Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 30, 2018 | |
Document Entity Information [Abstract] | ||
Entity Registrant Name | TEXAS PACIFIC LAND TRUST | |
Entity Central Index Key | 97,517 | |
Trading Symbol | tpl | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 7,805,498 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash and cash equivalents | $ 71,301 | $ 79,580 |
Accrued receivables | 27,644 | 17,773 |
Other assets | 3,076 | 849 |
Prepaid income taxes | 0 | 1,202 |
Property, plant and equipment, net of accumulated depreciation of $791 and $463 as of March 31, 2018 and December 31, 2017, respectively | 31,029 | 19,516 |
Real estate acquired | 1,866 | 1,115 |
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
Total assets | 134,916 | 120,035 |
LIABILITIES AND CAPITAL | ||
Accounts payable and accrued expenses | 4,855 | 5,608 |
Income taxes payable | 10,473 | 851 |
Deferred taxes payable | 114 | 114 |
Unearned revenue | 8,932 | 8,364 |
Total liabilities | 24,374 | 14,937 |
Commitments and contingencies | 0 | 0 |
Capital: | ||
Certificates of Proprietary Interest, par value $100 each; none outstanding | 0 | 0 |
Sub-share Certificates in Certificates of Proprietary Interest, par value $.03 1/3 each; outstanding 7,808,453 and 7,821,599 Sub-shares as of March 31, 2018 and December 31, 2017, respectively | 0 | 0 |
Accumulated other comprehensive loss | (791) | (804) |
Net proceeds from all sources | 111,333 | 105,902 |
Total capital | 110,542 | 105,098 |
Total liabilities and capital | 134,916 | 120,035 |
Land Surface Rights | ||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
Land (surface rights) situated in eighteen counties in Texas – 877,514 acres and 877,633 acres as of March 31, 2018 and December 31, 2017, respectively | 0 | 0 |
1/16th Nonparticipating Perpetual Royalty Interest | ||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
1/16th nonparticipating perpetual royalty interest in 373,777 acres | 0 | 0 |
1/128th Nonparticipating Perpetual Royalty Interest | ||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
1/128th nonparticipating perpetual royalty interest in 85,414 acres | $ 0 | $ 0 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)acounty$ / sharesshares | Dec. 31, 2017USD ($)a$ / sharesshares | |
Property, plant and equipment, net of accumulated depreciation of $791 and $463 as of March 31, 2018 and December 31, 2017, respectively | $ | $ 791 | $ 463 |
Number of counties with land surface rights | county | 18 | |
Certificates of proprietary interest, par value (in dollars per share) | $ / shares | $ 100 | $ 100 |
Certificates of proprietary interest, outstanding (in shares) | shares | 0 | 0 |
Sub-share certificates of proprietary interest, par value (in dollars per share) | $ / shares | $ 0.0333 | $ 0.0333 |
Sub-share certificates of proprietary interest, outstanding (in shares) | shares | 7,808,453 | 7,821,599 |
Land Surface Rights | ||
Land (surface rights), acres (Acre) | 877,514 | 877,633 |
1/16th Nonparticipating Perpetual Royalty Interest | ||
Nonparticipating perpetual royalty interest in acres (Acre) | 373,777 | 373,777 |
1/128th Nonparticipating Perpetual Royalty Interest | ||
Nonparticipating perpetual royalty interest in acres (Acre) | 85,414 | 85,414 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income and Total Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income: | ||
Oil and gas royalties | $ 26,547 | $ 10,588 |
Easements and sundry income | 16,978 | 14,867 |
Water sales and royalties | 13,607 | 4,828 |
Land sales | 2,750 | 0 |
Other operating income | 125 | 124 |
Total income | 60,007 | 30,407 |
Expenses: | ||
Salaries and related employee benefits | 2,289 | 386 |
Water service-related expenses | 1,306 | 0 |
General and administrative expenses | 808 | 340 |
Legal and professional fees | 647 | 715 |
Depreciation and amortization | 330 | 19 |
Taxes, other than income taxes | 144 | 55 |
Trustees’ compensation | 2 | 2 |
Total expenses | 5,526 | 1,517 |
Operating income | 54,481 | 28,890 |
Other income | 130 | 7 |
Income before income taxes | 54,611 | 28,897 |
Income taxes | 10,820 | 9,638 |
Net income | 43,791 | 19,259 |
Other comprehensive income – periodic pension costs, net of income taxes of $3 and $9, respectively | 13 | 17 |
Total comprehensive income | $ 43,804 | $ 19,276 |
Weighted average number of Sub-share Certificates outstanding (in shares) | 7,818,168 | 7,919,085 |
Basic and dilutive earnings per Sub-share Certificate on net income (in usd per share) | $ 5.60 | $ 2.43 |
Cash dividends per Sub-share Certificate (in usd per share) | $ 4.05 | $ 1.35 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Income and Total Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Other comprehensive income, tax | $ 3 | $ 9 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 43,791 | $ 19,259 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Deferred taxes | 0 | 2,406 |
