8-K
Kimbell Royalty Partners, LP (KRP)
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 21, 2024
Kimbell Royalty Partners, LP
(Exact name of registrant as specified in its charter)
| Delaware | 1-38005 | 47-5505475 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 777 Taylor Street, Suite 810<br><br> <br>Fort Worth, Texas | 76102 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, includingarea code:
(817
) 945-9700
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to 12(b) of the Act:
| Title of each class: | Trading symbol(s): | Name of each exchange on which registered: |
|---|---|---|
| Common<br> Units Representing Limited Partnership Interests | KRP | New<br> York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On February 21, 2024, Kimbell Royalty Partners, LP (the “Partnership”) issued a news release announcing its fourth quarter and full year 2023 financial and operating results. A copy of the news release is attached hereto, furnished as Exhibit 99.1 and incorporated in this Item 2.02 by reference.
| Item 7.01. | Regulation FD Disclosure. |
|---|
Also on February 21, 2024, the Partnership posted an updated investor presentation on its website. The presentation, titled “Spring 2024 Investor Presentation,” may be found at http://www.kimbellrp.com under the “Events and Presentations” section under the “Investor Relations” tab on the Partnership’s website. Investors should note that the Partnership announces financial information in filings with the Securities and Exchange Commission, press releases and public conference calls as well as on its website.
The information contained in Item 2.02, Item 7.01 and the accompanying Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits
| Number | Description |
|---|---|
| 99.1 | News release issued by Kimbell Royalty Partners, LP<br> dated February 21, 2024. |
| 104 | Cover Page Interactive<br> Data File (the cover page XBRL tags are embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KIMBELL ROYALTY PARTNERS, LP | |
|---|---|
| By: | Kimbell Royalty GP, LLC, |
| its general partner | |
| By: | /s/ Matthew S. Daly |
| --- | --- |
| Matthew S. Daly | |
| Chief Operating Officer |
Date: February 21, 2024
Exhibit 99.1
NEWSRELEASE
Kimbell RoyaltyPartners Announces Record Fourth Quarter and
Full Year 2023Results
Record Q4 23Run-Rate Daily Production of 24,332 Boe/d (6:1) Exceeds High End of Guidance; Represents Organic Growth of 3.4% Between Q3 2023 and Q42023
Activityon Acreage Remains Robust with 98 Active Rigs Drilling Representing 16%^1^ MarketShare of U.S. Land Rig Count
Superior Five-YearAnnual Average PDP Decline Rate of 14% Requires Only an Estimated 5.8 Net Wells Annually to Maintain Flat Production Compared to 8.4Net Line-of-Site Wells
Increase in BorrowingBase on Secured Revolving Credit Facility to $550 Million; Conservative Balance Sheet with Net Debt to Trailing Twelve Month ConsolidatedAdjusted EBITDA of 1.0x
Announces Q42023 Cash Distribution of $0.43 per Common Unit
FORTWORTH, Texas, February 21, 2024 – Kimbell Royalty Partners, LP (NYSE: KRP) (“Kimbell” or the “Company”), a leading owner of oil and natural gas mineral and royalty interests in over 129,000 gross wells across 28 states, today announced financial and operating results for the quarter ended and year ended December 31, 2023.
FourthQuarter 2023 Highlights
| · | Record<br> Q4 2024 run-rate daily production of 24,332 barrels of oil equivalent (“Boe”)<br> per day (6:1) |
|---|---|
| · | Record<br> Q4 2023 oil, natural gas and NGL revenues of $83.9 million, an increase of 21.2% from Q3<br> 2023 |
| --- | --- |
| · | Q4<br> 2023 net income of approximately $17.8 million and net income attributable to common units<br> of approximately $9.8 million, as compared to $18.5 million and $13.6 million, respectively,<br> from Q3 2023 |
| --- | --- |
| · | Record<br> Q4 2023 consolidated Adjusted EBITDA of $69.0 million, an increase of 23.7% from Q3 2023 |
| --- | --- |
| · | As<br> of December 31, 2023, Kimbell’s major properties^2^had 8.38 net drilled but uncompleted wells (“DUCs”) and net permitted<br> locations on its acreage (4.55 net DUCs and 3.83 net permitted locations) compared to an<br> estimated 5.8 net wells needed to maintain flat production |
| --- | --- |
| · | As<br> of December 31, 2023, Kimbell had 98 rigs actively drilling on its acreage, down 1 rig<br> from Q3 2023 and representing 16.3% market share of all rigs drilling in the continental<br> United States as of such time |
| --- | --- |
^1^Based on Kimbell rig count of 98 and Baker Hughes U.S. land rig count of 602 as of December 31, 2023.
^2^These figures pertain only to Kimbell's major properties and do not include possible additional DUCs and permits from Kimbell's minor properties, which generally have a net revenue interest of 0.1% or below and are time consuming to quantify but, in the estimation of Kimbell's management, could add an additional 15% to Kimbell’s net inventory.
