https://www.tpltrust.com/investors/news-events/press-releases/detail/109/texas-pacific-land-trust-declares-special-dividend-of

The specificity of the planned conversion date is most welcome. And $10/share is better than a sharp stick in the eye while a heavy slug of cash remains on the balance sheet.

I’ll stay away from over-reading the dividend tea leaves for the time being. The “new guys”, having a ton of cash and freedom, might go in a direction that makes us wish conversion happened a long time ago.

Let us never forget that this all could have been avoided.

Happy Thanksgiving!

I admit to being surprised at the speed of m&a consolidation. OXY will probably be a bridesmaid for a while longer as Vicki likes her debt, but once it’s rolled up it’s off to the races.

https://www.bloomberg.com/opinion/articles/2020-10-20/conoco-concho-deal-shows-shale-oil-s-death-was-exaggerated

 

The great “productivity from home” competency that companies and workers took pride in during the pandemic apparently didn’t extend to the TPL management or its legal representation. Not surprised.

New board members now getting a taste of the shit show to which they are attached.

https://www.tpltrust.com/investors/news-events/press-releases/detail/107/texas-pacific-land-trust-updates-timeline-for-corporate

Remember when TPL used to repurchase shares?

CALGARY, Alberta, Sept. 09, 2020 (GLOBE NEWSWIRE) — PrairieSky Royalty Ltd. (“PrairieSky” or the “Company“) (TSX: PSK) announced today that its Board of Directors has declared a quarterly dividend of CDN $0.06 per common share, payable in cash on October 15, 2020 to shareholders of record on September 30, 2020.  This dividend is designated as an “eligible dividend” for Canadian income tax purposes.

PrairieSky is also pleased to provide an update on its previously announced normal course issuer bid (the “NCIB”). During the period from July 1, 2020 to September 9, 2020, the third quarter to date (“Q3TD”), PrairieSky has purchased for cancellation a total of 7,215,000 common shares under the NCIB. Shares were purchased at a weighted average price of $9.34 per share, for a total purchase price of $67.4 million. Share purchases were funded using funds from operations and PrairieSky’s credit facility, which PrairieSky expects to pay down using excess cash flow above its quarterly dividend.

PrairieSky’s President and Chief Executive Officer, Andrew Phillips, commented, “We view the 7.2 million common share repurchase as an opportunistic acquisition at an attractive point, well below the intrinsic value of the Company. PrairieSky shareholders will continue to receive a fully-funded dividend and will own approximately 3% more of the business, equating to an acquisition of 468,000 acres of royalty lands and approximately 560 BOE per day of current royalty production. As our assets sit on the some of the best parts of the development cost curve, management views this as the highest quality acquisition available in the current environment. We also expect the share repurchase will enhance the dividend growth potential of the business over time. The Company expects to pay down the entirety of the debt incurred to make the share repurchases within the next 12 months, assuming current commodity prices, and has the flexibility to make further opportunistic share repurchases or acquisitions, which are a key component of our capital allocation strategy.”

Two fun reads posted today on Seeking Alpha.

https://seekingalpha.com/article/4371699-texas-pacific-land-revisited-resilient-profitable-and-undervalued

https://seekingalpha.com/article/4371740-texas-pacific-land-owns-permian-basin

As always, the comment section is where the magic happens.  I particularly liked (and agree with) the comment highlighted below.  I echo the sentiment of playing the long game with the assets while being fastidious about balance sheet and expense management.

To the board:  Don’t change into every other company.  Don’t become an agency problem disguised as a functioning company.  Don’t get hijacked by quarterly EPS and managment options awards/vesting culture.  Management should be rewarded for serving the holders of equity, not for serving themselves.  It’s a slippery slope.  Be brave and work hard.

