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FORM 10-K
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[X]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended: December 31, 2018
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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NOT APPLICABLE
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75-0279735
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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1700 Pacific Avenue, Suite 2770, Dallas, Texas 75201
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(Address of Principal Executive Offices) (Zip Code)
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(214) 969-5530
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(Registrant’s telephone number, including area code)
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Title of each class
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Name of Each Exchange on Which Registered
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Sub-shares in Certificates of Proprietary Interest
(par value $.03-1/3 per share)
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New York Stock Exchange
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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Emerging growth company
¨
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Page
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Years Ended December 31,
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|||||||||||||||||||
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2018
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2017
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2016
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Segment
Revenue
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% of Total
Consolidated
Revenue
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Segment
Revenue
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% of Total
Consolidated
Revenue
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Segment
Revenue
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% of Total
Consolidated
Revenue
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|||||||||
Oil and gas royalties
(1)
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$
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123.8
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41
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%
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$
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58.4
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38
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%
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$
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28.4
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43
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%
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Easements and sundry income
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63.9
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21
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%
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64.2
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42
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%
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26.2
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40
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%
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Sale of oil and gas royalty interests
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18.9
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6
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%
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—
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—
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%
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—
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—
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%
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Land sales and other income
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4.9
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2
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%
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0.7
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—
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%
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3.4
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5
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%
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Total Revenue - Land and Resource Management segment
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$
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211.5
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70
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%
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$
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123.3
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80
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%
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$
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58.0
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88
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%
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(1)
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On September 14, 2017, we settled the previously disclosed arbitration case with Chevron U.S.A., Inc. involving claims for underpayment of royalties. The Trust received $7.7 million as part of the settlement, including royalties that will be paid to the Trust on additional wells under several community leases. The settlement is included in oil and gas royalties for the year ended December 31, 2017.
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Years Ended December 31,
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2018
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2017
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2016
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Segment
Revenue
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% of Total
Consolidated
Revenue
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Segment
Revenue
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% of Total
Consolidated
Revenue
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Segment
Revenue
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% of Total
Consolidated
Revenue
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Water sales and royalties
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$
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63.9
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21
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%
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$
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25.5
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16
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%
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$
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8.1
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12
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%
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Easements and sundry income
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24.8
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9
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%
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5.8
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4
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%
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—
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—
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Total Revenue – Water Service and Operations segment
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$
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88.7
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30
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%
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$
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31.3
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20
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%
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$
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8.1
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12
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%
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•
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limited operating experience;
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•
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start-up costs for a new line of business;
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•
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lack of sufficient customers or loss of significant customers for the new line of business; and
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•
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difficulties in managing potentially rapid growth.
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Years Ended December 31,
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2018
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2017
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High
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Low
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High
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Low
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||||||||
1st Quarter
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$
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569.99
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$
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446.01
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$
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336.83
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$
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259.00
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2nd Quarter
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$
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739.89
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$
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496.15
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$
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315.00
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$
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275.65
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3rd Quarter
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$
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874.00
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$
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692.06
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$
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414.79
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$
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286.79
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4th Quarter
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$
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877.97
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$
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409.00
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$
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458.00
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$
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377.96
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Certificates of Proprietary Interest
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—
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Sub-shares in Certificates of Proprietary Interest
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247
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TOTAL
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247
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Period
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Total Number
of Sub-shares
Purchased
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Average
Price Paid
per
Sub-share
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Total
Number of Sub-
shares Purchased
as Part of
Publicly
Announced Plans
or Programs
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Maximum
Number (or
Approximate Dollar
Value) of Sub-
shares that May Yet
Be Purchased Under
the Plans or
Programs
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October 1, through October 31, 2018
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7,437
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$
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794.34
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—
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—
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November 1, through November 30, 2018
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7,368
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625.41
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—
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—
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December 1, through December 31, 2018
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4,612
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516.07
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—
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—
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Total
(1)
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19,417
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$
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664.14
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—
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—
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(1)
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The Trust purchased and retired 19,417 Sub-shares in the open market.
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Years Ended December 31,
(1)
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2018
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2017
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2016
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2015
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2014
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Income
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$
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300,220
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$
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154,634
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$
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66,109
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$
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78,090
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$
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53,661
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Income before income taxes
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$
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261,750
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$
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145,061
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$
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62,896
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$
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75,283
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$
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51,432
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Net income
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$
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209,736
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$
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97,231
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$
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42,275
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$
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50,039
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$
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34,765
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Net income per Sub-share
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$
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26.93
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$
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12.38
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$
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5.29
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$
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6.10
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$
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4.14
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Dividends per Sub-share
(2)
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$
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4.05
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$
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1.35
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$
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0.31
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$
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0.29
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$
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0.27
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Average number of Sub-shares outstanding
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7,787,407
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7,854,705
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7,989,030
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8,197,632
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8,397,314
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As of December 31,
(1)
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2018
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2017
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2016
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2015
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2014
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Total assets, exclusive of property with no assigned value
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$
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285,075
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$
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120,035
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$
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59,403
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$
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50,436
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$
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33,102
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(1)
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We adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue Recognition (Topic 606): Revenue from Contracts with Customers” on January 1, 2018 using the full retrospective method which required us to restate previously reported results as though the standard had always been in effect. Upon adoption of ASU 2014-09, we no longer defer revenue on our term easements.
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(2)
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Dividends per Sub-share include special dividends of
$3.00
and
$1.00
per Sub-share for the years ended December 31, 2018 and 2017, respectively.
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Years Ended December 31,
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||||||||||||
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2018
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|
2017
|
||||||||||
Revenues:
|
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|
|
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|
||||||
Land and resource management
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|
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|
|
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|
||||||
Oil and gas royalties
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$
|
123,834
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|
|
41
|
%
|
|
$
|
58,418
|
|
|
38
|
%
|
Easements and sundry income
|
63,908
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|
|
21
|
%
|
|
64,199
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|
|
42
|
%
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Sale of oil and gas royalty interests
|
18,875
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|
|
6
|
%
|
|
—
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|
|
—
|
%
|
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Land sales and other income
|
4,859
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|
|
2
|
%
|
|
723
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|
|
—
|
%
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||
|
211,476
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|
|
70
|
%
|
|
123,340
|
|
|
80
|
%
|
||
Water service and operations
|
|
|
|
|
|
|
|
||||||
Water sales and royalties
|
63,913
|
|
|
21
|
%
|
|
25,536
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|
|
16
|
%
|
||
Easements and sundry income
|
24,831
|
|
|
9
|
%
|
|
5,758
|
|
|
4
|
%
|
||
|
88,744
|
|
|
30
|
%
|
|
31,294
|
|
|
20
|
%
|
||
Total consolidated revenues
|
$
|
300,220
|
|
|
100
|
%
|
|
$
|
154,634
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
||||||
Net income
|
|
|
|
|
|
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|
||||||
Land and resource management
|
$
|
159,611
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|
|
76
|
%
|
|
$
|
78,468
|
|
|
81
|
%
|
Water service and operations
|
50,125
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|
|
24
|
%
|
|
18,763
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|
|
19
|
%
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||
Total consolidated net income
|
$
|
209,736
|
|
|
100
|
%
|
|
$
|
97,231
|
|
|
100
|
%
|
|
Years Ended December 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||
Land and resource management
|
|
|
|
|
|
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|
||||||
Oil and gas royalties
|
$
|
58,418
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|
|
38
|
%
|
|
$
|
28,385
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|
|
43
|
%
|
Easements and sundry income
|
64,199
|
|
|
42
|
%
|
|
26,156
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|
|
40
|
%
|
||
Land sales and other income
|
723
|
|
|
—
|
%
|
|
3,443
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|
|
5
|
%
|
||
|
123,340
|
|
|
80
|
%
|
|
57,984
|
|
|
88
|
%
|
||
Water service and operations
|
|
|
|
|
|
|
|
||||||
Water sales and royalties
|
25,536
|
|
|
16
|
%
|
|
8,125
|
|
|
12
|
%
|
||
Easements and sundry income
|
5,758
|
|
|
4
|
%
|
|
—
|
|
|
—
|
%
|
||
|
31,294
|
|
|
20
|
%
|
|
8,125
|
|
|
12
|
%
|
||
Total consolidated revenues
|
$
|
154,634
|
|
|
100
|
%
|
|
$
|
66,109
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
||||||
Net income
|
|
|
|
|
|
|
|
||||||
Land and resource management
|
$
|
78,468
|
|
|
81
|
%
|
|
$
|
37,049
|
|
|
88
|
%
|
Water service and operations
|
18,763
|
|
|
19
|
%
|
|
5,226
|
|
|
12
|
%
|
||
Total consolidated net income
|
$
|
97,231
|
|
|
100
|
%
|
|
$
|
42,275
|
|
|
100
|
%
|
|
|
Payment Due by Period
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Less than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More than
5 Years
|
||||||||||
Long-term debt obligations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital lease obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations
(1)
|
|
3,456
|
|
|
402
|
|
|
1,210
|
|
|
1,143
|
|
|
701
|
|
|||||
Purchase obligations
(2)
|
|
81,516
|
|
|
81,516
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other long-term liabilities reflected on the Trust’s balance sheet under GAAP
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
84,972
|
|
|
$
|
81,918
|
|
|
$
|
1,210
|
|
|
$
|
1,143
|
|
|
$
|
701
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes office leases for our corporate office which expires in 2025 and for our office in Midland, Texas which expires in 2022.
