KRP - Earnings call transcript Q1 2019 | Kimbell Royalty Partners, LP

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Operator

Welcome to Kimbell Royalty Partners first quarter earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the presentation. [Operator Instructions]. And as a reminder, this conference is being recorded. pleasure your my Investor Rick now Relations. is to host, introduce Black, It you. Thank Please go ahead.

Rick Black

be and everyone. of and advised good Kimbell be operator, webcast made XXXX. performance, any you, or Thank statements that morning, also the future of is pursuant expectations conference or the remind quarter being the speaks link provision any to replay. time-sensitive X, as can made This statements, for of the call section Act statements recorded information Information that in may Royalty today's are forward-looking the of Welcome call to audio Events Securities only of Presentations May events financial on safe call to review today, as harbor no results accessed date financial like operational please XXXX. be and the first you page accurate Private of and longer of so future facts, historical kimbellrp.com. discussion Reform on the Partners I that the also would to through considered not of Litigation including IR this of the are

the in Officer. call Commission. revise obligation Executive any in factors, These I Exchange other the release detail and be for earnings GAAP distribution. Chairman filings Securities statements now their update forward-looking adjusted statements. end Ravnaas, are results including to outside measures, nearest making disclosure of as and Kimbell well as found Reconciliations for be that, materially. described part forward-looking or Please like can will no press by assumes to release. and at Bob the differ may will Kimbell We to today's to on the the company's Chief non-GAAP available our risk factors cash Partners' with of call measures press to today's Management Bob? nature, turn uncertainties, today's forward-looking and uncertain over Royalty would refer publicly and also EBITDA Actual are statements. company's as of control. refer to the

Robert Ravnaas

Thank and our several other you, President increase our assets implies expect Officer; management here XX% Rick, mineral members Matt and are in for your during well, Chief a average This organic XX,XXX of our our through period team, March overview Most I'm from quarter, was annual like we'll of first by Operating that, the production Phillips Boe accounting Boe. of XX between Total this additional QX the acquisition. per position. an across many growth production which from of day, daily and QX Organic Phillips from giving reflects XXXX. production and 'XX, XXX% QX XX, March QX 'XX after up an to XXXX growth approximate the XXX,XXX performing Phillips expectations, X.X%, full quarter acquisition, newly-acquired rate. years development we The was XX% senior going an Davis very above expectations effect the Financial Controller. average our everyone. to notably, forward. for including Officer; expectations. Davis performance Ravnaas, ask of Blayne of to Daly, had morning, and by our performance Then our had would exceeding Chief I quarter, begin questions. Rhynsburger, providing our with more we production record first excellent After take followed cover our an high I'll We detail. financial daily good

which Permian drilling across States. drilling the over we costs isn't in are XX United XX interest have the any We As acreage. Mid-Con, and have wells, now rigs among surprising, the since our our across of in drilling lowest in XX,XXX rigs activity royalty don't slowdown quarter, XX% which properties, of of our the end break-even see with currently the on

$XX.X at and us, revenues in no most have Pioneer, NGL Oil In of including and Occidental we Concho, gas million, a up have quarter Parsley, the our acquisition, were ExxonMobil, from strongest quarter XXX% others. million, consolidated QX and in acreage, the cost million. generated $XX.X up of resulted of natural XXX% EOG, Phillips operators including full to adjusted XXXX, to many of compared on first the QX which which $XX.X addition, some efficient Petroleum, EBITDA adjusted EBITDA last drilling would consolidated year,

in paid $X.XX approximate paid be of which XXXX, distributions X% unit, XXXX, distribution our to conversion an yield. common total to quarter will IPO of first unit, two This and the C $X.XX instead to will should per just dividend non-taxable reductions common years implies which and income, all May substantially basis. XX% the our expect a QX of ago tax taxable XX, September XXXX distributions Our our generally not unitholders since per And since on we price. XXXX our constitute corp brings IPO to common QX is be

That each As cash available a distribute to variable is, reminder partnership. to company, of anyone be who quarter. a XXX% we distribution might our we are new

