KRP - Earnings call transcript Q1 2020 | Kimbell Royalty Partners, LP

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Operator

Greetings, and welcome to the Kimbell Royalty Partners First Quarter Earnings Conference Call. [Operator Instructions]. And as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black of Investor Relations. Thank you, Mr. being. may you Black,

Rick Black

is and Events conference everyone. and call first IR audio kimbellrp.com. This for Operator, be of and Kimbell through section Presentations accessed operational to page Royalty the the call XXXX. of Partners to on quarter being good you, webcast Welcome can the morning, link the results also and Thank review the financial of

any please time-sensitive as only may Information are remind in recorded also expectations Act be made pursuant today, considered X, accurate including discussion today's provision advised XXXX, not call are to statements the like made the that date safe replay. be or historical on the Reform or longer of so the of information or May no speaks events Litigation harbor Private Securities to of facts, performance, I that forward-looking statements future of this as of you any statements, that financial XXXX. future would

press We statements. forward-looking statements outside of nature, control. by today's part will materially. refer be which Actual to are and company's as the as are Please of making Commission. may These today's their risk differ on disclosure well filings uncertain uncertainties, release in described factors Securities factors, call, and the detail and results Exchange our other in company's for the forward-looking with as

for distribution. or earnings statements. no the the assumes refer also at any press publicly EBITDA to non-GAAP cash measures, Reconciliations will to update Kimbell to available GAAP adjusted obligation release. Management today's be forward-looking measures including nearest of end found revise can and

Bob to and Partners', Officer. Chairman Chief Kimbell to And turn with like Royalty would that, the Ravnaas, call Bob? Executive over I Mr. now

Robert Ravnaas

Davis on Blayne Operating We call including Rick, appreciate you, Rhynsburger, senior you our Controller. here Financial Officer; our several this for joining Chief President Officer; morning, Daly, call. Matt management Chief with members I'm team, joined Ravnaas, our and everyone. us of the good Thank our and

to These like support begin and from our crisis. thoughts employees by our of the we we're and of COVID-XX those the our certainly crisis. prayers times are that extending and community to to with the recovery this assist to safety all I'd unprecedented can health affected by and doing

all are being hard especially and We grateful an responders to have the us by workers. first all. truly work for They of inspiration performed healthcare been

We the the the this during all difficult also of keeping of running country hard and working that and vital legions the supply remained time. dedicated food applaud Americans up over other components to have nation's economy

COVID-XX continuing challenging glut sector existed unparalleled Kimbell's business created challenges industries and recently with contributed of perfect know, supply effects now deeper oil reached and crisis, pricing others. storm began before model an this the price has pandemic disruption. the far pressures record you that the in provide the health stable volatility have than of and energy The to As other believe and lows. fundamental as than more will the market resilient that economic crude most Notwithstanding demand the we

an approximately and quarter, liquidity. outlook. to from improved balance strengthened was our XX% first the gas, of continues sheet which improving our of As have production we have natural And macro

MMBTU. portion of of We currently believe the hedge duration. a and one we both our $X.XX two that strongest books the for terms going gas $XXs form low of all with production and we the out addition, averaging around have years oil of per In swaps and price of in averaging natural hedged in oil in have energy in gas substantial natural prices in

production second of I X this the to the over coming the the well In of number Kimbell storm. debt a months, of positioned down in pay portion past X been weather leadership during our decades a and has team curtailment very of decision we quarter. Our the successfully believe light cycles to through is potential managed to made for economic

with the closing from for the other fund received debt together distribution will at borrowings repayment cash cash the in allocating repayment, facility. revolving We and certain of $XX by credit available Springbok XX% acquisition of the million outstanding cash XXXX under QX our our reserves of for

We is particularly down paying our in right oil prudent. light in the now, of the gas believe that, of portion revolver sector, economy uncertainties the a in and

in provides powder also our additional sheet flexibility. We maintaining strengthening believe environment financial and that balance this dry challenging

on the record effect as date In XXXX. high was quarter case, achieved giving EBITDA. this we and Springbok, of to performance adjusted after a daily now full effective acquisition first October new Touching each consolidated of quarter for X, results, production the

compared was first run quarter springbok year. to up quarter production quarter per Boe up XX,XXX of quarter compared same to barrels Including XX% run per daily was a XX,XXX year. last X% rate rate day, full the last assets, first day, QX equivalent daily oil Our the production of the

