Item 1. Financial Statements

TEXAS PACIFIC LAND CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

			December 31, 2023						December 31, 2022
ASSETS
Cash and cash equivalents			$	725,169					$	510,834
Accounts receivable and accrued receivables, net			128,971						103,983
Prepaid expenses and other current assets			2,944						7,427
Tax like-kind exchange escrow			5,380						6,348
Prepaid income taxes			—						4,809
Total current assets			862,464						633,401
Real estate acquired			130,024						109,704
Property, plant and equipment, net			89,587						85,478
Royalty interests acquired, net			46,609						45,025
Intangible assets, net			21,025						—
Real estate and royalty interests assigned through the Declaration of Trust, no value assigned:
Land (surface rights)			—						—
1/16th nonparticipating perpetual royalty interest			—						—
1/128th nonparticipating perpetual royalty interest			—						—
Operating lease right-of-use assets			1,861						2,525
Other assets			4,828						1,294
Total assets			$	1,156,398					$	877,427
LIABILITIES AND EQUITY
Accounts payable and accrued expenses			$	22,501					$	23,443
Ad valorem and other taxes payable			10,761						8,497
Income taxes payable			4,795						3,167
Unearned revenue			6,330						4,488
Total current liabilities			44,387						39,595
Deferred taxes payable			42,365						41,151
Unearned revenue - noncurrent			25,006						21,708
Operating lease liabilities			1,170						1,955
Accrued liabilities - noncurrent			274						131
Total liabilities			113,202						104,540
Commitments and contingencies			—						—
Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none outstanding as of December 31, 2023 and 2022			—						—
Common stock, $0.01 par value; 7,756,156 shares authorized and 7,669,227 and 7,695,679 outstanding as of December 31, 2023 and 2022, respectively			78						78
Treasury stock, at cost; 86,929 and 60,477 shares as of December 31, 2023 and 2022, respectively			(144,998)						(104,139)
Additional paid-in capital			14,613						8,293
Accumulated other comprehensive income			1,831						2,516
Retained earnings			1,171,672						866,139
Total equity			1,043,196						772,887
Total liabilities and equity			$	1,156,398					$	877,427

See accompanying notes to consolidated financial statements.

F-3

TEXAS PACIFIC LAND CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND TOTAL COMPREHENSIVE INCOME

(in thousands, except shares and per share amounts)

			Years Ended December 31,
			2023						2022						2021
Revenues:
Oil and gas royalties			$	357,394					$	452,434					$	286,468
Water sales			112,203						84,725						67,766
Produced water royalties			84,260						72,234						58,081
Easements and other surface-related income			70,932						48,057						37,616
Land sales and other operating revenue			6,806						9,972						1,027
Total revenues			631,595						667,422						450,958
Expenses:
Salaries and related employee expenses			43,384						41,402						40,012
Water service-related expenses			33,566						17,463						13,233
General and administrative expenses			14,928						13,285						11,638
Legal and professional fees			31,522						8,735						7,281
Ad valorem and other taxes			7,385						8,854						144
Depreciation, depletion and amortization			14,757						15,376						16,257
Total operating expenses			145,542						105,115						88,565
Operating income			486,053						562,307						362,393
Other income, net			31,508						6,548						624
Income before income taxes			517,561						568,855						363,017
Income tax expense (benefit):
Current			110,517						121,230						93,265
Deferred			1,399						1,263						(228)
Total income tax expense			111,916						122,493						93,037
Net income			$	405,645					$	446,362					$	269,980
Amortization of net actuarial costs, net of income taxes of $(27), $9, and $30 for the years ended December 31, 2023, 2022 and 2021, respectively			(103)						32						114
Net actuarial (loss) gain on pension plan, net of income taxes of $(157), $931, and $418 as of December 31, 2023, 2022 and 2021, respectively			(582)						3,491						1,572
Total other comprehensive income (loss)			(685)						3,523						1,686
Total comprehensive income			$	404,960					$	449,885					$	271,666
Net income per share of common stock
Basic			$	52.81					$	57.80					$	34.83
Diluted			$	52.77					$	57.77					$	34.83
Weighted average number of shares of common stock outstanding
Basic			7,681,435						7,721,957						7,752,027
Diluted			7,686,615						7,726,809						7,752,054

See accompanying notes to consolidated financial statements.

F-4

TEXAS PACIFIC LAND CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except shares and per share amounts)

			Sub-share Certificates						Common Stock												Additional Paid-in Capital						Treasury Stock												Accum. Other Comp. Inc/(Loss)						Retained Earnings						Net Proceeds From All Sources						Total Equity
			Shares						Shares						Amount									Shares						Amount
Balances as of January 1, 2021			7,756,156						—						$	—					$	—					—						$	—					$	(2,693)					$	—					$	487,877					$	485,184
Net income			—						—						—						—						—						—						—						269,980						—						269,980
Conversion of Sub-shares into shares of common stock			(7,756,156)						7,756,156						78						—						—						—						—						487,799						(487,877)						—
Repurchases of common stock			—						(14,791)						—						—						14,791						(19,903)						—						—						—						(19,903)
Dividends paid and accrued — $11.00 per share of common stock			—						—						—						—						—						—						—						(85,264)						—						(85,264)
Share-based compensation, net of forfeitures			—						3,330						—						28						(3,330)						4,486						—						(4,486)						—						28
Periodic pension costs, net of income taxes of $448			—						—						—						—						—						—						1,686						—						—						1,686
Balances as of December 31, 2021			—						7,744,695						78						28						11,461						(15,417)						(1,007)						668,029						—						651,711
Net income			—						—						—						—						—						—						—						446,362						—						446,362
Repurchases of common stock			—						(48,959)						—						—						48,959						(87,900)						—						—						—						(87,900)
Regular dividends paid and accrued — $12.00 per share of common stock			—						—						—						—						—						—						—						(92,737)						—						(92,737)
Special dividends paid and accrued - $20.00 per share of common stock			—						—						—						—						—						—						—						(154,742)						—						(154,742)
Share-based compensation, net of forfeitures			—						699						—						8,265						(699)						940						—						(773)						—						8,432
Shares exchanged for tax withholdings			—						(756)						—						—						756						(1,762)						—						—						—						(1,762)
Periodic pension costs, net of income taxes of $940			—						—						—						—						—						—						3,523						—						—						3,523
Balances as of December 31, 2022			—						7,695,679						78						8,293						60,477						(104,139)						2,516						866,139						—						772,887
Net income			—						—						—						—						—						—						—						405,645						—						405,645
Repurchases of common stock, including excise taxes of $384			—						(27,619)						—						—						27,619						(42,801)						—						—						—						(42,801)
Regular dividends paid and accrued — $13.00 per share of common stock			—						—						—						—						—						—						—						(99,972)						—						(99,972)
Share-based compensation, net of forfeitures			—						2,332						—						6,320						(2,332)						4,006						—						(140)						—						10,186
Shares exchanged for tax withholdings			—						(1,165)						—						—						1,165						(2,064)						—						—						—						(2,064)
Periodic pension costs, net of income taxes of $184			—						—						—						—						—						—						(685)						—						—						(685)
Balances as of December 31, 2023			—						7,669,227						$	78					$	14,613					86,929						$	(144,998)					$	1,831					$	1,171,672					$	—					$	1,043,196

See accompanying notes to consolidated financial statements.

