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TPL > SEC Filings for TPL > Form 10-Q on 6-Nov-2012All Recent SEC Filings

Show all filings for TEXAS PACIFIC LAND TRUST

Form 10-Q for TEXAS PACIFIC LAND TRUST


6-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read together with (i) the factors discussed in Item 1A "Risk Factors" of Part I of our Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2011, (ii) the factors discussed in Part II, Item 1A "Risk Factors," if any, of this Quarterly Report on Form 10-Q and (iii) the Financial Statements, including the Notes thereto, and the other financial information appearing elsewhere in this Report. Period-to-period comparisons of financial data are not necessarily indicative, and therefore should not be relied upon as indicators, of the Trust's future performance. Words or phrases such as "does not believe" and "believes", or similar expressions, when used in this Form 10-Q or other filings with the Securities and Exchange Commission, are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.

Results of Operations for the Quarter Ended September 30, 2012 Compared to the Quarter Ended September 30, 2011

Earnings per Sub-share certificate were $.48 for the third quarter of 2012, compared to $.56 for the third quarter of 2011. Total operating and investing revenues were $7,043,281 for the third quarter of 2012 compared to $8,560,379 for the third quarter of 2011, a decrease of 17.7%. This decrease in revenue and earnings was due primarily to decreases in land sales, gas royalty revenue and interest income from notes receivable, which were partially offset by increases in easement and sundry income and oil royalty revenue.

No land sales occurred in the third quarter of 2012. In the third quarter of 2011 the Trust sold approximately 6,511 acres for a total of $2,955,972, or approximately $454 per acre.

Rentals, royalties and sundry income were $6,857,629 during the third quarter of 2012, compared to $5,388,491 for the third quarter of 2011, an increase of 27.3%. This increase resulted primarily from increases in easement and sundry income and oil royalty revenue, partially offset by a decrease in gas royalty revenue.

Oil and gas royalty revenue was $3,820,708 for the third quarter of 2012, compared to $3,683,621 for the third quarter of 2011, an increase of 3.7%. Oil royalty revenue was $2,992,539 for the third quarter of 2012, an increase of 12.7% from the third quarter of 2011 when oil royalty revenue was $2,655,431. The average price per royalty barrel of crude oil during the third quarter of 2012 was 9.3% lower than the average price prevailing during the third quarter of 2011. This price decrease, however, was more than offset by an increase of 24.2% in crude oil production subject to the Trust's royalty interest in the third quarter of 2012 compared to the third quarter of 2011. Gas royalty revenue was $828,169 for the third quarter of 2012, a decrease of 19.5% from the third quarter of 2011 when gas royalty revenue was $1,028,190. This decrease in gas royalty revenue resulted from a price decrease of 26.9% in the third quarter of 2012 compared to the third quarter of 2011, which more than offset a volume increase of 10.0% over the same period.


Easement and sundry income was $2,938,212 for the third quarter of 2012, an increase of 83.9% compared to the third quarter of 2011 when easement and sundry income was $1,597,594. This increase resulted primarily from increases in seismic and pipeline easement income and sundry lease rental income caused by an increase in drilling and exploration activity on land owned by the Trust. This category of income is unpredictable and may vary significantly from quarter to quarter.

Interest income, including interest on investments, was $185,652 for the third quarter of 2012 compared to $215,916 for the third quarter of 2011, a decrease of 14.0%. Interest on notes receivable for the third quarter of 2012 was $180,852, a decrease of 14.4% compared to the third quarter of 2011 when interest on notes receivable was $211,331. As of September 30, 2012, notes receivable for land sales were $9,667,642 compared to $10,892,178 at September 30, 2011, a decrease of 11.2%. Interest income earned from investments was $4,800 for the third quarter of 2012, an increase of 4.7% from the third quarter of 2011. Interest on investments is affected by such variables as cash on hand for investment and the rate of interest on short-term investments.

