KRP - Earnings call transcript Q1 2021 | Kimbell Royalty Partners, LP

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Operator

Greetings, and welcome to the Kimbell Royalty Partners First Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black. Thank you, Rick.

You may begin.

Rick Black

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

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

Bob Ravnaas

our members Operating call. Analytics. President joining Matt We Davis our Daly, Chief Rick, our good Officer; including Ravnaas, our Associate Rhynsburger, of call I’m several senior Marco Scarborough, and our and begin which our discuss and Geologist; with today’s discussion year’s for work Engineer; Pena, extensive Associate review Ryan Michelle this our portfolio, first releasing Officer; Data Controller; Chief we our Thank extremely everyone. providing the appreciate and a will exciting about management team, today Blayne here on the are technical joined our our you, by you quarter. after technical morning, Kimbell’s us I acreage of Financial then Head by I will of from results detailed over team. Pollyanna, comments

for for in questions, we our Before walk financials quarter Davis you over the turn detail. call through the will more

natural distributions shareholders. and XX%, to programs discipline be prices expenditure generation were flow performance on distribution. the as were NGL and cash a pricing the Let’s Operators greater were up XX%. up as significantly realized realized in of compared distribution for Improved our compared was fourth which cash of the the XXXX to up XXXX quarter maintaining XX% primary looking with up focus with in quarter capital start free first our XX% driver to Realized oil quarter. improved at $X.XX, prices the prices gas to with generally their appear fourth of quarter was their

the days X.X production day. in resulted XXX BOE of During lost to United or the curtailments per quarter the February of States across first part freeze large approximately due production a XXXX

we acreage levels progress Kimbell will production improved With year-end in the these curtailments and count XXXX, XX% by rig now to as XXXX. its acreage are increase as behind compared through that the optimistic increased our as activity us evidenced on on we experience

and details presentation I deep can dive our Kimbell The that than detailed to presentation discussing. had More discuss like review of have provides on website a will be resulting portfolio from XXXX, what that and would as of the we began extensive this further come our XX, posted results I portfolio. section information March supplemental it. that XX,XXX Relations acreage a morning, discovered that ago, Now Investor This review new of we our Haynesville, found slow website. Approximately was completions into XXXX. undrilled our the we down on be The year the located costs Eagle well acreage. This of major inventory breakeven of normalized Ford based given some is the the XX completions XX.X on the – net undrilled and upside more is lowest we best of years in total our which locations on the drilling U.S. net pace acreage gross on economic of and estimated XXXX, in XX% represents which during our Permian, of a an rate well has future inventory in believe returns pandemic the

does believe, to to the now identified including undrilled review a locations, gross net independent on our portfolio filed properties in is we additional Kimbell Ryder exercise. reserve for would as of in reserves our number which our order gross XX.X undeveloped could Therefore, implemented terms engineering net book which locations. an minor review. our or however, used Across and This was high below. of major potentially discuss have upside located background report this upside by this interest drilling net track SEC. the our XX% to all quantify Scott, detailed locations, analysis We We Let’s firm, the properties, net to XX both methodology time were of reviewed not consuming for only million any this year-end properties as third-party with having we define acres be it during that as added the up leading revenue very in minor X.X% generally of acreage.

judgment of current However, average between KRP’s gross X.X Management this geology, criteria, per classifications these underwriting counts under major are general include interest Kimbell’s in net upside less add properties Resources Permian. to have development Kimbell’s we These in With Kimbell’s internal consistent Guidelines, our for upside important quantify. DSUs underwriting of X.X% figures locations which fall categories conservative and net surrounding Haynesville we in undeveloped, that it rig Petroleum did and varies proved the database, But DSU regard reserves. and purpose was the System time-consuming include to believe SPE XX derived spacing only locations consideration. from reserve basin properties, not offset generally revenue probable to XX% an and which the believe a than fluctuates the peers. to exercise are to additional defined general our by note utilizing operator conservative compared reserves minor And vary can up aggregate. The the that the and spacing a when size. of development Kimbell’s would possible on is spacing reviewed assumptions approach. by by to wells operators, with were trends in and the inventory determined into to Development basin in takes based the Again, range

properties XX,XXX has analysis KRP So Mid-Con, detailed in Permian, and total just major net, in the basins, as mineral to most believe interests, the major in and including and from alone, long-term advantage reiterate PDP core identified growth demonstrated strong track provides a interest, consistently of decline portfolio record review, diversified well a We owns XXX% were which Appalachia Rockies. for seven our Kimbell Bakken, portfolio this space XX.X net Haynesville, Kimbell. stable revenue in gross and our a Eagle conclusions upside locations royalty XX. low stability the active profile within of the competitive through in the as royalty acquisitions assets, our company legacy organically is that strategic for lower Ford, producing basins a

