UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________

FORM 10-Q

_____________________

OR

Commission File Number: 1-737

Texas Pacific Land Trust

(Exact Name of Registrant as Specified in Its Charter)

(214) 969-5530

(Registrant’s Telephone Number, Including Area Code)

__________________________________________________________________

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☑

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. Forward-looking statements include statements regarding the Trust’s future operations and prospects, the markets for real estate in the areas in which the Trust owns real estate, applicable zoning regulations, the markets for oil and gas, production limits on prorated oil and gas wells authorized by the Railroad Commission of Texas, expected competition, management’s intent, beliefs or current expectations with respect to the Trust’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, 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, 2013, 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.

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements

TEXAS PACIFIC LAND TRUST

BALANCE SHEETS

See accompanying notes to financial statements.

TEXAS PACIFIC LAND TRUST

STATEMENTS OF INCOME AND TOTAL COMPREHENSIVE INCOME

(Unaudited)

See accompanying notes to financial statements.

TEXAS PACIFIC LAND TRUST

STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to financial statements.

TEXAS PACIFIC LAND TRUST

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2014

Supplemental cash flow information for the six month periods ended June 30, 2014 and 2013 is summarized as follows:

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

The following discussion and analysis should be read together with (i) the factors discussed in Item 1A “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2013, (ii) the factors discussed in Part II, Item 1A “Risk Factors,” if any, of this Quarterly Report on Form 10-Q and (iii) the Financial Statements, including the Notes thereto, and the other financial information appearing elsewhere in this Report. Period-to-period comparisons of financial data are not necessarily indicative, and therefore should not be relied upon as indicators, of the Trust’s future performance. Words or phrases such as “does not believe” and “believes”, or similar expressions, when used in this Form 10-Q or other filings with the Securities and Exchange Commission, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Results of Operations for the Quarter Ended June 30, 2014 Compared to the Quarter Ended June 30, 2013

Earnings per Sub-share certificate were $1.17 for the second quarter of 2014, compared to $.71 for the second quarter of 2013. Total operating and investing revenues were $15,583,264 for the second quarter of 2014 compared to $9,953,933 for the second quarter of 2013, an increase of 56.6%. This increase in revenue and earnings was due primarily to increases in oil and gas royalty revenue, easement and sundry income, and land sales. These increases were partially offset by a decrease in interest income on notes receivable.

In the second quarter of 2014, the Trust sold approximately 1,395 acres for a total of $1,670,605, or approximately $1,198 per acre. In the second quarter of 2013, the Trust sold approximately 43.7 acres for a total of $218,588, or approximately $5,000 per acre.

Rentals, royalties and sundry income were $13,870,779 during the second quarter of 2014, compared to $9,592,061 for the second quarter of 2013, an increase of 44.6%. This increase resulted primarily from increases in oil and gas royalty revenue and easement and sundry income.

Oil and gas royalty revenue was $7,863,507 for the second quarter of 2014, compared to $6,357,782 for the second quarter of 2013, an increase of 23.7%. Oil royalty revenue was $6,301,472 for the second quarter of 2014, an increase of 30.9% from the second quarter of 2013 when oil royalty revenue was $4,813,771. The average price per royalty barrel of crude oil during the second quarter of 2014 was 12.8% higher than the average price prevailing during the second quarter of 2013. In addition, crude oil production subject to the Trust’s royalty interest increased 16.1% in the second quarter of 2014 compared to the second quarter of 2013. Gas royalty revenue was $1,562,035 for the second quarter of 2014, an increase of 1.2% from the second quarter of 2013 when gas royalty revenue was $1,544,011. This increase in gas royalty revenue resulted from a volume increase of 4.9% in the second quarter of 2014 compared to the second quarter of 2013, which more than offset a price decrease of 3.5%.

Easement and sundry income was $5,863,269 for the second quarter of 2014, an increase of 90.3% compared to the second quarter of 2013 when easement and sundry income was $3,081,718. This increase resulted primarily from increases in pipeline easement income, sundry income, and seismic permit income caused by an increase in drilling and exploration activity on land owned by the Trust. This category of income is unpredictable and may vary significantly from quarter to quarter.

Interest income, including interest on investments, was $41,880 for the second quarter of 2014 compared to $143,284 for the second quarter of 2013, a decrease of 70.8%. Interest on notes receivable for the second quarter of 2014 was $38,500, a decrease of 72.5% compared to the second quarter of 2013 when interest on notes receivable was $140,175. As of June 30, 2014, notes receivable for land sales were $1,286,529 compared to $7,288,537 at June 30, 2013, a decrease of 82.3%. Interest income earned from investments was $3,380 for the second quarter of 2014, an increase of 8.7% from the second quarter of 2013. Interest on investments is affected by such variables as cash on hand for investment and the rate of interest on short-term investments.