F-5

TEXAS PACIFIC LAND CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			Years Ended December 31,
			2023						2022						2021
Cash flows from operating activities:
Net income			$	405,645					$	446,362					$	269,980
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization			14,757						15,376						16,257
Share-based compensation			10,343						8,432						28
Deferred taxes			1,399						1,263						220
Changes in operating assets and liabilities:
Receivables and other assets			(24,457)						(13,833)						(47,603)
Prepaid income taxes			4,809						(4,809)						—
Income taxes payable			1,628						(25,916)						25,029
Unearned revenue			5,140						1,938						(1,910)
Operating liabilities, excluding income taxes			(3,240)						10,015						3,152
Ad valorem and other taxes payable			2,264						8,321						10
Cash provided by operating activities			418,288						447,149						265,163
Cash flows from investing activities:
Acquisitions of intangible assets			(21,403)						—						—
Acquisition of real estate			(20,320)						(633)						(535)
Acquisition of royalty interests			(3,566)						(1,662)						—
Purchase of fixed assets			(15,028)						(19,212)						(15,548)
Proceeds from sales of fixed assets			5						106						1,086
Cash used in investing activities			(60,312)						(21,401)						(14,997)
Cash flows from financing activities:
Dividends paid			(99,972)						(247,281)						(85,264)
Repurchases of common stock			(42,573)						(87,765)						(19,684)
Shares exchanged for tax withholdings			(2,064)						(1,762)						—
Cash used in financing activities			(144,609)						(336,808)						(104,948)
Net increase in cash, cash equivalents and restricted cash			213,367						88,940						145,218
Cash, cash equivalents and restricted cash, beginning of period			517,182						428,242						283,024
Cash, cash equivalents and restricted cash, end of period			$	730,549					$	517,182					$	428,242
Supplemental disclosure of cash flow information:
Income taxes paid			$	104,079					$	151,956					$	68,223
Supplemental non-cash investing and financing information:
Nonmonetary exchange of assets			$	880					$	4,174					$	—
(Decrease) increase in accounts payable related to capital expenditures			$	403					$	(245)					$	867
Accrued dividends on unvested stock awards			$	158					$	198					$	—
Share repurchases and associated excise taxes not settled at the end of the period			$	582					$	354					$	219
Issuance of common stock			$	—					$	—					$	78
Operating lease right-of-use assets			$	—					$	1,364					$	—

See accompanying notes to consolidated financial statements.

F-6

TEXAS PACIFIC LAND CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business Segments

Texas Pacific Land Corporation (which, together with its subsidiaries as the context requires, may be referred to as “TPL”, the “Company”, “our”, “we” or “us”) is a Delaware corporation and one of the largest landowners in the State of Texas with approximately 868,000 surface acres of land in West Texas, principally concentrated in the Permian Basin. Additionally, we own a 1/128th nonparticipating perpetual oil and gas royalty interest (“NPRI”) under approximately 85,000 acres of land, a 1/16th NPRI under approximately 371,000 acres of land, and approximately 4,000 additional net royalty acres (normalized to 1/8th) (“NRA”) for a collective total of approximately 195,000 NRA located in the western part of Texas.

TPL’s income is derived primarily from oil, gas and produced water royalties, sales of water and land, easements, and commercial leases of the Company’s land.

On January 11, 2021, we completed our reorganization from a business trust, Texas Pacific Land Trust (the “Trust”), organized under a Declaration of Trust dated February 1, 1888 (the “Declaration of Trust”), into Texas Pacific Land Corporation, a corporation formed and existing under the laws of the state of Delaware (the “Corporate Reorganization”).

We operate our business in two segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of strategies and objectives of TPL and provide a framework for timely and rational allocation of resources within businesses. See Note 14, “Business Segment Reporting” for further information regarding our segments.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our consolidated accounts and the accounts of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

Revenue Recognition

Oil and Gas Royalties

Oil and gas royalties are received in connection with royalty interests owned by TPL. Oil and gas royalties are reported net of production taxes and are recognized as revenue when crude oil and natural gas products are removed from the respective mineral reserve locations. Oil and gas royalty payments are generally received one to two months after the crude oil and gas products are removed. An accrual for amounts not received during the month crude oil and natural gas products are removed is included in accounts receivable and accrued receivables, net based on historical trends.

The oil and gas royalties which we receive are dependent upon the market prices for oil and gas, and locational and contractual price differences. The market prices for oil and gas are subject to national and international economic and political conditions and subject to significant price fluctuations.

TPL has analyzed public reports of drilling activities by the oil companies operating where we have an oil and gas royalty interest in an effort to identify unpaid royalties associated with royalty interests we own. Rights to certain oil and gas royalties we believe to be due and payable may be subject to dispute with the oil company involved as a result of disagreements

F-7

with respect to drilling and related engineering information. Disputed oil and gas royalties are recorded when these contingencies are resolved.

Water Sales

Water sales revenue encompasses sales of water to operators and other customers, royalties received related to areas of mutual interest (“AMI”), and royalties received pursuant to legacy agreements with operators. In certain instances, we enter into agreements with third parties to provide various water services, including but not limited to, the purchase, sale or transfer of water within a specific geographic area, also known as an AMI. Our performance obligation is deemed satisfied upon the delivery of water at which point, revenue is recognized. In instances where a third party other than the customer is involved in the sale and/or transport of water, such as a revenue share agreement, brokered water sale transaction or third party acquisition of water, the Company will either be acting as the principal or the agent in the water sales transaction. If the Company is deemed to be acting as a principal, the associated revenues are reported on a gross basis in water sales revenue and the corresponding costs associated with the sale are reported as an operating expense in water service-related expenses in the consolidated income statement. If the Company is deemed to be acting as an agent, principally in brokered water transactions, the associated water sales revenue is reported net of the corresponding costs associated with the sale and included in the water sales revenue line item on the consolidated income statement.

Purchases of water from third parties, transfer costs and treatment expenses associated with water sales are included in water service-related expenses.

Produced Water Royalties

Produced water royalties represent revenue from the transfer and disposal of saltwater from producing oil and gas wells on our land. Revenue is recognized when the water is transported across or injected into our land.

