Staking Out The Middle Ground

I’ve been fortunate to talk to a large number of TPL holders over the past month.  Down to a person, the group is passionate about TPL and wants only the best (read: long term value maximization) for the Trust.  Old and new investors alike have a great deal of reverence for the history of the trust.  Another common refrain I hear from investors is that of TPL’s strong working culture and highly engaged team.  So, in light the commonalities and positive attributes above, I suggest all sides come together and steer this proxy battle away from getting any uglier.

Middle ground proposal:

  • In light of the wishes of a block that owns 25% of TPL, current Trustees Barry and Norris move to nominate and accept Eric Oliver as Trustee.
  • Trustees (working together) nominate a 5-7 person Governance Exploration Committee.  All members of the committee must be agreed upon by all three trustees.
  • Governance Exploration committee works for a period of six months to determine and recommend a long-term path for TPL oversight that 1) is respectful of the long term past values and goals of the Trust and 2) reflects 21stcentury realities of both corporate governance and the magnitude of the opportunity in West Texas.
  • New Governance form is brought to sub-unit holders for a go/no go vote
  • No vote = back to the drawing board
  • Yes vote = mandate to execute

That’s it.

It’s not perfect, but it represents a fair shake for all involved.  There are probably many other solutions like it.  The important part is that all sides come together and a solution is adopted.

The stakes are extremely high.  Mistakes can cost billions. Let’s set TPL up for high quality strategic direction and decision making via improved governance NOW.

Resistance to come to a common-sense middle ground should be looked upon by investors with contempt.  Personal ego, pride, and control should come AFTER doing the right thing for investors.

The horse is out of the barn, the cat is out of the bag, and we can never go home again.  There will never be another day in the future where governance at TPL isn’t an issue.  It must be resolved.

9 thoughts on “Staking Out The Middle Ground

  1. Have you really heard from legitimate, validated shareholders who are not intending to vote for Eric Oliver?
    If spoken with many, many shareholders and have not yet spoken with any serious holders who are not 100% on Oliver’s side.

    No reason for the dissidents to compromise in the way you suggest — they’ve got this in the bag


    • TPLblogger, I like your middle ground position. It puts Eric Oliver on the trustee bench, and outlines a path to an improved governance model. I believe the governance of the trust today is what has everyone upset, and provoked HK to join efforts to do something about it. The dollars are too large anymore, the permian is still a growth story, and business isn’t done the way it was in 1888 when the trust was formed. Intelligent checks and balances, quarterly conference calls on results, and better transparency on bonus and pay practices would be a good start,

      GG, I have appreciated your previous comments, and I also support Oliver and expect him to easily win the open trustee position. But, he is just one of three trustees, and can be outvoted 2-1 everytime. Having a compromise solution that puts us on a path like TPLblogger suggests means the trustees are playing nice together with a goal of a governance model both the trustees and executives, and the shareholders can support, especially if they have to vote to approve it.

      Liked by 1 person

      • Ted,
        I don’t think being 1 of 3 is as big an issue here as if it were a typical board of directors.

        This is a black and white issue of beneficiary rights — not just some small difference of opinion on corporate strategy. The courts and legal system would not be kind to trustees that are trying to entrench and enrich themselves directly against the wishes of the beneficiaries. And the personal liability that those trustees would be taking on to block the beneficiaries desires is very serious.

        So once one “good guy” is on the inside, I think that it’s likely that other insiders will change their tune. And if they dont, I’m more confident that they’ll be taken to court.

        Liked by 1 person

  2. Middle ground but it’s also common sense. The problem is that just three trustees seems like too little. The 5-7 committee members you site would be appropriate for the number of trustees.Good communication though, needs no exploratory committee, it could happen under any governess.

    Liked by 1 person

  3. No middle ground. No compromise. That gets us no where. Trustees should be large share holders with skin in the game. (“Show me the incentives and I’ll show you the outcome”).
    Trustees for life with no governance and no transparency in unacceptable.

    Liked by 1 person

  4. With both sides engaging in so much disrespectful and idiotic rhetoric, I agree with those who are seeking a common sense solution. I think the SoftVest/HK campaign would endorse the type of common sense next steps you are proposing, but I wish they would do a better job of a.) acknowledging the rich, unique history of TPL; b.) showing some respect for the current management’s successful stewardship over the explosive growth and outstanding results of the last few years (rather than the “being dealt a royal flush does not make for a good poker player” dig), and c.) most importantly, reassuring all shareholders that their focus on “maximizing value” is for the long-term health of all shareholders. My votes will likely be for Mr. Oliver, but I can understand why some long investors would be concerned that a 25% stake could lead to short-term motives. For example, we were shocked to learn in TPL’s proxy that Mr. Tessler recently presented two possible takeover offers to the trustees. How did this happen… Was he out in the O&G market actively seeking a buyer for TPL or did these (probably low ball offers) just fall into his lap? Is that what Oliver/Stahl want to happen for TPL in the near future ? What would be the protocol for shareholder approval be if a truly viable offer were to materialize and what would that mean for reporting of cost basis? Can Oliver clearly explain the pros/cons of what a C-corp conversion would actually mean for TPL? In the absence of real information all we can do is try to fill void with our speculations of what would happen and whether we think that is a good strategy, We have more questions than answers at this point and deserve much more clarity from both sides to make an informed decision.

    Liked by 1 person

    • “Being dealt a royal flush does not make you a good card player” this has been bothering me for days now.
      While that is true it is also true that nobody sits down plays one hand then leaves (or else Vegas Casinos wouldn’t be as nice as they are) what makes one a good card player is taking those royal flush winnings and properly betting on the next hand, and winning. And betting on the next hand, and winning. Being aggressive when they need to be and conservative when they need to be. Knowing when to hold em and when to fold em, day after day month after month project after project deal after deal. What makes you a good card player is winning your hands and repeatedly increasing your profits, which we have seen, day after day month after month project after project deal after deal. Now it appears a lot of other shareholders aren’t content with the winning streak and they all want us to move to the baccarat table we have never played at because it’s promising bigger payouts (even though we are getting royal flushes where we are) When you get greedy is when you lose at gambling EVERYBODY KNOWS THAT. Since they started the gambling metaphor… we all put $100 in the slot machine and are up $1000 and now the “casino” is trying to get us to move to a different machine…. think about it….

      Liked by 1 person

  5. The more effort that the two Trustees are putting out to get their General elected is starting to make me wonder if there’s something behind the curtain that they don’t want someone who they don’t ‘own’ to see. The General has no O&G experience, but he follows orders. One Oliver is elected, he gains insight into everything.and they may not want that to happen.

    Liked by 1 person

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