Texas Pacific Land Corporation Quarterly report [Sections 13 or 15(d)]

Quarterly report [Sections 13 or 15(d)]

Share-Based Compensation

Share-Based Compensation

3 Months Ended

Mar. 31, 2025

Share-Based Payment Arrangement [Abstract]

The Company grants share-based compensation to employees under the Texas Pacific Land Corporation 2021 Incentive Plan (the “2021 Plan”) and to its non-employee directors under the 2021 Non-Employee Director Stock and Deferred Compensation Plan (the “2021 Directors Plan” and, together with the 2021 Plan, the “Plans”). As of March 31, 2025, share-

based compensation granted under the Plans included restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”). RSUs granted under the 2021 Plan vest in one-third annual increments over three years, and PSUs granted under the 2021 Plan cliff vest at the end of three years if the applicable performance metrics are achieved (as discussed further below). RSAs granted under the 2021 Directors Plan vest in full on the date of grant.

Incentive Plan for Employees

The maximum aggregate number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) that may be issued under the 2021 Plan is 225,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of March 31, 2025, 122,038 shares of Common Stock remained available under the 2021 Plan for future grants.

The following table summarizes activity related to RSUs granted under the 2021 Plan for the three months ended March 31, 2025:



	Three Months Ended March 31, 2025
	Number of RSUs	Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period	23,212	$	509
Granted (1)	6,504	1,372
Vested (2)	(10,338)	481
Cancelled and forfeited	—	—
Nonvested at end of period	19,378	$	813

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

(2)Of the 10,338 RSUs that vested during the three months ended March 31, 2025, 4,198 RSUs were surrendered by employees to the Company upon vesting to settle tax withholdings.

The following table summarizes activity related to PSUs granted under the 2021 Plan for the three months ended March 31, 2025:



	Three Months Ended March 31, 2025
	Number of Target PSUs	Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period	21,078	$	573
Granted (1)	3,848	1,644
Vested (2)	(7,182)	452
Cancelled and forfeited	—	—
Nonvested at end of period	17,744	$	854

(1)The PSUs were granted on February 15, 2025 and include 1,924 RTSR PSUs (defined below) (based on target) with a grant date fair value of $1,915 per share and 1,924 FCF PSUs (defined below) (based on target) with a grant date fair value of $1,372 per share. If the maximum amount performance levels described in the PSU agreements are achieved, the actual number of shares that will ultimately vest under the PSU agreements will exceed target PSUs by 100% (i.e., a collective 3,848 additional shares would be issued).

(2)Vested PSUs are based on the original number of PSUs granted (i.e. target units). The actual number of shares delivered upon vesting of PSUs during the three months ended March 31, 2025 totaled 14,364 shares, of which 6,250 shares were surrendered by employees to the Company upon vesting to settle tax withholdings.

Each PSU has a value equal to one share of Common Stock. The PSUs will vest three years after grant if certain performance metrics are met, as follows: 50% of the PSUs may be earned based on the Company’s relative total stockholder return (“RTSR”) over the applicable three-year measurement period compared to the SPDR® S&P® Oil & Gas Exploration &

Production ETF (“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. Because the RTSR PSUs are market-based awards, their 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 awards). Expected volatility in the model was estimated based on the volatility of historical stock prices over a period matching the expected term of the awards. The risk-free interest rate was based on U.S. Treasury yield constant maturities for a term matching the expected term of the awards. The inputs for the Monte Carlo simulation model are designated as Level 2 within the fair value hierarchy.

Equity Plan for Non-Employee Directors

The maximum aggregate number of shares of Common Stock that may be issued under the 2021 Directors Plan is 30,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of March 31, 2025, 23,031 shares of Common Stock remained available under the 2021 Directors Plan for future grants. On January 1, 2025, the Company granted 1,188 RSAs with a grant date fair value of $1,106 per share, which vested in full on the grant date.

Share-Based Compensation Expense

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


	Three Months Ended March 31,
		2025		2024
Salaries and related employee expenses (employee awards)		$	3,083	$	2,220
General and administrative expenses (director awards)		1,314		1,134
Total share-based compensation expense (1)		$	4,397	$	3,354

(1)The Company recognized a tax benefit of $0.9 million and $0.7 million related to share-based compensation for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, there was $22.7 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 1.6 years.