Financial Performance - Total revenues for 2023 were $631,595,000, a decrease of 5.4% from $667,422,000 in 2022[21] - Net income for 2023 was $405,645,000, down 9.1% from $446,362,000 in 2022[21] - The Land and Resource Management segment generated total revenue of $432,105,000 in 2023, accounting for 69% of consolidated revenue[28] - Water Services and Operations segment revenue for 2023 was $199,490,000, representing 31% of consolidated revenue, up from $160,447,000 (24%) in 2022 and $130,571,000 (29%) in 2021[35] - Adjusted EBITDA for 2023 was $541.4 million, down from $591.8 million in 2022, a decrease of 8.5%[176] - Free Cash Flow for 2023 was $415.5 million, compared to $451.6 million in 2022, reflecting a decline of 8.0%[176] Revenue Sources - Oil and gas royalties accounted for 57% of the Land and Resource Management segment revenue in 2023, totaling $357,394,000[28] - Revenue from easements and other surface-related income increased to $67,905,000 in 2023, representing 11% of total segment revenue[28] - Water sales increased by 21.8% in volume during 2023 compared to 2022, contributing to the revenue growth[36] - Oil and gas royalty revenue decreased by 21.0% to $357.4 million for the year ended December 31, 2023, with average realized prices declining 30.0% to $42.58 per Boe[162] - Water sales revenue increased by 32.4% to $112.2 million in 2023, driven by a 21.8% increase in water sales volumes[170] - Produced water royalties increased to $84.3 million in 2023 from $72.2 million in 2022, reflecting higher produced water volumes[171] Operational Highlights - The number of drilled but uncompleted (DUC) wells under the company's royalty interest increased to 675 in 2023 from 584 in 2022[30] - The average total equivalent price for oil and gas was $42.58 per barrel of oil equivalent (Boe) in 2023, a decrease of 30.0% from $60.81 per Boe in 2022[29] - The average WTI Cushing price per barrel in 2023 was $77.58, down from $94.90 in 2022, while the Henry Hub average price per mmbtu decreased from $6.45 to $2.53[133] - Oil production volumes increased to 3,701 MBbls in 2023 from 3,401 MBbls in 2022, representing an 8.8% increase[164] - The average monthly horizontal permits in the Permian Basin decreased to 499 in 2023 from 627 in 2022, and the average monthly horizontal wells drilled fell to 422 from 511[133] - The average weekly horizontal rig count in the Permian Basin was 323 in 2023, slightly up from 318 in 2022[133] Strategic Initiatives - The company is exploring new opportunities in renewable energy and technology, including carbon capture and bitcoin mining facilities[26] - The company has a long-term strategy focused on optimizing cash flow margins with low ongoing capital expenditure requirements[16] - The company invested $15.2 million in TPWR projects and acquired groundwater rights for $3.8 million to enhance water sourcing assets[37] - A saltwater disposal easement was acquired for $17.6 million, covering approximately 49,000 acres, providing future disposal opportunities[37] Risk Factors - The business is subject to fluctuations in oil and gas market prices, which can impact revenues from oil and gas royalties[56] - Future revenue may be negatively impacted by industry trends such as decarbonization and shifts towards renewable energy sources, affecting demand for oil and natural gas[62] - Cybersecurity threats pose a significant risk to the company's operations, as reliance on digital technologies increases vulnerability to attacks and data breaches[63] - Supply chain risks, including material shortages and price increases due to macroeconomic conditions, could adversely affect the company's revenues and operating costs[67] - The evolving regulatory and legal environment may impact the company's operations and financial performance, necessitating ongoing adjustments to compliance strategies[84] Corporate Governance - The company completed its Corporate Reorganization from a business trust to a corporation on January 11, 2021, changing its name from Texas Pacific Land Trust to Texas Pacific Land Corporation[200] - Rhys J. Best became the Chair of the Board on November 10, 2023, and no longer serves on any committees of the Board[202] - General Donald G. Cook has extensive governance experience and served on the board of Burlington Northern Santa Fe Railroad during its sale to Berkshire Hathaway in a transaction valued at $44 billion[203] - Barbara J. Duganier has been a member of the Board since January 11, 2021, and previously held various leadership positions at Accenture, including Global Chief Strategy Officer[207] - Donna E. Epps served as an attest Partner at Deloitte LLP from 1998 through 2003 and has over 30 years of experience in risk and financial advisory[209] - Karl F. Kurz has extensive private equity experience and previously served as Chief Operating Officer at Anadarko Petroleum Corporation[211] Environmental and Safety Measures - The company reported zero spills of produced water in 2023 and 2022, highlighting its focus on environmental safety[48] - The company has spent $15.8 million on electric infrastructure to reduce costs and emissions, reflecting its commitment to sustainability[48] - The company has established a comprehensive cybersecurity program aligned with the NIST Cybersecurity framework to manage material risks from cybersecurity threats[96] - The company conducts annual external penetration testing and disaster recovery testing to evaluate its cybersecurity risk program[99] - The company has implemented annual information security training for all employees to raise awareness of potential cybersecurity threats[106]

