Kimbell Royalty Partners Announces First Quarter 2021 Results

FORT WORTH, Texas, May 6, 2021 /PRNewswire/ -- Kimbell Royalty Partners, LP (NYSE: KRP) ("Kimbell" or the "Company"), a leading owner of oil and natural gas mineral and royalty interests in more than 97,000 gross wells across 28 states, today announced financial and operating results for the quarter ended March 31, 2021. 

First Quarter 2021 Highlights

• Q1 2021 daily production of 13,721 barrels of oil equivalent ("Boe") per day (6:1)
• Q1 2021 production was composed of approximately 61% from natural gas and approximately 39% from liquids (26% from oil and 13% from natural gas liquids ("NGL")) (6:1)
• Q1 2021 oil, natural gas and NGL revenues of $36.4 million, an increase of 40% from Q4 2020, reflecting improved realized commodity prices
• Q1 2021 net income of approximately $537,000 and net loss attributable to common units of approximately $704,000; compared to a Q4 2020 net loss of $93.8 million and net loss attributable to common units of $62.2 million
• Q1 2021 consolidated Adjusted EBITDA of $26.0 million, an increase of 46% from Q4 2020
• Announced the results of a detailed portfolio review of Kimbell's 13 million gross acres:
• Total 10,160 gross and 68.1 net, 100% net revenue interest or NRI, of undrilled locations (includes only major properties and excludes minor properties, which Kimbell estimates could add up to an additional 20% to Kimbell's net inventory in the aggregate)¹;
• Represents an estimated 15 years of drilling inventory²
• As of March 31, 2021, Kimbell's major properties had 761 gross (2.20 net) drilled but uncompleted wells ("DUCs") and 669 gross (2.54 net) permitted locations on its acreage 
• As of March 31, 2021, Kimbell had 49 rigs actively drilling on its acreage, an increase of 26% from Q4 2020, which represented 11.8%³ market share of all rigs drilling in the continental United States as of such time
• Announced a Q1 2021 cash distribution of $0.27 per common unit, an increase of 42% from Q4 2020, reflecting a payout ratio of 75% of cash available for distribution; implies a 9.4% annualized yield based on the May 5, 2021 closing price of $11.51 per common unit; Kimbell intends to utilize the remaining 25% of its cash available for distribution to repay a portion of the outstanding borrowings under Kimbell's revolving credit facility
• Kimbell affirms its financial and operational guidance ranges for 2021 previously disclosed in its Q4 2020 earnings release

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¹ These figures include Kimbell's major properties and do not include locations from Kimbell's minor properties, which generally include properties with less than a 0.1% net revenue interest and are time consuming to quantify, but in the estimation of Kimbell's management could add up to an additional 20% to Kimbell's net inventory in the aggregate.
² Based on the pace of major well completions in 2019, which management believes is a more normalized rate for this calculation compared to 2020, which was impacted by the slowdown resulting from the COVID-19 pandemic. 
³ Based on Kimbell rig count of 49 and Baker Hughes U.S. land rig count of 416 as of April 1, 2021.

Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell's general partner, commented, "Improved pricing in Q1 21 as compared to Q4 20 was the primary theme of the quarter, with realized oil prices up 37%, realized natural gas prices up 62% and realized NGL prices up 63%.  Operators generally appear to be maintaining discipline with their capital expenditure programs with a greater focus on free cash flow generation and distributions to their shareholders. 

"During the quarter, production curtailments due to the February 2021 freeze across a large part of the U.S. resulted in approximately 1.2 days of lost production, or 188 Boe/d.  With these curtailments behind us and increased activity on our acreage as evidenced by the 26% increase in the rig count on our acreage as compared to year-end 2020, we are optimistic that Kimbell will experience improved production levels on its acreage as we progress through 2021."

