Jean Philippe Tissot via MOI Global

Pull the link up in Google Chrome and click translate if you too failed first semester Spanish in undergrad.

Some highlights:

TPL royalties have an approximate weighted average value of 5%, which is considerably lower than the standard paid in the Permian; This is a powerful incentive for producers to continue increasing production on TPL lands.

Another obstacle for investors who are comfortable with TPL is the near impossibility of assigning a value and anchoring it. TPL is an example of how optionality plays an important role. If I had to value TPL in the past, I would have assigned zero to the water business. I would not even have known.

In last year’s letter, I explained that I was looking for convex situations. These are situations in which, when the facts appear and are positive, they have a greater effect than when they are negative; TPL perfectly fulfills that attribute.