UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________

FORM 10-Q

_____________________

OR

Commission File Number: 1-737

Texas Pacific Land Trust

(Exact Name of Registrant as Specified in Its Charter)

(214) 969-5530

(Registrant’s Telephone Number, Including Area Code)

__________________________________________________________________

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☑

Cautionary Statement Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding management’s expectations, hopes, intentions or strategies regarding the future. Forward-looking statements include statements regarding the Trust’s future operations and prospects, the markets for real estate in the areas in which the Trust owns real estate, applicable zoning regulations, the markets for oil and gas, production limits on prorated oil and gas wells authorized by the Railroad Commission of Texas, expected competition, management’s intent, beliefs or current expectations with respect to the Trust’s future financial performance and other matters. All forward-looking statements in this Report are based on information available to us as of the date this Report is filed with the Securities and Exchange Commission, and we assume no responsibility to update any such forward-looking statements, except as required by law. All forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, 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, and in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements

TEXAS PACIFIC LAND TRUST

BALANCE SHEETS

See accompanying notes to financial statements.

TEXAS PACIFIC LAND TRUST

STATEMENTS OF INCOME AND TOTAL COMPREHENSIVE INCOME

(Unaudited)

See accompanying notes to financial statements.

TEXAS PACIFIC LAND TRUST

STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to financial statements.

TEXAS PACIFIC LAND TRUST

NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

Supplemental cash flow information for the nine month periods ended September 30, 2013 and 2012 is summarized as follows:

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 September 30, 2013 Compared to the Quarter Ended September 30, 2012

Earnings per Sub-share certificate were $1.10 for the third quarter of 2013, compared to $.48 for the third quarter of 2012. Total operating and investing revenues were $14,936,609 for the third quarter of 2013 compared to $7,043,281 for the third quarter of 2012, an increase of 112.1%. This increase in revenue and earnings was due primarily to increases in land sales, oil and gas royalty revenue and easement and sundry income. These increases were only slightly offset by a decrease in interest income from notes receivable.

In the third quarter of 2013 the Trust sold approximately 10,180 acres for a total of $5,201,600, or approximately $511 per acre. No land sales occurred in the third quarter of 2012.

Rentals, royalties and sundry income were $9,608,435 during the third quarter of 2013, compared to $6,857,629 for the third quarter of 2012, an increase of 40.1%. This increase resulted primarily from increases in oil and gas royalty revenue and, to a lesser extent, easement and sundry income.

Oil and gas royalty revenue was $5,853,309 for the third quarter of 2013, compared to $3,820,708 for the third quarter of 2012, an increase of 53.2%. Oil royalty revenue was $4,884,118 for the third quarter of 2013, an increase of 63.2% from the third quarter of 2012 when oil royalty revenue was $2,992,539. The average price per royalty barrel of crude oil during the third quarter of 2013 was 23.5% higher than the average price prevailing during the third quarter of 2012. In addition, crude oil production subject to the Trust’s royalty interest increased 32.2% in the third quarter of 2013 compared to the third quarter of 2012. Gas royalty revenue was $969,191 for the third quarter of 2013, an increase of 17.0% from the third quarter of 2012 when gas royalty revenue was $828,169. This increase in gas royalty revenue resulted from both volume and price increases of 6.1% and 10.4% respectively, in the third quarter of 2013 compared to the third quarter of 2012.

Easement and sundry income was $3,635,615 for the third quarter of 2013, an increase of 23.7% compared to the third quarter of 2012 when easement and sundry income was $2,938,212. This increase resulted primarily from increases in sundry income and sundry lease rental income, which were partially offset by a decrease in seismic easement income. This category of income is unpredictable and may vary significantly from quarter to quarter.

Interest income, including interest on investments, was $126,574 for the third quarter of 2013 compared to $185,652 for the third quarter of 2012, a decrease of 31.8%. Interest on notes receivable for the third quarter of 2013 was $123,831, a decrease of 31.5% compared to the third quarter of 2012 when interest on notes receivable was $180,852. As of September 30, 2013, notes receivable for land sales were $4,232,313 compared to $9,667,642 at September 30, 2012, a decrease of 56.2%. Interest income earned from investments was $2,743 for the third quarter of 2013, a decrease of 42.9% from the third 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, increased 38.3% for the third quarter of 2013 compared to the third quarter of 2012. This increase is attributable to an increase in oil and gas production taxes which resulted from the increase in oil and gas royalty revenue discussed above.