|
(2)
|
Includes purchase contracts to acquire approximately 18,000 acres of land in West Texas. The purchases will be funded from the proceeds related to our sale of approximately
14,000
acres for an aggregate price of
$100.0 million
in January 2019. See Note 11, “Subsequent Event” in Item 8. Financial Statements and Supplementary Data for further information regarding the sale in January 2019.
|
(a)
|
Disclosure Controls and Procedures.
|
(b)
|
Management’s Report on Internal Control over Financial Reporting.
|
(c)
|
Attestation Report of Registered Public Accounting Firm.
|
(d)
|
Changes in Internal Control over Financial Reporting.
|
(a)
|
Trustees:
|
Name
|
|
Age
|
|
Position and Offices Held with
Registrant
|
|
Period During Which Person Has
Served in Office
|
Maurice Meyer III
|
|
83
|
|
Trustee, Chairman of the Trustees, Chairman of Audit Committee and Member of Nominating, Compensation and Governance Committee
|
|
Trustee since February 28, 1991; Chairman of Trustees since May 28, 2003; resigned February 25, 2019.
|
John R. Norris III
|
|
65
|
|
Trustee and Member of Nominating, Compensation and Governance Committee
|
|
Trustee since June 7, 2000.
|
David E. Barry
|
|
73
|
|
Trustee, Member of Audit Committee and Member of Nominating, Compensation and Governance Committee
|
|
Trustee since January 12, 2017.
|
(b)
|
Executive Officers:
|
Name
|
|
Age
|
|
Position and Offices Held
with
Registrant
|
|
Period During Which Person Has
Served in Office
|
Tyler Glover
|
|
34
|
|
General Agent, Chief Executive Officer and Secretary
|
|
General Agent, Chief Executive Officer and Secretary as of November 5, 2016. Assistant General Agent from December 1, 2014 through November 5, 2016. Mr. Glover had previously served as Field Agent from September 2011 through December 1, 2014.
|
Robert J. Packer
|
|
49
|
|
General Agent and Chief Financial Officer
|
|
General Agent as of November 5, 2016. Chief Financial Officer as of December 1, 2014. Mr. Packer had previously served as Accounting Supervisor from March 21, 2011 through December 1, 2014.
|
(c)
|
Certain Significant Employees: Robert A. Crain, age 40, joined the Trust in June 2017 as the Executive Vice President of TPWR, the Trust’s wholly-owned subsidiary formed in June 2017, to lead the operations of TPWR. Prior to joining the Trust, Mr. Crain was Water Resources Manager with EOG Resources where he led the development of EOG’s water resource programs across multiple divisions including the Eagle Ford and Permian basins.
|
(d)
|
Family Relations: There are no family relationships among any of the Trustees and executive officers of the Trust.
|
(e)
|
Business Experience:
|
Name of Trustee or
Executive Officer
|
|
Principal Occupation or Employment
During the Past Five Years
|
Maurice Meyer III (Trustee through February 25, 2019)
|
|
Former Vice Chairman of Henderson Brothers; personal investments
|
John R. Norris III
|
|
Attorney; Norris & Weber, PLLC, Dallas, Texas
|
David E. Barry
|
|
President, Sidra Real Estate, Inc., formerly known as Donerail, Inc., since 2012; President, Tarka Resources, Inc. since 2012; retired Partner, Kelley Drye & Warren LLP, New York, New York
|
Tyler Glover
|
|
General Agent, Chief Executive Officer and Secretary as of November 5, 2016; Assistant General Agent of the Trust from December 1, 2014 through November 5, 2016; Field Agent for the Trust from September 2011 through December 1, 2014.
|
Robert J. Packer
|
|
General Agent as of November 5, 2016; Chief Financial Officer of the Trust as of December 1, 2014; Accounting Supervisor of Texas Pacific Land Trust from March 2011 through December 1, 2014.
|
(f)
|
Involvement in Certain Legal Proceedings: During the past 10 years, no Trustee or executive officer has been involved in any event reportable under this caption.
|
(g)
|
Promoters and Control Persons: Not applicable.
|
Name and Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Change in
Actuarial Present
Value of
Accumulated
Benefits
(1)
|
|
All Other
Compensation
(2)(3)
|
|
Total
|
||||||||||
Tyler Glover
|
|
2018
|
|
$
|
480,167
|
|
|
$
|
1,800,000
|
|
|
$
|
13,358
|
|
|
$
|
18,500
|
|
|
$
|
2,312,025
|
|
General Agent, Chief Executive Officer
|
|
2017
|
|
$
|
381,250
|
|
|
$
|
300,000
|
|
|
$
|
24,810
|
|
|
$
|
18,000
|
|
|
$
|
724,060
|
|
and Secretary (as of Nov. 5, 2016)
|
|
2016
|
|
$
|
152,889
|
|
|
$
|
30,000
|
|
|
$
|
9,259
|
|
|
$
|
9,173
|
|
|
$
|
201,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Robert J. Packer
|
|
2018
|
|
$
|
480,167
|
|
|
$
|
1,800,000
|
|
|
$
|
30,611
|
|
|
$
|
18,500
|
|
|
$
|
2,329,278
|
|
General Agent and Chief Financial Officer
|
|
2017
|
|
$
|
381,250
|
|
|
$
|
300,000
|
|
|
$
|
42,639
|
|
|
$
|
29,000
|
|
|
$
|
752,889
|
|
(as of Nov. 5, 2016)
|
|
2016
|
|
$
|
165,556
|
|
|
$
|
30,000
|
|
|
$
|
19,563
|
|
|
$
|
9,933
|
|
|
$
|
225,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the aggregate change in the actuarial present value of the Named Executive Officer’s accumulated benefit under all defined benefit and actuarial pension plans (including supplemental plans) from the pension plan measurement date used for financial statement reporting purposes with respect to the Trust’s audited consolidated financial statements for the prior completed fiscal year to the pension plan measurement date used for financial statement reporting purposes with respect to the Trust’s audited consolidated financial statements for the covered fiscal year.
|
(2)
|
Represents contributions by the Trust to the account of the Named Executive Officer under the Trust’s defined contribution retirement plan.
|
(3)
|
The aggregate value of the perquisites and other personal benefits, if any, received by the Named Executive Officer for all years presented have not been reflected in the table because the amount was below the SEC’s $10,000 threshold for disclosure except for Mr. Packer, whose perquisites consisted of $11,000 in automobile allowance for 2017.
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
|
|
Actuarial
Present Value of
Accumulated Benefit
|
|
Payments During
Last Fiscal Year
|
|||||
Tyler Glover
|
|
Restated Texas Pacific Land Trust Revised Employees’ Pension Plan
|
|
6.0
|
|
|
$
|
59,830
|
|
|
$
|
—
|
|
Robert J. Packer
|
|
Restated Texas Pacific Land Trust Revised Employees’ Pension Plan
|
|
6.5
|
|
|
$
|
124,000
|
|
|
$
|
—
|
|
Name
|
|
Fees Earned or Paid in Cash
|
|
Total
|
||||
Maurice Meyer III
|
|
$
|
104,000
|
|
|
$
|
104,000
|
|
John R. Norris III
|
|
$
|
104,000
|
|
|
$
|
104,000
|
|
David E. Barry
|
|
$
|
104,000
|
|
|
$
|
104,000
|
|
Name and Address
|
|
Number of
Securities
Beneficially Owned
|
|
Type of Securities
|
|
Percent of Class
|
Horizon Kinetics LLC
(1)
470 Park Avenue South, 4
th
Floor South,
New York, New York 10016
|
|
1,837,051
|
|
Sub-share Certificates
|
|
23.7%
|
|
(1)
|
The information set forth is based on a joint filing on Schedule 13D/A No.3 made on July 23, 2018 by Horizon Kinetics LLC (“Horizon”), Kinetics Asset Management, LLC (“Kinetics”), Horizon Asset Management LLC (“HAM”) and Kinetics Advisors, LLC (“Advisors”). According to the filing, Horizon has shared voting power and shared dispositive power with respect to 1,837,051 of the Sub-share Certificates, Kinetics has sole voting power and sole dispositive power with respect to 715,093 of the Sub-share Certificates, HAM has sole voting power and dispositive power with respect to 1,079,087 of the Sub-share Certificates, and Advisors has sole voting power and dispositive power with respect to 42,871 of the Sub-share Certificates. The filing indicates that Horizon is a holding company and Kinetics, HAM and Advisors are investment advisers and that the Sub-share Certificates were acquired for investment purposes.
|
Title and Class
(1)
|
|
Name of
Beneficial Owner
|
|
Amount and Nature of Ownership
on February 14, 2019
|
|
|
Percent
of Class
|
|
Sub-share Certificates
|
|
Maurice Meyer III
|
|
60,546
|
|
(2)
|
|
*
|
Sub-share Certificates
|
|
John R. Norris III
|
|
1,000
|
|
|
|
*
|
Sub-share Certificates
|
|
David E. Barry
|
|
300
|
|
|
|
*
|
Sub-share Certificates
|
|
Tyler Glover
|
|
100
|
|
|
|
*
|
Sub-share Certificates
|
|
Robert J. Packer
|
|
200
|
|
|
|
*
|
Sub-share Certificates
|
|
All Trustees and Officers as a Group
|
|
62,146
|
|
|
|
*
|
|
*
|
Indicates ownership of less than 1% of the class.
|
(1)
|
The Certificates of Proprietary Interest and Sub-share Certificates 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, and are deemed to constitute a single class. On February 14, 2019, no Trustee or executive officer was the beneficial owner, directly or indirectly, of any Certificates of Proprietary Interest.
