Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Kimbell Royalty Partners First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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, Rick Black, Investor Relations. you. Thank

begin. may You

Rick Black

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

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

financial I discussion are pursuant made you the that would that Act forward-looking statements Private Safe remind historical to today's Harbor XXXX. not Reform future in including facts, Litigation made future performance also are or to of of Securities statements the of like the provisions expectations statements or events

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

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

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

Robert Ravnaas

Daly, morning. of me on Chief everyone. our Operating and management We including our Rhynsburger, today and Davis Officer; the and Blayne Officer; are good call you appreciate Thank Matt Controller. members Financial morning, joining Chief you, President our team, our Ravnaas, senior several us With this Rick,

on our report of common a pleased cash declared record acreage results count distribution our that production, and daily $X.XX first new record high run are rate rig a quarter to per We included unit.

Midland royalty Basin last also excited We're mineral our that we announced acquisition about and very month.

acquisition close this to expect We this later month.

portfolio, is towards the MB last mix production, our count to With of continue materially now production year's in to the to After on categories of wells. sight expected and recent of momentum we giving effect rig our terms Permian shift Minerals leads build activity, oil. M&A now inventory, and line to all addition our

assets, acreage on prices operators. acreage first even Looking natural to count of at increased face a Haynesville gas testament in in this the in of the royalty led our in core by quarter-over-quarter our is count rig our the rig quality the natural low increase private gas the area. quarter, This

realized during by natural Hub DJ which royalty higher and led model. gas Bakken, the highlights that than Basin prices several QX, we addition, Henry were In basins of across substantially strength the diversified our

we gas prices that fact, natural above realized Henry were Hub. In XX% during QX

oil targeted Northern XX,XXX Before located on include I'd turning provide gas concentrated County. review Basin comment Davis interest a further financials, in detailed Howard primarily and gross over on in of Basin our mineral royalty Midland Midland acquisition. and These to the like acres the more approximately our to Northern call to assets

XXX active a by XXX% royalty overriding rigs acreage March contiguous a is is held DSUs and There and over ownership with producing XXX total high footprint is of horizontal XXst. mineral three production, interest over The on as and wells. the on

next natural XX% to oil, with a approximately XX% production XX% mix on X,XXX run estimated per average of XX We expect BOE daily our NGL the and gas based day rate months. add over

production, our company highly again and as count, multiple. terms leading at reinforces our Basin DUCs, for This transaction excellent inventory. and and of accretive unitholders our Permian undrilled an acquisition favorable position permits rig is our a active basin this believe in We very

expect We is Kimbell's X.XX day acquisition to over to and run net BOE add per production our rate the to daily permitted expected inventory. locations XX,XXX average DUCs to increase and net

oil XX% expect mix to we to daily transaction, weighting from increase our XX%. production the Following

We leading five-year approximately to PDP peer XX%. expect a decline also of maintain rate

zoom the has one US a near-term production due not the the not view to this arrive best continue oil the of out of relatively indicators from has US, from DUCs we we operators, commentary operators also only growth, recovered. growth to dropped the since is XXXX of If industry, to expect flat. in We but take that in and hearing production number fact for remain US which from precipitously we're the at broad to view

Many believe that on we've profitability oil production we the hyper be rather seen will their cycles. the prior Production labor drilling in the to continue of continue and to focus primary side investing growth inventory their during to replenishing inflationary will temper quality inventories of models short-term businesses and than the operators XXXX. will in continue stability, completion and pressures in of energy growth DUC themes

disciplined method and will is we Kimbell. forward, acquisition organic at both growth, drive Moving both continue a that our strategy consistent through to development and proven

to benefiting with our upside from We diverse and continue rates quality drilling locations. portfolio decline PDP expect production, also low

long-term oil the As it. bullish our and remain highly sector, in gas in about space a royalty and major US consolidator consolidation the in this role fragmented we

future are years. opportunities many and bright for very for that We extend believe Kimbell

