Kimbell Royalty Partners’ Earnings Call Highlights Growth

Kimbell Royalty Partners ((KRP)) has held its Q1 earnings call. Read on for the main highlights of the call.

Kimbell Royalty Partners’ recent earnings call painted a picture of robust financial health and strategic growth, marked by record achievements and strategic acquisitions. The sentiment was largely positive, with the company showcasing its strong position despite facing challenges in the natural gas M&A market and potential commodity price volatility. Overall, the outlook remains optimistic, underscoring Kimbell’s resilience in a fluctuating market.

Record First Quarter Achievements

Kimbell Royalty Partners reported a record-breaking first quarter, achieving significant milestones in oil, natural gas, and NGL revenues. The company also saw impressive figures in consolidated adjusted EBITDA and cash available for distribution, highlighting its strong financial performance.

Accretive Acquisition in Permian Basin

A key highlight was the completion of an accretive acquisition in the Permian Basin, which has bolstered the company’s production capabilities and financial stability. This strategic move underscores Kimbell’s commitment to enhancing its asset portfolio and market position.

Increase in Borrowing Base

The company increased its borrowing base from $550 million to $625 million, reflecting enhanced financial flexibility. This increase in elected commitments on the credit facility is a testament to Kimbell’s strategic financial management.

Distribution Increase

Kimbell declared a first-quarter distribution of $0.47 per common unit, marking a 17.5% increase from the previous quarter. This increase in distribution is indicative of the company’s strong cash flow and commitment to returning value to its unitholders.

Strong Drilling Activity

The company maintained robust drilling activity with 90 rigs actively drilling on its acreage, representing a 16% market share in the Lower 48. This strong operational performance highlights Kimbell’s competitive edge in the industry.

Permitting Success

Kimbell successfully permitted 17 additional wells on a long-held property in Martin County, Texas. This achievement showcases the strength and potential of the company’s asset portfolio.

Conservative Balance Sheet Management

The company maintained a conservative balance sheet with a net debt to trailing twelve-month consolidated adjusted EBITDA of approximately 0.9 times. This prudent financial management ensures significant undrawn capacity remains available.

Challenges in Natural Gas M&A

Despite its successes, Kimbell faced challenges in the natural gas M&A market, particularly in the Haynesville region, due to high competition. This highlights the competitive landscape of the natural gas sector.

Potential Volatility in Commodity Prices

The company acknowledged potential volatility in commodity prices due to broader economic uncertainties. This recognition of market conditions is crucial for strategic planning and risk management.

Hedging Strategy Concerns

Kimbell maintained a 20% hedging level, which might be considered conservative given the significant contango in the natural gas strip. This cautious approach reflects the company’s strategy to manage market risks.

Forward-Looking Guidance

Looking ahead, Kimbell reaffirmed its 2025 guidance, expressing confidence in its continued development and growth. The company aims to enhance long-term unitholder value by consolidating its position in the US oil and natural gas royalty sector, supported by robust operational activity and strategic acquisitions.

In conclusion, Kimbell Royalty Partners’ earnings call reflected a strong financial performance and strategic growth initiatives. Despite challenges in the natural gas M&A market and potential commodity price volatility, the company remains optimistic about its future prospects. The record achievements and strategic moves underscore Kimbell’s resilience and commitment to enhancing unitholder value.