[Texas Pacific Land Corporation Fourth Quarter and Full Year 2023 Results](index=1&type=section&id=Texas%20Pacific%20Land%20Corporation%20Fourth%20Quarter%20and%20Full%20Year%202023%20Results) [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) The company achieved record quarterly royalty production in Q4 2023, driving the year's strongest revenue and free cash flow Q4 2023 Key Metrics | Metric | Value | | :--- | :--- | | Net Income | $113.1 million | | Revenues | $166.7 million | | Adjusted EBITDA | $150.9 million | | Free Cash Flow | $116.3 million | | Royalty Production | 26.3k Boe/day (Record High) | | Stock Repurchases | $10.2 million | Full Year 2023 Key Metrics | Metric | Value | | :--- | :--- | | Net Income | $405.6 million | | Revenues | $631.6 million | | Adjusted EBITDA | $541.4 million | | Free Cash Flow | $415.5 million | | Royalty Production | 23.5k Boe/day | | Stock Repurchases | $42.4 million | | Total Cash Dividends | $100.0 million | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted Q4's record performance and noted that full-year business diversification offset lower commodity prices - Q4 2023 was the strongest quarter of the year, with the **highest consolidated revenues and free cash flow**, driven by robust oil and gas royalty production[5](index=5&type=chunk) - For the full year 2023, **record revenues from the Water segment** and nearly **50% year-over-year growth in easements** substantially offset lower commodity prices[5](index=5&type=chunk) - The company is well-positioned for 2024 to capitalize on growth opportunities, supported by its Permian footprint and **large net cash balance**[7](index=7&type=chunk) [Financial Results](index=3&type=section&id=Financial%20Results) Financial results reflect a contrast between higher production volumes and the negative impact of lower commodity prices [Fourth Quarter 2023 Financial Results](index=3&type=section&id=Fourth%20Quarter%202023%20Financial%20Results) Q4 net income and revenue grew year-over-year, driven by increased water income, easements, and production volumes Q4 2023 vs Q4 2022 Financials | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net Income | $113.1 million | $99.7 million | | Total Revenues | $166.7 million | $152.7 million | | Operating Expenses | $32.8 million | $28.5 million | - The increase in revenue was principally due to a combined **$10.1 million increase in water sales and royalties** and an **$8.3 million increase in easements**[8](index=8&type=chunk) - Royalty production increased to **26.3k Boe/d** from 21.3k Boe/d YoY, while the average realized price per Boe fell from **$51.57 to $42.81**[8](index=8&type=chunk) [Full Year 2023 Financial Results](index=3&type=section&id=Full%20Year%202023%20Financial%20Results) Full-year net income and revenue declined due to a significant drop in oil and gas royalty revenue from lower prices Full Year 2023 vs 2022 Financials | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Income | $405.6 million | $446.4 million | | Total Revenues | $631.6 million | $667.4 million | | Operating Expenses | $145.5 million | $105.1 million | - Excluding an $8.7 million settlement, oil and gas royalty revenue **decreased by $103.7 million** compared to 2022, as the average realized price per Boe fell to **$42.58**[11](index=11&type=chunk) - The revenue decline was partially offset by a combined **$39.5 million increase in water-related income** and a **$22.9 million increase in easements**[11](index=11&type=chunk) - The **$40.4 million increase in total operating expenses** was principally related to increases in legal and water service-related expenses[12](index=12&type=chunk) [Shareholder Returns and Corporate Governance](index=3&type=section&id=Shareholder%20Returns%20and%20Corporate%20Governance) The company declared a quarterly dividend and is actively considering a stockholder proposal regarding special meetings - On February 13, 2024, the Board declared a quarterly cash dividend of **$3.50 per share**[13](index=13&type=chunk) - The Board is evaluating a stockholder proposal to grant stockholders the right to call a special meeting, with a final recommendation pending[14](index=14&type=chunk) - During the full year 2023, TPL returned capital to shareholders via **$100.0 million in total cash dividends** and **$42.4 million in stock repurchases**[5](index=5&type=chunk) [Segment Operating Results](index=8&type=section&id=Segment%20Operating%20Results) The Water Services segment grew significantly in 2023, increasing its contribution to total revenue and net income Full Year Segment Revenue (in thousands) | Segment | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Land and Resource Management | $432,105 | $506,975 | | Water Services and Operations | $199,490 | $160,447 | | **Total Consolidated Revenues** | **$631,595** | **$667,422** | Full Year Segment Net Income (in thousands) | Segment | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Land and Resource Management | $306,706 | $365,041 | | Water Services and Operations | $98,939 | $81,321 | | **Total Consolidated Net Income** | **$405,645** | **$446,362** | - The Water Services and Operations segment's share of total revenue grew from **24% in 2022 to 31% in 2023**, while its share of total net income grew from **18% to 24%**[28](index=28&type=chunk) [Financial Statements and Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Reconciliations) Detailed statements show increased production