important to we today decline have I’m by that production to geological we XX our our and the teams keep engineering, the analysis of land extremely completed, our carefully also across In we million concluded of net PDP that dedicated addition proud work months only Kimbell It confirming were gross effort location spend X.X note hard each U.S. skilled rate. to to that analyze given the year requires is superior flat, approximately wells acres XX and the and that

assembling with to capital quality, we in we As decline in high highly generating focused continue royalty I role diversified PDP like and no flow significant gas recurring growth as royalty sector, on remain oil our a XXXX, major requirements. forward U.S. a reiterate potential, low to fragmented portfolio cash consolidator and the move and that

Kimbell future focused on are industry the been sustainability energy U.S. very for our the long-term fundamentals vision and summary, sector. In of we optimistic always about Our growth. inception has across given since rapidly improving

to excited are unitholders to our We about also further acreage years for with over footprint that, the expand And Davis. value compelling turn our call opportunities and the come. to I’ll now to deliver

Davis Ravnaas

Bob, good everyone. morning, Thanks, and

detailed we mentioned, of Kimbell’s deep our Bob excited current dive analysis review the results are As share portfolio. to of very

us This back, by and in analysis reviewed have to regard last so perform investors international years, take a drilling analysis to and engineering extremely deliberate careful to communicate way. it’s to step leading the with and the acquisitive inventory. of We over Ryder conclude today couple third-party important us a Scott was our finally where for been firm, our future independent portfolio stands assist a

trends first commenting of on been update very up with first like results. the Before XXXX company’s through to that, quarter improvements further prices the with provide realized I from we announced in NGL caste realized distribution substantially prices the on Based a $X.XX distribution up XX%. up the prices QX and cash gas XX% flows positive up of XX%, quarter, in on We’ve realized an pleased would XX%, higher pricing XXXX. oil improving quarter

available the down company for of Since to has its to utilized XXXX, million pay debt portion done the company down the XXXX have portion quarters, a allocating cash As May of distribution in debt approximately of we $XX credit flow paid in QX down. cash by its in a XX% QX XXXX. facility previous paid

on methodology allocate to for the pay we mitigation natural for price strategy two occurred prudent available the in believe before that hedges a oil effective and shocks debt place XXXX expect in to gas. Also, for a very is cash managing hedging our We year of in the strategy. on continue price be rolling distribution XX% a down substantial future. future risk to Having company’s basis risks our proves

natural the For $XX.XX and the $XX.XX. higher revenues per BOE $X.XX gas prices of barrel $XX.X $XX.XX oil, gas of natural per of natural of Mcf of liquids per million, oil, total quarter XXXX, combined were at and which average first realized for gas quarter first a significantly company’s NGLs, reflected barrel

curtailments Permian freezing basis and production average NGLs. temperatures first resulted from production X.X gas daily per end the XX,XXX rig X cross-section BOE The of led and at of in XX% to company grew day. up this identifiable of days by outlined day or weather QX the of the oil approximately from to XX XXXX from and end recorded QX and XX% a We XXXX quarter our counts affirming basins. in XX% that was that earnings QX QX. release. XXX estimate quarter, X BOE our seeing XXXX Haynesville U.S. per from XX% approximately we lost February substantial the are and a or we related Impacting quickly compared XX% of our level we are liquids active of activity natural comprised production from pricing, on Production on on had rebounded over first in we Our acreage approximately activity the rigs Based improved guidance with

had estimate gross XX March DUC well gross, could as wells, net not XX% include permit and additional Kimbell This an data net of the X.XX to As uncompleted as X.X and on properties, minor or we but our inventory. XXX which its XXX acreage. permits add net does drilled,

active last lower fiscal solid all drilling increase represented XX% market the earlier, XX the end XX%, on year XX approximate rig our time. QX, which that rigs mentioned from the property up rigs in of counts Kimbell’s a I at As XX at an at of of to end share the

million $X.XX was administrative $X.X side, were expense of expense million which per and BOE. general quarter, G&A On in or the expenses $X.X the cash

for for First approximately distribution increase quarter. a million unit $XXX,XXX quarter to of was common available was net per approximately adjusted common compared per reflects attributable unit. prior cash quarter income The EBITDA quarter the first payout the $X.XX $XX $XXX,XXX to and or units XX% distribution. the common consolidated of XX% an this Net was loss $X.XX

amount borrowings pay portion under credit Kimbell’s to We facility. the will down use outstanding of the retained a

broader As market our quarters, a to is in XXXX. liquidity experienced disciplined and balance sheet given in the manage manner, previous focus shocks our and especially