|
(2)
|
Does not include 11,500 Sub-shares owned by the wife of Mr. Meyer with respect to which Mr. Meyer disclaims any beneficial ownership.
|
(a)
|
Transactions with Related Persons: There are no significant reportable transactions or currently proposed transactions between Texas Pacific and any Trustee or executive officer of Texas Pacific or any 5% security holder of Texas Pacific or any member of the immediate family of any of the foregoing persons.
|
(b)
|
Review, Approval or Ratification of Transactions with Related Persons: Transactions with Trustees, executive officers or 5% or greater stockholders, or immediate family members of the foregoing, which might require disclosure pursuant to paragraph (a), above, would be subject to review, approval or ratification by the Nominating, Compensation and Governance Committee of the Trustees. That Committee is composed of all of the Trustees. The Committee’s charter empowers it to review any transactions, including loans, which may confer any benefit upon any Trustee, executive officer or affiliated entity to confirm compliance with the Trust’s Code of Conduct and Ethics and applicable law. The Committee has not adopted specific standards for evaluating such transactions beyond that mentioned above, because it is the sense of the Trustees that the activities and procedures of the Committee should remain flexible so that it may appropriately respond to changing circumstances.
|
(c)
|
Transactions with Promoters: Not applicable.
|
(d)
|
Independence: Each Trustee is an “independent director” within the meaning of the applicable rules of the New York Stock Exchange. Each member of the Audit and the Nominating, Compensation and Governance Committees of the Trustees is “independent” within the meaning of the applicable committee independence standards of the New York Stock Exchange.
|
*
|
Filed or furnished herewith.
|
|
|
TEXAS PACIFIC LAND TRUST
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Tyler Glover
|
|
|
|
Tyler Glover
General Agent, Chief Executive Officer and
Secretary
|
|
Signature
|
|
Title(s)
|
|
|
|
|
|
|
|
|
|
/s/ Tyler Glover
|
|
General Agent, Chief Executive Officer
|
|
Tyler Glover
|
|
and Secretary (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Robert J. Packer
|
|
General Agent and Chief Financial Officer
|
|
Robert J. Packer
|
|
(Principal Financial Officer and Principal
|
|
|
|
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/ John R. Norris III
|
|
Co-Chairman of the Trustees
|
|
John R. Norris III
|
|
|
|
|
|
|
|
|
|
|
|
/s/ David E. Barry
|
|
Co-Chairman of the Trustees
|
|
David E. Barry
|
|
|
Consolidated Financial Statements
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
ASSETS
|
|
|
|
||||
|
|
|
|
||||
Cash and cash equivalents
|
$
|
119,647
|
|
|
$
|
79,580
|
|
Accrued receivables
|
48,750
|
|
|
17,773
|
|
||
Other assets
|
7,683
|
|
|
849
|
|
||
Prepaid income taxes
|
9,398
|
|
|
1,202
|
|
||
Property, plant and equipment, net of accumulated depreciation of $3,012 and $463 in 2018 and 2017, respectively
|
64,802
|
|
|
19,516
|
|
||
Real estate acquired
|
10,492
|
|
|
1,115
|
|
||
Royalty interests acquired
|
24,303
|
|
|
—
|
|
||
Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned:
|
|
|
|
||||
Land (surface rights)
|
—
|
|
|
—
|
|
||
1/16
th
nonparticipating perpetual royalty interest
|
—
|
|
|
—
|
|
||
1/128
th
nonparticipating perpetual royalty interest
|
—
|
|
|
—
|
|
||
Total assets
|
$
|
285,075
|
|
|
$
|
120,035
|
|
|
|
|
|
||||
LIABILITIES AND CAPITAL
|
|
|
|
||||
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
10,505
|
|
|
$
|
5,608
|
|
Income taxes payable
|
1,607
|
|
|
851
|
|
||
Deferred taxes payable
|
14,903
|
|
|
114
|
|
||
Unearned revenue
|
13,369
|
|
|
8,364
|
|
||
Total liabilities
|
40,384
|
|
|
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 $0.03 1/3 each; outstanding 7,762,414 and 7,821,599 Sub-shares in 2018 and 2017, respectively
|
—
|
|
|
—
|
|
||
Accumulated other comprehensive loss
|
(1,078
|
)
|
|
(804
|
)
|
||
Net proceeds from all sources
|
245,769
|
|
|
105,902
|
|
||
Total capital
|
244,691
|
|
|
105,098
|
|
||
Total liabilities and capital
|
$
|
285,075
|
|
|
$
|
120,035
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Oil and gas royalties
|
$
|
123,834
|
|
|
$
|
58,418
|
|
|
$
|
28,385
|
|
Easements and sundry income
|
88,739
|
|
|
69,957
|
|
|
26,156
|
|
|||
Water sales and royalties
|
63,913
|
|
|
25,536
|
|
|
8,125
|
|
|||
Sale of oil and gas royalty interests
|
18,875
|
|
|
—
|
|
|
—
|
|
|||
Land sales
|
4,367
|
|
|
220
|
|
|
2,945
|
|
|||
Other operating income
|
492
|
|
|
503
|
|
|
498
|
|
|||
|
300,220
|
|
|
154,634
|
|
|
66,109
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Salaries and related employee expenses
|
18,433
|
|
|
3,774
|
|
|
1,446
|
|
|||
Water service-related expenses
|
11,168
|
|
|
491
|
|
|
—
|
|
|||
General and administrative expenses
|
4,704
|
|
|
1,523
|
|
|
931
|
|
|||
Legal and professional fees
|
2,498
|
|
|
3,523
|
|
|
778
|
|
|||
Depreciation and amortization
|
2,583
|
|
|
376
|
|
|
43
|
|
|||
|
39,386
|
|
|
9,687
|
|
|
3,198
|
|
|||
Operating income
|
260,834
|
|
|
144,947
|
|
|
62,911
|
|
|||
Other income (expense)
|
916
|
|
|
114
|
|
|
(15
|
)
|
|||
Income before income taxes
|
261,750
|
|
|
145,061
|
|
|
62,896
|
|
|||
Income taxes:
|
|
|
|
|
|
||||||
Current
|
37,200
|
|
|
46,864
|
|
|
22,041
|
|
|||
Deferred
|
14,814
|
|
|
966
|
|
|
(1,420
|
)
|
|||
|
52,014
|
|
|
47,830
|
|
|
20,621
|
|
|||
Net income
|
$
|
209,736
|
|
|
$
|
97,231
|
|
|
$
|
42,275
|
|
|
|
|
|
|
|
||||||
Amortization of net actuarial costs and prior service costs, net of income taxes of $14, $38, and $49, respectively
|
50
|
|
|
70
|
|
|
91
|
|
|||
Net actuarial (loss) gain on pension plan net of income taxes of ($38), $46, and $107, respectively
|
(144
|
)
|
|
86
|
|
|
198
|
|
|||
Total other comprehensive gain (loss)
|
(94
|
)
|
|
156
|
|
|
289
|
|
|||
Total comprehensive income
|
$
|
209,642
|
|
|
$
|
97,387
|
|
|
$
|
42,564
|
|
|
|
|
|
|
|
||||||
Net income per Sub-share Certificate - basic and diluted
|
$
|
26.93
|
|
|
$
|
12.38
|
|
|
$
|
5.29
|
|
|
|
|
|
|
|
||||||
Weighted average number of Sub-share Certificates outstanding
|
7,787,407
|
|
|
7,854,705
|
|
|
7,989,030
|
|
|
Sub-share
Certificates of
Proprietary
Interest
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Net Proceeds
From All
Sources
|
|
Total
Capital
|
|||||||
Balances at December 31, 2015
|
8,118,064
|
|
|
$
|
(1,249
|
)
|
|
$
|
46,936
|
|
|
$
|
45,687
|
|
Net income
|
—
|
|
|
—
|
|
|
42,275
|
|
|
42,275
|
|
|||
Periodic pension costs, net of income taxes of $156
|
—
|
|
|
289
|
|
|
—
|
|
|
289
|
|
|||
Repurchase and retirement of Sub-share Certificates in Certificates of Proprietary Interest
|
(190,750
|
)
|
|
—
|
|
|
(33,085
|
)
|
|
(33,085
|
)
|
|||
Dividends paid — $0.31 per Sub-share Certificate
|
—
|
|
|
—
|
|
|
(2,507
|
)
|
|
(2,507
|
)
|
|||
Balances at December 31, 2016
|
7,927,314