MJ-07

Much here depends on how responsibly TPL’s BOD manages this.If management hands out free stock like candy we’d have a problem.If management were smart, they would “signal” their intent to continuewith share buybacks at opportune times with the intent to shrink outstandingshares over the long run. Maybe they will use their stock to acquire situationsthat will add value to TPL. The asset base TPL has is “top shelf” and potentialis there to manage it to shareholders advantage, not managements paycheck.Hopefully they will not squander this opportunity before them. Land assets couldbe used to support a move into “green” operations such as solar and wind farms.Would be fantastic to get Tesla to build on TPL lands if at all feasible. Solidmanagement could do great things here. Bad management could do severedamage. Too early in the game to know what we have. Thanks for writing thisarticle…I was hoping we’d see one soon!

Lots here:  https://ir.stockpr.com/tpltrust/sec-filings-email/content/0000097517-20-000033/tpl-20200624.htm

1. New General Counsel/SVP coming on board 8/1/20.  He is a veteran of David Barry’s old firm, Kelley Drye & Warren LLP though I’m sure a nationwide search was conducted.
2. “On June 30, 2020, the Trust entered into an Indemnification Agreement with each of its Trustees, John R. Norris III and David E. Barry (each, an “Indemnification Agreement”). The Indemnification Agreements are identical in form and each provides that, subject to certain limitations set forth therein, the Trust will indemnify the Trustee to the fullest extent permitted by applicable law, against losses or expenses incurred in relation to the Trustee’s service to the Trust. The indemnification agreements also provide that the Trust will advance expenses, subject to certain limitations, to each Trustee in connection with proceedings covered by the indemnification agreement.”  What are we indemnifying ourselves from?
3. “Sameer Parasnis, Chief Commercial Officer of the Trust, is no longer employed by the Trust effective June 24, 2020.”  Recall that Mr. Parasnis was formerly an energy banker employed by Stifel and Credit Suisse.  What happened to cause this separation?

Seems like a big information dump.  The optimist in me hopes the conversion isn’t going south but I don’t have a great feeling about this.  Tell me I’m wrong!

 

C’mon team.  Join us.

In all fairness, they could be restricted due to pending conversion.

https://sec.report/Document/97517/000009751719000039/exhibit101employmentag.htm

(b)    Cash Bonus. During the Employment Term, Employee shall be eligible for an annual cash bonus of up to 300% of the Base Salary for the same year (the “Cash Bonus”) as determined in accordance with reasonable and customary performance metrics to be developed annually by the Trustees in consultation with the Employee, but subject to the ultimate decision of the Trustees. With respect to the calendar year 2019 only, the Cash Bonus shall be determined as set forth in Exhibit A. The Cash Bonus, if any, shall be paid no later than March 15^th of the year following the year in which the Bonus is earned (i.e., March 15, 2020 for the Cash Bonus earned in 2019), provided, however, that except as set forth in Sections 5 and 6 of this Agreement, Employee shall be eligible for the Cash Bonus for a year only to the extent he continued to be employed by the Trust through the end of that year; and provided further, that, until such time as Employee becomes eligible to participate in an equity compensation plan established by the Trust, Employee shall use no less than twenty-five percent (25%) of the value of the Cash Bonus (net of estimated taxes) to purchase shares of the Trust’s common stock; such purchase shall be completed no later than six (6) months after payment of the Cash Bonus has been completed unless, at that time Employee is in possession of material non-public information in which event the purchase shall occur as soon as practically available in accordance with Federal securities laws. The Trust’s exercise of its decision not to renew this Agreement voluntarily pursuant to the terms of Section 3 shall not affect Employee’s right to receive any calendar year bonus that has already accrued and remains to be paid. Further, the requirement upon Employee to use any portion of a Cash Bonus to purchase shares of the Trust’s common stock shall not apply in any situation where a Section 5 notice of termination has been issued.

https://open.spotify.com/episode/4dma6NOusHlUKiTf7Rch6g

“Permian is by far CVX’s most important growth engine”

“CVX forecasting 1.2mm barrels/day plateau out to 2040”

https://ir.stockpr.com/tpltrust/sec-filings-email/content/0001213900-20-014919/ea122864-8k_texas.htm

https://ir.stockpr.com/tpltrust/sec-filings-email/content/0001213900-20-014919/ea122864ex10-1_texas.htm

Staggered board:

