Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 31, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 1-737 | |
Entity Registrant Name | Texas Pacific Land Trust | |
Entity Tax Identification Number | 75-0279735 | |
Entity Address, Address Line One | 1700 Pacific Avenue | |
Entity Address, Address Line Two | Suite 2900 | |
Entity Address, City or Town | Dallas | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75201 | |
City Area Code | (214) | |
Local Phone Number | 969-5530 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Title of 12(b) Security | Sub-shares in Certificates of Proprietary Interest (par value $0.03-1/3 per share) | |
Trading Symbol | TPL | |
Security Exchange Name | NYSE | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 7,756,156 | |
Entity Central Index Key | 0000097517 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
ASSETS | ||
Cash and cash equivalents | $ 249,881 | $ 119,647 |
Accrued receivables | 62,803 | 48,750 |
Tax like-kind exchange escrow | 0 | 3,799 |
Other assets | 4,766 | 3,884 |
Prepaid income taxes | 0 | 9,398 |
Property, plant and equipment, net of accumulated depreciation of $8,006 and $3,012 as of September 30, 2019 and December 31, 2018, respectively | 87,072 | 64,802 |
Real estate acquired | 84,902 | 10,492 |
Royalty interests acquired | 29,320 | 24,303 |
Operating lease right-of-use assets | 3,250 | |
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
Total assets | 521,994 | 285,075 |
LIABILITIES AND CAPITAL | ||
Accounts payable and accrued expenses | 19,553 | 10,505 |
Income taxes payable | 4,364 | 1,607 |
Deferred taxes payable | 34,996 | 14,903 |
Unearned revenue | 16,184 | 13,369 |
Operating lease liabilities | 3,471 | |
Total liabilities | 78,568 | 40,384 |
Commitments and contingencies | 0 | 0 |
Capital: | ||
Certificates of Proprietary Interest, par value $100 each; none outstanding | 0 | 0 |
Sub-share Certificates in Certificates of Proprietary Interest, par value $0.0333 each; outstanding 7,756,156 and 7,762,414 Sub-share Certificates as of September 30, 2019 and December 31, 2018, respectively | 0 | 0 |
Accumulated other comprehensive loss | (1,051) | (1,078) |
Net proceeds from all sources | 444,477 | 245,769 |
Total capital | 443,426 | 244,691 |
Total liabilities and capital | 521,994 | 285,075 |
Land Surface Rights | ||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
Land (surface rights) | 0 | 0 |
1/16th Nonparticipating Perpetual Royalty Interest | ||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
1/16th nonparticipating perpetual royalty interest | 0 | 0 |
1/128th Nonparticipating Perpetual Royalty Interest | ||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned: | ||
1/128th nonparticipating perpetual royalty interest | $ 0 | $ 0 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Property, plant and equipment, accumulated depreciation | $ 8,006 | $ 3,012 |
Certificates of proprietary interest, par value (in dollars per share) | $ 100 | $ 100 |
Certificates of proprietary interest, outstanding (in shares) | 0 | 0 |
Sub-share certificates of proprietary interest, par value (in dollars per share) | $ 0.0333 | $ 0.0333 |
Sub-share certificates of proprietary interest, outstanding (in shares) | 7,756,156 | 7,762,414 |
1/16th Nonparticipating Perpetual Royalty Interest | ||
Nonparticipating perpetual royalty interest rate | 6.25% | 6.25% |
1/128th Nonparticipating Perpetual Royalty Interest | ||
Nonparticipating perpetual royalty interest rate | 0.78125% | 0.78125% |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income and Total Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues: | ||||
Total revenues | $ 98,530 | $ 73,168 | $ 377,164 | $ 207,019 |
Expenses: | ||||
Salaries and related employee expenses | 8,537 | 4,050 | 22,742 | 10,449 |
Water service-related expenses | 5,122 | 3,707 | 15,423 | 7,601 |
General and administrative expenses | 2,864 | 1,190 | 7,102 | 2,882 |
Legal and professional fees | 5,558 | 556 | 15,198 | 1,623 |
Depreciation and amortization | 2,631 | 706 | 5,286 | 1,519 |
Total operating expenses | 24,712 | 10,209 | 65,751 | 24,074 |
Operating income | 73,818 | 62,959 | 311,413 | 182,945 |
Other income | 941 | 236 | 1,771 | 526 |
Income before income taxes | 74,759 | 63,195 | 313,184 | 183,471 |
Income tax expense (benefit): | ||||
Current | 9,918 | 12,433 | 43,485 | 36,415 |
Deferred | 4,819 | 0 | 20,093 | 0 |
Total income tax expense | 14,737 | 12,433 | 63,578 | 36,415 |
Net income | 60,022 | 50,762 | 249,606 | 147,056 |
Other comprehensive income — periodic pension costs, net of income taxes of $2, $3, $7 and $10, respectively | 9 | 13 | 27 | 39 |
Total comprehensive income | $ 60,031 | $ 50,775 | $ 249,633 | $ 147,095 |
Weighted average number of Sub-share Certificates outstanding | 7,756,156 | 7,786,692 | 7,756,643 | 7,797,262 |
Net income per Sub-share Certificate — basic and diluted | $ 7.74 | $ 6.52 | $ 32.18 | $ 18.86 |
Cash dividends per Sub-share Certificate (in dollars per share) | $ 0 | $ 0 | $ 6 | $ 4.05 |