|
|
|
(960
|
)
|
|
53,619
|
|
|
52,659
|
|
|||
Net income
|
—
|
|
|
—
|
|
|
97,231
|
|
|
97,231
|
|
|||
Periodic pension costs, net of income taxes of $84
|
—
|
|
|
156
|
|
|
—
|
|
|
156
|
|
|||
Repurchase and retirement of Sub-share Certificates in Certificates of Proprietary Interest
|
(105,715
|
)
|
|
—
|
|
|
(34,267
|
)
|
|
(34,267
|
)
|
|||
Regular dividends paid — $0.35 per Sub-share Certificate
|
—
|
|
|
—
|
|
|
(2,769
|
)
|
|
(2,769
|
)
|
|||
Special dividends paid — $1.00 per Sub-share Certificate
|
—
|
|
|
—
|
|
|
(7,912
|
)
|
|
(7,912
|
)
|
|||
Balances at December 31, 2017
|
7,821,599
|
|
|
(804
|
)
|
|
105,902
|
|
|
105,098
|
|
|||
Net income
|
—
|
|
|
—
|
|
|
209,736
|
|
|
209,736
|
|
|||
Periodic pension costs, net of income taxes of ($24)
|
—
|
|
|
(274
|
)
|
|
180
|
|
|
(94
|
)
|
|||
Repurchase and retirement of Sub-share Certificates in Certificates of Proprietary Interest
|
(59,185
|
)
|
|
—
|
|
|
(38,397
|
)
|
|
(38,397
|
)
|
|||
Regular dividends paid — $1.05 per Sub-share Certificate
|
—
|
|
|
—
|
|
|
(8,206
|
)
|
|
(8,206
|
)
|
|||
Special dividends paid — $3.00 per Sub-share Certificate
|
—
|
|
|
—
|
|
|
(23,446
|
)
|
|
(23,446
|
)
|
|||
Balances at December 31, 2018
|
7,762,414
|
|
|
$
|
(1,078
|
)
|
|
$
|
245,769
|
|
|
$
|
244,691
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
209,736
|
|
|
$
|
97,231
|
|
|
$
|
42,275
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Deferred taxes
|
14,789
|
|
|
1,100
|
|
|
(1,264
|
)
|
|||
Depreciation and amortization
|
2,583
|
|
|
376
|
|
|
43
|
|
|||
(Gain) loss on disposal of fixed assets
|
(2
|
)
|
|
(4
|
)
|
|
8
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accrued receivables and other assets
|
(37,824
|
)
|
|
(12,022
|
)
|
|
(2,721
|
)
|
|||
Income taxes payable
|
756
|
|
|
(986
|
)
|
|
1,316
|
|
|||
Prepaid income taxes
|
(8,196
|
)
|
|
(1,202
|
)
|
|
—
|
|
|||
Unearned revenue
|
5,024
|
|
|
4,399
|
|
|
1,389
|
|
|||
Accounts payable, accrued expenses and other liabilities
|
4,783
|
|
|
4,938
|
|
|
(89
|
)
|
|||
Cash provided by operating activities
|
191,649
|
|
|
93,830
|
|
|
40,957
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sale of fixed assets
|
25
|
|
|
27
|
|
|
18
|
|
|||
Acquisition of real estate
|
(9,377
|
)
|
|
—
|
|
|
—
|
|
|||
Acquisition of royalty interests
|
(24,303
|
)
|
|
—
|
|
|
—
|
|
|||
Purchase of fixed assets
|
(47,878
|
)
|
|
(18,747
|
)
|
|
(977
|
)
|
|||
Cash used in investing activities
|
(81,533
|
)
|
|
(18,720
|
)
|
|
(959
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Purchase of Sub-share Certificates in Certificates of Proprietary Interest
|
(38,397
|
)
|
|
(34,267
|
)
|
|
(33,085
|
)
|
|||
Dividends paid
|
(31,652
|
)
|
|
(10,681
|
)
|
|
(2,507
|
)
|
|||
Cash used in financing activities
|
(70,049
|
)
|
|
(44,948
|
)
|
|
(35,592
|
)
|
|||
|
|
|
|
|
|
||||||
Net increase in cash and cash equivalents
|
40,067
|
|
|
30,162
|
|
|
4,406
|
|
|||
Cash and cash equivalents, beginning of period
|
79,580
|
|
|
49,418
|
|
|
45,012
|
|
|||
Cash and cash equivalents, end of period
|
$
|
119,647
|
|
|
$
|
79,580
|
|
|
$
|
49,418
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Income taxes paid
|
$
|
45,876
|
|
|
$
|
49,002
|
|
|
$
|
20,725
|
|
1.
|
Organization and Description of Business Segments
|
2.
|
Summary of Significant Accounting Policies
|
Fencing, water wells and water well fields (in years)
|
10
|
|
to
|
|
15
|
Software developed for internal use (in years)
|
|
|
5
|
|
|
Office furniture, equipment and vehicles (in years)
|
5
|
|
to
|
|
7
|
|
As reported
|
|
New Revenue
Standard
Adjustment
|
|
As Adjusted
|
||||||
Consolidated Statements of Income:
|
|
|
|
|
|
||||||
For the year ended December 31, 2017
|
|
|
|
|
|
||||||
Revenue
|
$
|
132,329
|
|
|
$
|
22,305
|
|
|
$
|
154,634
|
|
Taxes, other than income taxes
|
3,161
|
|
|
(2,896
|
)
|
|
265
|
|
|||
Income taxes - deferred
|
(3,365
|
)
|
|
4,331
|
|
|
966
|
|
|||
Net income
|
76,361
|
|
|
20,870
|
|
|
97,231
|
|
|||
Net income per Sub-share Certificate
|
9.72
|
|
|
2.66
|
|
|
12.38
|
|
|||
|
|
|
|
|
|
||||||
For the year ended December 31, 2016
|
|
|
|
|
|
||||||
Revenue
|
$
|
59,911
|
|
|
$
|
6,198
|
|
|
$
|
66,109
|
|
Taxes, other than income taxes
|
1,779
|
|
|
(1,612
|
)
|
|
167
|
|
|||
Income taxes - deferred
|
(4,194
|
)
|
|
2,774
|
|
|
(1,420
|
)
|
|||
Net income
|
37,240
|
|
|
5,035
|
|
|
42,275
|
|
|||
Net income per Sub-share Certificate
|
4.66
|
|
|
0.63
|
|
|
5.29
|
|
|||
|
|
|
|
|
|
||||||
Consolidated
Balance Sheets:
|
|
|
|
|
|
||||||
As of December 31, 2017
|
|
|
|
|
|
||||||
Assets:
|
|
|
|
|
|
||||||
Accrued receivables
|
$
|
18,205
|
|
|
$
|
(432
|
)
|
|
$
|
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
|
|
|
As reported in prior year
|
|
Retrospective adjustment
|
|
As reported in current year
|
||||||
For the year ended December 31, 2017
|
|
|
|
|
|
||||||
Operating income
|
$
|
119,776
|
|
|
$
|
25,171
|
|
|
$
|
144,947
|
|
Other income (expense)
|
84
|
|
|
30
|
|
|
114
|
|
|||
|
|
|
|
|
|
||||||
For the year ended December 31, 2016
|
|
|
|
|
|
||||||
Operating income
|
$
|
55,058
|
|
|
$
|
7,853
|
|
|
$
|
62,911
|
|
Other income (expense)
|
29
|
|
|
(44
|
)
|
|
(15
|
)
|
3.
|
Property, Plant and Equipment
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Property, plant and equipment, at cost:
|
|
|
|
||||
Water service-related assets
(1)
|
$
|
62,919
|
|
|
$
|
18,193
|
|
Furniture, fixtures and equipment
|
4,297
|
|
|
1,786
|
|
||
Other
|
598
|
|
|
—
|
|
||
Total property, plant and equipment, at cost
|
67,814
|
|
|
19,979
|
|
||
Less: accumulated depreciation
|
(3,012
|
)
|
|
(463
|
)
|
||
Property, plant and equipment, net
|
$
|
64,802
|
|
|
$
|
19,516
|
|
(1)
|
Water service-related assets include water wells and water well fields related to water sourcing and water re-use.
|
4.
|
Real Estate Activity
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||
|
|
Number of Acres
|
|
Net Book Value
|
|
Number of Acres
|
|
Net Book Value
|
||||||
Land (surface rights)
|
|
877,462
|
|
|
$
|
—
|
|
|
877,633
|
|
|
$
|
—
|
|
Real estate acquired
|
|
24,715
|
|
|
10,492
|
|
|
10,065
|
|
|
1,115
|
|
||
Total real estate situated in 19 counties in Texas
|
|
902,177
|
|
|
$
|
10,492
|
|
|
887,698
|
|
|
$
|
1,115
|
|
|
|
|
|
|
|
|
|
|
5.
|
Royalty Interests
|
|
|
Net Book Value
|
||||||
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
1/16th nonparticipating perpetual royalty interests
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
1/128th nonparticipating perpetual royalty interests
(2)
|
|
—
|
|
|
—
|
|
||
Royalty interests acquired
|
|
24,303
|
|
|
—
|
|
||
Total royalty interests
|
|
$
|
24,303
|
|
|
$
|
—
|
|
|
|
|
|
|
(1)
|
Nonparticipating perpetual royalty interests in
370,737
and
373,777
gross royalty acres as of
December 31, 2018
and
2017
, respectively.
|
(2)
|
Nonparticipating perpetual royalty interests in
84,934
and
85,414
gross royalty acres as of
December 31, 2018
and
2017
, respectively.
|
6.
