Kimbell Royalty Partners' Q1 2025: Unpacking Key Contradictions in M&A Strategy, Debt Management, and Production Trends

M&A interest and strategy, debt management and preferred unit redemption, production trends in Loving County, Delaware Basin, M&A strategy and activity, and hedge strategy and production risks are the key contradictions discussed in Kimbell Royalty Partners' latest 2025Q1 earnings call.



Record Financial Performance:
- Kimbell Royalty Partners reported record oil, natural gas, and NGL revenues of $90 million in Q1 2025, along with record consolidated adjusted EBITDA of $75.5 million and record cash available for distribution.
- This performance was driven by a full Q1 2025 impact of the acquired production and robust activity on the company's acreage, with 90 rigs actively drilling.

Increased Borrowing Base and Capital Structure Simplification:
- The company's borrowing base and elected commitments on its credit facility were increased from $550 million to $625 million on May 1, 2025.
- Additionally, 50% of the Series A cumulative convertible preferred units were redeemed on May 7, 2025, further simplifying the company's capital structure and reducing its cost of capital.

Robust Lease Bonus Activity and Mineral Production Resilience:
- Kimbell reported strong permit activity, with notable examples like one of its oldest properties permitting 17 additional wells in Martin County, Texas.
- The company's superior 5-year annual average PDP decline rate of 14% allows for only an estimated 6.5 net wells annually to maintain flat production, demonstrating resilience in mineral production.

Dividend Payout and Tax Advantage:
- The company declared a first-quarter distribution of $0.47 per common unit, reflecting an approximate 16% annualized tax advantage yield.
- Approximately 70% of this distribution is expected to be considered a return of capital, enhancing the after-tax return to common unitholders.