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Kimbell Royalty Partners (KRP) 7 Nov 24 2024 Q3 Earnings call transcript

AInvestThursday, Nov 7, 2024 8:19 pm ET
1min read

In its recent earnings call for the third quarter of 2024, Kimbell Royalty Partners highlighted its solid financial performance and optimistic future prospects. The call, led by CEO Bob Ravnaas and CFO Davis Ravnaas, underscored the company's strategic focus on delivering value to unitholders through robust drilling activity and a disciplined approach to operations.

Financial Performance and Distributions

The company reported a record number of lease bonuses during the third quarter, a testament to increased operator interest in developing Kimbell's acreage. The strong drilling activity was reflected in a high number of net DUCs (drilled but uncompleted wells), which increased by 34% quarter-over-quarter to 5.1 net DUCs. This indicates a resilient production outlook as the company wraps up 2024.

Kimbell's financial results for the quarter were impressive, with oil, natural gas, and NGL revenues totaling $71.1 million, and run rate production of 23,846 BOE per day. The company's operational discipline was evident in the cash G&A expenses of $2.57 per BOE, demonstrating positive operating leverage. Net income for the quarter was approximately $25.8 million, with a significant portion attributed to common unitholders.

Future Outlook and Strategic Direction

The company's future outlook is characterized by optimism and confidence. Kimbell is planning to redeem at least half of its Apollo preferred stock in May 2025, reflecting a conservative approach to financial management and a strong liquidity position. The company's net debt to trailing 12-month consolidated adjusted EBITDA ratio remains low at approximately 0.8x, underscoring its financial strength.

Kimbell's strategic direction remains focused on maximizing risk-adjusted returns for its investors. The company is evaluating opportunities across the Lower 48 basins, with a particular interest in the Permian Basin and Appalachia, where infrastructure investments and LNG exports could create new opportunities.

Impact of Elections and Market Trends

The recent elections and potential infrastructure investments in the U.S. have been identified as potential catalysts for increased M&A activity in the sector. Kimbell is positioning itself to capitalize on such opportunities while maintaining a disciplined approach to its balance sheet and strategic acquisitions.

Conclusion

Kimbell Royalty Partners' third quarter earnings call painted a picture of a company in a strong financial position, with a clear strategic direction and a focus on delivering value to its unitholders. The company's solid financial performance and optimistic outlook for the future underscore its commitment to maintaining a robust and efficient operations portfolio, even in the face of market challenges. As Kimbell continues to navigate the evolving energy landscape, its disciplined approach to financial management and strategic acquisitions will be key to unlocking value for its investors.

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