United in to XXXX, of rigs compared April QX XXXX the remarks. of Davis XX in more represents We you XXXX. share operating land through which market the walk properties active year-end rigs his increased drilling Continental States our an of had XX, as metrics all during will

fundamental I'd mineral the moments circumstances continued royalty today provide that current in the of of like economy the Given recapping confidence model to space. in unprecedented and few the the spend characteristics industry, about with our challenges us energy a

It our is our important to asset diverse business high portfolio. understand and quality model

asset minerals oil to any fact and make from rather that As we more company. and And extremely do we management structure efficient benefit and company, gas traditional our royalty company not a gas, capital the expenditures. expense is direct akin an an than oil and

all and broad, basins of the stable major Lower the diverse XX. Our on royalty in a builds assets portfolio business across

states over spanned XX,XXX XX,XXX and royalty million gross mineral Our with than more Permian over in acres in XX XX gross wells wells the and Basin. included

of Kimbell the forecasted one XX, is lowest and growth PDP production peers. the decline X XX%, its organic has last only of minerals among Over demonstrated which a rate years year

increased by end proved our X% organic addition, In XX% including year-over-year, at growth. developed approximately reserves year XXXX

These industry one our Kimbell Perhaps approximately of assets importantly, highly PDP P or business, consolidates reserve cash most accretive company. flow growth entire significant proven coupled our have demonstrated for in to the X ratios that highest production a bolt-on with characteristics has of strong energy in strategy the acquisition R years. over ratio of

goal that is our for Our since our to PDP ahead. are assets is cash gas, business the diversified well to producing contractually a continue substantial model flow minerals our portion years, production consolidator challenges our the substantial for for preeminent and of of of our strategy XX% high-quality couple positioned of decline hedged is of free And distribution as natural next unitholders. approximately tough a advancement long-term low generate

growth. strategic month, with announced remember which expect Last Springbok highly we of this as the as add to equity financial acreage that in issued Springbok cash year. complementary of acquisition closed continued seller purchase maintain our to the we Please believe an flexibility. significant flow, has well that exceptional to of a number We continue is helped we half will for was units directly that for nearly as acquisition us price, our total opportunity fixed the January

highly be minerals we current fund well depressed From plan at the fragmented M&A our to prices industry. consolidator strategy acquisition in perspective, continue and positioned commodity to micro as a continue to an

on maintain As targets. plan selection of discipline relative process a through focused high challenging the in diversifying landscape we today's volatility strict current to navigate quality to M&A, we

distribution of to and cash robust opportunity be years opportunities expect as long-term We plan to accretive, a new diversity, and capital Kimbell unitholders. value growth a to and for that want tax-free we creating return its well We also unitholders the focused common of instead business investment offers our immediately executing XXXX our growth. a units. as on enhanced a of extent be prospects with substantially yield, provide flow be production future considered basis We in and stability remain believe through compelling which to

the call that, to And over with turn I'll Davis. now

Davis Ravnaas

for employees, everyone. I crisis Thanks, our all take communities. Bob, moment opening we'll measures safety this ourselves, We our to to continue local and guidance and health Bob's pandemic. good this echo to vigilant COVID-XX a regarding comments and federal, and about regarding remain and follow want state, morning,

Regarding the traded entire book. beyond. due Even quarter X and distributable at oils we cash we in second that are XXXX grow to hedge XXXX, exposure gas that this our even asset flow strongly business portfolio our the crisis, of economic if we generate would natural WTI believe estimate and and effects positive for strong of significant well-positioned our manage still and

want Since numbers plan XXXX the date to quarter, quarter with entitled a will since remarks our to But of exclude effective today. our consolidated I QX date transaction with EBITA followed the without XX, and was Springbok the adjusted production GAAP closing I April in XXXX, recap results. provide First, XX,XXXX, October our in cover of flow, Springbok XXXX. Springbok are we by cash October QX my a financials and XXXX financial to record-breaking first Springbok. production

