¨ June 30, December 31, Assets 2017 2016 (Unaudited) Cash and cash equivalents Accrued receivables Other assets Deferred tax asset Notes receivable for land sales Water wells, vehicles, furniture, and equipment– at cost less accumulated depreciation Real estate acquired: (10,065 acres at June 30, 2017 and 10,065 acres at December 31, 2016) Real estate and royalty interests assigned through the 1888Declaration of Trust, no value assigned: Land (surface rights) situated in eighteen counties inTexas – 877,633 acres in 2017 and 877,488 acres in 2016 1/16 nonparticipating perpetual royalty interest in 373,777 acres in 2017and 2016 1/128 nonparticipating perpetual royalty interest in 85,414 acres in 2017and 2016 Liabilities and Capital Accounts payable and accrued expenses Income taxes payable Other taxes payable Total liabilities Capital: Certificates of Proprietary Interest, par value $100each; outstanding 0 Certificates Sub-share Certificates in Certificates of ProprietaryInterest, par value $.03 1/3 each; outstanding: 7,858,554 Sub-shares in 2017 and 7,927,314 Sub-shares in 2016 Other comprehensive loss ) ) Net proceeds from all sources Total capital Three Months Ended Six Months Ended 2017 2016 2017 2016 Income: Oil and gas royalties Land sales Easements and sundry income Other income Expenses: Taxes, other than income taxes General and administrative expenses Operating income Interest income earned from investments Income before income taxes Income taxes Net income Other comprehensive income – periodic pension costs,net of income taxes of $9,407, $12,307, $18,814,and $24,614 respectively Total comprehensive income Average number of sub-share certificatesand equivalent sub-share certificatesoutstanding Basic and dilutive earnings per sub-share certificate onnet income Cash dividends per sub-share certificate Six Months 2017 2016 Cash flows from operating activities: Net income Adjustments to reconcile net income to netcash provided by operating activities: Deferred taxes ) Depreciation and amortization Loss (gain) on disposal of fixed assets ) Changes in operating assets and liabilities: Accrued receivables and other assets ) ) Notes receivable for land sales Accounts payable, accrued expensesand other liabilities Income taxes payable ) Net cash provided by operating activities Cash flows from investing activities: Proceeds from sale of fixed assets Purchase of fixed assets ) ) Net cash used in investing activities ) ) Cash flows from financing activities: Purchase of Sub-share Certificates in Certificates ofProprietary Interest ) ) Dividends paid ) ) Net cash used in financing activities ) ) Net increase in cash and cashequivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 2017 2016 Income taxes paid interests. Thus, in addition to being subject to fluctuations in response to the market prices for oil and gas, our oil and gas royalty revenues are also subject to decisions made by the owners and operators of the oil and gas wells to which our royalty interests relate as to investments in and production from those wells. We monitor production reports by the oil and gas companies to assure that we are being paid the appropriate royalties. We review conditions in the agricultural industry in the areas in which our lands are located and seek to keep as much of our lands as possible under lease to local ranchers. average price received. Period Total Number of Sub-shares Purchased Average Price Paid per Sub-share Total Number of Sub-shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Sub-shares that May Yet Be Purchased Under the Plans or Programs April 1, through April 30, 2017 May 1, through May 31, 2017 June 1, through June 30, 2017 Total 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. Date: By:__________________________________________[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the quarterly period ended June 30, 2017OR[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from ______ to ______[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2018 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ______ to ______ PacificPacific Avenue, Suite 2770, Dallas,Texas ☑þ No ☐¨☑þ No ☐☑þ☐¨☐ (Do¨ (Do not check if a smaller reporting company)☐¨☐ o toSectionto Section 13(a) of the Exchange Act. ☐¨☐ ¨ No ☑
þCautionary Statement Regarding Forward-Looking StatementsStatements in this Quarterly Report on 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 December2016, 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.2018Page �� Item 1. Financial StatementsItem 1. Financial Statements $ 50,103,001 $ 49,417,889 12,428,962 6,550,429 266,283 232,970 8,548,133 3,874,788 46,389 94,971 4,651,223 1,168,281 1,114,601 1,114,601 – – – – – – $ 77,158,592 $ 62,453,929 $ 1,066,969 $ 826,771 1,199,397 1,950,774 422,070 276,813 Unearned revenue 25,908,540 11,775,049 28,596,976 14,829,407 – – – – (924,622 (959,563 49,486,238 48,584,085 48,561,616 47,624,522 $ 77,158,592 $ 62,453,929 March 31,
