Item 1. Financial Statements

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Item 1. Financial Statements

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

(Unaudited)


	June 30, 2024		December 31, 2023
ASSETS
Cash and cash equivalents	$	894,704	$	725,169
Accounts receivable and accrued receivables, net	119,102		128,971
Prepaid expenses and other current assets	3,878		2,944
Tax like-kind exchange escrow	—		5,380

Total current assets	1,017,684		862,464
Real estate acquired	130,800		130,024
Property, plant and equipment, net	95,511		89,587
Royalty interests acquired, net	45,583		46,609
Intangible assets, net	20,457		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	—		—

Other assets	5,756		6,689
Total assets	$	1,315,791	$	1,156,398
LIABILITIES AND EQUITY
Accounts payable and accrued expenses	$	31,656	$	22,501
Ad valorem and other taxes payable	5,661		10,761
Income taxes payable	891		4,795
Unearned revenue	6,060		6,330
Total current liabilities	44,268		44,387
Deferred taxes payable	43,121		42,365
Unearned revenue - noncurrent	21,094		25,006

Accrued liabilities - noncurrent	887		1,444
Total liabilities	109,370		113,202

Commitments and contingencies	—		—
Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, $0.01 par value; 46,536,936 and 7,756,156 shares authorized as of June 30, 2024 and December 31, 2023, respectively, and 22,983,392 and 23,007,681 (as adjusted for stock split) outstanding as of June 30, 2024 and December 31, 2023, respectively	231		78
Treasury stock, at cost; 102,684 and 86,929 shares as of June 30, 2024 and December 31, 2023, respectively	(158,296)		(144,998)
Additional paid-in capital	15,863		14,613
Accumulated other comprehensive income	1,789		1,831
Retained earnings	1,346,834		1,171,672
Total equity	1,206,421		1,043,196
Total liabilities and equity	$	1,315,791	$	1,156,398

See accompanying notes to condensed consolidated financial statements.

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND TOTAL COMPREHENSIVE INCOME

(in thousands, except shares and per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Oil and gas royalties	$	89,813	$	82,412	$	181,933	$	171,542
Water sales	40,650		37,648		77,776		59,377
Produced water royalties	25,301		20,841		48,307		40,975
Easements and other surface-related income	16,570		18,708		37,216		33,677
Land sales	—		1,000		1,244		1,400
Total revenues	172,334		160,609		346,476		306,971

Expenses:
Salaries and related employee expenses	12,771		10,596		25,232		21,189
Water service-related expenses	14,824		10,287		25,036		15,943
General and administrative expenses	3,673		3,327		8,597		6,879
Legal and professional fees	2,307		10,154		6,364		26,782
Ad valorem and other taxes	1,444		2,070		3,801		3,644
Land sales expenses	—		2		250		5
Depreciation, depletion and amortization	4,093		3,893		7,933		7,297
Total operating expenses	39,112		40,329		77,213		81,739

Operating income	133,222		120,280		269,263		225,232

Other income, net	13,220		6,871		23,163		12,260
Income before income taxes	146,442		127,151		292,426		237,492



Income tax expense	31,853		26,758		63,420		50,531
Net income	$	114,589	$	100,393	$	229,006	$	186,961




Other comprehensive loss — periodic pension costs, net of income taxes for the three and six months ended June 30, 2024 and 2023 of $5, $8, $11, and $14, respectively	(21)		(26)		(42)		(51)
Total comprehensive income	$	114,568	$	100,367	$	228,964	$	186,910

Net income per share of common stock
Basic	$	4.99	$	4.35	$	9.96	$	8.10
Diluted	$	4.98	$	4.35	$	9.95	$	8.10

Weighted average number of shares of common stock outstanding
Basic	22,987,971		23,056,986		22,995,486		23,068,056
Diluted	23,013,793		23,072,851		23,018,313		23,083,643

Cash dividends per share of common stock	$	1.17	$	1.08	$	2.34	$	2.16

See accompanying notes to condensed consolidated financial statements.