Depreciation and amortization | 330 | 19 |
Gain on disposal of fixed assets | 0 | (4) |
Changes in operating assets and liabilities: | ||
Accrued receivables and other assets | (12,099) | (3,758) |
Prepaid income taxes | 1,202 | 0 |
Accounts payable, accrued expenses and other liabilities | (172) | 846 |
Income taxes payable | 9,622 | 5,616 |
Cash provided by operating activities | 42,674 | 24,384 |
Cash flows from investing activities: | ||
Proceeds from sale of fixed assets | 0 | 28 |
Acquisition of land | (751) | 0 |
Purchase of fixed assets | (11,841) | (1,912) |
Cash used in investing activities | (12,592) | (1,884) |
Cash flows from financing activities: | ||
Purchase of Sub-share Certificates in Certificates of Proprietary Interest | (6,709) | (8,672) |
Dividends paid | (31,652) | (10,682) |
Cash used in financing activities | (38,361) | (19,354) |
Net increase in cash and cash equivalents | (8,279) | 3,146 |
Cash and cash equivalents, beginning of period | 79,580 | 49,418 |
Cash and cash equivalents, end of period | 71,301 | 52,564 |
Supplemental disclosure of cash flow information: | ||
Income taxes paid | $ 0 | $ 1,625 |
Organization and Description of
Organization and Description of Business Segments | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business Segments | Organization and Description of Business Segments Texas Pacific Land Trust (which, together with its subsidiaries as the context requires, may be referred to as “Texas Pacific”, the “Trust”, “our”, “we” or “us”) is one of the largest landowners in the State of Texas with approximately 890,000 acres of land in West Texas. Texas Pacific was 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, and to issue transferable Certificates of Proprietary Interest pro rata to the original holders of certain debt securities of the Texas and Pacific Railway Company. The Trust is organized to manage land, including royalty interests, for the benefit of its owners. The Trust’s income is derived primarily from oil, gas and water service-related royalties, sales of water and land, easements and leases of the land. We operate our business in two segments: Land and Resource Management and Water Service 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 the Trust and provide a framework for timely and rational allocation of resources within businesses. See Note 8, “Business Segment Reporting” for further information regarding our segments. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Interim Unaudited Financial Information The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements include all adjustments necessary to present fairly the financial position of the Trust as of March 31, 2018 and the results of its operations for the three month periods ended March 31, 2018 and 2017 , respectively, and its cash flows for the three month periods ended March 31, 2018 and 2017 , respectively. Such adjustments are of a normal recurring nature. Principles of Consolidation and Basis of Presentation The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2017 , which was filed with the SEC on February 28, 2018. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted from this report. Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset 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. Recently Adopted Accounting Guidance Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue Recognition (Topic 606): Revenue from Contracts with Customers.” The ASU provides a five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU allows for a practical expedient for companies to exclude sales or similar taxes collected from customers from the transaction price. Additionally, the ASU requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The most significant impact of the standard relates to our accounting for easement agreements and to a lesser extent oil and gas royalties. Specifically, we recognize revenue for term easements upon execution of the easement agreements, and as a result, we no longer defer revenue on our term easements. Historically, oil and gas royalties have been adjusted for production taxes paid by operators with a charge to taxes, other than income taxes and a corresponding increase to revenue. We elected the practical expedient allowed by the ASU and exclude production taxes from revenue. Revenue recognition related to our land sales and other sundry income remains substantially unchanged. Adoption of the standard resulted in (i) the acceleration of easement and sundry income as unearned revenue decreases, (ii) a reduction in oil and gas royalty revenue with a corresponding reduction in taxes, other than income taxes, and (iii) an increase in income tax expense for the three months ended March 31, 2017. We adopted the new standard on January 1, 2018 applying the full retrospective method with optional practical expedients. Adoption of the standard using the full retrospective