2018 December 31,
2017 (Unaudited) Cash and cash equivalents $ 71,301 $ 79,580 Accrued receivables 27,644 17,773 Other assets 3,076 849 Prepaid income taxes — 1,202 Property, plant and equipment, net of accumulated depreciation of $791 and $463 as of March 31, 2018 and December 31, 2017, respectively 31,029 19,516 Real estate acquired 1,866 1,115 Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: Land (surface rights) situated in eighteen counties in Texas – 877,514 acres and 877,633 acres as of March 31, 2018 and December 31, 2017, respectively — — 1/16th nonparticipating perpetual royalty interest in 373,777 acres — — 1/128th nonparticipating perpetual royalty interest in 85,414 acres — — Total assets $ 134,916 $ 120,035 Accounts payable and accrued expenses $ 4,855 $ 5,608 Income taxes payable 10,473 851 Deferred taxes payable 114 114 Unearned revenue 8,932 8,364 Total liabilities 24,374 14,937 Commitments and contingencies — — Capital: Certificates of Proprietary Interest, par value $100 each; none outstanding — — Sub-share Certificates in Certificates of Proprietary Interest, par value $.03 1/3 each; outstanding 7,808,453 and 7,821,599 Sub-shares as of March 31, 2018 and December 31, 2017, respectively — — Accumulated other comprehensive loss (791 ) (804 ) Net proceeds from all sources 111,333 105,902 Total capital 110,542 105,098 Total liabilities and capital $ 134,916 $ 120,035
June 30,
June 30, $ 12,882,976 $ 6,866,702 $ 24,075,738 $ 12,477,453 220,400 – 220,400 86,000 14,120,696 9,198,970 27,032,474 15,269,943 124,482 124,594 248,710 249,032 27,348,554 16,190,266 51,577,322 28,082,428 762,207 394,217 1,421,966 740,801 1,854,463 698,423 3,319,407 1,447,528 2,616,670 1,092,640 4,741,373 2,188,329 24,731,884 15,097,626 46,835,949 25,894,099 9,565 5,844 19,059 11,785 24,741,449 15,103,470 46,855,008 25,905,884 8,029,997 4,980,353 15,258,134 8,502,716 $ 16,711,452 $ 10,123,117 $ 31,596,874 $ 17,403,168 17,470 22,855 34,941 45,711 $ 16,728,922 $ 10,145,972 $ 31,631,815 $ 17,448,879 7,882,184 8,048,500 7,894,542 8,064,759 $ 2.12 $ 1.26 $ 4.00 $ 2.16 $ – $ – $ 1.35 $ .31 Three Months Ended
March 31, 2018 2017 Income: Oil and gas royalties $ 26,547 $ 10,588 Easements and sundry income 16,978 14,867 Water sales and royalties 13,607 4,828 Land sales 2,750 — Other operating income 125 124 Total income 60,007 30,407 Expenses: Salaries and related employee benefits 2,289 386 Water service-related expenses 1,306 — General and administrative expenses 808 340 Legal and professional fees 647 715 Depreciation and amortization 330 19 Taxes, other than income taxes 144 55 Trustees’ compensation 2 2 Total expenses 5,526 1,517 Operating income 54,481 28,890 Other income 130 7 Income before income taxes 54,611 28,897 Income taxes 10,820 9,638 Net income $ 43,791 $ 19,259 Other comprehensive income – periodic pension costs, net of income taxes of $3 and $9, respectively 13 17 Total comprehensive income $ 43,804 $ 19,276 Weighted average number of Sub-share Certificates outstanding 7,818,168 7,919,085 Basic and dilutive earnings per Sub-share Certificate on net income $ 5.60 $ 2.43 Cash dividends per Sub-share Certificate $ 4.05 $ 1.35
Ended June 30, $ 31,596,874 $ 17,403,168 (4,673,345 15,471 103,730 12,974 (3,901 8,201 (5,911,846 (2,348,299 48,582 27,333 14,553,887 3,401,200 (751,377 86,551 34,962,604 18,606,599 27,500 18,000 (3,610,271 (258,457 (3,582,771 (240,457 (20,013,701 (15,255,080 (10,681,020 (2,507,183 (30,694,721 (17,762,263 685,112 603,879 49,417,889 45,011,969 $ 50,103,001 $ 45,615,848 Three Months Ended
March 31, 2018 2017 Cash flows from operating activities: Net income $ 43,791 $ 19,259 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes — 2,406 Depreciation and amortization 330 19 Gain on disposal of fixed assets — (4 ) Changes in operating assets and liabilities: Accrued receivables and other assets (12,099 ) (3,758 ) Prepaid income taxes 1,202 — Accounts payable, accrued expenses and other liabilities (172 ) 846 Income taxes payable 9,622 5,616 Cash provided by operating activities 42,674 24,384 Cash flows from investing activities: Proceeds from sale of fixed assets — 28 Acquisition of land (751 ) — Purchase of fixed assets (11,841 ) (1,912 ) Cash used in investing activities (12,592 ) (1,884 ) Cash flows from financing activities: Purchase of Sub-share Certificates in Certificates of Proprietary Interest (6,709 ) (8,672 ) Dividends paid (31,652 ) (10,682 ) Cash used in financing activities (38,361 ) (19,354 ) Net increase in cash and cash equivalents (8,279 ) 3,146 Cash and cash equivalents, beginning of period 79,580 49,418 