|
Employee Benefit Plans
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Change in projected benefits obligation:
|
|
|
|
||||
Projected benefit obligation at beginning of year
|
$
|
5,032
|
|
|
$
|
4,833
|
|
Service cost
|
157
|
|
|
147
|
|
||
Interest cost
|
183
|
|
|
201
|
|
||
Actuarial (gain) loss
|
(369
|
)
|
|
82
|
|
||
Benefits paid
|
(258
|
)
|
|
(231
|
)
|
||
Projected benefit obligation at end of year
|
$
|
4,745
|
|
|
$
|
5,032
|
|
|
|
|
|
||||
Change in plan assets:
|
|
|
|
||||
Fair value of plan assets at beginning of year
|
$
|
5,356
|
|
|
$
|
4,937
|
|
Actual return on plan assets
|
(185
|
)
|
|
552
|
|
||
Contributions by employer
|
400
|
|
|
98
|
|
||
Benefits paid
|
(258
|
)
|
|
(231
|
)
|
||
Fair value of plan assets at end of year
|
5,313
|
|
|
5,356
|
|
||
Funded (unfunded) status at end of year
|
$
|
568
|
|
|
$
|
324
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Assets
|
$
|
568
|
|
|
$
|
324
|
|
Liabilities
|
—
|
|
|
—
|
|
||
|
$
|
568
|
|
|
$
|
324
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Net actuarial loss
|
$
|
(1,365
|
)
|
|
$
|
(1,246
|
)
|
Amounts recognized in accumulated other comprehensive income (loss), before taxes
|
(1,365
|
)
|
|
(1,246
|
)
|
||
Income tax benefit
|
287
|
|
|
442
|
|
||
Amounts recognized in accumulated other comprehensive income (loss), after taxes
|
$
|
(1,078
|
)
|
|
$
|
(804
|
)
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Components of net periodic benefit cost:
|
|
|
|
|
|
||||||
Service cost
|
$
|
157
|
|
|
$
|
147
|
|
|
$
|
153
|
|
Interest cost
|
183
|
|
|
201
|
|
|
215
|
|
|||
Expected return on plan assets
|
(367
|
)
|
|
(339
|
)
|
|
(311
|
)
|
|||
Amortization of net loss
|
64
|
|
|
108
|
|
|
140
|
|
|||
Net periodic benefit cost
|
$
|
37
|
|
|
$
|
117
|
|
|
$
|
197
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net actuarial (gain) loss
|
$
|
183
|
|
|
$
|
(132
|
)
|
|
$
|
(305
|
)
|
Recognized actuarial loss
|
(64
|
)
|
|
(108
|
)
|
|
(140
|
)
|
|||
Total recognized in other comprehensive income, before taxes
|
$
|
119
|
|
|
$
|
(240
|
)
|
|
$
|
(445
|
)
|
Total recognized in net benefit cost and other comprehensive income, before taxes
|
$
|
156
|
|
|
$
|
(123
|
)
|
|
$
|
(248
|
)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Plan assets in excess of projected benefit obligation:
|
|
|
|
||||
Projected benefit obligation
|
$
|
4,745
|
|
|
$
|
5,032
|
|
Fair value of plan assets
|
$
|
5,313
|
|
|
$
|
5,356
|
|
Plan assets in excess of accumulated benefit obligation:
|
|
|
|
||||
Accumulated benefit obligation
|
$
|
4,173
|
|
|
$
|
4,510
|
|
Fair value of plan assets
|
$
|
5,313
|
|
|
$
|
5,356
|
|
|
Years Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Weighted average assumptions used to determine benefit obligations as of December 31:
|
|
|
|
|
|
|||
Discount rate
|
4.25
|
%
|
|
3.75
|
%
|
|
4.25
|
%
|
Rate of compensation increase
|
7.29
|
%
|
|
7.29
|
%
|
|
7.29
|
%
|
|
|
|
|
|
|
|||
Weighted average assumptions used to determine benefit costs for the years ended December 31:
|
|
|
|
|
|
|||
Discount rate
|
3.75
|
%
|
|
4.25
|
%
|
|
4.50
|
%
|
Expected return on plan assets
|
7.00
|
%
|
|
7.00
|
%
|
|
7.00
|
%
|
Rate of compensation increase
|
7.29
|
%
|
|
7.29
|
%
|
|
7.29
|
%
|
|
Total
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
As of December 31, 2018:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents — money markets
|
$
|
407
|
|
|
$
|
407
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equities
|
813
|
|
|
813
|
|
|
—
|
|
|
—
|
|
||||
Equity funds
|
2,448
|
|
|
2,448
|
|
|
—
|
|
|
—
|
|
||||
Fixed income funds
|
1,645
|
|
|
1,645
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
5,313
|
|
|
$
|
5,313
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2017:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents — money markets
|
$
|
165
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equities
|
670
|
|
|
670
|
|
|
—
|
|
|
—
|
|
||||
Equity funds
|
2,468
|
|
|
2,468
|
|
|
—
|
|
|
—
|
|
||||
Fixed income funds
|
2,053
|
|
|
2,053
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
5,356
|
|
|
$
|
5,356
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Year ending December 31,
|
Amount
|
||
2019
|
$
|
238
|
|
2020
|
254
|
|
|
2021
|
250
|
|
|
2022
|
247
|
|
|
2023
|
242
|
|
|
2024 to 2028
|
1,203
|
|
7.
|
Income Taxes
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
||||||
U.S. Federal
|
$
|
35,593
|
|
|
$
|
46,013
|
|
|
$
|
21,665
|
|
State and local
|
1,607
|
|
|
851
|
|
|
376
|
|
|||
|
37,200
|
|
|
46,864
|
|
|
22,041
|
|
|||
Deferred expense (benefit)
|
14,814
|
|
|
966
|
|
|
(1,420
|
)
|
|||
|
$
|
52,014
|
|
|
$
|
47,830
|
|
|
$
|
20,621
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Computed tax expense at the statutory rate
|
$
|
54,968
|
|
|
$
|
50,771
|
|
|
$
|
22,014
|
|
Reduction in income taxes resulting from:
|
|
|
|
|
|
||||||
Statutory depletion
|
(4,185
|
)
|
|
(3,378
|
)
|
|
(1,609
|
)
|
|||
State taxes
|
1,243
|
|
|
530
|
|
|
231
|
|
|||
Effect of change in statutory tax rate
(1)
|
—
|
|
|
(103
|
)
|
|
—
|
|
|||
Other, net
|
(12
|
)
|
|
10
|
|
|
(15
|
)
|
|||
|
$
|
52,014
|
|
|
$
|
47,830
|
|
|
$
|
20,621
|
|
|
(1)
|
The effect of the change in statutory income tax rate from
35%
to
21%
effective
January 1, 2018
which was anticipated as of December 31, 2017.
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Deferred revenue
|
$
|
2,878
|
|
|
$
|
1,796
|
|
Total deferred tax assets
|
2,878
|
|
|
1,796
|
|
||
|
|
|
|
||||
Basis differences in property, plant and equipment
|
10,723
|
|
|
1,691
|
|
||
Deferred gains on 1031 exchanges
|
6,791
|
|
|
—
|
|
||
Basis differences in real estate acquired through foreclosure
|
142
|
|
|
142
|
|
||
Basis difference in pension plan liability
|
119
|
|
|
68
|
|
||
Deferred installment revenue on land sales for tax purposes
|
6
|
|
|
9
|
|
||
Total deferred tax liability
|
17,781
|
|
|
1,910
|
|
||
Net deferred tax liability
|
$
|
(14,903
|
)
|
|
$
|
(114
|
)
|
|
|
|
|
8.
|
Lease Commitments
|
Year ending December 31,
|
|
Amount
|
||
2019
|
|
$
|
402
|
|
2020
|
|
597
|
|
|
2021
|
|
613
|
|
|
2022
|
|
597
|
|
|
2023
|
|
546
|
|
|
Thereafter
|
|
701
|
|
|
|
|
$
|
3,456
|
|
9.
|
Capital
|
10.
|
Business Segment Reporting
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Land and resource management
|
$
|
211,476
|
|
|
$
|
123,340
|
|
|
$
|
57,984
|
|
Water service and operations
|
88,744
|
|
|
31,294
|
|
|
8,125
|
|
|||
Total consolidated revenues
|
$
|
300,220
|
|
|
$
|
154,634
|
|
|
$
|
66,109
|
|
|
|
|
|
|
|
||||||
Net income:
|
|
|
|
|
|
||||||
Land and resource management
|
$
|
159,611
|
|
|
$
|
78,468
|
|
|
$
|
37,049
|
|
Water service and operations
|
50,125
|
|
|
18,763
|
|
|
5,226
|
|
|||
Total consolidated net income
|
$
|
209,736
|
|
|
$
|
97,231
|
|
|
$
|
42,275
|
|
|
|
|
|
|
|
||||||
Capital Expenditures:
|
|
|
|
|
|
||||||
Land and resource management
|
$
|
2,790
|
|
|
$
|
920
|
|
|
$
|
478
|
|
Water service and operations
|
45,088
|
|
|
17,827
|
|
|
499
|
|
|||
Total capital expenditures
|
$
|
47,878
|
|
|
$
|
18,747
|
|
|
$
|
977
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization:
|
|
|
|
|
|
||||||
Land and resource management
|
$
|
506
|
|
|
$
|
136
|
|
|
$
|
24
|
|
Water service and operations
|
2,077
|
|
|
240
|
|
|
19
|
|
|||
Total depreciation and amortization
|
$
|
2,583
|
|
|
$
|
376
|
|
|
$
|
43
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Total Assets:
|
|
|
|
||||
Land and resource management
|
$
|
198,922
|
|
|
$
|
97,549
|
|
Water service and operations
|
86,153
|
|
|
22,486
|
|
||
Total consolidated assets
|
$
|
285,075
|
|
|
$
|
120,035
|
|
Property, plant and equipment, net:
|
|
|
|
||||
Land and resource management
|
$
|
3,720
|
|
|
$
|
1,449
|
|
Water service and operations
|
61,082
|
|
|
18,067
|
|
||
Total consolidated property, plant and equipment, net
|
$
|
64,802
|
|
|
$
|
19,516
|
|
11.
|
Subsequent Events
|
12.
|
Oil and Gas Producing Activities (Unaudited)
|
13.
