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, ~~2021~~2024

☐ 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, ~~2021,~~2024, the Registrant had ~~7,756,156~~22,989,755 shares of ~~common stock,~~Common Stock, $0.01 par value, outstanding.

TEXAS PACIFIC LAND CORPORATION

For the Quarter Ended March 31, ~~2021~~2024

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATEDBALANCE SHEETS

(in thousands, except shares and per share amounts)

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATEDSTATEMENTS OF INCOMEAND TOTAL COMPREHENSIVE INCOME

(in thousands, except shares and per share amounts)

Three Months Ended
March 31,
2021 2020
Revenues:
Oil and gas royalties $ 49,533 $ 42,360
Water sales 12,956 26,967
Produced water royalties 12,549 12,506
Easements and other surface-related income 9,047 13,761
Land sales 0 900
Other operating revenue 70 100
Total revenues 84,155 96,594
Expenses:
Salaries and related employee expenses 9,979 10,620
Water service-related expenses 3,298 6,780
General and administrative expenses 2,806 2,959
Legal and professional fees 2,212 2,358
Depreciation, depletion and amortization 3,838 3,335
Total operating expenses 22,133 26,052
Operating income 62,022 70,542
Other income, net 5 826
Income before income taxes 62,027 71,368
Income tax expense (benefit):
Current 12,122 14,022
Deferred (147) (55)
Total income tax expense 11,975 13,967
Net income $ 50,052 $ 57,401
Other comprehensive income — periodic pension costs, net of income taxes of $8 and $4, respectively 28 13
Total comprehensive income $ 50,080 $ 57,414
Weighted average number of common shares/Sub-share Certificates outstanding 7,756,156 7,756,156
Net income per common share/Sub-share Certificate — basic and diluted $ 6.45 $ 7.40
Cash dividends per common share/Sub-share Certificate $ 2.75 $ 16.00


	Three Months Ended March 31,
	2024		2023
Revenues:
Oil and gas royalties	$	92,120	$	89,130
Water sales	37,126		21,729
Produced water royalties	23,006		20,134
Easements and other surface-related income	20,646		14,969
Land sales	1,244		400
Total revenues	174,142		146,362

Expenses:
Salaries and related employee expenses	12,461		10,593
Water service-related expenses	10,212		5,656
General and administrative expenses	4,924		3,552
Legal and professional fees	4,057		16,628
Ad valorem and other taxes	2,357		1,574
Land sales expenses	250		3
Depreciation, depletion and amortization	3,840		3,404
Total operating expenses	38,101		41,410

Operating income	136,041		104,952

Other income, net	9,943		5,389
Income before income taxes	145,984		110,341



Income tax expense	31,567		23,773
Net income	$	114,417	$	86,568




Other comprehensive loss — periodic pension costs, net of income taxes of $6 for the three months ended March 31, 2024 and 2023	(21)		(25)
Total comprehensive income	$	114,396	$	86,543

Net income per share of common stock
Basic	$	4.97	$	3.75
Diluted	$	4.97	$	3.75

Weighted average number of shares of common stock outstanding
Basic	23,003,001		23,079,251
Diluted	23,020,249		23,095,193

Cash dividends per share of common stock	$	1.17	$	1.08

See accompanying notes to condensed consolidated financial statements.

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS

~~(in~~ (in thousands)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	114,417	$	86,568
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	3,840		3,404
Share-based compensation	3,354		2,473

Deferred taxes	(331)		(306)
Changes in operating assets and liabilities:
Operating assets, excluding income taxes	5,602		(2,076)
Operating liabilities, excluding income taxes	(11,446)		640
Income taxes payable	31,808		19,263
Prepaid income taxes	—		4,809

Cash provided by operating activities	147,244		114,775

Cash flows from investing activities:



Purchase of fixed assets	(2,238)		(1,749)
Proceeds from sale of fixed assets	—		5
Cash used in investing activities	(2,238)		(1,744)

Cash flows from financing activities:
Dividends paid	(26,907)		(25,061)
Settlement of common stock repurchases	(10,341)		(6,837)
Shares exchanged for tax withholdings	(1,207)		(939)
Cash used in financing activities	(38,455)		(32,837)

Net increase in cash, cash equivalents and restricted cash	106,551		80,194
Cash, cash equivalents and restricted cash, beginning of period	730,549		517,182
Cash, cash equivalents and restricted cash, end of period	$	837,100	$	597,376

Supplemental disclosure of cash flow information:
Income taxes paid	$	—	$	—
Supplemental non-cash investing and financing information:

Increase in accounts payable related to capital expenditures	$	3,424	$	2,024

Three Months Ended
March 31,
2021 2020
Cash flows from operating activities:
Net income $ 50,052 $ 57,401
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes (147) (55)
Depreciation, depletion and amortization 3,838 3,335
Changes in operating assets and liabilities:
Operating assets, excluding income taxes (13,657) (5,377)
Operating liabilities, excluding income taxes 172 3,909
Income taxes payable 12,129 9,426
Cash provided by operating activities 52,387 68,639
Cash flows from investing activities:
Acquisition of real estate 0 (3,890)
Acquisition of royalty interests 0 (16,936)
Purchase of fixed assets (1,449) (3,617)
Cash used in investing activities (1,449) (24,443)
Cash flows from financing activities:
Dividends paid (21,329) (124,098)
Cash used in financing activities (21,329) (124,098)
Net increase (decrease) in cash, cash equivalents and restricted cash 29,609 (79,902)
Cash, cash equivalents and restricted cash, beginning of period 283,024 303,645
Cash, cash equivalents, and restricted cash, end of period $ 312,633 $ 223,743
Supplemental disclosure of cash flow information:
Income taxes paid $ 0 $ 4,600
Supplemental non-cash investing and financing information:
Capital expenditure additions $ 1,289 $ 0
Issuance of common stock $ 78 $ 0

See accompanying notes to condensed consolidated financial statements.

TEXAS PACIFIC LAND CORPORATION

NOTES TO CONDENSEDCONSOLIDATEDFINANCIAL STATEMENTS

~~(UNAUDITED)~~(Unaudited)

1. Organization and ~~Basis~~Description of ~~Presentation~~

~~Organization~~Business Segments

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~~868,000 surface acres of land in West Texas, ~~with the majority of our ownership~~principally 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) (“NRA”) for a collective total of approximately 195,000 NRA located in the western part of Texas.

~~TPL’s income is~~Our revenues are derived ~~primarily~~ from oil and gas ~~and~~royalties, water sales, produced water royalties, ~~sales of water~~easements and other surface-related income and land ~~easements and commercial leases of the land.~~sales.

On January 11, 2021, we completed our reorganization from a business trust, Texas Pacific Land Trust (the “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 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 in reference to the Trust, and references to periods on that date and thereafter will be in reference to, into Texas Pacific Land Corporation, ~~or TPL Corporation.~~a corporation formed and existing under the laws of the state of Delaware (the “Corporate Reorganization”).

Increase in Authorized Shares of Common Stock

As of December 31, 2023, the Company had authorized shares consisting of 1,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”), and 7,756,156 shares of common stock, par value $0.01 per share (“Common Stock”). On March 1, 2024, we filed a Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware, pursuant to which the Certificate of Incorporation was amended and restated to provide that the total number of authorized shares of capital stock of the Company be increased to 47,536,936 shares of capital stock, consisting of 1,000,000 shares of Preferred Stock and 46,536,936 shares of Common Stock.

On March 26, 2024, we effected a three-for-one stock split in the form of a stock dividend of two shares of Common Stock for every share of Common Stock outstanding to stockholders of record as of March 18, 2024. All shares, stock awards, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and per share information have been retroactively adjusted to reflect the stock split. The three-for-one stock split was not applied to shares held as treasury stock. The shares of Common Stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common Stock.”

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.~~2023. 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, ~~2021~~2024 and the results of its operations ~~for the three months ended March 31, 2021 and 2020, respectively,~~ and its cash flows for the three months ended March 31, ~~2021~~2024 and ~~2020,~~2023, 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 Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2023. The results for the interim periods shown in this report are not necessarily indicative of future financial results.

