Month: November 2024

TPL in the WSJ

tpltblogger10 Comments

https://www.wsj.com/business/energy-oil/one-of-the-hottest-stocks-in-the-oil-patch-is-a-defunct-19th-century-railroad-4b10a483

“Just having the proper staff to keep up with the pace that the industry was moving at created a ton of revenue,” he said. 

Texas Pacific also started a water company to supply oil producers.

That created a new revenue stream and enabled drilling in dry areas. More drilling meant Texas Pacific could lease additional property for access roads, pipelines and power lines. It opened rock pits and sold producers caliche, a natural cement used to build the roads.

“It opened up a lot of acreage that I don’t think would have otherwise been developed,” Glover said. 

The article as linked to this fun WSJ story from 1998. https://www.wsj.com/articles/SB88653506413772000?mod=article_inline

Big Leagues

tpltblogger16 Comments

When this blog started in 2018 TPL was an index ineligible trust.

We owe a ton of gratitude to Eric, Murray, and many other engaged investors who willed (blood, sweat, tears, and legal fees) TPL into its current form of modern governance.

The next chapter after that was business scaling, revenue diversification, investor awareness building, and discipline in capital allocation. For as cantankerous as I get about the threat of equity sales, it is undeniable that management is now executing at a high level.

From the individual investor perspective, it’s been a hell of a ride.

Still in awe!

+$1500

tpltblogger10 Comments

Is the S&P500 around the corner waiting to scoop us up?

If so, I’d suggest the use of the remaining authorization to split the shares. Make liquidity a bit better and the bite size a bit smaller for current and future investors.

On another note, what we are seeing with MSTR is that they are being rewarded (probably excessively so) for selling marginal shares and putting an asset on their balance sheet (100% marginal Bitcoin) that is better than than their current assets (watered down Bitcoin). This strategy is great for the shareholders. But not so great for the new shareholders who get a diluted version of Bitcoin.

My view on TPL is that the marginal asset available for purchase is almost always WORSE (value per $$) than the existing assets. Who would be selling good inflation protection assets with this macro backdrop? TPL issuing shares would be the opposite of MSTR doing it. The market would not reward the trade.

I’m beating a dead horse here but I’m getting worried that the crew is getting antsy to hit a bid on shares.

Don’t do it! Stay on the course and stay on the rocket ship. Split and buyback. Rinse repeat. It’s a low cost, proven strategy. Margin expansion and equity footprint contraction will get you to the c-suite hall of fame. And if you really want to make a splash, get on podcasts and talk about this capital strategy. Maximize equity per share, not total assets.

3Q24 Earnings

tpltblogger2 Comments

https://www.texaspacific.com/investors/sec-filings/all-sec-filings/content/0001811074-24-000061/0001811074-24-000061.pdf

Robust volume growth all around. Margins continues to slide however as expenses creep up. Acquisitions (and the lawyers they require) are expensive. Expenses were up ~50% from same quarter last year.

Will the ROE/ROI/IRR (whatever) of the new purchases beat the hurdle rate of TPL’s historical stock performance? Not a chance in hell. The rally this week alone tells you that.

Split, buyback, split, buyback, split, buyback. Make the company liquid enough for index requirements and return capital efficiently. Not hard.

Will we get a regular report card on the performance of the new buys? Will that performance be contrasted with the opportunity cost of forgoing capital returns? Let’s keep asking for one.

Enjoy the meeting tomorrow! Keep us posted. I’ll set up a thread for meeting reactions in case in person attendees would like to share notes and reactions.