method required us to restate certain previously reported results as though the new standard had always been in effect. Adoption of the standard related to revenue recognition impacted our previously reported results as follows (in thousands, except per share amounts): As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Revenue $ 24,229 $ 6,178 $ 30,407 Taxes, other than income taxes 660 (605 ) 55 Income taxes 7,228 2,410 9,638 Net income 14,886 4,373 19,259 Net income per Sub-share Certificate $ 1.88 $ 0.55 $ 2.43 Consolidated Balance Sheets: As of December 31, 2017 Assets: Accrued receivables $ 18,206 $ (433 ) $ 17,773 Deferred tax asset (liability) 6,992 (7,106 ) (114 ) Liabilities and Capital: Unearned revenue $ 41,375 $ (33,011 ) $ 8,364 Other taxes payable 433 (433 ) — Net proceeds from all sources 79,997 25,905 105,902 Presentation of Net Periodic Pension Cost In March 2017, the FASB issued ASU No. 2017-07, “ Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost .” This ASU requires employers to disaggregate the service cost component from the other components of net benefit cost in the income statement, provides explicit guidance on the presentation of the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization. The service cost component is recorded within salaries and related employee benefits expense, and the other components of net benefit costs are recorded in other income. We adopted the new standard on January 1, 2018 applying the retrospective method. Adoption of the standard using the retrospective method required us to restate certain previously reported results as though the new standard had always been in effect. Adoption of the standard related to presentation of net periodic pension cost and the standard related to revenue recognition impacted our previously reported results for operating income and other income as follows (in thousands): As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Operating income (1) $ 22,104 $ 6,786 $ 28,890 Other income 9 (2 ) 7 (1) The retrospective adjustment amount includes approximately $6.8 million related to the adoption of the new revenue recognition guidance as discussed above. The retrospective adjustment amount related to the adoption of the presentation of net periodic pension cost had a minimal impact. Impact of the 2017 Tax Cuts and Jobs Act on Certain Income Tax Effects In March 2018, the FASB issued ASU 2018-05, “ Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 .” The amendments in this update provide guidance on when to record and disclose provisional amounts for certain income tax effects of the 2017 Tax Cuts and Jobs Act ("Tax Reform Act"). The amendments also require any provisional amounts or subsequent adjustments to be included in net income from continuing operations. Additionally, this ASU discusses required disclosures that an entity must make with regard to the Tax Reform Act. This ASU is effective immediately as new information is available to adjust provisional amounts that were previously recorded. The Trust has adopted this standard and will continue to evaluate indicators that may give rise to a change in our tax provision as a result of the Tax Reform Act. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) .” This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The new guidance will also require significant disclosures about the amount, timing and uncertainty of cash flows from leases. In January 2018, the FASB issued ASU No. 2018-01, “ Land Easement Practical Expedient for Transition to Topic 842 ” that clarifies the application of the new lease guidance to land easements. The ASU allows an optional transition practical expedient, which if elected, would not require an entity to reassess the accounting treatment on existing or expired land easements not previously accounted for as leases under the current lease guidance. Any new or modified land easements would be evaluated under the new lease guidance upon adoption of the new lease standard. The new lease standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which for the Trust is the first quarter of 2019. The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). ” This ASU allows for stranded tax effects in accumulated other comprehensive income resulting from the Tax Reform Act to be reclassified as retained earnings. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Trust is currently evaluating the impact that ASU 2018-02 will have on our consolidated financial statements and disclosures. |
Property, Plant and Equipment
