KRP - Earnings call 3 2023 | Kimbell Royalty Partners, LP

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Operator

Greetings, and welcome to the Kimbell Royalty Partners Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host, Rick Black, Investor Relations for Kimbell Royalty Partners. Thank you.

You may begin.

Rick Black

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

replay no listening be that transcript date any longer may be advised information the accurate please So of sensitive any or reading. of as time

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

to be results will nature, their company's uncertain We of part forward-looking differ forward-looking for as statements. may which, materially. earnings control. making today's of by call, refer our disclosure and today's the Actual press on outside release are statements Please

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

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

Bob Ravnaas

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

another that announce all operating in key quarter substantial are metrics. record to included growth pleased very We

first quarter XX,XXX from history. time $XXX per day a including million the exceeded seller our for BOE from a Our private total recent in production, full acquisition our

model not significant to to consolidating but at value gas U.S. aimed more long-term the as We are importantly, generating sector, strategic we this natural have continue our achieved only unitholders. royalty excited and also, and milestone business execute our for oil

marked permits. rig highs in production, The set third and DUCs count, all-time new quarter

U.S. the mix shift NGLs in Activity acreage oil our now continued During strong, production have quarter. our liquids last production remains quarter, with materially XX% to towards now to and representing still XX% and $XXX a Even we rate compared effect land XX% our of our overall have the we history. XX%. giving rig highest market best-in-class million after acquisition, PDP the share recent most our of in only decline the count, to of

maintain increase resilience production quarter as the to had that had us end confidence an ever net of up the needed the reflecting last the of the as DUCs number of our quarter XX% flat per are our spread This extremely we with only X.X look to as distribution well of this in of at XXXX declared production X.X we we net XXXX. in short, and third quarter. wells $X.XX wells widest line-of-sight quarter, we've In relative of pleased from permits wells year. and we At today, gives wrap

we largest September, the our history. in In closed company's acquisition

quality, believe basins targeted near-term of today, is best-performing, highest in flow and oil The then XX. excellent portfolio the reservoir significantly in drilling upside. Kimbell's long-term stated we our enhance approach complements gas to the to positions M&A, still royalty As cash and mineral interest and this growth acquisition combining Lower disciplined expected and

gas will look this the royalty consolidator the a accelerated and continuing generate we future oil major flow was accretive in unit, While We in cash years. as our acquisition immediately per to to natural it forward distributable role sector. accretion believe

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

Davis Ravnaas

performed discussed, that by significant run quarter Bob rate Thanks, generated which good well the third everyone. Kimbell a that will Including quarter daily record a revenues production in a full and full Kimbell the new marked day of XX,XXX extremely quarter, milestone Bob, morning, production and for received X:X the be just for of production per BOE basis. acquired the on was Kimbell.

quarter, of are we range and for for incremental QX. guidance As production result expectations a significant our today, production the our boosting the fourth

reflecting we cash business the expect BOE generates. model our addition, positive In leverage low per G&A operating QX, record at

increase of results start reviewing third second XX.X% the I'll oil, and million, compared quarter, an of to by financial the with $XX.X revenues from our quarter. gas NGL beginning natural

XX,XXX rate represents the a quarter average production to This our run XX XX% Third from acquisition. XX,XXX including day, of second XXXX BOE BOE average compared rate was daily run day. recent quarter daily days increase of per per production production

NGLs. XX% production and and quarter XX% third was from Our approximately or gas natural from mix from from oil of comprised approximately liquids XX% XX%

or September had acreage. not our the net permit and inventory. DUCs XXX gross to XX, net estimate properties, its does of X.XX on minor Kimbell's we X.X which add DUC or locations can major XX% properties data additional permitted XXXX, XXX As gross include This and an

of a In land in drilling represents the States addition, new United with we XX%, actively record. XX approximately exited market quarter on rigs our the and share continental acreage, all our rigs drilling

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

million per Excluding acquired a production transaction-related impact new including the the record quarter expenses with low of acquired was and $X.XX, G&A the impact of cash full approximately a the for production, BOE associated in $X.X company.

common as income to million, respectively, million and million $XX.X $XX.X approximately $XX.X $XX.X net compared from million last quarter. units quarter net Third income to and attributable approximately was was

million the consolidated June last EBITDA million. XX, $XX.X was was quarter September the adjusted production EBITDA $XX of quarter, through XXXX million, $XX.X Total from up adjusted XXXX, X, third XXXX, date from QX including consolidated acquired effective

news distribution per unit of pay Today, the announced find of will will third to under down distribution to $X.XX available XX% represents the credit end and that outstanding adjusted revolving EBITDA This cash portion a borrowings of unitholders reconciliation we at payment quarter. a our You release. a equates distribution for used and for remaining common cash cash Kimbell's facility. available the be consolidated a distribution of both common cash to for secured XX% the of

