This is a very contrite analysis and doesn’t take into account real world constraints to this very idealist investment thesis. You need to value the base business and if that is only worth $650/share and the stock is at $1,200, then you are paying $500/share (!) for this theoretical data center opportunity. Building the infrastructure for a data center will take many years. For example, if you order a gas turbine today, you won’t receive it until 2028/2029 at the earliest due to long lead time and then you need to build the plant and data center. For the $550/share of value you are paying for this data center opportunity, how many plants does that assume are built? What is the discount rate for the time value of money? The Permian is a big dessert like wasteland so why is open land such a big moat? You can build these thing practically anywhere and be very close to significant hydrocarbon capacity, so why lock into one provider when you can pull from 50 producers to reduce you risk. I could keep going but you sound like a guy who played the hype story well by listening to mgmt’s bull case, made some money, and are now trying to use that to build your reputation for being a stock genius when in fact you really are a guy who simply got lucky by being in the right place at the right time and happened to get the benefit of the index fund flows from S&P 500 inclusion into a stock w tight float.
i have read the assertion that tpl's checkerboard properties are not as conducive to data center development as the contiguous property of landbridge. what do think of this, and what do you think of landbridge more generally? thanks for your work.
Thanks Jeff. We believe both checkered and contiguous have advantages. Ease of permitting favors the contiguous approach. Checkered has the advantage of having a wider net. We wrote up LB a while back. We are long.
Talked to a person at Horizon and they mentioned that TPL and LB have a cooperation together to complete the checkerboard pattern of land so it’s mutually beneficial for both of them.
This is one for TPL and Water bridge for a cooperative agreement. That is the same management team as Landbridge.
It’s hard to find any agreement on paper. Think I heard Murray talking about it in one of the conferences.
I trust the Horizon person to be honest because everything they say matches their actions such as buying TPL and not selling it.
They will only give me what is public knowledge I just might hear about it a lot quicker than the rest.
If you listen to their quarterly updates, and the rest of the interviews they give a lot of information for free. Very few people take the time to listen but it’s a wealth of information.
Thanks- yea, I always look forward to their quarterly updates and any letters they put out. That said, information like this highlights the value of good old-fashioned scuttlebutt.
I did see that Energy Transfer has cloudburst for AI data center natural gas pipeline contract.
Energy Transfer has 70 interested in building pipelines to data centers in 12 states according to their Feb 2025 presentation slides.
Two are pipeliness in the Delaware basin for this year. Maybe it’s TPL or Landbridges territory but it doesn’t explicitly state where in the Delaware basin.
Sounds like the AI data center theme with natural gas energy is starting up. Hopefully it continues.
Nice retort and appreciate the analysis. One word of caution is Horizons track record. While they are very smart they are also exceedingly stubborn on alternative view points on their investments. In 2007 the sold Goldman Sachs and bought Lehman and Bear Stearns and both blew up. Repeatedly we asked them to sell them as the sticks were declining and they wouldn’t the same with FMNA. The lost over 60% through this unrelenting view and stubbornness to sell. They thought they were smarter than everyone else. I also have a close friend who has been involved in a number of their private investments which haven’t worked out very well and almost had to sue them for trying to change terms. I could easily go on but you get the drift. Just keep your eyes open and do your “own” research. Good luck and again appreciate your work.
Thank you, Dave. A reality check is always welcome. The psychological phenomenon of halo effect is a real thing to fight against and something I've observed prove fatal in the aviation community.
If you’re curious I recommend reading https://open.substack.com/pub/thezvi. The author writes monster posts every week about AI, sharing many points of view. He has covered DeepSeek extensively the past few weeks.
SB, thank you for respectfully sharing an opposite viewpoint.
Do we have an idea how many gas turbines and steam turbines would power these off the grid data centers? These data centers need to run 24/7. The obvious disadvantage of being off grid is that if one of the turbines (or some other equipment) goes down, the data center cannot fall back on the grid. In that regard massive off the grid data centers would be more tolerant to failures than smaller ones.
Tian, always good to hear from you. As far as the number turbines, it will vary, but here's a few examples.