We operate our business in 2two 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 8.13, “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 condensed 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

We consider investments in bank deposits, money market funds, and other highly-liquid cash investments, such as U.S. Treasury bills and commercial paper, with original maturities of three months or less to be cash equivalents. Our cash equivalents are considered Level 1 assets in the fair value hierarchy.

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 as of March 31, 2024 and December 31, 2023 (in thousands):

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

3. Real Estate Activity

~~Reclassifications~~As of March 31, 2024 and December 31, 2023, TPL owned the following land and real estate (in thousands, except number of acres):


	March 31, 2024			December 31, 2023
	Number of Acres	Net Book Value		Number of Acres	Net Book Value
Land (surface rights) (1)	798,958	$	—	798,999	$	—
Real estate acquired	69,447	129,774		69,447	130,024
Total real estate situated in Texas	868,405	$	129,774	868,446	$	130,024

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

~~Certain financial information on~~For the ~~condensed consolidated statements~~three months ended March 31, 2024, we sold 41 acres of ~~income~~land in Texas for an aggregate sales price of $1.2 million. There were no significant land sales for the three months ended March 31, ~~2020 have been revised to conform to the current year presentation. These revisions include a reclassification of $12.5 million of produced water royalties revenue~~2023. There were no land acquisitions for the three months ended March 31, ~~2020 previously included in easements and other surface-related income to a separate financial statement line item within revenues.~~2024 or 2023.

~~Recently Adopted Accounting Guidance~~

~~In December 2019, the FASB issued 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.

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4. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following as of March 31, ~~2021~~2024 and December 31, ~~2020~~2023 (in thousands):


	March 31, 2024		December 31, 2023
Property, plant and equipment, at cost:
Water service-related assets	$	141,920	$	136,340
Furniture, fixtures and equipment	9,884		9,801
Other	598		598
Total property, plant and equipment, at cost	152,402		146,739
Less: accumulated depreciation	(60,202)		(57,152)
Property, plant and equipment, net	$	92,200	$	89,587

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

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

Depreciation expense was ~~$3.6~~$3.1 million and ~~$3.2~~$3.0 million for the three months ended March 31, ~~2021~~2024 and ~~2020,~~2023, respectively.

~~4. Real Estate Activity~~

~~As of March 31, 2021~~5. Oil and ~~December 31, 2020, the Company owned the following land and real estate (in thousands, except number of acres):~~

~~Table of Contents~~

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

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

~~Land Sales~~

There were 0 land sales during the three months ended March 31, 2021. For the three months ended March 31, 2020, we sold 30 acres of land in Texas for an aggregate sales price of $0.9 million, an average of approximately $30,000 per acre.

~~Land Acquisitions~~

There were 0 land acquisitions during the three months ended March 31, 2021. For the three months ended March 31, 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.Gas Royalty Interests

As of March 31, ~~2021~~2024 and December 31, ~~2020,~~2023, we owned the following oil and gas royalty interests (in thousands):

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


	March 31, 2024		December 31, 2023
Oil and gas royalty interests:
1/16th nonparticipating perpetual royalty interests (1)	$	—	$	—
1/128th nonparticipating perpetual royalty interests (1)	—		—
Royalty interests acquired, at cost	51,494		51,494
Total royalty interests	51,494		51,494
Less: accumulated depletion	(5,340)		(4,885)
Royalty interests, net	$	46,154	$	46,609

(1)Royalty interests assigned through the Declaration of Trust.

There were no sales or acquisitions of oil and gas royalty ~~interest transactions~~interests during the three months ended March 31, 2024 or 2023.

Depletion expense was $0.5 million and $0.3 million for the three months ended March 31, ~~2021. For the three months ended March 31, 2020, we acquired oil~~2024 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 per net royalty acre.~~2023, respectively.

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6. ~~Income Taxes~~Intangible Assets

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


	March 31, 2024		December 31, 2023
Intangible assets, at cost:
Saltwater disposal easement	$	17,557	$	17,557
Groundwater rights acquired	3,846		3,846
Total intangible assets, at cost (1)	21,403		21,403
Less: accumulated amortization	(662)		(378)
Intangible assets, net	$	20,741	$	21,025

(1)The ~~calculation~~remaining weighted average amortization period for total intangible assets was 18.5 years as of ~~our effective tax rate is as follows~~March 31, 2024.

There were no intangible asset acquisitions for the three months ended March 31, ~~2021 and 2020 (in thousands, except percentages):~~2024 or 2023.

Three Months Ended
March 31,
2021 2020
Income before income taxes $ 62,027 $ 71,368
Income tax expense $ 11,975 $ 13,967
Effective tax rate 19.3 % 19.6 %
Amortization of intangible assets was $0.3 million for the three months ended March 31, 2024. There was no amortization of intangible assets for the three months ended March 31, 2023. The estimated future annual amortization expense of intangible assets is $0.9 million for the remainder of 2024, $1.1 million for each year of 2025 through 2029, and $14.3 million thereafter.

7. Share-Based Compensation

The ~~effective tax rates~~Company grants share-based compensation to employees under the Texas Pacific Land Corporation 2021 Incentive Plan (the “2021 Plan”) and to its non-employee directors under the 2021 Non-Employee Director Stock and Deferred Compensation Plan (the “2021 Directors Plan” and, with the 2021 Plan, the “Plans”). In conjunction with the three-for-one stock split effected on March 26, 2024, the Plans were ~~lower than~~adjusted to increase the ~~U.S. federal statutory rate~~authorized number of ~~21% due primarily~~shares that may be issued under the Plans. As of March 31, 2024, share-based compensation granted under the Plans has included these award types: stock awards, RSAs, RSUs and PSUs. Currently, all awards granted under the plans are entitled to ~~statutory depletion allowed~~receive dividends (which are accrued and distributed to award recipients upon vesting) or have dividend equivalent rights. Dividends and dividend equivalent rights are subject to the same vesting conditions as the awards to which they relate and are forfeitable if the related awards are forfeited. RSUs granted under the 2021 Plan vest in one-third increments and PSUs granted under the 2021 Plan cliff vest at the end of three years if the performance metrics are achieved (as discussed further below). RSAs granted prior to October 31, 2023 under the 2021 Directors Plan vested on ~~mineral royalty income.~~the first anniversary of the award. Effective October 31, 2023, the 2021 Directors Plan was amended such that stock awards granted vest in full on the date of grant.

Incentive Plan for Employees

The maximum aggregate number of shares of the Company’s Common Stock that may be issued under the 2021 Plan is 225,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of March 31, 2024, 136,596 shares of Common Stock remained available under the 2021 Plan for future grants.

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The following table summarizes activity related to RSAs and RSUs under the 2021 Plan for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
	2024						2023
	Restricted Stock Awards			Restricted Stock Units			Restricted Stock Awards			Restricted Stock Units
	Number of RSAs	Weighted-Average Grant-Date Fair Value per Share		Number of RSUs	Weighted-Average Grant-Date Fair Value per Share		Number of RSAs	Weighted-Average Grant-Date Fair Value per Share		Number of RSUs	Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period (1)	—	$	—	18,675	$	527	4,011	$	417	16,836	$	441
Granted (2)	—	—		12,297	478		—	—		8,544	641
Vested (3)	—	—		(6,213)	484		—	—		(3,810)	368
Cancelled and forfeited	—	—		(306)	528		—	—		—	—
Nonvested at end of period	—	$	—	24,453	$	514	4,011	$	417	21,570	$	533

(1)RSAs were granted on December 29, 2021: 5,979 shares vested on December 29, 2022, 120 shares were forfeited during 2023 and 3,891 shares vested on December 29, 2023.

(2)RSUs vest in one-third increments over a three-year period.

(3)Of the 6,213 shares that vested during the three months ended March 31, 2024, 2,469 shares were surrendered upon vesting by employees to the Company to settle tax withholdings.

