8-K: Kimbell Royalty Partners Announces Record Fourth Quarter and Full Year 2024 Results, Production Exceeds 25,000 Boe/d

Kimbell Royalty Partners reports record Q4 and full-year 2024 results, with production exceeding 25,000 Boe/d for the first time, driven by recent acquisitions.

Summary

• Kimbell Royalty Partners announced its fourth quarter and full year 2024 financial and operating results.
• Q4 2024 run-rate daily production was 24,082 barrels of oil equivalent (Boe) per day (6:1).
• Including the impact of the Acquired Production, run-rate production was 25,946 Boe per day (6:1).
• Q4 2024 oil, natural gas and NGL revenues totaled $69.1 million.
• The company reported a Q4 2024 net loss of approximately $39.3 million, primarily due to a non-cash ceiling test impairment expense of $56.2 million.
• Q4 2024 consolidated Adjusted EBITDA was $59.8 million.
• Kimbell announced a Q4 2024 cash distribution of $0.40 per common unit, representing a 75% payout ratio of cash available for distribution.
• The company initiated full year 2025 guidance with estimated daily production at its mid-point projected at 25,500 Boe/d.
• Proved developed reserves at year-end 2024 increased by approximately 3% year-over-year to over 67 MMBoe.
• Kimbell intends to pay out 75% of its projected cash available for distribution in quarterly distributions and utilize 25% of projected cash available for distribution to pay down a portion of the outstanding borrowings under its secured revolving credit facility each quarter.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with record production and a strong distribution, but the net loss due to impairment expense tempers the overall sentiment.

Positives

• Record production levels achieved, exceeding 25,000 Boe/d.
• Strong Q4 cash distribution of $0.40 per common unit.
• Conservative balance sheet with a low Net Debt to Trailing Twelve Month Consolidated Adjusted EBITDA ratio of 0.8x.
• Successful acquisition strategy contributing to production growth.
• Increased proved developed reserves at year-end 2024, up approximately 3% year-over-year.
• High rig activity on Kimbell's acreage, representing a significant market share.
• Kimbell grew total production 23% compared to 2023.
• Kimbell paid out $1.75 per common unit in tax-advantaged quarterly distributions during 2024.
• Kimbell paid down approximately $56.0 million on its credit facility by allocating 25% of cash available for distribution for debt-paydown.
• Since May 2020, Kimbell has paid down approximately $192.0 million of outstanding borrowings under its secured revolving credit facility by allocating a portion of its cash available for distribution for debt pay-down.

Negatives

• Net loss of approximately $39.3 million in Q4 2024, primarily due to a non-cash ceiling test impairment expense of $56.2 million.
• Decline in commodity prices impacted financial results.

Risks

• Potential declines in prices for oil and natural gas could result in downward revisions to the value of proved reserves.
• Operators may delay or suspend planned drilling and completion operations or reduce production levels, impacting cash flow.
• Risks relating to the availability of capital to fund drilling operations.
• Kimbell's ability to meet financial covenants under its credit agreement.
• Risks relating to Kimbell's hedging activities.
• Operating and production risks such as fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards.
• Delays in receipt of drilling permits.
• Unexpected adverse developments in the status of properties.
• Borrowing base redeterminations by Kimbell's lenders.
• Absence or delay in receipt of government approvals or third-party consents.
• Kimbell's ability to realize the anticipated benefits from and to integrate acquired assets, including the Acquired Production.
• Risks relating to tax matters.

Future Outlook

Kimbell initiated full year 2025 guidance with estimated daily production at its mid-point projected at 25,500 Boe/d, with a range of 24,000 to 27,000 Boe/d.

Management Comments

• Robert Ravnaas, Chairman and CEO, stated that 2024 was another outstanding year for Kimbell.
• He highlighted the 23% production growth compared to 2023 and the successful $455 million acquisition that closed in Q3 2023.
• He mentioned the recent acquisition from a private seller in the Midland Basin, further bolstering the Permian Basin as Kimbell's leading basin.
• He noted that production exceeded 25,000 Boe/d for the first time in Kimbell's history, including the full quarter effect from the recent acquisition.
• He stated that Kimbell expects to continue its role as a major consolidator in the U.S. oil and natural gas royalty sector.
• He believes that Kimbell is still in the early stages of this consolidation and will actively seek out targets that fit within its acquisition profile.

Industry Context

Kimbell's strategy focuses on consolidating mineral and royalty interests in the fragmented U.S. oil and natural gas royalty sector, estimated to be over $700 billion in size, positioning itself as a major player with the financial resources and expertise to complete large-scale acquisitions.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies.
• However, it highlights Kimbell's superior five-year annual average PDP decline rate of 14%, suggesting a competitive advantage in managing production decline.
• The company's active rig count representing 16% market share of U.S. land rig count indicates a significant operational presence.

Stakeholder Impact

• Shareholders will benefit from the cash distribution of $0.40 per common unit.
• Employees are likely to be impacted by the company's growth and acquisition strategy.
• The company's performance impacts its relationships with suppliers and creditors.

Next Steps

• Kimbell will continue to seek out acquisition targets that fit within its acquisition profile.
• The company will host a conference call and webcast to discuss fourth quarter 2024 results.
• Kimbell plans to utilize the remaining 25% of cash available for distribution for the fourth quarter of 2024 to pay down a portion of the outstanding borrowings under its secured revolving credit facility.

Key Dates