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

now liquidity. at sheet balance Looking and the

XXXX Kimbell of debt a million XX, approximately March revolving of $XXX.X under facility. As outstanding secure had credit

debt net consolidated facility. And in secured EBITDA company’s In adjusted addition approximately financial the covenants XX with month X.Xx. compliance was to Kimbell under trailing all revolving was its credit

end of about portfolio our under with facility the undrawn of as capacity Our quarter. first comments liquidity position to the strong million was Bob’s secured of review. $XX.X detailed the credit Adding

the detailed firm, coordination outstanding international in on independent this team engineering leading job Scott Ryder third-party an Our did with review.

over number pleased with generate we hope of with the number And business information flow. comfortable even years, very and be number ability long-term to investors are undrilled the pleased transparency superior the visibility our drilling given decline. and Kimbell’s terms to that more that cash two, believe flat and of needed and We small a with Kimbell XX inventory one, this model production in its relatively keep future results provides will that cash, distributions and of both locations increasing wells well be PDP with

with And that through distribution offers opportunity transparency cash hours distributions generation a to opportunities of culmination if of to over with robust units. value and proud With will for and unitholders to substantially dividend that course operator, which it’s investors and We we instead, of of continue expect growth our capital for ready to XX and the of We Kimbell man XXXX. goal last believe are of be the return taxes we come. focus of our team income considered questions. yield, the compelling a its years the a many thousands very are Kimbell long-term be generating free extent a investment of hundreds, and now with basis to not months. common our

Operator

Instructions] Thank you. Thank [Operator you.

comes question. Raymond with first question proceed with from Our Halbach James. your Please Harry

Harry Halbach

strong quarter. Hey guys, congrats the on

Bob Ravnaas

Thank you.

Harry Halbach

quarters, the about keep or is appetite function just a of forward basis. know in strip that I hedging has So last two to the oil leverage increasing in you expect the XX% hedges hedges exposure kind around few kind we a by years mentioned, of backwardation of it your all’s dropped is and improvements for of that the each strategy row more in you falling? of should all

Davis Ravnaas

our take roll this formula, equation has Yes. go our value so the percentage enterprise whatever so Pretty that so. every increased, or production simple our The we in far by plus and up is down. pref or denominator percentage therefore, cap quarter debt or that hedged, just of market divide it forward making XX% year

we less an feel taking of overall comfortable the So to becomes yes, as directly. leverage more enterprise, commodity more issue to the exposure

Matt Daly

And Matt. also this is Harry,

XXXX, the now, a in the next As price steep XXXX. the you as it know, is QX be prices in probably we backwardation. – into roll sort will The hedges of that are will level pretty of right be so the in high-XXs we hedging out

Harry Halbach

of excited and of success lot of deck for Thanks I dive. the talk looking this was a just of very inventory the all maybe formations Great. about some kind you at seems baked like into you seen we’ve upside the of where Could Austin I lately. potential the sort the the what’s mean, portfolio? you kind slide exclude on color. the Chalk, conservative. all And got deep then, Certainly, across

Davis Ravnaas

in the conservative analysis, mentioning were that. inventory for Yes. very We so thanks

open couple up we’ve a and that Scott. reviewed got engineer and the Michelle – on that I’ll and respectively, in by to work this had think, of and then it things geologist, here, Ryder did Marco I

the looney-tunes So, I asset, actually when operators the down this us is on years to XX start which how keep included yes, is the per the to it’s XX drilling clearly, flat did inventory, inventory, to But we people price our assumptions doing say wanted not resulted took we if units. XXXX And years and and I we do XX well, why months spacing, that’s about paying talking production just If think did just we’re is keep of of based X% what which on assumptions because of on – organic so in attention, work wanted we growth. actually that mind-boggling that’s is on nobody we our DSU, today, detail so this. recommend do stock this. the in pace,

XX wells from anywhere Delaware XX like Midland section for the example, in Basin. book peers, to Our and per

we’re a Chalk credit XX, maybe all? Austin did – but at few to We I assuming we give exceptions. the think, any gave

Unidentified Company Representative

permit. DUC a Only or if it was

Davis Ravnaas

was or DUC it Only if permit. a

Okay.

lot haven’t higher haven’t upside upside the a Three there’s say, is prices. captured. There’s up Haynesville additional the Boger discussed, Bakken would could we that about, additional talked else haven’t Forks gas – So we of Anything be in density we that I in there guys? justified