The following table summarizes activity related to PSUs for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
	2024			2023
	Number of Target PSUs	Weighted-Average Grant-Date Fair Value per Share		Number of Target PSUs	Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period (1)	12,738	$	595	7,182	$	452
Granted (2)	8,340	538		5,556	781
Vested	—	—		—	—
Cancelled and forfeited	—	—		—	—
Nonvested at end of period	21,078	$	573	12,738	$	595

(1)Nonvested PSUs as of January 1, 2024 include 6,369 RTSR (as defined below) PSUs and 6,369 FCF (as defined below) PSUs. If the maximum performance metrics described in the PSU agreements are achieved, the actual number of units that will ultimately be awarded under the PSU agreements will exceed target units by 100% (i.e. a collective 12,738 additional units would be issued).

(2)The PSUs were granted on February 13, 2024 and include 4,170 RTSR PSUs (based on target) with a grant date fair value of $602 per share and 4,170 FCF PSUs (based on target) with a grant date fair value of $475 per share. If the maximum performance potential metrics described in the PSU agreements are achieved, the actual number of units that will ultimately be awarded under the PSU agreements will exceed target units by 100% (i.e., a collective 8,340 additional units would be issued).

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

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Equity Plan for Non-Employee Directors

The maximum aggregate number of shares of Common Stock that may be issued under the 2021 Directors Plan is 30,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of March 31, 2024, 24,219shares of Common Stock remained available under the 2021 Directors Plan for future grants.

The following table summarizes activity related to the RSAs under the 2021 Directors Plan for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
	2024			2023
	Number of RSAs	Weighted-Average Grant-Date Fair Value per Share		Number of RSAs	Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period	1,134	$	781	2,097	$	427
Granted (1)	—	—		1,458	781
Vested	(1,134)	781		(1,785)	416
Cancelled and forfeited	—	—		—	—
Nonvested at end of period	—	$	—	1,770	$	730

(1)RSAs granted prior to October 31, 2023 vest on the first anniversary of the grant date.

In January 2024, the Company granted a total of 2,160 shares of Common Stock with a grant date fair value of $524 per share, the closing price of its Common Stock on the date of grant, to the members of the Company’s board of directors (the “Board”). The stock awards were vested in full on the date of grant.

Share-Based Compensation Expense

The following table summarizes our share-based compensation expense by line item in the condensed consolidated statements of income (in thousands):


	Three Months Ended March 31,
	2024		2023
Salaries and related employee expenses (employee awards)	$	2,220	$	2,156
General and administrative expenses (director awards)	1,134		317
Total share-based compensation expense (1)	$	3,354	$	2,473

(1)The Company recognized a tax benefit of $0.7 million and $0.5 million related to share-based compensation for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was $16.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under existing share-based plans expected to be recognized over a weighted average period of 1.7 years.

8. Other Income, Net

Other income, net, includes interest earned on our cash balances, other employee pension costs, and other miscellaneous income (expense). Miscellaneous income (expense) includes insurance proceeds and gains and losses on disposals of capital assets.

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Other income, net for the three months ended March 31, 2024 and 2023 was as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Other income, net:
Interest earned on cash and cash equivalents, net	$	9,801	$	5,258
Other employee pension costs	142		128
Miscellaneous other income (expense), net	—		3
Total other income, net	$	9,943	$	5,389

9. Income Taxes

The calculation of our effective tax rate was as follows for the three months ended March 31, 2024 and 2023 (in thousands, except percentages):


	Three Months Ended March 31,
	2024			2023
Income before income taxes	$	145,984		$	110,341
Income tax expense	$	31,567		$	23,773
Effective tax rate	21.6		%	21.5		%

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

10. Earnings Per Share

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

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The following table sets forth the computation of EPS for the three months ended March 31, 2024 and 2023 (in thousands, except number of shares and per share data):


	Three Months Ended March 31,
	2024		2023
Net income	$	114,417	$	86,568

Basic earnings per share:
Weighted average shares outstanding for basic earnings per share	23,003,001		23,079,251
Basic earnings per share	$	4.97	$	3.75

Diluted earnings per share:
Weighted average shares outstanding for basic earnings per share	23,003,001		23,079,251
Effect of dilutive securities:
Incentive and equity compensation plans	17,248		15,942
Weighted average shares outstanding for diluted earnings per share	23,020,249		23,095,193
Diluted earnings per share	$	4.97	$	3.75

Restricted stock, if any, is included in the number of shares of Common Stock issued and outstanding, but omitted from the basic EPS calculation until such time as the shares of restricted stock vest. Certain stock awards granted are not included in the dilutive securities in the table above as they are anti-dilutive for the three months ended March 31, 2024 and 2023.

11. Commitments and Contingencies

Litigation

Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the Company’s financial condition, results of operations or liquidity as of March 31, 2024.

Prior to January 1, 2022, ad valorem taxes with respect to our historical royalty interests were paid directly by third parties pursuant to an existing arrangement. After the completion of our Corporate Reorganization, we received notice from a third party that it no longer intended to pay the ad valorem taxes related to such historical royalty interests. In order to protect the historical royalty interests from any potential tax liens for non-payment of ad valorem taxes, we have accrued and/or paid such ad valorem taxes since January 1, 2022. While we intend to seek reimbursement from the third party for such taxes, we are unable to estimate the amount and/or likelihood of such reimbursement, and accordingly, no loss recovery receivable has been recorded as of March 31, 2024.

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12. Changes in Equity

The following tables present changes in our equity for the three months ended March 31, ~~2021~~2024 and ~~2020~~2023 (in thousands, except shares and per share amounts):


	Common Stock			Treasury Stock		Additional Paid-in Capital		Accum. Other Comp. Income (Loss)		Retained Earnings		Total Equity
	Shares	Amount
For the three months ended March 31, 2024:
Balances as of December 31, 2023	23,007,681	$	78	$	(144,998)	$	14,613	$	1,831	$	1,171,672	$	1,043,196
Net income	—	—		—		—		—		114,417		114,417
Issuance of common stock related to stock split	—	153		—		(153)		—		—		—
Dividends paid — $1.17 per share of common stock	—	—		—		—		—		(26,907)		(26,907)
Share-based compensation, net of forfeitures	8,373	—		4,698		(1,297)		—		15		3,416
Repurchases of common stock and related excise taxes	(20,106)	—		(10,445)		—		—		—		(10,445)
Shares exchanged for tax withholdings	(2,469)	—		(1,207)		—		—		—		(1,207)
Periodic pension costs, net of income taxes of $6	—	—		—		—		(21)		—		(21)
Balances as of March 31, 2024	22,993,479	$	231	$	(151,952)	$	13,163	$	1,810	$	1,259,197	$	1,122,449

Sub-share Certificates Common Stock
Number of shares Number of shares Par Value Accum. Other Comp. Loss Retained Earnings Net Proceeds from All Sources Total Equity
For the three months ended March 31, 2021:
Balances as of December 31, 2020 7,756,156 0 $ 0 $ (2,693) $ 0 $ 487,877 $ 485,184
Net income — — — — 50,052 — 50,052
Dividends paid ($2.75 per common share) — — — — (21,329) — (21,329)
Conversion of Sub-shares into shares of common stock (7,756,156) 7,756,156 78 — 487,799 (487,877) 0
Other comprehensive income — — — 28 — — 28
Balances as of March 31, 2021 0 7,756,156 $ 78 $ (2,665) $ 516,522 $ 0 $ 513,935


	Common Stock			Treasury Stock		Additional Paid-in Capital		Accum. Other Comp. Income (Loss)		Retained Earnings		Total Equity
	Shares	Amount
For the three months ended March 31, 2023:
Balances as of December 31, 2022	23,087,037	$	78	$	(104,139)	$	8,293	$	2,516	$	866,139	$	772,887
Net income	—	—		—		—		—		86,568		86,568
Dividends paid — $1.08 per share of common stock	—	—		—		—		—		(25,061)		(25,061)
Share-based compensation, net of forfeitures	5,268	—		3,033		(560)		—		(103)		2,370
Repurchases of common stock and related excise taxes	(10,881)	—		(6,749)		—		—		—		(6,749)
Shares exchanged for tax withholdings	(1,464)	—		(939)		—		—		—		(939)
Periodic pension costs, net of income taxes of $6	—	—		—		—		(25)		—		(25)
Balances as of March 31, 2023	23,079,960	$	78	$	(108,794)	$	7,733	$	2,491	$	927,543	$	829,051

