Valens Credit Weekly Insights - 2024 07 23
Texas Pacific Land Corporation (TPL) has proven its ability to monetize its land in the Permian Basin. Uniform Accounting shows that the market is not pricing in the opportunity for its returns to improve significantly as the company builds out newrevenue streams from its land, suggesting equity upside is warranted.
For the past two decades, Texas Pacific has successfully built out its O&G royalties' business and found new monetization opportunities with easements and water services. These revenue streams have transformed the company from a $8 million business to a $600 million business today, and as it pursues new opportunities in renewable energy and the potential for data centers grows, the company has the opportunity to accelerate Uniform ROA far higher than the market expects.
Texas Pacific's management is closely aligned to focus on growth and improving profitability, two key drivers for upside.
Management confidence in its first quarter earnings call about the quality of its water services suggest further reason for ROA expansion.
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