Kimbell Royalty Partners, LP – News Release
Page 2
| · | On<br> December 8, 2023, the borrowing base and aggregate commitments on Kimbell's secured<br> revolving credit facility were increased from $400 million to $550 million in connection<br> with its Fall redetermination |
|---|---|
| · | Announced<br> a Q4 2023 cash distribution of $0.43 per common unit, reflecting a payout ratio of 75% of<br> cash available for distribution; implies a 11.2% annualized yield based on the February 20,<br> 2024 closing price of $15.38 per common unit; Kimbell intends to utilize the remaining<br> 25% of its cash available for distribution to repay a portion of the outstanding borrowings<br> under Kimbell’s revolving credit facility |
| --- | --- |
| · | Initiated<br> full year 2024 guidance with estimated daily production at its mid-point projected at 24,000<br> Boe/d for the year |
| --- | --- |
Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell Royalty GP, LLC, Kimbell’s general partner (the “General Partner”), commented, “2023 was another record year for Kimbell. We completed our largest acquisition to date during 2023, which was not only immediately accretive to distributable cash flow per common unit, but also bolstered the Permian as the leading basin for the Company in terms of production, active rig count, DUCs, permits and undrilled inventory. Furthermore, the borrowing base and elected commitments on the Company’s revolving credit facility increased to $550 million, further enhancing our liquidity and conservative capital structure. Finally, the Company paid out $1.73 per common unit in tax-advantaged quarterly distributions during 2023 and paid down approximately $49.9 million on its credit facility by allocating 25% of cash available for distribution for debt-paydown.
“Q4 2023 reflected significant organic growth relative to Q3 2023 due to a number of high interest wells coming online in the Permian and Haynesville. We expect to continue this operational momentum as we progress through 2024 given that our rig count remains near record highs with 98 rigs actively drilling in the U.S.
“Reflecting on our growth since our IPO, we have now grown production from 3,116 Boe/d to 24,332 Boe/d, an increase of 681%. As evidenced by our significant acquisition activity in 2023, we expect to continue our role as a major consolidator in the highly fragmented U.S. oil and natural gas royalty sector, which we estimate to be over $700 billion in size. And, as I have stated in the past, there are only a handful of public entities in the U.S. and Canada that have the financial resources, infrastructure, network and technical expertise to complete large-scale, multi-basin acquisitions. We believe that we are still in the early stages of this consolidation and will actively seek out targets that fit within our acquisition profile. We are very excited about the opportunities to expand in the future and deliver unitholder value for years to come.”
Fourth Quarter2023 Distribution and Debt Repayment
Today, the Board of Directors of the General Partner (the “Board of Directors”) approved a cash distribution payment to common unitholders of 75% of cash available for distribution for the fourth quarter of 2023, or $0.43 per common unit. The distribution will be payable on March 20, 2024 to common unitholders of record at the close of business on March 13, 2024. Kimbell plans to utilize the remaining 25% of cash available for distribution for the fourth quarter of 2023 to pay down a portion of the outstanding borrowings under its secured revolving credit facility. Since May 2020 (excluding the expected upcoming pay-down from the remaining 25% of Q4 2023 projected cash available for distribution), Kimbell has paid down approximately $136.0 million of outstanding borrowings under its secured revolving credit facility by allocating a portion of its cash available for distribution for debt pay-down.
Kimbell Royalty Partners, LP – News Release
Page 3
Kimbell expects that approximately 93% of its fourth quarter 2023 distribution should not constitute dividends for U.S. federal income tax purposes, but instead are estimated to constitute non-taxable reductions to the basis of each distribution recipient’s ownership interest in Kimbell common units. The reduced tax basis will increase unitholders’ capital gain (or decrease unitholders’ capital loss) when unitholders sell their common units. The Form 8937 containing additional information may be found at www.kimbellrp.com under “Investor Relations” section of the site. Kimbell currently believes that the portion that constitute dividends for U.S. federal income tax purposes will be considered qualified dividends, subject to holding period and certain other conditions, which are subject to a tax rate of 0%, 15% or 20% depending on the income level and tax filing status of a unitholder for 2024. Kimbell believes these estimates are reasonable based on currently available information, but they are subject to change.
Financial Highlights
Kimbell’s fourth quarter 2023 average realized price per Bbl of oil was $77.69, per Mcf of natural gas was $2.27, per Bbl of NGLs was $21.71 and per Boe combined was $36.04.
During the fourth quarter of 2023, the Company’s total revenues were $99.2 million, net income was approximately $17.8 million and net income attributable to common units was approximately $9.8 million, or $0.14 per common unit. There was a non-cash ceiling test impairment expense of $18.2 million recorded during the quarter, primarily related to the decline in commodity prices.
Total fourth quarter 2023 consolidated Adjusted EBITDA was $69.0 million (consolidated Adjusted EBITDA is a non-GAAP financial measure. Please seea reconciliation to the nearest GAAP financial measures at the end of this news release).
In the fourth quarter of 2023, G&A expense was $9.1 million, $5.8 million of which was Cash G&A expense, or $2.59 per BOE (CashG&A and Cash G&A per Boe are non-GAAP financial measures. Please see definition under Non-GAAP Financial Measures in the SupplementalSchedules included in this news release). Excluding the impact of approximately $0.8 million in integration related expenses associated with the Q3 2023 acquired production, Cash G&A per Boe was $2.25. Unit-based compensation in the fourth quarter of 2023, which is a non-cash G&A expense, was $3.3 million or $1.49 per Boe.
