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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission File Number: 1-39804

Exact name of registrant as specified in its charter:
Texas Pacific Land Corporation

State or other jurisdiction of incorporation or organization:IRS Employer Identification No.:
Delaware75-0279735

Address of principal executive offices:
1700 Pacific Avenue, Suite 2900 Dallas, Texas 75201

Registrant’s telephone number, including area code:
(214) 969-5530

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock
(par value $.01 per share)
TPLNew York Stock Exchange


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 every Interactive Data File required to be submitted 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 such files). Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
 Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    




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

As of October 31, 2022, the Registrant had 7,704,496 shares of Common Stock, $0.01 par value, outstanding.




TEXAS PACIFIC LAND CORPORATION
Form 10-Q
For the Quarter Ended September 30, 2022
Table of Contents
Page No.
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
TEXAS PACIFIC LAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share amounts)
(Unaudited)
 September 30,
2022
December 31,
2021
ASSETS  
Cash and cash equivalents$446,588 $428,242 
Accounts receivable and accrued receivables, net139,656 95,217 
Prepaid expenses and other current assets2,943 3,054 
Total current assets589,187 526,513 
Real estate acquired109,083 109,071 
Property, plant and equipment, net81,556 79,722 
Royalty interests acquired, net 45,331 44,390 
Other assets3,817 4,368 
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned:  
Land (surface rights)   
1/16th nonparticipating perpetual royalty interest  
1/128th nonparticipating perpetual royalty interest   
Total assets$828,974 $764,064 
LIABILITIES AND EQUITY  
Accounts payable and accrued expenses$30,726 $18,008 
Income taxes payable8,262 29,083 
Unearned revenue4,611 3,809 
Total current liabilities43,599 50,900 
Deferred taxes payable38,108 38,948 
Unearned revenue - noncurrent21,434 20,449 
Accrued liabilities4,663 2,056 
Total liabilities107,804 112,353 
Commitments and contingencies  
Equity:  
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none outstanding as of September 30, 2022 and December 31, 2021
  
Common stock, $0.01 par value; 7,756,156 shares authorized and 7,708,845 and 7,744,695 outstanding as of September 30, 2022 and December 31, 2021, respectively
78 78 
Treasury stock, at cost; 47,311 and 11,461 shares as of September 30, 2022 and December 31, 2021, respectively
(72,926)(15,417)
Additional paid-in capital5,477 28 
Accumulated other comprehensive loss(983)(1,007)
Retained earnings789,524 668,029 
Total equity721,170 651,711 
Total liabilities and equity$828,974 $764,064 

See accompanying notes to condensed consolidated financial statements.
1

Table of Contents
TEXAS PACIFIC LAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND TOTAL COMPREHENSIVE INCOME
(in thousands, except shares and per share amounts)
(Unaudited)

 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Revenues:   
Oil and gas royalties$130,298 $79,098 $355,738 $186,835 
Water sales24,426 19,554 65,518 44,983 
Produced water royalties19,129 15,140 52,668 43,147 
Easements and other surface-related income14,129 9,832 37,311 27,856 
Land sales and other operating revenue3,129 69 3,481 959 
Total revenues191,111 123,693 514,716 303,780 
Expenses:  
Salaries and related employee expenses10,697 8,542 29,670 31,792 
Water service-related expenses6,348 3,650 13,045 10,499 
General and administrative expenses3,153 2,844 9,858 8,491 
Legal and professional fees2,106 1,551 4,988 4,904 
Ad valorem taxes2,835  6,856  
Depreciation, depletion and amortization3,917 3,866 12,223 11,562 
Total operating expenses29,056 20,453 76,640 67,248 
Operating income162,055 103,240 438,076 236,532 
Other income, net1,920 513 2,626 924 
Income before income taxes163,975 103,753 440,702 237,456 
Income tax expense 34,138 19,916 94,071 46,521 
Net income$129,837 $83,837 $346,631 $190,935 
Other comprehensive income — periodic pension costs, net of income taxes for the three and nine months ended September 30, 2022 and 2021 of $3, $8, $8, and $23, respectively
8 29 24 86 
Total comprehensive income$129,845 $83,866 $346,655 $191,021 
Net income per share of common stock
Basic$16.83 $10.82 $44.84 $24.62 
Diluted$16.82 $10.82 $44.82 $24.62 
Weighted average number of shares of common stock outstanding
Basic7,714,796 7,751,329 7,729,866 7,754,439 
Diluted7,720,221 7,751,329 7,733,505 7,754,439 
Cash dividends per share of common stock$3.00 $2.75 $29.00 $8.25 