volumes offset by lower commodity prices, impacting full-year profitability [Financial and Operational Results (Detailed Tables)](index=6&type=section&id=Financial%20and%20Operational%20Results%20(Detailed%20Tables)) Higher production volumes in 2023 were insufficient to overcome a sharp decline in realized prices for oil and gas Production and Price Comparison (Full Year) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Equivalents per day (MBoe/d) | 23.5 | 21.3 | | Realized Oil Price ($/Bbl) | $77.33 | $94.69 | | Realized Gas Price ($/Mcf) | $2.23 | $6.19 | | Realized Equivalents ($/Boe) | $42.58 | $60.81 | [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Full-year revenues and net income decreased, driven by lower oil and gas royalties and higher operating expenses Income Statement Summary (Full Year, in thousands) | Line Item | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Total Revenues | $631,595 | $667,422 | | Total Operating Expenses | $145,542 | $105,115 | | Operating Income | $486,053 | $562,307 | | Net Income | $405,645 | $446,362 | | Diluted EPS | $52.77 | $57.77 | [Non-GAAP Performance Measures](index=9&type=section&id=Non-GAAP%20Performance%20Measures) Non-GAAP metrics like Adjusted EBITDA and Free Cash Flow declined in 2023, consistent with lower net income - The company defines Free Cash Flow as Adjusted EBITDA less current income tax expense and capital expenditures[31](index=31&type=chunk) Non-GAAP Reconciliation Summary (Full Year, in thousands) | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Income | $405,645 | $446,362 | | Adjusted EBITDA | $541,442 | $591,814 | | Free Cash Flow | $415,494 | $451,617 | [Company Overview](index=5&type=section&id=About%20Texas%20Pacific%20Land%20Corporation) TPL is a major Texas landowner that monetizes its Permian-focused surface and royalty assets without producing oil and gas - TPL is a major landowner in Texas with approximately **868,000 acres**, primarily in the Permian Basin[17](index=17&type=chunk) - The company is not an oil and gas producer but generates revenue from its **surface and royalty ownership**[17](index=17&type=chunk) - Key revenue streams include land use payments, material sales, water services, oil and gas royalties, and infrastructure easements[17](index=17&type=chunk)

Financial Data and Key Metrics Changes - Total consolidated revenue for Q3 2023 was $158 million, with net income at $106 million, and adjusted EBITDA of $141 million, reflecting a 6% increase compared to the prior sequential quarter [35] - Free cash flow was approximately $106 million, and the company exited the quarter with approximately $660 million in cash on the balance sheet [20] - Royalty production decreased by 12% sequentially to approximately 21,800 barrels of oil equivalent per day, while the realized price per barrel of oil equivalent increased by 19% to approximately $45 [20] Business Line Data and Key Metrics Changes - Revenues from the produced water segment increased by 9% year-over-year, with third quarter 2023 source water sales volumes at approximately 545,000 barrels per day, indicating high utilization across the system [6][16] - The surface leases, easements, and materials segment (SLEM) benefited from robust pipeline easements driven by expanding infrastructure development in the Permian [5] - Sand royalties reached just under $1 million in the last quarter, with expanded caliche sales into New Mexico contributing positively [30] Market Data and Key Metrics Changes - Benchmark prices for oil, gas, and NGLs rose over the prior sequential quarter, leading to improved realizations relative to benchmark prices [10] - Rig counts in the overall Permian have declined by approximately 10% compared to last year, but more than 50 rigs are currently operating on TPL acreage, up from approximately 42 rigs last year [18] Company Strategy and Development Direction - The company is well-positioned to succeed through various market environments, supported by a strong backlog of completed wells and high levels of ongoing new permits [8] - The management emphasized the importance of infrastructure and logistics, which are expected to improve with additional natural gas takeaway capacity coming online [15] - The company is expanding its footprint in water sales and treatment, indicating a strategic focus on increasing water revenue as completions activity ramps up [28] Management's Comments on Operating Environment and Future Outlook - Management noted that elevated temperatures and brownouts had previously impacted production, but these issues have subsided, allowing for improved development activities [15] - The company expects production growth in the coming year, driven by a high number of permits and quicker turnaround times for permits to production [39] - Management highlighted that the timing of permit to spud and spud to completion has compressed considerably in 2023 compared to prior years, indicating operational efficiency [33] Other Important Information - The company maintained its $3.25 per share dividend and repurchased approximately 3,600 shares of common stock for about $6 million [10] - The company will host its 2023 Annual Meeting in Dallas, encouraging shareholders to review proxy materials [34] Q&A Session Summary Question: Production impact split between elevated temperatures and brownouts versus delayed TILs - Management indicated that the production was likely more heavily impacted by delays in TILs due to larger pad developments, which caused lumpier near-term production [22][23] Question: Future water sales outlook - Management stated that water sales typically parallel completions activity, and with a high number of permits and spud activity, there is an expectation for increased water sales in the coming quarters [28][45] Question: Contributors to easement revenue - The primary contributors to easement revenue have been pipeline easements and material sales, driven by significant infrastructure build-out [46]