Cash and cash equivalents, end of period $ 71,301 $ 52,564 Supplemental disclosure of cash flow information: Income taxes paid $ — $ 1,625 UNAUDITEDCONDENSEDCONSOLIDATEDFINANCIAL STATEMENTSJUNE 30, 2017(1)On June 8, 2017, Texas Pacific Land Trust (the “Trust”) announced the formation1. Organization and Description of Texas Pacific Water Resources LLC (“TPWR”). TPWR, a single-member LLC and wholly owned subsidiary of the Trust, will focus on providing a full-service water offering to operators in the Permian Basin. TPWR seeks to develop with operators integrated water servicing agreements to include brackish water sourcing, produced water gathering/treatment/recycling, infrastructure development/ construction, disposal, water tracking, analytical and well testing services. TPWR is committed to sustainable water development with significant focus on the large-scale implementation of recycled water operations. For the quarter ended June 30, 2017, there were minimal operations for TPWR with an immaterial effect on the consolidated financial statements and therefore are not reported separately from the Trust.Business Segments(2)In the opinion2. Summary of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Trust, including TPWR, as of June 30, 2017Significant Accounting Policies month and six month periods ended June 30, 2017 and 2016, respectively, and its cash flows for the six month periods ended June 30, 2017 and 2016, respectively. The consolidated financial statements and footnotes included herein should be read in conjunction with the Trust’s annual financial statements as of December 31, 2016 and 2015 and for each of the years in the three year period ended December 31, 2016 included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2016.(3)We evaluate events that occur after the balance sheet date but before consolidated financial statements are, or are available to be, issued to determine if a material event requires our amending the consolidated financial statements or disclosing the event. We evaluated subsequent events through August 4, 2017, the date we issued these consolidated financial statements.(4)No value has been assigned to the land held by the Trust other than parcels which have been acquired through foreclosure and a limited number of parcels which have been acquired because they were offered for sale and were contiguous to parcels already owned by the Trust. Consequently, no allowance for depletion is computed, and no charge to income is made, with respect thereto, and no cost is deducted from the proceeds of the land sales in computing gain or loss thereon.(5)The Sub-shares and the Certificates of Proprietary Interest are freely interchangeable in the ratio of one Certificate of Proprietary Interest for 3,000 Sub-shares or 3,000 Sub-shares for one Certificate of Proprietary Interest.(6)The Trust’s effective Federal income tax rate is less than the 35% statutory rate because taxable income is reduced by statutory percentage depletion allowed on mineral royalty income.(7)The results of operations for the three month and six month periods ended June 30, 2017 are not necessarily indicative of the results to be expected for the full year.(8)The Trust invests cash in excess of daily requirements primarily in bank deposit and savings accounts and certificates of deposit with maturities of ninety days or less. Such investments are deemed to be highly liquid debt instruments and classified as cash equivalents for purposes of the statements of cash flows.Supplemental cash flow information for the six month periods ended June 30,March 31, 2018 and 2017, respectively, and 2016its cash flows for the three month periods ended March 31, 2018 and 2017, respectively. Such adjustments are of a normal recurring nature. As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 Revenue $ 24,229 $ 6,178 $ 30,407 Taxes, other than income taxes 660 (605 ) 55 Income taxes 7,228 2,410 9,638 Net income 14,886 4,373 19,259 Net income per Sub-share Certificate $ 1.88 $ 0.55 $ 2.43 Consolidated Balance Sheets: As of December 31, 2017 Assets: Accrued receivables $ 18,206 $ (433 ) $ 17,773 Deferred tax asset (liability) 6,992 (7,106 ) (114 ) Liabilities and Capital: Unearned revenue $ 41,375 $ (33,011 ) $ 8,364 Other taxes payable 433 (433 ) — Net proceeds from all sources 79,997 25,905 105,902 summarizedrecorded within salaries and related employee benefits expense, and the other components of net benefit costs are recorded in other income.follows: $ 20,701,669 $ 8,425,307 As reported in prior year Retrospective Adjustment As reported in current year Consolidated Statements of Income: For the three months ended March 31, 2017 $ 22,104 $ 6,786 $ 28,890 Other income 9 (2 ) 7 (9)ASC 280, “Segment Reporting,” establishes standards