Property, Plant and Equipment | 3 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment, net consisted of the following as of March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Property, plant and equipment: Water service-related assets (1) $ 28,679 $ 18,193 Furniture, fixtures and equipment 3,141 1,786 Property, plant and equipment at cost 31,820 19,979 Less: accumulated depreciation (791 ) (463 ) Property, plant and equipment, net $ 31,029 $ 19,516 (1) Water service-related assets include water wells and water well fields related to water sourcing and water re-use projects. Depreciation expense was $0.3 million for the three months ended March 31, 2018 . Depreciation expense was insignificant for the three months ended March 31, 2017 . |
Real Estate Activity
Real Estate Activity | 3 Months Ended |
Mar. 31, 2018 | |
Real Estate [Abstract] | |
Real Estate Activity | Real Estate Activity Land Sales No value has been assigned to the land held by the Trust other than parcels which have been acquired through foreclosure and a limited number of parcels which have been acquired because they were offered for sale and were contiguous to parcels already owned by the Trust. Consequently, no allowance for depletion is computed, and no charge to income is made, with respect thereto, and no cost is deducted from the proceeds of the land sales in computing gain or loss thereon. During the three months ended March 31, 2018 , we completed the following sales of land parcels (in thousands, except number of acres): Date of sale Location Approximate number of acres sold Contract sale price February 2018 Loving County 40.0 $ 1,150 March 2018 Culberson County 80.0 1,600 Total sales in 2018 120.0 $ 2,750 There were no land sales during the three months ended March 31, 2017 . Real Estate Acquired Real estate acquired included the following activity for the three months ended March 31, 2018 and 2017 (in thousands, except number of acres): Three Months Ended Three Months Ended Acres Book Value Acres Book Value Balance at January 1, 10,064.78 $ 1,115 10,064.78 $ 1,115 Additions 640.60 751 — — Sales — — — — Balance at March 31, 10,705.38 $ 1,866 10,064.78 $ 1,115 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Effective January 1, 2018, the statutory Federal income tax rate for the Trust decreased from 35% to 21% . The Trust’s effective Federal income tax rate is less than the 21% statutory rate because taxable income is reduced by statutory percentage depletion allowed on mineral royalty income. |
Capital
Capital | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Capital | Capital The Sub-shares and the Certificates of Proprietary Interest are freely interchangeable in the ratio of one Certificate of Proprietary Interest for 3,000 Sub-shares or 3,000 Sub-shares for one Certificate of Proprietary Interest. Dividends On March 16, 2018 , we paid $31.7 million in dividends representing a cash dividend of $1.05 per Sub-share and a special dividend of $3.00 per Sub-share for sub-shareholders of record at the close of business on March 9, 2018 . On March 16, 2017 , we paid $10.7 million in dividends representing a cash dividend of $0.35 per Sub-share and a special dividend of $1.00 per Sub-share for sub-shareholders of record at the close of business on March 9, 2017. Repurchases of Sub-share Certificates During the three months ended March 31, 2018 , we purchased and retired 13,146 Sub-shares. During the three months ended March 31, 2017 , we purchased and retired 29,496 Sub-shares. |
Business Segment Reporting
Business Segment Reporting | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Business Segment Reporting | Business Segment Reporting During the periods presented, we reported our financial performance based on the following segments: Land and Resource Management and Water Service 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 the Trust 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 approximately 890,000 acres of land and related resources in West Texas owned by the Trust. The revenue streams of this segment consist primarily of royalties from oil and gas, land sales, and revenues from easements and leases. The Water Service and Operations segment encompasses the business of providing a full-service water offering to operators in the Permian Basin as well as managing agreements with energy companies and oilfield service businesses to allow such companies to explore for water, drill water wells, construct water-related infrastructure and purchase water sourced from land that we own. The revenue streams of this segment consist of revenues from royalties on water service-related activity as well as revenue generated from direct sales of water. Segment financial results were as follows for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended 2018 2017 Revenues: Land and resource management $ 42,753 $ 25,579 Water service and operations 17,254 4,828 Total consolidated revenues $ 60,007 $ 30,407 Net income: Land and resource management $ 32,811 $ 14,445 Water service and operations 10,980 4,814 Total consolidated net income $ 43,791 $ 19,259 Capital expenditures Land and resource management $ 1,252 $ 174 Water service and operations 10,589 1,738 Total capital expenditures $ 11,841 $ 1,912 Depreciation