Easements and Other Surface-Related Income

Easement contracts represent contracts which permit companies to install pipelines, electric lines and other equipment on land owned by TPL. When TPL receives a signed contract and payment, we make available the respective parcel of land to the grantee. Easement income is recognized upon the execution of the easement agreement, or in the event of a renewal upon receipt of the renewal payment, as at that point in time, we have satisfied our performance obligation and the customer has right of use.

Leases of our surface acreage include, but are not limited to, facility, roadway and surface leases with a typical lease term of ten years and generally require fixed annual payments. Lease cancellations are allowed under certain circumstances, but initial lease deposits are generally nonrefundable. The initial lease deposits and annual payments are recorded as unearned revenue upon receipt and amortized over the life of the lease. Advance lease payments are deferred and amortized over the appropriate accounting period.

Other surface-related income includes revenue from permits, material sales, and renewable energy sources. Revenue from permits is recognized upon execution of the contract and receipt of payment. Revenue from material sales is recognized upon the removal of materials by the customer. Revenue from renewable energy sources, such as wind and solar power, generally consist of leases, some of which may include a provision for future royalties once certain circumstances occur. As discussed above, lease payments are recorded as unearned revenue and amortized over the life of the lease. Royalties are recognized based upon actual production.

Land Sales and Exchanges

We consider purchasers of land to be our customers as land management, leasing and sales are normal operating activities for TPL. Revenue is recognized on land sales when the performance obligation to the purchaser (customer) is complete. Revenue from land exchanges is recognized based upon the estimated fair value of the consideration exchanged.

F-8

Cash, Cash Equivalents and Restricted Cash

We consider investments in bank deposits, money market funds, and highly-liquid cash investments with original maturities of three months or less to be cash equivalents. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

						December 31, 2023						December 31, 2022
Cash and cash equivalents						$	725,169					$	510,834
Tax like-kind exchange escrow						5,380						6,348
Total cash, cash equivalents and restricted cash shown in the statement of cash flows						$	730,549					$	517,182

Receivables

Receivables consist primarily of royalty income due related to our oil, gas and produced water royalties and trade accounts receivable related to water and material sales. An allowance is recorded for expected credit losses and is based upon our historical write-off experience, aging of trade accounts receivable and collectability patterns of our customers. The allowance for expected credit loss was approximately $0.2 million as of December 31, 2023 and 2022, respectively.

Accrual of Oil and Gas Royalties

The Company accrues oil and gas royalties, which are included in accounts receivable and accrued receivables, net. An accrual is necessary due to the time lag between the removal of crude oil and natural gas products from the respective mineral reserve locations and generation of the actual payment by operators. The oil and gas royalty accrual is based upon historical production volumes, estimates of the timing of future payments and recent market prices for oil and gas. Accrued oil and gas royalties included in accounts receivable and accrued receivables, net totaled $52.2 million and $50.1 million as of December 31, 2023 and 2022, respectively.

Real Estate Acquired

Real estate acquired is recorded at cost and carried at the lower of cost or market. Valuations are periodically performed or obtained by management whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairments, if any, are recorded by a charge to net income and a valuation allowance if the carrying value of the property exceeds its estimated fair value. Minimal real estate improvements are made to land. No impairments were recorded for the years ended December 31, 2023, 2022 and 2021.

Property, Plant and Equipment

Property, plant and equipment is carried at cost less accumulated depreciation. Maintenance and repair costs are expensed as incurred. Costs associated with our development of infrastructure for sourcing and treating water are capitalized. We account for depreciation of property, plant and equipment on the straight-line method over the estimated useful lives of the assets. Depreciable lives by category are as follows:

			Range of Estimated Useful Lives (in years)
Water wells and other water-related assets			3						to						20
Furniture, fixtures and equipment			3						to						15

Royalty Interests Acquired

We follow the successful efforts method of accounting for our royalty interests acquired, which are carried at the lower of cost or market. Valuations are periodically performed or obtained by management whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairments, if any, are recorded by a charge to net income and a reduction in the carrying value of our royalty interests if the carrying value exceeds the estimated fair value. No impairments were recorded for the years ended December 31, 2023, 2022 and 2021.

F-9

Depletion is recorded based upon a units of production basis. Depletion expense was approximately $2.0 million, $1.0 million and $1.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Real Estate and Royalty Interests Assigned Through the Declaration of Trust

The fair market value of the land and royalty interests that were assigned through the Declaration of Trust (referred to as “Assigned” land and royalty interests) was not determined in 1888 when the Trust was formed; therefore, no value is assigned in the accompanying consolidated balance sheets to the Assigned land and royalty interests. Consequently, in the consolidated statements of income and total comprehensive income, no allowance is made for depletion and no cost is deducted from the proceeds of sales of the Assigned land and royalty interests. Even though the 1888 value of real properties cannot be precisely determined, it has been concluded that the effect of this matter can no longer be significant to our financial position or results of operations. Minimal real estate improvements are made to land.

Intangible Assets, Net

Intangible assets include a saltwater disposal easement and acquired groundwater rights. When the Company acquires intangible assets that are attached to real estate and/or other tangible assets, an allocation of the total purchase price, including any direct costs of the acquisition, is made at the date of acquisition based on the estimated relative fair values of the assets acquired.

Intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from 15 to 20 years. Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In such event, the fair value of the asset is determined using an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, a loss for the difference between the carrying value and the estimated fair value of the intangible asset is recognized in the statement of income.

Leases

We lease certain facilities under operating leases. A determination of whether a contract contains a lease is made at the inception of the arrangement. Our leased facilities include our administrative offices located in Dallas and Midland, Texas, as well as some modular buildings in our West Texas yards.

Our leases generally contain options to extend or terminate the lease. We reevaluate our leases on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and how they align with our operating strategy. Therefore, substantially all of the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability as the options to extend are not reasonably certain at lease commencement. Short-term leases with an initial term of 12 months or less are not recognized in the right-to-use asset and lease liability on the consolidated balance sheets.

The lease liabilities are measured at the lease commencement date and determined using the present value of the minimum lease payments not yet paid and our incremental borrowing rate, which approximates the rate at which we would borrow, on a collateralized basis, over the term of a lease in the applicable currency environment. The interest rate implicit in the lease is generally not determinable in transactions where we are the lessee.

For real estate leases, we account for lease components and non-lease components (such as common area maintenance) as a single lease component. Certain real estate leases require reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Certain leases contain fixed lease payments for items such as common area maintenance and parking. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities. See Note 12, “Commitments” for additional information.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-10

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The liability for unrecognized tax benefits is zero as of December 31, 2023 and 2022. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes in the consolidated statements of income and total comprehensive income.

Share-Based Compensation

The Company utilizes the closing stock price on the date of grant to determine the fair value of stock awards and service-vesting awards, which for the Company includes stock awards, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and performance stock units (“PSUs”) with a performance condition. For PSUs with a market condition, grant date fair value is determined using a Monte Carlo simulation model. Unvested awards are entitled to dividends or dividend equivalents which are accrued and distributed to award recipients at the time such awards vest. Dividends are forfeitable if the related award is forfeited. For RSAs, RSUs and PSUs with performance conditions, forfeitures are recognized in the period in which they occur. For PSU awards with market conditions, forfeitures are only recognized if the award recipient does not render the required service during the measurement period.

