Business Description
The registrant was organized under a Declaration of Trust, dated February 1,
1888, to receive and hold title to extensive tracts of land in the State of
Texas, previously the property of the Texas and Pacific Railway Company, and
to issue transferable Certificates of Proprietary Interest pro rata to the holders
of certain debt securities of the Texas and Pacific Railway Company. The Trustees
are empowered under the Declaration of Trust to manage the lands with all the
powers of an absolute owner, and to use the lands and the proceeds of sale of
the lands, either to pay dividends to the Certificate holders or to buy in and
cancel outstanding Certificates. The Trust’s income is derived primarily
from oil and gas royalties, easements and sundry income, land sales, grazing
leases, and interest. This method of operation has continued through the present.
During the last five years there has not been any reorganization, disposition
of any material amount of assets not in the ordinary course of business (although
in the ordinary course of business Texas Pacific does sell or lease large tracts
of land owned by it), or any material change in the mode of conducting business.
Texas Pacific’s income from oil and gas royalties has been limited in
the past by the level of production authorized for prorated wells each year
by the regulations of the Railroad Commission of the State of Texas. The monthly
percentage of allowable production has averaged 100% in recent years, but, because
of the limited capacity of older wells and other operating problems, the percentage
permitted by the Railroad Commission may not be produced by all operators.
As previously indicated, the business done and intended to be done by Texas
Pacific consists of sales and leases of land owned by it, retaining oil and
gas royalties and the overall management of the land owned by it.
The Trust was organized in 1888 and holds title to extensive tracts of land
in numerous West Texas counties which were previously the property of the Texas
and Pacific Railway Company. We continue to manage those lands for the benefit
of the holders of Certificates of Proprietary Interest in the Trust (and/or
Sub-shares in the Certificates of Proprietary Interest). Our revenues are derived
primarily from oil and gas royalties, easements and sundry income, sales of
land, grazing leases of the land and interest. Due to the nature of our operations,
our revenue is subject to substantial fluctuations from quarter to quarter and
year to year. We are a passive seller of land and do not actively solicit sales
of land. In addition, the demand for, and sale price of, particular tracts of
land is influenced by many factors beyond our control, including general economic
conditions, the rate of development in nearby areas and the suitability of the
particular tract for the ranching uses prevalent in western Texas. The Trust
is not an oil and gas producer. Rather, its oil and gas revenue is derived from
retained perpetual non-participating oil and gas royalty interests. Thus, in
addition to being subject to fluctuations in response to the market prices for
oil and gas, our oil and gas royalty revenues are also subject to decisions
made by the owners and operators of the oil wells to which our royalty interests
relate as to investments in and production from those wells. We monitor production
reports by the oil and gas companies to assure that we are being paid the appropriate
royalties. We review conditions in the agricultural industry in the areas in
which our lands are located and seek to keep as much of our lands as possible
under lease to local ranchers. In recent years, we have been successful at keeping
over 99% of our land subject to grazing leases.
4.25% 
49.9 %