CEO & BOARD CHAIR MESSAGE
In 1839, a visionary investment was made when the Congress of the Republic of Texas set aside 50 leagues (eventually becoming 2.1 million acres) of West Texas land to establish an endowment and university. It is an intriguing story that carries through to the discovery of oil on the land in 1923 and the university systems borne of its fortunes. Today that endowment, aptly named the Permanent University Fund (PUF), supports Texas’ two preeminent university systems — The University of Texas and Texas A&M — and is the nation’s largest public university endowment. The PUF has proven to be a vital resource in helping more than 20 educational and health institutions achieve academic and research excellence. University Lands is the managing entity for the 2.1 million acres of West Texas land that fund that endowment. Our success results in funding that supports first-class state universities and medical facilities. As a native Texan and proud Aggie, it is personally rewarding to responsibly steward the natural resources of this great asset and generate revenue for the benefit of Texans. At the start of fiscal year 2020, which ran September 1, 2019, to August 31, 2020, we were coming off a record year for both oil and surface revenue. But the softening commodity prices and lack of access to capital for the upstream oil and gas industry—our primary revenue driver—caused concern early in FY 2020. In April and May, when the significant global economic impact of COVID-19 on energy demand and subsequent oil and natural gas prices became apparent, we worked closely with our oil and gas operators to slow activity, reducing oil production by 18% in one month. This provided much-needed activity relief to these operators and minimized production during a period of significantly lower oil prices. Even with the drastic change in market conditions that caused oil prices to be ~33% lower than last year, we were able to generate ~$850 million in revenue. As the energy markets normalized through the summer, the industry showed its resiliency and production was restored back to almost pre-COVID levels. After reassessing the energy markets and the potential for the PUF Lands going forward, we came to the following conclusions: • Worldwide energy demand will continue to grow, and oil and gas will be key to ensuring a worldwide supply of low-cost energy for years to come and the Permian Basin will remain one of the world’s most important oil and gas resources. • The available supply of renewable energy and its market share of energy demand will continue to grow globally. With its wind and solar conditions and existing power infrastructure, West Texas will provide an extremely attractive growth opportunity for renewables development. • All forms of energy development will be required to meet increasingly higher environmental stewardship and accountability standards. • The PUF Lands are well positioned to lead responsible energy development for a very long time. While there is much uncertainty as to exactly what “economic recovery” will look like over the next several years, University Lands is strategically working to ensure the energy industry increases its investment in developing the vast resources of the PUF lands, including oil and gas and renewable energy. We also will continue to lead the implementation of responsible water and grazing practices in West Texas. We are thankful that Texas is blessed with natural energy resources from the PUF Lands that will provide a long-term source of low-cost energy for the state, the country, and the world. These lands also will continue to provide significant revenues to the University of Texas and Texas A&M Systems to help future generations of Texans realize their dreams. So while there is much uncertainty as we say goodbye to 2020, and thankfully, head into 2021, we know there is much opportunity to continue generating unprecedented value from this significant asset.
Mark Houser Chief Executive Officer University Lands
James C. Weaver Chair University Lands Advisory Board Vice Chairman UT System Board of Regents
CEO & Board Chair Message
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