Month: April 2019

Institutional Holder Urges White Card Vote

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Letter at EDGAR

http://www.schwartzinvest.com/

Schwartz Investment Counsel Inc. is the investment adviser to entities that own collectively 35,930 Sub-share Certificates (“Shares”) of Texas Pacific Land Trust (“TPL”).  We write this letter:

  1. To express our support for Mr. Eric L. Oliver’s candidacy for Trustee,
  2. To urge fellow shareholders to vote for Mr. Oliver, and
  3. To express our frustration with certain aspects of the General Agents’ and Trustees’ (together “Management”) oversight of TPL.

Mr. Eric L. Oliver is the candidate proposed for Trustee by SoftVest, L.P., which owns over 25% of TPL.  We believe Mr. Oliver’s agenda seems reasonable, especially his proposal to convert the TPL trust into a Delaware C corporation.  As such, the governance practices of TPL could be updated from a 19th century trust model to a 21st century corporate democracy model under our free-market capitalist system.  We believe this corporate structure is utilized by nearly every other New York Stock Exchange listed company.  If TPL became a corporation, we shareholders would have a vote in electing every member of the Board of Directors who represent us.  Not a radical idea!

  • SoftVest is a long-time shareholder in TPL, with a substantial ownership position. Oliver has extensive oil and gas industry experience, including Permian Basin expertise, and can assist Management in its oversight of TPL and in reporting and communicating with current and prospective Shareholders.
  • We support Mr. Oliver’s proposal to explore TPL’s conversion to a Delaware corporation subject to modern governance principles.
  • Conversion would eliminate the life-tenure of the Trustee position – which we believe is inappropriate for a company of the size and complexity of TPL.
  • We support Mr. Oliver’s commitment to provide a higher degree of transparency and more frequent updates to Shareholders.

We have been frustrated with certain aspects of TPL’s management and oversight.

  • A history of poor disclosures to Shareholders:
    • In our discussions with Management, over the years it was communicated to us that former trustee, Maurice Meyer III, played a major role in the management of TPL, including capital allocation decisions and the execution of share repurchases for TPL. Given that, why was his illness not previously disclosed to shareholders?  (Mr. Meyer died on March 24, 2019 at the age of 83.)
  • Lack of Meaningful Share ownership by Management:
    • Tyler Glover is General Agent and CEO (since 2016) and has been employed by TPL since 2011. In the past 3 years, he earned total cumulative compensation of $3,237,406 (per the recently filed proxy statement).  Yet Mr. Glover owns only 100 Shares of TPL, which were recently purchased on 12/4/18 for approximately $60,000.
    • Robert Packer is General Agent and CFO (since 2016) and has been employed by TPL since 2011. In the past 3 years, he earned total cumulative compensation of $3,307,219 (per the recently filed proxy statement).  Yet Mr. Packer owns only 200 Shares of TPL, with a recent purchase of 100 Shares on 12/4/18 for approximately $60,000.
    • The two current trustees only own a combined 1,300 Shares.
    • Altogether, Management owns 1,600 Shares. Why does Management have such a small ownership stake in TPL? Don’t they believe in the long-term investment merits of TPL, like we do?

Management’s choice for new trustee is Donald G. Cook.

We acknowledge General Cook’s military credentials and public company board experience.  We thank him for his service to our country. But in our opinion, he clearly does not have the requisite oil & gas industry expertise that Mr. Oliver has.

Importantly, due to the Trustees’ life-tenure arrangement currently in place, shareholders may not get another opportunity to voice their opinion regarding the Management of TPL, for another decade or more.  Said differently, a vote for General Cook is a vote to possibly never having another chance to vote again.

Schwartz Investment Counsel, Inc. firmly believes that the election of Mr. Eric L. Oliver as TPL’s next trustee, would be in the best interests of all shareholders.  Therefore, we strongly urge our fellow shareholders to vote for Mr. Eric L. Oliver as TPL’s new trustee on the WHITE PROXY CARD.

