May Meeting / Evolving Governance

I’m inviting blog readers to share their thoughts on the topics of TPL’s 1) evolving governance and 2) evolving capital deployment strategy.

As a baseline, we’re used to land sales, royalty collections, and cancelled shares.  Recent events have brought us significant CAPEX, reduced share repurchases, and management changes.

I’m sensing that there are many different viewpoints on the issues above.  Thinking out loud, it may be possible to come up with a rough investor consensus that could be used by management to align expectations with reality.

For instance, if there is a clear preference for buybacks over dividends, it might make sense to formally communicate that.

My dream is to cut off any agency problems before they grow.

Maybe I’m crazy.

Email me if you’d prefer to stay out of the comment section.

 

 

9 thoughts on “May Meeting / Evolving Governance

  1. I think developing the water situation will bring good results, so money spent there seems good. I would rather see the excess cash going to buy back of stock, rather than a cash dividend which is taxable.

    Liked by 1 person

  2. I prefer buybacks over dividends. I strongly believe that current TPL management has lot more details which we don’t have and for the same reason, continuing with CAPEX Vs share buyback, as the CAPEX has high ROIC. I would wait and watch how everything unfolds in a year to reassess.

    Liked by 1 person

  3. Good idea TPLblogger,

    As I have said before, the dividend seems large, but since its yearly, and the stock currently has a 7 handle, its not that big a thing. Its less than the usual bid/ask spread and is not tax efficient. So, please, keep the silly dividend and repurchase more shares. Keep the compounding machine running!

    I think the water business is going to be worth a lot in the future. This makes sense to continue to build out and I am fine with deploying capital here.

    The royalty property swaps and the 100 million land deal are places that active management of the trust will be accretive. Would expect to see more of these kind of deals in the future and I support more opportunistic management.

    I would like more visability on how the top players are compensated. The bonus payments were huge in the last year, it would be nice to know the mechanics of how they were earned,

    Liked by 1 person

  4. I think there needs to be at least one Trustee with capital allocation experience who can provide meaningful input on the question of buybacks vs dividends. I believe Maurice Meyer was an investment professional and I always felt good having a non-oil person as the Chairman and with a massive stake in TPL. I know it’s wishful thinking, but I honestly would of loved for the Trustees to elect our friend Murray Stahl as the Chairman given his vested interest in TPL. I think he would of been a great pick and acted as the voice of the shareholders. The thing I worry about is TPL becoming an operation more interested in lining the pockets of the top brass, while returning capital to shareholders via dividends and buybacks becomes secondary. It’ll be interesting to see what salary they award to the new Chairman.

    Liked by 1 person

  5. I’m in a Sep-Ira, so no tax on dividends for me. But I like the aggressive move into the water business and that fact that it produced revenue so quickly. Growth in water is where the execs will justify their new salaries. Murray Stahl on the board isn’t a bad idea either.

    Liked by 1 person

  6. Wish I could attend the May meeting, but if I had a chance to express my views to management:

    Buybacks – I think it is fine that the trust eases off of repurchases while the share price is high, but I wish there was a clearer strategy and agility about jumping back in when price dips below a certain EPS. For example, I really hope they were in the market buying with both hands during the 4Q2018 correction and we can trust that the buybacks (along Horizon Kinetics ongoing faith) would be a safety net against a major crash.

    Dividends – Not a fan of dividends (especially the special dividends) but if they are going to pay a dividend, I would like to see it be at least a 1% yield so that it at least can be recognized by prospective subshare owners as paying a meaningful dividend.

    Water Business – I’ve been slow to come around to all this CAPEX but am starting to be a fan with the acceleration of revenue and market opportunity. Because this strategy is so divergent from TPL’s core mission, I would love to hear more commentary by management to help us gain comfort with the inherent risk. If there is thought of an eventual spinoff of the water business, that seems intriguing to me.

    Management /Governance – I agree with points made by others about wanting to understand more about the huge uptick in compensation. Certainly pay for performance is valid, but not in such a random manner with decisions made by such a small governance team. That’s getting too cozy. More stock ownership by management would send a very positive message about their commitment to shareholder interest.

    Liked by 1 person

  7. My Thoughts and who I am. I was in the oil and gas business for 30 years.
    I own a company similar to TPL. It collects mail box money from leases and royalty checks for a percentage of production. It’s a great business which you can operate with a small staff.
    1. The WATER BUSINESS. Yes, the water business can make some great money in the early stages of the business when everybody is expanding before things begin to tighten down. But sooner or later business will tighten down. Then margins get squeezed and jobs begin to get eliminated. When this happens and it will happen quickly (3 to 6 months max). Can TPL react quickly enough to minimize the losses. That will be my question. Look at all of the Permian oil companies now. They are on a treadmill right now. If you read THEIR quarterly reports now they always talking about BREAKING EVEN with what they spend and what they make NEXT YEAR. Do TPL stockholders want to get a subsidiarity that can get into this kind of trouble?
    2. I am really questioning the proposed new board hire. I have read his bio in the Houston Business Journal. He is a young (40 years old) go-getter. Who built a company from 0 to 150 people in 12 years. His goal is to double that number in five years.

    I just don’t see this fitting in with what TPL is or has been.

    PS. I own over 3,000 shares of TPL.

    Liked by 1 person

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