Share-based compensation expense for stock awards is recognized in the financial statements immediately on date of grant as there is no requisite service period. Share-based compensation expense for RSUs and RSAs is recognized in the financial statements over the awards’ vesting periods using the graded-vesting method. Share-based compensation expense for PSU awards with performance conditions is recognized ratably over the measurement period at such time as the awards are probable and estimable. Share-based compensation expense for PSU awards with market conditions is recognized ratably over the measurement period whether the market condition is satisfied or not if the service for the award is rendered. Share-based compensation is reported on the consolidated statements of income and total comprehensive income as a component of salaries and related employee expenses for employee awards and in general and administrative expenses for director awards.

Net Income Per Share

Basic income per share is based on the weighted average number of shares outstanding during the period. Diluted net income per share is computed based upon the weighted average number of shares outstanding during the period plus unvested shares issued pursuant to our equity and deferred compensation plans. See Note 11, “Earnings Per Share.”

Treasury Stock

Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired Common Stock is recorded as treasury stock. The cost associated with issuance of treasury stock is based on the average cost of treasury stock as of the date of issuance.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other gains and losses affecting capital that, under GAAP, are excluded from net income.

Concentrations of Credit Risk

We invest our cash and cash equivalents (which include U.S. Treasury bills, money market funds, and commercial paper with maturities of three months or less) among two major financial institutions in an attempt to minimize exposure to risk from any one of these entities. As of December 31, 2023 and 2022, we had cash and cash equivalents deposited in our financial institutions in excess of federally-insured levels. We regularly monitor the financial condition of these financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents.

F-11

Significant Customers

Three customers represented, in the aggregate, 42.5% of TPL’s total revenues for the year ended December 31, 2023. Four customers represented, in the aggregate, 51.8% of TPL’s total revenues for the year ended December 31, 2022. Three customers represented, in the aggregate, 41.0% of TPL’s total revenues for the year ended December 31, 2021.

Reclassifications

Certain financial information on the consolidated balance sheet as of December 31, 2022 and consolidated statement of income and total comprehensive income for the year ended December 31, 2022 and December 31, 2021, respectively, have been revised to conform to the current year presentation. These revisions include a balance sheet reclassification of $454,000 of other taxes payable previously included in accounts payable and accrued expenses to ad valorem and other taxes payable, an income statement reclassification of $120,000 of property taxes previously included in general and administrative expenses to ad valorem and other taxes, an income statement reclassification of $55,000 from land sales expenses to general and administrative expenses for the year ended December 31, 2022 and an income statement reclassification of $144,000 of property taxes previously included in general and administrative expenses to ad valorem and other taxes for the year ended December 31, 2021.

3. Real Estate Activity

As of December 31, 2023 and 2022, TPL owned the following land and real estate (in thousands, except number of acres):

						December 31, 2023												December 31, 2022
						Number of Acres						Net Book Value						Number of Acres						Net Book Value
Land (surface rights) (1)						798,999						$	—					817,060						$	—
Real estate acquired						69,447						130,024						57,306						109,704
Total real estate situated in Texas						868,446						$	130,024					874,366						$	109,704

*(1)*Real estate assigned through the Declaration of Trust.

The Assigned land held by TPL was recorded with no value at the time of acquisition. See Note 2, “Summary of Significant Accounting Policies — Real Estate and Royalty Interests Assigned Through the Declaration of Trust” for further information regarding the Assigned land. Real estate acquired includes land parcels which have either been acquired through foreclosure or transactions with third parties.

Land Sales

For the year ended December 31, 2023, we sold 18,061 acres of land in Texas for an aggregate sales price of $6.8 million.

For the year ended December 31, 2022, we sold 6,392 acres of land in Texas for an aggregate sales price of $9.7 million.

For the year ended December 31, 2021, we sold 30 acres of land in Texas for an aggregate sales price of approximately $0.7 million.

Land Acquisitions

For the year ended December 31, 2023, we acquired 12,141 acres of land in Texas for an aggregate purchase price of $20.0 million.

For the year ended December 31, 2022, we acquired 177 acres of land in Texas for an aggregate purchase price of $0.6 million.

F-12

For the year ended December 31, 2021, we acquired 88 acres of land in Texas for an aggregate purchase price of approximately $0.5 million.

4. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Property, plant and equipment, at cost:
Water service-related assets			$	136,340					$	125,166
Furniture, fixtures and equipment			9,801						9,718
Other			598						598
Total property, plant and equipment, at cost			146,739						135,482
Less: accumulated depreciation			(57,152)						(50,004)
Property, plant and equipment, net			$	89,587					$	85,478

Depreciation expense was $12.2 million, $14.2 million and $14.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

5. Oil and Gas Royalty Interests

As of December 31, 2023 and 2022, we owned the following oil and gas royalty interests (in thousands):

						December 31, 2023						December 31, 2022
Oil and gas royalty interests:
1/16th nonparticipating perpetual royalty interests (1)						$	—					$	—
1/128th nonparticipating perpetual royalty interests (2)						—						—
Royalty interests acquired, at cost (3)						51,494						47,928
Total royalty interests						51,494						47,928
Less: accumulated depletion						(4,885)						(2,903)
Royalty interests, net						$	46,609					$	45,025

(1) Nonparticipating perpetual royalty interests in 370,737 gross royalty acres as of December 31, 2023 and 2022.

(2) Nonparticipating perpetual royalty interests in 84,934 gross royalty acres as of December 31, 2023 and 2022.

(3) Royalty interest in 4,302 and 4,182 net royalty acres as of December 31, 2023 and 2022, respectively.

Royalty Interests Assigned Through the Declaration of Trust

The fair market value of the Trust’s Assigned royalty interests was not determined in 1888 when the Trust was formed, and accordingly, these Assigned royalty interests were recorded with no value. See Note 2, “Summary of Significant Accounting Policies — Real Estate and Royalty Interests Assigned Through the Declaration of Trust” for further information regarding the Assigned royalty interests. The Assigned royalty interests include 1/16th and 1/128th royalty interests.

Royalty Interest Transactions

For the year ended December 31, 2023, we acquired oil and gas royalty interests in 119 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $3.6 million.

For the year ended December 31, 2022, we acquired oil and gas royalty interests in 92 net royalty acres (normalized to 1/8th) for an aggregate purchase price of approximately $1.7 million.

There were no oil and gas royalty interest transactions for the year ended December 31, 2021.