See accompanying notes to condensed consolidated financial statements.
2

Table of Contents
TEXAS PACIFIC LAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(Unaudited)
 Nine Months Ended
September 30,
 20222021
Cash flows from operating activities:  
Net income$346,631 $190,935 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes
(840)(632)
Depreciation, depletion and amortization12,223 11,562 
Share-based compensation5,616  
Changes in operating assets and liabilities:  
Operating assets, excluding income taxes(45,065)(35,377)
Operating liabilities, excluding income taxes16,901 4,961 
Income taxes payable
(20,821)3,063 
Cash provided by operating activities314,645 174,512 
Cash flows from investing activities:  
Proceeds from sale of fixed assets106 1,079 
Acquisition of real estate(12)(10)
Acquisition of royalty interests
(1,662) 
Purchase of fixed assets
(13,023)(11,058)
Cash used in investing activities
(14,591)(9,989)
Cash flows from financing activities:  
Repurchases of common stock(57,578)(10,816)
Dividends paid(224,130)(63,970)
Cash used in financing activities
(281,708)(74,786)
Net increase in cash, cash equivalents and restricted cash18,346 89,737 
Cash, cash equivalents and restricted cash, beginning of period428,242 283,024 
Cash, cash equivalents and restricted cash, end of period$446,588 $372,761 
Supplemental disclosure of cash flow information:  
Income taxes paid$115,609 $44,113 
Supplemental non-cash investing and financing information:
Nonmonetary exchange of assets$4,174 $ 
(Decrease) increase in accounts payable related to capital expenditures$(868)$441 
Share repurchases not yet settled$1,090 $377 
Issuance of common stock$ $78 
Operating lease right-of-use assets$1,364 $ 

See accompanying notes to condensed consolidated financial statements.
3

Table of Contents
TEXAS PACIFIC LAND CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.    Organization and Description of Business Segments
 
Organization

Texas Pacific Land Corporation (which, together with its subsidiaries as the context requires, may be referred to as “TPL”, the “Company”, “our”, “we” or “us”) is a Delaware corporation and one of the largest landowners in the State of Texas with approximately 880,000 surface acres of land in West Texas, with the majority of our ownership concentrated in the Permian Basin. Additionally, we own a 1/128th nonparticipating perpetual oil and gas royalty interest (“NPRI”) under approximately 85,000 acres of land, a 1/16th NPRI under approximately 371,000 acres of land, and approximately 4,000 additional net royalty acres (normalized to 1/8th) in the western part of Texas.

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

On January 11, 2021, we completed our reorganization from a business trust, organized under a Declaration of Trust dated February 1, 1888 (the “Declaration of Trust”), to a corporation (the “Corporate Reorganization”) and changed our name from Texas Pacific Land Trust (the “Trust”) to Texas Pacific Land Corporation. See further discussion of the Corporate Reorganization and its impact on our equity structure in Note 10, “Changes in Equity.” Any references in these condensed consolidated financial statements and notes to the Company, TPL, our, we, or us with respect to periods prior to January 11, 2021 are in reference to the Trust, and references to periods on or after that date are in reference to Texas Pacific Land Corporation or TPL Corporation.
 
Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on the same basis as the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated financial statements herein include all adjustments which are, in the opinion of management, necessary to fairly state the financial position of the Company as of September 30, 2022 and the results of its operations for the three and nine months ended September 30, 2022 and 2021, respectively, and its cash flows for the nine months ended September 30, 2022 and 2021, respectively. Such adjustments are of a normal nature and all intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, and accordingly these interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2021. The results for the interim periods shown in this report are not necessarily indicative of future financial results.

We operate our business in two segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of strategies and objectives of TPL and provide a framework for timely and rational allocation of resources within businesses. See Note 11, “Business Segment Reporting” for further information regarding our segments.

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

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Share-Based Compensation

The Company utilizes the closing stock price on the date of grant to determine the fair value of service-vesting awards, which for the Company includes restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and performance stock units (“PSUs”) with a performance condition. For PSUs with a market condition, grant date fair value is determined using an advanced option-pricing model. Unvested awards are entitled to dividends or dividend equivalents which are accrued and distributed to award recipients at the time such awards vest. Dividends are forfeitable if the related award is forfeited. For RSAs, RSUs and PSUs with performance conditions, forfeitures are recognized in the period in which they occur. For PSU awards with market conditions, forfeitures are only recognized if the award recipient does not render the required service during the measurement period.

Share-based compensation expense for RSUs and RSAs is recognized in the financial statements over the awards’ vesting periods using the graded-vesting method. Share-based compensation expense for PSU awards with performance conditions is recognized ratably over the measurement period at such time as the awards are probable and estimable. Share-based compensation expense for PSU awards with market conditions is recognized ratably over the measurement period whether the market condition is satisfied or not if the service for the award is rendered. Share-based compensation is reported on the condensed consolidated statements of income and total comprehensive income as a component of salaries and related employee expenses for employee awards and in general and administrative expenses for director awards.

Recently Adopted Accounting Guidance

In July 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-05, “Leases (Topic 842) Lessors – Certain Leases with Variable Lease Payments.” Under the ASU, a lessor classifies a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or direct financing lease under ASC 842 classification criteria and the lessor would have otherwise recognized a day one loss. The adoption of this guidance, effective January 1, 2022, had no impact on our condensed consolidated financial statements and disclosures.

3.    Real Estate Activity

As of September 30, 2022 and December 31, 2021, TPL owned the following land and real estate (in thousands, except number of acres):
September 30,
2022
December 31,
2021
Number of AcresNet Book ValueNumber of AcresNet Book Value
Land (surface rights) (1)
823,323 $ 823,452 $ 
Real estate acquired57,146 109,083 57,129 109,071 
Total real estate situated in Texas880,469 $109,083 880,581 $109,071 
(1)Real estate assigned through the Declaration of Trust.

For the nine months ended September 30, 2022, we sold 129 acres of land in Texas for an aggregate sales price of $3.3 million, an average of approximately $25,300 per acre. For the nine months ended September 30, 2021, we sold 30 acres of land in Texas for an aggregate sales price of $0.7 million, an average of approximately $25,000 per acre. There was no land basis associated with these sales. There were no significant land acquisitions for the nine months ended September 30, 2022.

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4.    Property, Plant and Equipment
 
Property, plant and equipment, net consisted of the following as of September 30, 2022 and December 31, 2021 (in thousands):
 September 30,
2022
December 31,
2021
Property, plant and equipment, at cost:  
Water service-related assets$119,277 $108,732 
Furniture, fixtures and equipment9,633 9,071 
Other598 598 
Total property, plant and equipment, at cost129,508 118,401 
Less: accumulated depreciation(47,952)(38,679)
Property, plant and equipment, net$81,556 $79,722 

Depreciation expense was $3.6 million and $3.7 million for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense was $11.4 million and $10.9 million for the nine months ended September 30, 2022 and 2021, respectively.