On December 8, 2023, the borrowing base and aggregate commitments under Kimbell’s secured revolving credit facility were increased from $400 million to $550 million in connection with its Fall redetermination.
As of December 31, 2023, Kimbell had approximately $294.2 million in debt outstanding under its secured revolving credit facility, had net debt to fourth quarter 2023 trailing twelve month consolidated Adjusted EBITDA of approximately 1.0x and was in compliance with all financial covenants under its secured revolving credit facility. Kimbell had approximately $255.8 million in undrawn capacity under its secured revolving credit facility as of December 31, 2023.
Kimbell Royalty Partners, LP – News Release
Page 4
As of December 31, 2023, Kimbell had outstanding 73,851,458 common units and 20,847,295 Class B units. As of February 21, 2024, Kimbell had outstanding 74,938,960 common units and 20,847,295 Class B units.
Production
Fourth quarter 2023 average daily production was 25,235 Boe per day (6:1), which consisted of 903 Boe per day related to prior period production recognized in Q4 2023, and 24,332 Boe per day of run-rate production. The 24,332 Boe per day of run-rate production was composed of approximately 50% from natural gas (6:1) and approximately 50% from liquids (33% from oil and 17% from NGLs). The prior period production recognized in Q4 2023 was attributable to past production that came into pay status during the fourth quarter of 2023.
OperationalUpdate
As of December 31, 2023, Kimbell’s major properties had 807 gross (4.55 net) DUCs and 727 gross (3.83 net) permitted locations on its acreage. In addition, as of December 31, 2023, Kimbell had 98 rigs actively drilling on its acreage, which represents an approximate 16.3% market share of all land rigs drilling in the continental United States as of such time.
| Basin | Gross DUCs as of December 31, 2023^(1)^ | Gross Permits as of December 31, 2023^(1)^ | Net DUCs as of December 31, 2023^(1)^ | Net Permits as of December 31, 2023^(1)^ | ||||
|---|---|---|---|---|---|---|---|---|
| Permian | 495 | 396 | 2.55 | 2.22 | ||||
| Eagle Ford | 45 | 61 | 0.33 | 0.47 | ||||
| Haynesville | 66 | 30 | 0.51 | 0.37 | ||||
| Mid-Continent | 139 | 68 | 0.96 | 0.52 | ||||
| Bakken | 55 | 148 | 0.13 | 0.11 | ||||
| Appalachia | 3 | 9 | 0.01 | 0.02 | ||||
| Rockies | 4 | 15 | 0.06 | 0.12 | ||||
| Total | 807 | 727 | 4.55 | 3.83 |
^(1)^These figures pertain only to Kimbell's major properties and do not include possible additional DUCs and permits from Kimbell's minor properties, which generally have a net revenue interest of 0.1% or below and are time consuming to quantify but, in the estimation of Kimbell's management, could add an additional 15% to Kimbell's net inventory.
Reserves
Ryder Scott Company, L.P. prepared an estimate of Kimbell’s proved reserves as of December 31, 2023. Average prices of $78.22 per barrel of oil and $2.64 per MMBtu of natural gas were used in accordance with applicable rules of the Securities and Exchange Commission (the “SEC”). Realized prices with applicable differentials were $76.84 per barrel of oil, $2.11 per Mcf of natural gas and $23.78 per barrel of NGLs.
Kimbell Royalty Partners, LP – News Release
Page 5
Proved developed reserves at year-end 2023 increased by approximately 41% year-over-year to over 65 MMBoe, reflecting the acquisitions Kimbell made during the year along with continued development by the operators of Kimbell’s acreage.
| Crude Oil and<br> Condensate<br> (MBbls) | Natural Gas<br> (MMcf) | Natural Gas<br> Liquids (MBbls) | Total (MBOE) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net proved developed reserves at December 31, 2022 | 12,355 | 160,298 | 7,388 | 46,459 | ||||||||
| Revisions of previous estimates | 3,273 | 26,068 | 814 | 8,432 | ||||||||
| Purchases of minerals in place | 6,565 | 41,560 | 4,400 | 17,892 | ||||||||
| Production | (2,393 | ) | (23,384 | ) | (1,083 | ) | (7,374 | ) | ||||
| Net proved developed reserves at December 31, 2023 | 19,800 | 204,542 | 11,519 | 65,409 |
Results of UpdatedPortfolio Review
Kimbell completed an updated review of its portfolio, which as of December 31, 2023, identified 12,417 gross and 79.09 net (100% NRI) major total upside drilling locations. These locations only include Kimbell's major properties and do not include Kimbell's minor properties, which generally have less than a 0.1% net revenue interest and are time consuming to quantify, but in the estimation of Kimbell's management could add up to an additional 15% to Kimbell's net inventory in the aggregate. Including both the estimated major and minor upside locations, the Company believes it has a total of 93.05 net locations, or approximately 16 years of drilling inventory based on 5.8 net wells per year needed to maintain flat production.
