Texas Pacific Land Corporation: The Riches of Royalties
Preferred Shares Podcast
Understanding Oil Price Cycles and Their Impact on Royalties
This chapter dives into the cyclical nature of oil prices and the associated risks, particularly regarding royalty revenues. It also examines the historical journey of the Texas Pacific Land Corporation and its transition from a trust to a corporate entity.
Welcome to Episode 19 of the Preferred Shares Podcast.
We interviewed a special guest, Chadd Garcia, about Texas Pacific Land Corporation (TPL). Chadd is a veteran investment analyst, has worked in private equity, and is currently Vice President & Portfolio Manager at Ave Maria Mutual Funds.
In This Episode
Here are some highlights from the podcast episode about Texas Pacific Land Corporation (TPL):
* [1:52] – Chadd explains how he became interested in TPL.
* [2:53] – TPL’s early history
* [4:48] – Oil was discovered in West Texas in the 1920s, but fracking in the 2010s significantly increased the value of the land.
* [6:17] – TPL’s decision to get in the water business to support fracking.
* [11:12] – TPL’s unique shareholder base, comprised of long-term investors and Texas families.
* [14:11] – The reasons for internally handling the water business.
* [16:54] – The best way to assess TPL’s valuation, considering its unique advantages and potential call options.
* [18:07] – Discussion about the potential of data centers in the Permian Basin.
* [23:00] – Chadd shares his view that management would be better off allocating capital to share repurchases.
* [31:04] – Chadd is generally not a fan of TPL acquiring royalties.
* [36:14] – Discussion of how and why TPL recently became a corporation after being a trust for over 130 years.
* [38:09] – Chadd shares some concerns with management’s compensation structure.
* [40:22] – Appropriate incentive schemes for royalty companies.
Additional Reading & Listening
Curious to see what else we’ve been working on? Check out some of the interesting things we’ve done recently:
* Lawrence Hamtil (Fortune Financial and @lhamtil) was recently interviewed by Paul Cerro of Cedar Grove Capital. They discussed military history and the defense industry.
* 🎙️ IC #4: The Future of Defense — The History, Advances, And Outlook
* Douglas Ott (Andvari Associates and @yesandnotyes) wrote about the recent results of Mettler-Toledo and CoStar Group
* 📖 The Mighty Florance — CoStar Group FY2024 Results: Margins Up, Growth Continues
* 📖 Mettler-Toledo FY2024 Results — A Return to Positive Revenue Growth with Highest Gross Margins Ever
* Devin LaSarre (Invariant and @DevinLaSarre) was interviewed recently about Haypp Group and has written about the results of Philip Morris International
* 📖 Philip Morris International: Conquest
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Disclaimer
All opinions expressed by Preferred Shares hosts and guests are solely their own opinions and do not reflect the opinions of their respective employers. This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. None of the information contained in the podcast or this web site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person.
Clients of Andvari and Fortune Financial may maintain positions in the securities discussed in this podcast. Furthermore, from time to time, the Hosts may hold positions or other interests in securities mentioned in the Podcast and may trade for their own accounts based on the information presented. The Hosts may also take positions inconsistent with the views expressed in its messages on the Podcast.
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