Company Overview - Texas Pacific Land Corporation owns approximately 868,000 surface acres of land in West Texas, primarily concentrated in the Permian Basin[75]. Market Prices - Average WTI Cushing price per barrel decreased from $93.06 in Q3 2022 to $82.25 in Q3 2023, a decline of 11.7%[81]. - Average Henry Hub price per mmbtu dropped from $8.03 in Q3 2022 to $2.59 in Q3 2023, a decrease of 67.7%[81]. Financial Performance - Total revenues decreased by $33.1 million, or 17.3%, to $158.0 million for the three months ended September 30, 2023, compared to $191.1 million for the same period in 2022[98]. - Net income for the three months ended September 30, 2023, was $105.6 million, an 18.7% decrease from $129.8 million in the same period of 2022[98]. - For the nine months ended September 30, 2023, total revenues decreased by $49.8 million, or 9.7%, to $464.9 million compared to $514.7 million in the same period of 2022[105]. - Net income for the nine months ended September 30, 2023, was $292.5 million, a 15.6% decrease from $346.6 million in the same period of 2022[105]. - EBITDA for the nine months ended September 30, 2023, was $383.3 million, down from $452.9 million in the same period of 2022[145]. - Adjusted EBITDA for the nine months ended September 30, 2023, was $390.5 million, compared to $457.9 million for the same period in 2022[145]. - Free Cash Flow for the nine months ended September 30, 2023, was $299.2 million, down from $350.8 million in the same period of 2022[145]. Revenue Breakdown - Oil and gas royalty revenue decreased by $43.2 million, contributing significantly to the overall revenue decline[98]. - Land and Resource Management segment revenues decreased by $37.3 million, or 25.3%, to $109.9 million for the three months ended September 30, 2023, compared to the same period in 2022[119]. - Oil and gas royalty revenue was $87.1 million for the three months ended September 30, 2023, a decrease of 33.2% from $130.3 million for the same period in 2022, primarily due to lower average commodity prices and production volume[120]. - Water Services and Operations segment revenues increased by 9.4% to $48.0 million for the three months ended September 30, 2023, compared to $43.9 million for the same period in 2022[126]. - Water sales revenue increased by $2.0 million to $26.4 million for the three months ended September 30, 2023, driven by an increase in treated water sales volumes[127]. - Water Services and Operations segment revenues increased 23.9% to $149.7 million for the nine months ended September 30, 2023, compared to $120.8 million for the same period in 2022[138]. - Water sales revenue rose by $20.3 million to $85.8 million for the nine months ended September 30, 2023, driven by a 22.9% increase in water sales volumes[139]. - Produced water royalties increased to $20.8 million for the three months ended September 30, 2023, compared to $19.1 million for the same period in 2022[128]. - Produced water royalties increased to $61.8 million for the nine months ended September 30, 2023, up from $52.7 million in the same period of 2022, due to higher produced water volumes[140]. Expenses - Total operating expenses for the three months ended September 30, 2023, were $31.0 million, up from $29.1 million in the same period of 2022[99]. - Salaries and related employee expenses increased to $11.5 million for the three months ended September 30, 2023, from $10.7 million in 2022, due to a rise in employee numbers and market compensation adjustments[99]. - Legal and professional fees surged to $28.5 million for the nine months ended September 30, 2023, compared to $5.0 million in the same period of 2022, primarily due to legal expenses related to stockholder matters[110]. - The increase in expenses included an $11.5 million rise in water service-related expenses and a $3.8 million increase in income tax expense[141]. Cash Flow and Investments - Net cash provided by operating activities for the nine months ended September 30, 2023 was $306.9 million, down from $314.6 million in the same period of 2022[89]. - Total cash used in investing activities increased to $55.9 million for the nine months ended September 30, 2023, compared to $14.6 million in 2022[91]. - The company invested approximately $10.2 million in water sourcing assets and acquired intangible assets worth $21.4 million during the nine months ended September 30, 2023[87]. - As of September 30, 2023, Texas Pacific Land Corporation had cash and cash equivalents of $654.2 million[86]. - Common Stock repurchases amounted to $32.2 million for the nine months ended September 30, 2023, down from $58.4 million in the same period of 2022[96]. Production and Market Conditions - The Permian Basin currently produces over 5.8 million barrels of oil per day, the highest average daily production recorded prior to 2023[80]. - The average realized price for oil equivalent declined by 28.4% to $45.41 per Boe for the three months ended September 30, 2023, from $63.42 per Boe for the same period in 2022[120]. - There have been no material changes in market risk information since December 31, 2022[150].

Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were $161 million, a 10% increase from Q1 2023, driven by higher royalty production and water sales despite lower oil and gas prices [45][40] - Adjusted EBITDA and free cash flow for the quarter were $134 million and $105 million, respectively, with consolidated CapEx at $1.4 million [10][40] - Royalty production averaged approximately 24,900 barrels of oil equivalent per day, representing a 19% increase on a sequential quarter basis [10] Business Line Data and Key Metrics Changes - Source water revenues increased by 69%, produced water revenues rose by 12%, and SLEM revenues were up 34% year-over-year [26] - Produced water volumes for Q2 2023 were up 15% year-over-year, contributing nearly $60 million in high-margin revenue [42][40] - Over 60% of water sales were from outside TPL acreage, indicating successful expansion efforts [14] Market Data and Key Metrics Changes - Oil and gas royalty production increased by 26% year-over-year, but revenues decreased by 32% due to a decline in WTI crude oil and Henry Hub natural gas prices [40] - Average realized oil price for Q2 2023 was $73 per barrel, representing approximately 100% realization relative to WTI Cushing price [61] Company Strategy and Development Direction - The company focuses on maintaining a capital-light, high-margin business philosophy while expanding its water and surface-related income streams [4][25] - TPL is actively seeking land acquisitions that can be commercialized, particularly in underutilized areas [57][58] - The competitive landscape for royalty opportunities is described as very competitive, with ongoing opportunities for surface-related assets [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of strong water sales, despite potential tapering off in the fourth quarter due to seasonal activity [55] - The company anticipates continued growth in production for the remainder of the year, supported by high activity levels in key areas [51][31] Other Important Information - The company announced the nomination of two independent director candidates for the upcoming annual meeting, with current directors retiring [29] - TPL's recent acquisition of 12,000 surface acres in Andrews County is expected to provide incremental opportunities for commercialization [58] Q&A Session Summary Question: What are the drivers behind the strength in water resources this quarter? - Management highlighted increased activity in contracted areas of mutual interest as a key driver for the record water sales [50] Question: How should the production trajectory be viewed given the strength of Q2? - Management indicated that the trajectory for the rest of the year should include continued growth based on current activity levels [51] Question: What are the strategic implications of the recent surface acquisition? - The acquisition is seen as a good option due to the activity crossing the state line, providing potential for future commercialization [53] Question: What could hinder further growth in water sales? - Management noted that while Q2 was strong, water sales typically taper off in the fourth quarter due to reduced activity [55] Question: Are pipeline easement revenues expected to recur? - Most pipeline easements are on term agreements that will recur, indicating a stable revenue stream [69]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flow statements, and related notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (vs. Dec 31, 2022) | | :-------------------------------- | :----------------------------- | :------------------------------- | :------------------------ | | Cash and cash equivalents | $609,252 | $510,834 | +$98,418 | | Total current assets | $737,530 | $633,401 | +$104,129 | | Total assets | $1,001,324 | $877,427 | +$123,897 | | Total current liabilities | $44,884 | $39,595 | +$5,289 | | Total liabilities | $113,774 | $104,540 | +$9,234 | | Total equity | $887,550 | $772,887 | +$114,663 | - Total assets increased by **$123.9 million**, or **14.1%**, from **$877.4 million** at December 31, 2022, to **$1,001.3 million** at June 30, 2023, primarily driven by an increase in cash and cash equivalents[14](index=14&type=chunk) - Total equity increased by **$114.7 million**, or **14.8%**, from **$772.9 million** at December 31, 2022, to **$887.6 million** at June 30, 2023[14](index=14&type=chunk) [Condensed Consolidated Statements of Income and Total Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Total%20Comprehensive%20Income) | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change (YoY) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (YoY) | | :---------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $160,609 | $176,270 | -8.9% | $306,971 | $323,605 | -5.1% | | Operating income | $120,280 | $151,708 | -20.8% | $225,232 | $276,021 | -18.4% | | Net income | $100,393 | $118,894 | -15.6% | $186,961 | $216,794 | -13.8% | | Basic EPS | $13.06 | $15.37 | -15.1% | $24.31 | $28.02 | -13.3% | | Diluted EPS | $13.05 | $15.37 | -15.1% | $24.30 | $28.01 | -13.2% | | Cash dividends per share | $3.25 | $23.00 | -85.9% | $6.50 | $26.00 | -75.0% | - Oil and gas royalties decreased significantly, by **32.0%** for the three months and **23.9%** for the six months ended June 30, 2023, primarily due to lower commodity prices[15](index=15&type=chunk) - Water sales and produced water royalties showed strong growth, increasing by **69.9%** and **11.6%** respectively for the three months, and **44.5%** and **22.2%** for the six months ended June 30, 2023[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (YoY) | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Net cash provided by operating activities | $199,264 | $195,405 | +2.0% | | Net cash used in investing activities | $(27,654) | $(8,263) | +234.7% | | Net cash used in financing activities | $(77,345) | $(225,590) | -65.7% | | Net increase (decrease) in cash | $94,265 | $(38,448) | N/A | - Cash provided by operating activities increased slightly by **$3.9 million**, or **2.0%**, primarily due to decreases in income tax payments and working capital requirements[17](index=17&type=chunk) - Cash used in investing activities significantly increased by **$19.4 million**, or **234.7%**, mainly due to higher land acquisitions (**$20.3 million** in 2023 vs. **$12 thousand** in 2022)[17](index=17&type=chunk) - Cash used in financing activities decreased by **$148.2 million**, or **65.7%**, primarily due to a substantial reduction in dividends paid (**$50.0 million** in 2023 vs. **$201.0 million** in 2022, which included a special dividend)[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Organization and Description of Business Segments](index=8&type=section&id=Note%201.%20Organization%20and%20Description%20of%20Business%20Segments) - Texas Pacific Land Corporation (TPL) is a Delaware corporation and one of the largest landowners in Texas, holding approximately **886,000 surface acres**, primarily in the Permian Basin, along with various nonparticipating perpetual oil and gas royalty interests[19](index=19&type=chunk) - TPL's income is primarily derived from oil, gas, and produced water royalties, land and water sales, easements, and commercial leases[20](index=20&type=chunk) - The company operates in **two segments**: **Land and Resource Management**, and **Water Services and Operations**[22](index=22&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=8&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in accordance with **GAAP**, requiring management estimates and assumptions[23](index=23&type=chunk) - Cash equivalents include bank deposits, money market funds, U.S. Treasury bills, and commercial paper with original maturities of three months or less, classified as **Level 1 assets**[24](index=24&type=chunk) | Item (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------ | :------------ | :---------------- | | Cash and cash equivalents | $609,252 | $510,834 | | Tax like-kind exchange escrow | $2,195 | $6,348 | | Total cash, cash equivalents and restricted cash | $611,447 | $517,182 | [Note 3. Real Estate Activity](index=9&type=section&id=Note%203.%20Real%20Estate%20Activity) | Real Estate (in thousands, except acres) | June 30, 2023 | December 31, 2022 | | :--------------------------------------- | :------------ | :---------------- | | Land (surface rights) - Number of Acres | 817,017 | 817,060 | | Real estate acquired - Number of Acres | 69,447 | 57,306 | | Total real estate situated in Texas - Number of Acres | 886,464 | 874,366 | | Real estate acquired - Net Book Value | $130,024 | $109,704 | - For the six months ended June 30, 2023, TPL sold **43 acres** of land for **$1.4 million** and acquired **12,141 acres** for **$20.0 million**, significantly increasing land acquisitions compared to the prior year[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 4. Property, Plant and Equipment](index=9&type=section&id=Note%204.%20Property,%20Plant%20and%20Equipment) | Property, Plant and Equipment (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------------- | :------------ | :---------------- | | Water service-related assets | $130,106 | $125,166 | | Total property, plant and equipment, at

Financial Data and Key Metrics Changes - Total revenues for Q1 2023 were $146 million, representing a 4% decline sequentially from Q4 2022 due to lower oil and gas prices and royalty production, offset by higher sourced water sales and other income [7] - Oil and gas royalty revenues were down 14% year-over-year, while sourced water sales increased by 15%, produced water royalties rose by 35%, and easement and other surface-related income surged by 63% [4][5] - Adjusted EBITDA for the quarter was $116 million, and free cash flow was $88 million, with a cash balance of $591 million at the end of the quarter [7] Business Line Data and Key Metrics Changes - The non-oil and gas royalty businesses contributed nearly 40% of total revenues, providing a hedge against commodity price fluctuations [5] - The sourced water sales and produced water royalties showed significant growth, indicating diversification in revenue streams [4] Market Data and Key Metrics Changes - WTI Cushing Oil and Henry Hub natural gas prices decreased by 19% and 43% respectively compared to the same period last year, impacting oil and gas royalty revenues [4] - The company reported strong leading indicators such as new permitting and drilling activity, which remain at historically high levels [6] Company Strategy and Development Direction - The company maintains a debt-free balance sheet and focuses on maximizing shareholder value through capital allocation strategies, including a $250 million buyback authorization [8] - The long-term outlook remains strong, particularly in the Permian Basin, which is considered a premier resource play in North America [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism based on customer conversations and internal data, indicating a positive production outlook for