Approximately 75% of the total estimated undrilled net inventory is located in the Permian, Eagle Ford and Haynesville, which have some of the best economic returns and lowest break-even costs in the U.S. In addition, Kimbell's superior five-year average PDP decline rate of only 14% requires only an estimated 5.8 net wells each year to keep production flat.
Kimbell Royalty Partners, LP – News Release
Page 6
| Basin | Gross Major Locations as of December 31, 2023^(1)^ | Net Major Locations as of December 31, 2023^(1)^ | Avg. Gross Horizontal Wells/DSU^(2)^ | |||
|---|---|---|---|---|---|---|
| Permian | 5,216 | 32.14 | 12.0 | |||
| Eagle Ford | 1,577 | 14.42 | 6.9 | |||
| Haynesville | 1,022 | 12.90 | 5.9 | |||
| Mid-Continent | 2,440 | 12.64 | 6.8 | |||
| Bakken | 1,708 | 3.59 | 8.5 | |||
| Appalachia | 257 | 2.13 | 7.6 | |||
| Rockies | 197 | 1.27 | 10.5 | |||
| Total | 12,417 | 79.09 | 8.3 |
^(1)^Locations include permits, proven undeveloped (PUD), probable, and possible (per SPE-PRMS reserve definitions based on internal reserves database as of December 31, 2023). In addition, these figures pertain only to Kimbell's major properties and do not include additional locations from Kimbell's minor properties, which generally have a net revenue interest of 0.1% or below and are time consuming to quantify, but in the estimation of Kimbell's management, could add an additional 15% to Kimbell's net inventory in the aggregate.
^(2)^Gross horizontal wells per drilling spacing unit (“DSU”) from internal reserves database as of December 31, 2023. DSUs vary in size.
Hedging Update
The following provides information concerning Kimbell’s hedge book as of December 31, 2023:
| Fixed Price Swaps as of December 31, 2023 | ||||||
|---|---|---|---|---|---|---|
| Weighted Average | ||||||
| Volumes | Fixed Price | |||||
| Oil | Nat Gas | Oil | Nat Gas | |||
| BBL | MMBTU | /BBL | /MMBTU | |||
| 1Q 2024 | 143,871 | 1,305,213 | ||||
| 2Q 2024 | 140,959 | 1,318,317 | ||||
| 3Q 2024 | 142,508 | 1,328,940 | ||||
| 4Q 2024 | 141,588 | 1,332,712 | ||||
| 1Q 2025 | 140,400 | 1,289,520 | ||||
| 2Q 2025 | 140,686 | 1,310,127 | ||||
| 3Q 2025 | 136,068 | 1,261,964 | ||||
| 4Q 2025 | 146,372 | 1,291,680 |
All values are in US Dollars.
Kimbell Royalty Partners, LP – News Release
Page 7
2024 Guidance
Kimbell is providing financial and operational guidance ranges for 2024 as follows:
| 2024 | ||
| Net Production - Mboe/d (6:1) | - | 25.5 |
| Oil Production - % of Net Production | - | 36% |
| Natural Gas Production - % of Net Production | - | 52% |
| Natural Gas Liquids Production - % of Net Production | - | 18% |
| Unit Costs (/boe) | ||
| Marketing and other deductions | - | $2.40 |
| Depreciation and depletion expense | - | $14.00 |
| G&A | ||
| Cash G&A | - | $2.70 |
| Non-Cash G&A | - | $1.80 |
| Production and ad valorem taxes - % of Oil, Natural Gas and NGL Revenues | - | 9.0% |
| Payout Ratio (1) | 75% |
All values are in US Dollars.
(1) The Company intends to pay out 75% of its projected cash available for distribution in quarterly distributions and utilize 25% of projected cash available for distribution to pay down a portion of the outstanding borrowings under its secured revolving credit facility each quarter.
Conference Call
Kimbell Royalty Partners will host a conference call and webcast today at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss fourth quarter 2023 results. To access the call live by phone, dial 201-389-0869 and ask for the Kimbell Royalty Partners call at least 10 minutes prior to the start time. A telephonic replay will be available through February 28, 2024 by dialing 201-612-7415 and using the conference ID 13735463#. A webcast of the call will also be available live and for later replay on Kimbell’s website at http://kimbellrp.investorroom.com under the Events and Presentations tab.
Presentation
On February 21, 2024, Kimbell posted an updated investor presentation on its website. The presentation may be found at http://kimbellrp.investorroom.com under the Events and Presentations tab. Information on Kimbell’s website does not constitute a portion of this news release.
Kimbell Royalty Partners, LP – News Release
Page 8
About Kimbell Royalty Partners, LP
Kimbell (NYSE: KRP) is a leading oil and gas mineral and royalty company based in Fort Worth, Texas. Kimbell owns mineral and royalty interests in approximately 17 million gross acres in 28 states and in every major onshore basin in the continental United States, including ownership in more than 129,000 gross wells. To learn more, visit http://www.kimbellrp.com.
