Kevin Crowley of Bloomberg on TPL. May 2018

Bloomberg: The 130-Year-Old Bankruptcy That Created a $5 Billion Oil Giant

bloomberg map

I assume that most TPL-heads have seen this article but in the spirit of posting up all the resources / news / articles I find, here goes.

Kevin Crowley and David Wethe do a bang up job covering the the energy space for Bloomberg.  Kevin and David are particularly strong when it comes to writing about West Texas.  Be sure to give their stuff a look.

A couple notable takes from the article are below.  I worry/think about both:

Glover’s pay rose almost three times to $724,000 last year, while Packer got a similar increase to $753,000, according to the annual report.

Tyler Glover and Robert Packer (TPWR) are in the catbird seat and are going to want/deserve higher comp as some point in the future.  The Trust does not have a history of high pay though it seem like they are moving in that direction.

While it may have a unique history, Texas Pacific isn’t the only company making money from the Permian’s mineral leases. Diamondback Energy Inc. spun off its mineral rights into Viper Energy Partners LP in 2014. So far this year, Viper has climbed 28 percent.

Parsley Energy Inc.’s CEO last week said he’s “definitely looking into” doing something similar.

I think about bulk asset sales often.  TPL could hit a bid on the the mineral rights or the water biz (and its related land) and do a massive return of capital at any time.  The Trust, as designed (as far as I know) isn’t really a growth entity.

Maybe I’m way off?  Let me know.

 

Hot Then, Hot Now

Business Insider in 2014: One Of The Hottest Stocks On The NYSE Is A Company Most Of Us Have Never Heard Of — And It’s Got An Incredible Backstory

Much has changed in 4 years!

The Trust is a highly atypical company, and not only in terms of its financial performance. It manufactures no products and provides no services. It has never released a killer app or built a game-changing innovation, and it controls no patents. It maintains no factories, facilities, equipment, machinery, or inventory, nor does it carry any other meaningful expenses, aside from eight employees occupying a modest 27th-floor suite in a bland office tower in Dallas’ City Center. It has no competitors, no liabilities, and no debt. Its chief asset — land, lots of land — is finite and tends to steadily, reliably increase in value over time, that is, until someone figures out a way to suck out more oil, at which point it goes bananas.

TPL’s only real goal is to maximize returns while gradually liquidating its assets.

“Imagine the PowerPoint presentation,” muses Louis Geser, chief analyst for White Space marketing and an independent microcap analyst, who began purchasing TPL when it was around $35. “You could list what this company does on one hand, and it’s on autopilot.”

Not exactly, says David Peterson, the Trust’s CEO, who along with his team is kept pretty busy making real estate deals and keeping an eye on the accounts receivable. “It’s not as sleepy as it once was, that’s for sure, sir,” he says.

Murray Stahl Lunch Roundtable

Horizon Kinetics on Soundcloud

I came across this in a kick ass comments thread over on Seeking Alpha.  SA and Yahoo conversations are my two favorite places to read up on TPL as there are many passionate TPL holders that are willing to share their thoughts.  I’m active on both boards and may, from time to time, post links directly to comments and messages of note.  As I said at the outside, I’m using this blog to flag stuff that pertains to TPL that I find interesting.  I’m not looking to compete with/replace Yahoo or SA.

As most of us know, Murray Stahl is THE TPL guru.  He and his team may know this name likely better than anyone on the planet save for TPL management.  As a consumer of the information that HK so graciously shares, it’s hard not to get long some of their other favorite picks such as overseas freight shippers, gold trusts, and (yes) even Bitcoin (via GBTC before the NAV premium went bananas).