Sub-share Certificates Accum. Other Comp. Loss Net Proceeds from All Sources Total Capital
For the three months ended March 31, 2020:
Balances as of December 31, 2019 7,756,156 $ (1,461) $ 513,598 $ 512,137
Net income — — 57,401 57,401
Dividends paid ($16.00 per Sub-share) — — (124,098) (124,098)
Cumulative effect of accounting change — — (110) (110)
Other comprehensive income — 13 — 13
Balances as of March 31, 2020 7,756,156 $ (1,448) $ 446,791 $ 445,343

~~Corporate Reorganization~~Increase in Authorized Shares of Common Stock

On ~~January 11, 2021, TPL completed~~March 1, 2024, the Company increased its ~~Corporate Reorganization, officially changing its name~~authorized shares of capital stock to ~~Texas Pacific Land Corporation. To implement the Corporate Reorganization, the Trust~~47,536,936 consisting of 1,000,000 shares of Preferred Stock and ~~TPL Corporation entered into agreements~~46,536,936 shares of Common Stock. For further information see Note 1, “Organization and ~~undertook and caused to be undertaken a series~~Description 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 is a tax-free reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended.Business Segments.”

~~Prior~~Stock Repurchase Program

On November 1, 2022, our Board approved a stock repurchase program, which became effective January 1, 2023, to ~~the market opening on January 11, 2021, the Trust distributed all~~purchase up to an aggregate of ~~the shares~~$250 million of 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 itsour outstanding Common ~~Stock is listed under the symbol “TPL” on the New York Stock Exchange.~~Stock.

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

For the three months ended March 31, 2024 and 2023, we repurchased shares of our Common Stock in amounts totaling $10.3 million and ~~net proceeds from all sources were replaced with retained earnings on the condensed consolidated balance sheet.~~$6.7 million, respectively.

712

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8.13. 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~~approximate 868,000 surface acres of land and our approximate 195,000 NRA of 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~~

The following table presents segment financial results ~~were as follows~~ for the three months ended March 31, ~~2021~~2024 and ~~2020~~2023 (in thousands):

Three Months Ended
March 31,

2021

2020

Three Months Ended
March 31,

2024

Revenues:

Land and resource management

57,790

56,658

Land and resource management

Water services and operations

26,365

39,936

Water services and operations

Total consolidated revenues

84,155

96,594

Net income:

Land and resource management

39,513

39,118

Water services and operations

10,539

18,283

Water services and operations

Total consolidated net income

50,052

57,401

Capital expenditures:

Land and resource management

Water services and operations

2,738

3,529

Water services and operations

Total capital expenditures

2,738

3,617

Depreciation, depletion and amortization:

Land and resource management

494

337

Water services and operations

3,344

2,998

Water services and operations

Total depreciation, depletion and amortization

3,838

3,335

Total depreciation, depletion and amortization

813

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The following table presents total assets and property, plant and equipment, net by segment as of March 31, ~~2021~~2024 and December 31, ~~2020~~2023 (in thousands):


		March 31, 2021		December 31, 2020			March 31, 2024	December 31, 2023
Assets:	Assets:					Assets:
Land and resource management	Land and resource management	$	501,516	$	460,053
Water services and operations	Water services and operations	112,286		111,582
Total consolidated assets	Total consolidated assets	$	613,802	$	571,635

Property, plant and equipment, net:	Property, plant and equipment, net:
Property, plant and equipment, net:
Property, plant and equipment, net:
Land and resource management	Land and resource management	$	3,287	$	3,527
Water services and operations	Water services and operations	75,108		75,740
Total consolidated property, plant and equipment, net	Total consolidated property, plant and equipment, net	$	78,395	$	79,267

9.14. 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, ~~2021~~2024 and ~~March 31, 2020,~~2023, our share of oil and gas produced was approximately ~~16.4~~24.8 and ~~16.5~~20.9 thousand ~~BOEs~~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~~694 and ~~531~~675 DUC wells subject to our royalty interest (an estimated 10.3 and 9.7 net DUC wells) as of March 31, ~~2021~~2024 and December 31, ~~2020,~~2023, respectively.

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:

~~Dividend~~Dividends Declared

On May ~~3, 2021, the board of directors~~6, 2024, our Board declared a quarterly cash dividend of ~~$2.75~~$1.17 per share, payable on June ~~15, 2021~~17, 2024 to stockholders of record at the close of business on June ~~8, 2021.~~3, 2024.

~~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~~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 Quarterly Report on Form 10-Q or other filings with the Securities and Exchange Commission (the “SEC”), are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the Company’s future operations and prospects, the ~~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+~~the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively referred to as “OPEC+”), expected competition, management’s intent, beliefs or current expectations with respect to the Company’s future financial performance and other matters. All forward-looking statements in this 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,~~2023, 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~~in conjunction 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)~~2023 filed with the ~~factors discussed~~SEC on February 21, 2024 and the condensed consolidated financial statements and accompanying notes included, in Part ~~II,~~I, Item ~~1A. “Risk Factors,” if any,~~1 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.~~10-Q. Period-to-period comparisons of financial data are not necessarily indicative, and therefore, should not be relied upon as indicators, of the Company’s future performance.

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~~868,000 surface 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~~and approximately 4,000 additional net royalty acres (normalized to 1/8th). (“NRA”), for a collective total of approximately 195,000 NRA, all located in the western part of Texas.

The Company was originally organized under a Declaration of Trust, dated February 1, 1888, to receive and hold title to extensive tracts of land in the State of Texas, previously the property of the Texas and Pacific Railway Company. We completed our reorganization on January 11, 2021 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 in reference to the Trust, and references to periods on that date and thereafter will be in reference tointo Texas Pacific Land Corporation, ~~or TPL Corporation. For further information on~~a corporation formed and existing under the ~~Corporate Reorganization, see~~ ~~Note 7, “Changes in~~ ~~Equity”~~ inlaws of the ~~notes to the condensed consolidated financial statements.~~state of Delaware.

~~Our surface and royalty ownership allow steady revenue generation through the entire value chain of oil and gas development. While we~~We are not an oil and gas ~~producer, we benefit~~producer. Our business activity is generated from ~~various revenue sources throughout~~surface and royalty interest ownership in West Texas, primarily in the ~~life cycle of a well. During the initial development phase where infrastructure for~~Permian Basin. Our revenues are derived from oil and gas ~~development is constructed, we receive fixed fee payments for use of our land and revenue for~~royalties, water 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~~easements and other surface-related income and land ~~easements and commercial leases.~~sales. Due to the nature of our operations and concentration of our ownership in one geographic location, our revenue isand net income are subject to substantial fluctuations from quarter to quarter and year to year. ~~The~~In addition to fluctuations in response to changes in the market price for oil and gas, our financial results are also subject to decisions by the owners and operators of not only the oil and gas wells to which our oil and gas royalty interests relate, but also to other owners and operators in the Permian Basin as it relates to our other revenue streams, principally water sales, produced water royalties, easements, and other surface-related revenue.