White Card Presentation + EO Video #3

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SoftVest, L.P., Horizon Kinetics LLC, And ART-FGT Family Partners Publish Materials For Investors Of Texas Pacific Land Trust

Eric Oliver Also Releases New Video

PR Newswire

DALLAS, April 23, 2019

DALLAS, April 23, 2019 /PRNewswire/ — SoftVest, L.P., Horizon Kinetics LLC and ART-FGT Family Partners, which collectively beneficially own over 25% of the outstanding shares of Texas Pacific Land Trust (NYSE: TPL), released today a presentation highlighting the need for change at TPL, and Eric Oliver’s actionable plan to maximize value for TPL investors. 

Eric Oliver also released a new video addressing the incumbent Trustees’ refusal to deliver a copy of the NOBO list and previously undisclosed conflicts of interest of the incumbents’ initial choice of trustee. 

The presentation and video are now available at https://horizonkinetics.com/tpl/.

TPL investors with any questions about voting their shares should contact D.F. King, SoftVest LP’s proxy solicitor, by phone (212-269-5550) or e-mail (TPL@dfking.com).

White Card Calls, Again, For NOBO List

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SoftVest, L.P., Horizon Kinetics LLC, and ART-FGT Family Partners Issue Open Letter to Trustees of Texas Pacific Land Trust

As established here over the weekend, sharing this list appears to be common practice.

Strong call for C Corp conversion below.

Ultimately, and more importantly, your counsel’s letter makes clear in a very concrete and vivid manner the point we have been making all along: TPL must immediately convert into a Delawarecorporation, as permitted under its declaration of trust.  If TPL were a Delaware corporation we would not be having this surreal exchange regarding the NOBO list, as Delaware law makes clear that corporations not only have the right to provide a NOBO list to investors, but they have a legal obligation to their shareholders to do so. 

Iran Waivers Waved Off

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You’ll recall our not-so-fun selloff last year which was kicked off by crude rolling over. Looks like the catalyst of that rollover has been reversed.

China, India, Japan, South Korea, Italy, Greece, Turkey and Taiwan to continue importing Iranian crude without being subjected to retaliatory U.S. sanctions. With the end of the waivers, the buyers face being cut off from the American financial system if they continue purchases.

Letter From Gen. Cook; Video Inbound

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14a Filing

Video details:

“TPL shareholders deserve to hear directly from me, and I look forward to answering their questions and addressing what is at stake during this important election,” said General Cook. “While serving on the boards of numerous large public and private companies over the years, one critical lesson I learned is that, at the helm of any successful company, you will find directors who are knowledgeable, professional, experienced in governance and committed to carefully evaluating a company’s growth strategy.”

Shareholders can view the video Q&A on Thursday, April 25 by visiting http://www.TrustTPL.com at 11:00 a.m. CT. A replay will be available beginning on Friday, April 26 on the website for those who are not able to tune in on Thursday. Shareholders who desire more information about General Cook’s background and his vision for TPL are encouraged to submit questions via email at AskGeneralCook@tpltrust.com by Wednesday, April 24 at 5:00 p.m. CT and to visit http://www.TrustTPL.com

Letter highlight:

I agree with the shareholders who made their voices heard in recent months and believe that what is needed most at this point in TPL’s history is expertise in corporate governance, with a focus on ensuring that the TPL team has the right resources and oversight to continue working safely and effectively. An understanding of the E&P landscape may be relevant, but as TPL expands its water services business and considers all aspects of its future, what is more important is a Trustee who has experience evaluating a wide range of situations, strategies and options for a ~$7 billion market cap public company. As a highly-experienced public and private company director, I have participated in several processes to prudently consider strategic options. In all modesty, I am the only nominee that brings that kind of experience to TPL.

More transparency from the Trust. Will submit some questions and will certainly watch.

List Sharing

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I’m told that communication from BLUE to sub-unit holders has occured.  Any calls from WHITE yet?

The last we heard about the sharing of the non-objecting beneficial owners list was in this letter from Trust counsel.

The Trust will provide to you a list containing the names of each holder of Certificates and the amount of Certificates registered in the name of each such holder as of the close of business on March 28, 2019 as required by Section Fourth of the Declaration of Trust, solely for the purposes specified in the Letter. This list is enclosed herein as Exhibit A.

