Earnings Call


My favorite part:

At March 31, 2021, Texas Pacific at a robust inventory of 541 drill but uncompleted wells wells or DUCs and 488 permits providing clear visibility in the future royalty earnings. New DUCs grew from 91 in the fourth quarter to a 152 new ducks in the first quarter providing line of sight into future production. New permits grew from a 139 in the fourth quarter to a 176 in the first quarter. As of March 31, 17% of all Permian rigs were located on TPL drilling spacing units or DSU’s up from 11% of Permian rigs as of December 31. In terms of spuds, TPL DSU’s accounted for 18% of total spuds across the Permian during the first quarter. 14% of all permits approved by the Texas Railroad Commission in the first quarter intersect TPL DSU’s Importantly, most of our net royalty acres are concentrated within the Northern Delaware region and core of the – Basin. This diverse exposure represents a significant competitive advantage for TPL Overall, our oil and gas royalties are only 10% developed with the Delaware Basin being less developed than the Midland Basin. Within the Texas portion of the Delaware, TPL accounted for 49% of all spuds during the first quarter.We believe this gives us more runway to grow our royalties over time compared to our peers, as the Delaware should continue to support a high pace of growth in production. In addition to our oil and gas royalties, we also have surface ownership of our land. Over the past decade, technological advances in exploration and development have unlocked a tremendous amount of additional reserves contributing to a rapid build out of oil and gas infrastructure across the basin. These activities and others provide TPL enormous optionality to generate additional cash flows utilizing our surface assets.

I could have used more Q&A but overall I’d call this first call a win. Presenters were impressive and well prepared. Confidence building. I get the sense that cash is being kept on the balance sheet for opportunistic lifts. The little engine that was in the business of going out of business appears to be going the other way.

1Q21 Earnings


Press Release

I was coaching first base when I heard my phone whistle its notifcation for the earnings press release.  During a pitching change I quickly skimmed the document.  When the batter stepped in I got so distracted thinking about the $20MM buyback number that I sent my runner to steal 2nd with a runner already on that bag.  Thankfully the third base coach, who probably owns BSM, saw my folly and called his runner.  Some bad thows later and it all ended up ok.  But $20MM?

My expectations for the quarter were pretty light due to the tough winter conditions and pandemic hangover but I expected more from the buy back.  Is this management telling us the price is too high?

The quarter ended with $310MM (~$40/share) in cash on the balance sheet.  Do I get a dividend?  M&A inbound?

Water was challenging.  What’s the plan there?


Mutual Funds

Open End:

VTSMX, NAESX, VEXMX, PRDSX, and FSMAX are all recent (as of 3/31) buyers of 30k+ shares (each) of TPL.

VTSMX alone bought 131,880 shares. That is 1.7% of total outstanding shares if you are keeping score at home.

Though not a recent buyer, PRPFX owns 70K. TPL is the second largest position in the portfolio.


VB, VTI, VDE, VXF, and INFL all hold greater than 10k shares

Some of the portfolios above are benchmarked to indicies maintained by CRSP, MSCI, S&P, Dow Jones, and Wilshire. Mostly extended market and complete market benchmarks.