Texas Pacific Land Corporation · NYSE:TPL
Texas Pacific Land — Texas Pacific Land Trust — Proxy Contest (April 2019)
37 slides from Texas Pacific Land's proxy contest presentation, Apr 23, 2019
Slide 1: Texas Pacific Land Trust Shareholder Presentation
Texas Pacific Land Trust Shareholder PresentationPrepared in April 2019 HORIZON KINETICS LLC470 Park Ave SouthNew York, NY 10016 SOFTVEST PARTICIPANTS400 Pine Street, Suite 1010Abilene, TX 79601 TESSLER PARTICIPANTS2500 Moose-Wilson RoadWilson, WY 83014
Slide 2: Special Note Regarding This Presentation
Special Note Regarding This Presentation 2 SoftVest, L.P. (“SoftVest LP”) has filed a definitive proxy statement (the “Proxy Statement”) with the United States Securities and Exchange Commission (the “SEC”) in connection with the solicitation of proxies for a special meeting of holders of the sub-sh
Slide 3: An Overview
An Overview 3 Part 1: Executive SummaryPart 2: Investor Group’s Background and NomineePart 3: Texas Pacific Land Trust – Asset OverviewPart 3: Texas Pacific Land Trust – Recent ResultsPart 3: Why Transformation Is Needed NOWPart 4: Eric Oliver’s Actionable Plan
Slide 4: Executive Summary
>. HORIZON KINETICS EXECUTIVE SUMMARY
Slide 5: Executive Summary
Executive Summary 5 TPL was created as a business trust in 1888 as part of the reorganization following the bankruptcy of the Texas & Pacific Railway (“T&P Railway”). As a trust, trustees should be held to a very high standard both as a trustee and a fiduciary.The sole intended purpose of the format
Slide 6: Executive Summary
Executive Summary 6 Texas Pacific Land Trust (TPL) is a business trust created in 1888, and is currently one of the largest landowners in Texas.TPL’s revenues derive primarily from royalties from oil and gas; revenues from easements, leases and land sales; and sales of water.TPL continues to be gove
Slide 7: Investor Group's Background and Nominee
7 Investor Group’s Background and Nominee
Slide 8: Investor Group
Investor Group Heavily vested and rooting for the success of TPL SOFTVEST Participants Include: SOFTVEST, L.P., SOFTVEST ADVISORS, LLC, ERIC L. OLIVERTESSLER Participants Include: ART-FGT FAMILY PARTNERS LIMITED, TESSLER FAMILY LIMITED PARTNERSHIP, ALLAN R. TESSLERHORIZON KINETICS Participants Inclu
Slide 9: Investor Group Nominee: Eric Oliver
Investor Group Nominee: Eric Oliver In this brief video, Eric introduces himself and talks about his history with TPL.: https://vimeo.com/330849206/5eb7bbd692 9 An experienced oil and gas investor with over 22 years of experience buying and selling properties and over 35 years of experience managing
Slide 10: Texas Pacific Land Trust (TPL) Asset Overview
10 Texas Pacific Land Trust (TPL)Asset Overview
Slide 11: Texas Pacific Land Trust ("TPL")
Texas Pacific Land Trust (“TPL”) 11 Source: FactSet Research Systems, Company Filings Primary Assets902,177 surface acres, with water rights, in West Texas370,737 1/16th Non Participating Royalty Interest (“NPRI”) Acres84,934 1/128th Non Participating Royalty Interest (“NPRI”) Acres Business LinesOi
Slide 12: Asset Overview: Permian Basin
Asset Overview: Permian Basin 12 Source: Chevron Corporation, U.S. Energy Information Association, IHS Unconventional Play Monitor, Company Filings Large,Robust Resource
Slide 13: Texas Pacific Land Trust (TPL) Recent Results
13 Texas Pacific Land Trust (TPL)Recent Results
Slide 14: Recent Results: Oil & Gas Royalties
Recent Results 14 Source: FactSet Research Systems, Company Filings Five Year Royalty Production Figures *through 12/31/2018 *production data provided through year-end Oil & Gas Royalties
Slide 15: Recent Results: Production Growth v. Stock
Recent Results 15 Source: FactSet Research Systems, Company Filings Production Growth v. Stock (through Eric Oliver’s nomination) *production figures estimated year-to-date, TPL performance actual *year-to-date figures are through 3/15/19, announcement of Oliver nomination +745% +1,068% +805% +640%
Slide 16: Recent Results: Oil & Gas Royalties
Recent Results 16 Source: Chevron Corporation Oil & Gas Royalties Chevron is the primary operator on trust acreage. The company and its partners are driving all of the growth of the royalty portfolio.
Slide 17: Recent Results: Water Sales & Royalties
Recent Results 17 Figures in millions of dollars.Source: Company Filings Water Business Since Inception* *Water division created in June 2017, previously only royalties were earned Water Growth Rate Pre-TPWR* Water Sales & Royalties The water royalty business was growing at over a 200% rate in 2017
Slide 18: Recent Results: Water Sales & Royalties
Recent Results 18 Source: Bloomberg Strong spending tailwindsTighter well spacingTighter frac clustersHigher proppant and water loadsHigher oil & gas productionHigher Water Demand Water Sales & Royalties
Slide 19: Recent Results: Easement & Sundry Income
Recent Results 19 Source: Company Filings Easement & Sundry Income 2016 Annual Report “The Trust is currently moving toward the use of term easements (in lieu of perpetual easements).” How many companies hold perpetual easements across trust land signed before 2016? Trustees want credit for passive
Slide 20: Recent Results: Easement & Sundry Income
Recent Results 20 Source: Anadarko Petroleum Company, Western Midstream Easement & Sundry Income 3rd parties continue to commit billions of dollars to developing across trust acreage.
