Quarterly / Earnings Reports | First Quarter (1Q) Update | Financial Results | Capital Markets | Capital Expenditure
Kimbell Royalty Partners, LP Company First Quarter 2023 Results
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Kimbell Royalty Partners, LP announced first quarter 2023 results.
Highlights
- Record Q1 2023 run-rate daily production of 17,014 barrels of oil equivalent ("Boe") per day (6:1)
- Does not include any days of production from the Company's recently announced $143.1 million acquisition from MB Minerals (the "Acquired Production"), which is expected to close in Q2 2023 with an effective production date of April 1, 2023
- Q1 2023 oil, natural gas and NGL revenues of $57.4 million, a decrease of 10.9% from Q4 2022, primarily attributable to a decline in realized commodity prices
- Q1 2023 net income of approximately $28.9 million and net income attributable to common units of approximately $23.3 million, as compared to $35.2 million and $28.4 million, respectively, from Q4 2022
- Q1 2023 consolidated Adjusted EBITDA of $42.3 million, as compared to $46.2 million in Q4 2022
- Q1 2023 realized natural gas prices of $3.16 was approximately 19% above Henry Hub during due to premium prices received across several basins, including the DJ Basin and Bakken
- As of March 31, 2023, Kimbell's major properties1 had 6.74 net drilled but uncompleted wells ("DUCs") and net permitted locations on its acreage (3.55 net DUCs and 3.19 net permitted locations), compared to an estimated 4.5 net wells needed to maintain flat production
- As of March 31, 2023, Kimbell had a record 94 rigs actively drilling on its acreage, up from 92 rigs in Q4 2022 and representing 12.8%2 market share of all rigs drilling in the continental United States as of such time
- Announced a Q1 2023 cash distribution of $0.35 per common unit, reflecting a payout ratio of 75% of cash available for distribution; implies a 9.0% annualized yield based on the May 2, 2023 closing price of $15.63 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
First Quarter 2023 Distribution and Debt Repayment
Today, the Board of Directors of the 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 2023, or $0.35 per common unit. The distribution will be payable on May 22, 2023 to common unitholders of record at the close of business on May 15, 2023. Kimbell plans to utilize the remaining 25% of cash available for distribution for the first quarter of 2023 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 2023 projected cash available for distribution), Kimbell has paid down approximately $99.2 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 approximately 72% of its first quarter 2023 distribution should not constitute dividends for U.S. federal income tax purposes, but instead are estimated to constitute non-taxable reductions to the basis of each distribution recipient's ownership interest in Kimbell common units. The reduced tax basis will increase unitholders' capital gain (or decrease unitholders' capital loss) when unitholders sell their common units. The Form 8937 containing additional information may be found at www.kimbellrp.com under "Investor Relations" section of the site. Kimbell currently believes that the portion that constitute dividends for U.S. federal income tax purposes will be considered qualified dividends, subject to holding period and certain other conditions, which are subject to a tax rate of 0%, 15% or 20% depending on the income level and tax filing status of a unitholder for 2023. Kimbell believes these estimates are reasonable based on currently available information, but they are subject to change.
Financial Highlights
Kimbell's first quarter 2023 average realized price per Bbl of oil was $74.99, per Mcf of natural gas was $3.16, per Bbl of NGLs was $25.82 and per Boe combined was $36.19.
During the first quarter of 2023, the Company's total revenues were $66.9 million, net income was approximately $28.9 million and net income attributable to common units was approximately $23.3 million, or $0.37 per common unit.
Total first quarter 2023 consolidated Adjusted EBITDA was $42.3 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 2023, G&A expense was $8.3 million, $5.1 million of which was Cash G&A expense, or $3.34 per Boe (Cash G&A and Cash G&A per Boe are non-GAAP financial measures. Please see definition under Non-GAAP Financial Measures in the Supplemental Schedules included in this news release). Unit-based compensation in the first quarter of 2023, which is a non-cash G&A expense, was $3.2 million or $2.07 per Boe.
As of March 31, 2023, Kimbell had approximately $223.9 million in debt outstanding under its secured revolving credit facility, had net debt to first quarter 2023 trailing twelve month consolidated Adjusted EBITDA of approximately 1.0x and was in compliance with all financial covenants under its secured revolving credit facility. Kimbell had approximately $126.1 million in undrawn capacity under its secured revolving credit facility as of March 31, 2023.
As of March 31, 2023, Kimbell had outstanding 64,950,333 common units and 15,484,400 Class B units. As of May 3, 2023, Kimbell had outstanding 64,950,333 common units and 15,484,400 Class B units.
Production
Operational Update
Hedging Update
Kimbell maintains a consistent hedging methodology, and hedges out two years on a rolling quarterly basis. The Company's commodity derivative contracts consist of fixed price swaps, under which Kimbell receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume. Kimbell hedges expected daily production based on the amount of debt as a percent of total enterprise value. These economic hedges constituted approximately 15% of daily production for the first quarter of 2023.
The following provides information concerning Kimbell's hedge book as of March 31, 2023:
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Fixed Price Swaps as of March 31, 2023 |
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|
Weighted Average |
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Volumes |
Fixed Price |
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|
Oil |
Nat Gas |
Oil |
Nat Gas |
|
|
BBL |
MMBTU |
$/BBL |
$/MMBTU |
|
|
2Q 2023 |
70,889 |
998,179 |
$ 61.16 |
$ 2.52 |
|
3Q 2023 |
72,680 |
1,047,880 |
$ 61.70 |
$ 3.09 |
|
4Q 2023 |
67,988 |
995,532 |
$ 63.00 |
$ 3.28 |
|
1Q 2024 |
54,509 |
823,186 |
$ 76.32 |
$ 4.15 |
|
2Q 2024 |
56,511 |
809,354 |
$ 82.40 |
$ 4.31 |
|
3Q 2024 |
48,576 |
785,588 |
$ 69.30 |
$ 4.45 |
|
4Q 2024 |
68,448 |
811,164 |
$ 70.02 |
$ 4.48 |
|
1Q 2025 |
71,640 |
848,070 |
$ 66.31 |
$ 4.37 |
2023 Guidance Update
On April 11, 2023, Kimbell announced the signing of a purchase and sale agreement with MB Minerals, L.P. and certain of its affiliates (the "MB Minerals Acquisition") to acquire Midland Basin mineral and royalty assets for approximately $143.1 million in a cash and unit transaction. The Acquired Production is expected to increase Kimbell's run-rate average daily production by 1,901 Boe (6:1) per day (77% oil, 12% natural gas, 11% NGL), beginning in the second quarter of 2023. Completion of the MB Minerals Acquisition is subject to the satisfaction or waiver of certain customary closing conditions as set forth in the purchase and sale agreement. The MB Minerals Acquisition is expected to close in the second quarter of 2023, with an effective production date of April 1, 2023.
Kimbell management affirms 2023 guidance provided in the Q4 2022 earnings release, and management will provide updated 2023 guidance on or after the closing of the MB Minerals Acquisition.
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