Kimbell Royalty Partners (KRP) 1 Aug 24 2024 Q2 Earnings call transcript

In the second quarter of 2024, Kimbell Royalty Partners showcased a robust performance, highlighting a strong cash flow, continued debt paydown, and lower cash G&A costs. The company's rig count remains high, with 91 rigs actively drilling across the U.S., representing a significant 16% market share.

Strong Financial Performance and Market Position

Kimbell Royalty Partners reported a total revenue of $77 million from oil, natural gas, and NGLs in the second quarter. The company's net income was approximately $15.2 million, with a cash distribution of $0.42 per common unit paid out to unitholders. The company also maintained a conservative balance sheet, with a net debt to trailing 12-month consolidated adjusted EBITDA ratio of 0.9x and $284.2 million in undrawn capacity under the secured revolving credit facility.

Investment in Future Growth

The company announced plans to redeem about half of its preferred shares within the next 3 to 6 months, reflecting a strategic move to improve the balance sheet and enhance financial flexibility. This decision aligns with Kimbell's commitment to maintaining a debt-to-EBITDA ratio of less than 1.5x.

Navigating Market Challenges

The earnings call also touched upon the challenges faced in the current market, particularly in the gas sector. Davis Ravnaas, Kimbell's CFO, acknowledged the weak gas environment and the difficulty in finding attractive gas assets for acquisition. However, the company remains optimistic about the future of energy demand and the value of its diversified asset portfolio for unitholders.

Looking Ahead

Kimbell Royalty Partners continues to focus on its robust development plans, with several large 20% interest wells expected to come online later in 2024. The company's strategic position in the Mid-Continent, particularly in Oklahoma, has also contributed to a 5% increase in production and a 50% rig capture of all rigs in the state.

Outlook and Guidance

Despite the challenges, Kimbell remains confident about its prospects for continued robust development. The company is affirming its 2024 guidance, with a daily production midpoint of 24,000 BOE per day. Kimbell's leadership emphasizes its focus on returning value to unitholders, with a strategic balance of debt paydown and distribution payments.

Overall, Kimbell Royalty Partners' second-quarter results underscore the company's resilience and strategic position in the energy sector. The company's focus on operational discipline, financial flexibility, and growth opportunities positions it well for future challenges and opportunities. As Kimbell continues to navigate the market landscape, it remains committed to delivering value to its unitholders and stakeholders.