For a further overview of our business and business segments, see Item 1. “Business — General” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Average oil prices during 2024 have increased slightly compared to average oil prices during 2023. Oil prices continue to be impacted by certain actions by OPEC+, geopolitical factors, and evolving global supply and demand trends,

among other factors. Average natural gas prices during 2024 have decreased compared to average natural gas prices during 2023. Global and domestic natural gas markets have experienced volatility due to macroeconomic conditions, infrastructure and logistical constraints, weather, and geopolitical issues, among other factors. Since mid-2022, the Waha Hub located in Pecos County, Texas has at times experienced significant negative price differentials relative to Henry Hub, located in Erath, Louisiana, due in part to growing local Permian natural gas production and limited natural gas pipeline takeaway capacity. Midstream infrastructure is currently under construction by operators to provide additional takeaway capacity, though the impact on future basis differentials will be dependent on future natural gas production and other factors. Changes in global and domestic macro-economic conditions could result in additional shifts in oil and gas supply and demand in future periods. Although our revenues are directly and indirectly impacted by changes in oil and natural gas prices, we believe our royalty interests (which require no capital expenditures or operating expense burden from us for well development), strong balance sheet, and ~~sale~~liquidity position will help us navigate through potential commodity 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.volatility.

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 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 months ended March 31, 2021, we invested approximately $2.7 million in TPWR projects to maintain and/or enhance water sourcing assets.~~

~~Market Conditions~~

~~COVID-19 Pandemic and Impact of Increased Supply by OPEC+~~

The uncertainty caused by the global spread of COVID-19, together with the increased supply of oil and gas by member nations of OPEC+, led to declines in crude oil prices and a reduction in global demand for oil and gas beginning in the first quarter of 2020. These events led to production curtailments and/or conservation of capital by the owners and operators of the oil and gas wells to which the Company’s royalty interests relate. These events negatively affected the Company’s business and operations for 2020. The lingering impact of these events continues to reduce the demand for oil in 2021, and we expect that these events will continue to affect our financial results in 2021.

In response to these events, 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 focus was negotiating price reductions and discounts with certain vendors and reducing our usage of independent contract service providers. 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 fuel, equipment rental 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. 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, and will continue to be, on maintaining a safe and healthy work environment for our employees. Our information technology infrastructure has afforded us the opportunity to allow our corporate employees to work remotely and we have deployed additional safety and sanitation measures for our field employees.

Despite the uncertainty caused by these events, we believe our longevity in the industry, strong financial position and our capital resource allocation discipline have equipped us with the tools necessary to continue navigating through the uncertainty.

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 52 counties~~ across southeastern New Mexico and western Texas. ~~All~~Exploration and production (“E&P”) companies operating in the Permian Basin continue to maintain robust drilling and development activity. Per the U.S. Energy Information Administration, Permian production is currently in excess of ~~our assets are located in West Texas.~~6.0 million barrels per day, which is higher than the average daily production of any year prior to 2024.

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 months ended March 31, ~~2021~~2024 and ~~2020:~~2023:

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. DUC classification is based on well data and date stamps provided by Enverus. DUCs is based on wells that have a drilled/spud date stamp but do not have a completed or first production date stamp. Excludes wells that have been labeled plugged and abandoned or permit expired and wells drilled/spud more than five years ago.

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

The metrics above ~~demonstrate the shifts in~~show selected domestic benchmark oil and natural gas prices and approximate activity levels in the Permian Basin ~~from~~for the ~~first quarter of 2020~~three months ended March 31, 2024 and 2023. Oil prices in 2024 to date have increased compared to the ~~first quarter of 2021. While oil and~~same period in 2023, while natural gas prices ~~which began declining~~ in 2024 to date have declined compared to the ~~first quarter of 2020 (prior~~same period last year. Although E&P companies broadly continue to ~~oil reaching record lows in the second quarter of 2020), have rebounded in the first quarter of 2021, development,~~deploy capital at a measured pace, drilling and ~~completion and production~~development activities across the Permian Basin have ~~not returned to their previous levels. Operators are cautiously managing their capital allocations by deploying at a decreased pace of development while oil demand begins to recover.~~remained robust. 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~~both directly and indirectly, 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 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~~royalties, produced water royalties, water sales, and other surface-related income.

Our principal sources of liquidity are ~~revenues~~cash and cash flows generated from ~~oil, gas and produced water royalties, easements and other surface-related income and water and land sales.~~our operations. Our primary liquidity and capital requirements are for capital expenditures related to our Water Services and Operations segment (the extent and timing of which are under our control), working capital and general corporate needs.

We continuously review our 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, nor any off-balance sheet arrangements as of March 31, ~~2021 and have no immediate plans to enter into such arrangements.~~2024.

As of March 31, ~~2021,~~2024, we had cash and cash equivalents of ~~$310.7~~$837.1 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 per share (the “Common Stock”) subject to market conditions, to pay dividends subject to the discretion of ~~the~~our board of directors (the “Board”), for potential acquisitions and for

general corporate purposes. For the three months ended March 31, 2024, we paid $26.9 million in dividends to our stockholders and we repurchased $10.3 million of our Common Stock (including share repurchases not settled at the end of the period).

During the three months ended March 31, 2024, we invested approximately $5.6 million in Texas Pacific Water Resources LLC projects to maintain and/or enhance our water sourcing assets.

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.

Cash Flows from Operating Activities

For the three months ended March 31, 2024 and 2023, net cash provided by operating activities was $147.2 million and $114.8 million, respectively. Our cash flow provided by operating activities is primarily from oil, gas and produced water royalties, water and land sales, easements, and other surface-related income. Cash flows used in operations generally consist of operating expenses associated with our revenue streams, general and administrative expenses and income taxes.

The increase in cash flows provided by operating activities for the three months ended March 31, 2024 compared to the same period of 2023 was primarily related to an increase in operating income and changes in working capital requirements during 2024 as compared to 2023.

Cash Flows Used in Investing Activities

For the three months ended March 31, 2024 and 2023, net cash used in investing activities was $2.2 million and $1.7 million, respectively. Our cash flows used in investing activities are primarily related to acquisitions of land, acquisitions of intangible assets, such as subsurface easements, and capital expenditures related to our water services and operations segment.

The increase in net cash used by investing activities was due to the $0.5 million increase in capital expenditures during the three months ended March 31, 2024 compared to the same period of 2023.

Cash Flows Used in Financing Activities

For the three months ended March 31, 2024 and 2023, net cash used in financing activities was $38.5 million and $32.8 million, respectively. Our cash flows used in financing activities primarily consist of activities which return capital to our stockholders such as payment of dividends and repurchases of our Common Stock.

During the three months ended March 31, 2024 and 2023, we paid total dividends of $26.9 million and $25.1 million, respectively. During the three months ended March 31, 2024 and 2023, we repurchased $10.3 million and $6.7 million of our Common Stock, respectively (including share repurchases not settled at the end of the period).

Results of Operations - Consolidated

The following table shows our consolidated results of operations for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024		2023
Revenues:
Oil and gas royalties	$	92,120	$	89,130
Water sales	37,126		21,729
Produced water royalties	23,006		20,134
Easements and other surface-related income	20,646		14,969
Land sales	1,244		400
Total revenues	174,142		146,362

Expenses:
Salaries and related employee expenses	12,461		10,593
Water service-related expenses	10,212		5,656
General and administrative expenses	4,924		3,552
Legal and professional fees	4,057		16,628
Ad valorem and other taxes	2,357		1,574
Land sales expenses	250		3
Depreciation, depletion and amortization	3,840		3,404
Total operating expenses	38,101		41,410

Operating income	136,041		104,952

Other income, net	9,943		5,389
Income before income taxes	145,984		110,341



Income tax expense	31,567		23,773
Net income	$	114,417	$	86,568

For the Three Months Ended March 31, 2024 as Compared to the Three Months Ended March 31, 2023

Consolidated Revenues and Net Income:

Total revenues increased 19.0%, to $174.1 million for the three months ended March 31, 2024 compared to $146.4 million for the three months ended March 31, 2023. This increase was principally related to a $15.4 million increase in water sales, a $5.7 million increase in easements and other surface-related income, a $3.0 million increase in oil and gas royalty revenue and a $2.9 million increase in produced water royalties over the same period. Individual revenue line items are discussed below under “Segment Results of Operations.” Net income of $114.4 million for the three months ended March 31, 2024 was 32.2% higher than the comparable period of 2023 principally as a result of the increase in revenues discussed above.