|
Selected Quarterly Financial Data (Unaudited)
|
|
Quarters ended
|
||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30,
2018 |
|
March 31, 2018
|
||||||||
Income
|
$
|
93,201
|
|
|
$
|
73,168
|
|
|
$
|
73,844
|
|
|
$
|
60,007
|
|
Income before income taxes
|
$
|
78,279
|
|
|
$
|
63,195
|
|
|
$
|
65,665
|
|
|
$
|
54,611
|
|
Net income
|
$
|
62,680
|
|
|
$
|
50,762
|
|
|
$
|
52,503
|
|
|
$
|
43,791
|
|
Net income per Sub-share Certificate
|
$
|
8.06
|
|
|
$
|
6.52
|
|
|
$
|
6.73
|
|
|
$
|
5.60
|
|
|
Quarters ended
|
||||||||||||||
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30,
2017 |
|
March 31, 2017
|
||||||||
Income
|
$
|
39,957
|
|
|
$
|
51,977
|
|
|
$
|
32,293
|
|
|
$
|
30,407
|
|
Income before income taxes
|
$
|
36,455
|
|
|
$
|
49,324
|
|
|
$
|
30,385
|
|
|
$
|
28,897
|
|
Net income
|
$
|
24,620
|
|
|
$
|
33,002
|
|
|
$
|
20,350
|
|
|
$
|
19,259
|
|
Net income per Sub-share Certificate
|
$
|
3.14
|
|
|
$
|
4.20
|
|
|
$
|
2.58
|
|
|
$
|
2.43
|
|
ARTICLE I
|
THE PROPERTY
|
a)
|
Seller’s right, title and interest in and to 14,001.76 acres of land, more or less, located in Loving and Reeves Counties, Texas, as more particularly described in
Exhibit A-1
attached hereto and made a part hereof for all purposes (the “
Land
”),
together with all wind rights, improvements thereon and associated rights-of-way, permits, utilities and utility capacity (if any), and any and all interests of any type owned by Seller in such real property including, without limitation, any easements, rights-of-way, adjacent streets, alleys, strips, gores, and other appurtenances to such real property (collectively, with the Land, the “
Real Property
”), except that Seller for Seller and Seller’s heirs, successors and assigns reserves from any conveyance all oil, gas and other minerals that are in and under, and that may be produced from the Land and any and all royalty interests therein;
|
b)
|
Except as used in Seller’s commercial water production, treatment, and disposal operations, Seller’s right, title and interest in and to all personal property, equipment, fixtures, dwellings, barns, and any other apparatus or appurtenances situated therein or thereon or used or obtained in connection with the Real Property (the foregoing herein collectively called the “
Personal Property
”); and
|
c)
|
Seller’s right, title and interest in and to Seller’s interest in all Leases and Contracts (defined below); and
|
d)
|
the right to use the surface of the lands set forth on
Exhibit A-2
, including the right to drill fresh water or water disposal wells and operate and maintain such wells, together with all rights to use the surface of such lands to the extent reasonably necessary to drill, operate and maintain such wells, all as further described in the Surface Use and Right-of-Way Agreement and Easement attached hereto as
Exhibit G
(the lands to be covered by the Surface Use Agreement are Section 1 and 5, Block 56, Township 2, Loving and Reeves Counties, Texas);
|
a)
|
All rights, titles and interests of Seller in Groundwater located in, on or under the lands in Section 3, Block 55, Township 1, Loving County, Texas and Section 3, Block 56, Township 2 in Loving and Reeves Counties, Texas, together with the appurtenant rights related to such Groundwater, including the rights (i) to use, store, treat, reuse and recharge and (ii) to use the surface of such lands to the extent reasonably necessary for the exercise of such associated rights and for water operations on or off the Subject Lands, including such rights of ingress and egress associated therewith over the Real Property; provided, however, any access or use of the Real Property by Seller shall not unreasonably interfere with any of Purchaser’s operations on the Real Property; for purposes of this Agreement, “Groundwater” shall mean water (including fresh, salt and brackish water) percolating below the surface of the earth and not water produced from oil and natural gas exploration and production operations;
|
b)
|
the exclusive right to dispose of water (including fresh, salt, produced and brackish water) and oil and gas production waste or fluids into disposal or injection wells located on the lands in Section 3, Block 55, Township 1, Loving County, Texas and Section 3, Block 56, Township 2 in Loving, and Reeves Counties, Texas, together with the associated rights related to same, including the rights (i) to use, store, treat, reuse and recharge and (ii) to use the surface of such lands to the extent reasonably necessary for the exercise of such associated rights, including such rights of ingress and egress associated therewith over the Real Property; provided, however, any
|
c)
|
the right to use the surface of the Land in Section 3, Block 55, Township 1, Loving County, Texas, Section 3, Block 56, Township 1, Loving County, and Section 3, Block 56, Township 2 of Loving and Reeves Counties, Texas to construct, operate, replace, repair, maintain and use water impoundments (limited to existing for Section 3, Block 56, Township 1, Loving County, Texas) and associated apparatus and appurtenances, and the rights of ingress and egress associated therewith over the Real Property; provided, however, any access or use of the Real Property by Seller shall not unreasonably interfere with any of Purchaser’s operations on the Real Property;
|
d)
|
all personal property, equipment, fixtures, water wells, pipelines and other apparatus or appurtenances used in Seller’s commercial water production, treatment, and disposal operations removed from the Real Property on or before July 31, 2019 and the rights of ingress and egress necessary to remove such property; provided, however, any access or use of the Real Property by Seller shall not unreasonably interfere with any of Purchaser’s operations on the Real Property;
|
e)
|
all other personal property, equipment, fixtures, water wells, pipelines and other apparatus or appurtenances of Seller situated on Section 3, Block 55, Township 1, Loving County, Texas, Section 3, Block 56, Township 2 in Loving and Reeves Counties, Texas, and Section 3, Block 56, Township 1 in Loving County, Texas; and
|
f)
|
restrictive covenants prohibiting the use of Section 3, Block 55, Township 1, Loving County, Texas, and Section 3, Block 56, Township 2 in Loving and Reeves Counties, Texas by Purchaser or Purchaser’s heirs, successors and assigns for water disposal without Seller’s consent.
|
ARTICLE II
|
PURCHASE PRICE AND OTHER CONSIDERATION
|
ARTICLE III
|
FEASIBILITY REVIEW/RIGHT OF ENTRY
|
a)
|
Unless and until the sale and conveyance of the Property is closed pursuant to the terms and provisions of this Agreement, Purchaser and Purchaser’s agents, consultants and contractors (collectively “
Contractors
”) will maintain in confidence all information, reports, and evaluations generated in connection with any
|
b)
|
Any entry of Purchaser and/or the Purchaser Parties onto the Land is at the sole risk of Purchaser. Purchaser RELEASES Seller from and agrees to indemnify, defend and hold harmless Seller against, and from, any and all liens, claims, demands, costs and expenses of whatsoever nature in any way connected with or growing out of Purchaser’s inspections or examinations of the Property, including any work done, labor performed or materials furnished at the Property on behalf of Purchaser prior to Closing, EXCEPT AND SOLELY TO THE EXTENT ARISING FROM (i) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER OR (ii) THE MERE DISCOVERY BY PURCHASER OR PURCHASER’S CONTRACTORS OF ANY PRE-EXISTING ENVIRONMENTAL CONDITION NOT CAUSED OR EXACERBATED BY PURCHASER.
|
c)
|
If the sale of the Property does not close, Purchaser will, as soon as possible and at Purchaser’s sole expense, repair any damage caused by Purchaser or Purchaser’s Contractors during the Feasibility Activities to restore the Property to the same condition as it was prior to such inspections by Purchaser. If Purchaser fails to restore the Property, Seller may perform the work of restoration and Purchaser will reimburse Seller for Seller’s actual out-of-pocket costs in connection therewith within thirty (30) days of being invoiced by Seller.
|
d)
|
Until the sale and conveyance of the Property is closed pursuant to the terms and provisions of this Agreement, Purchaser will not materially disturb, interrupt or interfere with any activities of Seller or Seller’s employees, agents, contractors, subcontractors, consultants, tenants, invitees, licensees or other parties operating by, through or under Seller;
|
e)
|
During the Feasibility Period, Purchaser will comply with all health and safety requirements which may be reasonably imposed by Seller with respect to Purchaser’s activities upon or within the Real Property to the extent Seller delivers to Purchaser prior written notice thereof and such requirements do not negatively impact Purchaser’s ability to conduct due diligence on the Property;
|
f)
|
Purchaser shall pay when due all costs and expenses related to the Feasibility Activities of Purchaser; and
|
g)
|
Purchaser shall not permit any liens to attach to the Property by reason of any Feasibility Activities of Purchaser.
|
a)
|
Protection of any fiber optic cable systems is of extreme importance since any break could disrupt service to users resulting in business interruption and loss of revenue and profits. If it is determined that fiber optic cable is buried on the Property, Purchaser shall promptly inform Seller of the results of its investigation.
|
b)
|
Before drilling or excavating with mechanized equipment, Purchaser shall utilize the Texas ONE-CALL system to determine the location of any pipelines or utilities and will explore with hand tools to a depth of at least eight (8) feet below the surface or will use other suitable detection equipment.
|
ARTICLE IV
|
REPRESENTATIONS; COVENANTS; AS IS SALE, NO RELIANCE
|
a)
|
Authority
. Seller has all requisite power and authority, has taken all actions required by applicable law to execute and deliver this Agreement and, prior to Closing, to consummate the transactions contemplated in this Agreement without the joinder of any other party.
|
b)
|
OFAC
. Seller is not a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“
OFAC
”) of the Department of the Treasury, including those named on OFAC’s Specially Designated and Blocked Persons List (the “
List
”) or under Executive Order 13224 (the “
Executive Order
”) signed on September 24, 2001, and entitled “Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism” or any other governmental action; and throughout the term of this Agreement, Seller shall comply with the Executive Order.