XX, We so from the have no the continue come of in prices, to both broad, of best the influences worlds volume, fluctuation on and distribution or our acquisitions. operating expenditures, key commodity pace that To experience of the assets costs stable from our rate recently-acquired the broad we capital our PDP and production end, the and with Kimbell's industry's coupled diverse from mineral diverse the XX% of major lowest featuring decline stability all basins organic portfolio growth of in of portfolio. assets Lower across the from

acquisitions, while are organically PDP strategically growing year-over-year. through also reserves production adding We

we with very and pleased for have guidance are results, XXXX. We reaffirmed quarter our first our

a years we class moving forward. asset and IPO, have growth. nearly production, bullish model strategic Kimbell's have little model strategic growth We our quadrupled very sector about and that two upstream the our our remain continues fuel within to we proven In a since over

Now I'll over turn you Davis. to

Davis Ravnaas

first $XX.X everyone. XXXX increased of Thanks, Bob, good last year, the morning, and to quarter Total quarter revenues XX% million. from first

The loss, consolidated test sealing million. to of primarily XXXX. consolidated non-cash, QX net million of $X.X impairment a was was quarter net result QX, a million this $X.X interest, including XXXX $XX.X of quarter loss First full-cost non-controlling in in loss net a compared

As in G&A the $X.X low million range, of our to QX, expenses a sealing General our test expense, last was efficiencies which $X.XX as acquisitions which had the cash was $XX.X a Cash we available year and million. per common portfolio $X.X and capture approximately is guidance integration minerals. distribution were impairment of reminder, of $X.X to we existing full-cost of Boe, end our administrative units million. continue through the of for million attributable

of and both will You our distribution the a for release. reconciliation end news EBITDA cash available at adjusted of find

To market this minimal will capital expect think Moreover, the to we significant primarily should X.X% reduction don't units prices basis quarter we unit, $X.XX XXX% sold. distribution income As not Substantially taxes corporate will between Bob non-taxable to our mentioned, are all in to tax was distribution be a of These a an reduction to The the appreciates. income expect be and of future. clear, for as when tax gain taxes. due that something to to cash quarters. constitute a realized XXXX, and, first return dividend common factors reduced basis. be generally are our of capital distribution we compared reduction due per the X.X% have the dividend investor's instead, the quarter tax this increase taxable foreseeable fourth free from shields

structure a We more much put in our are tax advisors term. tax near our detailed also and advantageous forecast the working with plan out of to

$XX.XX, to was and were and with press Average liquids detailed are barrel per findings. oil gas per Mcf barrel represented compared this QX We with analysis realized $X.XX, done a natural gas our nearly declines intend natural which to per issue XXXX. price release for $XX.XX, was all

approximately XX% were the natural our X-XX-XXXX, gas As years. of oil and hedges of next production two our for daily

Looking of on million credit about our as now facility. $XXX million million outstanding at $XX of had March XX, cash the balance on-hand and sheet, $XX.X we revolving

As acquisitions. before, short-term to to our the use we've plan indicated for revolver provide financing is

debt-to-consolidated of Phillips Our adjusted at assets. reflecting remains EBITDA, balance conservative full a sheet quarter the X.Xx approximately

turning $XXX for differentiate are minerals over the size. It's clear what size that call questions, Before in I'd space market perspective The and and huge. growth we mineral is to drivers company provide our like billion believe again on for the some strategy. over

Some even $XXX billion. believe it's over

which year-to-date, way, Kimbell to to business companies growth Even strategy, and capital been a the recent the believe total over stock attention and a operating $XX is to exit. it estimates, additional have accretive organic that inevitably royalty sector from cash institutional will we about opportunity market will accretive will grows right and our our we proven acquisitions the each come our call royalty from and attract lead to years. just with a make treat earned peers, with institutional mineral public We ability continue investors. accretive variable with and have equity need along and return private private with sponsors public with However, XXX% of sector. XX%. and to and a market our our along believe distribution to consolidation ourselves one will in the in mineral of leader our top-performing still size, size, in quarter, These more have acquisitions a complicated, a public expenses acquisitions, years. an has no believe peers the unique the lead private more fairly. that By growth This last the We interest, sellers over sector We markets. or in and opportunity the growing mineral we as the that liquidity, have to capital are and this five market over tremendous only stocks out by represent pays volatility, into X% still of invested we that with proven holdings available close investors billion creates increased of inevitable. Through generalist diverse two built for billion-dollar