Consolidated Expenses:

Salaries and related employee expenses. Salaries and related employee expenses were $12.5 million for the three months ended March 31, 2024 compared to $10.6 million for the comparable period of 2023. The increase in salaries and related employee expenses is principally related to market compensation adjustments that take effect annually at the start of the year.

Water service-related expenses. Water service-related expenses increased $4.6 million to $10.2 million for the three months ended March 31, 2024 compared to the same period of 2023. Certain types of water-related expenses, including, but not limited to, transfer, treatment, and water purchases, will vary from period to period as our customers’ needs and requirements change. The increase in water service-related expenses for the three months ended March 31, 2024 is principally

related to the 70.9% increase in water sales over the same period of 2023. Water sales were impacted not only by increased customer volumes, but also by higher demand within shorter time commitments, and resulted in increased water treatment, purchase and transfer expenses. Additionally, a focus on increasing water production from existing wells resulted in increased repairs and maintenance expense. While these dynamics in demand resulted in an 80.5% increase in water service-related expenses for the three months ended March 31, 2024 compared to the same period of 2023, the operational decision to meet these demands resulted in increased revenues and operating income over the same time period.

General and administrative expenses. General and administrative expenses increased $1.4 million to $4.9 million for the three months ended March 31, 2024 compared to the same period of 2023. During the three months ended March 31, 2024, stock awards that were vested in full on the grant date were granted to members of the Company’s Board which resulted in immediate recognition of the grant date fair value of the awards on the date of grant. See further discussion of this change in Note 7, “Share-Based Compensation” in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. The increased board compensation expense for the three months ended March 31, 2024 resulting from this policy change is a one-time event.

Legal and professional fees. Legal and professional fees were $4.1 million for the three months ended March 31, 2024 compared to $16.6 million for the comparable period of 2023. The decrease is principally related to a reduction in legal expenses associated with stockholder matters that occurred during the prior year.

Ad valorem and other taxes. Ad valorem and other taxes were $2.4 million for the three months ended March 31, 2024, compared to $1.6 million for the three months ended March 31, 2023. The increase in ad valorem and other taxes is related to regulatory increases in estimated tax values driven by increased oil pricing and new production. Prior to January 1, 2022, the ad valorem taxes with respect to our historical royalty interests were paid directly by third parties pursuant to an existing arrangement. After the completion of our corporate reorganization on January 11, 2021, we received notice from a third party that it no longer intended to pay the ad valorem taxes related to such historical royalty interests. While we continue to believe the obligation to pay these ad valorem taxes belongs to the third party, we have accrued and/or paid an estimate of such taxes in order to protect the royalty interests from any potential tax liens for nonpayment of ad valorem taxes. While we intend to seek reimbursement from the third party following payment of such taxes, we are unable to determine the amount and/or likelihood of such reimbursement, and accordingly, have not recorded a loss recovery receivable as of March 31, 2024.

Other income, net. Other income, net was $9.9 million and $5.4 million for the three months ended March 31, 2024 and 2023, respectively. The increase in other income, net is primarily related to increased interest income earned on our cash balances during 2024. Higher cash balances and higher interest rates during this period contributed to the increase in interest income.

Total income tax expense. Total income tax expense was $31.6 million and $23.8 million for the three months ended March 31, 2024 and 2023, respectively. The increase in income tax expense is primarily related to increased operating income resulting from increased consolidated revenues.

Segment Results of Operations

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

We ~~analyze financial results for each~~evaluate the performance of our ~~reportable segments.~~operating segments separately to monitor the different factors affecting financial results. The reportable segments presented are consistent with our reportable segments discussed in Note 8.13, “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 months ended March 31, ~~2021 have been negatively impacted by~~2024 continue to benefit from activity in the ~~lingering reduction in demand for~~Permian Basin. Our oil and ~~Winter Storm Uri. These combined circumstances~~gas royalty revenues have ~~affected not only our production~~increased due to increased royalty production. Additionally, revenues derived from water sales, easements and other surface-related income, and produced water ~~volumes, but~~royalties have also ~~directly~~been positively impacted by our ~~surface-related income~~active management of our surface and ~~water sales as discussed further below.~~royalty interests.

For the ~~three months ended~~Three Months Ended March 31, ~~2021~~2024 as ~~compared~~Compared to the ~~three months ended~~Three Months Ended March 31, ~~2020~~

~~Revenues~~. Revenues decreased $12.4 million, or 12.9%, to $84.2 million for the three months ended March 31, 2021 compared to $96.6 million for the three months ended March 31, 2020. Net income decreased $7.3 million, or 12.8%, to $50.1 million for the three months ended March 31, 2021 compared to $57.4 million for the three months ended March 31, 2020.2023

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 %


	Three Months Ended March 31,
	2024				2023
Revenues:
Land and resource management:




Oil and gas royalties	$	92,120	53	%	$	89,130	61	%
Easements and other surface-related income	18,121		10	%	14,493		10	%
Land sales	1,244		1	%	400		—	%
Total land and resource management revenue	111,485		64	%	104,023		71	%

Water services and operations:
Water sales	37,126		21	%	21,729		15	%
Produced water royalties	23,006		13	%	20,134		14	%
Easements and other surface-related income	2,525		2	%	476		—	%
Total water services and operations revenue	62,657		36	%	42,339		29	%
Total consolidated revenues	$	174,142	100	%	$	146,362	100	%

Net income:
Land and resource management	$	80,971	71	%	$	65,343	75	%
Water services and operations	33,446		29	%	21,225		25	%
Total consolidated net income	$	114,417	100	%	$	86,568	100	%

Land and Resource Management

Land and Resource Management segment revenues increased ~~$1.1~~$7.5 million, or ~~2.0%~~7.2%, to ~~$57.8~~$111.5 million for the three months ended March 31, ~~2021~~2024 as compared ~~with $56.7 million for~~to the ~~comparable~~same period of ~~2020.~~2023. The increase in Land and Resource Management segment revenues is ~~principally due~~related to ana $3.6 million increase ~~in gas royalty revenue, partially offset by decreases~~ in easements and other surface-related income and to a ~~lesser extent,~~$3.0 million increase in oil and gas royalty revenue ~~as discussed further below.~~for three months ended March 31, 2024 compared to the same period of 2023.

Oil and gas royalties. Oil and gas royalty revenue was $92.1 million for the three months ended March 31, 2024 compared to $89.1 million for the three months ended March 31, 2023, an increase of 3.4%. Oil and gas royalties for the three months ended March 31, 2023 included an $8.7 million settlement with an operator with respect to unpaid oil and gas royalties for older production periods. Excluding the $8.7 million settlement, oil and gas royalties increased $11.7 million due to higher production volume for the three months ended March 31, 2024 compared to the same period of 2023. Our share of production increased to 24.8 thousand per barrels of oil equivalent (“Boe”) per day for the three months ended March 31, 2024 compared to 20.9 thousand Boe per day for the same period of 2023. The average realized price declined 4.6% to $42.71 per Boe for the three months ended March 31, 2024 from $44.76 per Boe for the three months ended March 31, 2023.

The financial and operational data by royalty stream is presented in the table below for the three months ended March 31, 2024 and 2023:

Our share of production volumes (1):

~~Oil~~(1)Commonly used definitions in the oil and gas ~~royalties~~industry not previously defined: MBbls represents one thousand barrels of crude oil, condensate or NGLs. Mcf represents one thousand cubic feet of natural gas. MMcf represents one million cubic feet of natural gas. MBoe represents one thousand Boe. MBoe/d represents one thousand Boe per day.

(2)~~. Oil~~The metrics provided for the three months ended March 31, 2023 exclude the impact of the $8.7 million settlement of oil and gas ~~royalty revenue~~royalties discussed above.

Easements and other surface-related income. Easements and other surface-related income was ~~$49.5~~$18.1 million for the three months ended March 31, ~~2021~~2024, an increase of 25.0% compared to ~~$42.4~~$14.5 million for the three months ended March 31, 2020. Oil royalty revenue was $34.2 million for the three months ended March 31, 2021, a decrease of 4.6% compared to the three 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, 2021 compared to the same period in 2020. Gas royalty revenue was $15.3 million for the three months ended March 31, 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 a 121.1% increase in our average realized price 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 in 2020.

