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TPL > SEC Filings for TPL > Form 10-Q on 7-May-2013All Recent SEC Filings

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Form 10-Q for TEXAS PACIFIC LAND TRUST


7-May-2013

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, 2012, (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 March 31, 2013 Compared to the Quarter Ended March 31, 2012

Earnings per Sub-share certificate were $.47 for the first quarter of 2013, compared to $.65 for the first quarter of 2012. Total operating and investing revenues were $6,726,854 for the first quarter of 2013 compared to $9,580,079 for the first quarter of 2012, a decrease of 29.8%. This decrease in revenue and earnings was due primarily to a decrease in land sales and, to a significantly lesser extent, decreases in gas royalty revenue and interest income from notes receivable. These decreases were partially offset by increases in oil royalty revenue and easement and sundry income.

In the first quarter of 2013 the Trust sold approximately 56.4 acres for a total of $113,000, or approximately $2,004 per acre. In the first quarter of 2012 the Trust sold approximately 5,460 acres for a total of $3,567,000, or approximately $653 per acre.

Rentals, royalties and sundry income were $6,463,508 during the first quarter of 2013, compared to $5,825,521 for the first quarter of 2012, an increase of 11.0%. This increase resulted primarily from increases in oil royalty revenue and easement and sundry income, which were partially offset by a decrease in gas royalty revenue.


Oil and gas royalty revenue was $3,994,691 for the first quarter of 2013, compared to $3,433,826 for the first quarter of 2012, an increase of 16.3%. Oil royalty revenue was $3,591,741 for the first quarter of 2013, an increase of 26.2% from the first quarter of 2012 when oil royalty revenue was $2,846,572. The average price per royalty barrel of crude oil during the first quarter of 2013 was 13.6% lower than the average price prevailing during the first quarter of 2012. This price decrease, however, was more than offset by an increase of 46.0% in crude oil production subject to the Trust's royalty interest in the first quarter of 2013 compared to the first quarter of 2012. Gas royalty revenue was $402,950 for the first quarter of 2013, a decrease of 31.4% from the first quarter of 2012 when gas royalty revenue was $587,254. This decrease in gas royalty revenue resulted from a price decrease of 40.8% in the first quarter of 2013 compared to the first quarter of 2012, which more than offset a volume increase of 15.8%.

Easement and sundry income was $2,353,498 for the first quarter of 2013, an increase of 2.5% compared to the first quarter of 2012 when easement and sundry income was $2,295,908. This increase resulted primarily from increases in sundry lease rental income and pipeline easement 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 $150,346 for the first quarter of 2013 compared to $187,558 for the first quarter of 2012, a decrease of 19.8%. Interest on notes receivable for the first quarter of 2013 was $147,275, a decrease of 19.2% compared to the first quarter of 2012 when interest on notes receivable was $182,361. As of March 31, 2013, notes receivable for land sales were $8,038,628 compared to $10,047,886 at March 31, 2012, a decrease of 20.0%. Interest income earned from investments was $3,071 for the first quarter of 2013, a decrease of 40.9% from the first quarter of 2012. 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, decreased 0.8% for the first quarter of 2013 compared to the first quarter of 2012. This decrease is primarily attributable to a decrease in ad valorem taxes, which was partially offset by an increase in oil production taxes which resulted from the increase in oil royalty revenue discussed above.

General and administrative expenses for the first quarter of 2013 were up 14.9%, compared to the first quarter of 2012. This was primarily due to an increase 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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