F-13

6. Intangible Assets

Intangible assets, net consisted of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Intangible assets, at cost:
Saltwater disposal easement			$	17,557					$	—
Groundwater rights acquired			3,846						—
Total intangible assets, at cost (1)			21,403						—
Less: accumulated amortization			(378)						—
Intangible assets, net			$	21,025					$	—

*(1)*The remaining weighted average amortization period for total intangible assets was 18.8 years as of December 31, 2023.

Acquisitions

For the year ended December 31, 2023, we acquired a saltwater disposal easement and groundwater rights in separate transactions for an aggregate cost of approximately $21.4 million. We had no intangible assets as of December 31, 2022.

Amortization of intangible assets was $0.4 million for the year ended December 31, 2023. The estimated future annual amortization expense of intangible assets is $1.1 million for each year of 2024 through 2028, and $15.5 million thereafter.

7. Pension and Other Postretirement Benefits

TPL has a defined contribution plan available to all eligible employees. Qualifying participants may receive a matching contribution based on the amount participants contribute to the plan up to 6% of their qualifying compensation. TPL contributed approximately $0.8 million, $0.7 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

TPL has a noncontributory pension plan (the “Pension Plan”) available to all eligible employees who have completed one year of continuous service with TPL during which they completed at least 1,000 hours of service. The Pension Plan provides for a normal retirement benefit at age 65. Contributions to the Pension Plan reflect benefits accrued with respect to participants’ services to date, as well as the amount actuarially determined to pay lifetime benefits to participants and their beneficiaries upon retirement.

F-14

The following table sets forth the Pension Plan’s changes in benefit obligation, changes in fair value of assets, and funded status as of December 31, 2023 and 2022 using a measurement date of December 31 (in thousands):

			December 31, 2023						December 31, 2022
Change in projected benefits obligation:
Projected benefit obligation at beginning of year			$	8,177					$	11,324
Service cost			1,537						2,870
Interest cost			423						336
Actuarial gain (loss)			658						(6,111)
Benefits paid			(242)						(242)
Projected benefit obligation at end of year			$	10,553					$	8,177
Change in Pension Plan assets:
Fair value of Pension Plan assets at beginning of year			$	11,650					$	10,713
Actual return on Pension Plan assets			725						(947)
Contributions by employer			2,068						2,126
Benefits paid			(242)						(242)
Fair value of Pension Plan assets at end of year			14,201						11,650
Funded status at end of year			$	3,648					$	3,473

The projected Pension Plan benefit obligation as of December 31, 2023 was impacted by changes in assumptions used as of that date compared to assumptions used as of December 31, 2022. These changes included a decrease in the discount rate from 5.25% as of December 31, 2022 to 5.00% as of December 31, 2023. The effect of the assumption changes was an increase in the projected benefit obligation of approximately $0.6 million.

Amounts recognized in the balance sheets as of December 31, 2023 and 2022 consist of (in thousands):

			December 31, 2023						December 31, 2022
Assets			$	3,648					$	3,473
Liabilities			—						—
			$	3,648					$	3,473

Amounts recognized in accumulated other comprehensive income on the Consolidated Balance Sheets consist of the following as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Net actuarial gain			$	2,319					$	3,189
Amounts recognized in accumulated other comprehensive income, before taxes			2,319						3,189
Income tax expense			(488)						(673)
Amounts recognized in accumulated other comprehensive income, after taxes			$	1,831					$	2,516

F-15

Net periodic benefit cost for the years ended December 31, 2023, 2022 and 2021 include the following components (in thousands):

			Years Ended December 31,
			2023						2022						2021
Components of net periodic benefit cost:
Service cost			$	1,537					$	2,870					$	3,225
Interest cost			423						336						264
Expected return on Pension Plan assets			(807)						(741)						(521)
Recognized actuarial (gain) loss			(130)						41						144
Net periodic benefit cost			$	1,023					$	2,506					$	3,112

Service cost, a component of net periodic benefit cost, is reflected in our consolidated statements of income and total comprehensive income within salaries and related employee expenses. The other components of net periodic benefit cost are included in other income, net on the consolidated statements of income and total comprehensive income.

Other changes in Pension Plan assets and benefit obligations recognized in other comprehensive (income) loss for the years ended December 31, 2023, 2022 and 2021 (in thousands):

			Years Ended December 31,
			2023						2022						2021
Net actuarial (gain) loss			$	739					$	(4,422)					$	(1,990)
Recognized actuarial gain (loss)			130						(41)						(144)
Total recognized in other comprehensive (income) loss, before taxes			$	869					$	(4,463)					$	(2,134)
Total recognized in net benefit cost and other comprehensive (income) loss, before taxes			$	1,892					$	(1,958)					$	978

TPL reclassified less than $0.6 million (net of income tax benefit of less than $0.2 million) out of accumulated other comprehensive loss for net periodic benefit cost to other income, net for the year ended December 31, 2023, $0.4 million (net of income tax benefit of less than $0.1 million) for the year ended December 31, 2022 and $0.2 million (net of income tax benefit of less than $0.1 million) for the year ended December 31, 2021.

The following table summarizes the projected benefit obligation in excess of Pension Plan assets and Pension Plan assets in excess of accumulated benefit obligation as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Projected benefit obligation in excess of Pension Plan assets:
Projected benefit obligation			$	10,553					$	8,177
Fair value of Pension Plan assets			$	14,201					$	11,650
Plan assets in excess of accumulated benefit obligation:
Accumulated benefit obligation			$	6,417					$	5,277
Fair value of Pension Plan assets			$	14,201					$	11,650

F-16

The following are weighted-average assumptions used to determine benefit obligations and costs as of December 31, 2023, 2022 and 2021:

			Years Ended December 31,
			2023						2022						2021
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate			5.00		%				5.25		%				3.00		%
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			5.25		%				3.00		%				2.75		%
Expected return on Pension Plan assets			7.00		%				7.00		%				7.00		%
Rate of compensation increase			7.29		%				7.29		%				7.29		%

The expected return on Pension Plan assets assumption of 7.0% was selected by TPL based on historical real rates of return for the current asset mix and an assumption with respect to future inflation. The rate was determined based on a long-term allocation of about two-thirds fixed income and one-third equity securities; historical real rates of return of about 2.5% and 8.5% for fixed income and equity securities, respectively; and assuming a long-term inflation rate of 2.5%.

The Pension Plan has a formal investment policy statement. The Pension Plan’s investment objective is balanced income, with a moderate risk tolerance. This objective emphasizes current income through a 30.0% to 80.0% allocation to fixed income securities, complemented by a secondary consideration for capital appreciation through an equity allocation in the range of 20.0% to 60.0%. Diversification is achieved through investment in equities and bonds. The asset allocation is reviewed annually with respect to the target allocations and rebalancing adjustments and/or target allocation changes are made as appropriate. Our current funding policy is to maintain the Pension Plan’s fully funded status on an ERISA minimum funding basis.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date.