Some notes on the call:

  • Overall Stahl thinks equities are overvalued (indicators at the high end of the range) so use that for context as he talks about TPL
  • Hold some cash for opportunities
  • Find stocks that are durable into a downtrade
  • TPL chatter starts at 9:00 mins
  • 880k surface acres, 450k royalty acres, West Texas, holdings look like a checkerboard
  • New tech makes oil in Texas readily extractable
  • All property benefits via oil, easements, water
  • Going to go on for “many, many, years”
  • Go on Google Earth and look at Reeves county.  You won’t see roads, infrastructure, etc.  Compare it to Midland county which is very big in oil related activity.  One day Reeves, Culberson, Loving, and Hudspeth counties (all TPL territory) are going to look like Midland
  • At night, wet gas is going flared off in west Texas due to lack of pipeline.  “If they just had pipelines, revenue would go up a lot”
  • Gas comes up with the oil during fracking.  Operators don’t have anything to do with most of the gas so they have to flare it.  Need pipeline or storage tanks to move or store it.  No railroad to move it either.  Largely the only way to move oil/gas is truck
  • Murray says he’d buy more of it if it was considered prudent.  I assume he’s talking about the positioning of his mutual funds and client accounts.  He goes on to say that he buys more for his PA all the time
  • Most of TPL is still a dormant asset
  • Pipelines are extremely hard to build as imminent domain laws are centered on public use.  Hard to argue that oil pipelines are public use.  Only specific parties (operators, owners of other land, oil buyers) benefit; not a slam dunk case.  All pipeline deals take time and many, many people to get on
  • First major pipe comes online in Spring 2019
  • Lots of DUCs along this line (Murray doesn’t say who is building the pipe or who has constructed the DUCs)
  • “I believe that area (TPL acreage) is going to be developed regardless of what happens”
  • Higher oil prices are good for TPL.  Makes stock durable into some systemic risks
  • Companys (TPL and CVEO) are valued on earnings.  Dormant assets are heavily discounted
  • Stahl talks about water at 1:41:30
  • TPL management does not make the decision to make wells.  They just the royalties.  Land owner / operate make the decision to drill wells.  It appears as if wells on TPL royalty land are increasing in number
  • TPL’s TPWR could capture 25-50% of the water biz in West Texas (I personally love the under).  Stahl says there are two giant owners of land (TPL and U of T) are the big landowners and it will be hard to beat them

Tweet tweet

Search for $TPL on Twitter and you mostly come up with Binance lists to buy a crypto coin with the ticker TPL.  But every once in a while you come up with someone who is hip to what’s going on at TPL.

This might seem mundane but I think monitoring chatter in forums, twitter, bloomberg chat rooms, etc is very important for small cap stocks.

History of Oil In Texas

Texas State Historical Association: Oil and Gas Industry

Good and fun read here.  The article presents a digestible history of oil and gas in Texas.  Of note is a a great map of the original Texas & Pacific Railway line.

The record stops short of the modern fracking era.  There is still much more history to be made.

During the 1970s and 1980s the Texas oil and gas industry had what might well have been its last boom. Subsequently, economic, social, and political life in the state changed greatly. The petroleum industry, more than one-quarter of the state’s economy in 1981, fell to half that level ten years later. Massive losses in energy and real estate lending brought the collapse of the large home-owned financial institutions that had commonly been at the center of community development; of the large banks, Frost National alone survived. One-third of oil and gas employment was lost between 1982 and 1994. Workers left producing regions as rigs shut down and producers carried through successive reductions in staff; white-collar ranks thinned noticeably from the late 1980s onward, as producers cut technical and managerial personnel in the face of stagnant prices and rising costs. State and local governments found that lower income from production and property taxes necessitated austere budgets, and affected communities launched searches for new revenue and increased efforts to diversify their economies. The proportion of state government revenue from the petroleum industry declined to 7 percent in 1993, one-quarter of its level ten years earlier. In the final decade of the twentieth century, a great industry and the aspects of Texas life that were related to it were downsizing. Only petrochemicals gained: lower prices for oil and gas caused facilities to expand and related employment to increase by one-tenth between 1988 and 1991. This sector of the industry remained competitive in international markets, despite pollution control and abatement costs, which approached $1 billion a year in 1994. At a rate governed by international prices and technology, the rest of the petroleum industry in Texas was inching down the road from Spindletop.