Texas Pacific Land Trust 10-Q 7 May 19 2019 Q1 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 30, 2019
Document Entity Information [Abstract]
Entity Registrant Name	TEXAS PACIFIC LAND TRUST
Entity Central Index Key	0000097517
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, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		7,756,156

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents	$ 113,261	$ 119,647
Accrued receivables	65,728	48,750
Tax like-kind exchange escrow	61,463	3,799
Other assets	3,397	3,884
Prepaid income taxes	0	9,398
Property, plant and equipment, net of accumulated depreciation of $4,193 and $3,012 as of March 31, 2019 and December 31, 2018, respectively	72,821	64,802
Real estate acquired	57,682	10,492
Royalty interests acquired	27,720	24,303
Operating lease right-of-use assets	2,834
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned:
Total assets	404,906	285,075
LIABILITIES AND CAPITAL
Accounts payable and accrued expenses	9,656	10,505
Income taxes payable	6,760	1,607
Deferred taxes payable	35,903	14,903
Unearned revenue	15,825	13,369
Operating lease liabilities	2,963
Total liabilities	71,107	40,384
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 7,756,156 and 7,762,414 Sub-share Certificates as of March 31, 2019 and December 31, 2018, respectively	0	0
Accumulated other comprehensive loss	(1,069)	(1,078)
Net proceeds from all sources	334,868	245,769
Total capital	333,799	244,691
Total liabilities and capital	404,906	285,075
Land Surface Rights
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned:
Land (surface rights)	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	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	$ 0	$ 0

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Property, plant and equipment, accumulated depreciation	$ 4,193	$ 3,012
Certificates of proprietary interest, par value (in dollars per share)	$ 100	$ 100
Certificates of proprietary interest, outstanding (in shares)	0	0
Sub-share certificates of proprietary interest, par value (in dollars per share)	$ 0.0333	$ 0.0333
Sub-share certificates of proprietary interest, outstanding (in shares)	7,756,156	7,762,414
1/16th Nonparticipating Perpetual Royalty Interest
Nonparticipating perpetual royalty interest rate	6.25%	6.25%
1/128th Nonparticipating Perpetual Royalty Interest
Nonparticipating perpetual royalty interest rate	0.78125%	0.78125%

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income and Total Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues:
Total revenues	$ 191,324	$ 60,007
Expenses:
Salaries and related employee expenses	6,464	2,563
Water service-related expenses	4,578	1,306
General and administrative expenses	2,142	680
Legal and professional fees	1,783	647
Depreciation and amortization	1,204	330
Total operating expenses	16,171	5,526
Operating income	175,153	54,481
Other income	393	130
Income before income taxes	175,546	54,611
Income tax expense
Current	14,548	10,820
Deferred	21,000	0
Total income tax expense	35,548	10,820
Net income	139,998	43,791
Other comprehensive income — periodic pension costs, net of income taxes of $2 and $3, respectively	9	13
Total comprehensive income	$ 140,007	$ 43,804
Weighted average number of Sub-share Certificates outstanding (in shares)	7,759,808	7,818,168
Net income per Sub-share Certificate — basic and diluted (in dollars per share)	$ 18.04	$ 5.60
Cash dividends per Sub-share Certificate (in dollars per share)	$ 6	$ 4.05
Oil and gas royalties
Revenues:
Total revenues	$ 33,213	$ 26,547
Easements and other surface-related income
Revenues:
Total revenues	31,367	16,978
Water sales and royalties
Revenues:
Total revenues	22,983	13,607
Land sales
Revenues:
Total revenues	103,625	2,750
Other operating revenue
Revenues:
Total revenues	$ 136	$ 125

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Income and Total Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Statement [Abstract]
Other comprehensive income, tax	$ 2	$ 3