Meta announced a new $10 billion data center in Richland Parish, northeast Louisiana. The data center will be powered by three combined-cycle combustion turbines with a capacity of 2.26GW built and operated by Entergy Louisiana.
The first projects, which the companies refer to as “power foundries”, are expected to leverage seven U.S. made GE Vernova 7HA natural gas turbines, secured under a slot reservation agreement, on an accelerated timeline
I disagree with Manny or whoever he is. Landbridge is more of a data center play than TPL. TPL’s value is predicated on royalties from oil, gas and water rights. Horizon and/or Murray Stahl buy shares almost everyday. Many times it I may just be one share. The stock is even more volatile now since it’s been added to an index. I would be a happy buyer at $600.00 a share too. My guess is that TPL would even initiate a share repurchasing program at those levels gladly.
Thanks for your work. Have you come across how much of TPL’s acreage is being productively utilized? I’d love to understand what FCF per utilized acre is for them and LB (and how that compares to their respective valuations).
On de-risking the data center thesis, I’d be curious to understand the minimum commitments LB secured with ground lease that was expected to be finalized last month. If development for a data center will take years, one would hope that these minimums cover opportunity cost for that acreage.
Thanks, kk. At $25 it's latest distribution (annualized) is 6%...assuming it gets back to its average (since 2017) distribution would equal %10. It's in a reasonable range in our view. It will fluctuate with the price of iron ore.
Totally agree with you, I'm not a shareholder of TPL because I think another royalty company in permian basin is cheaper but I would never short TPL.
A respectable opinion.
What’s that “other” company that you are talking about? :)
A company already mentioned by Murray Stahl, ROI Club and Six Bravo : Landbridge.
I see okay thank you
This is a very contrite analysis and doesn’t take into account real world constraints to this very idealist investment thesis. You need to value the base business and if that is only worth $650/share and the stock is at $1,200, then you are paying $500/share (!) for this theoretical data center opportunity. Building the infrastructure for a data center will take many years. For example, if you order a gas turbine today, you won’t receive it until 2028/2029 at the earliest due to long lead time and then you need to build the plant and data center. For the $550/share of value you are paying for this data center opportunity, how many plants does that assume are built? What is the discount rate for the time value of money? The Permian is a big dessert like wasteland so why is open land such a big moat? You can build these thing practically anywhere and be very close to significant hydrocarbon capacity, so why lock into one provider when you can pull from 50 producers to reduce you risk. I could keep going but you sound like a guy who played the hype story well by listening to mgmt’s bull case, made some money, and are now trying to use that to build your reputation for being a stock genius when in fact you really are a guy who simply got lucky by being in the right place at the right time and happened to get the benefit of the index fund flows from S&P 500 inclusion into a stock w tight float.
i have read the assertion that tpl's checkerboard properties are not as conducive to data center development as the contiguous property of landbridge. what do think of this, and what do you think of landbridge more generally? thanks for your work.
Thanks Jeff. We believe both checkered and contiguous have advantages. Ease of permitting favors the contiguous approach. Checkered has the advantage of having a wider net. We wrote up LB a while back. We are long.
Talked to a person at Horizon and they mentioned that TPL and LB have a cooperation together to complete the checkerboard pattern of land so it’s mutually beneficial for both of them.
Is that a formal agreement that either company has disclosed?
https://www.texaspacific.com/investors/news-events/press-releases/detail/135/texas-pacific-land-corporation-and-waterbridge-ndb-llc-form
This is one for TPL and Water bridge for a cooperative agreement. That is the same management team as Landbridge.
It’s hard to find any agreement on paper. Think I heard Murray talking about it in one of the conferences.
I trust the Horizon person to be honest because everything they say matches their actions such as buying TPL and not selling it.
They will only give me what is public knowledge I just might hear about it a lot quicker than the rest.
If you listen to their quarterly updates, and the rest of the interviews they give a lot of information for free. Very few people take the time to listen but it’s a wealth of information.
Thanks- yea, I always look forward to their quarterly updates and any letters they put out. That said, information like this highlights the value of good old-fashioned scuttlebutt.
I did see that Energy Transfer has cloudburst for AI data center natural gas pipeline contract.
Energy Transfer has 70 interested in building pipelines to data centers in 12 states according to their Feb 2025 presentation slides.