~~Easements and other surface-related income. Easements and other surface-related income was $8.2 million for the three months ended March 31, 2021, a decrease of 38.4% compared to $13.3 million for the three months ended March 31, 2020.~~2023. Easements and other surface-related income includes ~~pipeline, power line~~revenue related to the use and ~~utility easements, commercial leases, material sales~~crossing of our land for oil and ~~seismic~~gas exploration and ~~temporary permits.~~production, renewable energy, and agricultural operations. The ~~decrease~~increase in easements and other surface-related income is principally related to ~~a decrease~~increases of ~~$4.9~~$5.7 million in pipeline ~~easement income to $1.2 million~~easements and was partially offset by decreases in wellbore easements and material sales for the three months ended March 31, ~~2021 from $6.1 million for~~2024 compared to the ~~three months ended March 31, 2020.~~same period of 2023. 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 months ended March 31, ~~2021 relative to the same time period of 2020.~~2024.

Net ~~income~~income. . Net income for the Land and Resource Management segment ~~was $39.5~~increased 23.9% to $81.0 million for the three months ended March 31, ~~2021~~2024 compared to ~~$39.1~~$65.3 million for the three months ended March 31, ~~2020. The increase in net~~2023. Segment operating income is principally due to the $1.1 million increase in segment revenues, partially offset by a slight increase in segment expenses, including income tax expense. The increase in segment revenues is principally due to an increase in gas royalty revenue, partially offset by decreases in easements and other surface-related income and oil royalty revenues, as discussed above. Total segment expenses were $18.3 million and $17.6increased $17.4 million for the three months ended March 31, ~~2021~~2024 compared to the same period of 2023, largely driven by the $12.4 million decrease in legal and ~~2020, respectively. The overall~~professional fees and the $7.5 million increase in segment expenses was principally related to increased income tax expense, depletion expense related to our royalty interests and increased board of director expenses associated with our Corporate Reorganization.revenues. Expenses are discussed further ~~below~~above under ~~“Other Financial Data —~~“Results of Operations - Consolidated.”

Water Services and Operations

Water Services and Operations segment revenues ~~decreased 34.0%~~increased 48.0% to ~~$26.4~~$62.7 million for the three months ended March 31, ~~2021~~2024 as compared with ~~$39.9~~revenues of $42.3 million for the ~~comparable~~same period of ~~2020.~~2023. The ~~decrease~~increase in Water Services and Operations segment revenues is principally due to ~~a decrease~~increases in water sales revenue and produced water royalties, which is 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 $13.0~~increased $15.4 million, or 70.9% to $37.1 million for the three months ended March 31, ~~2021, a decrease~~2024, compared to the same period of ~~$14.0 million or 52.0%, compared with the three months ended March 31, 2020 when~~2023. The growth in water sales ~~revenue was $27.0 million. This decrease was~~is principally due to ~~a 40.7% decrease~~an increase of 51.3% in ~~the number of barrels of sourced and treated~~ water ~~sold and, to a lesser extent, a 20.4% decrease in the average~~ sales ~~price per barrel of water~~volumes for the three months ended March 31, ~~2021~~2024, compared to the same period ~~in 2020.~~of 2023.

Produced water royalties.Produced water royalties are ~~royalties~~ received from the ~~transportation~~transfer or disposal of produced water on our land. Produced water royalties are contractual and not paid as a matter of right. We do not operate any salt water disposal wells. Produced water royalties were ~~$12.5~~$23.0 million for the three months ended March 31, ~~2021 and 2020.~~2024 compared to $20.1 million for the same period in 2023. This increase is principally due to increased produced water volumes for the three months ended March 31, 2024 compared to the same period of 2023.

Net income. Net income for the Water Services and Operations segment was ~~$10.5~~$33.4 million for the three months ended March 31, ~~2021~~2024 compared to ~~$18.3~~$21.2 million for the three months ended March 31, ~~2020. As discussed above, segment revenues decreased 34.0% for the three months ended March 31, 2021 compared to the same period of 2020. Total segment expenses, including~~2023. Segment operating income ~~tax expense, were $15.8~~increased $13.7 million for the three months ended March 31, 2021 as compared to $21.6 million for the three months ended March 31, 2020. The overall decrease 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. 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 $10.0 million for the three months ended March 31, 2021 compared to $10.6 million for the comparable period of 2020. The decrease in salaries and related employee expenses during 2021 as2024 compared to the same period of ~~2020~~2023. The increase is principally due to ~~decreased usage of contract labor by our Water Services and Operations segment.~~

~~Water service-related expenses. Water service-related expenses were $3.3~~the $20.3 million for the three months ended March 31, 2021 compared to $6.8 million for the comparable period of 2020. The decrease in expenses during 2021 is primarily related to decreased 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.”

~~General and administrative expenses~~. General and administrative expenses decreased $0.2 million to $2.8 million for the three months ended March 31, 2021 from $3.0 million for the same period of 2020. The decrease in general and administrative expenses during the three months ended March 31, 2021 compared to the same period of 2020 is primarily 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.

~~Legal and professional expenses~~. Legal and professional fees were $2.2 million for the three months ended March 31, 2021 compared to $2.4 million for the comparable period of 2020. Legal and professional fees for the three months ended March 31, 2021 principally related to the completion of our Corporate Reorganization effective January 11, 2021. Legal and professional fees for the three months ended March 31, 2020 principally related to the conversion exploration committee and planning and preparation for the Corporate Reorganization.

~~Depreciation, depletion and amortization. Depreciation, depletion and amortization was $3.8 million for the three months ended March 31, 2021 compared to $3.3 million for the three months ended March 31, 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.segment revenues. Expenses are discussed further above under “Results of Operations - Consolidated.”

~~Cash Flow Analysis~~Non-GAAP Performance Measures

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

~~For the three months ended March 31, 2021 as compared to the three months ended March 31, 2020~~EBITDA, Adjusted EBITDA and Free Cash Flow

~~Cash flows provided by operating activities for the three months ended March 31, 2021~~EBITDA is a non-GAAP financial measurement of earnings before interest expense, taxes, depreciation, depletion and ~~2020 were $52.4 million~~amortization. Its purpose is to highlight earnings without finance, taxes, and ~~$68.6 million, respectively. The decrease in cash flows provided by operating activities was primarily related~~depreciation, depletion and amortization expense, and its use is limited to ~~decreased proceeds from water sales and easements~~specialized analysis. We calculate Adjusted EBITDA as EBITDA plus employee share-based compensation. Its purpose is to highlight earnings without non-cash activity such as share-based compensation and other ~~surface-related payments received during~~non-recurring or unusual items, if applicable. We calculate Free Cash Flow as Adjusted EBITDA less current income tax expense and capital expenditures. Its purpose is to provide an additional measure of operating performance. We have presented EBITDA, Adjusted EBITDA and Free Cash Flow because we believe that these metrics are useful supplements to net income in analyzing the ~~three months ended March 31, 2021.~~

Company's operating performance. Our definitions of Adjusted EBITDA and Free Cash ~~flows used in investing activities were $1.4 million compared to $24.4 million for the three months ended March 31, 2021 and 2020, respectively. Acquisitions~~Flow may differ from computations of ~~land and royalty interests were $20.8 million for the three months ended March 31, 2020. There were no acquisitions~~similarly titled measures of ~~land or royalty interests during the three months ended March 31, 2021.~~

Cash flows used in financing activities were $21.3 million compared to $124.1 million for the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, we paid total dividends of $21.3 million consisting of a quarterly cash dividend of $2.75 per share. During the three months ended March 31, 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.

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

The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and Free Cash Flow for the three months ended March 31, 2024 and 2023 (in thousands):

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. For a full discussion of our accounting policies please refer to Note 2 to the Consolidated Financial Statements included in our ~~2020~~2023 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. 21, 2024.

