KRP - Earnings call transcript Q3 2020 | Kimbell Royalty Partners, LP

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Operator

Greetings and welcome to the Kimbell Royalty Partners Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today's call, Rick Black, Investor Relations. you. Thank

begin. may You

Rick Black

audio accessed kimbellrp.com. also Events of and on and conference be everyone. today, on recorded and call third call for operator Kimbell operational this to Royalty of can only link the IR is November This XXXX. Partners to quarter as XXXX. webcast page of the good the the you, through and section Information Presentations Welcome call morning speaks the results being Thank review financial Xth,

financial So, any longer please any information be Harbor's like performance the forward-looking pursuant historical to the time-sensitive accurate of would that of Reform of made provision are discussion not that to I advised including date expectations facts, statements be that today's or future may are made remind statements you as Safe Private no of of XXXX. Act replay. statements Securities the in Litigation future or events also the

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

Bob Ravnaas

Officer; I'm call. for Ravnaas, President the to Davis detail. with both appreciate in our the to our with everyone. to very Chief performance by of senior had a quarter commodity joined resilience you largely pandemic our through several strong over third pricing you call Daly, joining the handing before Operating Production in our were Thank members Chief improvement like many walk overview place providing I'd year, Davis our production, this the this Blayne business and increased more were the We an financials good curtailments, and again morning the Permian quarter. during We proving good Rhynsburger, and quarter including and Ford begin Rick Eagle of here call of you, earlier which once in us Financial put reversed by of in on height team, Matt operators management our Officer; the in the model. the during Controller. a

were assets quarter. the curtailments place largely third However, still during in on our Bakken

are rigs prices. that the due XX our to in hopeful drilling QX was commodity in the end in XXXX. QX end count five at increase second drilling rigs a of Haynesville, occurred biggest differentials on acreage There improved of a XX. the of the number uptick We eight with these to to increase reverse The slight of in at drilling quarter rig from will XXXX rigs the from

average improvement per positive future very full expected very approximately curve. this XXXX in full year and both have expected for our this natural XX% of are futures year our improvement price year-to-date Mcf, XXXX is a production payments. year. from put With price prices To distribution based natural gas gas $X.XX the per far on QX $X.XX We prices. Mcf The have meaningful a flows to this natural quarterly prices, the the cash excited perspective, gas, natural could gas in in so over XX% on averaged XXXX improvement impact see daily XXXX, the and

weighted we our a Marcellus. in addition core the a major concentration of daily amount the significant production, the gas gas also U.S. to in inventory of have with natural the basins In located Haynesville areas future across and drilling

expect We of quarter, cost continued demonstrating this control gas also these G&A business for focus uncertain drilling on and record from our times. benefit a achieved to In years come. per the significant Boe, to inventory cash third natural our model the we during low efficiency

sheet hedge make acquisitions flexibility future strong further balance our and growth. In that -- accretive flexibility addition, for our accretive provides to book fit solid criteria

impact production commodity political our such regarding prices. acreage or prospects. consequence royalty a frac federal natural of frac energy in on would a the in the federal close future than material any ban hotly oil could on on acreage our With anything, acreage If supplies paying have and to causing the the discourse We overall federal U.S., less fracking ban on of industry. not in drilling potentially spike attention lands, potential unintended contested disrupting of are have X% a gas

we a As our the party remain leader that nation look global Washington, which no political matter in will and natural come. oil we decades the industry towards continue confident for gas controls future, to to be

energy hedges differentiated U.S. asset compared a in is royalty pricing pure Focusing companies the among on Kimbell very specific more mix we substantial the best in heavily diverse in the and that PDP a our and highly commodities low decline to have business which industry. model, a closely sector. with natural gas is is with concentrated strategy base, rate, model a most

believe to stable. tied not assets sustainable, These broad royalty basin, to maintaining an are mission particular consolidator a all of and KRP this we of one long-term continue All and in a particular sustainability strategy a diverse factors to portfolio idiosyncratic for to of will basins is unnecessary be design. continue risk. across contribute operator royalties growth. of our which creates our that major the and of company and believe We a mineral We of U.S. these aspects vision we created are with by

gross Since has five-year Kimbell more over and XX,XXX Our the in demonstrated million include XX%, of forecasted over organic mineral acres PDP XX production XX,XXX IPO, states one the interest than of peers. and decline among wells lowest growth a our gross XX is Permian our only which with in minerals wells span Basin.

