Tag: ripped from the headlines

Endeavor Energy for Sale

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Chevron, Exxon Mobil Weigh Bids for Endeavor Energy

There is talk that XOM or COP could by Endeavor for up to $15B.  Endeavor is a Midland based producer that owns 320k net mineral acres.

$15B / 320k acres = $46,875/acre.

TPL owns 24,028 net acres in mineral rights.  (Acreage x 1/16 or 1/128).

At that rate, TPL’s mineral rights business is worth $1.13B.

Adjusting TPL’s $4.65B market cap for the $1.13B = $3.52B for all surface land and revenues derived thereof.  Surface land @888k acres = $3,963/acre.

Said another way, the mineral business is worth $144 share.

So what would you pay for all that land and $200MM+ a year top line (soon) from water, sundry, and easements?

Love That Dirty Water

tpltblogger

Bloomberg: Drowning in Dirty Water, Permian Seeks $22 Billion Lifeline

Water is of critical importance in shale activities.  TPL happens to be sitting on ~900k acres of land from which water can be readily extracted and to which used water can be readily disposed.

Though the article doesn’t mention TPL’s newly (2017) formed water subsidiary, Texas Pacific Water Resources, my research indicates it is/will continue to be a player in the Texas/New Mexico water arena.

Not hard to envision a $300MM++ top line from TPWR one day soon.

I remind the reader that the above is conjecture.  Just personal estimates for me to get my thoughts together.  DYOR!

“Overall, the region will pull up enough water this year alone to cover all of Rhode Island nearly a foot deep. Wall Street is well aware of the threats posed by the Permian Basin’s pipeline and labor shortages, key side effects from the region’s rapid buildup. But investors “aren’t as well apprised of some of the other risks and challenges that could be just as material, if not more so,” said Gabriel Collins, a fellow in energy and the environment at Rice University

“I’d put water right at the top of that list,” he said.

How material? Spending on water management in the Permian Basin is likely to nearly double to more than $22 billion in just five years, according to industry consultant IHS Markit. The reason is twofold. The rig count is rising, and many of the “workhorse” disposal formations used for decades are starting to fill up, said Laura Capper, an industry consultant. That means explorers have to move water further to find a home for it.”

Meet the Shalennials (Bloomberg)

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Meet the Shalennials: CEOs Under 40 Making Millions in Texas Oil

“Glover joined Texas Pacific as a land man in 2011, the youngest person at the company by at least 15 years, he said. Texas Pacific had a market value then of just over $1 billion.
As the market woke up to the size of the company’s land holdings (a 1 million acre mix of surface and royalty rights), its value has surged to $6.4 billion to make it the best-performing major U.S. oil stock never to have pumped a barrel of crude. Glover is the chief executive officer, historically an administrative role.
“There is no way anyone could re-create an asset base like this today,” he said. “Because of the value of the land and resources we sit on now, more active management of Texas Pacific is a necessity.”

Glover did his homework and has been playing a good long game.  Historically, TPL hasn’t paid its employees much but there might be an argument to do so to keep Glover in the seat.  Unlike other employers in the area, TPL (I think!) does not have the ability to retain top talent with stock based comp.