23 thoughts on “Defendants’ Post-Trial Answering Brief”

  2. Having read the entire document (minus the referenced items) this should be a slam dunk summary judgement in HK/EO’s favor. There is not piece of TPL’s claims that hold water, and the ‘unclean hands’ is icing on the cake.

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  3. A powerful concluding brief by team HK/SV.

    This is the final brief in the four briefs (2 per side, with team HK/SV having the final brief) following the trial in mid-April which Judge Laster highlighted the process in the trial transcript.

    The brief does a masterful job of showing Proposal 4 is a recapitalization and is an extra-ordinary event and is also a governance change. I have not seen the previous three briefs on this case post trial, but I believe reasonable doubt has been created that HK/SV didn’t violate the shareholder agreement.

    The most compelling part of the brief is the affirmative defense of “unclean hands”. For “unclean hands” to work as an affirmative defense, it has to be proved. Having Director Kurz admit under oath at trial “false and misleading” statements on the proxy were made is powerful proof. Additional proof is Glass Lewis changing their recommendation based on what came out at trial and saying they were mislead.

    The great thing about an “unclean hands” affirmative defense is it works regardless of if there is any merit to TPL management’s case on if the settlement agreement was violated. I think there is high probability of success for Team HK/SV here.

    I believe a ruling will be made by Judge Laster soon. Delaware courts move cases to conclusion quickly following the submission of all post-trial briefs.

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  4. Just reading the commentary about how forceful management has been in pushing for acquisitions as critical to their “Strategic Vision” is alarming enough as a shareholder.

    I am almost certain now that even if Prop 4 is defeated, they will move forward with using the massive cash balance to make acquisitions. Why else are they building the cash balance and not buying back shares? Surely the legal fees can’t be all of it…

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    • I have the same concern. I still hold hope that with the size of HK’s position they aren’t going to let this thing go be destroyed.

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      • And though the 2 shares a day is a little strange, they are still accumulating. I have had the thought “gee, I hope they aren’t blind to a permanently damaged thesis because of how in deep they are”. But from what I have seen of Murray Stahl and Steve Bregman I have a good level of confidence that they are truly independent thinkers who are willing to admit a mistake and change course if it becomes clear.

        Thoughts?

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        • HK have to keep fighting. They’ve got a tiger by the tail because their position size is so huge. Like, how would you even unwind that when you have reporting obligations on every transaction, and people could figure out what you’re doing from a mile away.

          It’d be such a nightmare to do on the public market, you’d have to try to sell private blocks IMO.

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    • I just can’t believe we are paying an entire acquisitions committee to pursue dilutive acquisitions of less valuable assets. Oxy AND Brigham? Unbelievable.

      This management team is so off the reservation. It’s just one thing after another that either destroys shareholder value, or straight up disrespects shareholders… all while getting overpaid with our cash AND shares now. If there isn’t a clear path soon to completely flipping this management team, I don’t know if I can continue to hold my shares.

      They are hell-bent on ruining this company for their benefit.

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  6. No issuance of new shares – doesn’t align with the significant reason for my investment in TPL.

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  7. As much as I appreciate and agree with the thorough post-trial briefings by the defendants (seems like a slam dunk case if there ever was one!), keep in mind that we shareholders will end up paying the defendant legal fees when they win the case. That amount probably wasn’t accounted for in the $16 million accrued expense from 1Q report.

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    • Honestly that is the least of my (personal) worries. I will happily pay for HK to win this thing so as not to permanently impair the business and allow it to continue being the phenomenal asset it is.

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    • Does this type of case have a basis for fee shifting? Typically each party bears its own cost absent a specific statute or provision to shift fees. I am not aware of one here that would require TPL to payHK’s legal fees if it loses.

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  9. I found this in the comments of a new Leo Nielsen SA article, has the impact of CO2 EOR [Enhanced Oil Recovery] on TPL been looked into? It seems like there should be a significant number of out of production wells on TPL range that may be brought back into production.

    What I got out of reading her comment is that it can be used on existing wells to get more production out of wells that are already drilled and possibly shut in.

    https://seekingalpha.com/article/4609566-top-energy-crisis-picks-two-dividend-powerhouses#comment-95419068

    Nnnnnot So Smart
    Today, 9:08 AM

    Comments (606)
    |
    No mention of CO2 EOR which will dramatically improve recoveries in the Permian and other shale basins?
    Berkshire Hathaway now own approximately 25% of Occidental Petroleum common stock + warrants + preferred stock paying an 8% dividend.
    At the Berkshire Hathaway annual meeting Warren/Charlie said the following with respect to OXY and the Permian:
    buffett.cnbc.com/…
    CHARLIE MUNGER: Yeah. It really dies fast, those shale wells. If you like quick death in your oil wells, we have them for you…
    WARREN BUFFETT: “And we love the position with Occidental. And we love having Vicki run it.
    CHARLIE MUNGER: And there’s a lot more oil down there, if anybody can figure out another magic trick. That’s all we need is another magic trick.”
    I believe OXY has found at least one “magic trick” already and that trick is CO2 Enhanced Oil Recovery (EOR)for the Permian shales.
    Vicki Hollub makes the following comment a recent interview with Smead Capital:

    Quote:
    (38:15 min)
    Question: About Permian and other shale plays having a short life cycle (rapid shale oil well declines).
    Vicki Hollub: “The Permian is a shorter life cycle, but we intend to make it a longer life cycle. And the way to do that of course is with CO2. If you look at a shale player today…because this is how we look at our assets in the Permian. We’ve got an inventory of more than ten years (of new well locations) to drill. But what happens beyond that? What do you do if you are a shale player? If you have a five to ten year inventory what comes after the ten years?
    And for us what comes after the ten years is CO2 applied to the shale and the conventional (reservoirs). And once you are putting CO2 into the reservoir, then the well decline rates are much different. There is hardly any decline. Our conventional (reservoir) assets decline at about 3-4%. So, we are going to turn our Permian (shale) high decline high return into a low decline but solid return asset over time. When people start thinking the industry goes away in ten years, there are going to be some companies, some assets and some countries that are going to remain to continue beyond that. And that’s where we’ll be. Because you’re going to be able to almost double (oil recovery), not quite …Our technical people have run pilots putting CO2 in the shale that have indicated we’re going to get 8% more out of the shale than we would not have without using the CO2.”

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  10. Subject to interpretation, I believe I found somewhere in the thread that Oxy was recovering about 10 percent of the oil in the well and “…you’re going to be able to almost double (oil recovery), not quite ….” and 8% is about an 80% increase from 10%. There was also an article on OilPrice.com about the Chairman of XOM touting the same technology. BTW doesn’t an 80% increase in yield equate to about an 80% increase in Royalty Payments to TPL? Recovering oil from existing wells also offers another benefit, the well already exists and it produced oil. You know its there, and you don’t have to drill to find it. If the wells are shut in and the Operator has abandoned the lease who owns the mineral rights? Chevron, they bought them from TPLT years ago? TPL owns the royalty interest, is that correct. [Oh so many questions come to mind]!

    If they are up to speed on all this, Warren and Charlie don’t look so dumb for snapping up OXY stock. do they [Grin]? I also own some Berkshire Hathaway stock and have for years.

    Thinking about it some more where is all that CO2 to be injected going to come from and is TPL going to find a way to make money off providing it?

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  11. If they are up to speed on all this, Warren and Charlie don’t look so dumb for snapping up 25% of OXY stock. do they, and Chevron that may own a lot of the mineral Rights [Grin]?

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    • interesting and thanks, whether injection of CO2 or refracturing, it seems like there is new impetus to get more oil out of shale. Seemed inevitable that newer methods would be developed. This is only great news for TPL.

      pretty sure Glover is on this. Danny I mean…….

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  12. This strategy is driven by management’s questionable belief that it could exchange TPL stock for the stock of target companies trading at a lower price-to-EBITDA ratio and thereby create a combined, post-transaction company with a higher EBITDA per share than TPL has today. Defendants (Horizon Kinetics) and their designees on TPL’s Board oppose this strategy. They note that TPL’s so-called “valuation premium” reflects not inexplicable market irrationality, but the market’s recognition that TPL holds more valuable assets than its potential targets. Indeed, TPL management admits that it does not know whether TPL would be able to retain enough of its valuation premium after a stock-for-stock transaction such that TPL’s post-merger price-per-share would increase. Nonetheless, TPL insists on pursuing its strategy of growth-by-acquisitions.

    EBITDA can lead to distorted thinking and may not be a useful measure of valuation for most companies that require capex.

    TPL wanting to issue shares of a company owning high quality assets with the no to low cost structure of a royalty company (TPL has 80 to 85% gross margins–which should be higher if SG&A was NOT spent on useless legal expenses) to buy a capex guzzling oil and gas company. One of the most stupid ideas ever presented in financial history!

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  13. We have to change management’s ‘Strategic Vision’ to the Shareholders’ ‘Strategic Vision’. That starts with firing Glover and all the extremely overpaid staff that they have added to pursue their view of the world.

    We must follow that by voting Norris & Barry out as they come up for a vote this year, then continue the housecleaning each year UNTIL WE Shareholders have some control over our assets.

    Since the rest of the Board followed N & B like blind sheep, we have found out through the lawsuit and they don’t have the credentials and/or ethics to be on ANY Board.

    We also have to delete the word ‘acquisitions’ for their vocabulary. It’s ‘Buy back and retire shares’. PERIOD

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