business, themselves accretive in company. coupled flow assets and characteristics a These scale, storm, right of economic is strategy managed team Our situations the and to cycles for a successfully leadership significant be not Kimbell quality also demonstrated number past well-positioned present over through believe this very our of has acquires with cash and as several opportunistic only decades, weather future. high growth, our I that consolidation proven the strong have the but

contractually flow advancement diversified to couple tough distribution unitholders. strategy Our and continue long-term PDP and of that from the economic substantial preeminent roughly our goal decline a is production our since believe is years, a And the as XX% in free our challenges of our recovery. cash consolidator generates is to hedged next low for of participate ahead model daily substantial is portion that we for of to for of business positioned production and any eventual our natural gas well minerals

and a to our basis unitholders that a common robust distributions investment believe offers its and XXXX instead capital considered opportunity yield expect in to units. growth be return tax-free opportunities through We we a distribution to which compelling extent also be of of substantially with a Kimbell the

specifically. to pace the energy with remain ended new we completions that, and And uncertainties primarily remainder the in significant very U.S. business energy of sector, the of XXXX, drilling and of related our Davis. remain the about the call industry U.S. to XXXX now While turn future for and over I'll optimistic the

Davis Ravnaas

everyone. morning good and Bob Thanks

on third quarter, Eagle As we and quarter, on our curtailments largely discussed themselves Ford in reversed our call last specifically Permian properties. the

third assets our in place However, the still curtailments quarter. in were largely on Bakken

that also improved reverse quarter fourth these hopeful are will We the in prices. commodity given

is strong more pleased the are our of portfolio with fact production asset as as We heavily natural diverse the that mix production. continued large and to performance weighted gas well

Bob which over out next could compared significant up XX% futures the price ago, months in prices few improvement approximately the in company. a gas As XX projected cash average a flow the the be last laid generate to moments for as XX months, to are natural

rest production XXXX. for into and We by pricing the continuing and are XXXX the are way of encouraged currently positioned

We continue significant QX amount a XXXX book robust a hedged of through using production swaps. with future hedge to maintain

continue acreage as to our very wells strong result to strong addition, the a maintain we a of In inventory momentum across uncompleted and on permits pandemic. drilling drilled just of prior and acreage our

and oil wells resume to conversions comprised from run basis occur approximately when Boe was average XX% We rate on production expect NGLs. XX% crews XX% company's third liquids, provide natural and operations. these X:X gas producing to even quarter more of from locations per day, from frac as will profile stability from our XX,XXX daily a The production eventual XX%

on net of wells all As XXX XX% and end September drilling time. Lower the of acreage. and XX company in as well XXX of of our actively net the at had uncompleted on gross rig market Kimbell represent rigs X.XX permits share acreage, Also, September, a but that its as drilling as XX XXth, the had gross activity drilled which X.XX

gains were third the which In a combined average gas natural For $X.XX of liquids $XX.XX. realization total Mcf of $XXX,XXX. of barrel per reflected $XX.X natural barrel realized of of of oil, QX NGLs gas we of quarter and approximately $XX.XX prices hedging oil, realized and million, per XXXX, natural per $XX.XX gas QX, the revenue company's for Boe

non-cash $XX.X On our per This XX% to XXXX. unit. for October cash $X.XX prices. distribution. Kimbell in cash its million QX adjusted were XX% new the ability times. is G&A non-cash uncertain was of focus million XXXX available $X.XX per its the was or payout million, of per The acquisitions common declared of expense a compared for G&A QX side, future. quarter Kimbell reflects test $X.XX the impairment the on QX an was by these increase ceiling QX third during of for quarter administrative million to in intense weakness distribution expense record expense expenses and attributable loss for on or million XXXX, substantial XXrd, loss which available make cash $X.X common to approximately million the impact units reflecting liquidity $XX.X $XX.X reflected which was ceiling marks the to Net a of generated controlling during EBITDA or $X.X or impairment cash recorded The costs QX, QX consolidated distribution to per expected loss was $XX.X common net unit, and general the as test commodity for related This in Boe not net low Boe. a the

the Kimbell's facility. down strengthen of outstanding the sheet credit retained use balance under will portion the amount and a pay to We borrowings

the and company manner, a sector and the events unprecedented uncertainties broader in year's manage to conservative economy. the this continue in prudent We given especially and energy