and Our daily XX,XXX XX,XXX first of prior per oil to was X:X XX% the production per average production XX% XX% rate from daily Boe XX% which was a consisted quarter. of was QX total on average day run from liquids, quarter rate day NGLs; The of relating a natural per basis. XX,XXX in which for Boe XXXX comprised and Boe day day, period production run Boe approximately production per from XXX gas recognized of with

quarter run performance outperforming Oil, XXXX, liquids to in the in a QX from estimates. in gas increased for natural XX months, to quarter XX,XXX wells quarter first past due full reflects to the prices. acquisitions year and company. for Springbok QX high per recognized commodity increase natural production rate decrease gas record the production period a new for This despite XX% prior day, $XX.X. The was was the made XXXX primarily solid realized Boe first of revenues the Including new compared last

in to adjusted prior was QX EBITDA new up broad-based, million, million, with adjusted a E&P quarters, downward of cash quarter first was Consolidated, full also companies, XXXX. while Springbok of portfolio $XX.X a $XX.X for our persisted expectations the flows, for XXXX XX% outperform compared high-quality QX. continued Including record. quarter consolidated pressure Consistent to asset EBITDA

as to were $X.X XXXX in strengthen May $XX XXXX, to of QX, $X.XX which expense side, common down general The sheet in XXth full G&A per XXXX Including On cash business made cash of million of the close will for order G&A expense of attributable quarter a May record of and company on to liquidity. $X.XX per Xth with of expenses assets, on the Boe. the cash also or balance the million administrative Springbok $X.XX distribution holders was Boe. debt distribute QX and the to million the of paid per QX unit production decision $X.X increase

not distribution been debt, down would $X.XX. allocated pay of distribution to cash we for cash have the available unit XX% Had QX XXXX per

high the of recent economic given However, and uncertainty the broader industry. we level energy a this in believe measure, the is conservative prudent markets disruptions in and

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

QX As will units. common loss, gain, Kimbell all that distribution or a substantially non-taxable when sell capital the you anticipates increase of unitholders unitholders know, reduction their the unitholders' capital to decrease be

expects through subsequent paid distributions substantially taxable expected dividend paid unitholders are dividend not and of XX% Kimbell will through be income. to distributions for the Furthermore, XXXX all than to be taxable XXXX XXXX common two to years, less XXXX, from income unitholders common

of realized of in is barrel pricing per per gas $XX.XX, oil natural average and quarter, Boe Bbl and realized per NGLs Turning now Mcf $X.XX, was per the $XX.XX, was of combined price to $XX.XX. first

covenants cash with the XX, to price credit into account in XXXX, base, XXXX, portion the Springbok sheet drawdown balance facility $XXX the were after equal under capacity, Kimbell million. debt million if aggregate XX, commitments and under credit debt all XXth, compliance at previously approximately had million credit $XXX.X in March $XXX.X At Looking financial had purchase to facility of its facility. approximately $XXX.X the and its approximately March at which revolving revolving and in Kimbell's revolving outstanding or the disclosed under $XXX.X liquidity. April undrawn in approximately now its is taking borrowing million billion was XXXX. Kimbell Kimbell current acquisition, fund At outstanding

maintenance in outstanding We to quarter X.Xx. leverage important the the required capital the doesn't outstanding a generally to EBITDA, since $XX other million and occur metric, the is gas oil in cash factor facility effect measure giving pro borrowings, or leverage flow. borrowings approximately is is second free the primary total note companies which which under debt of full to drilling debt to repayment of XXXX, to previously adjusted Kimbell assets, $XXX.X in debt revolving to EBITDA free our flow focus more that XXXX QX consolidated is a forma it generates. its annualized power to and cash million quarter expect After have it of The the announced metric to tend meaningless, of business think appropriate in on anticipated including credit requirements. Springbok approximately truly to of as Traditional

cash depending As use can cash or we a combination their debt substantial our to other in positive real cash have E&Ps entirety balance. each no have of ability on flow in either of portion EBITDA, pay its of conditions. to amount proven our a is down payout a have pay but a free flow. meaningful that a both in market down or negative of we QX, form may X Most Thus, they tool debt, the quarter distribution, free

consistent cash model efficient more generation. far that flow We is free are heavily focused on a simply business