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net income	$ 139,998	$ 43,791
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	21,000	0
Depreciation and amortization	1,204	330
Changes in operating assets and liabilities:
Operating assets, excluding income taxes	(19,331)	(10,102)
Prepaid income taxes	9,398	1,202
Operating liabilities, excluding income taxes	4,579	(172)
Income taxes payable	5,153	9,622
Cash provided by operating activities	162,001	44,671
Cash flows from investing activities:
Proceeds from sale of fixed assets	30	0
Acquisition of land	(47,189)	(751)
Acquisition of royalty interests	(3,418)	0
Purchase of fixed assets	(9,247)	(11,841)
Cash used in investing activities	(59,824)	(12,592)
Cash flows from financing activities:
Purchase of Sub-share Certificates in Certificates of Proprietary Interest	(4,353)	(6,709)
Dividends paid	(46,546)	(31,652)
Cash used in financing activities	(50,899)	(38,361)
Net increase in cash, cash equivalents, and restricted cash	51,278	(6,282)
Cash, cash equivalents and restricted cash, beginning of period	123,446	79,580
Cash, cash equivalents, and restricted cash, end of period	174,724	73,298
Supplemental disclosure of cash flow information:
Income taxes paid	$ 0	$ 0

Organization and Description of

Organization and Description of Business Segments	3 Months Ended
	Mar. 31, 2019
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 900,000 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 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 9, “Business Segment Reporting” for further information regarding our segments.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2019
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, 2019 and the results of its operations for the three months ended March 31, 2019 and 2018 , respectively, and its cash flows for the three months ended March 31, 2019 and 2018 , respectively. Such adjustments are of a normal recurring nature. Principles of Consolidation and 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 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, 2018 , which was filed with the SEC on February 28, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with 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. Reclassifications Certain financial information on the condensed consolidated balance sheets as of December 31, 2018 and condensed consolidated statements of income for the three months ended March 31, 2018 has been revised to conform to the current year presentation. These revisions affected the classification of the tax like-kind exchange escrow from other assets to a separate balance sheet line item and certain expense items from one expense line item to another expense line item. Total assets and expenses were not affected by these reclassifications. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): March 31, 2019 December 31, 2018 Cash and cash equivalents $ 113,261 $ 119,647 Tax like-kind exchange escrow 61,463 3,799 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 174,724 $ 123,446 Recently Adopted Accounting Guidance Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases (Topic 842) ” which amended the existing lease accounting guidance to require lessees to recognize a right of use asset and lease liability on the balance sheet for all leases with terms greater than twelve months. We adopted the new leasing standard and all related amendments on January 1, 2019. We elected the optional transition method provided by ASU No. 2018-11, “ Leases (Topic 842): Targeted Improvements ” and as a result, have not restated our condensed consolidated financial statements for prior periods presented. We also elected the practical expedients permitted under the transition guidance that retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. In addition, we have not reassessed the accounting treatment of contracts entered into prior to adoption of the new lease guidance. Upon adoption, we recorded a right-of-use asset for $3.0 million and a lease liability for $3.0 million related to operating leases in connection with our administrative offices located in Dallas and Midland, Texas. The lease agreements require monthly rent payments and expire in March 2025 and August 2022, respectively. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease cost for the three months ended March 31, 2019 was $0.1 million . Future minimum lease payments under these operating leases are as follows as of March 31, 2019 (in thousands): 2019 (excluding the three months ended March 31) $ 344 2020 597 2021 613 2022 597 2023 546 Thereafter 701 Total lease payments 3,398 Less: imputed interest (435 ) Total operating lease liabilities $ 2,963

Recent Accounting Pronouncement

Recent Accounting Pronouncements	3 Months Ended
	Mar. 31, 2019
Accounting Changes and Error Corrections [Abstract]
Recent Accounting Pronouncements	Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-14, “ Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to Disclosure Requirements for Defined Benefit Plans .” The ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Trust is currently evaluating the impact that ASU 2018-14 will have on our consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU requires a customer in a cloud computing arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to capitalize as an asset. The ASU is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted, and may be applied retrospectively or as of the beginning of the period of adoption. The Trust is currently evaluating the impact that ASU 2018-15 will have on our consolidated financial statements and disclosures.