The fair value accounting standards establish a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect our assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs used in measuring fair value, as follows:

Level 1 – Inputs are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Since inputs are based on quoted prices that are readily and regularly available in an active market, Level 1 inputs require the least judgment.

Level 2 – Inputs are based on quoted prices for similar instruments in active markets, or are observable either directly or indirectly. Inputs are obtained from various sources including financial institutions and brokers.

Level 3 – Inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised by us in determining fair value is greatest for fair value measurements categorized in Level 3.

F-17

The fair values of the Pension Plan assets by major asset category as of December 31, 2023 and 2022, are as follows (in thousands):

			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, 2023:
Cash and cash equivalents — money markets			$	1,179					$	1,179					$	—					$	—
Equities			8,182						8,182						—						—
Equity funds			401						401						—						—
Fixed income funds			1,000						1,000						—						—
Taxable bonds			3,439						3,439						—						—
Total			$	14,201					$	14,201					$	—					$	—
As of December 31, 2022:
Cash and cash equivalents — money markets			$	2,571					$	2,571					$	—					$	—
Equities			392						392						—						—
Equity funds			2,884						2,884						—						—
Fixed income funds			598						598						—						—
Taxable bonds			5,205						5,205						—						—
Total			$	11,650					$	11,650					$	—					$	—

Management intends to at least fund the minimum ERISA amount for 2024 and may make some discretionary contributions to the Pension Plan, the amounts of which have not yet been determined.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the following ten-year period (in thousands):

Year ending December 31,						Amount
2024						$	261
2025						257
2026						257
2027						263
2028						329
2029 to 2033						2,059

8. Share-Based Compensation

The Company grants share-based compensation to employees under the Texas Pacific Land Corporation 2021 Incentive Plan (the “2021 Plan”) and to its non-employee directors under the 2021 Non-Employee Director Stock and Deferred Compensation Plan (the “2021 Directors Plan”). As of December 31, 2023, share-based compensation granted under the plans has included these award types: stock awards, RSAs, RSUs and PSUs. Currently, all awards granted under the plans are entitled to receive dividends (which are accrued and distributed to award recipients upon vesting) or have dividend equivalent rights. Dividends and dividend equivalent rights are subject to the same vesting conditions as the awards to which they relate and are forfeitable if the related awards are forfeited. RSUs granted under the 2021 Plan vest in one-third increments and PSUs granted under the 2021 Plan cliff vest at the end of three years if the performance metrics are achieved (as discussed further below). RSAs granted under the 2021 Directors Plan vest on the first anniversary of the award. Effective October 31, 2023, the 2021 Directors Plan was amended to eliminate vesting requirements on stock awards granted after October 31, 2023.

F-18

Incentive Plan for Employees

The maximum aggregate number of shares of the Company’s Common Stock that may be issued under the 2021 Plan is 75,000 shares, which may consist, in whole or in part, of authorized and unissued shares (if any), treasury shares, or shares reacquired by the Company in any manner. As of December 31, 2023, 55,089 shares of Common Stock remained available under the 2021 Plan for future grants.

The following table summarizes activity related to RSAs and RSUs under the 2021 Plan for the years ended December 31, 2023 and 2022:

						Years Ended December 31,
						2023																								2022
						Restricted Stock Awards (1)												Restricted Stock Units (2)												Restricted Stock Awards (1)												Restricted Stock Units (2)
						Number of RSAs						Weighted-Average Grant-Date Fair Value per Share						Number of RSUs						Weighted-Average Grant-Date Fair Value per Share						Number of RSAs						Weighted-Average Grant-Date Fair Value per Share						Number of RSUs						Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period						1,337						$	1,252					5,612						$	1,323					3,330						$	1,252					—						$	—
Granted						—						—						2,848						1,924						—						—						5,612						1,323
Vested (3)						(1,297)						1,252						(1,864)						1,324						(1,993)						1,252						—						—
Cancelled and forfeited						(40)						1,252						(371)						1,602						—						—						—						—
Nonvested at end of period						—						$	—					6,225						$	1,581					1,337						$	1,252					5,612						$	1,323

*(1)*RSAs were granted on December 29, 2021: 1,993 shares vested on December 29, 2022, 40 shares were forfeited during 2023 and 1,297 shares vested on December 29, 2023.

*(2)*RSUs vest in one-third increments over a three-year period.

*(3)*Of the 3,161 shares that vested during the year ended December 31, 2023, 1,165 shares were surrendered upon vesting by employees to the Company to settle tax withholding obligations.

The following table summarizes activity related to PSUs for the years ended December 31, 2023 and 2022:

						Years Ended December 31,
						2023												2022
						Number of Target PSUs						Weighted-Average Grant-Date Fair Value per Share						Number of Target PSUs						Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period (1)						2,394						$	1,355					—						$	—
Granted (2)						1,852						2,342						2,394						1,355
Vested						—						—						—						—
Cancelled and forfeited						—						—						—						—
Nonvested at end of period						4,246						$	1,786					2,394						$	1,355

*(1)*The PSUs were granted on February 11, 2022 and include 1,197 RTSR (as defined below) PSUs (based on target) with a grant date fair value of $1,605 per share and 1,197 FCF (as defined below) PSUs (based on target) with a grant date fair value of $1,105 per share. If the maximum performance potential metrics described in the PSU agreements are achieved, the actual number of units that will ultimately be awarded under the PSU agreements will exceed target units by 100% (i.e., a collective 2,394 additional units would be issued).

*(2)*The PSUs were granted on February 10, 2023 and include 926 RTSR PSUs (based on target) with a grant date fair value of $2,761 per share and 926 FCF PSUs (based on target) with a grant date fair value of $1,924 per share. If the maximum performance potential metrics described in the PSU agreements are achieved, the actual number of units that will ultimately be awarded under the PSU agreements will exceed target units by 100% (i.e., a collective 1,852 additional units would be issued).

F-19

Each PSU has a value equal to one share of Common Stock. The PSUs will vest three years after grant if certain performance metrics are met, as follows: 50% of the PSUs may be earned based on the Company’s relative total stockholder return (“RTSR”) over the applicable three-year measurement period compared to the SPDR® S&P® Oil & Gas Exploration & Production ETF (“XOP”) Index, and 50% of the PSUs may be earned based on the cumulative free cash flow per share (“FCF”) over the three-year vesting period. As the RTSR PSU is a market-based award, its grant date fair value was determined using a Monte Carlo simulation model that uses the same input assumptions as the Black-Scholes model to determine the expected potential ranking of the Company against the XOP Index, i.e., the probability of satisfying the market condition defined in the award. Expected volatility in the model was estimated based on the volatility of historical stock prices over a period matching the expected term of the award. The risk-free interest rate was based on U.S. Treasury yield constant maturities for a term matching the expected term of the award.

