Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the Kimbell Royalty Partners Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you, Rick.

You may begin.

Rick Black

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

date be listening speaks be time-sensitive any information transcript no longer this Information of November that recorded call on replay X, advised today, as of of reading. the accurate as or only XXXX, any so please may

of I today's be would part outside remind made expectations statements the statements financial to as which, including not like made future XXXX. call, of in forward-looking safe are provisions Reform We'll you forward-looking of the statements also the harbor historical making uncertain of pursuant of that to today's or their statements Private by are or are the nature, Securities future control. events discussion and that performance, company's Act facts, Litigation

obligation distribution. including publicly and Actual materially. Please statements. factors today's adjusted the Exchange will on and no our to filings can to refer measures, update results non-GAAP the detail forward-looking the may for cash uncertainties Reconciliations company's Commission. forward-looking These available or any nearest found risks the other to EBITDA release. end and in assumes earnings Kimbell for and at also to revise be measures with differ described earnings disclosure GAAP in statements. Securities release of today's are Management refer

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

Bob Ravnaas

review including our the quarter. momentum maintained senior the appreciate David of Officer; call Rhynsburger, Matt the start to this quarter, I'll the today second With you, operating We Financial are more third Chief detail before Officer; our our several turning Chief we team, Controller. the before Rick, results and morning. We our record you open us Operating and joining environment on to off and over strong Davis President our call by Thank commenting in financials on morning, to call Daly, Blayne current good me questions. and members coming the in management Ravnaas, the in your everyone. quarter

of In XX,XXX rate production record terms as achieved was we for daily production, per another run XXXX day. BOE QX

by the last and driven in a gas increase sequential oil-weighted oil Eagle X% production. surge accelerated quarter's an in natural primarily in performance While Haynesville, production record production was Permian driven Ford, drove quarter's in record this by was activity, which

is good diversity. power example the geographic of This a of

As over up of level the Continental September market XX, drilling of since acreage actively XXXX, on quarter acreage, experienced drilling United we is XXXX. actively XX.X% and last from the representing rigs all drilling had of our rigs that XX on This share we've rigs highest in States. X% our

these Reflecting our today unit. announce to strong pleased that common quarterly $X.XX is third-quarter are per results, we distribution

success operational leading last into acquisitions end since this DUCs the continued a with in a XXXX. we at planted of the momentum of more basins of across X by XXXX. final the the over number in record result million seeds QX believe is We see supported and U.S. years than the of Moving XXXX, $XXX quarter permits that

growth. propel includes and and having upside significant criteria of enhanced consistent set Our acquisition model strict inventory, our which proven business strategy of to time-tested drilling a continues

this in strategy, conversions, We benefits acquisition as operational our realizing production, of and now performance. the inventory record are reflected

per Kimbell's of X.X only further net net Kimbell prior announce we now stability. This I'm X.X best-in-class keep the reduction completed reduction from year that needs each year. wells flat, highlights an pleased to wells production believe to XX% production estimate

well-positioned have currently another to is we're which decks production record, quarterly growth. permits, we and organic X.XX net that drive Given continued

headlines financial environment. sectors, over the dominating headwinds which last were current significant years, events in macro in the are this the leaders many experiencing several industry Today,

is best well believe my prepared be future any sector storm in in to I the weather I've spanned is the shape XX that that over energy seen has may as However, in quarters. coming years, which career,

running In expecting general, management interest environment. cash increased to low especially balance levels drilling are labor. term due the in strong, sheets in and a of Many slowdown are remain teams at compelling, even is flow free leverage, disciplined, medium valuations in rate are costs, higher a

received advantages higher we one production being have and is yet we pure competitive a upside costs, I company, inflationary of of the As prices. X risks from said commodity namely, drilling royalty of this the terms before, strongest in

natural structurally bullish woefully to due remain energy to U.S., the trends low We investment, global accelerate that term of expect outside long among gas on especially of strong and the both we companies over XXXX. and demand oil in years

We generate Board finish employees, our are As a remain role as about years we excited year XXXX, Directors, in to oil royalty the long-term record achieve a the grateful come. we for leading of unitholder sector value Kimbell. for prospects and for to helping very extremely consolidator at advisers Kimbell gas our us and and to

the now Davis in our to more turn over review financials call open questions. we detail to I'll to the before call

Davis Ravnaas

Thanks, morning, Bob, and good everyone.