Property, Plant and Equipment

Property, Plant and Equipment	3 Months Ended
	Mar. 31, 2019
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, 2019 and December 31, 2018 (in thousands): March 31, 2019 December 31, 2018 Property, plant and equipment: Water service-related assets (1) $ 71,593 $ 62,919 Furniture, fixtures and equipment 4,823 4,297 Other 598 598 Property, plant and equipment at cost 77,014 67,814 Less: accumulated depreciation (4,193 ) (3,012 ) Property, plant and equipment, net $ 72,821 $ 64,802 (1) Water service-related assets reflect assets related to brackish water sourcing and water re-use projects. Depreciation expense was $1.2 million and $0.3 million for the three months ended March 31, 2019 and 2018 , respectively.

Real Estate Activity

Real Estate Activity	3 Months Ended
	Mar. 31, 2019
Real Estate [Abstract]
Real Estate Activity	Real Estate Activity As of March 31, 2019 and December 31, 2018 , the Trust owned the following land and real estate (in thousands, except number of acres): March 31, 2019 December 31, 2018 Number of Acres Net Book Value Number of Acres Net Book Value Land (surface rights) 856,211 $ — 877,462 $ — Real estate acquired 36,416 57,682 24,715 10,492 Total real estate situated in 19 counties in Texas 892,627 $ 57,682 902,177 $ 10,492 No valuation allowance was necessary at March 31, 2019 and December 31, 2018 . Land Sales For the three months ended March 31, 2019 , the Trust sold approximately 21,251 acres ( 13,180 acres in Loving County, 5,598 acres in Culberson County, 1,651 acres in Hudspeth County and 822 acres in Reeves County) of the Trust’s Assigned land in Texas for an aggregate sales price of approximately $103.6 million , with an average of approximately $4,876 per acre. For the three months ended March 31, 2018 , the Trust sold approximately 120 acres ( 80 acres in Culberson County and 40 acres in Loving County) of the Trust’s Assigned land in Texas for an aggregate sales price of approximately $2.8 million , with an average of approximately $22,917 per acre. Land Acquisitions For the three months ended March 31, 2019 , the Trust acquired approximately 11,702 acres (Culberson and Reeves Counties) of land in Texas for an aggregate purchase price of approximately $47.2 million , with an average of approximately $4,033 per acre. For the three months ended March 31, 2018 , the Trust acquired approximately 641 acres (all in Upton County) of land in Texas for an aggregate purchase price of approximately $0.8 million , with an average of approximately $1,171 per acre.

Royalty Interests

Royalty Interests	3 Months Ended
	Mar. 31, 2019
Real Estate [Abstract]
Royalty Interests	Royalty Interests As of March 31, 2019 and December 31, 2018 , the Trust owned the following oil and gas royalty interests (in thousands, except number of interests): Net Book Value March 31, 2019 December 31, 2018 1/16th nonparticipating perpetual royalty interests $ — $ — 1/128th nonparticipating perpetual royalty interests — — Royalty interests acquired 27,720 24,303 Total royalty interests $ 27,720 $ 24,303 No valuation allowance was necessary at March 31, 2019 and December 31, 2018 . For the three months ended March 31, 2019 , the Trust acquired oil and gas royalty interests in approximately 301 net royalty acres (normalized to 1/8th) for an aggregate purchase price of $3.2 million , an average price of approximately $10,500 per net royalty acre. There were no oil and gas royalty interest transactions for the three months ended March 31, 2018 .

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2019
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. The Trust structured the $100.0 million land sale in January 2019 as a §1031exchange for federal income tax purposes. As a result, the current federal income tax liability and current federal income tax expense were each reduced by approximately $21.0 million during the three months ended March 31, 2019 .

Capital

Capital	3 Months Ended
	Mar. 31, 2019
Equity [Abstract]
Capital	Capital The Sub-share Certificates (“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 15, 2019 , we paid $46.5 million in dividends representing a regular cash dividend of $1.75 per Sub-share and a special dividend of $4.25 per Sub-share for sub-shareholders of record at the close of business on March 8, 2019 . On March 16, 2018 , we paid $31.7 million in dividends representing a regular 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 . Repurchases of Sub-shares During the three months ended March 31, 2019 , we purchased and retired 6,258 Sub-shares. During the three months ended March 31, 2018 , we purchased and retired 13,146 Sub-shares.