and amortization: Land and resource management $ 70 $ 5 Water service and operations 260 14 Total depreciation and amortization $ 330 $ 19 The following table presents total assets and property, plant and equipment, net by segment as of March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Assets: Land and resource management $ 92,676 $ 97,549 Water service and operations 42,240 22,486 Total consolidated assets $ 134,916 $ 120,035 Property, plant and equipment, net Land and resource management $ 2,633 $ 1,449 Water service and operations 28,396 18,067 Total consolidated property, plant and equipment, net $ 31,029 $ 19,516 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events We evaluate events that occur after the balance sheet date but before consolidated financial statements are, or are available to be, issued to determine if a material event requires our amending the consolidated financial statements or disclosing the event. We evaluated subsequent events through the filing date we issued these consolidated financial statements and did not identify any subsequent events requiring disclosure. |
Oil and Gas Producing Activitie
Oil and Gas Producing Activities | 3 Months Ended |
Mar. 31, 2018 | |
Extractive Industries [Abstract] | |
Oil and Gas Producing Activities | Oil and Gas Producing Activities There are a number of oil and gas wells that have been drilled but are not yet completed (DUC) where the Trust has a royalty interest. Currently, the Trust has identified 209 DUC wells affected by our royalty interest. The process of identifying these wells is ongoing and we anticipate updates going forward to be affected by a number of factors including, but not limited to, ongoing changes/updates to our identification process, changes/updates by Drilling Info (our main source of information in identifying these wells) in their identification process, the eventual completion of these DUC wells, and additional wells drilled but not completed by companies operating where we have a royalty interest. ***** |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Principals of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2017 , which was filed with the SEC on February 28, 2018. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted from this report. |
Use of Estimates in the Preparation of Financial Statements | Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset 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. |
Recent Accounting Pronouncements | Recently Adopted Accounting Guidance Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue Recognition (Topic 606): Revenue from Contracts with Customers.” The ASU provides a five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU allows for a practical expedient for companies to exclude sales or similar taxes collected from customers from the transaction price. Additionally, the ASU requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The most significant impact of the standard relates to our accounting for easement agreements and to a lesser extent oil and gas royalties. Specifically, we recognize revenue for term easements upon execution of the easement agreements, and as a result, we no longer defer revenue on our term easements. Historically, oil and gas royalties have been adjusted for production taxes paid by operators with a charge to taxes, other than income taxes and a corresponding increase to revenue. We elected the practical expedient allowed by the ASU and exclude production taxes from revenue. Revenue recognition related to our land sales and other sundry income remains substantially unchanged. Adoption of the standard resulted in (i) the acceleration of easement and sundry income as unearned revenue decreases, (ii) a reduction in oil and gas royalty revenue with a corresponding reduction in taxes, other than income taxes, and (iii) an increase in income tax expense for the three months ended March 31, 2017. We adopted the new standard on January 1, 2018 applying the full retrospective method with optional practical expedients. Adoption of the standard using the full retrospective method required us to restate certain previously reported results as though the new standard had always been in effect. Adoption of the standard related to revenue recognition impacted our previously reported results as follows (in thousands, except per share amounts): As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Revenue $ 24,229 $ 6,178 $ 30,407 Taxes, other than income taxes 660 (605 ) 55 Income taxes 7,228 2,410 9,638 Net income 14,886 4,373 19,259 Net income per Sub-share Certificate $ 1.88 $ 0.55 $ 2.43 Consolidated Balance Sheets: As of December 31, 2017 Assets: Accrued receivables $ 18,206 $ (433 ) $ 17,773 Deferred tax asset (liability) 6,992 (7,106 ) (114 ) Liabilities and Capital: Unearned revenue $ 41,375 $ (33,011 ) $ 8,364 Other taxes payable 433 (433 ) — Net