Kimbell Royalty Partners: Unveiling Q1 2025 Earnings and Strategic Moves

In the ever-evolving landscape of the oil and gas sector, Kimbell Royalty Partners, LP (NYSE: KRP) has consistently positioned itself as a leader in mineral and royalty interests. On March 20, 2025, the company announced the release date for its first quarter 2025 financial results, scheduled for May 8, 2025, before the market opens. This announcement comes at a pivotal moment for Kimbell, as it continues to navigate the complexities of the energy market while leveraging strategic acquisitions and operational efficiencies to drive growth.



The company's recent acquisition of mineral and royalty interests in properties located under the historic Mabee Ranch in the Midland Basin has significantly bolstered its presence in the Permian Basin. This acquisition, valued at $230.4 million, has contributed to a record high mid-point daily production of 25,500 Boe/d for 2025, with a high-end projection of 27,000 Boe/d and a low-end projection of 24,000 Boe/d. This represents a 23% growth in total production compared to 2023, largely due to the contribution of the record $455 million acquisition that closed in Q3 2023.

Kimbell's operational guidance for 2025 reflects its commitment to maintaining and growing its production levels. As of December 31, 2024, Kimbell had 91 rigs actively drilling on its acreage, representing 16% market share of all land rigs drilling in the continental United States. This robust drilling activity, combined with a superior five-year annual average PDP decline rate of 14%, requires only an estimated 6.5 net wells annually to maintain flat production. This strategic positioning allows Kimbell to leverage its extensive acreage and well portfolio to drive long-term growth and maintain a competitive edge in the market.



The company's conservative balance sheet, with a net debt to trailing twelve-month consolidated Adjusted EBITDA of 0.8x, provides a solid financial foundation for future growth. The cash distribution of $0.40 per common unit for Q4 2024, reflecting a payout ratio of 75% of cash available for distribution, implies a 10.2% annualized yield based on the February 26, 2025 closing price of $15.62 per common unit. This distribution strategy, along with the company's intention to utilize the remaining 25% of its cash available for distribution to repay a portion of the outstanding borrowings under its secured revolving credit facility, demonstrates Kimbell's commitment to financial discipline and long-term sustainability.

However, Kimbell's reliance on leading operators for the development of its acreage presents both opportunities and risks. On the one hand, Kimbell benefits from the continued development of its acreage by these operators at no cost to the company. This means that Kimbell can generate revenue from the production on its acreage without incurring the costs associated with drilling and production. On the other hand, the performance of these operators can impact Kimbell's production and revenue. For example, if the operators experience financial difficulties or operational challenges, it could lead to a reduction in drilling activity on Kimbell's acreage, which in turn could impact Kimbell's production and revenue.

Technological advancements present both opportunities and risks for Kimbell. On the one hand, technological advancements can increase the efficiency and effectiveness of drilling and production, which could lead to increased production and revenue for Kimbell. On the other hand, technological advancements could also lead to increased competition in the oil and gas industry, which could impact Kimbell's ability to generate revenue from its mineral and royalty interests.

In conclusion, Kimbell Royalty Partners' strategic acquisitions and operational guidance for 2025 reflect its long-term growth prospects and market positioning in the oil and gas sector. The company's extensive acreage, robust drilling activity, and financial discipline position it well to drive production growth and maintain a competitive edge in the market. However, Kimbell's reliance on leading operators for the development of its acreage and the potential impact of technological advancements present both opportunities and risks that the company must navigate to achieve its long-term growth objectives.