Ravnaas continued, "I am also very pleased to announce the results of our deep dive review into our extensive portfolio and report that as of March 31, 2021, Kimbell had 10,160 gross and 68.1 net (100% NRI) total upside locations. This represents an estimated 15 years of future drilling inventory based on the pace of well completions during 2019.  We are using 2019 activity levels for this estimate because we believe 2019 exhibited a more normalized rate compared to 2020, which was impacted by the slowdown resulting from the COVID-19 pandemic.  Approximately 80% of the total estimated undrilled net inventory is located in the Permian, Eagle Ford and Haynesville, which have some of the best economic returns and lowest break-even costs in the U.S.  In addition, we estimate that Kimbell's superior five-year average PDP decline rate of only 12% requires only 4.5 net wells each year to keep production flat. I am proud of the skilled and dedicated effort, and the 19 months of hard work, spent by our engineering, land and geological teams to carefully analyze our 13 million gross acres across the U.S.  This analysis was reviewed by a leading third party independent international engineering firm, Ryder Scott.  These locations also only include Kimbell's major properties and do not include Kimbell's minor properties, which generally have less than a 0.1% net revenue interest and are time consuming to quantify, but in our estimation could add up to an additional 20% to Kimbell's net inventory in the aggregate.  We are thrilled with these results and have provided a separate stand-alone presentation on our website that provides further details and transparency (https://kimbellrp.investorroom.com/events-and-presentations). 

"We are very optimistic about the future of our industry given rapidly improving fundamentals across the U.S. energy sector.  We are also excited about the opportunities to further expand our acreage footprint and deliver compelling value to our unitholders for years to come."

First Quarter 2021 Distribution and Debt Repayment

On April 23, 2021, the Board of Directors of Kimbell Royalty GP, LLC, Kimbell's general partner (the "Board of Directors"), approved a cash distribution payment to common unitholders of 75% of cash available for distribution for the first quarter of 2021, or $0.27 per common unit.  The distribution will be payable on May 10, 2021 to common unitholders of record at the close of business on May 3, 2021.  Kimbell plans to utilize the remaining 25% of cash available for distribution for the first quarter of 2021 to pay down a portion of the outstanding borrowings under its secured revolving credit facility.  Since May 2020 (excluding the expected upcoming pay down from the remaining 25% of Q1 2021 projected cash available for distribution), Kimbell has paid down approximately $25.0 million of outstanding borrowings under its secured revolving credit facility by allocating a portion of its cash available for distribution for debt pay down.

Kimbell expects that substantially all of its first quarter 2021 distribution will not constitute taxable dividend income and instead will generally result in a non-taxable reduction to the tax basis of unitholders' common units.  The reduced tax basis will increase unitholders' capital gain (or decrease unitholders' capital loss) when unitholders sell their common units.  Furthermore, Kimbell expects that substantially all distributions paid to common unitholders from 2021 through 2023 will not be taxable dividend income and less than 25% of distributions paid to common unitholders for the subsequent two years (2024 to 2025) will be taxable dividend income. 

Financial Highlights

Kimbell's first quarter 2021 average realized price per Bbl of oil was $54.52, per Mcf of natural gas was $3.31, per Bbl of NGLs was $24.45 and per Boe combined was $29.45.

During the first quarter of 2021, the Company's total revenues were $22.4 million, net income was approximately $537,000 and net loss attributable to common units was approximately $704,000, or $0.02 per common unit. 

Total first quarter 2021 consolidated Adjusted EBITDA was $26.0 million (consolidated Adjusted EBITDA is a non-GAAP financial measure. Please see a reconciliation to the nearest GAAP financial measures at the end of this news release). 

In the first quarter of 2021, G&A expense was $6.8 million, $4.1 million of which was Cash G&A expense, or $3.32 per Boe (Cash G&A and Cash G&A per Boe are non-GAAP financial measures.  Please see definition under Non-GAAP Financial Measures at end of this news release).  Unit-based compensation in the first quarter of 2021, which is a non-cash G&A expense, was $2.7 million or $2.18 per Boe. 

