Texas Pacific Land Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Business Segment Reporting

Business Segment Reporting

9 Months Ended

Sep. 30, 2018

During the periods presented, we reported our financial performance based on the following segments: Land and Resource Management and Water Service 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 the Trust 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 approximately 890,000 acres of land and related resources in West Texas owned by the Trust. The revenue streams of this segment consist primarily of royalties from oil and gas, revenues from easements and leases, and land sales.

The Water Service and Operations segment encompasses the business of providing a full-service water offering to operators in the Permian Basin as well as managing agreements with energy companies and oilfield service businesses to allow such companies to explore for water, drill water wells, construct water-related infrastructure and purchase water sourced from land that we own. The revenue streams of this segment consist of revenue generated from direct sales of water as well as revenues from royalties on water service-related activity.

Segment financial results were as follows for the three and nine months ended September 30, 2018 and 2017 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenues:
Land and resource management	$	47,513	$	42,343	$	142,642	$	93,209
Water service and operations	25,655		9,634		64,377		21,468
Total consolidated revenues	$	73,168	$	51,977	$	207,019	$	114,677

Net income:
Land and resource management	$	36,385	$	27,424	$	109,700	$	59,535
Water service and operations	14,377		5,578		37,356		13,076
Total consolidated net income	$	50,762	$	33,002	$	147,056	$	72,611

Capital expenditures
Land and resource management	$	909	$	1,682	$	2,464	$	2,188
Water service and operations	7,533		2,678		37,542		5,782
Total capital expenditures	$	8,442	$	4,360	$	40,006	$	7,970

Depreciation and amortization:
Land and resource management	$	160	$	104	$	330	$	123
Water service and operations	546		105		1,189		190
Total depreciation and amortization	$	706	$	209	$	1,519	$	313

The following table presents total assets and property, plant and equipment, net by segment as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018		December 31, 2017
Assets:
Land and resource management	$	141,934	$	97,549
Water service and operations	77,767		22,486
Total consolidated assets	$	219,701	$	120,035

Property, plant and equipment, net
Land and resource management	$	3,567	$	1,449
Water service and operations	54,422		18,067
Total consolidated property, plant and equipment, net	$	57,989	$	19,516