TPL

Texas Pacific Land ($TPL) Sees 150+ Insider Buys Over 13 Months... Debt-Free Operations and Water Services Growth Drive Confidence

07/03/2025 04:06

Texas Pacific Land ($TPL), the largest private landowner in Texas's Permian Basin, has witnessed an overwhelming wave of insider buying over the past 13 months that's capturing investor attention. From June 2024 through July 2025, over 150 insider transactions occurred, with more than 95% being purchases. Founded in 1888, Texas Pacific Land operates a unique energy land management business model, owning approximately 880,000 surface acres and 207,000 net royalty acres. Unlike traditional E&P companies that engage in direct oil production, TPL operates a capital-light model generating stable cash flows through royalty income and water services. The most notable pattern comes from Director Murray Stahl's buying activity. Since August 2024, he has been purchasing 10-12 shares almost daily, systematically increasing his stake through a Rule 10b5-1 plan adopted on November 21, 2024. His purchases have ranged from the $800s to $1,400s per share, demonstrating long-term conviction across various price levels. Major shareholder Horizon Kinetics Asset Management has similarly maintained aggressive buying behavior. They've been purchasing small lots of 1-3 shares almost daily, expanding their stake to approximately 16% of the company. This consistent buying has continued regardless of price volatility, showcasing insiders' strong conviction. The backdrop for this insider buying frenzy lies in TPL's solid financial structure and growth prospects. The company maintains a debt-free operation with $460 million in cash, recording exceptional profitability with 39.5% ROE and 26.7% ROA. Particularly notable is the water services segment's 44% annual growth, now accounting for one-third of total revenue. From a stock performance perspective, insiders' judgment has proven correct. Starting from around $580 in early June 2024, the stock reached a peak of $1,700 in November, recording nearly 200% gains. After some correction, it currently trades around $1,070, still showing 45.8% returns on a one-year basis. However, investors should consider certain factors. The current P/E ratio of 53.65x represents a significant premium compared to typical energy companies (15-25x). While this reflects TPL's unique business model and scarcity value, the high valuation also implies potential near-term volatility risks. Nevertheless, the continuous insider buying signals several positive developments. First, rapid growth in the water services segment is diversifying revenue streams, reducing sensitivity to oil price fluctuations. Second, ongoing acquisition of additional mineral rights within the Permian Basin continues to provide long-term growth drivers. Third, debt-free operations and abundant cash reserves enable stable operations even during economic downturns. For investors, several scenarios are worth considering at current price levels. In an optimistic scenario, continued growth in water services and successful additional acquisitions could justify current valuations, with new business areas like carbon capture and desalination providing additional upside catalysts. A base case scenario suggests sideways trading at current levels with continued shareholder returns through dividends and share buybacks. A cautious scenario involves potential correction pressure from high valuation burdens and royalty income decline during oil price downturns. In conclusion, TPL's insider buying spree appears to be a systematic and sustained investment strategy rather than a one-time event. Over 150 purchase transactions across 13 months suggests insiders hold strong conviction about the company's long-term value and growth potential. Despite high valuations, the long-term growth story based on a unique business model and solid financial structure remains compelling.