Oil and gas royalties | ||||
Revenues: | ||||
Total revenues | $ 38,259 | $ 31,253 | $ 111,113 | $ 88,078 |
Easements and other surface-related income | ||||
Revenues: | ||||
Total revenues | 33,911 | 22,068 | 87,635 | 66,845 |
Water sales and royalties | ||||
Revenues: | ||||
Total revenues | 21,654 | 18,178 | 65,067 | 47,428 |
Land sales | ||||
Revenues: | ||||
Total revenues | 4,621 | 1,543 | 113,020 | 4,293 |
Other operating revenue | ||||
Revenues: | ||||
Total revenues | $ 85 | $ 126 | $ 329 | $ 375 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Income and Total Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Other Comprehensive Income, Tax | $ 2 | $ 3 | $ 7 | $ 10 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 249,606 | $ 147,056 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Deferred taxes | 20,093 | 0 |
Depreciation and amortization | 5,286 | 1,519 |
Changes in operating assets and liabilities: | ||
Operating assets, excluding income taxes | (18,278) | (28,706) |
Prepaid income taxes | 9,398 | 1,202 |
Operating liabilities, excluding income taxes | 15,361 | 7,555 |
Income taxes payable | 2,757 | 2,208 |
Cash provided by operating activities | 284,223 | 130,834 |
Cash flows from investing activities: | ||
Proceeds from sale of fixed assets | 117 | 25 |
Acquisition of land | (74,410) | (2,663) |
Acquisition of royalty interests | (5,017) | 0 |
Purchase of fixed assets | (27,579) | (40,006) |
Cash used in investing activities | (106,889) | (42,644) |
Cash flows from financing activities: | ||
Purchase of Sub-share Certificates in Certificates of Proprietary Interest | (4,353) | (25,501) |
Dividends paid | (46,546) | (31,652) |
Cash used in financing activities | (50,899) | (57,153) |
Net increase in cash, cash equivalents, and restricted cash | 126,435 | 31,037 |
Cash, cash equivalents and restricted cash, beginning of period | 123,446 | 79,580 |
Cash, cash equivalents, and restricted cash, end of period | 249,881 | 110,617 |
Supplemental disclosure of cash flow information: | ||
Income taxes paid | $ 31,337 | $ 34,251 |
Organization and Description of
Organization and Description of Business Segments | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business Segments | Organization and Description of Business Segments Texas Pacific Land Trust (which, together with its subsidiaries as the context requires, may be referred to as “Texas Pacific”, the “Trust”, “our”, “we” or “us”) is one of the largest landowners in the State of Texas with approximately 900,000 acres of land in West Texas. Texas Pacific was organized under a Declaration of Trust, dated February 1, 1888, to receive and hold title to extensive tracts of land in the State of Texas, previously the property of the Texas and Pacific Railway Company, and to issue transferable Certificates of Proprietary Interest pro rata to the original holders of certain debt securities of the Texas and Pacific Railway Company. The Trust is organized to manage land, including royalty interests, for the benefit of its owners. The Trust’s income is derived primarily from oil and gas royalties, sales of water and land, easements and commercial leases of the land. We operate our business in two segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of strategies and objectives of the Trust and provide a framework for timely and rational allocation of resources within businesses. See Note 9, “Business Segment Reporting” for further information regarding our segments. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Interim Unaudited Financial Information The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements include all adjustments necessary to present fairly the financial position of the Trust as of September 30, 2019 and the results of its operations for the three and nine months ended September 30, 2019 and 2018, respectively, and its cash flows for the nine months ended September 30, 2019 and 2018, respectively. Such adjustments are of a normal recurring nature. Principles of Consolidation and Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our accounts and the accounts of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 28, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report. Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Change in Accounting Estimate Management evaluates its estimates on a routine basis. Effective July 1, 2019, the Trust revised the estimated useful lives of certain water service-related assets after its disaggregation of water service-related projects into sub classifications. The Trust purchased these water service-related assets from July 1, 2017 through June 30, 2019. Based on information gained from operations over this time period, management believes that these water service-related assets will benefit periods ranging from four The net book value of these water service-related assets at June 30, 2019, was not modified and is depreciated over the revised estimated useful lives of these assets. The effect of the change in estimated useful lives to depreciation expense, net income and earnings per share for the three and nine months ended September 30, 2019 is presented in the table below (in thousands, except earnings per share): Effect on income statement line items due to change in estimated useful lives Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Increase in depreciation and amortization expense $ 916 $ 916 Decrease in net income $ (723) $ (723) Decrease in net income per Sub-share Certificate — basic and diluted $ (0.09) $ (0.09) Reclassifications Certain financial information on the condensed consolidated balance sheets as of December 31, 2018 and condensed consolidated statements of income for the three and nine months ended September 30, 2018 has been revised to conform to the current year presentation. These revisions include, but are not limited to, the classification of the tax like-kind exchange escrow from other assets to a separate balance sheet line item and certain expense items from one expense line item to another expense line item. Total assets and expenses were not affected by these reclassifications. Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): September 30, 2019 December 31, 2018 Cash and cash equivalents $ 249,881 $ 119,647 Tax like-kind exchange escrow — 3,799 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 249,881 $ 123,446 Recently Adopted Accounting Guidance Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases (Topic 842) ” which amended the existing lease accounting guidance to require lessees to recognize a right of use asset and lease liability on the balance sheet for all leases with terms greater than twelve months. We adopted the new leasing standard and all related amendments on January 1, 2019. We elected the optional transition method provided by ASU No. 2018-11, “ Leases (Topic 842): Targeted Improvements ” and as a result, have not restated our condensed consolidated financial statements for prior periods presented. We also elected the practical expedients permitted under the transition guidance that retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. In addition, we have not reassessed the accounting treatment of contracts entered into prior to adoption of the new lease guidance. As of September 30, 2019, we have recorded right-of-use assets of $3.3 million and lease liabilities for $3.5 million primarily related to operating leases in connection with our administrative offices located in Dallas and Midland, Texas. The office lease agreements require monthly rent payments and expire in December 2025 and August 2022, respectively. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease cost for the three and nine months ended September 30, 2019 was $0.2 million and $0.4 million, respectively. Future minimum lease payments under these operating leases are as follows as of September 30, 2019 (in thousands): 2019 (excluding the nine months ended September 30) $ 144 2020 696 2021 796 2022 697 2023 537 Thereafter 1,067 Total lease payments 3,937 Less: imputed interest (466) Total operating lease liabilities $ 3,471 Implementation Costs Incurred in Cloud Computing Arrangements In August 2018, the FASB issued ASU 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-14, “ Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to Disclosure Requirements for Defined Benefit Plans .” The ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Trust is currently evaluating the impact that ASU 2018-14 will have on our consolidated financial statements and disclosures. |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment, net consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands): September 30, 2019 December 31, 2018 Property, plant and equipment: Water service-related assets (1) $ 88,625 $ 62,919 Furniture, fixtures and equipment 5,855 4,297 Other 598 598 Property, plant and equipment at cost 95,078 67,814 Less: accumulated depreciation (8,006) (3,012) Property, plant and equipment, net $ 87,072 $ 64,802 (1) Water service-related assets reflect assets related to water sourcing and water treatment projects. Depreciation expense was $2.6 million and $0.7 million for the three months ended September 30, 2019 and 2018, respectively. Depreciation expense was $5.2 million and $1.5 million for the nine months ended September 30, 2019 and 2018, respectively. |
Real Estate Activity