Business Segment Reporting

Business Segment Reporting	3 Months Ended
	Mar. 31, 2019
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 900,000 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, revenues from easements and leases, and land sales. 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 revenue generated from direct sales of water as well as revenues from royalties on water service-related activity. Segment financial results were as follows for the three months ended March 31, 2019 and 2018 (in thousands): Three Months Ended 2019 2018 Revenues: Land and resource management $ 160,459 $ 42,753 Water service and operations 30,865 17,254 Total consolidated revenues $ 191,324 $ 60,007 Net income: Land and resource management $ 123,117 $ 32,811 Water service and operations 16,881 10,980 Total consolidated net income $ 139,998 $ 43,791 Capital expenditures Land and resource management $ 534 $ 1,252 Water service and operations 8,713 10,589 Total capital expenditures $ 9,247 $ 11,841 Depreciation and amortization: Land and resource management $ 177 $ 70 Water service and operations 1,027 260 Total depreciation and amortization $ 1,204 $ 330 The following table presents total assets and property, plant and equipment, net by segment as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 December 31, 2018 Assets: Land and resource management $ 297,450 $ 198,922 Water service and operations 107,456 86,153 Total consolidated assets $ 404,906 $ 285,075 Property, plant and equipment, net Land and resource management $ 4,052 $ 3,720 Water service and operations 68,769 61,082 Total consolidated property, plant and equipment, net $ 72,821 $ 64,802

Oil and Gas Producing Activitie

Oil and Gas Producing Activities	3 Months Ended
	Mar. 31, 2019
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 313 DUC wells subject to 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.

Subsequent Events

Subsequent Events	3 Months Ended
	Mar. 31, 2019
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 identified the following subsequent event requiring disclosure. Land Transaction On April 22, 2019 , the Trust acquired approximately 3,400 acres of land in Loving County, Texas for an aggregate purchase price of $20.4 million . The Trust utilized proceeds from the land sale in January 2019 to fund the acquisition.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
Principals of Consolidation and Basis of Presentation	Principles of Consolidation and 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 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, 2018 , which was filed with the SEC on February 28, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with 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.
Reclassifications	Reclassifications Certain financial information on the condensed consolidated balance sheets as of December 31, 2018 and condensed consolidated statements of income for the three months ended March 31, 2018 has been revised to conform to the current year presentation. These revisions affected the classification of the tax like-kind exchange escrow from other assets to a separate balance sheet line item and certain expense items from one expense line item to another expense line item. Total assets and expenses were not affected by these reclassifications.
Recently Accounting Pronouncements	Recently Adopted Accounting Guidance Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases (Topic 842) ” which amended the existing lease accounting guidance to require lessees to recognize a right of use asset and lease liability on the balance sheet for all leases with terms greater than twelve months. We adopted the new leasing standard and all related amendments on January 1, 2019. We elected the optional transition method provided by ASU No. 2018-11, “ Leases (Topic 842): Targeted Improvements ” and as a result, have not restated our condensed consolidated financial statements for prior periods presented. We also elected the practical expedients permitted under the transition guidance that retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. In addition, we have not reassessed the accounting treatment of contracts entered into prior to adoption of the new lease guidance. Upon adoption, we recorded a right-of-use asset for $3.0 million and a lease liability for $3.0 million related to operating leases in connection with our administrative offices located in Dallas and Midland, Texas. The lease agreements require monthly rent payments and expire in March 2025 and August 2022, respectively. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease cost for the three months ended March 31, 2019 was $0.1 million . Future minimum lease payments under these operating leases are as follows as of March 31, 2019 (in thousands): 2019 (excluding the three months ended March 31) $ 344 2020 597 2021 613 2022 597 2023 546 Thereafter 701 Total lease payments 3,398 Less: imputed interest (435 ) Total operating lease liabilities $ 2,963 Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-14, “ Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to Disclosure Requirements for Defined Benefit Plans .” The ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Trust is currently evaluating the impact that ASU 2018-14 will have on our consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The ASU requires a customer in a cloud computing arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to capitalize as an asset. The ASU is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted, and may be applied retrospectively or as of the beginning of the period of adoption. The Trust is currently evaluating the impact that ASU 2018-15 will have on our consolidated financial statements and disclosures.