1. Board Composition and Related Matters.

(a) Immediately following the Distribution Time, TPL Corp shall take all actions necessary to appoint Murray Stahl (together with any replacement designated pursuant to this Section 1(a), the “Horizon Designee”) and Eric L. Oliver (together with any replacement designated pursuant to this Section 1(a), the “SoftVest Designee”, and together with the Horizon Designee, each an “Investor Group Designee” and, collectively, the “Investor Group Designees”) to the Board if each Investor Group Designee fulfills each of the conditions set forth in Section 1(d) below (the “Appointment Conditions”) as of the Distribution Time. Based on the information available to the Trustees (including responses to the director questionnaires and follow-up questions thereto), the Trustees believe that Murray Stahl and Eric L. Oliver satisfy the Appointment Conditions as of the Effective Date. In the event that, prior to the Distribution Time, either of Murray Stahl or Eric L. Oliver fails to satisfy the Appointment Conditions, the Investor Group shall have the right to designate replacement candidates for the Horizon Designee or SoftVest Designee, as applicable, until two candidates satisfy the Appointment Conditions and have been approved as Investor Group Designees by the Trustees (such approval not to be unreasonably withheld).

(b) Immediately following the Distribution Time, TPL Corp shall take all actions necessary to appoint Dana F. McGinnis (together with any replacement designated pursuant to this Section 1(b), the “Mission Designee” and together with the Investor Group Designees, each a “Stockholder Designee” and, collectively, the “Stockholder Designees”) to the Board if the Mission Designee fulfills each of the Appointment Conditions as of the Distribution Time. Based on the information available to the Trustees (including responses to the director questionnaires and follow-up questions thereto), the Trustees believe that Dana F. McGinnis satisfies the Appointment Conditions as of the Effective Date. In the event that, prior to the Distribution Time, Dana F. McGinnis fails to satisfy the Appointment Conditions, the Trustees and Murray Stahl shall agree on a replacement candidate for the Mission Designee, who satisfies the Appointment Conditions (such agreement not to be unreasonably withheld).

(c) Effective immediately following the Distribution Time, (i) the Board shall be divided into three classes of directors, as nearly equal in number as reasonably possible in accordance with the Certificate of Incorporation of TPL Corp (as amended from time to time, the “Charter”), and (ii) the Trust and TPL Corp, as applicable, shall have taken and completed all actions necessary to cause the Mission Designee to be appointed to Class I of the Board (with a term expiring in 2021), the SoftVest Designee to be appointed to Class II of the Board (with a term expiring in 2022) and the Horizon Designee to be appointed to Class III of the Board (with a term expiring in 2023).

“Customary Standstill”:

(b) acquire, offer or seek to acquire, agree to acquire or acquire rights to acquire or otherwise beneficially own (except by way of stock dividends or other distributions or offerings made available to holders of voting securities of the Trust or TPL Corp generally on a pro rata basis), directly or indirectly, whether by purchase, tender or exchange offer, through the acquisition of control of another person, by joining a group, through swap or hedging transactions or otherwise, any voting securities of the Trust or TPL Corp (other than through a broad-based market basket or index) or any voting rights decoupled from the underlying voting securities which would result in (i) Horizon having ownership or control of, or other beneficial ownership interest in, 23.5% or more, in the aggregate, of the then-outstanding Sub-share Certificates or shares of the Common Stock (the “Horizon Cap”), (ii) SoftVest having ownership or control of, or other beneficial ownership interest in, 4.0% or more, in the aggregate, of the then-outstanding Sub-share Certificates or shares of the Common Stock (the “SoftVest Cap”) or (iii) Mission having ownership or control of, or other beneficial ownership interest in, 5% or more, in the aggregate, of the then-outstanding Sub-share Certificates or shares of the Common Stock (the “Mission Cap”, and each of the Horizon Cap, the SoftVest Cap and the Mission Cap, individually, an “Ownership Cap”); provided, however, that, subject to Section 3(c), in the event that the Trust or TPL Corp (A) acquires through share purchases Sub-share Certificates or shares of the Common Stock or (B) undertakes a reverse share split, and any of such actions reduces the number of securities of the Trust or TPL Corp outstanding and thereby increases the proportionate number of Sub-share Certificates or shares of Common Stock that a Stockholder has ownership or control of, or otherwise beneficially owns, to a proportion of Sub-share Certificates or shares of the Common Stock that is equal to or greater than the applicable Ownership Cap for such Stockholder (such event, a “Share Reduction Event”), then such Stockholder shall not be deemed to have acquired or otherwise beneficially own an amount of Sub-share Certificates or shares of the Common Stock that is greater than the number of shares permitted pursuant to such Stockholder’s applicable Ownership Cap (such amount of securities in excess of a Stockholder’s Ownership Cap, the “Excess Shares”) in violation of this Section 3(b) as a result of such Share Reduction Event; provided, further, that such Stockholder shall divest its Excess Shares within a reasonable time period (but in any event, within 30 calendar days of becoming aware of such Share Reduction Event) so that such Stockholder no longer has ownership or control of, or otherwise holds a beneficial ownership interest in, such Excess Shares;