Real Estate Activity | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Real Estate Activity | Real Estate Activity As of September 30, 2019 and December 31, 2018, the Trust owned the following land and real estate (in thousands, except number of acres): September 30, 2019 December 31, 2018 Number of Acres Net Book Value Number of Acres Net Book Value Land (surface rights) 855,476 $ — 877,462 $ — Real estate acquired 46,386 84,902 24,715 10,492 Total real estate situated in 19 counties in Texas 901,862 $ 84,902 902,177 $ 10,492 No valuation allowance was necessary at September 30, 2019 and December 31, 2018. Land Sales For the nine months ended September 30, 2019, the Trust sold approximately 21,986 acres (13,180 acres in Loving County, 5,675 acres in Culberson County, 1,651 acres in Hudspeth County, 843 acres in Reeves County, 636 acres in Midland County and approximately 1 acre in Glasscock County) of land in Texas for an aggregate sales price of approximately $113.0 million, with an average of approximately $5,141 per acre. For the nine months ended September 30, 2018, the Trust sold approximately 167 acres (80 acres in Culberson County, 40 acres in Loving County, 32 in Reeves County and 15 in El Paso County) of land in Texas for an aggregate sales price of approximately $4.3 million, with an average of approximately $25,734 per acre. Land Acquisitions For the nine months ended September 30, 2019, the Trust acquired approximately 21,671 acres (Culberson, Glasscock, Loving and Reeves Counties) of land in Texas for an aggregate purchase price of approximately $74.4 million, with an average of approximately $3,434 per acre. For the nine months ended September 30, 2018, the Trust acquired approximately 2,884 acres (Mitchell and Upton Counties) of land in Texas for an aggregate purchase price of approximately $2.7 million, with an average of approximately $924 per acre. |
Royalty Interests
Royalty Interests | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Royalty Interests | Royalty Interests As of September 30, 2019 and December 31, 2018, the Trust owned the following oil and gas royalty interests (in thousands, except number of interests): Net Book Value September 30, 2019 December 31, 2018 1/16th nonparticipating perpetual royalty interests $ — $ — 1/128th nonparticipating perpetual royalty interests — — Royalty interests acquired 29,320 24,303 Total royalty interests $ 29,320 $ 24,303 No valuation allowance was necessary at September 30, 2019 and December 31, 2018. For the nine months ended September 30, 2019, the Trust acquired oil and gas royalty interests in approximately 1,247 net royalty acres (normalized to 1/8th) for an aggregate purchase price of $4.7 million, an average price of approximately $3,800 per net royalty acre. There were no oil and gas royalty interest transactions for the nine months ended September 30, 2018. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Effective January 1, 2018, the statutory Federal income tax rate for the Trust decreased from 35% to 21%. The Trust’s effective Federal income tax rate is less than the 21% statutory rate because taxable income is reduced by statutory percentage depletion allowed on mineral royalty income. The Trust structured the $100.0 million land sale consummated in January 2019 as a §1031 exchange for federal income tax purposes and recognized temporary tax basis differences related to acquisition of property, plant and equipment for the three and nine months ended September 30, 2019. As a result, the current federal income tax liability and expense were each reduced by approximately $20.1 million during the nine months ended September 30, 2019, while the deferred federal income tax liability and expense increased by the same amount. |
Capital
Capital | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Capital | Capital The Sub-share Certificates (“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. Dividends On March 15, 2019, we paid $46.5 million in dividends representing a regular cash dividend of $1.75 per Sub-share and a special dividend of $4.25 per Sub-share for sub-shareholders of record at the close of business on March 8, 2019. On March 16, 2018, we paid $31.7 million in dividends representing a regular cash dividend of $1.05 per Sub-share and a special dividend of $3.00 per Sub-share for sub-shareholders of record at the close of business on March 9, 2018. Repurchases of Sub-shares During the nine months ended September 30, 2019, we purchased and retired 6,258 Sub-shares. During the nine months ended September 30, 2018, we purchased and retired 39,768 Sub-shares. |
Business Segment Reporting
Business Segment Reporting | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Business Segment Reporting | Business Segment Reporting During the periods presented, we reported our financial performance based on the following segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of strategies and objectives of the Trust and provide a framework for timely and rational allocation of resources within businesses. We eliminate any inter-segment revenues and expenses upon consolidation. The Land and Resource Management segment encompasses the business of managing approximately 900,000 acres of land and related resources in West Texas owned by the Trust. The revenue streams of this segment consist primarily of royalties from oil and gas, revenues from easements and commercial leases, and land and material sales. The Water Services and Operations segment encompasses the