common our distribution nontaxable additional approximately to tax third XXXX that for instead XX% Please not expect are today's interest of basis income each to recipients We earnings should in but distribution release of purposes constitute the refer to taxes. commentary federal quarter constitute estimated dividends to related ownership for Kimbell units. U.S. reductions

sheet balance liquidity. our to now and Moving

other amended million revolver credit and things, June to June from commitment the borrowing $XXX on reminder, existing we the our million amount on extend and a base the XXXX. As XX, $XXX elected increase to, to agreement among maturity secured

had we in secured credit million under As facility. approximately of $XXX.X revolving debt September our XX, outstanding XXXX,

million adjusted We XX-months Kimbell $XX.X continue a balance September with under of revolving had XXXX. undrawn to maintain of its conservative approximately consolidated XX, EBITDA to as credit secured debt X.Xx. capacity sheet trailing in net facility

are a our about we We position, We the and company of base shareholder our for comfortable our value. remain and very and financial syndicates see opportunities expanding as support to continued long growth our horizon bullish industry our with strong very enhance financial flexibility.

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

Operator

Stifel. Derrick the Whitfield [Operator of Instructions] with Our question first line comes from

Derrick Whitfield

on question, I With trajectory. focus growth wanted my to first your

that QX, requirement, in upside of maintenance reasonable quite largely given there's beyond it a to feels far bit to like line holding Is statement? that Looking with your forecast production of continue a QX. inventories we're exceeding sight flat

Davis Ravnaas

a It's a question. It's great great point.

given permit As say just completion as control cetera. fact the dates, That it's the growth point don't a volumes well we et royalty and conversions, company, you always production being have, obviously, DUC challenging your is know, to said, predict least to that founded. over

to flat in relative I history we've than now of kind we production ever company of more wells maintenance a keep sight as have So had wells ratio. believe line to

organic least in than suggest going So forward the on at more had or that would an past growth certainly robust basis. we've

probably What point premise. us and continued we being your well as any on dig production. there see into in and guidance from I thoughts? That anybody is Matt, conservative said, to provide and don't is want the XXXX, the disagree justified, with numbers on view else a for stated jump you'll

Matthew Daly

very just the we in say Yes. Eagle Ford. mean that had PDP to looking and conversions I Yes. Haynesville would good I Permian, at QX,

acquisition our and the X% actually quarter-over-quarter between production made we QX. QX grew legacy in Excluding QX,

annualized that's X% our growth So organically for legacy production.

flat. as sight So forward, that's great looking have stay Davis That's correct. a highest We net company you're history. to in the I right X.X spread need wells a there. of mean, we said, X.XX. line only But quarter growth number wells of the now, record

only going production, of feel resilience organic the to we wrap we also the good as very potential about but So for up 'XX and not growth 'XX. QX

Davis Ravnaas

to I be best that's in guidance aggressive the of We unduly balance. a obvious conservative, we we but also want given be hope do want when Derrick, view. to it's of don't your lack so don't issuing operational control. just kind fair our overly

Derrick Whitfield

for present market? in And understanding recent, you in bid is. wanted interest I follow-up, or the ] ask change with at in you largest [ in have commodity It participating the interest as out could characterize my competitive the transaction M&A driving the firming in prices the guys company. the the dynamics history that surge the guess, landscape your I it? to on and of has clearly, And done if

Davis Ravnaas

question. Great

ourselves M&A historic opinion, So our also but foremost, I for peers. in would just my say just in royalty a first the not and this sector, was year

I job consolidating public of think, have a the sector. and getting into minerals done fabulous private

overall. it's big year been a So

most think in the that actually would see seen across some be the are many probably ways we that larger for and that in the this favorable competitive desk the some competitively targeting larger time. deals our we priced that deals. dynamic smaller of is buyers I to I would ones than I've come that argue quite like packages,

think some let's someone it, together try pay, But XXx going they then I in like range. or of greater the to X like to multiple reality, that, XXx. lot flow meaningful sell call to ourselves our a flow so the are And packages to have aggregators from peers that it's difficulty large you're and else Xx a are where deals cash in that whether M&A seeing, than cash putting

So being there larger we buyer a think to right now benefit is assets. of

always We will at look everything.

we've to were unexpected in we predict be didn't the they done to and just the acquisitions nature. that hard wave had years years they frankly, but we I that that is one ones, them. [indiscernible] year, deal. the We've it's continue happen on meaningful we very M&A time. at deals. like, able assets in really We where no And we We've we'll make. we're did what done we've This and to a where are get X think be see had place you'll good to all -- right

levering anticipate that obviously, pursuing deals we up, don't say are I'd a So participate. chances. already we're than basis. be We'll our leverage-neutral and to like going any more on We we