Two are pipeliness in the Delaware basin for this year. Maybe it’s TPL or Landbridges territory but it doesn’t explicitly state where in the Delaware basin.
Sounds like the AI data center theme with natural gas energy is starting up. Hopefully it continues.
Steve, this is great. Thanks for sharing this. We hadn't seen ET's presentation yet.
Nice retort and appreciate the analysis. One word of caution is Horizons track record. While they are very smart they are also exceedingly stubborn on alternative view points on their investments. In 2007 the sold Goldman Sachs and bought Lehman and Bear Stearns and both blew up. Repeatedly we asked them to sell them as the sticks were declining and they wouldn’t the same with FMNA. The lost over 60% through this unrelenting view and stubbornness to sell. They thought they were smarter than everyone else. I also have a close friend who has been involved in a number of their private investments which haven’t worked out very well and almost had to sue them for trying to change terms. I could easily go on but you get the drift. Just keep your eyes open and do your “own” research. Good luck and again appreciate your work.
Thank you, Dave. A reality check is always welcome. The psychological phenomenon of halo effect is a real thing to fight against and something I've observed prove fatal in the aviation community.
Nice work
Thanks JP.
Has the deepseek AI scare, with lower power needs, perhaps, to run AI models changed the basic thesis here?
If you’re curious I recommend reading https://open.substack.com/pub/thezvi. The author writes monster posts every week about AI, sharing many points of view. He has covered DeepSeek extensively the past few weeks.
I'll check it out. Thank you Tian.
If AI becomes more efficient more will be used, requiring more energy.
SB, thank you for respectfully sharing an opposite viewpoint.
Do we have an idea how many gas turbines and steam turbines would power these off the grid data centers? These data centers need to run 24/7. The obvious disadvantage of being off grid is that if one of the turbines (or some other equipment) goes down, the data center cannot fall back on the grid. In that regard massive off the grid data centers would be more tolerant to failures than smaller ones.
Tian, always good to hear from you. As far as the number turbines, it will vary, but here's a few examples.
Meta announced a new $10 billion data center in Richland Parish, northeast Louisiana. The data center will be powered by three combined-cycle combustion turbines with a capacity of 2.26GW built and operated by Entergy Louisiana.
https://www.datacenterdynamics.com/en/news/exxonmobil-plots-natural-gas-power-plant-to-exclusively-power-data-centers/
The first projects, which the companies refer to as “power foundries”, are expected to leverage seven U.S. made GE Vernova 7HA natural gas turbines, secured under a slot reservation agreement, on an accelerated timeline
https://www.chevron.com/newsroom/2025/q1/power-solutions-for-us-data-centers
Yes, behind-the-meter power plants would need to provide surplus power for when scheduled and unscheduled maintenance is required.
I disagree with Manny or whoever he is. Landbridge is more of a data center play than TPL. TPL’s value is predicated on royalties from oil, gas and water rights. Horizon and/or Murray Stahl buy shares almost everyday. Many times it I may just be one share. The stock is even more volatile now since it’s been added to an index. I would be a happy buyer at $600.00 a share too. My guess is that TPL would even initiate a share repurchasing program at those levels gladly.
Yes, the percentage of LB's revenue that comes from surface leases is much higher than that of TPL's. LB was built to maximize surface use.
The story is nice but you didn't back it up with any numbers. What is TPL's fair value in your opinion?
I get your point. I find it hard to discount cashflows I see turning on but yet not reflected.
Thanks for your work. Have you come across how much of TPL’s acreage is being productively utilized? I’d love to understand what FCF per utilized acre is for them and LB (and how that compares to their respective valuations).
On de-risking the data center thesis, I’d be curious to understand the minimum commitments LB secured with ground lease that was expected to be finalized last month. If development for a data center will take years, one would hope that these minimums cover opportunity cost for that acreage.
hx for the great review.
bit curious about MSB, currently 25$. do you think this is still undervalued?
Thanks, kk. At $25 it's latest distribution (annualized) is 6%...assuming it gets back to its average (since 2017) distribution would equal %10. It's in a reasonable range in our view. It will fluctuate with the price of iron ore.