|
c)
|
No Parties in Possession
. Except for the agreements set forth on
Annex I
(herein “
Leases and Contracts
”), to Seller’s knowledge there are no parties in possession of any portion of the Property as lessees.
|
d)
|
Litigation
. (i) Seller has not been served with written notice (in the form of a complaint or otherwise) of any lawsuit, action, arbitration, governmental investigation or proceeding against the Property or Seller for which such action or claim could impact the Property, (ii) to Seller’s knowledge, no lawsuit, action, arbitration, governmental investigation or proceeding is threatened against the Property or Seller for which such action or claim could impact the Property, and (iii) there is no unsatisfied order or judgment against the Property or against Seller for which such order or judgment could impact the Property, or (B) questions the validity of this Agreement or any action taken or to be taken pursuant hereto, or (C) involves condemnation or eminent domain proceedings (excluding any common carrier pipeline condemnations for which a final offer letter has not been received) involving the Property or any portion thereof that has not already been settled prior to the date of this Agreement and with no ongoing financial obligations to be imposed on Purchaser or the Property after the Effective Date.
|
e)
|
Reports
. To Seller’s knowledge, Seller has made available or will promptly make available to Purchaser all environmental audits, site assessments, reports, inspections, data, and other information, regarding environmental matters, which pertain to the Property and which are in Seller’s actual possession or control.
|
f)
|
Other Rights
. Except for the Leases and Contracts set forth on
Annex I
, to Seller’s knowledge, there are no unrecorded agreements or leases with respect to the Real Property.
|
g)
|
Claims
. To Seller’s knowledge, there are no unpaid charges, debts, liabilities, claims, or obligations arising from the ownership or operation of the Property that could give rise to any mechanics’ or materialman’s or other statutory liens against the Property, or any part thereof, or for which Purchaser will be responsible.
|
h)
|
Condemnation
. To Seller’s knowledge, and except for potential common carrier pipeline easement condemnations for which a final offer letter has not been received, there is no pending or, to the best knowledge of Seller, threatened condemnation or similar proceeding or special assessment (inclusive of assessments for street widening, repair, or improvement) affecting the Property, or any part thereof.
|
i)
|
Environmental
. To Seller’s knowledge, (i) the Property is not in material violation of any state, local or federal statutes, laws, regulations, ordinances, rules or guidance pertaining to water rights, health and safety or the environment (“
Environmental
Laws
”), including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act of 1976 (“RCRA”), the Endangered Species Act, the Migratory Bird Treaty Act, the Safe Drinking Water Act, the Federal Clean Air Act, the Hazardous Materials Transportation Act, the Texas Solid Waste Disposal Act, the Texas Water Code, each as amended and all regulations promulgated thereunder, (ii) nor is the Property subject to any existing, pending or threatened investigation or inquiry (including request for information) or notice of violation or notice of enforcement by any governmental authority with respect to Environmental Laws or any claims, demands, suspected or known, for remedial obligations under Environmental Laws, and (iii) there are no conditions on, in, under or in connection with the Property that would reasonably be considered a material remediation obligation of the Property owner or give rise to a material liability of the Property owner under Environmental Laws.
|
j)
|
Consents; Preferential Rights
. No consent of any third party is necessary to consummate the transaction contemplated by this Agreement that will not be obtained prior to Closing and no party has any preferential right to purchase the Property or any interest therein.
|
k)
|
Taxes
. Seller has paid all state and local taxes due and owing with respect to the Property prior to Closing, and, to Seller’s knowledge, there are no unpaid or delinquent taxes creating a lien on any portion of the Real Property.
|
a)
|
Maintenance and Operations
. To the extent within Seller’s reasonable control,
Seller shall (i) cause the Property
to be maintained and operated in compliance with all applicable laws and in the ordinary course
,
consistent with past practices including but not limited to using commercially reasonable efforts to m
a
intain all insurance applicable to the Real Property during such period
; (ii) maintain in full force and effect all permits or authorizations held by Seller and required for ownership and/or operation of the Property; (iii)
obtain Purchaser’s prior written approval, which approval may not be unreasonably withheld, conditioned or delayed, prior to any future expenditures and proposed contracts and agre
e
ments (including but not limited to any rights of way
,
easements
,
other types of burdens) relating to the Property
including but not limited to amending, renewing, terminating or otherwise altering the same, (iv) not enter into any agreement or arrangement transferring, selling, or encumbering any of the Property; (v) not grant any preferential right or other similar right to purchase any property; (vi) obtain Purchaser’s prior written approval, which approval may not be unreasonably withheld, conditioned or delayed to enter into, terminate or amend any contract relating to the Property which would be binding upon Purchaser or the Property following Closing; and (vii) not commit to do any of the foregoing in subsections (i)-(vi).
|
b)
|
Notification of Litigation
. Seller will promptly notify Purchaser of any litigation or administrative proceeding, of which Seller becomes actually aware, concerning or affecting the Property or the use or operation thereof or the ability of Seller to perform its obligations under this Agreement.
|
c)
|
Notification of Condemnation
. Seller will promptly notify Purchaser of any actual knowledge regarding the threat, in writing, of the potential institution of any proceedings for the condemnation of the Property, or any portion thereof.
|
d)
|
Notification of Violation of Laws
. Seller will promptly provide to Purchaser copies of any notices which Seller receives from any governmental authority with respect to the alleged violation of any applicable laws relating to the Property.
|
e)
|
No Lien or Assignment
. Seller will not prior to Closing, without the prior written consent of Purchaser, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any deed of trust, mortgage, voluntary or involuntary lien, whether statutory, constitutional or contractual (except for the lien for ad valorem taxes on the Property which are not delinquent), security interest, encumbrance or charge, or conditional sale or other title retention document, against or covering the Property, or any part thereof, other than the Permitted Exceptions, which would be binding upon Purchaser or the Property following Closing.
|
f)
|
No Marketing
. Seller shall withdraw the Real Property from active marketing and Seller will not accept or discuss any additional offers to acquire the Real Property during the duration of this Agreement.
|
ARTICLE V
|
ESCROW, SURVEY, TITLE INSURANCE AND ABSTRACT OF TITLE
|
a)
|
as to any Real Property with remaining Property Objections, exclude in increments of at least an entire section up to an aggregate exclusion of the Real Property no greater than three (3) aggregate sections all of which must be on or adjacent to the perimeter boundary of the entire Real Property which shall also include Section 11, Block 57, Township 1, and Section 3, Block 55, Township 1, (any such properties are also included in the term “
Excluded Property
”), reduce the Purchase Price by Eight Thousand Dollars ($8,000) per acre for each such Excluded Property, and proceed to Closing and accept title to all other Property subject to such Property Objections; provided, however, should such exclusion result in Seller not having access to the Excluded Property, Purchaser shall grant Seller rights of ingress and egress across the Property conveyed to Purchaser hereunder to the extent necessary for Seller to reach such Excluded Property and on terms mutually agreeable to Seller and Purchaser;
|
b)
|
terminate this Agreement prior to the Closing Date and shall be refunded the Earnest Money (less the Independent Consideration); or
|
c)
|
proceed to Closing and accept title to the Property subject to such Property Objections.
|
ARTICLE VI
|
CONDITIONS TO CLOSING; FORM OF DEED; RESERVATIONS;
CLOSING DOCUMENTS
|
a)
|
Purchaser’s Representations and Warranties
. Each of the representations and warranties made by Purchaser herein shall be true and correct in all material respects on the Closing Date as if made on and as of such date.
|
b)
|
Performance by Purchaser
. Purchaser shall have performed in all material respects all obligations which it is required to perform on or before the Closing Date pursuant to the provisions of this Agreement.
|
a)
|
Seller’s Representations and Warranties
. Each of the representations and warranties made by Seller herein shall be true and correct in all material respects (except as to those representations qualified by materiality, whether by reference to the terms “material,” “materiality” or similar qualifiers, which such representations shall be true and correct in all respects) on the Closing Date.
|
b)
|
Performance by Seller
. Seller shall have performed in all material respects all obligations which Seller is required to perform on or before the Closing Date pursuant to the provisions of this Agreement.
|
c)
|
No Injunctions
. The transactions contemplated under this Agreement to be effected on the Closing Date shall not have been restrained or prohibited by any injunction
|
d)
|
No Title Changes
. No change shall have occurred, without Purchaser’s written consent, in the state of title matters disclosed in the PTR and the Survey (if obtained) since the expiration of the Feasibility Period.
|
e)
|
Environmental
. There shall be no material violation, material remediation obligation or other material liability under Environmental Laws relating to the Property which first occurred after the expiration of the Feasibility Period.
|
f)
|
Necessary Consents and Preferential Right Waivers
. On or prior to Closing, Seller shall have obtained all necessary consents and waivers for the Necessary Consents and Preferential Right Waivers (and paid all necessary costs thereto to obtain the same).
|
ARTICLE VII
|
CLOSING - DEFAULT
|
ARTICLE VIII
|
SECTION 1031 EXCHANGE
|
ARTICLE IX
|
PRORATIONS; CLOSING COSTS
|
a)
|
Seller Costs
. Seller shall pay (i) the basic premium of the Title Policy (but not for extended coverage or any endorsements or modifications to the Title Policy) and (ii) the costs, if any, incurred by Seller in connection with the performance of its obligations under this Agreement.