TEXAS PACIFIC LAND CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	229,006	$	186,961
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	7,933		7,297
Share-based compensation	6,054		5,323

Deferred taxes	756		(673)
Changes in operating assets and liabilities:
Operating assets, excluding income taxes	10,016		(14,477)
Operating liabilities, excluding income taxes	(4,328)		8,040
Income taxes payable	(3,904)		1,984
Prepaid income taxes	—		4,809

Cash provided by operating activities	245,533		199,264

Cash flows from investing activities:

Acquisition of real estate	(1,026)		(20,320)
Acquisition of royalty interests	—		(1,803)
Purchase of fixed assets	(8,622)		(5,536)
Proceeds from sale of fixed assets	—		5
Cash used in investing activities	(9,648)		(27,654)

Cash flows from financing activities:
Dividends paid	(53,801)		(50,027)
Settlement of common stock repurchases	(16,722)		(26,379)
Shares exchanged for tax withholdings	(1,207)		(939)
Cash used in financing activities	(71,730)		(77,345)

Net increase in cash, cash equivalents and restricted cash	164,155		94,265
Cash, cash equivalents and restricted cash, beginning of period	730,549		517,182
Cash, cash equivalents and restricted cash, end of period	$	894,704	$	611,447

Supplemental disclosure of cash flow information:
Income taxes paid	$	66,557	$	44,396
Supplemental non-cash investing and financing information:

Increase (decrease) in accounts payable related to capital expenditures	$	3,539	$	(392)

See accompanying notes to condensed consolidated financial statements.

TEXAS PACIFIC LAND CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 869,000 surface acres of land, 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, principally concentrated in the Permian Basin.

Our revenues are derived from oil and gas royalties, water sales, produced water royalties, easements and other surface-related income and land sales.

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”).

Increase in Authorized Shares of Common Stock

As of December 31, 2023, the Company had authorized shares consisting of 1,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”), and 7,756,156 shares of common stock, par value $0.01 per share (“Common Stock”). On March 1, 2024, we filed a Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware, pursuant to which the Certificate of Incorporation was amended and restated to provide that the total number of authorized shares of capital stock of the Company be increased to 47,536,936 shares of capital stock, consisting of 1,000,000 shares of Preferred Stock and 46,536,936 shares of Common Stock.

Common Stock Split

On March 26, 2024, we effected a three-for-one stock split in the form of a stock dividend of two shares of Common Stock for every share of Common Stock outstanding to stockholders of record as of March 18, 2024. All shares, stock awards, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and per share information have been retroactively adjusted to reflect the stock split. The three-for-one stock split was not applied to shares held as treasury stock. The shares of Common Stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common Stock.”

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on the same basis as the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated financial statements herein include all adjustments which are, in the opinion of management, necessary to fairly state the financial position of the Company as of June 30, 2024 and the results of its operations for the three and six months ended June 30, 2024 and 2023, and its cash flows for the six months ended June 30, 2024 and 2023, respectively. Such adjustments are of a normal nature and all intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this Quarterly Report, and these interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2023. The results for the interim periods shown in this Quarterly Report are not necessarily indicative of future financial results.

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 13, “Business Segment Reporting” for further information regarding our segments.

2. Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of condensed 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.

Cash, Cash Equivalents and Restricted Cash

We consider investments in bank deposits, money market funds, and other highly-liquid cash investments, such as U.S. Treasury bills and commercial paper, with original maturities of three months or less to be cash equivalents. Our cash equivalents are considered Level 1 assets in the fair value hierarchy.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that correspond to the same such amounts shown in the condensed consolidated statements of cash flows as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	894,704	$	725,169
Tax like-kind exchange escrow	—		5,380
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	894,704	$	730,549

3. Real Estate Activity

As of June 30, 2024 and December 31, 2023, TPL owned the following land and real estate (in thousands, except number of acres):


	June 30, 2024			December 31, 2023
	Number of Acres	Net Book Value		Number of Acres	Net Book Value
Land (surface rights) (1)	798,958	$	—	798,999	$	—
Real estate acquired	70,087	130,800		69,447	130,024
Total real estate	869,045	$	130,800	868,446	$	130,024

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

Land Acquisitions

For the six months ended June 30, 2024, we acquired 640 acres of land for an aggregate purchase price of $1.0 million. For the six months ended June 30, 2023, we acquired 12,141 acres of land for an aggregate purchase price of $20.0 million.