Forward-Looking Statements
This news releaseincludes forward-looking statements, in particular statements relating to Kimbell’s financial, operating and production resultsand prospects for growth (including financial and operational guidance), drilling inventory, growth potential, identified locations andall other estimates and predictions resulting from Kimbell’s portfolio review, the tax treatment of Kimbell's distributions, changesin Kimbell’s capital structure, future natural gas and other commodity prices and changes to supply and demand for oil, naturalgas and NGLs. These and other forward-looking statements involve risks and uncertainties, including risks that the anticipated benefitsof acquisitions are not realized and uncertainties relating to Kimbell’s business, prospects for growth and acquisitions and thesecurities markets generally, as well as risks inherent in oil and natural gas drilling and production activities, including risks withrespect to potential declines in prices for oil and natural gas that could result in downward revisions to the value of proved reservesor otherwise cause operators to delay or suspend planned drilling and completion operations or reduce production levels, which wouldadversely impact cash flow, risks relating to the impairment of oil and natural gas properties, risks relating to the availability ofcapital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in oiland natural gas prices, risks relating to Kimbell’s ability to meet financial covenants under its credit agreement or its abilityto obtain amendments or waivers to effect such compliance, risks relating to Kimbell’s hedging activities, risks of fire, explosion,blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and productionrisks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of futurewell performance or delay the timing of sales or completion of drilling operations, risks relating to delays in receipt of drilling permits,risks relating to unexpected adverse developments in the status of properties, risks relating to borrowing base redeterminations by Kimbell’slenders, risks relating to the absence or delay in receipt of government approvals or third-party consents, risks relating to acquisitions,dispositions and drop downs of assets, risks relating to Kimbell's ability to realize the anticipated benefits from and to integrateacquired assets, including the Acquired Production, risks relating to tax matters, and other risks described in Kimbell's Annual Reporton Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”), available at the SEC's websiteat www.sec.gov. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date ofthis news release. Except as required by law, Kimbell undertakes no obligation and does not intend to update these forward-looking statementsto reflect events or circumstances occurring after this news release. When considering these forward-looking statements, you should keepin mind the risk factors and other cautionary statements in Kimbell's filings with the SEC.
Kimbell Royalty Partners, LP – News Release
Page 9
Contact:
Rick Black
Dennard Lascar Investor Relations
krp@dennardlascar.com
(713) 529-6600
– Financial statements follow –
Kimbell Royalty Partners, LP – News Release
Page 10
Kimbell RoyaltyPartners, LP
Condensed ConsolidatedBalance Sheet
(Unaudited, inthousands)
| December 31, | |||
|---|---|---|---|
| 2023 | |||
| Assets: | |||
| Current assets | |||
| Cash and cash equivalents | $ | 30,993 | |
| Oil, natural gas and NGL receivables | 59,020 | ||
| Derivative assets | 11,428 | ||
| Accounts receivable and other current assets | 1,699 | ||
| Total current assets | 103,140 | ||
| Property and equipment, net | 590 | ||
| Oil and natural gas properties | |||
| Oil and natural gas properties (full cost method) | 2,048,690 | ||
| Less: accumulated depreciation, depletion and impairment | (827,034 | ) | |
| Total oil and natural gas properties, net | 1,221,656 | ||
| Right-of-use assets, net | 2,189 | ||
| Derivative assets | 2,888 | ||
| Loan origination costs, net | 7,326 | ||
| Total assets | $ | 1,337,789 | |
| Liabilities and unitholders' equity: | |||
| Current liabilities | |||
| Accounts payable | $ | 6,595 | |
| Other current liabilities | 6,173 | ||
| Derivative liabilities | 209 | ||
| Total current liabilities | 12,977 | ||
| Operating lease liabilities, excluding current portion | 1,888 | ||
| Derivative liabilities | 60 | ||
| Long-term debt | 294,200 | ||
| Other liabilities | 197 | ||
| Total liabilities | 309,322 | ||
| Commitments and contingencies | |||
| Mezzanine equity: | |||
| Series A preferred units | 314,424 | ||
| Kimbell Royalty Partners, LP unitholders' equity: | |||
| Common units | 670,531 | ||
| Class B units | 1,042 | ||
| Total Kimbell Royalty Partners, LP unitholders' equity | 671,573 | ||
| Non-controlling interest in OpCo | 42,470 | ||
| Total unitholders' equity | 714,043 | ||
| Total liabilities, mezzanine equity and unitholders' equity | $ | 1,337,789 |
Kimbell Royalty Partners, LP – News Release
Page 11
Kimbell RoyaltyPartners, LP
Condensed ConsolidatedStatements of Operations
(Unaudited, inthousands, except per-unit data and unit counts)
| Three Months Ended | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| December 31, 2023 | December 31, 2022 | |||||
| Revenue | ||||||
| Oil, natural gas and NGL revenues | $ | 83,949 | $ | 64,421 | ||
| Lease bonus and other income | 573 | 1,034 | ||||
| Gain on commodity derivative instruments, net | 14,674 | 3,216 | ||||
| Total revenues | 99,196 | 68,671 | ||||
| Costs and expenses | ||||||
| Production and ad valorem taxes | 5,658 | 2,697 | ||||