Taxes, other than income taxes, were $447,703 for the second quarter of 2014 compared to $384,115 for the second quarter of 2013, an increase of 16.6%. This increase is primarily attributable to an increase in oil and gas production taxes which resulted from the increase in oil and gas royalty revenue discussed above.

General and administrative expenses were $422,649 for the second quarter of 2014 compared to $520,140 for the second quarter of 2013, a decrease of 18.7%. This decrease was primarily due to decreases in legal expenses and employment expenses.

Results of Operations for the Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Earnings per Sub-share certificate were $2.03 for the first six months of 2014, compared to $1.18 for the first six months of 2013. Total operating and investing revenues were $27,165,217 for the first six months of 2014 compared to $16,680,787 for the first six months of 2013, an increase of 62.9%. This increase in revenue and earnings was primarily due to increases in oil and gas royalty revenue, easement and sundry income, and land sales. These increases were only slightly offset by a decrease in interest income from notes receivable.

During the first six months of 2014, the Trust sold approximately 1,395 acres for a total of $1,670,605, or approximately $1,198 per acre. In the first six months of 2013, the Trust sold approximately 100.1 acres for a total of $331,588, or approximately $3,313 per acre.

Rentals, royalties, and sundry income were $25,383,590 for the first six months of 2014, compared to $16,055,569 for the first six months of 2013, an increase of 58.1%. This increase resulted primarily from increases in oil and gas royalty revenue and easement and sundry income.

Oil and gas royalty revenue was $15,105,566 for the first six months of 2014, compared to $10,352,473 for the first six months of 2013, an increase of 45.9%. Oil royalty revenue was $11,696,673 for the first six months of 2014, an increase of 39.2% from the first six months of 2013 when oil royalty revenue was $8,405,512. The average price per royalty barrel of crude oil during the first six months of 2014 was 10.6% higher than the average price prevailing during the first six months of 2013. In addition, crude oil production subject to the Trust’s royalty interest increased 25.9% in the first six months of 2014 compared to the first six months of 2013. Gas royalty revenue was $3,408,893 for the first six months of 2014, an increase of 75.1% from the first six months of 2013 when gas royalty revenue was $1,946,961. This increase in gas royalty revenue resulted from both volume and price increases of 42.6% and 22.7%, respectively, in the first six months of 2014 compared to the first six months of 2013.

Easement and sundry income was $10,031,473 for the first six months of 2014, an increase of 84.6% compared to the first six months of 2013 when easement and sundry income was $5,435,217. This increase resulted primarily from increases in pipeline easement income, sundry income, and seismic permit income caused by an increase in drilling and exploration activity on land owned by the Trust. This category of income is unpredictable and may vary significantly from quarter to quarter.

Interest income, including interest on investments, was $111,022 for the first six months of 2014 compared to $293,630 for the first six months of 2013, a decrease of 62.2%. Interest on notes receivable for the first six months of 2014 was $104,298, a decrease of 63.7% compared to the first six months of 2013 when interest on notes receivable was $287,450. As of June 30, 2014, notes receivable for land sales were $1,286,529 compared to $7,288,537 at June 30, 2013, a decrease of 82.3%. Interest income earned from investments was $6,724 for the first six months of 2014, an increase of 8.8% from the first six months of 2013. Interest on investments is affected by such variables as cash on hand for investment and the rate of interest on short-term investments.

Taxes, other than income taxes, were $874,380 for the first six months of 2014 compared to $625,702 for the first six months of 2013, an increase of 39.7%. This increase is attributable to an increase in oil and gas production taxes which resulted from the increase in oil and gas royalty revenue discussed above.    

General and administrative expenses were $938,377 for the first six months of 2014 compared to $1,161,697 for the first six months of 2013, a decrease of 19.2%. This decrease was primarily due to decreases in legal expenses and employment expenses.

Liquidity and Capital Resources

The Trust’s principal sources of liquidity are revenues from oil and gas royalties, lease rentals and receipts of interest and principal payments on the notes receivable arising from land sales. In the past, those sources have generated more than adequate amounts of cash to meet the Trust’s needs and, in the opinion of management, should continue to do so in the foreseeable future.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the information related to market risk of the Trust since December 31, 2013.

Item 4.     Controls and Procedures

Pursuant to Rule 13a-15, management of the Trust under the supervision and with the participation of David M. Peterson, the Trust’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures as of the end of the Trust’s fiscal quarter covered by this Report on Form 10-Q. Based upon that evaluation, Mr. Peterson concluded that the Trust’s disclosure controls and procedures are effective in timely alerting him to material information relating to the Trust required to be included in the Trust’s periodic SEC filings.

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

PART II

OTHER INFORMATION

Item 1A.     Risk Factors

There have been no material changes in the risk factors previously disclosed in response to Item 1A “Risk Factors” of Part I of the Trust’s Annual Report on Form 10-K for the year ended December 31, 2013.

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

* The Trust purchased and retired 25,141 Sub-shares in the open market.

Item 6. Exhibits

SIGNATURES

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

INDEX TO EXHIBITS

11