As for the remaining materials you requested, the Trust is willing to provide such materials, provided that the Trust has the legal authority to share such information. As you will understand, the Trustees cannot share the private contact information of thousands of individual holders without their consent unless there is a legal authority to do so. In your Letter, you reference “common law” as the sole basis for your request. We assume your legal counsel has conducted extensive legal research in support of your claim and, in order to expedite your request and reduce costs for the Trust, please provide us with legal authority, such as case law or treatises, applicable to the Trust. We look forward to hearing from you on this.

Alternatively, we would like to point you to Rule 14a-7 under Regulation 14A promulgated under Section 14 of the Securities Exchange Act of 1934, as amended, which requires the Trust to mail any and all materials of yours upon your request. Please let us know should you be interested in submitting a demand under Rule 14a-7. We would promptly comply with any such demand.

So it appears as if WHITE got holder names but not contact info.

I’m no lawyer but it looks like courts have decided in the past that ALL shareholder NOBO information is elegible to be shared.  Again, I have no idea about the exact set of laws (NY? Texas?) to which the Trust is subject.  That said, there is precident for Deleware C Corps being compelled to share.  It appears to be common practice to request this information in proxy fights.

The Nevada Supreme Court has not ruled on this topic. Several cases from Delaware, however, are instructive. In Shamrock Assoc’s. v. Texas American Energy Corp., 517 A.2d 658 (Del.Ch.1986) the plaintiff had begun a proxy fight against the defendant’s incumbent management. In so doing, the plaintiff made a demand for the stock ledger, and also demanded access to the NOBO list which the corporation had acquired to contact its shareholders. The defendant refused to deliver the NOBO list, claiming among other things that Delaware law only required delivery of the stock ledger, and that any other material, such as a NOBO list, was merely ancillary, and need not be produced.

The Delaware court rejected this argument. In interpreting the relevant section of the Delaware Code, the court found it had repeatedly recognized that “the stock-list materials provided to a shareholder should include all of those forms of shareholder data readily available to the corporation.” Id., at 661. If the corporation were allowed to shield the names of the actual owners of the corporation from other shareholders, the court found, it would have an unfair advantage in the proxy solicitation battle. Id. (citing Hatleigh, supra, pg. 1146, at 354-55). By requiring the corporation to divulge all of the shareholder information in its possession, the court concluded that the goal of fairness in proxy solicitation would be effectuated. Therefore, the court ordered that the defendant allow the plaintiff access to any NOBO list which the corporation might have acquired in the course of proxy solicitation. In addition, the court impliedly held that the plaintiff would be allowed access to all other forms of ancillary shareholder information used by the corporation to contact its shareholders, such as Cede & Co. breakdowns and magnetic tapes. Id; see also Scott v. Multi-Amp Corp., 386 F. Supp. 44, 51 (D.N.J.1974); Hatleigh, supra, pg. 1146.

Based upon the preceding authority, it appears that Bryson is entitled to inspect all materials which Cenergy uses regularly to communicate with its shareholders. This would include the NOBO list, as well as any Cede & Co. breakdowns and computer records which Cenergy has in its possession. Cenergy argues, however, that the Court cannot read the Nevada statute as to allow this broader type of inspection rights, for the Nevada Supreme Court has given this statute a very narrow construction. In that the state’s highest court has narrowly construed the inspection *1148 rights, Cenergy argues that this Court must similarly construe them.

 

 

Eric Oliver, Video #2

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Video on Vimeo

EO hits the following points:

-Vote the white card if you intend to vote FOR him. Hits the point made here yesterday.

-Not running for day to day executive leadership. Running for oversight in the form of 1 of 3 Trustee positions.

-Takes issue with the 2018 NPRI sale to CVX and the surface acreage sale to WPX. Makes the case that both sales look short sighted from a strategic perspective.

-Wonders why former Chief David Peterson did a water sale deal with an entity that ended up employing him after his resignation from TPL.

Hits home on the need for both 1) proper oversight and 2) the strategic thinking of an experienced portfolio manager.

The attractive marginal trade available to a portfolio today might be antithetical to the portfolio strategy of tomorrow.