5.    Oil and Gas Royalty Interests

As of September 30, 2022 and December 31, 2021, we owned the following oil and gas royalty interests (in thousands):
Net Book Value
September 30,
2022
December 31,
2021
1/16th nonparticipating perpetual royalty interests$ $ 
1/128th nonparticipating perpetual royalty interests  
Royalty interests acquired47,928 46,266 
Total royalty interests, gross47,928 46,266 
Less: accumulated depletion(2,597)(1,876)
Total royalty interests, net$45,331 $44,390 

Acquisition

For the nine months ended September 30, 2022, we acquired oil and gas royalty interests in 92 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $1.7 million. There were no oil and gas royalty interest transactions for the nine months ended September 30, 2021.

Depletion expense was $0.3 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively. Depletion expense was $0.7 million and $0.5 million for the nine months ended September 30, 2022 and 2021, respectively.

6.    Share-Based Compensation

Incentive Plan for Employees

As of September 30, 2022, the Company has issued RSAs, RSUs and PSUs under the Texas Pacific Land Corporation 2021 Incentive Plan (the “2021 Plan”) to certain employees. The maximum aggregate number of shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) that may be issued under the 2021 Plan is 75,000 shares and, as of September 30, 2022, 63,664 shares of Common Stock remained available under the 2021 Plan for future grants. Currently, all RSAs, RSUs, and PSUs granted under the 2021 Plan are entitled to receive dividends (for RSAs and RSUs, which are accrued and distributed to award recipients upon vesting) or have dividend equivalent rights. Dividends and dividend equivalent rights are subject to the same vesting conditions as the awards to which they relate and are forfeitable if the related awards are
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forfeited. The Company utilizes the closing stock price on the date of grant to determine the fair value of RSAs, RSUs and PSUs with a performance condition. For PSUs with a market condition, the Company utilizes a Monte Carlo simulation model to determine grant date fair value per share.

The following table summarizes activity related to RSAs and RSUs for the nine months ended September 30, 2022:
Restricted Stock AwardsRestricted Stock Units
Number of RSAsGrant-Date Fair Value per ShareNumber of RSUsGrant-Date Fair Value per Share
Outstanding at December 31, 2021 (1)
3,330 $1,252  $ 
Granted (2)
  5,612 1,323 
Vested    
Cancelled and forfeited    
Outstanding at September 30, 2022
3,330 $1,252 5,612 $1,323 
(1)RSAs were granted on December 29, 2021 with 1,993 shares vesting on December 29, 2022 and 1,337 shares vesting on December 29, 2023.
(2)On February 11, 2022, 3,824 RSUs were granted to certain employees with a grant date fair value per share of $1,105. On September 1, 2022, 1,788 RSUs were granted to certain employees with a grant date fair value per share of $1,790 per share. The RSUs vest in one-third increments over a three-year period.

The following table summarizes activity related to PSUs for the nine months ended September 30, 2022:

Performance Stock Units
Number of PSUsWeighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 2021
 $ 
Granted (1)
2,394 1,355 
Vested  
Cancelled and forfeited  
Outstanding at September 30, 2022
2,394 $1,355 
(1)Includes 1,197 RTSR (as defined below) PSUs with a grant date fair value of $1,605 per share and 1,197 FCF (as defined below) PSUs with a grant date fair value of $1,105 per share.

On February 11, 2022, the Company granted PSUs to certain employees. Each PSU has a value equal to one share of Common Stock. The PSUs will vest three years after grant if certain performance metrics are met, as follows: 50% of the PSUs may be earned based on the Company’s relative total stockholder return (“RTSR”) for the three-year period from January 2022 to January 2025 compared to the XOP Index, and 50% of the PSUs may be earned based on the cumulative free cash flow per share (“FCF”) over the three-year vesting period. As the RTSR PSU is a market-based award, its grant date fair value was determined using a Monte Carlo simulation model that uses the same input assumptions as the Black-Scholes model to determine the expected potential ranking of the Company against the XOP Index, i.e. the probability of satisfying the market condition defined in the award. Expected volatility in the model was estimated based on the volatility of historical stock prices over a period matching the expected term of the award. The risk-free interest rate was based on U.S. Treasury yield constant maturities for a term matching the expected term of the award.