| Depreciation and depletion expense | 36,196 | 16,726 | ||||
| Impairment of oil and natural gas properties | 18,220 | — | ||||
| Marketing and other deductions | 3,387 | 2,744 | ||||
| General and administrative expense | 9,116 | 7,190 | ||||
| Consolidated variable interest entities related: | ||||||
| General and administrative expense | — | 447 | ||||
| Total costs and expenses | 72,577 | 29,804 | ||||
| Operating income | 26,619 | 38,867 | ||||
| Other income (expense) | ||||||
| Equity loss in affiliate | — | (989 | ) | |||
| Interest expense | (7,465 | ) | (3,950 | ) | ||
| Consolidated variable interest entities related: | ||||||
| Interest earned on marketable securities in trust account | — | 2,208 | ||||
| Net income before income taxes | 19,154 | 36,136 | ||||
| Income tax expense | 1,326 | 888 | ||||
| Net income | 17,828 | 35,248 | ||||
| Distribution and accretion on Series A preferred units | (5,269 | ) | — | |||
| Net income attributable to non-controlling interests | (2,765 | ) | (6,847 | ) | ||
| Distributions on Class B units | (21 | ) | (8 | ) | ||
| Net income attributable to common units of Kimbell Royalty Partners, LP | $ | 9,773 | $ | 28,393 | ||
| Basic | $ | 0.14 | $ | 0.48 | ||
| Diluted | $ | 0.14 | $ | 0.48 | ||
| Weighted average number of common units outstanding | ||||||
| Basic | 71,900,028 | 59,484,641 | ||||
| Diluted | 115,412,176 | 69,913,842 |
Kimbell Royalty Partners, LP – News Release
Page 12
Kimbell RoyaltyPartners, LP
Condensed ConsolidatedStatements of Operations
(Unaudited, inthousands, except per-unit data and unit counts)
| Year Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| December 31, 2023 | December 31, 2022 | |||||
| Revenue | ||||||
| Oil, natural gas and NGL revenues | $ | 267,585 | $ | 281,964 | ||
| Lease bonus and other income | 5,595 | 3,074 | ||||
| Gain (loss) on commodity derivative instruments, net | 20,889 | (36,979 | ) | |||
| Total revenues | 294,069 | 248,059 | ||||
| Costs and expenses | ||||||
| Production and ad valorem taxes | 20,326 | 16,239 | ||||
| Depreciation and depletion expense | 96,477 | 50,086 | ||||
| Impairment of oil and natural gas properties | 18,220 | — | ||||
| Marketing and other deductions | 12,565 | 13,383 | ||||
| General and administrative expense | 35,678 | 29,129 | ||||
| Consolidated variable interest entities related: | ||||||
| General and administrative expense | 928 | 2,304 | ||||
| Total costs and expenses | 184,194 | 111,141 | ||||
| Operating income | 109,875 | 136,918 | ||||
| Other income (expense) | ||||||
| Equity income in affiliate | — | 2,669 | ||||
| Interest expense | (25,951 | ) | (13,818 | ) | ||
| Loss on extinguishment of debt | (480 | ) | — | |||
| Other (expense) income | (181 | ) | 4,043 | |||
| Consolidated variable interest entities related: | ||||||
| Interest earned on marketable securities in trust account | 3,509 | 3,721 | ||||
| Net income before income taxes | 86,772 | 133,533 | ||||
| Income tax expense | 3,766 | 2,739 | ||||
| Net income | 83,006 | 130,794 | ||||
| Distribution and accretion on Series A preferred units | (6,310 | ) | — | |||
| Net income attributable to non-controlling interests | (16,465 | ) | (18,823 | ) | ||
| Distributions on Class B units | (89 | ) | (42 | ) | ||
| Net income attributable to common units of Kimbell Royalty Partners, LP | $ | 60,142 | $ | 111,929 | ||
| Basic | $ | 0.93 | $ | 1.75 | ||
| Diluted | $ | 0.91 | $ | 1.72 | ||
| Weighted average number of common units outstanding | ||||||
| Basic | 66,595,273 | 54,112,595 | ||||
| Diluted | 93,057,731 | 65,837,017 |
Kimbell Royalty Partners, LP – News Release
Page 13
Kimbell RoyaltyPartners, LPSupplemental Schedules
NON-GAAPFINANCIAL MEASURES
Adjusted EBITDA, Cash G&A and Cash G&A per Boe are used as supplemental non-GAAP financial measures by management and external users of Kimbell’s financial statements, such as industry analysts, investors, lenders and rating agencies. Kimbell believes Adjusted EBITDA is useful because it allows us to more effectively evaluate Kimbell’s operating performance and compare the results of Kimbell’s operations period to period without regard to its financing methods or capital structure. In addition, management uses Adjusted EBITDA to evaluate cash flow available to pay distributions to Kimbell’s unitholders. Kimbell defines Adjusted EBITDA as net income (loss), net of depreciation and depletion expense, interest expense, income taxes, impairment of oil and natural gas properties, non-cash unit based compensation, unrealized gains and losses on derivative instruments, cash distribution from affiliate, equity income (loss) in affiliate, gains and losses on sales of assets and operational impacts of variable interest entities, which include general and administrative expense and interest income. Adjusted EBITDA is not a measure of net income (loss) or net cash provided by operating activities as determined by GAAP. Kimbell excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within Kimbell’s industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Adjusted EBITDA should not be considered an alternative to net income, oil, natural gas and natural gas liquids revenues, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Kimbell’s computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Kimbell expects that cash available for distribution for each quarter will generally equal its Adjusted EBITDA for the quarter, less cash needed for debt service and other contractual obligations, tax obligations, and fixed charges and reserves for future operating or capital needs that the Board of Directors may determine is appropriate.
