface rights) (1)	823,482	$	0	823,482	$	0	Land (surface rights) (1)	823,452	$	—	823,482	$	—
Real estate acquired	Real estate acquired	57,041	108,536		57,041	108,536		Real estate acquired	57,049	108,546		57,041	108,536
Total real estate situated in Texas	Total real estate situated in Texas	880,523	$	108,536	880,523	$	108,536	Total real estate situated in Texas	880,501	$	108,546	880,523	$	108,536


		Net Book Value					Net Book Value
		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
1/16th nonparticipating perpetual royalty interests	1/16th nonparticipating perpetual royalty interests	$	0	$	0	1/16th nonparticipating perpetual royalty interests	$	—	$	—
1/128th nonparticipating perpetual royalty interests	1/128th nonparticipating perpetual royalty interests	0		0		1/128th nonparticipating perpetual royalty interests	—		—
Royalty interests acquired	Royalty interests acquired	46,266		46,266		Royalty interests acquired	46,266		46,266
Total royalty interests, gross	Total royalty interests, gross	46,266		46,266		Total royalty interests, gross	46,266		46,266
Less: accumulated depletion	Less: accumulated depletion	(831)		(620)		Less: accumulated depletion	(1,115)		(620)
Total royalty interests, net	Total royalty interests, net	$	45,435	$	45,646	Total royalty interests, net	$	45,151	$	45,646


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
Emerging growth company	☐


		Sub-share Certificates	Common Stock									Sub-share Certificates				Common Stock		Treasury Stock			Accum. Other Comp. Loss		Retained Earnings		Net Proceeds from All Sources			Total Equity
		Number of shares	Number of shares	Par Value		Accum. Other Comp. Loss		Retained Earnings		Net Proceeds from All Sources			Total Equity			Shares	Shares	Amount		Shares							Total Equity
For the three months ended March 31, 2021:
For the nine months ended September 30, 2021:															For the nine months ended September 30, 2021:
Balances as of December 31, 2020	Balances as of December 31, 2020	7,756,156	0	$	0	$	(2,693)	$	0	$	487,877		$	485,184	Balances as of December 31, 2020	7,756,156	—	$	—	—	$	—	$	(2,693)	$	—		$	487,877	$	485,184
Net income	Net income	—	—	—		—		50,052		—			50,052		Net income	—	—	—		—	—		—		50,052			—		50,052
Dividends paid ($2.75 per common share)	Dividends paid ($2.75 per common share)	—	—	—		—		(21,329)		—			(21,329)		Dividends paid ($2.75 per common share)	—	—	—		—	—		—		(21,329)			—		(21,329)
Conversion of Sub-shares into shares of common stock	Conversion of Sub-shares into shares of common stock	(7,756,156)	7,756,156	78		—		487,799		(487,877)			0		Conversion of Sub-shares into shares of common stock	(7,756,156)	7,756,156	78		—	—		—		487,799			(487,877)		—
Other comprehensive income	Other comprehensive income	—	—	—		28		—		—			28		Other comprehensive income	—	—	—		—	—		28		—			—		28
Balances as of March 31, 2021	Balances as of March 31, 2021	0	7,756,156	$	78	$	(2,665)	$	516,522	$	0		$	513,935	Balances as of March 31, 2021	—	7,756,156	$	78	—	$	—	$	(2,665)	$	516,522		$	—	$	513,935
Net income															Net income	—	—	—		—	—		—		57,046			—		57,046
Dividends paid ($2.75 per common share)															Dividends paid ($2.75 per common share)	—	—	—		—	—		—		(21,329)			—		(21,329)
Repurchases of common stock															Repurchases of common stock	—	(1,633)	—		1,633	(2,504)		—		—			—		(2,504)
Other comprehensive income															Other comprehensive income	—	—	—		—	—		29		—			—		29
Balances as of June 30, 2021															Balances as of June 30, 2021	—	7,754,523	$	78	1,633	$	(2,504)	$	(2,636)	$	552,239		$	—	$	547,177
Net income															Net income	—	—	—		—	—		—		83,837			—		83,837
Dividends paid ($2.75 per common share)															Dividends paid ($2.75 per common share)	—	—	—		—	—		—		(21,312)			—		(21,312)
Repurchases of common stock															Repurchases of common stock	—	(6,179)	—		6,179	(8,689)		—		—			—		(8,689)
Other comprehensive income															Other comprehensive income	—	—	—		—	—		29		—			—		29
Balances as of September 30, 2021															Balances as of September 30, 2021	—	7,748,344	$	78	7,812	$	(11,193)	$	(2,607)	$	614,764		$	—	$	601,042


	Three Months Ended March 31,
	2021				2020
Revenues:
Land and resource management:
Oil and gas royalties	$	49,533	59	%	$	42,360	44	%
Easements and other surface-related income	8,187		10	%	13,298		14	%
Land sales and other operating revenue	70		—	%	1,000		1	%
	57,790		69	%	56,658		59	%
Water services and operations:
Water sales	12,956		15	%	26,967		28	%
Produced water royalties	12,549		15	%	12,506		13	%
Easements and other surface-related income	860		1	%	463		—	%
	26,365		31	%	39,936		41	%
Total consolidated revenues	$	84,155	100	%	$	96,594	100	%

Net income:
Land and resource management	$	39,513	79	%	$	39,118	68	%
Water services and operations	10,539		21	%	18,283		32	%
Total consolidated net income	$	50,052	100	%	$	57,401	100	%