In spite of further stabilization in the oil and natural gas markets and improved differentials and commodity prices, Kimbell believes that the ongoing COVID-19 outbreak and potential supply/demand imbalances in the oil and natural gas markets could have an adverse effect on Kimbell's business, production, cash flows, financial condition and results of operations during 2021.

As of March 31, 2021, Kimbell had approximately $168.5 million in debt outstanding under its secured revolving credit facility, had net debt to first quarter 2021 trailing twelve month consolidated Adjusted EBITDA of approximately 2.2x and was in compliance with all financial covenants under its secured revolving credit facility.  Kimbell had approximately $96.5 million in undrawn capacity under its secured revolving credit facility as of March 31, 2021.

As of March 31, 2021, Kimbell had outstanding 39,769,896 common units and 20,779,781 Class B units.  As of May 6, 2021, Kimbell had outstanding 39,748,270 common units and 20,779,781 Class B units.

Production

First quarter 2021 average daily production was 13,721 Boe per day (6:1), composed of approximately 61% from natural gas (6:1) and approximately 39% from liquids (26% from oil and 13% from NGLs).  Due to curtailments related to the freeze in February 2021, Kimbell lost approximately 1.2 days of production, or 188 Boe per day (6:1) during Q1 2021. 

Operational Update

As of March 31, 2021, Kimbell's major properties had 761 gross (2.20 net) DUCs and 669 gross (2.54 net) permitted locations on its acreage.  In addition, as of March 31, 2021, Kimbell had 49 rigs actively drilling on its acreage, which represents an approximate 11.8% market share of all land rigs drilling in the continental United States as of such time.

 Results of Detailed Portfolio Review

Kimbell completed a detailed review of its portfolio, which as of March 31, 2021, identified 10,160 gross and 68.1 net (100% NRI) total upside drilling locations, which represents an estimated 15 years of drilling inventory based on the pace of major well completions during 2019, which management believes is a more normalized level given the pandemic in 2020.  These locations only include Kimbell's major properties and do not include Kimbell's minor properties, which generally have less than a 0.1% net revenue interest and are time consuming to quantify, but in the estimation of Kimbell's management could add up to an additional 20% to Kimbell's net inventory in the aggregate.  This analysis was reviewed by a leading third party independent international engineering firm, Ryder Scott.

Approximately 80% of the total estimated undrilled net inventory is located the Permian, Eagle Ford and Haynesville, which have some of the best economic returns and lowest break-even costs in the U.S.  In addition, Kimbell's superior five-year average PDP decline rate of only 12% requires only an estimated 4.5 net wells each year to keep production flat. 

Hedging Update

The following provides information concerning Kimbell's hedge book as of March 31, 2021:

Conference Call

Kimbell Royalty Partners will host a conference call and webcast today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss first quarter 2021 results.  To access the call live by phone, dial 201-389-0869 and ask for the Kimbell Royalty Partners call at least 10 minutes prior to the start time.  A telephonic replay will be available through May 13, 2021 by dialing 201-612-7415 and using the conference ID 13717951#.  A webcast of the call will also be available live and for later replay on Kimbell's website at http://kimbellrp.investorroom.com under the Events and Presentations tab. 

Presentation

On May 6, 2021, Kimbell posted an updated investor presentation and supplemental presentation its website.  The presentations may be found at http://kimbellrp.investorroom.com under the Events and Presentations tab.  Information on Kimbell's website does not constitute a portion of this news release.

About Kimbell Royalty Partners, LP

Kimbell (NYSE: KRP) is a leading oil and gas mineral and royalty company based in Fort Worth, Texas.  Kimbell owns mineral and royalty interests in over 13 million gross acres in 28 states and in every major onshore basin in the continental United States, including ownership in more than 97,000 gross wells with over 41,000 wells in the Permian Basin.  To learn more, visit http://www.kimbellrp.com.