Unidentified Company Representative

Yes, Delaware. there are zones the in

Davis Ravnaas

Other zones in Midland, the Midland. zones Delaware, other other zones in in the the

have and guys keep inventory flat, Ryder been these I has. our audited So years and basically, what XX of I think, it’s to properties I firm, again, conservative hydrocarbons. Scott, think, our we’ve man, should engineering end conclusion mean, reviewed be upside an the by of the basically production conservative we effectively by outside using production think, what assumptions on until proven and extremely that’s it’s or I have portfolio

been something and work again, started themselves. speak results almost we two So this for is It’s of that a doing amount years I ago. the think mind-boggling

Harry Halbach

guys. Great, all taking color. my Thanks I Yes. for questions. appreciate the for

Operator

you. Thank

with question Stifel. your Please Our Derrick next from Whitfield proceed with comes question.

Derrick Whitfield

your congrats this all you for morning, provided release. Good on and the disclosure And asset detailed certainly with quarter. thanks

Davis Ravnaas

appreciate Derrick. Thanks, that. I

Derrick Whitfield

Perhaps question, third-party your else, picking view up clearly with on meaningfully you know than base the anyone asset any the last better change did area? given your assessment while guys

Davis Ravnaas

to get mic Marco? over Marco? the Can we

Marco Pena

that number with offset, comparing our DSU. areas per just the PDP type database to we we March back through just going went so them more full provided the those there make forecast, putting not we in is versus to curve XP and reserves, scheduling, Ryder locations, sure locations comfortable they our but map did of Yes, our XP on disclose Scott the really since the our and these are

signed that reserves the final fall all SPE. that was they stating letter the a XP deliverable within the So, us sent

Davis Ravnaas

any I dramatically they us where on that think mind too they changed pacing, they anything comes our were cut – have conservative or do said of that there back felt or that’s do to what… they generally, think we like it Is

Marco Pena

couple have the and of might a type Bakken and so little PDP we in for been a of tighter the under wells were deeper did the example, There with forecast Yes. offset where areas dive. Three Forks, like for them we our agree

a but cut majority line of it, of for that. view in type was So with the did our areas, back we on of couple

Davis Ravnaas

conservative Yes, assessment. as which Ryder happens, than softer independent always in and gets, there, of about the tweaks With And here it generally, but agreement. there in as too. couple Scott’s

Derrick Whitfield

the for that my thanks exceptionally your wanted asset have to up, noted maybe follow is shift market, for disclosure. been and count deep base as your exceptional Page XX. And rig and Absolutely, gains to over as on

you backlog and likely Scott, Ryder As can years? several with level assessment permit sustain resource to would evaluate near-term success fair that the the it for be that assume with guys next the long-term you of

Davis Ravnaas

always and There on upside of think is our that them, ours. always unusual. decline very engineered of properties, each top business is Derrick head mean, – What’s him. bought what started for the these us growth these think been of with single I this ton showing a kind – I is deals, and right? we’ve So we to – companies like because We’ve this what I off we XXXX, was the I low Davis. dad known few my my mean, assets that’s goes a when this challenging one that of – every has targeted there we’re is was model individually. of back one

few There think, are blend U.S. companies decline have that low then very that but of is up nice the Canada, kind candidly. I upside. in of closest companies

hedge shallow, of well, that’s are fund us XX% us been and the these you a tired got on And decline have of got year guided guys don’t some always but growth just that peers toward. every frustrating so, other on you’ve it’s up beaten I for great

down to man, can his recently or got and we just of so And and to had said, individually can building to that’s across going did Marco out couple every Bob of and you take our and a cut look to kind We through question and single mind-blown years that independent I over and was time hired is do somebody and actually was way years asked job, we there these was show basically actually so it single units of go upside. then that the we and and XX-hours we up just every that together of a like yesterday we week rolled it. acres I full up. mean, staffed a eyes we ago And our I Ryder so, X,XXX we units them what XX at maps. just one sat quantify that guys Scott, one show that million

for this up and making have be and that just not mean, can so I I have confidence some your we think, going spend to looking XX I not do time years. rates the agree. – think our we long assumptions I is, We’re like said through really sustained production that I to at question answer hopefully look to detail confidence think, I really after we – we’re use, on you’ll the get you XX it,

Derrick Whitfield

reaction I’ll exceptional. when in presentation Haynesville was quick my gut the Basin I’d quality are do tell first asset and the kind and flipped of through I Midland you

So, see we and in and look that your certainly your that’s market see quite sustainable. share something position as it at

guys. time. helpful very for your So Thanks

Davis Ravnaas

paying attention. you. Thanks, Thanks Thank Derrick. for

Operator

you. Thank

with Baker question. Suisse. Our your Credit next Chris from proceed with Please comes question

