Earnings press release
Impressive top line growth. I can’t help but see that EBITDA (newly included by TPL in releases) is pretty much equal to revenues from royalties, land sales, and easements. It appears as if all profits from water are being eaten by legal fees and comp. Estimated water margins appear to have stabilized near 50%. The sheet below isn’t perfect but it’s likely directionally right. Margins are being squeezed by expenses.
Simple margins tell you this as well.
Can’t wait until legal fees are in the rear view mirror.
I’m not operating the business but my guess is that there are some aspects that can be tightened up. We shall see.
That all being said, $7.74/share x 4 = $31/share annualized. $569 / $31 = 18 P/E. Low to historic multiples. We’re looking at a $775 price at a 25x multiple which is more consistent with historical valuations.
Conversion Committe update
The Committee has continued to meet with its advisors, including Credit Suisse, which is assisting the Trust and the Committee in developing its recommendation to the Trustees. The Committee has met 5 times, both in person and over the phone, since its inception, and deliberations to date have been productive and informative. Although its deliberations are confidential, the Committee will continue to provide monthly progress reports to shareholders as required by its Charter before issuing a final recommendation to the Trustees.
Was hoping for a bit more progress than that! So 2 meetings in October?
File this under “things we don’t want”.
From 2014 through 2018, Texas Instruments bought back 228.6 million shares for $15.4 billion. That works out to an average purchase price of $67.37.
Over that same time span, Texas Instruments sold 90.8 million shares to management and board members as they exercised options and restricted stock grants, for a total of $2.5 billion. That works out to an average sale price of $27.51.
The difference in average purchase price and average sale price, multiplied by the number of shares so affected, is the direct monetary benefit for management. This is true whether or not management sells their new shares into the buyback or holds them. That amount works out to be $3.6 billion.
In other words, 40% of TXN’s stock buybacks over this five year period were used to sterilize stock issuance to senior management and the board of directors.
In 2018, JP Morgan bought back 181.5 million shares of stock for $20 billion. Also in 2018, JP Morgan issued 32 million new shares to management (18% of buyback). Those newly issued shares were worth $3.5 billion then, and are worth $4.2 billion today.
In 2017, JP Morgan bought back 166.6 million shares of stock for $15.4 billion. Also in 2017, JP Morgan issued 31 million new shares to management (18% of buyback). Those newly issued shares were worth $2.9 billion then, and are worth $4.03 billion today.
In 2016, JP Morgan bought back 140.4 million shares of stock for $9.1 billion. Also in 2018, JP Morgan issued 38 million new shares to management (27% of buyback). Those newly issued shares were worth $2.5 billion then, and are worth $4.94 billion today.
Were these newly issued shares spread evenly throughout the company, perhaps as part of an employee stock ownership program (ESOP)?
No. In each year, there were fewer than 1 million shares issued for the JP Morgan ESOP program, less than 3% of the dilutive issuance. Senior management received more than 97% of the newly issued shares.
For the years 2020 through 2026, the sales revenue forecasted growth rate is 5%. The terminal value occurs in year 2023. The resulting value of $7,158,560,998 is obtained by calculating the net present value (NPV) of the free cash flow (FCF) from years 2019 to 2023, discounted at my required rate of return of 8%. The resulting value represents the future cash flows discounted back to the present. We can use the $7,158,560,998 value as the value of what TPL’s market cap should be worth today. You can also see in the table below that the current market cap of TPL is $4,679,987,000.
If we divide $7,158,560,998 by the current number of shares outstanding, we get a resulting value per share of $919.30.
Not the most precise analysis in the world but at least he’s trying. Problem with DCF is that TPL’s top and bottom line include both recurring (as recurring as royalties, water services, and easements can be) and non-recurring items (land and royalty sales). #doubledipping
Good update on pipeline and storage capacity.
Record exports in recent weeks were supported by higher inbound flows via new pipeline capacity. Plains’ Cactus II pipeline and EPIC’s NGL pipeline, which is temporarily in crude service, commenced operations in August. Both lines deliver barrels to the Corpus Christi area from West Texas, alleviating a bottleneck in the Permian Basin and fueling substantial growth in exports from the coast.
We began monitoring Cactus II pipeline flows in September as part of the Gulf Coast Pipeline service. Volumes on the line averaged 361,000 bpd in September and reached an average of 472,000 bpd for the week ending October 4. We are currently assessing monitoring feasibility of the EPIC NGL pipeline, as well as nearly-completed pipeline projects which will bring more crude into the region from West Texas.
Phillips 66’s 900,000 bpd Gray Oak pipeline, which will also transport crude from West Texas to the Corpus Christi area, is expected online in Q4 2019, according to an August Phillips 66 investor presentation. Gray Oak and other expected capacity increases could further facilitate higher export volumes from the Texas Gulf Coast as additional Permian supply gains access to waterborne transit.