results are XXXX record fourth reviewing full-year by release. report disclosed natural previously quarter the very our guidance during a press realized decline primarily commodity performance are was reaffirming start I'll quarter, a from third from XXXX we financial We million, of to XXXX, X% our gas, again pleased QX that prices. our revenues decrease in beginning $XX.X of to in due and quarter, and the oil, NGL with

realized Kimbell's oil per and was barrel third MCF $X.XX, per BOE combined per per was $XX.XX. gas price of NGLs of was $XX.XX, natural XXXX $XX.XX, was barrel of average quarter

liquids XX% per from or X.X% XX% daily from a basis, XX% third-quarter NGLs. and on average of XX,XXX barrels record was Our oil, from composed of X:X a daily XX% approximately production and from XXXX. of natural basis oil equivalent was an QX increase This day production X:X gas approximately on from

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

and distribution consolidated portion EBITDA Today, was secured of to XX% represents quarter. of of was distribution cash distribution, million. used announced common a unitholders adjusted $XX.X facility. quarter per common outstanding to remaining Third for the we third a unit. third cash revolving be per was payment Total cash the common income million, cash a will $X.XX XX% This under $X.XX available borrowings net pay the unit approximately available quarter for distribution for down and credit Kimbell's of $XX.X

its just its a payment, facility credit paydown. sheet of further Commenting for cash revolving distributions allocating portion million approximately Since down for Kimbell on paid May its by available upcoming excluding of and XXXX, $XX.X has QX borrowings this balance under liquidity. outstanding debt our secured

$XXX.X adjusted X.Xx, had Kimbell secured credit revolving in with EBITDA million under facility. and approximately debt XX, its XXXX, revolving compliance September facility. trailing outstanding also of financial had It XX-month quarter its credit third of As and to consolidated secured net approximately all debt under remained covenants

in approximately under its undrawn had facility. $XX.X capacity Kimbell credit revolving secured million

perform proud model, highly strength industry. extremely energy are We well to of business cyclical the very of that the in our continues

lower. for completed our to years ready remain we pleased seeds that which several planted We with of much of We on also is come. generating we operator, for years highly With prices result the were very when ago are acquisitions many questions. performance, focused unitholder largely when value now goal commodity strong our are long-term

Operator

question Instructions] with John [Operator Ana first Our is from Stifel.

Unidentified Analyst

strong Congrats on quarter. a

For the or wanting ratio get leverage Xx of dividends. buying my back to mentioned stock question, you before first in increasing the past considering below some

your you could you're around the Xx share increasing stock that that updated or level, Now payout ratio thoughts buybacks? on

Bob Ravnaas

of one most the discussed Yes. frequently team question. the and topics Thanks level. for at that a That's management as that we board

the to at As want environment, look continue the to business. think we investors I us delever

prices would down, levels to I inevitably XX% they say, maybe at it think we turn be at mid-cycle Xx. the back X.X trough if leverage that get of long-term do it, go back so to or fall mid-cycle at nice let's from Looking of kind could when

deleveraging So thing. important is thinking about I an think

though, relative the the the If continues our fundamentals to we very at time, want course, but we of and do, levels feel that focus leverage. environment. undervalued, stock, business, our reduce notwithstanding to we M&A are we particularly the of to back then context undervalued to good buying look could At third-party at we continuing think about the overall same would, trade consider overall on dramatically stock that

a see what us in combination of which And will forward share think flow. a payout third-party active I approach rewarded for or that the increasing kind you'll cash hopefully thoughtful, depending the be going M&A optimizing possible repurchases, paydown or of So with are their ratio. very our -- on is way to debt investors

the environment all of and those will table options think context. are I on the in on So the depend

Unidentified Analyst

commentary assessment regarding performed the per to And the better you keep required understand my net follow-up, wanted reduction then me this X I to you flat. led focus production year? wells revise on were Could drivers for wells in for estimate to the down you help the what that to

Bob Ravnaas

Great and don't lot that of a people Sure. think a I this of our important question really is part business understand.

