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