Preferred Shares Podcast

Texas Pacific Land Corporation: The Riches of Royalties

Mar 3, 2025
Guest
Chadd Garcia
Chadd Garcia, Vice President & Portfolio Manager at Ave Maria Mutual Funds, shares his extensive experience in investment analysis, particularly focused on Texas Pacific Land Corporation (TPL). He dives into TPL's transformation from a railroad post-Civil War to a thriving resource management powerhouse. Chadd discusses the impact of fracking on land value, TPL's strategic entry into the water business, and its unique long-term shareholder base. He also critiques management's incentive structure and the recent shift from a trust to a corporation, raising concerns for investor alignment.
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INSIGHT

Fracking Turbocharged TPL's Growth

  • Fracking introduced in the 2010s dramatically increased oil production and TPL's revenues from around $20 million to $600 million by 2023.
  • The company's employee count and payroll also expanded significantly, reflecting growth fueled by fracking.
INSIGHT

Water Business Supports Fracking

  • TPL strategically developed a water business to supply the water-intensive fracking process using its land assets.
  • The water business infrastructure was costly to build but leveraged land owned at no cost, creating a competitive advantage.
INSIGHT

TPL's Rare Long-Term Shareholders

  • TPL's shareholder base consists largely of long-term investors and families, creating a rare low-turnover ownership structure.
  • This shareholder loyalty supports valuation stability and continuity distinct from typical public companies.
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