TPL 2.0 : Investor Preferences

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This thread is pinned to the top.  The list below is based upon the comments from our original c-corp conversion open thread.  The list remains very much open to edits.  Comments and suggested edits welcome.

Investor Preferences in C-Corp Conversion:

  1. No dilution.  Share issuance of any kind should be prohibited in the corporate charter.  Any changes to this policy should require a significant majority vote. 
  2. Share repurchases should remain the primary method of returning capital.
    1. If a dividend is necessary, it should be regular and consistent.
  3. Board members, including originating board members, must be voted upon by shareholders.  Board terms should be of reasonable length.
  4. Board should be of reasonable size so as to function healthily at all times. Independent directors should outnumber executive members. 
  5. Remain in “business of going out of business”.  Primary duty of corporation is return of capital via royalty collections and asset sales.
    1. State limitations on additional business activity such as new business ventures and additional land/royally acquisitions.  
  6. Executives shall be required to purchase shares via dedicated cash compensation and/or company loans to ensure that shareholder and management incentives are aligned.  Executives should be required to attain and maintain some material level of ownership. 
  7. Executive compensation should be simple and oriented towards long term results.
  8. Stock shall be split regularly so as to facilitate liquidity for repurchases.
  9. Transparency in reporting of results and material events should be commensurate with those expected of a $5B+ publicly traded corporation.
  10. Corporation must hold an annual meetings and be regularly open to investor communcation.

The list above was kept short deliberately.  Spin-offs, head count, and other business decisions (in my opinion) should be the responsibility of directors and management with interests and incentives that are aligned with those of shareholders (TPL 2.0).

EPIC Midstream

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HOUSTON, Aug 15 (Reuters) – EPIC Midstream Holdings Inc on Thursday shipped its first crude on its 400,000 barrel per day (bpd) pipeline from the Permian Basin to the U.S. Gulf Coast, pushing Midland prices higher, traders said.

Terminal operator Moda Midstream LLC confirmed it would be accepting the Permian crude from the EPIC line at its facility in Ingleside, Texas, by Friday. Oil prices in Midland, the heart of the Permian shale field, rallied to 50 cents per barrel over U.S. crude futures.

ESG

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ESG is becoming the cornerstone to how some endowments and foundations invest.  For many, the investing funnel starts at ESG and then narrows at relative value.

Sectors tend to be scored relative to other sectors.  Within sectors, companies are scored relative to their peers.  The energy sector, for instance, doesn’t score well in E or S outright but the E&Ps that are efficient in water usage and have good safety records get scored higher relative to their peers.  G is typically a layup for most large cap companies with proper risk controls and diversification of ownership.

Governance matters to insitutional investors.

https://www.bloomberg.com/news/articles/2019-08-11/how-to-tell-if-your-investment-is-really-responsible-quicktake

The boom in responsible investing worldwide throws up a key question for borrowers, fund managers and index compilers: How exactly do you evaluate and compare responsible investments? A whole industry has grown up to try to provide answers. It looks beyond financial performance to score companies and investments on criteria including their environmental friendliness, social impact and governance — shorthanded as ESG. ESG ratings are increasingly taken into account in decisions on where to invest or allocate capital. But there’s debate over whether they can truly buffer against financial risk or even act as a guide to better-performing investments.

1. What are ESG ratings?

They help companies, investors and other finance professionals factor environmental, social and governance criteria into their decisions. They can help gauge whether a company is a global citizen, or how well it’s handling risks with potentially costly consequences. A rating can cover a long list of diverse factors including carbon emissions, water usage, gender equality, fair labor practices, human rights, crime-prevention controls, board composition and shareholder rights. There’s no single method for scoring or ranking companies. Some ratings companies rely on analysts, while others focus on quantitative information or company-provided data. They can analyze a company or fund for how transparently it reports such issues, or how well it stacks up against competitors or its own performance over time.

Friday Night Lights

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Nothing like a late summer Friday afternoon 8-k.

These guys are getting paid. I like that they have to buy shares though. Can’t wait to see the details of the new equity compensation plan.

Nice parachute in there too.

On August 8, 2019, Texas Pacific Land Trust (the “Trust”) entered into employment agreements (the “Agreements”) with Tyler Glover, its General Agent and Chief Executive Officer (the “Glover Agreement”) and Robert Packer, its General Agent and Chief Financial Officer (the “Packer Agreement”). The Agreements are effective as of July 1, 2019. Pursuant to the Agreements, Mr. Glover will continue to serve as General Agent and Chief Executive Officer of the Trust, and Mr. Packer will continue to serve as General Agent and Chief Financial Officer of the Trust. Each officer will receive a base salary of $800,000 per annum, subject to annual review, and be eligible for an annual cash bonus of up to 300% of such base salary for achievement of specified performance targets, as established by the Nominating, Compensation and Governance Committee of the Trust. Until the Trust establishes an equity compensation plan, Mr. Glover and Mr. Packer are required to use at least 25% of their cash bonuses (net of estimated taxes) to purchase shares of the Trust’s common stock. The term of each Agreement ends on December 31, 2020, with automatic one (1) year extensions unless notice not to renew is given by either party at least 120 days prior to the relevant end date.

Banker On Board

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Sameer Parasnis

Mr. Parasnis has over 20 years of financial experience, nearly 17 of which have been in banking. He has a wealth of experience advising companies in the oil and gas industry on equity capital markets, debt capital markets and strategic M&A, with a considerable focus on the Permian Basin. Prior to joining TPL, Mr. Parasnis served as a Managing Director of Stifel Financial Corporation’s oil and gas team in Houston and was instrumental in helping the firm develop its upstream investment banking advisory franchise.