Equity Plan for Non-Employee Directors

The maximum aggregate number of shares of Common Stock that may be issued under the 2021 Directors Plan is 10,000 shares, which may consist, in whole or in part, of authorized and unissued shares (if any), treasury shares, or shares reacquired by the Company in any manner. As of December 31, 2023, 8,793 shares of Common Stock remained available under the 2021 Directors Plan for future grants.

The following table summarizes activity related to the RSAs under the 2021 Directors Plan for the years ended December 31, 2023 and 2022:

																		Years Ended December 31,
																		2023																					2022
												Restricted Stock Awards																		Restricted Stock Awards
																		Number of RSAs						Weighted-Average Grant-Date Fair Value per Share																		Number of RSAs						Weighted-Average Grant-Date Fair Value per Share
Nonvested at beginning of period																		699						$	1,281																	—						$	—
Granted (1)																		486						2,344																		784						1,277
Vested																		(807)						1,423																		—						—
Cancelled and forfeited																		—						—																		(85)						1,249
Nonvested at end of period																		378						$	2,344																	699						$	1,281

*(1)*RSAs vest on the first anniversary of the grant date.

As noted above, there are no vesting requirements associated with stock awards granted under the 2021 Directors Plan effective for awards granted subsequent to October 31, 2023. In November 2023, the Company granted a total of 22 shares of Common Stock to two new members of the Company’s board of directors. The grant date fair value was $1,641 per share, the closing price of its Common Stock as of November 10, 2023.

Share-Based Compensation Expense

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

			Years Ended December 31,
			2023						2022						2021
Salaries and related employee expenses (employee awards)			$	9,124					$	7,583					$	28
General and administrative expenses (director awards)			1,219						849						—
Total share-based compensation expense (1)			$	10,343					$	8,432					$	28

*(1)*The Company recognized a tax benefit of $2.2 million and $1.8 million related to share-based compensation for the years ended December 31, 2023 and 2022, respectively.

F-20

As of December 31, 2023, there was $8.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under existing share-based plans expected to be recognized over a weighted average period of 1.1 years.

9. Other Income, Net

Other income, net, includes interest earned on our cash balances, other employee pension costs, and other miscellaneous income (expense). Miscellaneous income (expense) includes insurance proceeds and gains and losses on disposals of capital assets.

Other income, net for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

			Years Ended December 31,
			2023						2022						2021
Other income, net:
Interest earned on cash and cash equivalents, net			$	28,630					$	6,207					$	78
Other employee pension costs			514						363						113
Miscellaneous other income (expense), net (1)			2,364						(22)						433
Total other income, net			$	31,508					$	6,548					$	624

*(1)*For the year ended December 31, 2023, miscellaneous other income (expense), net includes $1.4 million of interest and damages resulting from an arbitration settlement with an operator. See Note 12, “Commitments” for further information regarding the arbitration.

10. Income Taxes

The income tax provision charged to operations for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

			Years Ended December 31,
			2023						2022						2021
Current:
U.S. Federal			$	106,721					$	117,395					$	90,920
State and local			3,796						3,835						2,345
Current income tax expense			110,517						121,230						93,265
Deferred (benefit) expense			1,399						1,263						(228)
Total income tax expense			$	111,916					$	122,493					$	93,037

Although TPL was a trust until January 11, 2021, it was historically taxed as if it were a corporation for income tax purposes prior to its conversion to a corporation.

F-21

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21% for the years ended December 31, 2023, 2022 and 2021 to income before Federal income taxes as a result of the following (in thousands):

			Years Ended December 31,
			2023						2022						2021
Computed tax expense at the statutory rate of 21%			$	108,688					$	119,460					$	76,234
Reduction in income taxes resulting from:
Statutory depletion			(682)						(823)						(584)
State taxes			3,439						3,045						1,740
Executive compensation			1,117						1,146						1,687
Prior year tax adjustments			(305)						(13)						18
Correction of historical tax depletion			—						805						12,975
Estimated penalties and interest			—						(763)						1,022
Other, net			(341)						(364)						(55)
Total income tax expense			$	111,916					$	122,493					$	93,037
Effective tax rate			21.6		%				21.5		%				25.6		%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows (in thousands):

			December 31, 2023						December 31, 2022
Unearned revenue			$	6,717					$	5,621
Stock compensation			2,097						1,256
Other			760						48
Total deferred tax assets			9,574						6,925
Property, plant and equipment			17,532						16,958
Real estate and royalty interests			33,215						30,387
Pension plan asset			767						731
Other, net			425						—
Total deferred tax liabilities			51,939						48,076
Deferred taxes payable			$	(42,365)					$	(41,151)

TPL is subject to taxation in the United States and Texas. TPL is no longer subject to U.S. Federal income tax examination by tax authorities for tax years before 2020.

11. Earnings Per Share

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares outstanding during the period. Diluted EPS is computed based upon the weighted average number of shares outstanding during the period plus unvested restricted stock and other unvested awards granted pursuant to our incentive and equity compensation plans. The computation of diluted EPS reflects the potential dilution that could occur if all outstanding awards under the incentive and equity compensation plans were converted into shares of Common Stock or resulted in the issuance of shares of Common Stock that would then share in the earnings of the Company. The number of dilutive securities is computed using the treasury stock method.

F-22

The following table sets forth the computation of EPS for the years ended December 31, 2023, 2022 and 2021 (in thousands, except number of shares and per share data):

			Years Ended December 31,
			2023						2022						2021
Net income			$	405,645					$	446,362					$	269,980
Basic earnings per share:
Weighted average shares outstanding for basic earnings per share			7,681,435						7,721,957						7,752,027
Basic earnings per share			$	52.81					$	57.80					$	34.83
Diluted earnings per share:
Weighted average shares outstanding for basic earnings per share			7,681,435						7,721,957						7,752,027
Effect of Dilutive securities:
Stock-based incentive plan			5,180						4,852						27
Weighted average shares outstanding for diluted earnings per share			7,686,615						7,726,809						7,752,054
Diluted earnings per share			$	52.77					$	57.77					$	34.83

Restricted stock is included in the number of shares of Common Stock issued and outstanding, but omitted from the basic earnings per share calculation until such time as the shares of restricted stock vest. Certain stock awards granted are not included in the dilutive securities in the table above as they are anti-dilutive for the year ended December 31, 2023.

12. Commitments

Litigation

Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the Company’s financial condition, results of operations or liquidity as of December 31, 2023.

Prior to January 1, 2022, ad valorem taxes with respect to our historical royalty interests were paid directly by third parties pursuant to an existing arrangement. Since the completion of our Corporate Reorganization, we have received notice from a third party that they no longer intend to pay the ad valorem taxes related to such historical royalty interests. In order to protect the historical royalty interests from any potential tax liens for non-payment of ad valorem taxes, we have accrued and/or paid such ad valorem taxes since January 1, 2022. While we intend to seek reimbursement from the third party for such taxes, we are unable to estimate the amount and/or likelihood of such reimbursement, and accordingly, no loss recovery receivable has been recorded as of December 31, 2023.