proceeds from all sources 79,997 25,905 105,902 Presentation of Net Periodic Pension Cost In March 2017, the FASB issued ASU No. 2017-07, “ Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost .” This ASU requires employers to disaggregate the service cost component from the other components of net benefit cost in the income statement, provides explicit guidance on the presentation of the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization. The service cost component is recorded within salaries and related employee benefits expense, and the other components of net benefit costs are recorded in other income. We adopted the new standard on January 1, 2018 applying the retrospective method. Adoption of the standard using the retrospective method required us to restate certain previously reported results as though the new standard had always been in effect. Adoption of the standard related to presentation of net periodic pension cost and the standard related to revenue recognition impacted our previously reported results for operating income and other income as follows (in thousands): As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Operating income (1) $ 22,104 $ 6,786 $ 28,890 Other income 9 (2 ) 7 (1) The retrospective adjustment amount includes approximately $6.8 million related to the adoption of the new revenue recognition guidance as discussed above. The retrospective adjustment amount related to the adoption of the presentation of net periodic pension cost had a minimal impact. Impact of the 2017 Tax Cuts and Jobs Act on Certain Income Tax Effects In March 2018, the FASB issued ASU 2018-05, “ Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 .” The amendments in this update provide guidance on when to record and disclose provisional amounts for certain income tax effects of the 2017 Tax Cuts and Jobs Act ("Tax Reform Act"). The amendments also require any provisional amounts or subsequent adjustments to be included in net income from continuing operations. Additionally, this ASU discusses required disclosures that an entity must make with regard to the Tax Reform Act. This ASU is effective immediately as new information is available to adjust provisional amounts that were previously recorded. The Trust has adopted this standard and will continue to evaluate indicators that may give rise to a change in our tax provision as a result of the Tax Reform Act. In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) .” This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The new guidance will also require significant disclosures about the amount, timing and uncertainty of cash flows from leases. In January 2018, the FASB issued ASU No. 2018-01, “ Land Easement Practical Expedient for Transition to Topic 842 ” that clarifies the application of the new lease guidance to land easements. The ASU allows an optional transition practical expedient, which if elected, would not require an entity to reassess the accounting treatment on existing or expired land easements not previously accounted for as leases under the current lease guidance. Any new or modified land easements would be evaluated under the new lease guidance upon adoption of the new lease standard. The new lease standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which for the Trust is the first quarter of 2019. The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). ” This ASU allows for stranded tax effects in accumulated other comprehensive income resulting from the Tax Reform Act to be reclassified as retained earnings. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Trust is currently evaluating the impact that ASU 2018-02 will have on our consolidated financial statements and disclosures. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | Adoption of the standard related to revenue recognition impacted our previously reported results as follows (in thousands, except per share amounts): As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Revenue $ 24,229 $ 6,178 $ 30,407 Taxes, other than income taxes 660 (605 ) 55 Income taxes 7,228 2,410 9,638 Net income 14,886 4,373 19,259 Net income per Sub-share Certificate $ 1.88 $ 0.55 $ 2.43 Consolidated Balance Sheets: As of December 31, 2017 Assets: Accrued receivables $ 18,206 $ (433 ) $ 17,773 Deferred tax asset (liability) 6,992 (7,106 ) (114 ) Liabilities and Capital: Unearned revenue $ 41,375 $ (33,011 ) $ 8,364 Other taxes payable 433 (433 ) — Net proceeds from all sources 79,997 25,905 105,902 Adoption of the standard related to presentation of net periodic pension cost and the standard related to revenue recognition impacted our previously reported results for operating income and other income as follows (in thousands): As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Operating income (1) $ 22,104 $ 6,786 $ 28,890 Other income 9 (2 ) 7 (1) The retrospective adjustment amount includes approximately $6.8 million related to the adoption of the new revenue recognition guidance as discussed above. The retrospective adjustment amount related to the adoption of the presentation of net periodic pension cost had a minimal impact. |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment, net consisted of the following as of March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Property, plant and equipment: Water service-related assets (1) $ 28,679 $ 18,193 Furniture, fixtures and equipment 3,141 1,786 Property, plant and equipment at cost 31,820 19,979 Less: accumulated depreciation (791 ) (463 ) Property, plant and equipment, net $ 31,029 $ 19,516 (1) Water service-related assets include water wells and water well fields related to water sourcing and water re-use projects. |
Real Estate Activity (Tables)
Real Estate Activity (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Real Estate [Abstract] | |
Schedule of Real Estate Properties | Real estate acquired included the following activity for the three months ended March 31, 2018 and 2017 (in thousands, except number of acres): Three Months Ended Three Months Ended Acres Book Value Acres Book Value Balance at January 1, 10,064.78 $ 1,115 10,064.78 $ 1,115 Additions 640.60 751 — — Sales — — — — Balance at March 31, 10,705.38 $ 1,866 10,064.78 $ 1,115 During the three months ended March 31, 2018 , we completed the following sales of land parcels (in thousands, except number of acres): Date of sale Location Approximate number of acres sold Contract sale price February 2018 Loving County 40.0 $ 1,150 March 2018 Culberson County 80.0 1,600 Total sales in 2018 120.0 $ 2,750 |
Business Segment Reporting (Tab
Business Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Financial Results | Segment financial results were as follows for the three months ended March 31, 2018 and 2017 (in thousands): Three Months Ended 2018 2017 Revenues: Land and resource management $ 42,753 $ 25,579 Water service and operations 17,254 4,828 Total consolidated revenues $ 60,007 $ 30,407 Net income: Land and resource management $ 32,811 $ 14,445 Water service and operations 10,980 4,814 Total consolidated net income $ 43,791 $ 19,259 Capital expenditures Land and resource management $ 1,252 $ 174 Water service and operations 10,589 1,738 Total capital expenditures $ 11,841 $ 1,912 Depreciation and amortization: Land and resource management $ 70 $ 5 Water service and operations 260 14 Total depreciation and amortization $ 330 $ 19 |
Schedule Of Total Assets And Property, Plant, and Equipment | The following table presents total assets and property, plant and equipment, net by segment as of March 31, 2018 and December 31, 2017 (in thousands): March 31, 2018 December 31, 2017 Assets: Land and resource management $ 92,676 $ 97,549 Water service and operations 42,240 22,486 Total consolidated assets $ 134,916 $ 120,035 Property, plant and equipment, net Land and resource management $ 2,633 $ 1,449 Water service and operations 28,396 18,067 Total consolidated property, plant and equipment, net $ 31,029 $ 19,516 |
Organization and Description 22
Organization and Description of Business Segments - Narrative (Details) a in Thousands | 3 Months Ended |
Mar. 31, 2018asegment | |
Organization, Consolidation and Presentation of Financial Statements [Line Items] | |
Number of operating segments | segment | 2 |
West Texas | |
Organization, Consolidation and Presentation of Financial Statements [Line Items] | |
Area of land (in acres) | a | 890 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies - Adoption of ASU 2014-09 (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Consolidated Statements of Income: | |||
Revenue | $ 60,007 | $ 30,407 | |
Taxes, other than income taxes | 144 | 55 | |
Income taxes | 10,820 | 9,638 | |
Net income | $ 43,791 | $ 19,259 | |
Net income per Sub-share Certificate (in usd per share) | $ 5.60 | $ 2.43 | |
ASSETS | |||
Accrued receivables | $ 27,644 | $ 17,773 | |
Deferred tax liability | (114) | (114) | |
Liabilities and Capital: | |||
Unearned revenue | 8,932 | 8,364 | |
Other taxes payable | 0 | ||
Net proceeds from all sources | $ 111,333 | 105,902 | |
Scenario, Previously Reported | |||
Consolidated Statements of Income: | |||
Revenue | $ 24,229 | ||
Taxes, other than income taxes | 660 | ||
Income taxes | 7,228 | ||
Net income | $ 14,886 | ||
Net income per Sub-share Certificate (in usd per share) | $ 1.88 | ||
ASSETS | |||
Accrued receivables | 18,206 | ||
Deferred tax asset | 6,992 | ||
Liabilities and Capital: | |||
Unearned revenue | 41,375 | ||
Other taxes payable | 433 | ||
Net proceeds from all sources | 79,997 | ||
Accounting Standards Update 2014-09 | Restatement Adjustment | |||
Consolidated Statements of Income: | |||
Revenue | $ 6,178 | ||
Taxes, other than income taxes | (605) | ||
Income taxes | 2,410 | ||
Net income | $ 4,373 | ||
Net income per Sub-share Certificate (in usd per share) | $ 0.55 | ||