Equity Plan for Non-Employee Directors

As of September 30, 2022, the Company had granted 699 RSAs to non-employee directors of the Company under the 2021 Non-Employee Director and Deferred Compensation Plan (the “2021 Directors Plan”). The maximum aggregate number of shares of Common Stock that may be issued under the 2021 Directors Plan is 10,000 shares, which may consist, in whole or in part, of authorized and unissued shares (if any), treasury shares, or shares reacquired by the Company in any manner. As of September 30, 2022, 9,301 shares of Common Stock remained available under the 2021 Directors Plan for future grants. Currently, all RSAs granted under the 2021 Directors Plan are entitled to receive dividends, which are accrued and distributed to award recipients upon vesting. Dividends are subject to the same vesting conditions as the awards to which they relate and
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are forfeitable if the related awards are forfeited. The Company utilizes the closing stock price on the date of grant to determine the fair value of the RSAs.

The following table summarizes activity related to the RSAs under the 2021 Directors Plan for the nine months ended September 30, 2022:
Restricted Stock Awards
Number of RSAsGrant-Date Fair Value per Share
Outstanding at December 31, 2021
 $ 
Granted784 1,277 
Vested  
Cancelled and forfeited(85)1,249 
Outstanding at September 30, 2022 (1)
699 $1,281 
(1)On January 1, 2022, the Company granted 680 shares of restricted stock to directors. During the nine months ended September 30, 2022, 85 shares were forfeited resulting from the departure of a director in March 2022, and an additional 104 shares of restricted stock were granted to new directors on April 15, 2022. The shares will vest on the first anniversary of the award.

Share-Based Compensation Expense

The following table summarizes our share-based compensation expense by line item in the condensed consolidated statements of income (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Salaries and related employee expenses (employee awards)$1,910 $ $4,989 $ 
General and administrative expenses (director awards)211  627  
Total share-based compensation expense (1)
$2,121 $ $5,616 $ 
(1)The Company recognized a tax benefit of $0.4 million and $1.2 million related to share-based compensation for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2022, there was $10.1 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under existing share-based plans expected to be recognized over a weighted average period of 1.4 years.

7.    Income Taxes

The calculation of our effective tax rate is as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands, except percentages):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Income before income taxes$163,975 $103,753 $440,702 $237,456 
Income tax expense$34,138 $19,916 $94,071 $46,521 
Effective tax rate20.8 %19.2 %21.3 %19.6 %

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



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The Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law and includes a number of tax-related provisions, including (i) a 15-percent book minimum tax (“corporate AMT”) on adjusted financial statement income once the three year average of adjusted financial statement income is greater than $1.0 billion, (ii) certain clean energy tax incentives in the form of tax credits, and (iii) a one-percent excise tax on certain corporate stock buybacks (effective beginning January 1, 2023). The Company is evaluating the IRA and does not currently anticipate that the IRA will have a significant impact on the Company’s financial position or results of operations.

8.    Earnings Per Share

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

The following table sets forth the computation of EPS for the three and nine months ended September 30, 2022 and 2021 (in thousands, except number of shares and per share data):
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net income$129,837 $83,837 $346,631 $190,935 
Basic EPS:
Weighted average shares outstanding for basic EPS7,714,796 7,751,329 7,729,866 7,754,439 
Basic EPS$16.83 $10.82 $44.84 $24.62 
Diluted EPS:
Weighted average shares outstanding for basic EPS7,714,796 7,751,329 7,729,866 7,754,439 
Effect of dilutive securities:
Incentive and equity compensation plans5,425  3,639  
Weighted average shares outstanding for diluted EPS7,720,221 7,751,329 7,733,505 7,754,439 
Diluted EPS$16.82 $10.82 $44.82 $24.62 

Restricted stock is included in the number of shares of Common Stock issued and outstanding, but omitted from the basic EPS calculation until such time as the shares of restricted stock vest.