And currency, that I very currency a as direct done issuances our think or assets. either we've through sellers to offerings acquire historically using in well to primary

differentiated think I in we're regard. that

And so landscape. you'll to I us think see in the continue M&A

or going to want our guys you to we're shot add? So very in Matt, approach. else anything be rifle Bob

Bob Ravnaas

only at accretive pricing. thing really Yes. delighted we've have we The X to acquisitions add to last to love the and we're I'd them been that able like done, is get

MB a So with and activity. lot year, are last third production just on recent of and then largest starting quality the drilling this all quarter most X the acquisition, of [indiscernible] excellent

about excited performing. acquisitions we're X these very So are the way

Operator

of of question next from comes Bank Abbott John with the America. Our line

John Abbott

Yes.

So both our really questions are tax. on

off paid indicated you've What sort of for does in do federal is look over distribution a that I your that? real of about the sort So November a guess question presentation, the will your purposes. from multiyear -- that be XX% how just trajectory per federal forecast? based nontax think you basis of

Davis Ravnaas

going of future, In terms change number that forward? XX% how does

John Abbott

Correct.

Davis Ravnaas

Yes. question. call on to I that you Blayne, it might to now? right are defer answer you the

R. Rhynsburger

in Yes, quarter-by-quarter. going previous year, to than to But guidance I increased, am. of do made we out kind further quarter. And just provide it we commodity the prices then when used change the

number say really is with number, to XX% would I going ride really prices. that commodity just So that

where going factors other that's you other that. to So really run no number go going to in change a and that down. there's if that's capital the But is than oil see

with I answer just move -- that with that, prices so. So commodity would change and would the going to be it's

John Abbott

the understand I are necessarily I like anymore, taxed guidance understand prices. understand. you commodity tax you corp. of C I and a that provide multiyear But volatility don't

How do sort at we Are that maybe and to of strip you years You've after helps your not X taxpayer? you today. acquisition, that full acquisitions, of a taxes year kind if just done what at probably you be if just you would of a your guys we so looking think point, sort next assuming that. bit the would little if do look probably out? But X another did --

Davis Ravnaas

it's John, fair Yes, a question.

you're this Given had for, candidly, the asking growth challenging. dramatic we've that it's analysis year, that

We takes that. have to come with work time with accounting firms and to it up

fact, one on we're firms that. In at think provided only sector, ever in our of multiyear least guidance, us that's I reflect the tax let

Given the and worth this pretty we've the something the be that had our M&A time point taken growth might meaningfully. obviously, to But of disclosure always is year, that's that changed have revisit company dynamics additional great. that

on So us, us fair. providing and that's figure steps let additional internally that's guidance, on up if out circle next

Operator

next line James. the with Our Raymond from of question comes Lamar Trafford

Trafford Lamar

think higher moving to we time? have directionally thinking of is first XX% that? lower. one the are move that? how guys is guess I and Or I we Xx anticipate about should a you ratio leverage continues payout How Should over below now

Davis Ravnaas

debt, question. how the the way. do rewarding flows about do level, most when Yes. cash Board payout our XX% us manage efficient the on say for we're consistent cash you interest Excellent would the paying to paying and We it down we particularly question we is shareholders best that of the how Always flow. want at with ratio at think ratio -- I the XX%. in like X% keep

some see to point you'll for start time. to that that quite we think we profit redeem will have. the I a us be So at to do continue which want There

flexibility gives up to bringing capacity revolver, on So additional more that. just do the us

is but where at to we very point it's increase in conservative. this is Bob, which the point evaluate. is think great may that in payout something constantly a it's to we or the be at add? that we this at point, that want are just taken, your point, that's balance at don't guys feel just that And There that I shape. sheet well unduly because So Matt future anything decide least ratio yet. where you we're -- We point

Matthew Daly

month, say that determination facility. credit We're to I'd at [indiscernible] our million continues a our we right on increase. -- and borrowing this to later base No, have we're going now, $XXX meeting

right over to expect credit Apollo this of says, is good position, quarters But in as next up additional call preferred. Davis go in now, which liquidity. to redeem a a to, down plan next the facility adding We to it, year time that the the that be pay QX, chunk continue is to to big

So...

Trafford Lamar

in you higher a hedging note, similar number, you've moving hedges, below got kind Awesome. and all added how of kind where kind price 'XX do second regarding about oil And some of on Similarly the kind all leverage proportionally of that's in forward? of 'XX and with swap half the gas and of Xx hedges 'XX. think

Davis Ravnaas

think systematically of do a We -- We question always it. you as a do company. how about royalty it's hedging

leverage budget do built-in like debt. financial vis-a-vis at For us, -- the the us, does, for CapEx But obviously. protect we look have we a we have don't to driller

take And ratio a we divide basis. we by on so it and what X-year hedge debt, we that our forward do enterprise value, rolling is we

believe right now, So not X I XX% years mistaken, that's think, on Matt, if for I the I'm at average. next

Matthew Daly

yes. correct, That's

Davis Ravnaas

Yes.