and an for provide also our investors. favorable extremely advantageous structure tax We

be to for this strategy in value a our enhance and our unitholders. continue will to We execute space leader

to active maintaining conferences and understood. are with get and story we addition, our In heard meeting a investors schedule, very attending

the Given we class decline the that our universe. asset fact operational and upstream believe performance we company we with diversified are least royalty that best-in-class PDP the oil-and-gas record-setting risky rate, are in a a

you within getting its before, can both X% institutional are we while acquisitions? now low the class been in business To to for else its a around an as for with assets, With place upstream that years, is find with conclude, an proven has ability asset yield operator, sector through started. questions. that, oil-and-gas over and As and ready grow approximate organically just stable where business royalty the a we've XXX has company risk, tax-free mentioned model

Operator

[Operator Instructions].

are of questions John first Raymond with Our James. from Freeman the line

John Freeman

mentioned looking there any Is to you updated that of accumulator kind a So was concept? micro I relationship assets. on interesting build possibly thoughts royalty call, idea. a thought last with of pretty all strategic a that

Davis Ravnaas

about Yes. Thank asking that. for you

in exactly for agreement We with a long are partnership that decade, line actually very kind to time, we've signing some Dallas a track known record. an in that, and close has very a with of group incredible over

in-house, of hope but so perspective. have terms whereby parameters that next to hire into from to XX XX definitive - we're would us. game announce signed, that something a working to them we with quarter to This something to obviously, without believe, been documentation are, an We So to G&A to that in very we very invest entering under agreement report here us a it's, having of very attractive no advantageous a we certain accretive framework allows have hope and kind. ground do partnership guaranteed, or people has on nothing

John Freeman

a have I only really drop-down sort And parties And just you one sponsors that's you've then maybe know you the my because think done of - still one potential. it's potential market, don't your - with just how I component, by think of other view still public. well-understood. the really the just are and contributing and follow-up not remind drop-down sort underappreciated everybody could I'm drop-down, while peer you I question

Davis Ravnaas

Yes, for John. asking that absolutely. too, Thanks

hundred sponsors down We have are that million the is company. hope dropped of It over several for those held assets time. our are private our dollars assets by that

opportunities. right now but in future, now, I at coming third-party think some M&A we're have right with it imminent inundated and point We nothing is the

activity are for Phillips the So those best agree we our huge out. don't so grew The M&A it's assets. us. I More us, was staying It's on organically it mean, I have peer more the we more And on advantage production was least general a expected is that on attention royalty of than quarter that time quarter frustrating head. so to over the a time one obviously, this we've quarter, going dramatic volumes captive what drop-down inventory quick we're, only believe the outperforming. performance quarter to opinion, kind head did about whereas we saw group this performance. I assets, of production drop-down or don't see the entire has people we I X% at of you, and they're the continue actually your is focusing a some and to the underwrote I outstanding undervalued, We our with to execute less be gangbusters but many we've grew price an production people but we to across-the-board third-party also I high, above far, the note specifically, in think morning, hit if go that of because I peers we're the entities the XX% been nail And pay volumes stock though, benefit this have, higher-growth us. John, announced, opportunities, our away several our just them, for after kind had think is with I so been and mean, of continue acquisition, you just and we the think appreciate. on X.X%. be totally our that comment, to ever and down companies our at might publicly-traded beat we

think also like in strategy part resilient and think how, capital cuts, quarter an this, companies basis, cycles. commodity the through environment this of E&P showing a how is our discipline the only on on I but through being cycles, really not price relative CapEx where is So seen we've with first the capital allocation this I

is us. a So this huge quarter for

really see this. to investor of with the seem assets doesn't of be I we performing any proving the couldn't it's think to that that are our disappointing above even performance business. happier It's and the expectation, understand community very

