1Q20 Q

https://ir.stockpr.com/tpltrust/sec-filings-email/content/0000097517-20-000029/tpl-20200331.htm

Sold a little, bought more:

For the three months ended March 31, 2020, the Trust sold approximately 30 acres (Pecos County) of land in Texas for an aggregate sales price of approximately $0.9 million, an average of approximately $30,000 per acre.

For the three months ended March 31, 2020, the Trust acquired approximately 756 acres (Culberson and Reeves Counties) of land in Texas for an aggregate purchase price of approximately $3.9 million, an average of approximately $5,134 per acre.

For the three months ended March 31, 2020, the Trust acquired oil and gas royalty interests in approximately 1,017 net royalty acres (normalized to 1/8th) for an aggregate purchase price of $16.9 million, an average price of approximately $16,659 per net royalty acre.

DUC:

There are a number of oil and gas wells that have been drilled but are not yet completed (“DUC”) where the Trust has a royalty interest. The number of DUC wells are determined using uniform drilling spacing units with pooled interests for all wells awaiting completion. The Trust has identified 597 and 486 DUC wells subject to our royalty interest as of March 31, 2020 and December 31, 2019, respectively.

Don’t forget!:

Despite the uncertainty the record low oil prices and the COVID-19 pandemic have had on both the global and U.S. oil & gas industry as a whole, we believe our longevity in the industry and strong financial position provide us with the tools necessary to navigate these unprecedented times. We have no debt and a strong cash position. Our cash and cash equivalents balance as of March 31, 2020 was $223.7 million.

Borrow?  Please don’t:

We continuously review our liquidity and capital resources. The Trust’s principal sources of liquidity are its revenues from oil and gas royalties, easements and other surface-related income, and water and land sales. Our primary liquidity and capital requirements are for capital expenditures related to our Water Services and Operations segment, working capital and general corporate needs. If market conditions were to change, for instance due to the uncertainty created by the COVID-19 pandemic or the significant decline in oil prices, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be reduced. Should this occur, we could seek alternative sources of funding, including potential future borrowing under a credit facility or other financing options.

I can sleep at night now:

Pursuant to Rule 13a-15, management of the Trust under the supervision and with the participation of Tyler Glover, the Trust’s Chief Executive Officer, and Robert J. Packer, the Trust’s Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures as of the end of the Trust’s fiscal quarter covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, Mr. Glover and Mr. Packer concluded that the Trust’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Trust required to be included in the Trust’s periodic SEC filings.

Expense management:

In an effort to decrease ongoing operational costs, we have implemented certain cost reduction measures which include, but are not limited to, negotiated price reductions and discounts with certain vendors. We are closely monitoring our customer base and outstanding accounts receivable balances as a means of minimizing any potential collection issues. As a royalty owner, we have no capital expenditure or operating expense burden for development of wells. Furthermore, our water operations currently have limited capital expenditure requirements, the amount and timing of which is entirely within our control.

Get on Zoom and figure it out:

On March 23, 2020, we announced that our Trustees approved a plan for reorganizing the Trust from its current structure to a corporation formed under the laws of the State of Delaware. The Trustees made their determination following careful consideration of the recommendation of the Conversion Exploration Committee of the Trust. The Trust presently intends that the corporate reorganization will be effected by the end of the third quarter of 2020, but the Trust recognizes that unforeseen impacts of COVID-19 or other developments could extend this timeframe despite the Trust’s efforts. Barring any unforeseen disruptions, further information regarding the corporate reorganization will be included in a registration statement on Form 10 to be filed by the corporation with the SEC as well as in other communications and disclosures anticipated to be made by the Trust and the corporation.

Transparency is improving.  Let’s buy some shares back.

Mineral Revenue Recognition

Some chatter about this yesterday.  From the K.

https://www.sec.gov/Archives/edgar/data/97517/000009751720000017/tpl-20191231.htm

Revenue Recognition

Oil and Gas Royalties

Oil and gas royalties are received in connection with royalty interests owned by the Trust. Oil and gas royalties are reported net of production taxes and are recognized as revenue when crude oil and gas products are removed from the respective mineral reserve locations. Oil and gas royalty payments are generally received one to two months after the crude oil and gas products are removed. An accrual is included in accrued receivables for amounts not received during the month removed based on historical trends.

The oil and gas royalties which the Trust receives are dependent upon the market prices for oil and gas. The market prices for oil and gas are subject to national and international economic and political conditions and, in the past, have been subject to significant price fluctuations.

The Trust has analyzed public reports of drilling activities by the oil companies operating where the Trust has an oil and gas royalty interest in an effort to identify unpaid royalties associated with royalty interests owned by the Trust. Rights to certain oil and gas royalties believed by the Trust to be due and payable may be subject to dispute with the oil company involved as a result of disagreements with respect to drilling and related engineering information. Disputed oil and gas royalties are recorded when these contingencies are resolved.

