8-K: Kimbell Royalty Partners to Redeem 50% of Outstanding Series A Preferred Units

Kimbell Royalty Partners announces the redemption of 50% of its outstanding Series A Cumulative Convertible Preferred Units on May 7, 2025, for approximately $182.3 million.

Summary

• Kimbell Royalty Partners, LP (the Partnership) has announced the redemption of 162,500 Series A Cumulative Convertible Preferred Units, representing 50% of the outstanding Preferred Units.
• The redemption is scheduled for May 7, 2025 (the Redemption Date).
• The redemption price is $1,121.91781 per Preferred Unit, totaling approximately $182.3 million.
• The Partnership intends to fund the redemption through borrowings under its revolving credit facility.
• Following the redemption, 162,500 Preferred Units will remain outstanding, representing the remaining 50% of the originally issued Preferred Units in 2023.

Sentiment

Score: 7

Explanation: The announcement is generally positive as it reflects active capital management, but the reliance on debt financing introduces some risk.

Positives

• The redemption simplifies the capital structure by reducing the number of outstanding preferred units.
• The company has access to its revolving credit facility to fund the redemption.

Negatives

• The redemption will be funded by borrowings under the Partnership's revolving credit facility, potentially increasing debt levels.

Risks

• The Partnership's ability to fund the redemption depends on the availability of funds under its revolving credit facility.
• Market conditions and other factors could affect the Partnership's ability to execute the redemption as planned.
• The forward-looking statements are subject to risks and uncertainties described in the Partnership's filings with the SEC, including the Annual Report on Form 10-K for the year ended December 31, 2024.

Future Outlook

The Partnership expects to fund the redemption with borrowings under its revolving credit facility, but actual results may differ due to various factors, including market conditions and the terms of the redemption.

Industry Context

This announcement reflects a move by Kimbell Royalty Partners to manage its capital structure, which is a common practice in the oil and gas industry to optimize financial performance and shareholder value.

Comparison to Industry Standards

• Many companies in the oil and gas sector use preferred stock as a financing tool.
• Redeeming preferred stock is a common way for companies to reduce their cost of capital or simplify their capital structure.
• Similar companies such as Viper Energy Partners and Black Stone Minerals have also used various capital management strategies, including debt refinancing and equity offerings, to optimize their financial positions.

Stakeholder Impact

• Holders of the redeemed Preferred Units will receive cash for their units.
• Shareholders may see a change in the capital structure and potential impact on earnings per share.
• Creditors may be affected by the increased borrowings under the revolving credit facility.

Next Steps

• The Partnership will proceed with the redemption of the Preferred Units on May 7, 2025.
• The Partnership will fund the redemption through borrowings under its revolving credit facility.

Key Dates

Keywords

redemption, preferred units, Kimbell Royalty Partners, revolving credit facility, Series A