I keep doing think we'll We're to consistent just historically that, trouble So people not gas of a to lot continue prices, and predict that. get do movements just a in trying oil strategy.

So...

Operator

Capital KeyBanc Markets. from [Operator Rezvan the Tim Instructions] of comes with Our question line next

Timothy Rezvan

on Congratulations night. the last Texas Rangers

Davis Ravnaas

Yes, thanks.

Bob Ravnaas

a That game. was great

Timothy Rezvan

questions, so more topics. was think Good I series. actually push important took a Derrick both my I they're because little to hoping

yours. that by well. On as peers And you've noticed some sellers I'd seen pretty up financing the M&A debt set imagine attractive market, of that

than available at broke -- sector? -- like that there's of year overall sort latest -- on a we kind near-term of saw the year. about start the So now the maybe think in thought looks M&A to year of you this what's financing of just the logjam people I'm do how the for more the outlook and it trying kind understand

Davis Ravnaas

really public most since fun it's environment, one ago, surprised packages are that of at volume there. we up massively just trillion $X.X effort and and evolve to That's are question. just There basis, We're $XXX private incredible and of this is public the going a on mean context groups see XX but out know out doing about great out monthly we we on to fun business just really fragmented. just just there, previously. started not watch last and going over been just size, M&A that how really reflection million there an the our that -- have introduced the going XX a it's get it's of gearing it's in big the sheer a consolidation Man, for that years, be looking things industry to the to weekly, out they years if by didn't and I the continue in there there's well, is. sellers

So we expect that trend.

we If if conservative We chart up out you like volume bit just end is always to frankly, being always it there. us. had it, on and it a always M&A a up. look surprises historically, bar go continues much And of there how little

so Our I would that we say expect M&A continue view, to activity. robust

a the the we our them opportunities, Rangers, look that to always buy. view and shareholders. of get those and year, selective highly Our that opportunity. up and out say, in we maximizes pitch just you lot swing we be right there we're we to is right the just every asset best waiting around And returns if what's on We for the at to the at possible try there's at try sit to focus to a not run in landscape price and can what want

that are buyers. private if the very a not small at on don't an number environment looking debt financing buyers and thousands of of -- you think with hundreds, there's public you're there agree I So where I angle.

think And sets as buyer. us so buyer, public very as a for a favorable I that a dynamic up

by a to cases we that down in valuations pay where public the think you've to I the private little disappointed gotten that have ability trickle of cases, the the kind should the are. forgotten bit think I of private And trade some in folks public. what valuations

so public for We're that's some is I of seen this -- folks opposite consistently, and a dynamic and money think private going just kind what outbid us, the you strange would and on. you've expect. And competitors, there raise of seeing

these but for changes, and working be of to for that point, peers, larger it exit where limited not seems some at ourselves working seems maybe there a focusing to just opportunity on some So is our everybody. packages us,

So I more of guys to this in do want think we'll same just you continue Bob to the or add? Matt, environment. anything

Bob Ravnaas

great No, answer. that's a

Timothy Rezvan

appreciate I back maintenance the levels. great. that And That's to Okay. context. of then the sort activity

net locations. I X.X think net X.X permitted DUCs,

strong now have You sort to quarter. kind And you of to bigger execution insight mentioned of curious converting Mid-Con. a on the those in I'm just exposure the on permits any much visibility third PDPs.

Just about more year? how you had that's think earlier in that than that the how the you been now you exposure have trending? And lot to a Mid-Con

Davis Ravnaas

not average, what we yet that's the really full how I give XX answer Bob, on permits on Mid-Con you real months? the to a say, have permits in I'm those convert Yes, have question. XX to you across say data asset of portfolio, a would enough to would great recently sure converted development. most terms acquired

Bob Ravnaas

yes, Yes, that, usually within yes. but

Davis Ravnaas

we Mid-Con love And position. our Yes.

of ever question. buys of relative been of for was good terms think in buy able price. place in and made, purchase we terms best what A that in of buck In we've to bang hydrocarbon we've terms to the in fact, one frankly, your

the to how terms quarter seeing there. a a on going just on little Let what's think full you terms give probably of permit too us next more bit over you early or I there activity answer in read we're in X conversions. of But a give

So...

Operator

Thank management to and our that session. final the for I'll you. question-and-answer any turn comments. Ladies gentlemen, concludes floor back

Bob Ravnaas

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

Operator

Thank you.

disconnect now and lines. interest. may your You you for your participation Thank

Kimbell Royalty Partners (KRP) 2 Nov 232023 Q3 Earnings call transcript