9.    Commitments

Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the Company’s financial condition, results of operations or liquidity as of September 30, 2022.

Prior to January 1, 2022, ad valorem taxes with respect to our historical royalty interests were paid directly by certain third parties pursuant to an existing arrangement. Since the completion of our Corporate Reorganization, we have received notice from one such third party that they no longer intend to pay the ad valorem taxes related to such historical royalty interests. As of September 30, 2022, the Company has recorded an accrual of approximately $6.9 million for ad valorem taxes and intends to pay such taxes when they become due. While we intend to seek reimbursement from the third party following payment of such taxes, we are unable to determine the likelihood of such reimbursement, and accordingly, no loss recovery receivable has been recorded as of September 30, 2022.

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10.    Changes in Equity

The following tables present changes in our equity for the nine months ended September 30, 2022 and 2021 (in thousands, except shares and per share amounts):
Common StockTreasury StockAdditional Paid-in CapitalAccum.
Other
Comp.
Inc/(Loss)
Retained EarningsTotal
Equity
SharesAmountSharesAmount
For the nine months ended September 30, 2022:
Balances as of December 31, 2021
7,744,695 $78 11,461 $(15,417)$28 $(1,007)$668,029 $651,711 
Net income— — — — — — 97,900 97,900 
Dividends paid — $3.00 per share of common stock
— — — — — — (23,224)(23,224)
Share-based compensation, net of forfeitures595 — (595)800 1,477 — (796)1,481 
Periodic pension costs, net of income taxes of $2
— — — — — 8 — 8 
Balances as of March 31, 2022
7,745,290 78 10,866 (14,617)1,505 (999)741,909 727,876 
Net income— — — — — — 118,894 118,894 
Dividends paid — $3.00 per share of common stock
— — — — — — (23,188)(23,188)
Special dividends paid — $20.00 per share of common stock
— — — — — — (154,586)(154,586)
Share-based compensation, net of forfeitures104 — (104)140 1,851 — (180)1,811 
Repurchases of common stock(17,478)— 17,478 (25,534)— — — (25,534)
Periodic pension costs, net of income taxes of $2
— — — — — 8 — 8 
Balances as of June 30, 2022
7,727,916 $78 28,240 $(40,011)$3,356 $(991)$682,849 $645,281 
Net income— — — — — — 129,837 129,837 
Dividends paid — $3.00 per share of common stock
— — — — — — (23,132)(23,132)
Share-based compensation, net of forfeitures— — — — 2,121 — (30)2,091 
Repurchases of common stock(19,071)— 19,071 (32,915)— — — (32,915)
Periodic pension costs, net of income taxes of $3
— — — — — 8 — 8 
Balances as of September 30, 2022
7,708,845 $78 47,311 $(72,926)$5,477 $(983)$789,524 $721,170 
Sub-share CertificatesCommon StockTreasury StockAccum.
Other
Comp.
Inc/(Loss)
Retained EarningsNet Proceeds
From All
Sources
Total
Equity
SharesSharesAmountSharesAmount
For the nine months ended September 30, 2021:
Balances as of December 31, 2020
7,756,156  $ $ $ $(2,693)$ $487,877 $485,184 
Net income— — — — — — 50,052 — 50,052 
Dividends paid — $2.75 per share of common stock
— — — — — — (21,329)— (21,329)
Conversion of Sub-shares into shares of common stock(7,756,156)7,756,156 78 — — — 487,799 (487,877) 
Periodic pension costs, net of income taxes of $8
— — — — — 28 — — 28 
Balances as of March 31, 2021
 7,756,156 78   (2,665)516,522  513,935 
Net income— — — — — — 57,046 — 57,046 
Dividends paid — $2.75 per share of common stock
— — — — — — (21,329)— (21,329)
Repurchases of common stock— (1,633)— 1,633 (2,504)— — — (2,504)
Periodic pension costs, net of income taxes of $8
— — — — — 29 — — 29 
Balances as of June 30, 2021
 7,754,523 78 1,633 (2,504)(2,636)552,239  547,177 
Net income— — — — — — 83,837 — 83,837 
Dividends paid — $2.75 per share of common stock
— — — — — — (21,312)— (21,312)
Repurchases of common stock— (6,179)— 6,179 (8,689)— — — (8,689)
Periodic pension costs, net of income taxes of $8
— — — — — 29 — — 29 
Balances as of September 30, 2021
 7,748,344 $78 7,812 $(11,193)$(2,607)$614,764 $ $601,042 