Land Sales

For the six months ended June 30, 2024, we sold 41 acres of land for an aggregate sales price of $1.2 million. For the six months ended June 30, 2023, we sold 43 acres of land for an aggregate sales price of $1.4 million.

4. Property, Plant and Equipment

Property, plant and equipment, net consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Property, plant and equipment, at cost:
Water service-related assets	$	148,303	$	136,340
Furniture, fixtures and equipment	9,996		9,801
Other	598		598
Total property, plant and equipment, at cost	158,897		146,739
Less: accumulated depreciation	(63,386)		(57,152)
Property, plant and equipment, net	$	95,511	$	89,587

Depreciation expense was $3.2 million for each of the three months ended June 30, 2024 and 2023. Depreciation expense was $6.2 million and $6.3 million for the six months ended June 30, 2024 and 2023, respectively.

5. Oil and Gas Royalty Interests

As of June 30, 2024 and December 31, 2023, we owned the following oil and gas royalty interests (in thousands):


	June 30, 2024		December 31, 2023
Oil and gas royalty interests:
1/16th nonparticipating perpetual royalty interests (1)	$	—	$	—
1/128th nonparticipating perpetual royalty interests (1)	—		—
Royalty interests acquired, at cost	51,494		51,494
Total royalty interests	51,494		51,494
Less: accumulated depletion	(5,911)		(4,885)
Royalty interests, net	$	45,583	$	46,609

*(1)*Royalty interests assigned through the Declaration of Trust.

There were no sales or acquisitions of oil and gas royalty interests during the six months ended June 30, 2024. For the six months ended June 30, 2023, we acquired oil and gas royalty interests in 61 NRA (normalized to 1/8th) for an aggregate purchase price of approximately $1.8 million. There were no sales of oil and gas royalty interests during the six months ended June 30, 2023.

Depletion expense was $0.6 million for each of the three months ended June 30, 2024 and 2023. Depletion expense was $1.0 million and $0.9 million for the six months ended June 30, 2024 and 2023, respectively.

6. Intangible Assets

Intangible assets, net consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Intangible assets, at cost:
Saltwater disposal easement	$	17,557	$	17,557
Groundwater rights acquired	3,846		3,846
Total intangible assets, at cost (1)	21,403		21,403
Less: accumulated amortization	(946)		(378)
Intangible assets, net	$	20,457	$	21,025

*(1)*The remaining weighted average amortization period for total intangible assets was 18.3 years as of June 30, 2024.

There were no intangible asset acquisitions for the six months ended June 30, 2024 or 2023.

Amortization of intangible assets was $0.3 million and $0.6 million for the three and six months ended June 30, 2024, respectively. There was no amortization of intangible assets for the three and six months ended June 30, 2023. The estimated future annual amortization expense of intangible assets is $0.6 million for the remainder of 2024, $1.1 million for each year of 2025 through 2029, and $14.3 million thereafter.

7. 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” and, with the 2021 Plan, collectively referred to herein as the “Plans”). In conjunction with the three-for-one stock split effected on March 26, 2024, the Plans were adjusted to increase the authorized number of shares that may be issued under the Plans. As of June 30, 2024, 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 prior to October 31, 2023 under the 2021 Directors Plan vested on the first anniversary of the award. Effective October 31, 2023, the 2021 Directors Plan was amended such that stock awards granted vest in full on the date of grant.

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 225,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of June 30, 2024, 136,238 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 six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024						2023
	Restricted Stock Awards			Restricted Stock Units			Restricted Stock Awards			Restricted Stock Units
	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)	—	$	—	18,675	$	527	4,011	$	417	16,836	$	441
Granted (2)	—	—		12,655	481		—	—		8,544	641
Vested (3)	—	—		(6,213)	484		—	—		(3,810)	368
Cancelled and forfeited	—	—		(306)	528		—	—		—	—
Nonvested at end of period	—	$	—	24,811	$	514	4,011	$	417	21,570	$	533

*(1)*There were 4,011 RSAs unvested as of June 30, 2023. As of December 31, 2023, the 4,011 RSAs had either vested or had been forfeited. No additional RSAs have been granted under the 2021 plan.