Kimbell believes Cash G&A and Cash G&A per Boe are useful metrics because they isolate cash costs within overall G&A expense and measure cash costs relative to overall production, which is a widely utilized metric to evaluate operational performance within the energy sector. Cash G&A is defined as general and administrative expenses less unit-based compensation expense. Cash G&A per Boe is defined as Cash G&A divided by total production for a period. Cash G&A should not be considered an alternative to G&A expense presented in accordance with GAAP. Kimbell’s computations of Cash G&A and Cash G&A per Boe may not be comparable to other similarly titled measures of other companies.
Kimbell Royalty Partners, LP – News Release
Page 14
Kimbell RoyaltyPartners, LP
SupplementalSchedules
(Unaudited, inthousands)
| Three Months Ended | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| December 31, 2023 | December 31, 2022 | |||||
| Reconciliation of net cash provided by operating activities to Adjusted EBITDA and cash available for distribution | ||||||
| Net cash provided by operating activities | $ | 59,309 | $ | 38,631 | ||
| Interest expense | 7,465 | 3,950 | ||||
| Income tax expense | 1,326 | 888 | ||||
| Impairment of oil and natural gas properties | (18,220 | ) | — | |||
| Amortization of right-of-use assets | (85 | ) | (82 | ) | ||
| Amortization of loan origination costs | (529 | ) | (491 | ) | ||
| Equity loss in affiliate | — | (989 | ) | |||
| Unit-based compensation | (3,326 | ) | (2,982 | ) | ||
| Gain on derivative instruments, net of settlements | 15,368 | 13,029 | ||||
| Changes in operating assets and liabilities: | ||||||
| Oil, natural gas and NGL revenues receivable | (2,300 | ) | 606 | |||
| Accounts receivable and other current assets | (1,156 | ) | 967 | |||
| Accounts payable | 505 | (336 | ) | |||
| Other current liabilities | 4,368 | 1,509 | ||||
| Operating lease liabilities | 90 | 84 | ||||
| Consolidated variable interest entities related: | ||||||
| Interest earned on marketable securities in Trust Account | — | 2,208 | ||||
| Other assets and liabilities | — | (180 | ) | |||
| Consolidated EBITDA | $ | 62,815 | $ | 56,812 | ||
| Add: | ||||||
| Impairment of oil and natural gas properties | 18,220 | — | ||||
| Unit-based compensation | 3,326 | 2,982 | ||||
| Gain on derivative instruments, net of settlements | (15,368 | ) | (13,029 | ) | ||
| Cash distribution from affiliate | — | 171 | ||||
| Equity loss in affiliate | — | 989 | ||||
| Consolidated variable interest entities related: | ||||||
| Interest earned on marketable securities in Trust Account | — | (2,208 | ) | |||
| General and administrative expense | — | 447 | ||||
| Consolidated Adjusted EBITDA | $ | 68,993 | $ | 46,164 | ||
| Adjusted EBITDA attributable to non-controlling interest | (15,188 | ) | (8,967 | ) | ||
| Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $ | 53,805 | $ | 37,197 | ||
| Adjustments to reconcile Adjusted EBITDA to cash available for distribution | ||||||
| Less: | ||||||
| Cash interest expense | 5,308 | 2,558 | ||||
| Cash distributions on Series A preferred units | 3,802 | — | ||||
| Cash income tax expense | 2,281 | 15 | ||||
| Distributions on Class B units | 21 | 8 | ||||
| Cash available for distribution on common units | $ | 42,393 | $ | 34,616 |
Kimbell Royalty Partners, LP – News Release
Page 15
Kimbell RoyaltyPartners, LP
SupplementalSchedules
(Unaudited, inthousands, except for per-unit data and unit counts)
| Three Months Ended | |||
|---|---|---|---|
| December 31, 2023 | |||
| Net income | $ | 17,828 | |
| Depreciation and depletion expense | 36,196 | ||
| Interest expense | 7,465 | ||
| Income tax expense | 1,326 | ||
| Consolidated EBITDA | $ | 62,815 | |
| Impairment of oil and natural gas properties | 18,220 | ||
| Unit-based compensation | 3,326 | ||
| Gain on derivative instruments, net of settlements | (15,368 | ) | |
| Consolidated Adjusted EBITDA | $ | 68,993 | |
| Adjusted EBITDA attributable to non-controlling interest | (15,188 | ) | |
| Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $ | 53,805 | |
| Adjustments to reconcile Adjusted EBITDA to cash available for distribution | |||
| Less: | |||
| Cash interest expense | 5,308 | ||
| Cash distributions on Series A preferred units | 3,802 | ||
| Cash income tax expense | 2,281 | ||
| Distributions on Class B units | 21 | ||
| Cash available for distribution on common units | $ | 42,393 | |
| Common units outstanding on December 31, 2023 | 73,851,458 | ||
| Common units outstanding on March 13, 2024 Record Date | 74,938,960 | ||
| Cash available for distribution per common unit outstanding | $ | 0.57 | |
| Fourth quarter 2023 distribution declared ^(1)^ | $ | 0.43 |
(1) The difference between the declared distribution and the cash available for distribution is primarily attributable to Kimbell allocating 25% of cash available for distribution to pay outstanding borrowings under its secured revolving credit facility.