Forward-Looking Statements

This news release includes forward-looking statements, in particular statements relating to Kimbell's financial, operating and production results and prospects for growth, drilling inventory, growth potential, identified locations and all other estimates and predictions resulting from Kimbell's portfolio review, the tax treatment of Kimbell's distributions, future natural gas and other commodity prices, changes to supply and demand for oil, natural gas and NGLs and the recent COVID-19 outbreak and its impacts on Kimbell and on the oil and gas industry. These and other forward-looking statements involve risks and uncertainties, including risks that the anticipated benefits of acquisitions are not realized, risks relating to the COVID-19 outbreak, and uncertainties relating to Kimbell's business, prospects for growth and acquisitions and the securities markets generally, as well as risks inherent in oil and natural gas drilling and production activities, including risks with respect to low or declining prices for oil and natural gas that could result in downward revisions to the value of proved reserves or otherwise cause operators to delay or suspend planned drilling and completion operations or reduce production levels, which would adversely impact cash flow, risks related to the impact of COVID-19 on the global economy and Kimbell's business, risks relating to the impairment of oil and natural gas properties, risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in oil and natural gas prices, risks relating to Kimbell's ability to meet financial covenants under its credit agreement or its ability to obtain amendments or waivers to effect such compliance, risks relating to Kimbell's hedging activities, risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations, risks relating to delays in receipt of drilling permits, risks relating to unexpected adverse developments in the status of properties, risks relating to borrowing base redeterminations by Kimbell's lenders, risks relating to the absence or delay in receipt of government approvals or third-party consents, risks relating to acquisitions, dispositions and drop downs of assets, risks relating to Kimbell's ability to realize the anticipated benefits from and to integrate acquired assets, including the Springbok assets, risks relating to tax matters, and other risks described in Kimbell's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the "SEC"), available at the SEC's website at www.sec.gov. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Except as required by law, Kimbell undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this news release. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Kimbell's filings with the SEC.

Contact:

Rick Black
Dennard Lascar Investor Relations
[email protected]
(713) 529-6600

– Financial statements follow –

Kimbell Royalty Partners, LP
Supplemental Schedules

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA and Cash G&A are used as a supplemental non-GAAP financial measures by management and external users of Kimbell's financial statements, such as industry analysts, investors, lenders and rating agencies.  Kimbell believes Adjusted EBITDA is useful because it allows us to more effectively evaluate Kimbell's operating performance and compare the results of Kimbell's operations period to period without regard to its financing methods or capital structure.  In addition, management uses Adjusted EBITDA to evaluate cash flow available to pay distributions to Kimbell's unitholders.  Kimbell defines Adjusted EBITDA as net income (loss) before interest expense, non-cash unit-based compensation, unrealized gains and losses on derivative instruments, cash distributions from affiliate, equity income from affiliates, impairment of oil and natural gas properties, income taxes and depreciation and depletion expense, and adjusted for distributions from equity investments.  Adjusted EBITDA is not a measure of net income (loss) or net cash provided by operating activities as determined by GAAP.  Kimbell excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within Kimbell's industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.  Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as historic costs of depreciable assets, none of which are components of Adjusted EBITDA.  Adjusted EBITDA should not be considered an alternative to net income, oil, natural gas and natural gas liquids revenues, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.  Kimbell's computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.  Kimbell expects that cash available for distribution for each quarter will generally equal its Adjusted EBITDA for the quarter, less cash needed for debt service and other contractual obligations, tax obligations, and fixed charges and reserves for future operating or capital needs that the Board of Directors may determine is appropriate.

Kimbell believes Cash G&A and Cash G&A per Boe are useful metrics because they isolate cash costs within overall G&A expense and measure cash costs relative to overall production, which is a widely utilized metric to evaluate operational performance within the energy sector.  Cash G&A is defined as general and administrative expenses less unit-based compensation expense.  Cash G&A per Boe is defined as Cash G&A divided by total production for a period.  Cash G&A should not be considered an alternative to G&A expense presented in accordance with GAAP. Kimbell's computations of Cash G&A and Cash G&A per Boe may not be comparable to other similarly titled measures of other companies.

SOURCE Kimbell Royalty Partners, LP

Related Links

http://www.kimbellrp.com

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