ASSETS | |||
Accrued receivables | (433) | ||
Deferred tax liability | (7,106) | ||
Liabilities and Capital: | |||
Unearned revenue | (33,011) | ||
Other taxes payable | (433) | ||
Net proceeds from all sources | $ 25,905 |
Summary of Significant Accoun24
Summary of Significant Accounting Policies - Adoption of ASU 2017-07 (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating income | $ 54,481 | $ 28,890 |
Other income | 7 | |
Scenario, Previously Reported | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating income | 22,104 | |
Other income | 9 | |
Accounting Standards Update 2017-07 | Restatement Adjustment | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating income | 6,786 | |
Other income | $ (2) |
Property, Plant and Equipment25
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment: | $ 31,820 | $ 19,979 | |
Less: accumulated depreciation | (791) | (463) | |
Property, plant and equipment, net | 31,029 | 19,516 | |
Depreciation | 330 | $ 19 | |
Water Service-related Assets | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment: | 28,679 | 18,193 | |
Furniture, fixtures and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment: | $ 3,141 | $ 1,786 |
Real Estate Activity Real Estat
Real Estate Activity Real Estate Activity - Sold (Details) | 1 Months Ended | 3 Months Ended | ||
Mar. 31, 2018USD ($)a | Feb. 28, 2018USD ($)a | Mar. 31, 2018USD ($)a | Mar. 31, 2017USD ($) | |
Real Estate [Line Items] | ||||
Approximate number of acres sold (in acres) | a | 120 | |||
Contract sale price | $ | $ 2,750,000 | $ 0 | ||
Loving County | ||||
Real Estate [Line Items] | ||||
Approximate number of acres sold (in acres) | a | 40 | |||
Contract sale price | $ | $ 1,150,000 | |||
Culberson County | ||||
Real Estate [Line Items] | ||||
Approximate number of acres sold (in acres) | a | 80 | |||
Contract sale price | $ | $ 1,600,000 |
Real Estate Activity Real Est27
Real Estate Activity Real Estate Activity - Acquired (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)a | Mar. 31, 2017USD ($)a | |
Acres | ||
Balance at January 1, (in acres) | a | 10,064.78 | 10,064.78 |
Additions (in acres) | a | 640.60 | 0 |
Sales (in acres) | a | 0 | 0 |
Balance at March 31, (in acres) | a | 10,705.38 | 10,064.78 |
Book Value | ||
Balance at January 1, | $ | $ 1,115 | $ 1,115 |
Additions | $ | 751 | 0 |
Sales | $ | 0 | 0 |
Balance at March 31, | $ | $ 1,866 | $ 1,115 |
Capital (Details)
Capital (Details) - USD ($) $ / shares in Units, $ in Millions | Mar. 16, 2018 | Mar. 16, 2017 | Mar. 31, 2018 | Mar. 31, 2017 |
Class of Stock [Line Items] | ||||
Payments of dividends | $ 31.7 | $ 10.7 | ||
Dividend paid per sub-share (in usd per share) | $ 4.05 | $ 1.35 | ||
Certificate | ||||
Class of Stock [Line Items] | ||||
Number of shares used in ratio (in shares) | 1 | |||
Sub Shares | ||||
Class of Stock [Line Items] | ||||
Number of shares used in ratio (in shares) | 3,000 | |||
Number of shares repurchased and retired (in shares) | 13,146 | 29,496 | ||
Cash Dividend | Sub Shares | ||||
Class of Stock [Line Items] | ||||
Dividend paid per sub-share (in usd per share) | $ 1.05 | $ 0.35 | ||
Special Dividend | Sub Shares | ||||
Class of Stock [Line Items] | ||||
Dividend paid per sub-share (in usd per share) | $ 3 | $ 1 |
Business Segment Reporting (Det
Business Segment Reporting (Details) a in Thousands | Mar. 31, 2018a |
West Texas | |
Segment Reporting Information [Line Items] | |
Area of land (in acres) | 890 |
Business Segment Reporting - Fi
Business Segment Reporting - Financial Results (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Revenue | $ 60,007 | $ 30,407 |
Net income | 43,791 | 19,259 |
Capital expenditures | 11,841 | 1,912 |
Depreciation and amortization | 330 | 19 |
Land and resource management | ||
Segment Reporting Information [Line Items] | ||
Revenue | 42,753 | 25,579 |
Net income | 32,811 | 14,445 |
Capital expenditures | 1,252 | 174 |
Depreciation and amortization | 70 | 5 |
Water service and operations | ||
Segment Reporting Information [Line Items] | ||
Revenue | 17,254 | 4,828 |
Net income | 10,980 | 4,814 |
Capital expenditures | 10,589 | 1,738 |
Depreciation and amortization | $ 260 | $ 14 |
Business Segment Reporting - As
Business Segment Reporting - Assets and Property, Plant, and Equipment, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Assets | $ 134,916 | $ 120,035 |
Property, plant and equipment, net | 31,029 | 19,516 |
Land and resource management | ||
Segment Reporting Information [Line Items] | ||
Assets | 92,676 | 97,549 |
Property, plant and equipment, net | 2,633 | 1,449 |
Water service and operations | ||
Segment Reporting Information [Line Items] | ||
Assets | 42,240 | 22,486 |
Property, plant and equipment, net | $ 28,396 | $ 18,067 |
Oil and Gas Production (Details
Oil and Gas Production (Details) | Mar. 31, 2018well |
Extractive Industries [Abstract] | |
Number of DUC wells | 209 |