Tessler Parties Exit Cooperation Agreement

https://www.sec.gov/Archives/edgar/data/97517/000114036120007305/formsc13da.htm

Looks like Tessler Parties are out of the Cooperation Agreement. Horizon and Softvest remain.  Would be a joy to see Tessler figure out another way to poke at the hornet’s nest.

March 27, 2020

Reference is made to that certain Cooperation Agreement (as amended, the “Cooperation Agreement“) by and among SoftVest Advisors, LLC (“SoftVest“), Horizon Kinetics LLC (“Horizon“), Tessler Family Limited Partnership (“TFLP“), and ART-FGT Family Partners Limited (“ART-FGT” and together with TFLP, the “Tessler Parties“) (collectively, the “Parties” and each, a “Party“).  Each of the Parties hereby mutually agree to terminate the Cooperation Agreement with respect to the Tessler Parties, effective immediately (the “Tessler Withdrawal“).

The undersigned Tessler Parties hereby wish to withdraw from the Cooperation Agreement and upon countersignature from SoftVest and Horizon, such withdrawal shall immediately become effective.  Upon such withdrawal, the undersigned Tessler Parties will no longer have any agreement, arrangement or understanding whatsoever with SoftVest or Horizon with respect to the acquisition, holding, voting or disposition of securities of Texas Pacific Land Trust (“TPL“).  Furthermore, upon such withdrawal, SoftVest and Horizon may vote or dispose of any securities of Texas Pacific Land Trust that they may beneficially own in their sole discretion, subject to any contractual obligations each may have to other third parties or to each other (including pursuant to the Cooperation Agreement).

The Cooperation Agreement shall otherwise remain in full force and effect between Horizon and SoftVest.  For the avoidance of doubt, Sections 6(d), 7, 8 and 9 of the Cooperation Agreement shall survive the withdrawal by the undersigned.

The Tessler Parties acknowledge that notwithstanding such withdrawal, the Tessler Parties may be subject to ongoing obligations to TPL under the Settlement Agreement dated July 30, 2019, as amended.

Underwhelmed

The Conversion Committee recommended a conversion to C-Corp on January 22, 2020.  After two months and a day pass, the Trustess come out to say they will adopt the recommendation of the committee they were on(!!!).  With no further details other than, uh, um, Fall 2020 maybe.

Why are things taking so long?  How much money has been paid in legal bills?

Even in good news there is misery with this pair of “Trustees” who appear to be working in the interest of everybody but the owners of the trust.

 

 

Done Deal

https://www.businesswire.com/news/home/20200323005276/en/

There’s your conversion.  Who’s on the board?

DALLAS–(BUSINESS WIRE)–The Trustees of Texas Pacific Land Trust (NYSE: TPL) (the “Trust”) announced today that the Trust has approved a plan to reorganize from its current structure to a corporation formed under Delaware law. The Trustees made their determination following careful consideration of the recommendation of the Conversion Exploration Committee of the Trust.

“The Trust’s present structure has suited the Trust’s needs and those of its shareholders for more than a century, but a Delaware corporate structure is more aligned with the expectations of today’s investors. A new corporate structure would better allow us to execute on business goals and capitalize on our enviable assets, resources and business potential,” said David E. Barry, a Trustee of the Trust. “With an enhanced governance framework in step with practices of publicly traded peer corporations, we expect a new corporate structure would enable value creation over time and drive value for stockholders.” John R. Norris III, Trustee of the Trust, added, “We are grateful to the members of the Committee for dedicating their time and attention to providing a thoughtful recommendation that informed this decision.”

Under the corporate reorganization plan, common stock of the new corporation would be distributed upon the consummation of the reorganization process to holders of sub-share certificates of proprietary interest of the Trust and traded on the New York Stock Exchange (NYSE). At or about such time, the sub-share certificates would be cancelled. The corporate reorganization is intended to be tax-free in the United States, and the corporation will be deemed a c-corporation for U.S. taxation purposes.

The Trust is presently aiming for the corporate reorganization to be effective by the end of the third quarter of 2020, but the Trust recognizes that unforeseen impacts of COVID-19 could extend this timeframe despite the Trust’s efforts. Barring any such unforeseen disruptions, further information regarding the corporate reorganization will be included in a registration statement on Form 10 to be filed by the corporation with the SEC as well as in other communications and disclosures anticipated to be made by the Trust and the corporation.

Tough Day

Record high volume of 96,356.  Volume weighted average price was $504.11.  Last trade was 751 shares @ $467.21.  Down 24.89% in price on the day.

Hoping the Trustees will act honorably and enact much needed governance changes so that repurchases can commence.  Not holding my breath.

We’ll see what tomorrow brings.