4Q20 and 2020 Earnings

10-K & Press Release

  • Share buybacks back! at discretion of board
  •  7,756,156 shares out as of 1/31/21
  • Quarterly dividends going forward. Starting at $2.75/share. 1% regular div yield
  • $44.8mm net income; $5.77/share
  • Income down $24.3mm vs $4Q19. Primary driver of that was $20.4mm reduction in land sales
  • First month WTI futures were $35.82, $45.10, and $48.46 to close Oct, Nov, and Dec 20 respectively. Compare with 2019 at $54.15, $55.41, and $61.12 over the same three months.
  • Expenses $6.1mm lower Q4 to Q4
  • Water top line down, primarily on price, but so are expenses. Will be interesting to see where water goes from here given consolidation and the long term thinking touted by the E&Ps
  • Largest customer OXY is slowly de-levering and has found some stable ground
  • Search for new compensation consultant being undertaken by comp committee
  • Are the independent directors not paid enough at $24k a piece?
  • $281mm in cash on the balance sheet. Will be ~$250mm after March dividend payment. $250mm = 2.9% of market cap
  • BOE:  2019 = 13,700.  2020 = 16,200 
  • DUC:  2019 = 486.  2020 = 531



Welcome, ETFs

PBSM (0.14%), OSCV (1.06%), IUSS (0.09%), MGMT (2.77%) all appear to have taken positions in Texas Pacific Land Corp as of late. OSCV, IUSS, and MGMT appear to be an actively managed funds. PBSM is a passive fund that tracks the MSCI USA Small Cap Index. The commonality amongst all of these funds is a focus on small cap stocks.

To be sure, these are tiny positions and are in no way responsible for the recent move in share price. That said, these ETFs report positioning daily so as to facilitate create/redeems. Traditional MFs (active and passive) and some active ETFs are not required to report as frequently. We’ll get more clarity after 3/31 filings roll in.

Fun fact: As of this writing, the market cap of TPL is $9.1B. There are currently 36 constituents in the S&P500 with market capitalizations smaller than that of TPL.

Delaware IRRs

Platts:Higher prices lead to better returns, but producers still cautious

The Delaware continues to lead all US shale plays as a stronger Waha price has boosted most of the region’s robust wellhead gas revenue, pushing this region’s IRRs into the 25% area. With IRRs of 20% to 30%, operators will likely start to increase their completion activity quickly in the near term, according to Platts Analytics. Hydraulic fracturing of the approximately 200 drilled-but-uncompleted wells will help Texas and New Mexico operators stabilize the region’s production after the reduction in activity experienced in 2020.

A New Start

Transformation complete! Congratulations to those who worked so hard for this day.

Looking ahead, investors should keep tabs on the board and remain vocal about representation. The 2021 term ends in ~10 months.

Press Release

“A Delaware corporation structure is more aligned with the expectations of today’s investors than the former trust structure and is intended to allow us to execute on business goals and capitalize on our superb assets, resources and business potential,” said David E. Barry, Co-Chair of the Board. John Norris, Co-Chair of the Board, added, “We expect that our enhanced governance framework, in step with practices of publicly traded peer corporations, will foster value creation over time and benefit our stockholders.”

TPL Corporation’s board of directors consists of nine directors. Barbara J. Duganier, Dana F. McGinnis, and Tyler Glover are serving as directors in Class I (with terms expiring at the 2021 annual meeting of stockholders), Donna E. Epps, General Donald G. Cook, USAF (Ret.) and Eric L. Oliver are serving as directors in Class II (with terms expiring at the 2022 annual meeting of stockholders), and David E. Barry, John R. Norris III, and Murray Stahl are serving as directors in Class III (with terms expiring at the 2023 annual meeting of stockholders). Eight of the nine directors are independent under the independence standards established by the Sarbanes-Oxley Act and the applicable rules of the U.S. Securities and Exchange Commission (“SEC”) and the NYSE.


Contribution Agreement

A) Annual Meetings of Stockholders.

(1)  Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders at an annual meeting of stockholders may be made only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (b) by or at the direction of the Board or any committee thereof, or (c) by any stockholder of the Corporation who (i) was a stockholder of record at the time of giving of notice provided for in these Bylaws and at the time of the annual meeting, (ii) is entitled to vote at the meeting and (iii) complies with the notice procedures and other requirements set forth in these Bylaws and applicable law. Section 2.8(A)(1)(c) of these Bylaws shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the Corporation’s notice of meeting and annual meeting proxy statement) before an annual meeting of the stockholders.

(2)  For any nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to Section 2.8(A)(1)(c) of these Bylaws, (a) the stockholder must have given timely notice thereof in writing and in proper form to the Secretary of the Corporation at the principal offices of the Corporation, (b) such other business must otherwise be a proper matter for stockholder action under the DGCL and (c) the record stockholder and the beneficial owner, if any, on whose behalf any such proposal or nomination is made, must have acted in accordance with the representations set forth in the Solicitation Statement required by these Bylaws. To be timely, a stockholder’s notice must be received by the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day before the date of the one (1) year anniversary of the immediately preceding year’s annual meeting (which anniversary, in the case of the first (1st) annual meeting of stockholders and solely for the purpose of this Section 2.8(A)(2), shall be deemed November 16, 2021) and not later than the close of business on the ninetieth (90th) day before the date of such anniversary; providedhowever, that, subject to the following sentence, in the event that the date of the annual meeting is scheduled for a date that is more than thirty (30) days before or more than sixty (60) days after such anniversary date or in the event that no annual meeting was held in the prior year, notice by the stockholder to be timely must be so delivered, or mailed and received, not earlier than the close of business on the one hundred twentieth (120th) day before such annual meeting and not later than the close of business on the later of the ninetieth (90th) day before such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

Permian Highway



The pipeline, which has multiple ownership interests but is operated by KMI subsidiary Kinder Morgan Texas Pipeline (KMTP), is fully subscribed under long-term contracts. KMI said PHP provides approximately 2.1 Bcf/d of natural gas capacity, helping to reduce gas flaring in the Permian Basin.