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

Davis Ravnaas

good and Thanks, everyone. morning, Bob,

the are during We first strong performance to quarter. pleased report

release will affirming of XXXX after MB the guidance Minerals acquisition. full guidance closing full XXXX our we We year XXXX are year also the previously our in was that update disclosed press quarter our fourth and

due first realized I'll NGL with our revenues of quarter gas beginning $XX.X primarily a a natural start quarter fourth from to and decline financial decrease prices. oil, from reviewing by in results commodity the of the million, XX.X%

the NGLs was coming was quarter for our per $XX.XX of Hub combined QX, Henry Despite prices XXXX Basin barrel the Bakken. average per across gas Mcf QX and barrel in of of was several natural by per above XX% $X.XX, led Kimbell's to were lower and realized basins price is BOE gas oil due prices per received premium first DJ natural average realized $XX.XX, $XX.XX. than

quarter period per to basis, daily XXXX. day run of production. attributable average to into prior came was recognized pay BOE and related QX X:X XXX recognized status The production production production prior BOE during on quarter per per a day consisted this past which First that day during XXXX XX,XXX production BOE of was the XX,XXX quarter rate period

and daily liquids oil or of composed natural was from and Our first NGLs. XX% XX% rate increase production record of from run of approximately QX XX% from BOE from XX.X% XXXX, XX% day, from gas an quarter per XX,XXX approximately

announced production last first not production The quarter MB that from any run does rate acquisition Minerals month. include daily the we

X.XX March as wells acreage. of including and Kimbell's XXX XXXX, the gross but as As XXX permits gross Minerals drilled on MB properties XXst, acquisition, net its well major and uncompleted not net had X.XX

data our an This minor the add additional estimate to and not does inventory. include permit we XX% properties, DUC which could

share addition, XX.X%. land the quarter XXXX. our acreage, with market record XX actively continental of all drilling we at exited our Currently, XX represents United In a in up rigs rigs approximately the end from States of the rigs drilling on

a $X.XX G&A BOE. uptick due last BOE. payment in saw $X.X non-cash million professional expenses G&A the certain third-party to timing million is in which per to quarter, first side, $X.X Unit expenses compensation or On cash expense was Kimbell and quarter, compared general $X.X We the quarter G&A was of the based were which an million expense $X.XX the administrative expense expenses. of in cash for per or fee

year. the However, to remainder those come costs are through of expected the down

income million. First quarter was net approximately $XX.X

quarter, million. For adjusted first the was EBITDA consolidated $XX.X

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

for of XX% XX% first cash distribution pay used be quarter. borrowings distribution secured a credit unit represents $X.XX announced a under unitholders outstanding This of common cash cash the common distribution and we the remaining of revolving portion the to of Kimbell's payment facility. per will down Today, a to for available

paid distributed XXXX, through revolving by credit its XX% portion Kimbell of its for this upcoming a facility QX became outstanding Kimbell's May allocating under $X.XX secured cash total IPO payment, we approximately approximately debt IPO of price. our $XX.X paydown. cash since unitholders for And unit, common excluding in Since borrowings public common million unit distribution has available down per per is since XXXX $XX company to a today, the of

further liquidity, revolving our sheet on as million had its Commenting under $XXX.X approximately and balance of outstanding XXst, in credit facility. we March secured debt

adjusted net to debt a continue consolidated XX-month of trailing to We one EBITDA times. approach conservative with maintain

secured million and approximately the comfortable undrawn for financial With our capacity credit our continued this provides flexibility we revolving in under consolidation. position strong very $XXX.X our with are facility,

acquisition our accretive is in of run like your great Kimbell to call think the at briefly up comments We open that questions, for beginning MB we reiterate a year. to Bob's about highly would this is I multiple this Minerals. home acquisition a QX Before of

price common Kimbell million approximately purchase valued operating our of company. by XX% of at the valued $XX.X is issued at of million total that which million of million. the The is $X.X approximately X.X in comprised value consideration, holding newly see units approximately Kimbell Kimbell units sellers X.X Royalty vote of cash, support and the units issued in Partners confidence We common at of of $XX.X newly Royalty the million appreciate