Taxes, other than income taxes, increased 1.4% for the third quarter of 2012 compared to the third quarter of 2011. This increase is mainly attributable to an increase in oil production taxes which resulted from the increase in oil royalty revenue discussed above.

General and administrative expenses for the third quarter of 2012 were down 9.0%, compared to the third quarter of 2011. This was primarily due to a decrease in legal expenses.

Results of Operations for the Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

Earnings per Sub-share certificate were $1.73 for the first nine months of 2012, compared to $1.49 for the first nine months of 2011. Total operating and investing revenues were $25,330,098 for the first nine months of 2012 compared to $23,079,474 for the first nine months of 2011, an increase of 9.8%. This increase in revenue and earnings was primarily due to increases in easement and sundry income and oil royalty revenue, which were partially offset by decreases in land sales, gas royalty revenue and interest income from notes receivable.

During the first nine months of 2012 the Trust sold approximately 7,252 acres for a total of $5,809,747, or approximately $801 per acre. In the first nine months of 2011 the Trust sold approximately 13,261 acres for a total of $7,147,972, or approximately $539 per acre.

Rentals, royalties, and sundry income were $18,961,648 for the first nine months of 2012 compared to $15,229,529 for the first nine months of 2011, an increase of 24.5%. This increase resulted primarily from increases in easement and sundry income and oil royalty revenue, partially offset by a decrease in gas royalty revenue.

Oil and gas royalty revenue was $10,582,788 for the first nine months of 2012 compared to $10,751,036 for the first nine months of 2011, a decrease of 1.6%. Oil royalty revenue was $8,601,160 for the first nine months of 2012, an increase of 4.5% from the first nine months of 2011 when oil royalty revenue was $8,234,302. The average price per royalty barrel of crude oil during the first nine months of 2012 was essentially equal to the average price prevailing during the first nine months of 2011. Crude oil production subject to the Trust's royalty interest increased 4.5% in the first nine months of 2012 compared to the first nine months of 2011. Gas royalty revenue was $1,981,628 for the first nine months of 2012, a decrease of 21.3% from the first nine months of 2011 when gas royalty income was $2,516,734. This decrease in gas royalty revenue resulted from a price decrease of 29.7% in the first nine months of 2012 compared to the first nine months of 2011, partially offset by a volume increase of 11.9% over the same period.


Easement and sundry income was $8,010,317 for the first nine months of 2012, an increase of 95.8% compared to the first nine months of 2011 when easement and sundry income was $4,091,829. This increase resulted primarily from increases in sundry income, pipeline and seismic easement income and sundry lease rental income caused by an increase in drilling and exploration activity on land owned by the Trust. This category of income is unpredictable and may vary significantly from quarter to quarter.

Interest income, including interest on investments, was $558,703 for the first nine months of 2012 compared to $701,973 for the first nine months of 2011, a decrease of 20.4%. Interest on notes receivable for the first nine months of 2012 was $543,702, a decrease of 21.0% compared to the first nine months of 2011 when interest on notes receivable was $688,657. As of September 30, 2012, notes receivable for land sales were $9,667,642 compared to $10,892,178 at September 30, 2011, a decrease of 11.2%. Interest income earned from investments was $15,001 for the first nine months of 2012, an increase of 12.7% from the first nine months of 2011. Interest on investments is affected by such variables as cash on hand for investment and the rate of interest on short-term investments.

Taxes, other than income taxes, were essentially flat for the first nine months of 2012 compared to the first nine months of 2011.

General and administrative expenses for the first nine months of 2012 were down 6.8% compared to the first nine months of 2011. This decrease was primarily due to a decrease in legal expenses.

Liquidity and Capital Resources

The Trust's principal sources of liquidity are revenues from oil and gas royalties, lease rentals and receipts of interest and principal payments on the notes receivable arising from land sales. In the past, those sources have generated more than adequate amounts of cash to meet the Trust's needs and, in the opinion of management, should continue to do so in the foreseeable future.

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