Summary of Significant Accoun_3

Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
Cash and Cash Equivalents	The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): March 31, 2019 December 31, 2018 Cash and cash equivalents $ 113,261 $ 119,647 Tax like-kind exchange escrow 61,463 3,799 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 174,724 $ 123,446
Restricted Cash	The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): March 31, 2019 December 31, 2018 Cash and cash equivalents $ 113,261 $ 119,647 Tax like-kind exchange escrow 61,463 3,799 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 174,724 $ 123,446
Future Minimum Lease Payments	Future minimum lease payments under these operating leases are as follows as of March 31, 2019 (in thousands): 2019 (excluding the three months ended March 31) $ 344 2020 597 2021 613 2022 597 2023 546 Thereafter 701 Total lease payments 3,398 Less: imputed interest (435 ) Total operating lease liabilities $ 2,963

Property, Plant and Equipment (

Property, Plant and Equipment (Tables)	3 Months Ended
	Mar. 31, 2019
Property, Plant and Equipment [Abstract]
Property, Plant and Equipment	Property, plant and equipment, net consisted of the following as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 December 31, 2018 Property, plant and equipment: Water service-related assets (1) $ 71,593 $ 62,919 Furniture, fixtures and equipment 4,823 4,297 Other 598 598 Property, plant and equipment at cost 77,014 67,814 Less: accumulated depreciation (4,193 ) (3,012 ) Property, plant and equipment, net $ 72,821 $ 64,802 (1) Water service-related assets reflect assets related to brackish water sourcing and water re-use projects.

Real Estate Activity (Tables)

Real Estate Activity (Tables)	3 Months Ended
	Mar. 31, 2019
Real Estate [Abstract]
Schedule of Real Estate Properties	As of March 31, 2019 and December 31, 2018 , the Trust owned the following land and real estate (in thousands, except number of acres): March 31, 2019 December 31, 2018 Number of Acres Net Book Value Number of Acres Net Book Value Land (surface rights) 856,211 $ — 877,462 $ — Real estate acquired 36,416 57,682 24,715 10,492 Total real estate situated in 19 counties in Texas 892,627 $ 57,682 902,177 $ 10,492

Royalty Interests (Tables)

Royalty Interests (Tables)	3 Months Ended
	Mar. 31, 2019
Real Estate [Abstract]
Schedule of Royalty Interests	As of March 31, 2019 and December 31, 2018 , the Trust owned the following oil and gas royalty interests (in thousands, except number of interests): Net Book Value March 31, 2019 December 31, 2018 1/16th nonparticipating perpetual royalty interests $ — $ — 1/128th nonparticipating perpetual royalty interests — — Royalty interests acquired 27,720 24,303 Total royalty interests $ 27,720 $ 24,303

Business Segment Reporting (Tab

Business Segment Reporting (Tables)	3 Months Ended
	Mar. 31, 2019
Segment Reporting [Abstract]
Schedule of Segment Financial Results	Segment financial results were as follows for the three months ended March 31, 2019 and 2018 (in thousands): Three Months Ended 2019 2018 Revenues: Land and resource management $ 160,459 $ 42,753 Water service and operations 30,865 17,254 Total consolidated revenues $ 191,324 $ 60,007 Net income: Land and resource management $ 123,117 $ 32,811 Water service and operations 16,881 10,980 Total consolidated net income $ 139,998 $ 43,791 Capital expenditures Land and resource management $ 534 $ 1,252 Water service and operations 8,713 10,589 Total capital expenditures $ 9,247 $ 11,841 Depreciation and amortization: Land and resource management $ 177 $ 70 Water service and operations 1,027 260 Total depreciation and amortization $ 1,204 $ 330
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, 2019 and December 31, 2018 (in thousands): March 31, 2019 December 31, 2018 Assets: Land and resource management $ 297,450 $ 198,922 Water service and operations 107,456 86,153 Total consolidated assets $ 404,906 $ 285,075 Property, plant and equipment, net Land and resource management $ 4,052 $ 3,720 Water service and operations 68,769 61,082 Total consolidated property, plant and equipment, net $ 72,821 $ 64,802