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

Operator

first be question conducting time, a question. Thank from the comes John you. with line Ladies Our question-and-answer and session. Annis proceed this Stifel. gentlemen, Instructions] will of [Operator with your at Please we

John Annis

for everyone, my Good and thanks morning, questions. taking

Haynesville one, by certainly mentioned, were looking quarter was testament driven a acreage increase the during in first operators across was the rig first when that my your decreasing privates. six-rig And is to there quality. position, increase activity generally you noted as rigs For you largely a your the the at active

question see and a that completions trend commodity activity deferring the So of lower reductions? commentary do from holding industry up my against backdrop Thanks. is, further regarding how and you

Davis Ravnaas

Yes, thanks John. for question, the

Davis. that think -- is this one was I

observed one in more obvious Haynesville think more surprising the we we was I data be of the to activity commodity points from just were that quarter-over-quarter this comparison. the in rig given muted Frankly, the drop expecting that price.

to predict going of We what's in happen activity. to terms us do for think operator Impossible

an that's activity the it's our just increased than average, meaningfully. rig better fact that the area above perhaps in average indication that given an is and acreage even extremely obviously,

ground prices and gas our when the it time, at But opposed higher. pulling out keeping the commodity we wouldn't the are be same to in totally operators

sort to guys So good price. add to but estimate that sign in to the a don't want or make decline activity it about notwithstanding more the the commodity get to Matt, than appear acreage anything you general, overall, going our well, want any we happen forward, going basin, what's Bob of is that? to on the

Matthew Daly

gas natural mean, add driving in a Haynesville. mean, those ability shaped their right mean, I I of high just curve especially the increase XXXX, Haynesville hedge to a $X.XX likely now, in their are basically can part that, XXXX is prices, a and would this hedge they lot Yes, the that into drilling I very operators, at return drilling. that's these of in and ability $X.XX all I you in and gas natural contango

don't we of So drilling the that the way based slowdown Haynesville. all -- like in on a acreage of we we major Davis the XX flattens currently. But that right see unless out, said. hard really contango Right to have our rigs rigs in in I really now, on Haynesville we don't one-third now, That's Haynesville. the have mean, predict much

drilling But, good in the I So see. yes, contango think this to so. mainly what's is the Haynesville, certainly driving

John Annis

above And what upside maintenance the at color. your the is If relatively transaction. line all legacy of fair next is touch growth you to follow-up, there trending the potential how based a wanted the well full on over pending guide appreciate it production the implies, company on MB quarters I production say my that look is excluding on flat being above is we your few year to for requirements, that sight see I Terrific. inventory which midpoint? to basis,

Davis Ravnaas

Yes, John.

flat quarter in company's is last on the number net level to relative our the this believe, it. needed permits of I to history. think mean, I at said acreage the best keep its, we and it's and I Yes, number the DUCs So production we'll reiterate

a expect headwind So beyond being and would we an now. said, increase maintenance levels. are obviously in commodity potentially above right production That prices

forward. the obviously It deferred currently. have on those control, be mineral just It's as don't don't to would of unsurprising for we that We production our completion. which us evidence wouldn't see going over see a company obviously, of acreage, impact completions timing

So that completed. It's we DUCs get those feel inevitable very good.

The super point, all control majority, those at developed get just not if of the timing. permits some can't we

Bob materializes. there's that -- the we just We would uncertainty timing So good around to when Matt, anything it. add or feel guys just about too? you

Matthew Daly

agree No. I that.

Robert Ravnaas

No. I agree.

John Annis

Thanks from my That's taking sense. questions. again it for Makes me.

Davis Ravnaas

John. Thank,

Operator

question proceed your next question. James. Freeman with Raymond the of line John comes Please Our from with

John Freeman

guys. Hi,

Davis Ravnaas

Hey, John.

Robert Ravnaas

Hey, John. How's it going?