Ongoing Arbitration with an Operator

As part of an ongoing arbitration between TPL and an operator with respect to underpayment of oil and gas royalties resulting from improper deductions of post-production costs by the operator for production periods before and through June 2023, the operator has agreed to pay $10.1 million to TPL, comprised of $8.7 million of unpaid oil and gas royalties, $0.9 million of interest and $0.5 million of damages. The full amount of $10.1 million has been recorded as a receivable, $8.7 million has been included in oil and gas royalty revenue and the remaining $1.4 million has been recorded as other income in the consolidated financial statements for the year ended December 31, 2023. The Company received payment from the operator for the full amount in January 2024.

Lease Commitments

As of December 31, 2023 and 2022, we have recorded right-of-use assets of $1.9 million and $2.5 million, respectively, and lease liabilities for $2.0 million and $2.8 million, respectively, primarily related to operating leases in connection with our administrative offices located in Dallas and Midland, Texas. The office lease agreements require monthly rent payments and expire in December 2025 and July 2027, respectively. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease cost for each of the years ended December 31, 2023 and 2022 was $0.8 million.

F-23

While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations. There are no residual value guarantees in our lease commitments. The weighted-average lease term for our operating lease liabilities is approximately 33 months. The weighted average discount rate of our operating leases is 4.7%.

Future minimum lease payments were as follows as of December 31, 2023 (in thousands):

Year ending December 31,						Amount
2024						$	854
2025						826
2026						316
2027						187
Total lease payments						2,183
Less: imputed interest						(159)
Total operating lease liabilities						$	2,024

Rent expense for these lease agreements amounted to approximately $0.8 million for each of the years ended December 31, 2023, 2022 and 2021.

13. Equity

Corporate Reorganization

On January 11, 2021, TPL completed its Corporate Reorganization. As part of the implementation of the Corporate Reorganization, prior to the market opening on January 11, 2021, the Trust distributed all of the shares of Common Stock of TPL Corporation to holders of Sub-shares of the Trust, on a pro rata, one-for-one, basis in accordance with their interests in the Trust (the “Distribution”). As a result of the Distribution, TPL Corporation is a corporation with its Common Stock listed under the symbol “TPL” on the New York Stock Exchange.

Stock Repurchase Program

On November 1, 2022, our board of directors approved a stock repurchase program, which became effective January 1, 2023, to purchase up to an aggregate of $250 million of our outstanding Common Stock.

The Company repurchases stock under a repurchase program opportunistically with funds generated by cash from operations. This repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. Purchases under the stock repurchase program may be made through a combination of open market repurchases in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, privately negotiated transactions, and/or other transactions at the Company’s discretion, including under a Rule 10b5-1 trading plan implemented by the Company, and will be subject to market conditions, applicable legal requirements and other factors.

For the year ended December 31, 2023, we repurchased 27,619 shares of Common Stock totaling $42.4 million for an average price per share of $1,536. For the year ended December 31, 2022, we repurchased 48,959 shares of Common Stock totaling $87.9 million for an average price per share of $1,795.

Dividends

For the year ended December 31, 2023, we paid total cash dividends of $13.00 per share of Common Stock. For the year ended December 31, 2022, we paid total cash dividends of $12.00 per share of Common Stock and special dividends of $20.00 per share of Common Stock.

F-24

14. Business Segment Reporting

During the periods presented, we reported our financial performance based on the following segments: Land and Resource Management and Water Services and Operations. Our segments provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of our strategies and objectives and provide a framework for timely and rational allocation of resources within businesses. We eliminate any inter-segment revenues and expenses upon consolidation.

The Land and Resource Management segment encompasses the business of managing our approximately 868,000 surface acres of land and our oil and gas royalty interests in West Texas, principally concentrated in the Permian Basin. The revenue streams of this segment consist primarily of royalties from oil and gas, revenues from easements and commercial leases, and land and material sales.

The Water Services and Operations segment encompasses the business of providing a full-service water offering to operators in the Permian Basin. The revenue streams of this segment primarily consist of revenue generated from sales of sourced and treated water as well as revenue from produced water royalties.

The following table presents segment financial results for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

			Years Ended December 31,
			2023						2022						2021
Revenues:
Land and resource management			$	432,105					$	506,975					$	320,387
Water services and operations			199,490						160,447						130,571
Total consolidated revenues			$	631,595					$	667,422					$	450,958
Net income:
Land and resource management			$	306,706					$	365,041					$	208,897
Water services and operations			98,939						81,321						61,083
Total consolidated net income			$	405,645					$	446,362					$	269,980
Capital Expenditures:
Land and resource management			$	241					$	393					$	4,688
Water services and operations			15,190						18,574						11,727
Total capital expenditures			$	15,431					$	18,967					$	16,415
Depreciation, depletion and amortization:
Land and resource management			$	3,073					$	2,234					$	2,397
Water services and operations			11,684						13,142						13,860
Total depreciation, depletion and amortization			$	14,757					$	15,376					$	16,257

F-25

The following table presents total assets and property, plant and equipment, net by segment as of December 31, 2023 and 2022 (in thousands):

			December 31, 2023						December 31, 2022
Assets:
Land and resource management			$	975,136					$	735,193
Water services and operations			181,262						142,234
Total consolidated assets			$	1,156,398					$	877,427
Property, plant and equipment, net:
Land and resource management			$	5,322					$	5,998
Water services and operations			84,265						79,480
Total consolidated property, plant and equipment, net			$	89,587					$	85,478

15. Subsequent Events

We evaluated events that occurred after the balance sheet date through the date these financial statements were issued, and the following events that met recognition or disclosure criteria were identified:

Dividends Declared

On February 13, 2024, our board of directors declared a quarterly cash dividend of $3.50 per share, payable on March 15, 2024 to stockholders of record at the close of business on March 1, 2024.

16. Oil and Gas Producing Activities (Unaudited)

We measure our share of oil and gas produced in barrels of oil equivalent (“Boe”). One Boe equals one barrel of crude oil, condensate, NGLs (natural gas liquids) or approximately 6,000 cubic feet of gas. For the years ended December 31, 2023, 2022 and 2021, our share of oil and gas produced was approximately 23.5, 21.3 and 18.6 thousand Boe per day, respectively. Reserves related to our royalty interests are not presented because the information is unavailable.

There are a number of oil and gas wells that have been drilled but are not yet completed (“DUC”) where we have a royalty interest. The number of DUC wells is determined using uniform drilling spacing units with pooled interests for all wells awaiting completion. We have identified 675, 584, and 452 DUC wells subject to our royalty interest as of December 31, 2023, 2022 and 2021, respectively.

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