earlier. Turning now that mentioned to Bob our reserves

of XX during barrels of on reflecting the reserves growth XX% equivalent, XXXX, proved increased XX, continued to year organic along million acreage. As reserve made acquisitions by approximately December oil almost Kimbell's with year-over-year the

we properties, to XXX or experience. add gross net This assets, the data in our to release, on properties. our Springbok X.XX to does our X.XX the based DUCs, had on inventory Finally, include DUCs earnings by we able as are permits, net time March which first DUC DUCs permits of XXXX. an acreage XXX very gross major disclose and our basin minor on permits XX% our for pleased the Including not additional could estimate and permit we be Kimbell's XX,

that X.X the months for X and have step to average we check gross which XXXX. wells on data during each online were estimate we average completed for analysis, wells on addition, XXX In net brought month

and also level has transparency providing across not that an effort but gas development of catalysts development both only near-term its show acreage, at on robust future are major increased nearly natural oil We the producing in this to every company basin.

due continues on leading space. not business a changed to recent record Kimbell its Our events, and oil and as the mineral in has model track to build consolidator gas

to continue success across of our to We of ownership U.S. ownership expect the private mineral to XXXX. continue We accelerate. assets migration into do think public will

ready questions. we operator, now that, With are for

Operator

Instructions]. [Operator

from James. the comes question John first Raymond of Our line with Freeman

John Freeman

how the of, the of I talk was about little think just at to payout in about you ratio of least sort more future, the all wanted you balancing strategy, a bit foreseeable lower you'd about pronged likely the looking sort at would the really to in leverage lower more, dry expect and attractive having payout lot that but what acquisition have a kind of is lowering also with opportunities ratio? powder of I this get market, the two

Davis Ravnaas

plan enormous given I is think really a discussion to market, in payout it quarter-by-quarter to basis. pertains as just Board the it the take our the uncertainty our ratio, on from

out. amount we flow quarter, what what we the at So reevaluate to each of pay want cash

We continue to fund our micro aggregation strategy.

couple it -- pretty new your compelling in see to takes on is. to for some checks to experience, accept to Based for a Royalty our owners receiving amounts flow expect of we at them acquisition cash future. months near hydrocarbon of get reduced them the pricing reality the here where So point, opportunities of

market, might months. A&D imagine, is X it slow up the the next, we you pretty let's pick currently, So but X expect call in to to it, as

entirely accomplish directly One, it's extent us with the And DCF that equity equity private accretion that, diversified stock ones. particularly $X delever our things tremendous it highly continue then issued on deals, X basis. doing use to a opportunity Beyond assets to backed also to equity, to with selectively very accretive to have seller. improve per that we on transactions, at see the funded to allows groups all

now. feel about very And it was know being this for in environment. So $XX better it with We're just ago. that's but lot think how things careful a at today, thinking I days I we're oil $XX X

I So develop. we as quarter-by-quarter decisions make management and in on Board prudent only real-time think things it's a our those as basis that

John Freeman

at your sort the change have way sort the the in it's lowers of -- ratio that Does of looking all equity the capital. with does record you cost benefit payout of that it. acquisitions, given lot of the side you're you recent any on the a bigger can at at, And Does accretive that then fact when look where moment the set change at? of your least track using at assets of of -- at deals? especially It

Robert Ravnaas

No, obvious, stock. to like I and same. think the recovery expect obviously, still in use the game the plan we the to a of in unduly not see is major to state I do John, think don't think a start selective. conditions. where happy market don't have any mean, environment you with to eminently our that, sector changes than We're, this before we reflection be other it's we'd I that in kind today. it it's even no, market overall been this our to low, always obviously, we've just strategy, hyper We selective to But, trading of say, deals

I in we groups there's only outside small it. of Basin the of only that's think of buying might the both Permian capable be assets one a -- and

So I continue to think is competition for to going assets dwindle. nationally

a backed the competition and folks it in seeing to attractive private up. of think, an deploy for dry equity difficult, It's really become raise lot I We're way. more money

you'd that think present coming add our as out it's overtime. compelling going I Matt? well of this, some plays to We acquisition so And think pretty into opportunities. hand Anything

Matthew Daly

Right and capital rates looking rate facility John, between X.X% and we're Yes, credit of so question interest your credit with about the and low, of cost much terms you LIBOR just in interest cost a WACC. X.X%. so at know now of dropping being facility

us. of on especially lot the to So generates do cost To extremely it a high micro using capital, extent strategy the credit low have transactions of facility. the it's immediate some of where cash, those yields, acquisitions, extremely we accretion that

Robert Ravnaas

good Yes, point.