Kimbell Royalty Partners, LP – News Release
Page 16
Kimbell RoyaltyPartners, LP
SupplementalSchedules
(Unaudited, inthousands, except for per-unit data and unit counts)
| Three Months Ended | |||
|---|---|---|---|
| December 31, 2022 | |||
| Net income | $ | 35,248 | |
| Depreciation and depletion expense | 16,726 | ||
| Interest expense | 3,950 | ||
| Income tax expense | 888 | ||
| Consolidated EBITDA | $ | 56,812 | |
| Unit-based compensation | 2,982 | ||
| Gain on derivative instruments, net of settlements | (13,029 | ) | |
| Cash distribution from affiliate | 171 | ||
| Equity loss in affiliate | 989 | ||
| Consolidated variable interest entities related: | |||
| Interest earned on marketable securities in Trust Account | (2,208 | ) | |
| General and administrative expense | 447 | ||
| Consolidated Adjusted EBITDA | $ | 46,164 | |
| Adjusted EBITDA attributable to non-controlling interest | (8,967 | ) | |
| Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $ | 37,197 | |
| Adjustments to reconcile Adjusted EBITDA to cash available for distribution | |||
| Less: | |||
| Cash interest expense | 2,558 | ||
| Cash income tax expense | 15 | ||
| Distributions on Class B units | 8 | ||
| Cash available for distribution on common units | $ | 34,616 | |
| Common units outstanding on December 31, 2022 | 64,231,833 | ||
| Common units outstanding on March 9, 2023 Record Date | 65,229,995 | ||
| Cash available for distribution per common unit outstanding | $ | 0.53 | |
| Fourth quarter 2022 distribution declared ^(1)^ | $ | 0.48 |
(1) The difference between the declared distribution and the cash available for distribution is primarily attributable to Kimbell allocating 25% of cash available for distribution to pay outstanding borrowings under its secured revolving credit facility. Additionally, Kimbell utilized cash flows received from the Q4 2022 Acquired Production after the effective date of October 1, 2022, but prior to the closing date of December 15, 2022, to pay outstanding borrowings under its credit facility and to distribute the additional cash flows to common unitholders. Revenues, production and other financial and operating results from the Q4 2022 acquisition are reflected in Kimbell's condensed consolidated financial statements from December 15, 2022 onward.
Kimbell Royalty Partners, LP – News Release
Page 17
Kimbell RoyaltyPartners, LP
SupplementalSchedules
(Unaudited, inthousands)
| Three Months Ended | |||
|---|---|---|---|
| December 31, 2023 | |||
| Net income | $ | 17,828 | |
| Depreciation and depletion expense | 36,196 | ||
| Interest expense | 7,465 | ||
| Income tax expense | 1,326 | ||
| Consolidated EBITDA | $ | 62,815 | |
| Impairment of oil and natural gas properties | 18,220 | ||
| Unit-based compensation | 3,326 | ||
| Gain on derivative instruments, net of settlements | (15,368 | ) | |
| Consolidated Adjusted EBITDA | $ | 68,993 | |
| Q1 2023 - Q3 2023 Consolidated Adjusted EBITDA ^(1)^ | 209,221 | ||
| Trailing Twelve Month Consolidated Adjusted EBITDA | $ | 278,214 | |
| Long-term debt (as of 12/31/23) | 294,200 | ||
| Cash and cash equivalents (as of 12/31/23) ^(2)^ | (25,000 | ) | |
| Net debt (as of 12/31/23) | $ | 269,200 | |
| Net Debt to Trailing Twelve Month Consolidated Adjusted EBITDA | 1.0 | x |
(1) Consolidated Adjusted EBITDA for each of the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023 was previously reported in a news release relating to the applicable quarter, and the reconciliation of net income to consolidated Adjusted EBITDA for each quarter is included in the applicable news release. This also includes the trailing twelve months pro forma results from the Q2 2023 acquisition that closed in May 2023 and the Q3 2023 acquisition that closed in September 2023 in accordance with Kimbell's secured revolving credit facility.
(2) In accordance with Kimbell's secured revolving credit facility, the maximum deduction of cash and cash equivalents to be included in the net debt calculation for compliance purposes is $25 million.