Operator

Schultz of next RBC. questions Our TJ the line with are from

Torrey Schultz

bring need accumulator So evolve more mineral you it getting the bigger partnership the on how is of companies they with competitive of the a your the bit. to have? table, response considering, more to dynamic new to to is what they out that sourcing and or you're that trying just change mineral with there, just relationships you're in kind kind understand, little seeing public to asset-specific I'm deals,

Davis Ravnaas

Yes. No, great question.

factors. it's think of number I a

it's have is market biggest portion assets billion sub-$X is I the the in think, first all, that but of owners the micro-cap market, of so that mineral size, largest segment by the size. million mineral are that held $XXX of in

often very, And and very, so that I think, what get we've seen, can market, attractive deals. that in very is you

that ground that played years been last, and a and in that relationships over into really, market. incredible never have been We we've to an in the to from. three in benefit micro-cap record it, we the market, could partner on experience find in interested moving track field We've trying and the has always two that

which DCF, a and assets the $XX,XXX, meaningful. some able of revolver are appreciation the want and also our M&A smaller size, on $XX,XXX roll can but I them it's per market they so and modest execute by deals amount every And continue are in want finance you drawing $XX,XXX, very - be up quarter of and but of significant think be driving to unit we enough these on only to kind opportunities, production we to huge address not to - these to growth in

growth think didn't for previously And our new company is so we avenue have. we this a for that

many assets one be so our think interesting. Viper already could Texas, that and game, think example, very they got of isn't attractive, going there successfully quite excellent partnership has we We found group are in West all there back, competitive do that's of for any something that those a is this. them. deals, quarter, Some competitors it's very so can of an group Every to ground getting forward. form buying we right that we've the and hope The formal pricing we -

Torrey Schultz

billion that a there in mentioned seen you kind for market of We've $XXX while. out size. that kind then And of mineral

monetize a $XXX market not trying a you exactly you You're about all do public set When may that that bit. just sure acquire of of mineral the to public just little of E&Ps I the down kind want minerals? has to equity what differences go know that's sandbox a size a for I'm mineral in ballpark companies, private of but you or some break think of billion, held realistic have saying And second opportunity maybe the mineral think but so calculations, for invested, then that, maybe subset by those size to minerals? what for to kind do market that the you

Davis Ravnaas

with discussions carve minerals, deals various or even monetize to potential and doing they companies We're their in an E&P out override, Yes. about where us.

that own size, $XXX estimate billion, with just why billion We've math but so the I market people we relying we're level, estimates on is think overall that. $XXX our our $XXX other of own mentioned size seen billion. that's our at and

think so Permian what, U.S. but that the the XX% but very groups outside happy in now of active the we're has for very I one is, Permian. Permian, the oil successful only also us, not production, still investing the is really of and frankly, that the in Permian, of only been we're

better It's peers let's in the I'd - the are there. returns. our deploy we're that's perfect it, more less the candidates going for and But allows of very So more competitive competitive, us, still XX% capital Permian non-Permian us to market just say, to and call market. generate participate active of

game obviously, open going right the I'd are half be but and folks say other and question, I'd - your us, Permian probably other anybody, say I'd of in including taken answer XX% then by the for is, wheelhouse. that our is that the say specialists, half to Permian So opportunity to is

- at they're looking I'm market of out just team So sandbox. and I'm our here, talking is probably my I loud think - nodding XX% that and

Robert Ravnaas

And inbound and that or the another facility from alternative a size, the of other are E&Ps $XXX market to overall think. market financing than we've I right interest looking using probably royalty calls bonds, credit to thing, ways their of TJ, had that - would is $XXX that's flurry techniques now, so rather for billion billion

Davis Ravnaas

because look public. following and we I us mean, And, you've TJ, know you exactly. went since this, Yes, - been

in whole acreage really mean, we're rate, of environment obviously, PDP we not this really ones that, activity of mean, not think have what just basis, doing said, take more - I we that's I production outstanding reiterate doesn't mean, this We it that's happy a quarter on for the be a for is Glasscock, so also EOG production reasons big - some it with relative to basis. activity big to across-the-board XX% so of I well could on when you the on one some had a Dewey, in just what exactly company. us only decline with come County. we're just quarter. on positive Gonzales generate was wells growth, driving meaningful an on had kind seeing. an really in come and I in your wells absolute on but some growth lot I We