for the way public business enterprises are to report information about operating segments. In accordance with ASC 280, the Trust utilizes the management approach as a basis for identifying reportable segments. (1) The management approach is based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The Trust’s management views its operations as one segment and believes the only significant activity is managing the land which was conveyedretrospective adjustment amount includes approximately $6.8 million related to the Trust in 1888 and any other land thereafter acquired. The Trust’s management makes decisions about resource allocation and performance assessment based on the same financial information presented in these consolidated financial statements. Managing the land includes sales and leases of such land, and the retention of oil and gas royalties.(10)In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”(“ASU 2017-07”). This ASU requires employers to disaggregate the service cost component from the other components of net benefit cost. ASU 2017-07 also provides explicit guidance on how to present the service cost component and the other components of net benefit costs in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The requirementsadoption of the new standard are effective for annual reporting periods beginning after December 31, 2017, and interim periods within those annual periods, which forrevenue recognition guidance as discussed above. The retrospective adjustment amount related to the Trust is the first quarter of 2018. The Trust is evaluating the new guidance to determine the impact it will have on our consolidated financial statements.(11)In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory (Topic 740)”(“ASU 2016-16”). This ASU will require recognitionadoption of the income tax consequencespresentation of an intra-entity transfer of an asset other than inventory when the transfer occurs as opposednet periodic pension cost had a minimal impact.3. Recent Accounting Pronouncements 4. Property, Plant and Equipment March 31, 2018 December 31, 2017 Property, plant and equipment: $ 28,679 $ 18,193 Furniture, fixtures and equipment 3,141 1,786 Property, plant and equipment at cost 31,820 19,979 Less: accumulated depreciation (791 ) (463 ) Property, plant and equipment, net $ 31,029 $ 19,516 (1) Water service-related assets include water wells and water well fields related to waiting for it to be sold to an outside party. This standard is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.water sourcing and water re-use projects.(12)In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326)”(“ASU 2016-13”). This ASU modifies the measurement of expected credit losses of certain financial instruments. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which for the Trust is the first quarter of 2020. The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.5. Real Estate Activity Date of sale Location Approximate number of acres sold Contract sale price February 2018 Loving County 40.0 $ 1,150 March 2018 Culberson County 80.0 1,600 Total sales in 2018 120.0 $ 2,750 Three Months Ended
March 31, 2018 Three Months Ended
March 31, 2017 Acres Book Value Acres Book Value Balance at January 1, 10,064.78 $ 1,115 10,064.78 $ 1,115 Additions 640.60 751 — — Sales — — — — Balance at March 31, 10,705.38 $ 1,866 10,064.78 $ 1,115 6. Income Taxes 7. Capital 8. Business Segment Reporting Three Months Ended
March 31, 2018 2017 Revenues: Land and resource management $ 42,753 $ 25,579 Water service and operations 17,254 4,828 Total consolidated revenues $ 60,007 $ 30,407 Net income: Land and resource management $ 32,811 $ 14,445 Water service and operations 10,980 4,814 Total consolidated net income $ 43,791 $ 19,259 Capital expenditures Land and resource management $ 1,252 $ 174 Water service and operations 10,589 1,738 Total capital expenditures $ 11,841 $ 1,912 Depreciation and amortization: Land and resource management $ 70 $ 5 Water service and operations 260 14 Total depreciation and amortization $ 330 $ 19 March 31, 2018 December 31, 2017 Assets: Land and resource management $ 92,676 $ 97,549 Water service and operations 42,240 22,486 Total consolidated assets $ 134,916 $ 120,035 Property, plant and equipment, net Land and resource management $ 2,633 $ 1,449 Water service and operations 28,396 18,067 Total consolidated property, plant and equipment, net $ 31,029 $ 19,516 (13)In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”(“ASU 2016-02”). This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The new guidance will also require significant disclosures about the amount, timing, and uncertainty of cash flows from leases. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which for the Trust is the first quarter of 2019. The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.9. Subsequent Events (14)In May 2014, the FASB issued ASU No. 2014-09, “Revenue Recognition (Topic 606): Revenue from Contracts with Customers”(“ASU 2014-09”). This ASU introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing,10. Oil and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14,“Revenue fromContracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”). This ASU deferred the effective date for ASU 2014-09 to fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Trust is reviewing and analyzing the impact that this ASU will have on our consolidated financial statements. This review process includes evaluating key accounting policy decisions, judgments, estimates, and disclosures for each significant category of revenue. This ASU will require additional disclosures on revenue and could affect the timing of revenue recognition. Certain categories of revenue may be more impacted than others. The Trust will complete its implementation process during the third and fourth quarters of 2017, including preparing the quantitative impact on comparable periods and necessary disclosures, if applicable.Gas Producing Activities(15)There are a number of oil and gas wells that have been drilled but are not yet completed (DUC) where the Trust has a royalty interest. Currently, the Trust has identified 90 DUC wells affected by our royalty interest. The process of identifying these wells is ongoing and we anticipate updates going forward to be affected by a number of factors including, but not limited to, ongoing changes/updates to our identification process, changes/updates by Drilling Info (our main source of information in identifying these wells) in their identification process, the eventual completion of these DUC wells, and additional wells drilled but not completed by companies operating where we have a royalty interest.Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2.Management’s1A “Risk Factors” of Part I ofour Annual Reporton Form 10-Kfor the year ended December 31, 2017, and in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations” and Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.2016,2017, (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”“expects” and “believes”, or similar expressions, when used in this Form 10-Q or other filings with the Securities and Exchange Commission,SEC, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.ResultsOperationsthe largest landowners in the State of Texas with approximately 890,000 acres of land in West Texas. We were organized under a Declaration of Trust, dated February 1, 1888, to receive and hold title to extensive tracts of land in numerous counties in West Texas, previously the property of the Texas and Pacific Railway Company. Our Trustees are empowered under the Declaration of Trust to manage the lands with all the powers of an absolute owner.Quarter Ended June 30, 2017 Compared to the Quarter Ended June 30, 2016Earnings per Sub-share certificate were $2.12 for the second quarter of 2017, compared to $1.26 for the second quarter of 2016. Total operatingranching uses prevalent in western Texas.investing revenues were $27,358,119 for the second quarter of 2017 compared to $16,196,110 for the second quarter of 2016, an increase of 68.9%. This increase ingas producer. Rather, our oil and gas revenue and earnings was due primarily to increases in easements and sundry income andis derived from our retained perpetual non-participating oil and gas royalty revenue. Three Months Ended March 31, 2018 2017 Revenues: Land and resource management: Oil and gas royalties $ 26,547 44 % $ 10,588 35 % Easements and sundry income 13,331 22 % 14,867 49 % Land sales and other income 2,875 5 % 124 — % 42,753 71 % 25,579 84 % Water service and operations: Water sales and royalties 13,607 23 % 4,828 16 % Easements and sundry income 3,647 6 % — — % 17,254 29 % 4,828 16 % Total consolidated revenues $ 60,007 100 % $ 30,407 100 % Net income: Land and resource management $ 32,811 75 % $ 14,445 75 % Water service and operations 10,980 25 % 4,814 25 % Total consolidated net income $ 43,791 100 % $ 19,259 100 % $12,882,976$26.5 million for the second quarter of 2017,three months ended March 31, 2018 compared to $6,866,702$10.6 million for the second quarter of 2016, an increase of 87.6%.three months ended March 31, 2017. Oil royalty revenue was $9,192,884$20.1 million for the second quarterthree months ended March 31, 2018 compared to $7.7 million for the comparable period of 2017, an2017. This increase of 67.0% from the second quarter of 2016 whenin oil royalty revenue was $5,503,313. Crudeis principally due to the combined effect of a 129.0% increase in crude oil production, subject to the Trust’s royalty interest, increased 29.1%and a 13.5% increase in the second quarter of 2017 compared to the second quarter of 2016. In addition, the average price per royalty barrel of crude oil received during the second quarter of 2017 was 29.3% higher thanthree months ended March 31, 2018 compared to the average price received during the second quarter of 2016.same period in 2017. Gas royalty revenue was $3,690,092$6.4 million for the second quarter of 2017,three months ended March 31, 2018, an increase of 170.7% from121.8% over the second quarter of 2016three months ended March 31, 2017 when gas royalty revenue was $1,363,389.