Operator

Whitfield of comes Stifel. the from Derrick with line next question Our

Derrick Whitfield

Bob stay for I John's or cash Davis, flow to distributions wanted on question. build Perhaps on first to

towards or guiding As scenario, percentage increasing a look for we conditions the recovery of out will your distributable be flow? what principles cash

Davis Ravnaas

That is question. great a

going can't we and our For at think it's say address for that to likely, we point Board to But a below to XXX%. I'll I I'll -- to. But, If X.Xx, out we leverage on probable ratio -- target back that large. now, yes, get a speak our we're if get our paying when not basis. quarter-by-quarter if directionally, back resume I

-- might pay be in debt to I just environment just history environment. too is, by be we I conservative and But way. it's in conservative want been down an some think other to mean, that cash the directing maybe and we've uncertainty, rather we this with show incredible the reality too

back or I a So X.Xx, confident less resuming start control probably we we to at position which point that's like more we we is feel leverage feel the think under get where XXX% once the and payout. than

it's something So that effect. to

Derrick Whitfield

you And with any your as regarding more sensing the royalty Are in follow-up, my forward steadily broadly. curve? change position improving Haynesville activity

Davis Ravnaas

last eminently. seen the really We have a Haynesville. in not had anything We big year year

You of growth quarter-over-quarter led which had quarter believe it -- to online, huge the X% second might was we last in I come the some and wells company. recall year, entire

So and PUDs very acreage meaningful more acreage at that similar wells. nearby still had We on address.

point, position yet that see in to -- have in the is Shale. best the to natural industry, Haynesville our we the particularly We amongst gas think your

see and in Haynesville. We improved drop an natural increase in gas, immediate outlook expect expect but increased holistically, the gas seen with would impact haven't for the we to drilling an would we associated that to activity,

come Funny enough, Appalachia one see rigs had X of some big did Appalachia we rig quarter, -- from and we in online. this went

gas continue. that the and some to So we in seeing we are expect would basins improvement

I just in that were on ridiculed is by for that "gassy." use And, anybody production being -- always past of of natural word for We even XX% again benefit the will say call. for widely the the gas. again, I'll this We've design. the our done

this, company one gas. exactly investors has and hit a protect gotten the where healthy always our has disproportionate moments natural Our to of commodity had in other. balance relative to it's like oil And

of an this think, a and environment with a natural is PDP rate And where model healthy low gas so, should oil mix decline and outperform. a diversified I

environment, we challenging but up for that challenge. we're So think it's a

Matthew Daly

Just we across I pretty ran overall rigs of And as this X/XX, recently, as just had follow-up we Springbok. comment, XX XX one count. rig our rigs on year-end we acreage, the mean had including of 'XX.

on share actually from to fleet our XX.X% drilling Permian in a So X/XX. the to the XX.X% rigs market from of lower rig We as XX XX count at based rigs X/XX. land Baker went entire a had year-end on increase Hughes XX

And in rigs had we four the Pioneer. Parsley; XX had Diamondback; with with Midland X of County. as operators, we This with Concho; of We all two had rigs is some of X X/XX.

earlier, rigs to we we from had drop Appalachia, expected, in are drop were rigs we Now, X had some had added well. rigs those as a Williston of as -- Haynesville the Basin. two out rig and and rigs, the Davis Mid-Con few X in Cabot the we But went mentioned that

So a pretty is lot of activity -- good. frankly, and this market

Davis Ravnaas

Yes.

kind better you We continues Anything best I our add the share think, else is of acreage, that of market best improve rigs, litmus to rig think of locations for all the would Bob? if in our that. that's the focus people we on to the think drop test on tend way a that than that's average market despite count. showing in overall share that Derrick, be average assets we -- the reason

Robert Ravnaas

No. I agree.