There have been no material changes to our critical accounting policies or in the estimates and ~~estimates~~assumptions underlying those policies, from ~~the information~~those provided in Item 7. ~~Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations” included in our ~~2020~~2023 Annual Report on Form 10-K.

New Accounting Pronouncements

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

There have been no material changes in the information related to market risk of the Company ~~since~~disclosed in Part II, Item 7A. “Quantitative and Qualitative Disclosure on Market Risk” set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2023 filed with the SEC on February 21, 2024.

Evaluation of Disclosure Controls and Procedures

~~Pursuant to Rule 13a-15 under the Exchange Act,~~Our management, ~~of the Company~~ under the supervision and with the participation of ~~Tyler Glover,~~ the Company’s Chief Executive Officer (“CEO”) and ~~Robert J. Packer, the Company’s~~ Chief Financial Officer ~~carried out~~(“CFO”), performed an evaluation of the effectiveness of the ~~design and operation of the~~ Company’s disclosure controls and procedures (as defined in Rules 13a-15 under the Exchange Act) as of the end of the ~~Company’s fiscal quarter~~period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, ~~Mr. Glover~~our CEO and ~~Mr. Packer~~CFO have concluded that the Company’s disclosure controls and procedures ~~are~~were effective ~~in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.~~as of March 31, 2024.

There have been no changes during the quarter ended March 31, 2024 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.

Item 1.Legal Proceedings.

TPL is not involved in any material pending legal ~~proceedings.~~proceedings other than as disclosed below.

On November 23, 2022, TPL filed a complaint in Delaware Chancery Court (“the Court”) against Horizon Kinetics, LLC, Horizon Kinetics Asset Management LLC, SoftVest Advisors LLC, and SoftVest, L.P. (collectively, the “Stockholder Defendants”) under the caption Texas Pacific Land Corporation v. Horizon Kinetics LLC, Horizon Kinetics Asset Management LLC, SoftVest Advisors, LLC, and SoftVest L.P. (C.A. No. 2022-1066-JTL) (the “Action”). Horizon Kinetics LLC and Horizon Kinetics Asset Management LLC are affiliated with Murray Stahl, a member of the Board, and SoftVest Advisors, LLC and SoftVest L.P. are affiliated with Eric Oliver, a member of the Board. TPL filed the Action to resolve a disagreement with the Stockholder Defendants over their voting commitments pursuant to a Stockholders’ Agreement with the Company. A trial was held on April 17, 2023. On December 1, 2023, the Court ruled (the “Ruling”) that the Stockholder Defendants’ shares were deemed to have been voted in favor of Proposal Four, the Company’s proposal to increase the number of authorized shares of Common Stock, which the Court deemed approved by holders of a majority of the shares of Common Stock, at the Company’s 2022 annual meeting of stockholders. The Ruling was appealed by the Stockholder Defendants, and on February 27, 2024, the Delaware Supreme Court affirmed the Ruling in favor of the Company.

Item 1A.Risk ~~Factors~~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~~2023 filed with the SEC on February ~~25, 2021.~~21, 2024.

~~The Company did not repurchase any Sub-shares or any shares of Common Stock during~~

During the three months ended March 31, ~~2021.~~2024, the Company repurchased shares of its Common Stock as follows:

Total Number of Shares Purchased(1)

Average Price Paid per Share(1)


		March 31, 2021		December 31, 2020			March 31, 2024	December 31, 2023
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	310,655	$	281,046
Accrued receivables, net		61,392		48,216
Accounts receivable and accrued receivables, net
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,822		2,778
Tax like-kind exchange escrow	Tax like-kind exchange escrow	1,978		1,978

Total current assets	Total current assets	375,847		334,018
Total current assets
Total current assets
Real estate acquired
Property, plant and equipment, net	Property, plant and equipment, net	78,395		79,267
Real estate acquired		108,536		108,536
Royalty interests acquired, net	Royalty interests acquired, net	45,435		45,646
Operating lease right-of-use assets		2,314		2,473
Other assets		3,275		1,695
Intangible assets, net
Real estate and royalty interests assigned through the Declaration of Trust, no value assigned:	Real estate and royalty interests assigned through the Declaration of Trust, no value assigned:					Real estate and royalty interests assigned through the Declaration of Trust, no value assigned:
Land (surface rights)	Land (surface rights)	0		0
1/16th nonparticipating perpetual royalty interest	1/16th nonparticipating perpetual royalty interest	0		0
1/128th nonparticipating perpetual royalty interest	1/128th nonparticipating perpetual royalty interest	0		0

Other assets
Other assets
Other assets
Total assets	Total assets	$	613,802	$	571,635

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	12,367	$	12,530
Ad valorem and other taxes payable
Income taxes payable
Unearned revenue	Unearned revenue	5,298		3,997
Income taxes payable		16,183		4,054
Total current liabilities	Total current liabilities	33,848		20,581
Deferred taxes payable	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
Unearned revenue - noncurrent

Accrued liabilities - noncurrent
Accrued liabilities - noncurrent
Accrued liabilities - noncurrent
Total liabilities	Total liabilities	99,867		86,451

Commitments and contingencies	Commitments and contingencies	0		0
Commitments and contingencies
Commitments and contingencies
Equity:	Equity:					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)
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none outstanding as of March 31, 2024 and December 31, 2023
Common stock, $0.01 par value; 46,536,936 and 7,756,156 shares authorized as of March 31, 2024 and December 31, 2023, respectively, and 22,993,479 and 23,007,681 (as adjusted for stock split) outstanding as of March 31, 2024 and December 31, 2023, respectively
Treasury stock, at cost; 92,597 and 86,929 shares as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings	Retained earnings	516,522		—
Net proceeds from all sources		—		487,877
Total equity	Total equity	513,935		485,184
Total liabilities and equity	Total liabilities and equity	$	613,802	$	571,635


	Three Months Ended March 31,
	2024		2023 (2)
Our share of production volumes (1):
Oil (MBbls)	990		792
Natural gas (MMcf)	3,806		3,306
NGL (MBbls)	633		539
Equivalents (MBoe)	2,258		1,882
Equivalents per day (MBoe/d)	24.8		20.9

Oil and gas royalty revenue (in thousands):
Oil royalties	$	72,614	$	56,894
Natural gas royalties	7,062		10,956
NGL royalties	12,444		12,615
Total oil and gas royalties	$	92,120	$	80,465

Realized prices:
Oil ($/Bbl)	$	76.77	$	75.23
Natural gas ($/Mcf)	$	2.01	$	3.58
NGL ($/Bbl)	$	21.24	$	25.28
Equivalents ($/Boe)	$	42.71	$	44.76


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(2)
January 1 through January 31, 2024	1,373	$	1,518	1,373
February 1 through February 29, 2024	2,375	1,529		2,375
March 1 through March 31, 2024(3)	3,888	1,190		3,888
Total	7,636	$	1,354	7,636	$	197,241,439


EXHIBIT NUMBER						DESCRIPTION

3.1*						Second Amended and Restated Certificate of Incorporation dated May 18, 2023, as amended.
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, ~~2021~~2024 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income and Total Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) Notes to Condensed Consolidated Financial Statements.
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2021,~~2024, formatted in iXBRL.


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


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


	Sub-share Certificates	Common Stock
	Number of shares	Number of shares	Par Value		Accum. Other Comp. Loss		Retained Earnings		Net Proceeds from All Sources		Total Equity
For the three months ended March 31, 2021:
Balances as of December 31, 2020	7,756,156	0	$	0	$	(2,693)	$	0	$	487,877	$	485,184
Net income	—	—	—		—		50,052		—		50,052
Dividends paid ($2.75 per common share)	—	—	—		—		(21,329)		—		(21,329)
Conversion of Sub-shares into shares of common stock	(7,756,156)	7,756,156	78		—		487,799		(487,877)		0
Other comprehensive income	—	—	—		28		—		—		28
Balances as of March 31, 2021	0	7,756,156	$	78	$	(2,665)	$	516,522	$	0	$	513,935