Organization and Description _2

Organization and Description of Business Segments (Details)	3 Months Ended
	Mar. 31, 2019asegment
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	900,000

Summary of Significant Accoun_4

Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Cash and cash equivalents	$ 113,261	$ 119,647
Tax like-kind exchange escrow	61,463	3,799
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$ 174,724	$ 123,446	$ 73,298	$ 79,580

Summary of Significant Accoun_5

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 2,834
Operating lease liabilities	2,963
Operating lease expense	$ 100
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets		$ 3,000
Operating lease liabilities		$ 3,000

Summary of Significant Accoun_6

Summary of Significant Accounting Policies - Future Minimum Lease Payments (Details) $ in Thousands	Mar. 31, 2019USD ($)
Accounting Policies [Abstract]
2019 (excluding the three months ended March 31)	$ 344
2020	597
2021	613
2022	597
2023	546
Thereafter	701
Total lease payments	3,398
Less: imputed interest	(435)
Total operating lease liabilities	$ 2,963

Property, Plant and Equipment_2

Property, Plant and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property, plant and equipment at cost	$ 77,014		$ 67,814
Less: accumulated depreciation	(4,193)		(3,012)
Property, plant and equipment, net	72,821		64,802
Depreciation	1,200	$ 300
Water service-related assets
Property, Plant and Equipment [Line Items]
Property, plant and equipment at cost	71,593		62,919
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment at cost	4,823		4,297
Other
Property, Plant and Equipment [Line Items]
Property, plant and equipment at cost	$ 598		$ 598

Real Estate Activity - Schedule

Real Estate Activity - Schedule of Land and Real Estate Ownership (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019USD ($)acounty	Dec. 31, 2018USD ($)acounty
Number of Acres
Land (surface rights) (acre) | a	856,211	877,462
Real estate acquired (acre) | a	36,416	24,715
Total real estate situated in 19 counties in Texas (acre) | a	892,627	902,177
Net Book Value
Land (surface rights) | $	$ 0	$ 0
Real estate acquired | $	57,682	10,492
Total real estate situated in 19 counties in Texas | $	$ 57,682	$ 10,492
Number of counties with real estate in Texas | county	19	19

Real Estate Activity (Details)

Real Estate Activity (Details) $ in Millions	1 Months Ended	3 Months Ended
	Jan. 31, 2019USD ($)	Mar. 31, 2019USD ($)a$ / a	Mar. 31, 2018USD ($)a$ / a
Real Estate Properties [Line Items]
Area of real estate property, sold (acre)		21,251	120
Proceeds from sale of real estate | $	$ 100	$ 103.6	$ 2.8
Average sale price (in dollars per acre) | $ / a		4,876	22,917
Additions (acre)		11,702
Additions | $		$ 47.2	$ 0.8
Average purchase price (in dollars per acre) | $ / a		4,033	1,171
Loving county
Real Estate Properties [Line Items]
Area of real estate property, sold (acre)		13,180	40
Culberson county
Real Estate Properties [Line Items]
Area of real estate property, sold (acre)		5,598	80
Hudspeth county
Real Estate Properties [Line Items]
Area of real estate property, sold (acre)		1,651
Reeves county
Real Estate Properties [Line Items]
Area of real estate property, sold (acre)		822
Upton county
Real Estate Properties [Line Items]
Additions (acre)			641

Royalty Interests (Details)