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

our certain credit was satisfaction Looking on begin which in liquidity. additional including approximately are Increases approximately the $XXX XX-month XXXX, had million major balance current aggregate by under we approximately have equal $XXX the and lenders. September accordion from new and announced capacity revolving in release. would $XX debt EBITDA revolving trailing in X.X of consolidated and disclosing base, sheet that were borrowing this million commitments properties, additional Kimbell's our outstanding we conditions, pursuant and permits debt At earnings in or feature continued Earlier subject of times. if commitments Total its now disclosure facility undrawn to credit quarter commitments million we at basin XXth, to existing this million. or year, Kimbell $XXX.X DUCs is the facility to to third QX obtaining our the

to business. will net our of and to in Kimbell's operator, questions. long-term XXX we appreciate strive we As could of to years value add based With include our September permit XXth, X.XX I permits an XX% Kimbell the net gross the on in strategy We properties, the generate X.XX period. investors to data and interest additional believing at does which ready for permits, DUCs inventory minor reported end DUCs, to the DUC This gross XXX XXXX, we in continue not estimate our we're want the come. your on experience. that, and for our thank acreage

Operator

you. Thank

conducting your be proceed session. Suisse. Instructions] with Baker first question. question comes a from Our now Please will Credit We [Operator with question-and-answer Chris

Chris Baker

over sequentially hope could I guys seeing of Any back like where anything and there? count about Haynesville. It from up terms to growth next you eight. talk guys major of little operators growth that looks robust more you're what morning. the some good rig the certainly you points sense in bit your volume a Hey year? with potential you are in hearing that And

Davis Ravnaas

question, the for thanks Yes, Chris.

area portfolio. frankly, feel seven -- River. the doing our result Red Haymaker of fact and material, K, a we to. a that? Parish, had very I but next of that And aware has years uncertainty a lot with position rig one of or Chesapeake which in We one conjunction we were Bob yet we is were natural together anticipate I'll haven't coupled or Matt, play largely fact anything It's investors, Haynesville legacy that of Haynesville better guidance about shale the made of with are want I the the But do. any guys I the just was to putting pioneers not been It a think not that else attention had new add it's a obviously production. release asset we're market. and private, We're assets, well couple company, -- that think our ready in ago. operated. rapidly, the Bienville stress, the that the in acquisition those to again, years -- County XX the that can so this, just Aethon in gas prices still the Bossier count originally to Chris. -- as we largest in of up good know, was paying and in We going that part you than six story you we In improving given were confirm Wine our And so ago, wells year. public dramatically, of all by the that had for

Matthew Daly

would our wells have in count Typically, the news that those XX good Yes, can just that on I is presentation like would net higher just we that revenue well are that points basis the being closer say say -- in wells wells that's currently of the drilled X/XX, rig I are average this Matt. see to is that investor lot interest Haynesville, you drill. the the X% a interest versus we interest. more

So when net of that benefit hopefully the online hopefully wells QX, year, interest. say, come next of we'll revenue get in, higher QX those

Chris Baker

And And in at cash a recent can and you great. as certainly there. a That's the rate what then progress about beyond? of we to the just run improvement side, on in quarter Can sustainability cost good some talk follow-up clean G&A? maybe see of continue fourth look the terms

Davis Ravnaas

Really you want smaller cost than to couple hard which want permanent of that vendors Yes. or of you just terminated question. worked sustainable is about reduction anything amount canceled. detail virus, G&A. given because our that costs. to any good give reduce to or marketing of everything as more I in related a answer couple with just We a were of classify the for do specific We traveling that be Matt, would to might we and any relationships. It's some to add? investor lot a the But that we got there conferences, didn't relations that cut of, and

Matthew Daly

-- was as you Yes, $XXX,XXX of yes, million. that's the acquisition. the Springbok basically, associated I cash know, with I QX G&A was mean, TSA mean, $X.X that

Davis And So said, to lower fees is, it down million, QX. $XXX,XXX. so run you -- professional rate million drop really about it's it of in back as $X said, just lot was the a was overall. $X.X was again, due lower QX, in activity as

things probably looking would so you going it's cash up again hopefully to fees. at say more record activity, I mean, transactions next more and per just with say I of additional to year unit up wouldn't tick some as X.X% low So forth. get we're extent a professional is I the Boe -- That's ramp as $X.XX. a

be that's say February. So, but I guidance little wouldn't when release a of a would earnings better say QX that bit the that's would on in higher -- I -- sustainable, we'll that than give we sort

Chris Baker

guys. Great. Thanks

Bob Ravnaas

Chris. Thanks

Operator

with Raymond from is question your Please next with proceed Halbach Our Harry James. question.