annual, the at annual wells model. twice, that look try not an always believe we sustainability we -- We've look upstream So an of that if to We at in on way. many basis. so how been

one 'XXs really guys only the focuses of first the rate. that got going felt that, mineral one decline groups underlying started only of the We've always we probably when to and as important, We're critically on late PDP the really buyers. that's back

look when call So us always see replacement that's really it's -- levels to what it let's that, our at we are. -- important production

nature let's decline of seen the keep the assets net focused -- why a a years that higher have Well, from, So unconventional to over flat drop their by by to right, last that wells nature, call wells? properties, production X have which on been X.X lot on did PDP our growth it, rate. few production have you've

of wells fewer a wells started rate as decline underlying it online, come those that production PDP flat. keep and As mature bit lower, new wells therefore, maintain has kind are and and have had have little shifted we've to that required to

is number of to the started quantifying and felt we've to well, maybe come in permits, ratio in terms need ever can of since to best that we acreage permits order net relative the wells production. online say we've say that of ever and net would maintain felt, since the on the just our certainly tracking DUCs best I that our I and DUCs started we this probably

X X.XX new see happy production at DUCs we only that. need we're have a were We flat. So we record, -- permits, keep And which fantastic. and which net is to very wells to is

let's So for drilling. we than offset development it, the, development call to by divided one immediate more the other, have XX% catalyst roughly category

always with we're guidance. So conservative

grow, environment. to better digits a digits, like typically single see low production in We our single high perhaps

would case. this that think that fundamentals suggest I latter the the of kind support

what about relative better our have of necessary from felt DUCs flat. we So in just have very to and simplistically, we business. net to to permits be good development in It's perspective, a what's our production terms never immediate point keep

Operator

[Operator Our RBC is Torrey Schultz with Capital. question next from Instructions]

Torrey Schultz

highlighted of just considering acquisitions Or, all? M&A. I having transactions for You $XXX for the it landscape in peers change million see into you X you at context since how you've your year? the how you competitive merger, also size to think that it's had setup and remain change clear generally, How and of may scale success competitive? does a next view Maybe all, if do executing the the on of XXXX,

Davis Ravnaas

on Good TJ. view Thanks, Yes. Nothing's the we M&A changed landscape. how question.

that brought frankly, just mean, The of We which I deals. competitive We've is and deviated. on never coming and know, disappoint because investment criteria $X up American, looking have large XX trillion years other we're underwrite with very for for math have under you so are since just is often XX an simple. a space talking just million selective. you set and pushing we're sell-side As the companies about dynamics. exit pretty we it doing bankers, mineral we now been really brokers, sector

groups, royalty a trying investor We XX the bunch $XXX and to Bloomberg, month. quantify our those million including for have of in the get sector. and checks, our size average are adopted most over royalty I on of a methodology presentation of But minerals have Americans think

market. consolidating rapidly a it's overall public the a represent mineral low fraction percentage of that, So like very space. The companies a small single-digit of

consolidation happen. to So happening. It is needs

mineral only Moreover, often United mineral exists. space the overlooked the ownership where gets is the I private because States place think

class $X.X So planet, if outside people realize X that United billion it. you at even you asset the the don't this them of look invest in States, on and billion that exists can

that that not, dozen underappreciated acquire the exists companies early company of So out growth, are very be there a half opinion, a in innings or there. and even in to will everything able single our

done done on So or And our seen worry we've for don't on what where we've X, X us, we we year. seen do. we've does. per years deals. think, X years We've focus what We average, executed on competition I about we've X

year, So the looking on forward same. to doing we of next more plan

you'll I more the in focused deploying unitholders us our see way. be, think always, of on capital as most behalf on effective

highest be hottest every generate a of the solely We the That want not gives regardless return capital on at to us to basin huge time. advantage on basin. focused invested

it's So we can to think Anything deploy. I most look we'll for just you'd where efficient to do And continue us add, Bob? that.

Bob Ravnaas

with agree those. No, all I

Torrey Schultz

how I geographically mean, you out there. of -- opportunities diverse, a guess do you very I consider lot are

more think of on As where you some basins, anything others? you're today there focused different versus kind about the is

Bob Ravnaas

the that this of the only successful been one We're We gas always has way. we're And basin, at back agnostic market. no. T.J., always the we're available question. States. in the the going agnostic our and Great all to acquiring is basin IPO. that And sense in throughout on United We've buyers look to unique what's been that We're that oil. answer the to to way every

investing So to much opinion, an from have our we deploy in in just more we aren't efficiently capital, have we because certain ability places. -- precluded

we So we everything. all major about transactions, hear very it. kind we wheelhouse. only on underwriting of something, We'd say like of find percentage those we our to I evaluate small when But that believe move look we most of and in there's everything. And fit them. a that at

Operator

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

Matt Daly

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

Operator

This concludes today's conference.

your your may you Thank You disconnect participation. at lines this for time.

Kimbell Royalty Partners (KRP) 3 Nov 222022 Q3 Earnings call transcript