business of providing a full-service water offering to operators in the Permian Basin. The revenue streams of this segment consist of revenue generated from direct sales of sourced and treated water as well as revenues from royalties on water service-related activity. Segment financial results were as follows for the three and nine months ended September 30, 2019 and 2018 (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Revenues: Land and resource management $ 65,076 $ 47,513 $ 284,223 $ 142,642 Water services and operations 33,454 25,655 92,941 64,377 Total consolidated revenues $ 98,530 $ 73,168 $ 377,164 $ 207,019 Net income: Land and resource management $ 43,911 $ 36,385 $ 204,222 $ 109,700 Water services and operations 16,111 14,377 45,384 37,356 Total consolidated net income $ 60,022 $ 50,762 $ 249,606 $ 147,056 Capital expenditures: Land and resource management $ 29 $ 909 $ 1,445 $ 2,464 Water services and operations 4,949 7,533 26,134 37,542 Total capital expenditures $ 4,978 $ 8,442 $ 27,579 $ 40,006 Depreciation and amortization: Land and resource management $ 257 $ 160 $ 695 $ 330 Water services and operations 2,374 546 4,591 1,189 Total depreciation and amortization $ 2,631 $ 706 $ 5,286 $ 1,519 The following table presents total assets and property, plant and equipment, net by segment as of September 30, 2019 and December 31, 2018 (in thousands): September 30, 2019 December 31, 2018 Assets: Land and resource management $ 398,120 $ 198,922 Water services and operations 123,874 86,153 Total consolidated assets $ 521,994 $ 285,075 Property, plant and equipment, net: Land and resource management $ 4,470 $ 3,720 Water services and operations 82,602 61,082 Total consolidated property, plant and equipment, net $ 87,072 $ 64,802 |
Oil and Gas Producing Activitie
Oil and Gas Producing Activities | 9 Months Ended |
Sep. 30, 2019 | |
Extractive Industries [Abstract] | |
Oil and Gas Producing Activities | Oil and Gas Producing ActivitiesThere 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. As of September 30, 2019, the Trust has identified 424 DUC wells subject to our royalty interest. Beginning in the third quarter of 2019, we implemented a new methodology to quantify the number of DUC wells. We changed the measurement period for determining a DUC well from waiting a minimum of 120 days to all wells awaiting completion. Additionally, we began using uniform drilling spacing units with pooled interests which yields a higher number of DUC wells at a lower net royalty interest. For comparative purposes, the table below presents the number of DUC wells by quarter for current and prior periods utilizing the new methodology discussed above: Number of DUC wells September 30, 2019 424 June 30, 2019 369 March 31, 2019 376 December 31, 2018 362 September 30, 2018 341 June 30, 2018 364 March 31, 2018 347 December 31, 2017 319 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsWe 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 the filing date we issued these consolidated financial statements and did not identify any subsequent events requiring disclosure. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Principals of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our accounts and the accounts of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 28, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report. |
Use of Estimates in the Preparation of Financial Statements | Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Change in Accounting Estimate |
Reclassifications | Reclassifications Certain financial information on the condensed consolidated balance sheets as of December 31, 2018 and condensed consolidated statements of income for the three and nine months ended September 30, 2018 has been revised to conform to the current year presentation. These revisions include, but are not limited to, the classification of the tax like-kind exchange escrow from other assets to a separate balance sheet line item and certain expense items from one expense line item to another expense line item. Total assets and expenses were not affected by these reclassifications. |
Leases | Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “ Leases (Topic 842) ” which amended the existing lease accounting guidance to require lessees to recognize a right of use asset and lease liability on the balance sheet for all leases with terms greater than twelve months. We adopted the new leasing standard and all related amendments on January 1, 2019. We elected the optional transition method provided by ASU No. 2018-11, “ Leases (Topic 842): Targeted Improvements ” and as a result, have not restated our condensed consolidated financial statements for prior periods presented. We also elected the practical expedients permitted under the transition guidance that retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. In addition, we have not reassessed the accounting treatment of contracts entered into prior to adoption of the new lease guidance. |