$2.9 million. This increase in gas royalty revenue resulted from both price anda volume increasesincrease of 67.8% and 61.2%, respectively, in154.4% for the second quarter of 2017three months ended March 31, 2018 as compared to the second quarter of 2016.In the second quartersame period of 2017, the Trust sold approximately 11.02 acres of land forpartially offset by a total of $220,400, or approximately $20,000 per acre. No land sales occurred13.9% decrease in the second quarter of 2016.$14,120,696$13.3 million for the second quarterthree months ended March 31, 2018, a decrease of 2017,10.3% compared to $14.9 million for the three months ended March 31, 2017. Easements and sundry income includes pipeline easement income, seismic and temporary permit income, and income from material sales. Pipeline easement income decreased 20.4% to $7.7 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. This decrease was due to temporary timing differences resulting from a change in the form of our pipeline easement agreements. This decrease was partially offset by an increase of 53.5% compared to the second quarter of 2016 when easements and sundry$1.4 million in seismic permit income was $9,198,970. This increase resulted primarily from increases in pipeline easement income and water sales, and to a lesser extent, material sales. Pipeline easement income was $7,827,726 (before deferral of term easements) for the second quarter of 2017, compared to $6,379,792 (before deferral of term easements) for the second quarter of 2016, an increase of 22.7%. The Trust is currently moving toward the use of term easements (in lieu of perpetual) which will require us to gradually recognize the income for easements over the life of the agreement,$0.3 million in lieu of recognizing it all at the beginning of the term of the easement. As a result, $5,936,543 of easement income received in the second quarter of 2017material sales during this same time frame. Easements and $2,485,911 of easement income received in the second quarter of 2016 was deferred and therefore not reflected in the consolidated statements of income and total comprehensive income. This was the primary reason for the 120.0% increase in unearned revenue. Water sales for the second quarter of 2017 were $6,838,747 compared to $2,276,813 in the second quarter of 2016 an increase of 200.4%. This category ofsundry income is unpredictable and may vary significantly from quarterperiod to quarter.Otherperiod. Effective January 1, 2018, the Trust adopted the new revenue recognition accounting standard using the full retrospective method, and no longer defers revenue on its term easements. See more discussion in Note 2, “Summary of Significant Accounting Policies - Recently Adopted Accounting Guidance” for further discussion and analysis of impact on our condensed consolidated financial statements.interestincome tax expense, for the Land and Resource Management segment were $10.0 million and $11.1 million for the three months ended March 31, 2018 and 2017, respectively. The decrease in expenses was due to the reduction in the federal income tax rate from 35% to 21% effective January 1, 2018. This decrease in expenses was partially offset by increased salary and general and administrative expenses. See further discussion of these expenses below under “Other Financial Data - Consolidated.”investments,its own land along with an increase in the royalties received from existing agreements.$134,047$3.6 million. There was no such revenue for the three months ended March 31, 2017.20172017.