Lastly, I think of the quote below often. Hits the Peterson situation well. How much did he own?

“Show me the incentive and I will show you the outcome.” – Charlie Munger

While I have you, was it a signaling error for none of the crew (Glover, Packer, Barry, Norris) to lift sub-units at the end of 1Q? Was thinking about this on a long drive today. Too expensive? Not bullish? What’s the reason? If it’s regulatory, I’d love to know so I can be corrected.

SEC filing of transcript

Integrateds Spending

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Some good, reader supplied articles on major m&a. Have to think the implications for TPL are many. Fewer counterparties is obvious. 2020+ counterparties will be: low levered, patient, exacting, strategic, cost disciplined, and looking to drive margins high and sustainable for as LONG as possible.

OilPrice.com: Could This Be The Next High Profile Permian Takeover?

The shale-doom crowd chooses to ignore the obvious, and frankly, the most compelling pro-argument for shale that exists. Big Oil is committing resources to shale in droves. Companies are falling over each other in the attempt to land big “Shale” fish, like Anadarko. And, in so doing have laid out ambitious growth plans for this resource. BP, (BP), ExxonMobil, (XOM), and now Chevron. What are they telling us by voting for shale with their capex dollars?

It’s simple really. They are saying that their geophysical teams-which, let’s acknowledge are the best in the business, have told them that with scale, they can wring more oil and gas for less money than any other equivalent investment. What scale brings is a low base cost of production, which when combined with the high technology these companies can bring to bear on a project, turns into profits and free cash flow.

SL Advisors: Chevron Writes Shale’s Next Chapter

The CVX/APC deal highlights how things have changed. IOCs are no longer focused on trying to act like a small company practicing rapid innovation. Instead, they’re applying the scale and efficiencies of a big company to drilling techniques that are now well established. It’s the next stage in the Shale Revolution.

Forbes: Which Company Could Be The Next Permian Basin Acquisition Target?

Ultimately, price and valuation are only part of the equation. Anadarko wasn’t the cheapest acquisition target for Chevron, but Chevron liked the synergies of Anadarko’s locations. Thus, every major operator in the Permian is more likely to acquire companies whose properties are adjacent to their own. A deeper dive thus becomes an exercise in not only value, but in studying maps of the Permian producers — large and small.

Two Cards, One Vote

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***Warning: I’m not a lawyer or a proxy expert.  Below are my conclusions based on research of similar cases.  I take no responsibility for your vote or the outcome.  Below is my opinion only.  I just write a blog.***

TL;DR:

We’re all going to get two proxy cards in either physical or electronic form (or both).  You do not need to vote both cards.

Vote only one card.

If you have a candidate that you prefer, I strongly suggest you specifically vote FOR that person using the card explicitly naming that person in the ballot question.

White = Oliver.  Blue = Cook.

An AGAINST vote for Oliver is not a FOR vote for Cook.  An AGAINST vote for Cook is not a FOR vote for Oliver.

It is my belief that the candidate with the most FORs win*. AGAINSTs are essentially non-votes and don’t contribute to the denominator of the tally*.

*My conclusion.  Could be wrong.

Any help in nailing this down definitively would be appreciated!  Also, feedback on my logic (or lack there of) is welcome.  Let’s get this right. 

Two Cards:

You will get two cards electronically or via mail.  I’ve personally received both via Fidelity.com (who uses proxyvote.com) but only one physical card (White) via snail mail.  I expect the physical Blue card will arrive at home in the coming few days.

The BLUE card is a solicitation to vote FOR or AGAINST General Cook.  The physical card received in the mail will be blue.  Electronic voting and the physical card will both have the language immediately below. blue

The WHITE card is a solicitation to vote FOR or AGAINST Eric Oliver.  The physical card received in the mail will be white.  Electronic voting and the physical card will both have the language immediately below. white

One Vote:

This PDF written by Fried Frank is a treasure for getting into the nitty gritty on proxy battles.  The following language on page 8 is relevant to our situation:

In the course of a proxy contest, investors may receive multiple proxy cards from each side, and may, intentionally or inadvertently, submit more than one proxy card. The latest dated proxy card revokes any prior proxy.