the remainder of the year despite short-term volatility [6][11] - The company is positioned well with a strong inventory of permits and DUCs, suggesting potential for increased production [7][11] Other Important Information - The company is involved in a legal dispute with Horizon Kinetics regarding voting commitments, with a court decision anticipated following a trial held on April 17, 2023 [6] - A one-time revenue adjustment related to Chevron's over-deduction of expenses was disclosed, which could have impacted oil revenue by an estimated $8 million on a normalized basis [18][19] Q&A Session Summary Question: Growth outlook of oil and gas royalty segment - Management expects TPL to outperform the basin in the near and medium term, with strong near-term inventory supporting a positive production outlook [11] Question: Impact of Chevron's issues on operations - The company has limited exposure to Chevron's operations, as most of the minerals have been leased out [12] Question: Drivers behind strong SLEM business performance - Increased pipeline easements and successful rock sales have contributed to the strong performance in the SLEM business [13] Question: Legal expenses and future expectations - Legal expenses are accrued, and future spending cannot be commented on at this time [17] Question: One-time revenue from arbitration - The one-time revenue was related to past overcharges by Chevron, and it is not expected to recur [18][19] Question: Capital expenditure in Water Resource business - The capital expenditure is aligned with maintenance needs and electrification processes, with the Water Resource business generating positive free cash flow [21]

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 March 31, 2023 ☐ 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 ...

Financial Data and Key Metrics Changes - Full year 2022 revenue reached $667 million, a 48% year-over-year increase, exceeding the previous record by over $170 million [4][15] - Net income for fiscal year 2022 was $446 million, representing a 65% increase compared to the prior year [15] - Consolidated adjusted EBITDA margin for the full year was 89%, indicating efficient conversion of revenue into cash flow [4] - The company returned $335 million to shareholders through dividends and buybacks, and exited the year with zero debt and over $500 million in cash [4] Business Line Data and Key Metrics Changes - Revenue from oil and gas royalties contributed to record revenues, while combined water sales, produced water royalties, and easements generated over $200 million [4] - Source water revenue increased by 25%, produced water royalties rose by 24%, and easements and other surface-related income grew by 28% year-over-year [15] - Royalty production for the full year was approximately 21,300 barrels of oil equivalent per day, with a 15% year-over-year growth [16] Market Data and Key Metrics Changes - The company observed a trend of declining well productivity among operators, with many moving towards co-development of multiple zones [8] - Natural gas pricing realizations weakened, particularly among smaller independent producers, due to tight pipeline capacity out of the Permian [10][17] - The company noted that insufficient takeaway capacity presents opportunities for pipeline easement development [10] Company Strategy and Development Direction - The company is expanding revenue opportunities beyond its legacy business, including contracts for carbon capture, battery storage, and bitcoin mining facilities [5] - The company has executed contracts for in-basin wet sand mines, which are expected to generate revenue and reduce truck congestion and emissions [6][27] - A new agreement with bpx, a subsidiary of BP, was announced to provide comprehensive source water and produced water offtake across approximately 270,000 acres [7][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining positive momentum despite commodity price volatility, emphasizing the quality of their resource base [13] - The company is focused on sustainability and safety, achieving zero spills and reportable safety incidents in 2022 [13] - Management highlighted the importance of their robust cash position, which allows for flexibility in capital allocation [20] Other Important Information - The company plans to repurchase shares under a newly expanded $250 million share repurchase plan [19] - The company has a strong focus on next-generation opportunities while maintaining its legacy business [30] Q&A Session Summary Question: Growth outlook for business segments - Management acknowledged quarterly volatility but expressed confidence in outperforming the Permian as a whole due to a strong normalized DUC count [21] Question: Details on the bpx agreement - The agreement provides both parties with rights within the AMI, facilitating bpx's operations and increasing TPL's water offtake [28] Question: Potential of wet sand opportunity - Management expects to see revenue from contracted sand mines this year, potentially adding around $20 million in revenue within a couple of years [26][27] Question: Methodology for stock buyback program - The buyback program will be opportunistic, with capital deployment based on various market factors [32] Question: Preferred cash level - Management emphasized the importance of maintaining a robust cash balance to capitalize on future opportunities [33]