$130,438$0.4 million for the second quartercomparable period of 2016, an2017. The increase in salaries and related employee benefits is directly related to the increase in the number of 2.8%. Grazing lease income was $123,457employees from 10 employees as of March 31, 2017 to 36 as of March 31, 2018 and additional contract labor expenses for the second quarter of 2017, compared to $122,234 for the second quarter of 2016, an increase of 1.0%. Interest on notes receivable for the second quarter of 2017 was $1,025, a decrease of 56.6%three months ended March 31, 2018 compared to the second quartersame period of 2016 when interest on notes receivable was $2,360. This decrease is primarily due to principal prepayments received on notes due to the Trust. As2017.June 30, 2017, notes receivable for land sales were $46,389 compared to $111,781 at June 30, 2016, a decrease of 58.5%. Interest income earned from investments was $9,565$1.3 million for the second quarter of 2017, comparedthree months ended March 31, 2018, include expenses for equipment rental, propane and fuel and other equipment-related expenses associated with TPWR. The Trust did not incur water service-related expenses during the three months ended March 31, 2017.$5,844$0.8 million for the second quarter of 2016, an increase of 63.7%. 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 $762,207three months ended March 31, 2018 from $0.3 million for the second quartersame period of 2017 compared to $394,217 for2017. Approximately $0.2 million of the second quarter of 2016, an increase of 93.3%. This increase is primarily attributablerelated to an increase in oilinsurance expenses which are partially attributable to the increase in the number of employees subsequent to March 31, 2017. Travel expenses, office rent and gas production taxes which resultedother general expenses increased as a result of the opening of an additional office in Midland, Texas for our TPWR operations.royalty revenue discussed above.General and administrative expenses were $1,854,463 for the second quarter of 2017 compared to $698,423 for the second quarter of 2016, an increase of 165.5%. This increase was primarily due to an increase in professional fees related to a strategic review of the company and an increase in employment expenses due to the increase in drilling and exploration activity on land owned by the Trust.Results of Operations for the Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016Earnings per Sub-share certificate were $4.00 for the first six months of 2017, compared to $2.16 for the first six months of 2016. Total operating and investing revenues were $51,596,381 for the first six months of 2017 compared to $28,094,213 for the first six months of 2016, an increase of 83.7%. This increase in revenue and earnings was due primarily to increases inroyalties collected, easements and sundry income and oil and gas royalty revenue.Oil and gas royalty revenue was $24,075,738 for the first six months of 2017, compared to $12,477,453 for the first six months of 2016, an increase of 93.0%. Oil royalty revenue was $17,271,801 for the first six months of 2017, an increase of 82.9% from the first six months of 2016 when oil royalty revenue was $9,445,507. Crude oil production subject to the Trust’s royalty interest increased 29.9% in the first six months of 2017 compared to the first six months of 2016. In addition, the average price per royalty barrel of crude oilpayments received during the first six months of 2017 was 40.8% higher than the average price received during the first six months of 2016. Gas royalty revenue was $6,803,937 for the first six months of 2017, an increase of 124.4% from the first six months of 2016 when gas royalty revenue was $3,031,946. This increase in gas royalty revenue resulted from both price and volume increases of 50.6% and 49.4% respectively, in the first six months of 2017 compared to the first six months of 2016.During the first six months of 2017, the Trust sold approximately 11.02 acres of land for a total of $220,400, or approximately $20,000 per acre. In the first six months of 2016, the Trust sold approximately 8.56 acres for a total of $86,000, or approximately $10,047 per acre.Easements and sundry income was $27,032,474 for the first six months of 2017, an increase of 77.0% compared to the first six months of 2016 when easements and sundry income was $15,269,943. This increase resulted primarily from increases in pipeline easement income and water sales and royalties collected during the three months ended March 31, 2018 over the three months ended March 31, 2017.a lesser extent, material sales. Pipeline easement income was $18,951,057 (before deferral of term easements)$1.9 million for the first sixthree months ended March 31, 2018 and 2017, respectively. The increased use of 2017,investing cash flows is due to our investment of $10.5 million in water service-related assets during the three months ended March 31, 2018.