John Freeman

done these annually. was at Hatch, last $XXX $XXX of acquisitions I and four-year deals, get occurring relative I'm sense what just that's thanks. deals just done kind to more the Good, over two for trying of looked of just rate, a kind of the in in four what's also that And three, changed this the you not in looking but when I prior deals -- size quality of run to of all attractive months, backdrop kind very years? kind much you've at get to favorable recently of million the the I'm to created million of six these was sort Permian just the averaging you're acquisitions, with over like prior prior you've --

Davis Ravnaas

I that which XXXX. impactful observation. for -- largest excellent thank company made that's was most the acquisition we John, an million $XXX the back making transforming then. of think acquisition was we perhaps was in you our terms and plus made That in the We Haymaker acquisition question

kind in back asked that that then million able the acquisitions have been able focused expected capital have M&A, changed would think we that was hundred in, of of to major equity more I every A&D was had Permian. do us and cadence continue to private you of What would XXXX specifically we several hoped mostly XXXX, of I have influx terms If that and timeframe, what think came would being on a sort in cash we there dollars year. expected of

And so sellers made I equity. a sellers, lot think that to well, of prefer always cash

particular available there cash as that in to timeframe, more too consideration. sellers think accept for was and exit I to

our chest think And war competitive that equity issue sellers challenging so it pursuing of and us more was cash similar opportunities. with to we're be I to for large

that Basin, ago, were At the very the of positions most same Delaware positions specifically that existed mineral in Permian time, five Basin, the existed years ago, the six more scale years of the very, in mature.

we're I'm providing So was all production this, assets on about small. context -- know for my I -- the little and just know answer very those talking you very

production -- a So a were been lot and it production activity. ramp in had but of were million could development little have very these folks deals existing expecting $XXX buyers and deal -- that

buying control public that. flow, that company, done We've it's tough strategy. are assets never that never liked We've bet a non-producing just dilutive development we think And you distributable as immediately be to mineral company. can't on a as to cash making a that

on and wait So the was of speak, previously and we then an of lot kind combination maturing cash had to to as a so immature basin in a immature of was of sidelines. process very that buyers the it out,

flow. MB, for to distributable forward that accretive from also a asset Hatch, kind us of is the fast to that So cash and immediately -- it's Hatch an perfect was standpoint from

was but mature to accretive it it on about enough on excited growth us such running then for a get asset basis, asset to the still a cash was room meaningfully enough was had So flow really -- opportunities as us there also well. that it the

they're if And and with just And they the even out financing don't we're private like million, see competing out new that targeting. those, then buy coming coupled more think to the have commitments We that going billion portfolio equity be mature don't necessarily go $X ones firms minerals. for companies, I with alternatives. $XXX major assets did to

the months. driven all of those a think combination last which that on So had front has the six the success it's over factors we've kind of M&A I

untouched but frankly and to been we've it. virtually improvements our haven't anything about modifications and and the underwriting We XX process approach years made it, process, similar which internally for has changed thought behind

that to $XXX right it's in or think do timing. didn't Matt, forward. it's Bob that been you to of the we're think we And execute. right I in good we're just would six and add? welcome. it confluence place expect of happened It time we We continues the million didn't more guys we a of going that going hope the were So months. different that and deals a very certainly But position anything events for at necessarily last

Robert Ravnaas

I'd that Yes, we're acquisitions, to very like just add fortunate. John, both

selective there just looking assets both checked said, the flow criteria. regard they forget and long know for the As a together And that never then I'll team very any immediately we wasn't anything of at boxes was also change with his asked Davis It we're he I and set underwriting so better. to almost cash an had you accretive inventory know too, Murchison our on have excellent put -- in to in all Hatch. Jimmy and offer NAV. Delaware. just couldn't

So saw I think runs, on I when the we're going I said, engineering to competitive I and saw first be that this.

checks as of we a it, lot of long at about everything backstop. acre. lot per use companies think do really the as a I if high royalty look, unfortunate, is quality dollars it that looking a we per think still lot it's I care And And area on I backstop at don't less as know think a look -- with of a development, of I the a but acre boxes, which us, we or dollars

a The tremendous other amount thing about permits. is Hatch DUCs of and had they near-term

de-risked it other years. is the for first cash us, over So flows two and half, it year it the de-risked aspect of a