Slide 21: Recent Results: Large Scale Asset Sales
Recent Results 21 Source: Chevron Corp., WPX Energy, Company Filings $100 million land sale buyer: WPX Energy (NYSE:WPX)Enterprise Value: ~$8.5b* Reeves & Loving Counties $19 million NRPI mineral buyer: Chevron (NYSE:CVX)Enterprise Value: $220b* Midland County Large Scale Asset Sales Are the Trustee
Slide 22: Recent Results: Financial Review
Recent Results 22 Financial Review Expense Growthover 2x Greater than Revenue Growth Figures in millions of dollars.Source: Company Filings
Slide 23: Recent Results: Declining Returns of Capital
Recent Results 23 Source: Company Filings Figures in millions of dollars*Dividend payments counted towards fiscal year prior to declaration and payment Declining Returns of Capital Financial Review Figures in millions of dollars
Slide 24: Why Transformation is Needed NOW
24 Why Transformation is Needed NOW
Slide 25: Why Transformation Is Needed NOW
Why Transformation Is Needed NOW 25 Trustees/General Agents Lack of Relevant Experience Trustees have spent their careers as attorneys and lack any relevant oil & gas experience.Trustees acknowledge that no current member of the Board of Trustees would meet the definition of an “audit committee fina
Slide 26: Virtually No Alignment of Interest
Why Transformation Is Needed NOW 26 Management & Trustees Own Minimal StockTotal inside ownership in the stock is 1,600 Shares, including only 300 by the General Agents – less than 0.03% of outstanding Shares. This current inside ownership level is a dramatic decline and the lowest level over the pa
Slide 27: Conflicts of Interest are Ignored and Not Disclosed
Why Transformation Is Needed NOW 27 Conflicts of Interest are Ignored and Not DisclosedThe previous General Agent (CEO) assigned large surface acreage rights to a private operator prior to leaving TPL to work for the very company involved in the transaction.TPL failed to disclose that its initial no
Slide 28: Current Management Has Demonstrated Poor Judgment
Why Transformation Is Needed NOW 28 In Our View, Current Management Has Demonstrated Poor JudgmentIn 2011, without disclosure—TPL swapped 15,746 surface acres and 13,211 gross 1/16 non-participating royalty interest (NPRI) along the state line in Culberson County for Mineral Classified acreage in ce
Slide 29: Current Management Has Demonstrated Poor Judgment (Cont'd)
Why Transformation Is Needed NOW 29 In Our View, Current Management Has Demonstrated Poor Judgment (Cont’d)Management has spent over $62 million on an active water business that requires large capital expenditures and employee management without shareholder approval and limited disclosure.2018 was t
Slide 30: Sample TPL Management Social Ads
Why Transformation Is Needed NOW 30 Sample TPL Management Social Ads (filed by TPL with the SEC on 4/10/19:Facebook:“There’s a storm on the horizon. Texas Pacific Land Trust and its legacy of value creation are under threat by a dissident group putting its own interests before those of other shareho
Slide 31: Trustees Should Embrace and Work Collaboratively With Eric Oliver
Why Transformation is Needed NOW The Trustees Should Embrace and Work Collaboratively With Eric Oliver TPL’s Management Already Seeks Out To Him For His Knowledge and Expertise 31 We firmly believe that, despite their recent rhetoric that includes unsubstantiated references to “serious concerns with
Slide 32: Changed their Nominee And Failed to Disclose Conflicts
Why Transformation is Needed NOW 32 Changed their Nominee And Failed to Disclose ConflictsTPL switched their nominees between the filing of their preliminary proxy statement and their definitive proxy statement, only after Mr. Oliver’s nomination was made public. TPL failed to disclose that its init
Slide 33: Eric Oliver's Actionable Plans
33 Eric Oliver’sActionable Plans
Slide 34: Mr. Oliver's Plan
Mr. Oliver’s Plan 34 Board will operate according to modern governance standards with requisite independent members and disclosuresInclude several oil and gas professionals, in addition to an expert for the Audit CommitteeEvaluate all significant capital allocation decisions Create a Board of Direct
Slide 35: Trustee Nominees vs Incumbent Trustees
Trustee Nominees Incumbent Trustees The Opportunity to Improve 35 Oil & Gas Experience Large Shareholder Land Expertise Geology Expertise Governance Experience Eric Oliver General Cook David Barry John Norris Why We Are Behind Our Candidate: Eric Oliver
Slide 36: The Opportunity to Improve: Positioning TPL for the Future
The Opportunity to Improve 36 Positioning TPL for the Future Modern Governance Transparency & Disclosure Board of Directors Vested Board/Management Experienced Board/Management Reemphasize buyback and return of capital to unitholders----------Work with State and operators to maximize assets to mutua
Slide 37: Forward-Looking Statements
This Presentation may include forward-looking statements that reflect the Participants’ current views with respect to future events. Statements that include the words ‘‘expect,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘believe,’’ ‘‘project,’’ ‘‘anticipate,’’ ‘‘will,’’ ‘‘may,’’ ‘‘would’’ or similar words are often u
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