Trustee Challenge : Thoughts

While I reserve the right to change my opinion if new information arises, my gut instinct is that I’m on board with the Eric Oliver as trustee.  I’m writing to flesh out my thoughts.  I don’t pretend to have more information than anyone else; in fact, I’m likely behind the curve on crucial particulars as they relate to 1) the exact state and value of TPL’s mineral rights, 2) the potential of the water business (customer base, breadth of service, etc) and 3) what the future holds for the Permian.  I’m not in the oil industry and I live just about as far away from Texas as a US citizen can.  This is me building my mosaic as a qualitative investor.

  • HK is on board.  Out of any single party involved, HK has the greatest incentive (by virtue of amount held) to see that TPL’s value is maximized.
  • Change is hard.  Gut instinct and reactions to change can often be very negative.  We all know that TPL has had a good thing going for a long time and the operational history (liquidating and concentrating the equity base) of TPL is what attracted many of us to invest.
  • Circumstances have changed rapidly.  Those that can adapt to new realities usually come out on top.  What got you here won’t get you there.
  • Eric Oliver, as evidenced by his control of SoftVest, appears to be qualified for the job.  Again, HK’s tacit endorsement speaks volumes.
    • “Eric serves President of Midland Map Company, LLC a 55-year-old company that tracks lease and ownership changes throughout the Permian Basin of West Texas”.
    • SoftVest appears to control $30MM market value of TPL sub-shares
  • Allen Tessler and family appear to be an extremely accomplished and competent.
  • HK, Oliver, and Tessler all have stakes well in excess of current management.
  • I too have significant personal skin and the game and was relieved by reading the filing yesterday.  I’d admit to having grown quite worried about agency and succession issues after the resignation of Maurice Meyer.
    • I don’t write this to be dismissive of Preston Young who appears to be a very capable individual.
    • Nor do I wish to make light of the excellent stewardship of Tyler Glover, Robert Packer, John Norris, and David Packer.

I’m still not 100% (though I’m not sure it matters anyhow).  But as you can tell, I’m certainly leaning toward the direction of change.

5 thoughts on “Trustee Challenge : Thoughts

  1. I have been a shareholder since the 1980’s with what is now a substantial position. We have no debt, retire shares regularly, and until recently was operating with minimum expenses and risk. That has all changed. There are many more aggressive stocks out there, and there are many that went bankrupt during the oil price downdraft of 2014. Everyone wants to maximize profits, but with limited info or insight as to potentially what we have, it is hard to assess. There is something to be said for just sitting back and collecting royalty checks.Shareholders need more information to make an intelligent decision.

    Liked by 1 person

    • Per the most recent 10-K, one thing that HAS changed is that the trustees just seemed to have increased their paychecks from $2,000 per year to $104,000 per year. Egregious? No. But you should never have a scenario where the trustees are elected FOR LIFE and also in a position to vote their own salary increases….

      Likewise, if the Trust is going to be doling out multi-millions in bonuses to executives, then there needs to be shareholder oversight into the people who make those decisions. Glover and Packer each took home a $1.8 million bonus. Totally ok from the perspective of increased income, but it’s problematic that shareholders do not have any say outside of the very-rare trustee votes (literally only when a trustee resigns or dies).

      Much more important than who is being nominated to be a trustee, is the line from the sec filing “Such discussions may include (1) the conversion of TPL into a Delaware corporation subject to modern governance principles, as permitted by TPL’s declaration of trust”

      Modern governance, and a real elected board that answers to shareholders would clearly be a step up from the current situation.

      Liked by 1 person

  2. John Norris owns 1000 subshares and David Barry has 300, Packer 200 and Grover 100. I stand corrected. That’s not a lot overall, but I had missed Norris’ holdings.

    Liked by 1 person

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