Stahl Speaks on FRMO Call

https://seekingalpha.com/article/4318766-frmo-corporation-frmo-ceo-murray-stahl-on-q2-2020-results-earnings-call-transcript?part=single

Okay, there’s a couple of questions on TPL. I’m going to read them, and then I’m going to answer them in generalized ways, because some of the news is actually out and some of it I just can’t say, but two questions, are you able to work with the present trustees a bit of TPL? Well, and then secondarily it’s related question, will the corporate conversion happen?

Well to the latter, you might have observed the SEC filing on TPL. I believe it was Wednesday. Yesterday, you can see, so you can read it for yourselves, but the committee recommended the conversion, and you can see what’s going on there.

And I think that document answers the first question, because I think, I hope you could read that in the document. I thought everybody was working very well together or at least it strikes me that’s what the document should say, because I think it reads very well, but I leave it to you to judge for yourself. Anyway, the information is out there. You can read it and that’s the way it is. Okay, next question?

OK.  I’ll take it.

C-Corp Conversion Details

https://www.tpltrust.com/investors/news-events/press-releases/detail/100/texas-pacific-land-trust-committee-recommends-conversion-to

The decision of whether to convert TPL into a c-corporation is subject to determination of the current Trustees. The Committee recommended that, if the Trustees elect to authorize the conversion, the conversion should follow a process intended to ensure a smooth transition that would be tax-free to shareholders. As proposed, TPL would transfer all its assets, including cash, land, Texas Pacific Water Resources, and other assets, to a wholly-owned limited liability company subsidiary of TPL (“TPL Holdco”). TPL would then contribute all of the equity in TPL Holdco, holding all of TPL’s assets, to a newly-created corporation (“TPL Corporation”). Current shareholders of the Trust would receive an amount of shares in TPL Corporation proportional to their ownership of shares in the Trust. When this process as recommended is completed, shares of the Trust would be cancelled. Shareholders of the Trust would not need to take any action to receive the new shares in TPL Corporation.

 

Great opportunity to split the new shares too. Would be amazing/horrifying if the Trustees went rogue and decided not to adopt. Given all we’ve been through I wouldn’t be surprised. That certainly isn’t the base case though.

Some folks were wondering about a unit holder vote to convert. That doesn’t appear to be the case.

Much remains unsaid about governance of the new entity. Also not mentioned is the plan for returning accumulated cash and cash going forward.

Bloomberg Reports on Stifel Coverage

One of Best Permian Investments Doesn’t Produce Oil, Stifel Says

The shale boom transformed the Permian from an overlooked backwater into the world’s hottest drilling region. But many producers there have delivered little in the way of returns for investors as companies put all their revenue back into new wells to boost output. Texas Pacific has bucked that trend.

“We believe TPL is the best single ETF to own for Permian exposure,” Stifel said.

The downside of buying now is that others have already noticed Texas Pacific’s attributes. The stock has soared 569% in the past four years, far outpacing oil prices.

700 Acres of Solar

RWE takes 100MW shine to Texas

Diversifying the revenue base.  Does TPL get a royalty on the power produced?

RWE has started commercial operations at its 100MW West of the Pecos solar farm in Texas.

The project is located on 283 hectares of land in Reeves County leased from Texas Pacific Land Trust and Texas General Land Office.

It comprises nearly 350,000 solar modules and is RWE’s first photovoltaic project in Texas.

West of the Pecos has a long-term power purchase agreement with SK E&S LNG for 50MW of the output.

RWE begins commercial operations of 100MW solar project in US

Located 75miles (120.7km) southwest of Midland-Odessa, the solar plant is spread across on more than 700 acres of land leased from Texas Pacific Land Trust and Texas General Land Office within the county and is powered by nearly 350,000 solar modules.

RWE Renewables CEO Anja-Isabel Dotzenrath said: “The completion of our largest solar project in the U.S. is another good example of RWE’s continued success in the U.S. market and our effort to diversify our portfolio across technologies. With a development pipeline of more than 10 GW our strategy for renewables in the U.S. is geared for growth.

“A very big thank you to all involved employees and partners, who made an excellent job in the smooth execution of this project. West of the Pecos underscores our commitment to being the partner of choice for the transition to a lower-carbon future.”

10%

What’s the max?

https://kineticsfunds.com/funds/small-cap-opportunities-fund/commentary

We believe that many of the core positions in the Fund are actually both true growth and value investments. As an example, Texas Pacific Land Trust has grown sales and net income at a 50% compound annual rate over the trailing five years. A statistical review might conclude that this is a “reasonably priced” growth stock, trading at approximately 16.5x trailing earnings over the past twelve months. However, this earnings figure includes a sizeable one‐time land sale and is not directly relevant to the run‐rate cash flow of the business. That being said, a bottom‐up valuation of the company’s land portfolio and related oil and gas, easement and water businesses suggests a substantial discount to net asset value, given that less than 10% of the company’s core assets have been exploited to date.

Thanks to Gary for this link!