Can HK not buy more TPL on behalf of new client funds?  The standstill section is long and I’m not a lawer.  Sounds like everyone is contractually bound to play nice with respect to ownership stake changes and the like.

Speaking of playing nice:

4. Mutual Non-Disparagement. Without the prior written consent of the other parties, no party shall, nor shall it permit any of its Representatives to, make any public or private statement that undermines, disparages or otherwise reflects detrimentally on (a) another party, (b) another party’s current or former trustees (including the Trustees) or directors in their capacity as such, (c) another party’s officers or employees (including with respect to such persons’ service at the other party), (d) another party’s subsidiaries, or (e) the business of another party or another party’s subsidiaries or any of its or its subsidiaries’ current directors, officers or employees, including the business and current or former directors, officers and employees of the other party’s controlled Affiliates, as applicable. The restrictions in this Section 4 shall not (i) apply (A) in any compelled testimony or production of information in response to a Legal Requirement, or (B) to any disclosure that such party reasonably believes, after consultation with its outside counsel, to be legally required by applicable law, rules or regulations; or (ii) prohibit any party from reporting what it reasonably believes, after consultation with its outside counsel, to be violations of federal law or regulation to any governmental authority pursuant to Section 21F of the Exchange Act or Rule 21F promulgated thereunder.

5. Mutual Releases. Effective at the Distribution Time, and as a condition to the appointment of the Stockholder Designees to the Board, the Trust, the Trustees, and all members of the Investor Group (as defined in the Settlement Agreement) shall execute an agreement substantially in the form attached as Exhibit C to the Settlement Agreement (the “Form of Mutual General Release Agreement”), provided, however, that the Form of Mutual General Release Agreement shall, prior to execution, be modified to expressly provide that such agreement shall be effective upon the Distribution Time.

6. No Litigation. Each party hereby covenants and agrees that it shall not, and shall not permit any of its Representatives to, directly or indirectly, alone or in concert with others, encourage, pursue or assist any other person to threaten or initiate, any lawsuit, claim or proceeding before any court (each, a “Legal Proceeding”) against the other party or any of its Representatives, except for (a) any Legal Proceeding initiated primarily to remedy a breach of or to enforce this Agreement and (b) counterclaims with respect to any proceeding initiated by, or on behalf of one party or its Affiliates against the other party or its Affiliates; provided, however, that the foregoing shall not prevent any party or any of its Representatives from responding to oral questions, interrogatories, requests for information or documents, subpoenas, civil investigative demands or similar processes (each, a “Legal Requirement”) in connection with any Legal Proceeding if such Legal Proceeding has not been initiated by, on behalf of or at the direct or indirect suggestion of such party or any of its Representatives; provided, further that in the event any party or any of its Representatives receives such Legal Requirement, such party shall give prompt written notice of such Legal Requirement to the other party (except where such notice would be legally prohibited or not practicable). Each party represents and warrants that neither it nor any assignee has filed any pending Legal Proceeding against any other party.