I take this to mean that your latest vote nullifies and earlier votes.  For instance, if you voted the WHITE card FOR Eric Oliver yesterday and then vote BLUE card AGAINST General Cook tomorrow, your second vote is the ultimately the one that counts.  In that instance, your counted vote would be a vote AGAINST General Cook which isn’t the same as a vote FOR Eric Oliver.  The reverse is also true.

It appears to me as if AGAINST votes are non-votes and effectively function the same as the ABSTAIN option.

To be safe, I suggest you ignore the card of the candidate you oppose.

What Now?:

If you are unsatisfied with your vote (for instance: you made an AGAINST vote instead of a FOR vote), I suggest you clear your current vote online (I can do this on Fidelity.com/proxyvote.com) or call your brokerage and have them assist you with clearing your vote.  After your vote is clear, find the FOR card that you support (White = Oliver, Blue = Cook) and vote FOR.

If you’ve responded via physical mail and want to amend your vote, contact your brokerage to have them assist you in doing so.

Of course, if the card you didn’t vote is the FOR card for the candidate you prefer, you can simply vote that card as FOR.  It will override your prior vote (assuming the plumbing works as expected).

Supporting Evidence and Miscellaneous:

If you inadvertently voted to support the current board with the White Proxy Card, it is not too late to change your vote. Simply vote for the Blue Proxy Card. The most recent vote sent before voting closes will be the only vote that counts.

  • Barron’s writes on the state of proxy voting.  Votes via brokerage houses get rolled down to the owner and then get rolled back up in a fairly ugly way.  This makes the case for voting once and doing so as directly and simply as you can (FOR).

For an annual meeting vote, DTC/Cede identifies the bank-broker participants that hold the stock as of the record date and sends them an omnibus proxy. Participants, in turn, send a proxy or a voting instruction form (VIF) to their own clients, such as institutions, individual investors, or respondent banks, which have accounts with a participant bank.

Cascades of proxies can follow. Respondent banks may have their own clients, which may include still other banks with shareholder clients. All will send out proxies or VIFs to their clients. As votes are cast, the proxies and VIFs reverse course, heading back up the chain until they reach the tabulator of the vote. This can be done by mail, email, or telephone, depending on the participant, the shareholder, and the third parties involved.

Eric Oliver Video

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Horizon Kinetics Hosts

Click the top link. Video shot 4/16.

Transcript in 14A

What I want to say to all of you is this election is so important. There’s only been four elections in thirty years. And with a lifetime appointment, we may not have another meeting until another trustee dies or resigns. Which, actuaries tell me could be thirteen years. So Murray and Alan and I got our heads together and said this election is so important we need to at least let our voice be heard. That we think it’s time for modern corporate government. We think it’s time for term limits. We think it’s time to expand the board. To have real committees. Have functioning accountability and checks and balances in place. We believe it’s important that the board be represented by its owners. If my opponent is elected, it would be the least amount of ownership on the board in over fifty years, since the Frasier and the Meyer family have served for three generations. And finally, we think this third and final seat deserves to have an expert in the oil and gas and royalty and Permian Basin marketplace.

Universal Guaranty Life Supports Oliver

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LiveInsuranceNews.com: Universal Guaranty Life Insurance Company Announces Support of Eric Oliver

Stanford, KY, April 16, 2019 –(PR.com)– Universal Guaranty Life Insurance Company, a wholly-owned subsidiary of UTG, Inc., announced today its enthusiastic support for the election of Eric Oliver as trustee of Texas Pacific Land Trust (TPL) at the special meeting of shareholders to be held on May 22, 2019. UG intends to vote all 39,000 of their shares for Eric Oliver using the White Proxy Card.

Eric Oliver introduced UG to TPL 10 years ago. Eric had followed UG for some time and was an active investor. Eric has continually demonstrated his belief in TPL by investing both personally and through companies he controls. With his background, knowledge and experience as a seasoned oil and gas investor, UG believes Eric Oliver is the right candidate to succeed Maurice Meyer III as a TPL trustee.