Derrick Whitfield

your Diversification matters, clearly for commentary. thanks

Davis Ravnaas

Thanks Derrick.

Robert Ravnaas

you. thank Yes,

Operator

comes Jason of question next Wangler line Our with Imperial from Capital.

Jason Wangler

that on guys on you even or in about, maybe aspect that of affect Are the how now. May. production, next that might shutting hearing mean, as hard couple you answer seeing it's maybe a April are any I you guys that's more months? real-time guys what lot impact Just or hearing in even But, talk the to question into late whether of as operators a it's we're

Davis Ravnaas

ask you that. Glad

the more think any think is wells for in the that second the helpful be States. United in I acreage a going maybe probably large, quarter the to our given at just than industry company I other -- exposure point and more to So data company fact more we have

that on changing we're behavior, and their seeing are QX And see And are that. so, information to how I able way things end provide activity we're at the with to that, going be going hope, guys, the changing. you think operators to of I

You I surprised we've an Eagle the from didn't know this, only majeure we hear might even and Other we've Ford. any operator that's that still that, gotten -- if force in than received you notice be table there the to one are -- requirements existed we to happening. material I other curtailing. know around their any are it's know sure We notices. know plans. back operators notification force legal majeure I'm of we that not looking mean, and provide us look with

what they're notify think to do. reluctant and probably intend thousands we'll But of tracking I that. owners minerals they to be

And lot see months paid to We a get our more. relative companies. lags, X get sometimes months to similar it's how to on that to wells going concentrated X Because production affected or XX in be we are suspense. of interesting even

groups wells, So the out, of just we -- we'll of asset outperform that XXs we number thousands but that given other didn't this relative combined we million small a this the got know how even an the and be of a plays on in check just interest see we small $X it owned. we to of diversification, my that, quarter, would And lot effect. -- that expectation

good nowhere that with out these comes we I kind diversified sometimes. So mean, just news of find of portfolios

Robert Ravnaas

we as last the said quality taken thing, The other we've high really care XX past, to years, over the properties. buy in

probably and small production. and the shut think wells wells overall our that going I the operators to of it's percentage the stripper and happen a marginal when in that's so very, you going are very And to hear

think, I have that, too. against So, we insurance

Jason Wangler

things Is of contract guys and bit the on extensions whether make lease changing kind about hear looking maybe make bonuses not lease like, are something about, kind Davis the down. far of sure coming this And your, -- activity nature? actually, may you things or as bump that alongside on like that leases maybe it's they're and which that with said, of a Folks, you that, that to slow to due sure acreage. or your that extend to kind you mentioned up either of as there to like starting that

Davis Ravnaas

question, good Yes, Jason.

So to by this we is I'll of, we own know you. Everything held that say that production.

going So necessarily away. we're about worried not leases

to recourse. -- allowing allow majeure what of The haven't only force legal we I in shutting expect fact would that them us temporarily, around and which to think that kind we've production we to notice, fact one have given of I suggests me mean, that, leases. in to in me some surprised that me They're what -- all has more frankly, probably dramatically. -- which cases, choking you aren't me, just seen not get which these to pretty tell too in the see, back, -- operators shutting entirely suggests think, necessarily received any the

shared existing don't HBP. business aspect only we have That's everything properties again, not by expect buy of production. to lose because others. a leases, a is necessarily that lot So many we own We unique of our model, that's

aggressive see But to to obligations their all of to value a for start our playing to seen investors as folks. certainly to that we the haven't extent we are to out maximize of yet. have operators we trying games any can So get as we duty to of us, be

these of collect leases, lose in else, higher to somebody your worst and they're operators areas, some and royalty we'll release good new if scenario, to point them bonus lease hopefully proceed And a if that case way. a

to we difficult and this protect can protect we're value our investors through be maximize So, time. to doing our assets, going everything

Operator

further I'd are at management the to for back floor like turn closing comments. questions There no this over to time.

Robert Ravnaas

forward we all again you results. thank the Thank when you quarter today's look joining to speaking for with completes and This report morning second this you. us call. We

Operator

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

a have day. disconnect wonderful lines your You may and

Kimbell Royalty Partners (KRP) 10 May 202020 Q1 Earnings call transcript