Harry Halbach

I shut-ins estimate in quarter, could you percent. give guys. if like me wondering morning somewhat as Good an of was a the

X% but said a you just the production decline You quarter, all from what's normal sense to down trying or fair get I'm a like it just X% last of obviously saw? came

Davis Ravnaas

you or think? if just Good to wonder tackle Bob, question. you What that do want Matt first?

Matthew Daly

Yes.

mentioned -- related the of was So drop so the out quarter X% to of we the quarter, X% last the curtailments.

that reversed are back we That's day. All are QX. of is in those Eagle that XX estimating that Boe and in is and XXX reversed we're and QX per will in Ford basin Permian. back that -- curtailed the come Bakken and currently hasn't be to offline the online only and hopeful online not currently that's production The the between

take by you XXX current or XX,XXX our daily the if production currently of divided that's XX currently, curtailed. day Boe our of that's So, per percentage production

but very it's small, can difference. So, make it a

so will in we're online it QX. that again, And hopeful come back

Harry Halbach

Great. you Thank the are any to M&A, commodities? interest gas versus vergence the in in you. split And two then in right properties all regards given seeing oil for meaningful

Davis Ravnaas

directly are that active we front. of success and discount an to looking using and very not on We'll we're equity right focused want cleaning the do this now recently. at in had really to just still in much interested we sellers But up balance at We've don't the past. cash. cash raise the as environment we've an given at as the in We're we been fact sheet Yes, raise we M&A on a unpalatable in to are issuing the acquisitions. can look that doing units lot

bids. making still we're So,

all into just is for free that dividend XX%, equity. stock is still yield, the undervalued. cash yield we're mean, I XX% trading at I think the challenge XX% flow us

high work. so to accretive just M&A And very the make is bar

think and And adjust to need they're more or It's it working still environment sellers in to be the lowest think, function the that the opportunity this to supposed acquisitions to for just down catalyst, little the these dramatically, just arguably those that. agreements I not realize have. still the in mean I on assets. expectations peers, But submitting think equity-backed so a best amongst that best bids. challenging. away. sellers. we're should firms monetize positioned have which of we're the is a going acquire They them trade the of cost to I these takes partner It's opportunity. around time, eventually of when the public And capital we to or trickle companies, that consolidate is So, to the There's private our down us there. limited that portfolios clock bit

as little pertains everybody a Haymaker we it to ago. and enough, Now, we gas. seen that And oil was to question two hated like mix, bit versus on the largely made contrarian. we acquisition have aggressive your about more on aggressive it. get people gas gas be We Funny were years

overpay gas but this to becoming them, I So, in increasingly more assets think to We're for oil we're not interesting. we're some going are assets going not to at going look and environment. overpay

short, we asset to quality and really question M&A Bob, think successfully wanted? Matt, on long asset we side that anything in we a months XX to we mean, competition our of that add us concern or -- like guess hands I we execute any didn't and got of. we've pickup six on out that our that I exist gas deal strategy. went impede missed even out or don't I somebody Bob -- seen our have else to that I'll the So, ability the -- any doesn't seen have ago. that But

So--

Matthew Daly

That we bit we've of no put been number bid little really lost of of because is it just sure There was quality was a that where fair no. a shareholders. bids our and deals that deal it but we wanted happened. we hasn't that on, No, made lost because a that that There's bid price. to and a we accretive really,

lost on. So, that we've nothing no, there's out

bid few been However, on. we've quite there has a that

Harry Halbach

guys you my question. taking Appreciate Great.

Operator

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

Rick Black

we today's Yes. report speaking and call. Thank look quarter Thanks forward for everyone. you results. this year-end joining and again This fourth completes when you with morning to

Operator

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

your disconnect may day. have and You a lines wonderful

Kimbell Royalty Partners (KRP) 7 Nov 202020 Q3 Earnings call transcript