So that This too. we most we love that. acquisition, love current

checked and in boxes. both we were that just very So out fortunate our came they they

Davis Ravnaas

particular, teams, and business are the that mentioned just equity the We're we've different a I'll past MB, then John, baskets, experiences and and we side. more that very also also is to have in lucky of then owners Bob with. to management trust with done and that on just add one had good these sponsors And we've sponsor in EnCap private groups with groups Hatch team, obviously mineral that

think of early just in this speaks sector, of kind which still is the consolidating. And I that's to stages the so in of relationships importance

John Freeman

that portfolio direction, a this of really rates color on relative Davis look and because cetera, good comes deal operators, where all Bob done is a affect inventory, I is with circumstances just acquiring mean great all All got the sold in of And year that to accretive, move may generally decline I on -- you've beg thinking topic going at you that the seen do a base you it's theoretically a) deal, who's all or go be right a on? right, would sort think or that's two. the decline you of interesting is companies no, and by it's good it's just were accretive would a to it going next year that the focused we've that, still stick different but your And about few inventory, are it deals decline a rate actually, does I materially things, but a high to if these it to high had all good you is rate, that If all get one on, great. rate sizable private be other assess contrast I two to that I touched base under M&A they But over you that the acreage going budge, -- guess it's sort your And question and side, to the it's able XX% get decline barely actually prior number it that that like to coming priority. was on with the materially base higher two E&P that equity et base it's and but you metrics obviously, them. yet, that post. and all a pretty XX% of it's deals area, I'm number stuff

Davis Ravnaas

to been we deals We've that haven't that scale rate fit that fortunate had point. at pursued up John, to really alluding meaningful that you're great higher question. this least decline

would is we we're -- on be do think what open-minded we'd I think those I opportunities.

as -- time from benefit obviously, our base decline continues rate by, flatten. we that goes think I to

of rate. and base So MB impact the the kind on an have why that's -- outsized decline Hatch of our one reasons such didn't

opportunities continues know PDP changing the that's As our us to rate critically you're decline which it profile, well. think production like what I us important allows underlying and to pursue you without as something to our base is describing D&A decline mature, of

challenging So just I that excited think for open-minded, more makes think, it probably get to on I about. balance the us acquisition

the something meaningfully need I higher was base we to of need base to rate, we what in probably and decline terms rate would think increased if decline see meaningfully see. Kimbell's

see money per We We on of need direct. impact. front we for to to more to cash be able time. see see ability cash be then We make make shareholders the a the on it greater need our flow accretion and immediately to need more more those unit need over to to flows meaningful more impact drive to able to

would So it just think consideration us. by disqualify it -- desirable it I from would I think package. in it don't a less be But

that frankly, encouraged that to the specifically in just those hands, of profile lot we're continues still mature, of production you more think know. a of private them some but packages, the And are as I Delaware as

we reasons continue of in in more for that that competitive some will we become sense. going mentioned. they're I Hopefully become I that the all increasingly I missed acquiring makes increasingly think previously to think the -- to past deals those

John Freeman

That makes for sense. detailed I appreciate guys the answers. Thanks again it.

Davis Ravnaas

Thanks, John.

Robert Ravnaas

John. Thanks, Yes.

Operator

line comes with question. the from with Tim of question Our proceed Please Rezvan KeyBanc. next your

Tim Rezvan

production modeling a my quickies third for run had the a be Good to should going morning, from kind starting And say in us after quarter? of expect you Did prepared everybody. maybe that as forward we assume a that help the of XX% just taking comments on oil of close? you based couple standpoint. Thanks to rate question. I

Matthew Daly

something the deal QX, guidance will would Matt. mix XX% integrated forward G&A numbers, would weighting be in revised percent. so have production correct. is here this to XX% that Yes, of issue or commodities, will shortly, going yes, oil But, of are course, and be to use plus cash a something Yes, this forth. going have minus that's various that and and that we couple of