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Corporate Reorganization

On January 11, 2021, TPL completed its Corporate Reorganization, officially changing its name to Texas Pacific Land Corporation. To implement the Corporate Reorganization, the Trust and TPL Corporation entered into agreements and undertook and caused to be undertaken a series of transactions to effect the transfer to TPL Corporation of all of the Trust’s assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the Corporate Reorganization.

Prior to the market opening on January 11, 2021, the Trust distributed all of the shares of Common Stock of TPL Corporation to holders of sub-share certificates (“Sub-shares”) of the Trust, on a pro rata, one-for-one, basis in accordance with their interests in the Trust (the “Distribution”). As a result of the Distribution, TPL Corporation is now a corporation with its Common Stock listed under the symbol “TPL” on the New York Stock Exchange.

Stock Repurchase Program

On March 11, 2022, our board of directors approved a stock repurchase program to purchase up to an aggregate of $100 million of shares of our outstanding Common Stock during 2022. In connection with the stock repurchase program, the Company entered into a Rule 10b5-1 trading plan (the “Trading Plan”) that generally permits the Company to repurchase shares at times when it might otherwise be prevented from doing so under securities laws. Stock repurchases under the Trading Plan began April 18, 2022. The stock repurchase program expires on December 31, 2022. For the nine months ended September 30, 2022, we repurchased $58.4 million (including share repurchases not yet settled).

11.    Business Segment Reporting
 
During the periods presented, we reported our financial performance based on the following segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of our strategies and objectives and provide a framework for timely and rational allocation of resources within businesses. We eliminate any inter-segment revenues and expenses upon consolidation.
 
The Land and Resource Management segment encompasses the business of managing our approximately 880,000 surface acres of land and our oil and gas royalty interests in West Texas, principally concentrated in the Permian Basin. The revenue streams of this segment consist primarily of royalties from oil and gas, revenues from easements and commercial leases and land and material sales.

The Water Services and Operations segment encompasses the business of providing a full-service water offering to operators in the Permian Basin. The revenue streams of this segment primarily consist of revenue generated from sales of sourced and treated water as well as revenue from produced water royalties.
 
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Segment financial results were as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenues:
Land and resource management$147,215 $86,792 $393,947 $211,823 
Water services and operations43,896 36,901 120,769 91,957 
Total consolidated revenues$191,111 $123,693 $514,716 $303,780 
Net income:
Land and resource management$108,188 $65,292 $285,418 $150,248 
Water services and operations21,649 18,545 61,213 40,687 
Total consolidated net income$129,837 $83,837 $346,631 $190,935 
Capital expenditures:
Land and resource management$114 $4,528 $339 $4,541 
Water services and operations1,694 2,059 11,816 6,958 
Total capital expenditures$1,808 $6,587 $12,155 $11,499 
Depreciation, depletion and amortization:
Land and resource management$567 $363 $1,632 $1,299 
Water services and operations3,350 3,503 10,591 10,263 
Total depreciation, depletion and amortization$3,917 $3,866 $12,223 $11,562 

The following table presents total assets and property, plant and equipment, net by segment as of September 30, 2022 and December 31, 2021 (in thousands):
 September 30,
2022
December 31,
2021
Assets:  
Land and resource management$676,205 $635,338 
Water services and operations152,769 128,726 
Total consolidated assets$828,974 $764,064 
Property, plant and equipment, net:  
Land and resource management$6,197 $6,639 
Water services and operations75,359