TPL

Texas Pacific Land ($TPL) Director's 'Daily Buying' Signal... Hidden Value in Permian Land King?

06/14/2025 04:02

Texas Pacific Land ($TPL) operates a unique business model that sets it apart from conventional energy companies. Founded in 1888, the company owns approximately 873,000 acres of vast land holdings in the Permian Basin, America's largest shale oil production region, generating stable cash flows through land leases and oil & gas royalties. Unlike traditional oil developers who must invest massive capital in drilling and production, TPL maintains high profitability with relatively lower risk as a landowner. The most notable aspect is Director Murray Stahl's extraordinarily consistent buying pattern. From August 2024 through June 2025, he has purchased shares almost daily, demonstrating a level of conviction rarely seen in the industry. Stahl has been executing systematic purchases under a 10b5-1 plan adopted on November 21, 2024, continuing to buy consistently as the stock price fluctuated between the $800s and over $1,700. Major shareholder Horizon Kinetics Asset Management has also been making continuous small purchases, clearly showing insiders' long-term confidence. However, some executives have taken different approaches. CFO Chris Steddum sold 750 shares for approximately $970,000 in March, while CAO Stephanie Buffington disposed of 210 shares for about $290,000. While these could be part of stock option exercises or tax planning, there's clearly a temperature difference among insiders. The company's financial health is remarkably solid, even by energy industry standards. It operates with zero debt and holds $460 million in cash. Trailing twelve-month revenue stands at $728 million with net income of $460 million, yielding a 63% profit margin. Return on equity (ROE) reaches 39.5%, overwhelming most S&P 500 companies. This demonstrates the power of a royalty business based on scarce land assets. However, valuation appears quite burdensome. The P/E ratio of 55.87x is much higher than typical energy companies (5-15x). While this reflects TPL's unique business model and scarcity, it also incorporates high growth expectations. The current share price of $1,119 represents a 35% correction from the November 2024 peak of $1,723. Recent market conditions have been somewhat unfavorable for the energy sector. Oil price downward pressure continues due to potential OPEC+ production increases and high U.S. inventory levels. Brent crude trades in the mid-$60s while WTI is in the low $60s, which could impact TPL's royalty income. Indeed, Q1 results showed adjusted EBITDA of $169.4 million, falling short of Wall Street's $180 million expectation. However, TPL's competitive advantages remain solid. Shale oil production in the Permian Basin is expected to continue long-term, and the company's water services business is growing. Subsidiary Texas Pacific Water Resources, providing essential water supply and treatment services for oil field development, is establishing itself as a new revenue source. Key indicators investors should monitor include: if WTI oil continues falling below $65, concerns about declining royalty income could intensify. Conversely, if it stably exceeds $70, accelerated revenue growth can be expected. Changes in Murray Stahl's buying pattern are also important signals. If the current near-daily purchasing pattern ceases, it could indicate a shift in insider sentiment. Looking at scenarios, the optimistic case involves oil price stabilization, increased Permian Basin production, and water services expansion enabling 20%+ annual revenue growth. In this case, current valuation could be justified. The base case expects current oil price and production levels to maintain 10-15% annual growth. The cautionary scenario sees oil price collapse or Permian Basin development slowdown reducing growth to below 5%, where high valuation would become burdensome. In conclusion, TPL is recognized for long-term investment value based on its unique business model with scarce assets and excellent financial health. Continuous buying by Murray Stahl and other key insiders signals strong confidence. However, given current high valuation, short-term volatility could be significant, requiring careful monitoring of oil price trends and Permian Basin development pace.

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