Recently Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-14, “ Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to Disclosure Requirements for Defined Benefit Plans |
Implementation Costs Incurred In Cloud Computing Arrangements | Implementation Costs Incurred in Cloud Computing Arrangements In August 2018, the FASB issued ASU 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Change in Accounting Estimate | The effect of the change in estimated useful lives to depreciation expense, net income and earnings per share for the three and nine months ended September 30, 2019 is presented in the table below (in thousands, except earnings per share): Effect on income statement line items due to change in estimated useful lives Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Increase in depreciation and amortization expense $ 916 $ 916 Decrease in net income $ (723) $ (723) Decrease in net income per Sub-share Certificate — basic and diluted $ (0.09) $ (0.09) |
Cash and cash equivalents | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): September 30, 2019 December 31, 2018 Cash and cash equivalents $ 249,881 $ 119,647 Tax like-kind exchange escrow — 3,799 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 249,881 $ 123,446 |
Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): September 30, 2019 December 31, 2018 Cash and cash equivalents $ 249,881 $ 119,647 Tax like-kind exchange escrow — 3,799 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 249,881 $ 123,446 |
Future Minimum Lease Payments | Future minimum lease payments under these operating leases are as follows as of September 30, 2019 (in thousands): 2019 (excluding the nine months ended September 30) $ 144 2020 696 2021 796 2022 697 2023 537 Thereafter 1,067 Total lease payments 3,937 Less: imputed interest (466) Total operating lease liabilities $ 3,471 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment, net consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands): September 30, 2019 December 31, 2018 Property, plant and equipment: Water service-related assets (1) $ 88,625 $ 62,919 Furniture, fixtures and equipment 5,855 4,297 Other 598 598 Property, plant and equipment at cost 95,078 67,814 Less: accumulated depreciation (8,006) (3,012) Property, plant and equipment, net $ 87,072 $ 64,802 (1) Water service-related assets reflect assets related to water sourcing and water treatment projects. |
Real Estate Activity (Tables)
Real Estate Activity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Schedule of Real Estate Properties | As of September 30, 2019 and December 31, 2018, the Trust owned the following land and real estate (in thousands, except number of acres): September 30, 2019 December 31, 2018 Number of Acres Net Book Value Number of Acres Net Book Value Land (surface rights) 855,476 $ — 877,462 $ — Real estate acquired 46,386 84,902 24,715 10,492 Total real estate situated in 19 counties in Texas 901,862 $ 84,902 902,177 $ 10,492 |
Royalty Interests (Tables)
Royalty Interests (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Schedule of Royalty Interests | As of September 30, 2019 and December 31, 2018, the Trust owned the following oil and gas royalty interests (in thousands, except number of interests): Net Book Value September 30, 2019 December 31, 2018 1/16th nonparticipating perpetual royalty interests $ — $ — 1/128th nonparticipating perpetual royalty interests — — Royalty interests acquired 29,320 24,303 Total royalty interests $ 29,320 $ 24,303 |
Business Segment Reporting (Tab
Business Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Financial Results | Segment financial results were as follows for the three and nine months ended September 30, 2019 and 2018 (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Revenues: Land and resource management $ 65,076 $ 47,513 $ 284,223 $ 142,642 Water services and operations 33,454 25,655 92,941 64,377 Total consolidated revenues $ 98,530 $ 73,168 $ 377,164 $ 207,019 Net income: Land and resource management $ 43,911 $ 36,385 $ 204,222 $ 109,700 Water services and operations 16,111 14,377 45,384 37,356 Total consolidated net income $ 60,022 $ 50,762 $ 249,606 $ 147,056 Capital expenditures: Land and resource management $ 29 $ 909 $ 1,445 $ 2,464 Water services and operations 4,949 7,533 26,134 37,542 Total capital expenditures $ 4,978 $ 8,442 $ 27,579 $ 40,006 Depreciation and amortization: Land and resource management $ 257 $ 160 $ 695 $ 330 Water services and operations 2,374 546 4,591 1,189 Total depreciation and amortization $ 2,631 $ 706 $ 5,286 $ 1,519 |
Schedule of Total Assets And Property, Plant, and Equipment | The following table presents total assets and property, plant and equipment, net by segment as of September 30, 2019 and December 31, 2018 (in thousands): September 30, 2019 December 31, 2018 Assets: Land and resource management $ 398,120 $ 198,922 Water services and operations 123,874 86,153 Total consolidated assets $ 521,994 $ 285,075 Property, plant and equipment, net: Land and resource management $ 4,470 $ 3,720 Water services and operations 82,602 61,082 Total consolidated property, plant and equipment, net $ 87,072 $ 64,802 |
