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Kimbell Royalty Partners, LP (NYSE:KRP) Q1 2024 Earnings Call Transcript

Kimbell Royalty Partners, LP (NYSE:KRP) Q1 2024 Earnings Call Transcript May 2, 2024

Kimbell Royalty Partners, LP misses on earnings expectations. Reported EPS is $0.08012 EPS, expectations were $0.19. Kimbell Royalty Partners, LP isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to Kimbell Royalty Partners First Quarter Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Mr. Rick Black, Investor Relations. Thank you, Mr. Black. You may begin.

Rick Black: Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the first quarter 2024 ended March 31, 2024. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, which is May 2, 2024. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are considered forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

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We will be making forward-looking statements as part of today's call, which by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to today's earnings press release for our disclosure on forward-looking statements. These factors as well as other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners' Chairman and Chief Executive Officer.

Bob?

Bob Ravnaas: Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call this morning. With me today are several members of our senior management team, including Davis Ravnaas, our President and Chief Financial Officer; Matt Daly, our Chief Operating Officer; and Blayne Rhynsburger, our Controller. We had another excellent quarter. Following on the operational momentum from 2023, we achieved several new quarterly records in terms of daily production, revenue and EBITDA. Strong organic run rate production growth this quarter exceeded the midpoint of guidance, and we exited the quarter with a near record number of rigs drilling on our acreage. In addition, our line of sight wells continue to be well above the number needed to maintain flat production, giving us confidence in the resilience of our production as we progress through 2024.

A broad sunset view of a modern oil & natural gas facility in the Permian Basin.
A broad sunset view of a modern oil & natural gas facility in the Permian Basin.

Today, we were also very pleased to announce a $0.49 distribution per common unit, a 14% increase compared to last quarter. We are proud of the Kimball track record of delivering value to our unitholders in the form of quarterly cash distributions. Furthermore, we expect that approximately 79% of this distribution will be considered return of capital and not subject to dividend taxes, further enhancing the after-tax return to our common unitholders. As we look forward in 2024 and beyond, we remain bullish on the U.S. oil and natural gas industry, our role as a leading consolidator in the sector and the prospects for Kimball to generate long-term unitholder value. I'll now turn the call over to Davis.

Davis Ravnaas: Thanks, Bob, and good morning, everyone. We had another great quarter here at Kimball as we built upon our 2023 success by delivering another strong quarter of new records for daily production, revenue and EBITDA. I'll start by reviewing our financial results from the quarter, beginning with oil, natural gas and NGL revenues which totaled $87.5 million, an increase of 4.2% compared to the fourth quarter. This marks the highest quarterly revenue in our history. In the first quarter, we had run rate production of 24,678 BOE per day, which reflected 1.4% organic growth from Q4 2023 or 5.6% organic growth on an annualized basis. We exited the quarter with 98 rigs actively drilling on our acreage, which represents approximately 16.3% market share of all land rigs drilling in the Continental United States.

On the expense side, first quarter general and administrative expenses were $9.4 million of which was cash G&A expense or $2.57 per BOE. -- unit-based compensation in the first quarter, which is a noncash G&A expense was $3.7 million or $1.64 per BOE. Net income in the first quarter was approximately $9.3 million and net income attributable to common units was approximately $3.2 million or $0.04 per common unit. Total first quarter consolidated adjusted EBITDA was a record at $74.1 million and was up approximately 7.4% from last quarter. You will find a reconciliation of both consolidated adjusted EBITDA and cash available for distribution at the end of our news release. As Bob mentioned, today, we announced a cash distribution of $0.49 per common unit for the first quarter.

This represents a cash distribution payment to common unitholders that equates to 75% of cash available for distribution and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell's secured revolving credit facility. Moving now to our balance sheet and liquidity. At March 31, 2024, we had approximately $285.4 million and debt outstanding under our secured revolving credit facility. We continue to maintain a conservative balance sheet with net debt to trailing 12-months consolidated adjusted EBITDA of 1x. We had approximately $264.6 million in undrawn capacity under the secured revolving credit facility as of March 31, 2024. We remain very comfortable with our strong financial position, the support of our expanding bank syndicate and our financial flexibility.

Today, we are also affirming our 2024 guidance, which includes daily production at its midpoint of 24,000 BOE per day. As a reminder, our full guidance outlook was provided in the Q4 2023 earnings press release. We feel confident about the prospects for continued robust development given the number of rigs actively drilling on our acreage as well as the operator commentary we are hearing around their expected development activity in 2024, especially in the Permian. We continue to believe that industry trends, overall demand for energy and positive operator sentiment represent a positive outlook for the royalties and mineral space and Kimbell specifically. We are pleased with our start to 2024, and we are focused on a long-term horizon for continued growth and opportunities to enhance unitholder value.

We are proud of our hard work, dedicated and talented team here at Kimbell, and we greatly appreciate their continued contributions to driving growth and enhancing the value of our organization for all stakeholders. In addition, we work with some of the best financial advisers and institutions in the business, and we greatly appreciate these partnerships that contribute to the company's success. With that, operator, we are now ready for questions.

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