Royalty Interests (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019USD ($)a$ / a	Mar. 31, 2018USD ($)	Dec. 31, 2018USD ($)
Net Book Value
Royalty interests acquired	$ 27,720	$ 24,303	$ 24,303
Total royalty interests	27,720	24,303
Acquisition of royalty interests	$ 3,418	0
Royalty interest rate	12.50%
1/16th nonparticipating perpetual royalty interests
Real Estate Properties [Line Items]
Nonparticipating perpetual royalty interest rate	6.25%		6.25%
Net Book Value
1/16th nonparticipating perpetual royalty interest	$ 0	0	$ 0
1/128th nonparticipating perpetual royalty interests
Real Estate Properties [Line Items]
Nonparticipating perpetual royalty interest rate	0.78125%		0.78125%
Net Book Value
1/128th nonparticipating perpetual royalty interest	$ 0	$ 0	$ 0
Additional real estate acquisitions
Net Book Value
Net royalty interests (acre) | a	301
Acquisition of royalty interests	$ 3,200
Average price per net royalty acre acquired (in dollars per acre) | $ / a	10,500

Income Taxes - Narrative (Detai

Income Taxes - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Jan. 31, 2019	Mar. 31, 2019	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Land sale	$ 100	$ 103.6	$ 2.8
Current federal income tax liability		21
Current federal income tax expense		$ 21

Capital (Details)

Capital (Details) $ / shares in Units, $ in Millions	Mar. 15, 2019USD ($)$ / shares	Mar. 16, 2018USD ($)$ / shares	Mar. 31, 2019$ / sharesshares	Mar. 31, 2018$ / sharesshares
Class of Stock [Line Items]
Payments of dividends | $	$ 46.5	$ 31.7
Dividend paid per sub-share (in dollars per share)			$ 6	$ 4.05
Sub Shares
Class of Stock [Line Items]
Ratio of certificates to sub-shares			0.0003333333333
Number of shares repurchased and retired (in shares) | shares			6,258	13,146
Cash Dividend | Sub Shares
Class of Stock [Line Items]
Dividend paid per sub-share (in dollars per share)	$ 1.75	$ 1.05
Special Dividend | Sub Shares
Class of Stock [Line Items]
Dividend paid per sub-share (in dollars per share)	$ 4.25	$ 3

Business Segment Reporting (Det

Business Segment Reporting (Details)	Mar. 31, 2019a
West Texas
Segment Reporting Information [Line Items]
Area of land (in acres)	900,000

Business Segment Reporting - Fi

Business Segment Reporting - Financial Results (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Segment Reporting Information [Line Items]
Revenue	$ 191,324	$ 60,007
Net income	139,998	43,791
Capital expenditures	9,247	11,841
Depreciation and amortization	1,204	330
Land and resource management
Segment Reporting Information [Line Items]
Revenue	160,459	42,753
Net income	123,117	32,811
Capital expenditures	534	1,252
Depreciation and amortization	177	70
Water service and operations
Segment Reporting Information [Line Items]
Revenue	30,865	17,254
Net income	16,881	10,980
Capital expenditures	8,713	10,589
Depreciation and amortization	$ 1,027	$ 260

Business Segment Reporting - As

Business Segment Reporting - Assets and Property, Plant, and Equipment, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Assets	$ 404,906	$ 285,075
Property, plant and equipment, net	72,821	64,802
Land and resource management
Segment Reporting Information [Line Items]
Assets	297,450	198,922
Property, plant and equipment, net	4,052	3,720
Water service and operations
Segment Reporting Information [Line Items]
Assets	107,456	86,153
Property, plant and equipment, net	$ 68,769	$ 61,082

Oil and Gas Producing Activit_2

Oil and Gas Producing Activities (Details)	Mar. 31, 2019well
Extractive Industries [Abstract]
Number of DUC wells	313

Subsequent Events (Details)

Subsequent Events (Details) $ in Thousands	Apr. 22, 2019USD ($)a	Mar. 31, 2019USD ($)a	Mar. 31, 2018USD ($)
Subsequent Event [Line Items]
Additions (acre) | a		11,702
Land purchase price | $		$ 47,189	$ 751
Subsequent Event
Subsequent Event [Line Items]
Additions (acre) | a	3,400
Land purchase price | $	$ 20,400