Oil and Gas Producing Activit_2
Oil and Gas Producing Activities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Extractive Industries [Abstract] | |
Schedule Of Number of DUC Wells | For comparative purposes, the table below presents the number of DUC wells by quarter for current and prior periods utilizing the new methodology discussed above: Number of DUC wells September 30, 2019 424 June 30, 2019 369 March 31, 2019 376 December 31, 2018 362 September 30, 2018 341 June 30, 2018 364 March 31, 2018 347 December 31, 2017 319 |
Organization and Description _2
Organization and Description of Business Segments (Details) | 9 Months Ended |
Sep. 30, 2019asegment | |
Organization, Consolidation and Presentation of Financial Statements [Line Items] | |
Number of operating segments | segment | 2 |
West Texas | |
Organization, Consolidation and Presentation of Financial Statements [Line Items] | |
Area of land (in acres) | a | 900,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies- Summary Of Changes in Accounting Estimates (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Depreciation and amortization | $ 2,631 | $ 706 | $ 5,286 | $ 1,519 |
Net income | $ 60,022 | $ 50,762 | $ 249,606 | $ 147,056 |
Net income per Sub-share Certificate — basic and diluted | $ 7.74 | $ 6.52 | $ 32.18 | $ 18.86 |
Minimum | Water service-related assets | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible asset, useful life | 4 years | |||
Maximum | Water service-related assets | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-lived intangible asset, useful life | 15 years | |||
Service Life | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Depreciation and amortization | $ 916 | $ 916 | ||
Net income | $ (723) | $ (723) | ||
Net income per Sub-share Certificate — basic and diluted | $ (0.09) | $ (0.09) |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 249,881 | $ 119,647 | ||
Tax like-kind exchange escrow | 0 | 3,799 | ||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ 249,881 | $ 123,446 | $ 110,617 | $ 79,580 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Accounting Policies [Abstract] | ||
Operating lease right-of-use assets | $ 3,250 | $ 3,250 |
Operating lease liabilities | 3,471 | 3,471 |
Operating lease expense | $ 200 | $ 400 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Future Minimum Lease Payments (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Accounting Policies [Abstract] | |
2019 (excluding the nine months ended September 30) | $ 144 |
2020 | 696 |
2021 | 796 |
2022 | 697 |
2023 | 537 |
Thereafter | 1,067 |
Total lease payments | 3,937 |
Less: imputed interest | (466) |
Total operating lease liabilities | $ 3,471 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment at cost | $ 95,078 | $ 95,078 | $ 67,814 | ||
Less: accumulated depreciation | (8,006) | (8,006) | (3,012) | ||
Property, plant and equipment, net | 87,072 | 87,072 | 64,802 | ||
Depreciation expense | 2,600 | $ 700 | 5,200 | $ 1,500 | |
Water service-related assets | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment at cost | 88,625 | 88,625 | 62,919 | ||
Furniture, fixtures and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment at cost | 5,855 | 5,855 | 4,297 | ||
Other | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment at cost | $ 598 | $ 598 | $ 598 |
Real Estate Activity - Schedule
Real Estate Activity - Schedule of Land and Real Estate Ownership (Details) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019USD ($)acounty | Dec. 31, 2018USD ($)acounty | |
Number of Acres | ||
Land (surface rights) (in acres) | a | 855,476 | 877,462 |
Real estate acquired (in acres) | a | 46,386 | 24,715 |
Total real estate situated in 19 counties in Texas (in acres) | a | 901,862 | 902,177 |
Net Book Value | ||
Land (surface rights) | $ | $ 0 | $ 0 |
Real estate acquired | $ | 84,902 | 10,492 |
Total real estate situated in 19 counties in Texas | $ | $ 84,902 | $ 10,492 |
Number of counties with real estate in Texas | county | 19 | 19 |
Real Estate Activity (Details)
Real Estate Activity (Details) $ in Millions | 1 Months Ended | 9 Months Ended | |
Jan. 31, 2019USD ($) | Sep. 30, 2019USD ($)a$ / a | Sep. 30, 2018USD ($)a$ / a | |
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 21,986 | 167 | |
Proceeds from sale of real estate | $ | $ 100 | $ 113 | $ 4.3 |
Average sale price (in dollars per acre) | $ / a | 5,141 | 25,734 | |
Additions | $ | $ 74.4 | $ 2.7 | |
Average purchase price (in dollars per acre) | $ / a | 3,434 | 924 | |
Loving county | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 13,180 | 40 | |
Culberson county | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 5,675 | 80 | |
Hudspeth county | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 1,651 | ||