Operator

of questions line the Our Stifel. Tim from next are with Howard

Timothy Howard

be a timing, tax conclusion, going the available. could maybe what's provide preliminary if some potentially you analysis, more to details that's on Just on if included, and all

Davis Ravnaas

been weigh our is, for gives to and on current to to the have this, taxes shield to think it often of most and rather what's press several X We to basically years, actually receive Big and we today, complicated, in very rather I'd I quantify release - that. but the had in detail. can tax the firm had is always out we accounting a the also hoped questions - XXX%, tax specifics, I and obviously, it's is involved lot complicated, to one a we've of but a experts so give we're then model generalities. to speak going next something to a because are plan legal be Yes, wait going building very so that announce have to some I'd thoughtful

as be the - outlook as unitholders multi-year goal can much to at to of able receive will our the the of release to hope kind to also always transparency investors, we is, management of be corporate what percentage on we distributions what our not treated and want you the be, Tim, is as as but would capital. so our to And shield do possibly that so provide tax is level, return that the a only will and

mean, can that going And so mean, can so - making investor assets investors I decisions. an as taxes to it's a thoughtful, the I you're conservative is that in we're obviously our we you're we on conservative huge after-tax yield. use getting be that's company, and it's putting in if you're about yield number. as X% that someone guidance cares as specific - our and we're that can out an as our

investing other you X% when to industries take in a XX% in to It's and the should So opportunities really X it's you X.XX, in top it class. that other is really like to like which rate. be opportunity, - and asset it compare divide can minus tax a by comparing low-risk be it yield, you generate

number hope understood - the And tax years. to I'd So mean, done and going really that our not the are that's be we have that's why work percentage to it's consensus. probably of and asked I week distributions that it, asked out high two. the say by something about questions getting of free think you then next general keep for people, very we've and I about being a to it's a or be going in

Robert Ravnaas

agree. I Yes,

Timothy Howard

like XQ into And there a should second or we The any is then just speak that just wide. that quarter just It rate that, above if of so of conservative half, to guidance the could kind high end run is you was through on a the XQ at Thanks. well maybe level, range anticipate pretty headwinds the guidance? seems XQ. provided, is

Davis Ravnaas

the so credibility guidance, we year that I important that that we that guidance anticipated this is We provided Conservative Yes, numbers and out think with there. the establish great we've first one. put question. it's -

- other goes it be probably most Tim, quarter, quarter as is plan, do, that by that range after - as companies the point, our not the of next the for significantly So data many - so we'll in that the possibly well-run might on narrow year. year because but

we more guys So looking to you specificity at with provide time over narrow when the would and range that intend modeling. company to

Matthew Daly

Hey, rigs. Tim. This as was Matt. is The of rig X-XX XX count

As of production, so but any X-X, our was of XX year. stayed been it in the slowdown so so the whatsoever rigs, Ford, of big the rigs There's we movement looks flat. our to the Eagle outside flat, see basically Permian really of a terms overall and rig count far has rest everything don't for good

Davis Ravnaas

Tim, quarter-over-quarter, talking been it really we've I think activity not Davis I X.X% if I Yes, themselves. up, our organic XX% here. been were surprised numbers on been a very we've been by cuff pretty for remarkable, and - just growth growth I equate mean, has is would the - this mean, speak we've I acreage. pleased. been salesman the - how - We keeps here. the being that robust it's it's frankly annualized mean, off mean, very, to just so I'm

Operator

Wei are questions the line Credit Jiang next with Suisse. from of Our

Wei Jiang

to interest the average comment should running additional the wanted be portfolio? for follow you the about royalty just on your activity. of interest how we How thinking you your just rigs in compare in have details the I compared XXXX? XX earlier asset. net in on that to assets the does the it activity your up Thank presentation to And those rig on

Davis Ravnaas

that? question. Good want do Matt, to take you

Matthew Daly

Phillips. sort apples say count. have same to of but Yes, - I the net would X%, don't Haymaker the average to roughly of year, flat - on it's closed is didn't be I in oranges. slightly last mean, it's rig and We so sort the average. mean, activity I - of We in terms the That's have interest July, relatively level up The we going

Davis Ravnaas

we stuff guys the that correct? X.X% of older, slightly than with that wells, to some X% X% horizontal mature maybe you have. on Would higher being on agree directionally

Robert Ravnaas

Yes.