Robert Ravnaas

And then, close. be after we quarter this the so full that Bob. Tim, a struck deal, is We would second

be date, that's So after it just won't the effective closing the date.

we'll get the quarter. second of beginning So full the in beginning production

the would on. XX% quarter for second apply whole that So

Tim Rezvan

said Okay. All I How I years a quarter. the heard acquisition, appreciate PDP more on one sort three right. that three then you you you so near-term talked it about rigs kind little like that. underwrite a active And or was what end growth. impending expectations? pricing looks of of there's the or of you over this is that Beyond the expect at wells. some two, you I thing a embedded growth? of your about the asset number the correctly, first of attractive you seems Do was surprised of think acquisition. longer-term do in I know next kind producing If did

Davis Ravnaas

and Matt? start you then do to out want then you me here, jump and Bob, Yes, can in

Robert Ravnaas

Sure.

Davis Ravnaas

So, question. question. Great Tim, great

not much So as from inventory much the like right, a has drilling room on something an front longer as runway standpoint. which Hatch, running

Hatch of So kind inventory we accretion. in of future have accretive, a drive love but that because also growth to lot then immediately was

this correct, see with Hatch a much isn't but that's point, multi-year lower to has, on at multiple inventory room We but it's less acquisition, being then a said, has. more do package, cash is accretion that a near which as PDP term Contrast which growth MB this declining. going forward. asset running lot your the as not just flow That a much

what at MB, And It another. didn't they was proactively good it to second -- is circumstance. will one that kind out so the But just is which drives to a term and more of well to say cash flow, because a to a kind to everybody nice add. way has. and inventory kind candidly nature because seek quarter We near of going the be that it complement really out see by we longer-term accretion look it balanced then nice turned of Hatch buy are it complement of adds it in

on been don't that's to I you has time, declining out with over bought why too. meaningful that's I peaked pointed the -- that asset an that think a conclusion want out mean, we there's I no, you But rates can amount leave production rigs and there that and the you there, go look informed presentation your as running kind mean, on are of on own DUC permit calls, running the inventory the of investor is I well. at room and opinion make acreage. and

is there it of Hatch. we quite that forward But much why cash we sense. and But multiple just as didn't there, on pay as and basis makes Hatch, growth cash did not much the as that's flow at that bought also a flow as

Tim Rezvan

Yes, totally.

I and wanted just sneak I expected. to if then could as that quick Okay. in kind of was confirm that And a final one.

Davis Ravnaas

Sure.

Tim Rezvan

in kind understanding about the You touched My that million the of factoring acquisition. $XXX before million this $XXX drawn. -- undrawn capacity, it's

of you when when see redetermination could timing a we or that how liquidity might kind talk change? about the wise, So could

Davis Ravnaas

to want that one? tackle you Matt,

Matthew Daly

a increase. which PDP lot -- is This the relatively asset, a credit is as on borrowing base Yes. the said, gave Davis heavy this banks of

be mid-May. the It will So bank we're looking meeting. at

some potential here. out throwing Just numbers

on you're And that. probably You're of a transaction, in with $XXX million least course, more than this base looking liquidity. increase at be $XX million probably borrowing of looking at that could increase, about

So pro forma post liquidity a times. ratio leverage around acquisition, this and one lot of a

Tim Rezvan

you, Thank everybody. that's Okay, great.

Matthew Daly

bet. You

Davis Ravnaas

you. Thank

Robert Ravnaas

Tim. thanks, Yes,

Operator

are to further queue. back in to the remarks. hand call questions the There no management closing for I'd like

Robert Ravnaas

quarter This completes again Thanks, we report everyone. your forward call. second you earnings. look when today's our and time to today appreciate talking to We

Operator

gentlemen, your teleconference. and today's for does Thank Ladies participation. this conclude you

You may disconnect your lines at this time and day. have a wonderful

Kimbell Royalty Partners (KRP) 3 May 232023 Q1 Earnings call transcript