Chris Baker

the it. around working you consideration angle little maybe of potential the could all divestiture through or of thoughts a buyback of bit on point the demonstrate your small the provided value side, Wondering, to there. undeveloped market. maybe take update to Solid kind but inventory a share this a to details of share to at perhaps lot just clearly, this potential Still help if different a

there helpful. thoughts be any Just would

Davis Ravnaas

Great point.

undisclosed in on think our non-producing was an Delaware and thoughts like assets just back the for I years to sold, XX history only ridiculous divestment, is going we our XXXX sold my assets buyer. enterprise a we’ve entire and once an that think, I in thoughts price – that

and critical five I meaningful got only and the bigger that mineral have them you’ve one we our think weakness I they that the in most those agree. really get sector two think, companies scale of would even scale need these need think, view companies and and or is to that’s is I

So when kind it runs divest, counter we that. to of

the Now our about get non-producing development. the said, talk were valuations. that fruit alone money eye-popping past kind that then we is certain that for, we at that that there have that comfortable buying the with the assets. We that sell saw assets weakness in our unit way we is we right? Midland just only We for our producing don’t nobody did of pay always Chris, to force it, has least County have PDP people don’t and to least could paying on on we strategy upside well to at that outrageous multiples in get production. look model this best know, low-hanging when the back The over Pioneer you the We get like we for to and money at section back being something on for control are could but way have buy now. we absolute and in much been, one have is the us a have in non-producing stuff the bit. drill of has existing it. So like develop to can’t We we

all divestible going that run said, home like sale just So assets of any that are easily another to non-producing, we that. we’re get kind being kind where don’t have of

bit assets. divesting little a the against think, we I are So

to runs your time. and bigger talk to synergies But to and just that I we about we buybacks, our capture and need continue get that all view on consolidate increase on counter point the it think, liquidity.

just they’d it buying the rather It view million Paying think and buying back with you the up. to about we just of of spend the sheet. that’s I goes – think, Enterprise somebody time buying work doing base balance stock that is pay down something talk debt equity had is and could think we accretive just for, folks, back it as nowhere to to that’s the like right something I into our we debt wish it’s shareholders that man, great, from we stock, shareholder instead improves – debt down equity. and and our is view opposed that’s we kind the consensus and that but goes quarter problem $XX concrete, value they’re – down, if all of is the same, pay When that. see sell about down is us out back stock. debt could I could that a our

So the that our free, tax benefit sending is to paying money our or stock is unique Chris, company, of flow are us. buying debt back we what’s down on versus our think, lost investors. cash I not But about back tax so dividends send back

can to them pay don’t to the opportunity in can stock dividend, back want the we buy of our talk stock. at giving We’re don’t sense I they If making more company, they decision they our take buy them and some that they corporate and have level. this to any the all that time. We be about hope, for think stock. should our buy we makes taxes

Unidentified Company Representative

float. you these increase know also as buybacks our Chris, And well. our volume trading We reduces that, try to that

Davis Ravnaas

right. Nailed it, good point. That’s

Chris Baker

remind just terms in leverage great. the us you target. can then, Okay, of And

can to terms Just thinking Just target how quickly down about the think potential preferred achieve of would in take to you get helpful. that you and you with level? for out be that potential when the timing the leverage revolver

Davis Ravnaas

to the pref continue our down talked take quarter. then out we’re last about head probably below least anticipate to of we’re call, pay going bump to on to we that’s debt Do and up X.Xx going leverage next going get the to We So that we closer top as – the we that when at disclosed. have happening. does we previously until to off Xx, your anybody know

Unidentified Company Representative

a right so terms wouldn’t many there’s there commodity I prices. guidance mean, variables want now. of give in to in I

Davis Ravnaas

can too acquisition below or of Chris, thing, because is we’re immediately. by $XX kind sudden and we one that’s EBITDA of tough Xx and make answer million that and million a of with all other then all that The sudden X.Xx $XXX just equity do to the question, –

have you’d to anything what again, I’m You going buy of to we question, – that obviously which we saying, assume see give to isn’t ever that assume don’t us for happen. so kind like, have to it’s

So anyway.

Chris Baker

the guys. Appreciate Great. color

Davis Ravnaas

Chris. Thanks,

Operator

There no turn would you. floor comment. to time. this Thank for any at further like back closing I are the to questions management over

Bob Ravnaas

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

Operator

today’s This conference. concludes

Thank You you may your time. wonderful a day. Have participation. lines your disconnect at this for

Kimbell Royalty Partners (KRP) 9 May 212021 Q1 Earnings call transcript