Financial Performance - In 2022, Texas Pacific Land Corporation reported revenues of $667.4 million, a 48% increase from $451.0 million in 2021[20]. - The net income for 2022 was $446.4 million, representing a 65% increase compared to $270.0 million in 2021[20]. - Total revenues increased by $216.5 million, or 48.0%, to $667.4 million for the year ended December 31, 2022, compared to $451.0 million for 2021[137]. - Net income for the year ended December 31, 2022, was $446.4 million, up from $270.0 million in 2021, representing a 65.4% increase[166]. - Operating income for 2022 was $562.3 million, a 55.2% increase from $362.4 million in 2021[137]. - Adjusted EBITDA for the year ended December 31, 2022, was $591.8 million, compared to $388.0 million in 2021, indicating a significant increase in operational performance[166]. Revenue Sources - The company’s oil and gas royalties accounted for 68% of the total revenue in the Land and Resource Management segment, generating $452.4 million in 2022, up from $286.5 million in 2021[27]. - Water sales in the Water Services and Operations segment reached $84.7 million in 2022, a 25% increase from $67.8 million in 2021, driven by a 10.3% increase in the number of sourced and treated barrels sold[34]. - The company’s revenues are primarily derived from oil, gas, and produced water royalties, as well as sales of water and land, easements, and commercial leases[118]. - Oil and gas royalties rose by $166.0 million, contributing significantly to the revenue increase[137]. - Water Services and Operations segment revenues increased by 22.9% to $160.4 million in 2022, attributed to higher water sales and produced water royalties[159]. Market Conditions - The total equivalent price for crude oil, natural gas, and NGL production was $60.81 per barrel of oil equivalent (Boe) in 2022, a 37.8% increase from $44.14 per Boe in 2021[28]. - Average WTI Cushing price per barrel increased to $94.90 in 2022 from $68.14 in 2021, while Henry Hub average price per mmbtu rose to $6.45 from $3.89[123]. - Average realized prices for oil increased to $94.69 per barrel in 2022 from $66.62 in 2021, while natural gas prices rose to $6.19 per Mcf from $3.67[155]. Customer Base - Major customers included Occidental Petroleum Corporation, contributing $115.3 million (17.3% of total revenues), and Chevron Corporation, contributing $94.8 million (14.2% of total revenues) in 2022[37][38]. - 51.8% of the company's revenue comes from four major customers, all of which are among the top 25 energy companies globally, with two in the top 10[39]. Capital Expenditures and Investments - The company generated $13.3 million in capital expenditures in 2022 and 2021 for electric infrastructure to reduce costs and emissions[54]. - The company invested approximately $18.6 million in Texas Pacific Water Resources LLC (TPWR) projects in 2022, with $6.9 million allocated to electrifying water sourcing infrastructure[35]. Shareholder Returns - The company paid a total cash dividend of $12.00 per share for the year ended December 31, 2022, compared to $11.00 per share in 2021[107]. - Total cash dividends paid in 2022 amounted to $247.3 million, compared to $85.3 million in 2021, reflecting a significant increase in shareholder returns[135]. - The company repurchased $87.9 million of its Common Stock in 2022, up from $19.9 million in 2021[135]. - During the year ended December 31, 2022, the company repurchased 48,959 shares of Common Stock, which were placed in treasury[88]. Corporate Governance - The board of directors includes members with extensive experience in the energy sector and corporate governance, enhancing strategic oversight[190][191][193]. - The company has a robust governance structure with committees focused on Nominating and Corporate Governance, Compensation, and Audit[194][198]. - TPL is focused on expanding its market presence and enhancing its investment strategies through experienced leadership[208]. - The company is committed to maintaining strong governance practices with a well-structured Board[207]. Risks and Challenges - The company’s oil and gas royalties are highly dependent on market prices, which are subject to significant fluctuations due to various macroeconomic factors[57]. - The company faces risks from natural and human causes that could disrupt its operations and financial results[63]. - Global health threats, such as COVID-19, may lead to reduced demand for oil and gas, impacting the company's earnings and cash flow[68]. - Supply chain risks, including material shortages and price increases, could negatively affect revenues and operating costs[69]. - Supply chain issues may disrupt operations and development activities, impacting revenues from oil and gas royalties and water offerings[70]. ESG Initiatives - The company has developed a tailored ESG program addressing the ethical management of water resources and sustainability goals[45]. - The company’s ESG strategy includes annual reviews and assessments to ensure continuous improvement[48]. - The company has initiated energy tracking since 2020 to monitor energy consumption trends[54]. Management and Leadership - Tyler Glover serves as TPL's President and Chief Executive Officer, with over 10 years of experience in energy services and land management[208]. - Chris Steddum has been TPL's Chief Financial Officer since June 1, 2021, previously working in oil and gas investment banking for 10 years[210]. - TPL's leadership team has a combined experience of over 30 years in the energy and investment sectors, positioning the company for future growth[210].