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

*(3)*Of the 6,213 RSUs that vested during the six months ended June 30, 2024, 2,469 RSUs were surrendered by employees to the Company upon vesting to settle tax withholdings.

The following table summarizes activity related to PSUs for the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024			2023
	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)	12,738	$	595	7,182	$	452
Granted (2)	8,340	538		5,556	781
Vested	—	—		—	—
Cancelled and forfeited	—	—		—	—
Nonvested at end of period	21,078	$	573	12,738	$	595

*(1)*Nonvested PSUs as of January 1, 2024 include 6,369 RTSR (as defined below) PSUs and 6,369 FCF (as defined below) PSUs. If the maximum amount of the performance metrics described in the PSU agreements are achieved, the actual number of shares that will ultimately be awarded under the PSU agreements will exceed target PSUs by 100% (i.e., a collective 12,738 additional shares would be issued).

*(2)*The PSUs were granted on February 13, 2024 and include 4,170 RTSR PSUs (based on target) with a grant date fair value of $602 per share and 4,170 FCF PSUs (based on target) with a grant date fair value of $475 per share. If the maximum amount of the performance metrics described in the PSU agreements are achieved, the actual number of shares that will ultimately be awarded under the PSU agreements will exceed target PSUs by 100% (i.e., a collective 8,340 additional shares would be issued).

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. Because 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 30,000 shares, which may consist, in whole or in part, of authorized and unissued shares, treasury shares, or shares reacquired by the Company in any manner. As of June 30, 2024, 24,219 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 six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024			2023
	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	1,134	$	781	2,097	$	427
Granted (1)	—	—		1,458	781
Vested	(1,134)	781		(2,097)	427
Cancelled and forfeited	—	—		—	—
Nonvested at end of period	—	$	—	1,458	$	781

*(1)*RSAs granted prior to October 31, 2023 vest on the first anniversary of the grant date.

In January 2024, the Company granted a total of 2,160 shares of Common Stock with a grant date fair value of $524 per share, which was the closing price of its Common Stock on the date of grant, to the members of the Company’s board of directors (the “Board”). The stock awards were vested in full on the date of grant.

Share-Based Compensation Expense

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Salaries and related employee expenses (employee awards)	$	2,700	$	2,559	$	4,920	$	4,715
General and administrative expenses (director awards)	—		291		1,134		608
Total share-based compensation expense (1)	$	2,700	$	2,850	$	6,054	$	5,323

*(1)*The Company recognized a tax benefit of $0.6 million related to share-based compensation for each of the three months ended June 30, 2024 and 2023. The Company recognized a tax benefit of $1.3 million and $1.1 million related to share-based compensation for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, there was $14.1 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 1.4 years.

8. Other Income, Net

Other income, net, includes interest earned on our cash balances, other employee pension costs, and miscellaneous income (expense).

Other income, net for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Other income, net:
Interest earned on cash and cash equivalents, net	$	10,761	$	6,741	$	20,562	$	11,999
Other employee pension costs	143		130		285		258
Miscellaneous income (expense), net (1)	2,316		—		2,316		3
Total other income, net	$	13,220	$	6,871	$	23,163	$	12,260

*(1)*During the three months ended June 30, 2024, miscellaneous income (expense), net includes $1.9 million of proceeds from a settlement with a title company regarding a defect in title to property acquired in a prior year.

9. Income Taxes

The calculation of our effective tax rate was as follows for the three and six months ended June 30, 2024 and 2023 (in thousands, except percentages):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Income before income taxes	$	146,442		$	127,151		$	292,426		$	237,492
Income tax expense	$	31,853		$	26,758		$	63,420		$	50,531
Effective tax rate	21.8		%	21.0		%	21.7		%	21.3		%

For interim periods, our income tax expense and resulting effective tax rate are based upon an estimated annual effective tax rate adjusted for the effects of items required to be treated as discrete to the period, including changes in tax laws, changes in estimated exposures for uncertain tax positions, and other items.