$9,497,329 (before deferral of term easements)$19.4 million for the first sixthree months ended March 31, 2018 and 2017, respectively. During the three months ended March 31, 2018, the Trust paid total dividends of 2016, an increase$31.7 million consisting of 99.5%. The Trust is currently moving toward the usea cash dividend of term easements (in lieu$1.05 per Sub-share and a special dividend of perpetual) which will require us$3.00 per Sub-share to gradually recognize the income for easements over the lifeeach sub-shareholder of the agreement, in lieu of recognizing it allrecord at the beginningclose of business on March 9, 2018. During the termthree months ended March 31, 2017, the Trust paid total dividends of $10.7 million consisting of a cash dividend of $0.35 per Sub-share and a special dividend of $1.00 per Sub-share to each sub-shareholder of record at the easement. As a result, $12,743,433close of easement income received in the first six months of 2017 and $2,485,911 of easement income received in the first six months of 2016 was deferred and therefore not reflected in the consolidated statements of income and total comprehensive income. This was the primary reason for the 120.0% increase in unearned revenue. Water sales for the first six months of 2017 were $11,666,316 compared to $3,662,521 in the first six months of 2016 an increase of 218.5%. This category of income is unpredictable and may vary significantly from quarter to quarter.Other income, including interestbusiness on investments, was $267,769 for the first six months of 2017 compared to $260,817 for the first six months of 2016, an increase of 2.7%. Grazing lease income was $246,608 for the first six months of 2017, compared to $244,309 for the first six months of 2016, an increase of 0.9%. Interest on notes receivable for the first six months of 2017 was $2,102, a decrease of 55.5% compared to the first six months of 2016 when interest on notes receivable was $4,723. This decrease is primarily due to principal prepayments received on notes due to the Trust. As of June 30, 2017, notes receivable for land sales were $46,389 compared to $111,781 at June 30, 2016, a decrease of 58.5%. Interest income earned from investments was $19,059 for the first six months of 2017, compared to $11,785 for the first six months of 2016, an increase of 61.7%. 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 $1,421,966 for the first six months of 2017 compared to $740,801 for the first six months of 2016, an increase of 91.9%. 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 $3,319,407 for the first six months of 2017 compared to $1,447,528 for the first six months of 2016, an increase of 129.3%. This increase was primarily due to an increase in professional fees related to a strategic review of the company and an increase in employment expenses due to the increase in drilling and exploration activity on land owned by the Trust.gaswater service-related royalties, easements and sundry income, and water and land sales. Inpast, those sources have generated more than adequate amountsgrowth of ourthe Trust’songoing capital expenditures, working capital requirements and other cash needs and, in the opinion of management, should continue to do so infor the foreseeable future.2016.2017.PART IIOTHER INFORMATION2016.2017.(c)During the second quarter of 2017, the Trust repurchased Sub-share certificates as follows: 8,789 $ 282.37 – – 16,619 $ 292.76 – – 13,856 $ 288.32 – – 39,264* $ 288.87 – – * The Trust purchased and retired 39,264 Sub-shares in the open market.Period January 1 through January 31, 2018 2,343 $ 509.65 — — February 1 through February 28, 2018 2,958 498.06 — — March 1 through March 31, 2018 7,845 515.14 — — Total 13,146 $ 510.32 — — (1) The Trust purchased and retired 13,146 Sub-shares in the open market. DESCRIPTION 31.131.1* 31.231.2* 32.132.1* 32.232.2* 101.INSXBRL Instance 101.SCH101* The following information from the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 formatted in XBRL Taxonomy Extension Schema(eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income and Total Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) Notes to Condensed Consolidated Financial Statements. 101.CALXBRL Taxonomy Extension Calculation101.DEF* XBRL Taxonomy Extension Definition101.LABXBRL Taxonomy Extension Labels101.PREXBRL Taxonomy Extension PresentationSIGNATURESTEXAS PACIFIC LAND TRUST (Registrant)TEXAS PACIFIC LAND TRUST (Registrant) Date: May 7, 2018 By: /s/ Tyler Glover Tyler Glover, General Agent and Chief Executive Officer Date: August 4, 2017 By: /s/Tyler Glover Tyler Glover, General Agent andChief Executive Officer August 4, 2017May 7, 2018 /s/Robert J. Packer Robert J. Packer, General Agent and Chief Financial OfficerINDEX TO EXHIBITSEXHIBITNUMBERDESCRIPTION 31.1Rule 13a-14(a) Certification of Chief Executive Officer. 31.2Rule 13a-14(a) Certification of Chief Financial Officer.32.1Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance101.SCHXBRL Taxonomy Extension Schema101.CALXBRL Taxonomy Extension Calculation101.DEF XBRL Taxonomy Extension Definition101.LABXBRL Taxonomy Extension Labels101.PRE XBRL Taxonomy Extension Presentation13