Texas National Petroleum

Texas National Petroleum (TNP) was a small oil and gas producer and the subject of a detailed Workout case study in the 1963 Letter.

📝 The Deal (1962-1963)

• Scenario: TNP announced a sellout to Union Oil of California.
• Buffett's Entry: Despite rumors floating earlier, Buffett waited for the publicly announced terms before entering. He purchased 6.5% debentures, common stock, and warrants.
• Complexity: The deal faced delays due to a tax ruling complexity involving the University of Southern California (USC), which was a production payment holder.

📈 Outcome

• Return: The partnership realized a 20-22% annual return on both the debt and equity components.
• The Lesson: Buffett used TNP to illustrate the "run-of-the-mill" nature of workouts—they take longer than projected but often pay out slightly better than estimates.

🔗 Connections

• Source: 1963 Letter
• Concept: Work-outs