January 11, 2021

Looks like it’s happening!  Jan 11.  Same ticker.  No split.  The third link I listed looks to be comprehensive doc describing the corporate action.  Please post in the comments section if anything catches your eye.

I’m now going to unpin the 2.0 Investor Preferences post that we’re all tired of seeing.  As the final documents come out, I’ll circle back to each point in that post to see how we did.  All signs point to pretty good.

While I’m still prepared for something to go sideways, I’d like to say thank you to Eric Oliver and Murray Stahl (and their families, colleagues, and other support) for fighting this fight.  It couldn’t have been easy.  As an analyst and TPL follower, I came into the 3rd Trustee contest fairly neutral but it became very clear, very quickly who was on the right side of the divide.  This a great outcome for owners.

1 : Press Release

The Trustees of Texas Pacific Land Trust (NYSE: TPL) (the “Trust”) announced today that, in connection with the Trust’s previously announced plan to reorganize the Trust from its current structure to a corporation formed under Delaware law named Texas Pacific Land Corporation (“TPL Corporation”), the Trust expects to distribute all of the common stock of TPL Corporation to holders of sub-share certificates in certificates of proprietary interest of the Trust (“sub-share certificates”) on January 11, 2021 (such date, the “effective date”).

Prior to the market opening on the effective date, the Trust will distribute all of the shares of TPL Corporation common stock to holders of sub-share certificates as of such date on a pro rata, one-for-one basis in accordance with their interests in the Trust. The trading of sub-share certificates on the New York Stock Exchange (“NYSE”) will cease prior to the market opening and TPL Corporation common stock will begin trading on the NYSE on the same date under the symbol “TPL,” and the sub-share certificates will be cancelled.

2 : 8-K

3 : Information Statement

Stockholders’ Ageement Extended


The Stockholders’ Agreement, which establishes certain features of governance for the New Corporation, provides that the agreement will terminate if the corporate reorganization has not been completed by December 31, 2020 (the “Outside Date”). As the Trust currently plans to complete the corporate reorganization during January 2021, the Trust and the Stockholders have entered into the First Amendment to Settlement Agreement, dated December 14, 2020 (the “Amendment”), to change the Outside Date to January 31, 2021.

Another step towards conversion.

A Dividend and a Date


The specificity of the planned conversion date is most welcome. And $10/share is better than a sharp stick in the eye while a heavy slug of cash remains on the balance sheet.

I’ll stay away from over-reading the dividend tea leaves for the time being. The “new guys”, having a ton of cash and freedom, might go in a direction that makes us wish conversion happened a long time ago.

Let us never forget that this all could have been avoided.

Happy Thanksgiving!


We’ve been conditioned to expect a big lump of coal in our stocking.

The period between now and 1/1 is relatively unproductive in banking, capital markets, law, and the like. My base case is a postponement. What’s yours?

3Q20 Earnings


Expenses moving down.

What was sold?

The Trust recognized land sales revenue of $11.5 million for the third quarter ended September 30, 2020 and $4.6 million for the comparable period of 2019.

$46mm in net income + $4mm in depreciation = $50mm more cash on the balance sheet.  Add that to the $258mm from the end of Q2 to get $308mm or ~$40/share or 8.5% of market cap.

Update:  The actual cash number is $316mm.


Management Purchase Deadline

Deadline for CEO and CFO required stock purchases is today though managment might be in “blackout” given the pending conversion.

Trustees + management own 1,300 shares or $625k in market value combined. Not a whole lot of skin in the game.


Cash Bonus. During the Employment Term, Employee shall be eligible for an annual cash bonus of up to 300% of the Base Salary for the same year (the “Cash Bonus”) as determined in accordance with reasonable and customary performance metrics to be developed annually by the Trustees in consultation with the Employee, but subject to the ultimate decision of the Trustees. With respect to the calendar year 2019 only, the Cash Bonus shall be determined as set forth in Exhibit A. The Cash Bonus, if any, shall be paid no later than March 15th of the year following the year in which the Bonus is earned (i.e., March 15, 2020 for the Cash Bonus earned in 2019), provided, however, that except as set forth in Sections 5 and 6 of this Agreement, Employee shall be eligible for the Cash Bonus for a year only to the extent he continued to be employed by the Trust through the end of that year; and provided further, that, until such time as Employee becomes eligible to participate in an equity compensation plan established by the Trust, Employee shall use no less than twenty-five percent (25%) of the value of the Cash Bonus (net of estimated taxes) to purchase shares of the Trust’s common stock; such purchase shall be completed no later than six (6) months after payment of the Cash Bonus has been completed unless, at that time Employee is in possession of material non-public information in which event the purchase shall occur as soon as practically available in accordance with Federal securities laws. The Trust’s exercise of its decision not to renew this Agreement voluntarily pursuant to the terms of Section 3 shall not affect Employee’s right to receive any calendar year bonus that has already accrued and remains to be paid. Further, the requirement upon Employee to use any portion of a Cash Bonus to purchase shares of the Trust’s common stock shall not apply in any situation where a Section 5 notice of termination has been issued