Kimbell Royalty Partners Delivers Strong Q1 2025 Earnings Amid Strategic Growth in Core Basins

Kimbell Royalty Partners, LP (KRT) reported robust financial and operational results for the first quarter of 2025, marking a significant milestone in its transition to a higher-growth energy royalty player. The company not only delivered a 400% surge in earnings per share (EPS) but also achieved record production levels driven by strategic acquisitions and a focus on core U.S. basins. Let’s unpack the details.

Financial Highlights: A Surprising EPS Boost

Kimbell’s Q1 2025 revenue rose modestly to $84.21 million, up from $82.23 million in the same period last year. However, net income soared to $23.08 million (+173% year-over-year), while basic and diluted EPS jumped to $0.20, a staggering 400% increase from $0.04 in Q1 2024. This outperformance underscores the company’s ability to leverage operational scale and cost discipline.

Operational Triumph: Permian Basin Dominance and the Mabee Ranch Impact

The real story lies in Kimbell’s production metrics. Q1 2025 marked a record daily production rate of 25,501 barrels of oil equivalent per day (Boe/d), a 23% increase over 2023 levels. This growth is directly tied to the January 2025 acquisition of the Mabee Ranch mineral interests in the Permian Basin, which added 68,049 gross acres and 875 gross producing wells.

The Permian Basin now accounts for 52% of Kimbell’s revenue and 43% of production, solidifying its status as the company’s crown jewel. The Mabee Ranch deal also boosted Kimbell’s liquids production to 51% of its mix, enhancing resilience against gas price volatility.

Acreage and Inventory: A Fortress Position

Kimbell’s 17 million gross acres across 28 states remain a key asset, but the Permian Basin’s dominance is undeniable. The Mabee acquisition added 6.06 net upside locations, expanding the undrilled inventory by 19% in this basin. With 91 active rigs operating on its acreage (16% of all U.S. land rigs), Kimbell benefits from operator-led drilling without lifting a finger—its royalty model requires zero capital expenditure.

The company’s production maintenance is equally impressive: just 6.5 net wells annually are needed to sustain flat output, thanks to a five-year proved developed producing (PDP) decline rate of 14%. This efficiency reduces risk and allows capital to be redeployed into accretive acquisitions.

Balance Sheet Strength and Distribution Yield

Kimbell’s conservative financial strategy shines through its 0.9x net leverage ratio post-acquisition and a 15.2% distribution yield (as of Q4 2024). While 25% of cash flow is allocated to debt reduction, the company continues to reward shareholders with distributions like its $0.40 per unit payout in Q4 2024 (implying a 10.2% annualized yield at the time). This balance positions Kimbell as a high-yield, low-risk play in a sector rife with volatility.

Risks and Considerations

Kimbell isn’t immune to macro challenges. Oil and gas price swings, operator execution risks, and technological shifts (e.g., renewables) loom large. However, its royalty structure insulates it from operational costs, and its focus on Tier 1 operators (like ConocoPhillips and ExxonMobil) mitigates execution risk.

Conclusion: A Compelling Play on Permian Growth

Kimbell Royalty Partners’ Q1 2025 results highlight a strategic shift toward higher-margin, liquids-rich assets in core basins like the Permian. With record production, a 400% EPS surge, and a fortress balance sheet, the company is well-positioned to capitalize on the energy sector’s cyclical upturn.

The Mabee Ranch acquisition alone is projected to generate $30.9 million in 2025 cash flow and has already pushed Kimbell’s 2025 production guidance to a mid-point of 25,500 Boe/d—a 17% increase over 2023. Combined with its 15.2% distribution yield and minimal capital needs, Kimbell offers a rare blend of income stability and growth potential.

For income-focused investors seeking exposure to the Permian’s ongoing renaissance, Kimbell Royalty Partners is a high-conviction pick—provided they can stomach energy sector volatility. The data points to a company that’s not just surviving but thriving in a challenging market.