Davis Ravnaas

answering So X.X% would the X.X% one, I your others think Wei, kind in have - in good level with and be holdings, and Phillips to much guess kind the is of which pretty of a pretty of we I KRP so interest legacy that way Haymaker on in average. line question,

was areas have very units interests, revenue big interest, we other had we net fluctuates, - where stuff then it really revenue quarter we net some so we have have and low had where but we Some this pretty similar, Betty. pretty you're on you should I would net - about I being rigs a at thinking basis like now if start lower say exposure similar. these before, than getting it's to our wouldn't high

Wei Jiang

And then the one question on acquisitions.

attractive more As see opportunities as do you're you perhaps, unconventional has decline bit is evaluating all at right which which market, higher pursued? you on greater opportunities your the most now? have than region appetite a in to evolved the emphasis historically assets, what then had And

Davis Ravnaas

long going and question, short. try I'm give it of to answer. kind to Great keep you a I'll

of in good groups near-term market, ahead buying so most that the drill that's right? And focus been unconventionally equity So shale invested or the the A&D the in money focused, the job has minerals private cash producing is equity flow is, private of looking basins obviously, and and kind bit, they're are now these to monetize. have a done properties that of in been M&A

lot are model. have the making strategy, not we lot shale to We So assets don't presents that cognizant acquisitions, to right? buy us of making more consistent decline or those a XX% company's the because but acquisitions of for that XX% of changing that's near-term opportunity just rates, want set very our I business a think with

have more we do to in to that intend attempt balance what mature kind with what acquisitions acquisitions So is shallow - would very we declines. basins of that

it's that's a another a has then and little the and lot of again, flat kind us bit might announce one see of exposure, to big that that so, just decline strategy acquisition you after same out. more unconventional of a And it stable balance

be that the what then here. part opportunity M&A And of the your second ideally, would, I would So look we apologize. was question, at how set Betty?

Wei Jiang

see you more do the most competitive, regions you that go you so opportunity, earlier would lot Permian which mentioned guess getting because I where just No, a next? is acquisition

Davis Ravnaas

Yes, a that they in Permian, their I at mean, Permian just look groups just only sponsors mandate that have buy the can are there the to a lot of from alone. they're so being forced and

say I'd now. buyers fact, the that's of mineral In majority

Bakken, the have Appalachia, success to think Ford, to would Bob, the we've in the that anything had add places most in Haynesville that? Eagle you order. probably the like I and maybe

Robert Ravnaas

it sale is a looking an the in I comfortable always buying we're agree. No, one basins. major at Yes. And because of advantage multi-basin, have, too, we assets and just familiar but all assets multi-basin, isn't basin, agree. are so in I that

Davis Ravnaas

acquisition, outside of we so so perfect XX% that's not and in the because far. at think it's buyers from XX% recently their us a interested to volumes kind Permian, what's is Eagle their don't seen underwrote think the been understand specialists assets to us that, and run the a in think valuations, up it's scope. Ford, buying to comes sponsor but again, in either not assets They I XX% They particular if want have for in I when above And or that aren't the Phillips and home their a is Haynesville, have level, allowed made. one mean, a right, and of I we benefit that's what strategic It's specific we've exposure. the just most basin. in want buyers, basin, Yes, be most reiterate, multiple-basin the - that's which for for assets so did to Bakken the are Marcellus, assets you've just is pick wheelhouse. the the acquisitions us, from better performing of up us, don't we when I package that

Operator

back to concludes I'd like This you. turn our question-and-answer Thank for session. Bob the closing Ravnaas floor to comments.

Robert Ravnaas

everyone, thank you, and joining Thank today's you for this This morning. us all call. completes

Operator

Ladies your teleconference. participation. and for conclude This gentlemen, today's thank you does

and may You disconnect day. wonderful a lines, your have

Kimbell Royalty Partners (KRP) 11 May 192019 Q1 Earnings call transcript