10. 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.

The following table sets forth the computation of EPS for the three and six months ended June 30, 2024 and 2023 (in thousands, except number of shares and per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	114,589	$	100,393	$	229,006	$	186,961

Basic earnings per share:
Weighted average shares outstanding for basic earnings per share	22,987,971		23,056,986		22,995,486		23,068,056
Basic earnings per share	$	4.99	$	4.35	$	9.96	$	8.10

Diluted earnings per share:
Weighted average shares outstanding for basic earnings per share	22,987,971		23,056,986		22,995,486		23,068,056
Effect of dilutive securities:
Incentive and equity compensation plans	25,822		15,865		22,827		15,587
Weighted average shares outstanding for diluted earnings per share	23,013,793		23,072,851		23,018,313		23,083,643
Diluted earnings per share	$	4.98	$	4.35	$	9.95	$	8.10

Restricted stock, if any, is included in the number of shares of Common Stock issued and outstanding, but omitted from the basic EPS 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 three and six months ended June 30, 2023. There were no anti-dilutive securities for the three and six months ended June 30, 2024.

11. Commitments and Contingencies

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 June 30, 2024, other than as described below.

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. After the completion of our Corporate Reorganization, we received notice from a third party that it no longer intended 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 June 30, 2024.

12. Changes in Equity

The following tables present changes in our equity for the six months ended June 30, 2024 and 2023 (in thousands, except shares and per share amounts):


	Common Stock			Treasury Stock		Additional Paid-in Capital		Accum. Other Comp. Income (Loss)		Retained Earnings		Total Equity
	Shares	Amount
For the six months ended June 30, 2024:
Balances as of December 31, 2023	23,007,681	$	78	$	(144,998)	$	14,613	$	1,831	$	1,171,672	$	1,043,196
Net income	—	—		—		—		—		114,417		114,417
Issuance of common stock related to stock split	—	153		—		(153)		—		—		—
Dividends paid — $1.17 per share of common stock	—	—		—		—		—		(26,907)		(26,907)
Share-based compensation, net of forfeitures	8,373	—		4,698		(1,297)		—		15		3,416
Repurchases of common stock and related excise taxes	(20,106)	—		(10,445)		—		—		—		(10,445)
Shares exchanged for tax withholdings	(2,469)	—		(1,207)		—		—		—		(1,207)
Periodic pension costs, net of income taxes of $6	—	—		—		—		(21)		—		(21)
Balances as of March 31, 2024	22,993,479	231		(151,952)		13,163		1,810		1,259,197		1,122,449
Net income	—	—		—		—		—		114,589		114,589
Dividends paid — $1.17 per share of common stock	—	—		—		—		—		(26,894)		(26,894)

Share-based compensation, net of forfeitures	—	—		—		2,700		—		(58)		2,642
Repurchases of common stock and related excise taxes	(10,087)	—		(6,344)		—		—		—		(6,344)
Periodic pension costs, net of income taxes of $5	—	—		—		—		(21)		—		(21)
Balances as of June 30, 2024	22,983,392	$	231	$	(158,296)	$	15,863	$	1,789	$	1,346,834	$	1,206,421