|
b)
|
Purchaser Costs
. Purchaser shall pay (i) any premiums related to extended coverage or any endorsements or modifications to the Title Policy requested by Purchaser, (ii) the recording fees, (iii) the cost of the Survey, if obtained, (iv) any escrow fee or similar charges of Title Company, and (v) the costs, if any, incurred by Purchaser in connection with the performance of its obligations under this Agreement.
|
c)
|
Other Costs
. All other expenses incurred by Seller or Purchaser with respect to the Closing, including, but not limited to, legal fees of Purchaser and Seller (except in the event of litigation), will be borne and paid exclusively by the party incurring same, without reimbursement, except to the extent otherwise specified in this Agreement.
|
ARTICLE X
|
NEGOTIATIONS - BROKERS AND FINDERS
|
ARTICLE XI
|
POST-CLOSING COVENANTS
|
ARTICLE XII
|
CONDEMNATION
|
ARTICLE XIII
|
DISCLOSURES AND NOTICES TO PURCHASER
|
ARTICLE XIV
|
MISCELLANEOUS
|
If to Seller:
Texas Pacific Land Trust
1700 Pacific Avenue, Suite 2770
Dallas, Texas 75201
Attn: Ty Glover
Email: tyler@tpltrust.com
Telephone No.214-969-5530
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If to Purchaser:
WPX Energy Permian, LLC
3500 One Williams Center, Suite 2600
Tulsa, OK 74172
Attn: Vice President, Land
Email: greg.geist@wpxenergy.com
Telephone No. 539-573-3006
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With a copy to (which shall not constitute notice):
Micheal W. Dobbs
Kelley Drye & Warren, LLP
515 Post Oak Blvd., Suite 900
Houston, Texas 77027
Email: mdobbs@kellydrye.com
Telephone No.713-355-5055
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With a copy to (which shall not constitute notice):
WPX Energy Permian, LLC
3500 One Williams Center, Suite 2600
Tulsa, OK 74172
Attn: General Counsel
Email: dennis.cameron@wpxenergy.com
Telephone No. 539-573-6846
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(a)
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The Title Company (hereinafter referred to as the “
Escrow Agent
”) shall hold the Earnest Money in escrow in an interest-bearing bank account (the “
Escrow Account
”) at the direction of Purchaser.
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(b)
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The Escrow Agent shall hold the Earnest Money in escrow in the Escrow Account until the Closing or sooner termination of this Agreement and shall hold or apply such proceeds in accordance with the terms of this
Section 14.15(b)
. Seller and Purchaser understand that no interest is earned on the Earnest Money during the time it takes to transfer into and out of the Escrow Account. At Closing, the Earnest Money shall be paid by the Escrow Agent to, or at the direction of, Seller. If for any reason the Closing does not occur and either party makes a written demand upon the Escrow Agent (a copy of which shall be given to the other party) for payment of such amount, the Escrow Agent shall, within 24 hours give written notice to the other party of such demand (provided, however, that prior to the expiration of the Feasibility Period, Escrow Agent shall promptly and without further action refund the Earnest Money to Purchaser following written demand therefor by Purchaser (with a copy given to Seller)). If the Escrow Agent does not receive a written objection within five (5) business days after the giving of any such notice, the Escrow Agent is hereby authorized to make such payment. If the Escrow Agent does receive such written objection within such five (5) business day period or if for any other reason the Escrow Agent in good faith shall elect not to make such payment, the Escrow Agent shall continue to hold such amount until otherwise directed by joint written
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(c)
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The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and the Escrow Agent shall not be liable to either of the parties for any act or omission on its part, other than for its gross negligence or willful misconduct. Seller and Purchaser shall jointly and severally indemnify and hold the Escrow Agent harmless from and against all costs, claims and expenses, including, without limitation, attorneys’ fees and disbursements, incurred in connection with the performance of the Escrow Agent’s duties hereunder.
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(d)
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The Escrow Agent has acknowledged its agreement to these provisions by signing this Agreement in the place indicated following the signatures of Seller and Purchaser.
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County
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State
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Abstract
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Section
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Block
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Township
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Acres
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Loving
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Texas
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93
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3
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55
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1
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640
|
Loving
|
Texas
|
141
|
3
|
56
|
1
|
640
|
Loving
|
Texas
|
144
|
9
|
56
|
1
|
640
|
Loving
|
Texas
|
145
|
11
|
56
|
1
|
640
|
Loving
|
Texas
|
146
|
13
|
56
|
1
|
640
|
Loving
|
Texas
|
147
|
15
|
56
|
1
|
640
|
Loving
|
Texas
|
148
|
17
|
56
|
1
|
640
|
Loving
|
Texas
|
149
|
19
|
56
|
1
|
370.08
|
Loving
|
Texas
|
150
|
21
|
56
|
1
|
640
|
Loving
|
Texas
|
151
|
23
|
56
|
1
|
640
|
Loving
|
Texas
|
152
|
25
|
56
|
1
|
640
|
Loving
|
Texas
|
153
|
27
|
56
|
1
|
640
|
Loving
|
Texas
|
154
|
29
|
56
|
1
|
640
|
Loving
|
Texas
|
155
|
31
|
56
|
1
|
443.52
|
Loving
|
Texas
|
156
|
33
|
56
|
1
|
640
|
Loving
|
Texas
|
157
|
35
|
56
|
1
|
640
|
Loving
|
Texas
|
158
|
37
|
56
|
1
|
640
|
Loving
|
Texas
|
159
|
39
|
56
|
1
|
640
|
Loving
|
Texas
|
160
|
41
|
56
|
1
|
640
|
Loving
|
Texas
|
221
|
43
|
56
|
1
|
64
|
Loving
|
Texas
|
161
|
45
|
56
|
1
|
640
|
Loving
|
Texas
|
162
|
47
|
56
|
1
|
426.66
|
Reeves
|
Texas
|
576
|
47
|
56
|
1
|
213.34
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Loving
|
Texas
|
215
|
3
|
56
|
2
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29.3
|
Reeves
|
Texas
|
577
|
3
|
56
|
2
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608.16
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Loving
|
Texas
|
166
|
11
|
57
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1
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326.7
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a)
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All rights, title and interest in Groundwater located in, on or under the Land in Section 3, Block 55, Township 1, Loving County, Texas and Section 3, Block 56, Township 2 in Loving and Reeves Counties, Texas (the “
Subject Lands
”), together with the appurtenant rights related to such Groundwater, including the rights (i) to use, store, treat, reuse and recharge and (ii) to use the surface of such lands to the extent reasonably necessary for the exercise of such associated rights, including such rights of ingress and egress associated therewith over the Land and for water operations on or off the Subject Lands; provided, however, any access or use of the Land by Grantor shall not unreasonably interfere with any of Grantee’s operations on the Real Property; for purposes of this Deed, “Groundwater” shall mean water (including fresh, salt, and brackish water) percolating below the surface of the earth and not water produced from oil and natural gas exploration and production operations;
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b)
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the exclusive right of the surface estate owner to dispose of water (including fresh, salt, produced and brackish water) and oil and gas production waste or fluids into disposal or injection wells located on the Land in Section 3, Block 55, Township 1, Loving County, Texas and Section 3, Block 56, Township 2 in Loving, and Reeves Counties, Texas, together with the associated rights related to such, including the rights (i) to use, store, treat, reuse and recharge and (ii) to use the surface of such lands to the extent reasonably necessary for the exercise of such associated rights, including such rights of ingress and egress associated therewith over the Land; provided, however, any access or use of the Land by Grantor shall not unreasonably interfere with any of Grantee’s operations on the Real Property; and
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c)
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the right to use the surface of the Land in Section 3, Block 55, Township 1, Loving County, Texas, Section 3, Block 56, Township 1, Loving County, and Section 3, Block 56, Township 2 of Loving and Reeves Counties, Texas to construct, operate, repair, replace, maintain and use the water impoundments (limited to existing for Section 3, Block 56, Township 1, Loving County, Texas) and associated apparatus and appurtenances, and the rights of ingress and egress associated therewith over the Real Property; provided, however, any access or use of the Real Property by Grantor shall not unreasonably interfere with any of Grantee’s operations on the Real Property.
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1)
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disposal of water (including fresh, salt, produced and brackish water) or oil and gas production waste or fluids;
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2)
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extraction or production of Groundwater;
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3)
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sale or transfer of any Groundwater extracted or produced from such property.
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TRANSFEREE:
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WPX Energy Permian, LLC
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1.
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Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and Treasury Regulations);
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2.
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Transferor is not a disregarded entity as defined in Treasury Regulations Section 1.1445-2(b)(2)(iii);
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3.
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Transferor’s U.S. employer identification number is ______________; and
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4.
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Transferor’s office address is: _______________________________________
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Entity
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Jurisdiction
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Texas Pacific Water Resources LLC
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Delaware
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TPL Holdings LLC
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Texas
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Texas Eagle Ranches, LLC
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Texas
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Texas Pacific Royalty Acquisitions, LLC
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Texas
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Riverton Holdings, LLC
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Texas
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1.
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I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2018 of Texas Pacific Land Trust;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 28,
2019
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By:
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/s/ Tyler Glover
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Tyler Glover, General Agent and Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2018 of Texas Pacific Land Trust;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: February 28, 2019
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By:
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/s/ Robert J. Packer
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Robert J. Packer, General Agent and Chief Financial Officer
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Date: February 28, 2019
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By:
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/s/ Tyler Glover
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Tyler Glover, General Agent and
Chief Executive Officer
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Date: February 28, 2019
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By:
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/s/ Robert J. Packer
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Robert J. Packer, General Agent and Chief Financial Officer
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