3Q Earnings and Conversion Committee Update

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.

q3 margin analysis updated

Simple margins tell you this as well.

simple margins q319

Can’t wait until legal fees are in the rear view mirror.

D&A increasing.

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?

18 thoughts on “3Q Earnings and Conversion Committee Update

  1. Wow! Numbers look great! Oil & Gas royalty Revenue up 26% YOY even as oil and gas prices dropped! Once Oil prices go back up I can’t even imagine what that will do to EPS! Very excited for the future!

    Liked by 3 people

    • Unfortunately, they did not buy back any shares in 3Q (or 2Q). They have had 7,756,156 shares outstanding since April 2019. You are comparing share count with 3Q of last year.

      Liked by 1 person

  2. Ronald, are you sure that the reduction in shares you are seeing isn’t the result of buybacks YOY? The weighted number of shares outstanding reported in the q2 2019 release is the same as reported in q3 2019, indicating to me that no shares were purchased by the Trust in q3. Otherwise given the price of oil the report seems pretty good.I long for the buyback days of old……..

    Liked by 1 person

  3. I am most definitely loading up on more shares tomorrow. I believe we have seen the bottom and it will continue to rise from here. Monster numbers!!

    Liked by 3 people

  4. These “updates” are basically being thrown out by the trustees because they are forced to, but apparently no one can force them to put relevant info in them. I find it very hard to believe that there is no info at all that they can provide shareholders that would not violate the confidentiality agreement, its just that they don’t want to. Like I mentioned in one of my previous posts, I hope the meetings are being held with maturity, and there is actual progress being made, because this seems like very childish behavior. Are the 7 of them having civil meetings? Sure hope so.

    Liked by 1 person

  5. Has anyone heard from mgmt when share buybacks are going to resume? At these depressed levels I am surprised they haven’t been buying more

    Liked by 1 person

  6. A solid quarter of results, and the nice move today.

    The “status reports” on the Special Committee are pathetic. Absolutely no content, other than its confidential (duh, we already knew that) and the conversations have been “productive and informative”. Could it be any more of a plain vanilla platitude is doubtful.

    I question why in three months the “Special Committee” has only met five times. Wow, that less than two times a month! Not even a weekly standing meeting which most of us have experienced in our careers…that would have resulted in 12 meetings by now. As a retired IT management guy, when there were really important issues to deal with, there were daily meetings until resolved. But I guess the proxy fight, the legal battles, the fundamental differences between HK and the trustees are not important enough for more frequent discussion.

    The “Special Committee” says they will pay $8,000 per month to the committee members who are not trustees, unless they waive their compensation. If I was the retired general, being paid 24K over three months to attend 5 meetings really puts the “special” in Special Committee.

    Liked by 1 person

    • ” If I was the retired general, being paid 24K over three months to attend 5 meetings really puts the “special” in Special Committee.”…………

      Yep. appears to me the General won the Special election after all.

      Liked by 1 person

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