	Common Stock			Treasury Stock		Additional Paid-in Capital		Accum. Other Comp. Income (Loss)		Retained Earnings		Total Equity
	Shares	Amount
For the six months ended June 30, 2023:
Balances as of December 31, 2022	23,087,037	$	78	$	(104,139)	$	8,293	$	2,516	$	866,139	$	772,887
Net income	—	—		—		—		—		86,568		86,568
Dividends paid — $1.08 per share of common stock	—	—		—		—		—		(25,061)		(25,061)
Share-based compensation, net of forfeitures	5,268	—		3,033		(560)		—		(103)		2,370
Repurchases of common stock and related excise taxes	(10,881)	—		(6,749)		—		—		—		(6,749)
Shares exchanged for tax withholdings	(1,464)	—		(939)		—		—		—		(939)
Periodic pension costs, net of income taxes of $6	—	—		—		—		(25)		—		(25)
Balances as of March 31, 2023	23,079,960	78		(108,794)		7,733		2,491		927,543		829,051
Net income	—	—		—		—		—		100,393		100,393
Dividends paid — $1.08 per share of common stock	—	—		—		—		—		(24,966)		(24,966)
Share-based compensation, net of forfeitures	—	—		—		2,849		—		(43)		2,806
Repurchases of common stock and related excise taxes	(42,525)	—		(19,708)		—		—		—		(19,708)
Periodic pension costs, net of income taxes of $8	—	—		—		—		(26)		—		(26)
Balances as of June 30, 2023	23,037,435	$	78	$	(128,502)	$	10,582	$	2,465	$	1,002,927	$	887,550

Increase in Authorized Shares of Common Stock

On March 1, 2024, the Company increased its authorized shares of capital stock to 47,536,936 consisting of 1,000,000 shares of Preferred Stock and 46,536,936 shares of Common Stock. For further information see Note 1, “Organization and Description of Business Segments.”

Stock Repurchase Program

On November 1, 2022, our Board approved a stock repurchase program, which became effective January 1, 2023, to purchase up to an aggregate of $250.0 million of our outstanding Common Stock.

The Company opportunistically repurchases stock under the stock repurchase program with funds generated by cash from operations. This stock repurchase program may be suspended from time to time, modified, extended or discontinued by

the Board 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 six months ended June 30, 2024 and 2023, we repurchased shares of our Common Stock in amounts totaling $16.6 million and $26.2 million, respectively.

Declaration of Special Cash Dividend

On June 13, 2024, the Board declared a special cash dividend in the amount of $10.00 per share of Common Stock. The special cash dividend was paid on July 15, 2024 to stockholders of record at the close of business on July 1, 2024.

13. 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 approximate 869,000 surface acres of land and our approximate 195,000 NRA of oil and gas royalty interests, 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 three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Land and resource management	$	104,032	$	101,320	$	215,517	$	205,343
Water services and operations	68,302		59,289		130,959		101,628
Total consolidated revenues	$	172,334	$	160,609	$	346,476	$	306,971

Net income:
Land and resource management	$	80,129	$	69,633	$	161,100	$	134,976
Water services and operations	34,460		30,760		67,906		51,985
Total consolidated net income	$	114,589	$	100,393	$	229,006	$	186,961

Capital expenditures:
Land and resource management	$	93	$	(31)	$	144	$	144
Water services and operations	6,406		1,402		12,017		5,000
Total capital expenditures	$	6,499	$	1,371	$	12,161	$	5,144

Depreciation, depletion and amortization:
Land and resource management	$	813	$	912	$	1,506	$	1,530
Water services and operations	3,280		2,981		6,427		5,767
Total depreciation, depletion and amortization	$	4,093	$	3,893	$	7,933	$	7,297

The following table presents total assets and property, plant and equipment, net by segment as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
Assets:
Land and resource management	$	1,122,656	$	975,136
Water services and operations	193,135		181,262
Total consolidated assets	$	1,315,791	$	1,156,398

Property, plant and equipment, net:
Land and resource management	$	5,072	$	5,322
Water services and operations	90,439		84,265
Total consolidated property, plant and equipment, net	$	95,511	$	89,587

14. Oil and Gas Producing Activities

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 each of the three months ended June 30, 2024 and 2023, our share of oil and gas produced was approximately 24.9 thousand Boe per day. For the six months ended June 30, 2024 and 2023, our share of oil and gas produced was approximately 24.9 and 22.9 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 635 and 675 DUC wells subject to our royalty interest (an estimated 9.5 and 9.7 net DUC wells) as of June 30, 2024 and December 31, 2023, respectively.

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 August 6, 2024, our Board declared a quarterly cash dividend of $1.17 per share, payable on September 17, 2024 to stockholders of record at the close of business on September 3, 2024.

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