Reeves county | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 843 | 32 | |
El paso county | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 15 | ||
Midland County | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 636 | ||
Glasscock County | |||
Real Estate Properties [Line Items] | |||
Area of real estate property, sold (acre) | 1 | ||
Culberson, Glasscock, Loving and Reeves Counties | |||
Real Estate Properties [Line Items] | |||
Additions (acre) | 21,671 | ||
Mitchell and Uptown County | |||
Real Estate Properties [Line Items] | |||
Additions (acre) | 2,884 |
Royalty Interests (Details)
Royalty Interests (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019USD ($)a$ / a | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($) | |
Net Book Value | |||
Royalty interests acquired | $ 29,320 | $ 24,303 | |
Total royalty interests | 29,320 | $ 24,303 | |
Acquisition of royalty interests | $ 5,017 | $ 0 | |
1/16th Nonparticipating Perpetual Royalty Interest | |||
Real Estate Properties [Line Items] | |||
Nonparticipating perpetual royalty interest rate | 6.25% | 6.25% | |
Net Book Value | |||
1/16th nonparticipating perpetual royalty interest | $ 0 | $ 0 | |
1/128th Nonparticipating Perpetual Royalty Interest | |||
Real Estate Properties [Line Items] | |||
Nonparticipating perpetual royalty interest rate | 0.78125% | 0.78125% | |
Net Book Value | |||
1/128th nonparticipating perpetual royalty interest | $ 0 | $ 0 | |
Additional real estate acquisitions | |||
Net Book Value | |||
Net royalty interests (acre) | a | 1,247 | ||
Acquisition of royalty interests | $ 4,700 | ||
Average price per net royalty acre acquired (in dollars per acre) | $ / a | 3,800 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 9 Months Ended | |
Jan. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |||
Land sale | $ 100 | $ 113 | $ 4.3 |
Current federal income tax liability reduction | 20.1 | ||
Current federal income tax expense reduction | 20.1 | ||
Deferred federal income tax liability increase | 20.1 | ||
Deferred federal income tax expense increase | $ 20.1 |
Capital (Details)
Capital (Details) $ / shares in Units, $ in Millions | Mar. 15, 2019USD ($)$ / shares | Mar. 16, 2018USD ($)$ / shares | Sep. 30, 2019$ / shares | Sep. 30, 2018$ / shares | Sep. 30, 2019$ / sharesshares | Sep. 30, 2018$ / sharesshares |
Class of Stock [Line Items] | ||||||
Payments of dividends | $ | $ 46.5 | $ 31.7 | ||||
Dividend paid per sub-share (in dollars per share) | $ 0 | $ 0 | $ 6 | $ 4.05 | ||
Sub Shares | ||||||
Class of Stock [Line Items] | ||||||
Ratio of certificates to sub-shares | 0.00033333 | |||||
Number of shares repurchased and retired (in shares) | shares | 6,258 | 39,768 | ||||
Cash Dividend | Sub Shares | ||||||
Class of Stock [Line Items] | ||||||
Dividend paid per sub-share (in dollars per share) | $ 1.75 | $ 1.05 | ||||
Special Dividend | Sub Shares | ||||||
Class of Stock [Line Items] | ||||||
Dividend paid per sub-share (in dollars per share) | $ 4.25 | $ 3 |
Business Segment Reporting (Det
Business Segment Reporting (Details) | Sep. 30, 2019a |
West Texas | |
Segment Reporting Information [Line Items] | |
Area of land (in acres) | 900,000 |
Business Segment Reporting - Fi
Business Segment Reporting - Financial Results (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Revenues | $ 98,530 | $ 73,168 | $ 377,164 | $ 207,019 |
Net income | 60,022 | 50,762 | 249,606 | 147,056 |
Capital expenditures | 4,978 | 8,442 | 27,579 | 40,006 |
Depreciation and amortization | 2,631 | 706 | 5,286 | 1,519 |
Land and resource management | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 65,076 | 47,513 | 284,223 | 142,642 |
Net income | 43,911 | 36,385 | 204,222 | 109,700 |
Capital expenditures | 29 | 909 | 1,445 | 2,464 |
Depreciation and amortization | 257 | 160 | 695 | 330 |
Water services and operations | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 33,454 | 25,655 | 92,941 | 64,377 |
Net income | 16,111 | 14,377 | 45,384 | 37,356 |
Capital expenditures | 4,949 | 7,533 | 26,134 | 37,542 |
Depreciation and amortization | $ 2,374 | $ 546 | $ 4,591 | $ 1,189 |
Business Segment Reporting - As
Business Segment Reporting - Assets and Property, Plant, and Equipment, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Segment Reporting Information [Line Items] | ||
Assets | $ 521,994 | $ 285,075 |
Property, plant and equipment, net | 87,072 | 64,802 |
Land and resource management | ||
Segment Reporting Information [Line Items] | ||
Assets | 398,120 | 198,922 |
Property, plant and equipment, net | 4,470 | 3,720 |
Water services and operations | ||
Segment Reporting Information [Line Items] | ||
Assets | 123,874 | 86,153 |
Property, plant and equipment, net | $ 82,602 | $ 61,082 |
Oil and Gas Producing Activit_3
Oil and Gas Producing Activities (Details) - well | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Extractive Industries [Abstract] | ||||||||
Number of DUC wells | 424 | 369 | 376 | 362 | 341 | 364 | 347 | 319 |