General and administrative expenses for the third quarter of 2013 were up 15.3%, compared to the third quarter of 2012. This was primarily due to increases in legal and dues and subscription expenses.

Results of Operations for the Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012

Earnings per Sub-share certificate were $2.28 for the first nine months of 2013, compared to $1.73 for the first nine months of 2012. Total operating and investing revenues were $31,617,396 for the first nine months of 2013 compared to $25,330,098 for the first nine months of 2012, an increase of 24.8%. This increase in revenue and earnings was primarily due to increases in oil and gas royalty revenue and easement and sundry income, which were partially offset by decreases in land sales and interest income from notes receivable.

During the first nine months of 2013 the Trust sold approximately 10,280 acres for a total of $5,533,188, or approximately $538 per acre. In 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.

Rentals, royalties, and sundry income were $25,664,004 for the first nine months of 2013 compared to $18,961,648 for the first nine months of 2012, an increase of 35.3%. This increase resulted primarily from increases in oil and gas royalty revenue and, to a lesser extent, easement and sundry income.

Oil and gas royalty revenue was $16,205,783 for the first nine months of 2013, compared to $10,582,788 for the first nine months of 2012, an increase of 53.1%. Oil royalty revenue was $13,289,630 for the first nine months of 2013, an increase of 54.5% from the first nine months of 2012 when oil royalty revenue was $8,601,160. The average price per royalty barrel of crude oil during the first nine months of 2013 was 1.7% lower than the average price prevailing during the first nine months of 2012. This price decrease, however, was more than offset by an increase of 57.2% in crude oil production subject to the Trust’s royalty interest in the first nine months of 2013 compared to the first nine months of 2012. Gas royalty revenue was $2,916,153 for the first nine months of 2013, an increase of 47.2% from the first nine months of 2012 when gas royalty revenue was $1,981,628. This increase in gas royalty revenue resulted primarily from a volume increase of 41.4% in the first nine months of 2013 compared to the first nine months of 2012, which was augmented by a modest price increase of 3.9% over the same period.

Easement and sundry income was $9,070,832 for the first nine months of 2013, an increase of 13.2% compared to the first nine months of 2012 when easement and sundry income was $8,010,317. This increase resulted primarily from increases in sundry lease rentals, sundry income, and pole line 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 period to period.

Interest income, including interest on investments, was $420,204 for the first nine months of 2013 compared to $558,703 for the first nine months of 2012, a decrease of 24.8%. Interest on notes receivable for the first nine months of 2013 was $411,281, a decrease of 24.4% compared to the first nine months of 2012 when interest on notes receivable was $543,702. As of September 30, 2013, notes receivable for land sales were $4,232,313 compared to $9,667,642 at September 30, 2012, a decrease of 56.2%. Interest income earned from investments was $8,923 for the first nine months of 2013, a decrease of 40.5% from the first nine months 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, increased 36.1% for the first nine months of 2013 compared to the first nine months of 2012. This increase is attributable to an increase in oil and gas production taxes which resulted from the increase in oil and gas royalty revenue discussed above.

General and administrative expenses for the first nine months of 2013 increased 9.1% compared to the first nine months 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.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the information related to market risk of the Trust since December 31, 2012.

Item 4.     Controls and Procedures

Pursuant to Rule 13a-15, management of the Trust under the supervision and with the participation of Roy Thomas, the Trust’s Chief Executive Officer, and David M. Peterson, the Trust’s Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures as of the end of the Trust’s fiscal quarter covered by this Report on Form 10-Q. Based upon that evaluation, Mr. Thomas and Mr. Peterson concluded that the Trust’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Trust required to be included in the Trust’s periodic SEC filings.

There have been no changes in the Trust’s internal control over financial reporting during the Trust’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1A.    Risk Factors

There have been no material changes in the risk factors previously disclosed in response to Item 1A “Risk Factors” of Part I of the Trust’s Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2012.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

(c)       During the third quarter of 2013, the Trust repurchased Sub-share certificates as follows:

* The Trust purchased and retired 95,447 Sub-shares in the open market.

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INDEX TO EXHIBITS

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