Kimbell Royalty Partners(US:KRP)2020-05-07 21:24Asset Acquisition and Production - The Springbok Acquisition completed on April 17, 2020, involved $95.0 million in cash and the issuance of 2,224,358 common units, enhancing the company's asset base significantly [93]. - The acreage acquired in the Springbok Acquisition produced 2,586 Boe/d, comprising 56% natural gas, 34% oil, and 10% NGLs as of March 31, 2020 [94]. - As of March 31, 2020, the company owned mineral and royalty interests in approximately 8.8 million gross acres, with over 98% of the acreage leased to working interest owners [91]. - As of March 31, 2020, the company had a total of 94,827 gross wells across its mineral and royalty interests [92]. - The company’s mineral and royalty interests are located in 28 states, including significant holdings in the Permian Basin, Mid-Continent, and Bakken/Williston Basin [91]. Financial Performance - The company recorded total revenues of $35.9 million for the three months ended March 31, 2020, an increase of 100% from $17.9 million in the same period of 2019 [130]. - Oil, natural gas, and NGL revenues were $25.6 million for the three months ended March 31, 2020, up by $2.8 million from $22.8 million in 2019, primarily due to the Phillips Acquisition contributing approximately $3.6 million [131]. - The net loss for Q1 2020 was $59.78 million, compared to a net loss of $5.35 million in Q1 2019 [121]. - Adjusted EBITDA for Q1 2020 was $11.76 million, an increase from $6.69 million in Q1 2019 [121]. - Cash available for distribution on common units was $9.83 million in Q1 2020, compared to $5.24 million in Q1 2019 [121]. Commodity Price Volatility - The company anticipates continued volatility in commodity prices and a significant downturn in the oil and gas industry due to the ongoing impacts of COVID-19 and OPEC decisions [104]. - The average daily oil price for Q1 2020 was $45.54 per Bbl, down from $54.82 in Q1 2019, while natural gas averaged $1.90 per MMBtu compared to $2.92 in the previous year [110]. - The pricing for oil, natural gas, and NGL production has been volatile and is expected to remain so due to factors like COVID-19 and OPEC decisions [165]. Impairments and Expenses - The company expects to record an impairment to its oil and natural gas properties in Q2 2020 due to the significant decline in average trailing twelve-month pricing [105]. - The company recorded an impairment of $70.9 million on oil and natural gas properties for the three months ended March 31, 2020, compared to $2.8 million in 2019, due to significant declines in commodity prices [127]. - Depreciation and depletion expense increased to $13.3 million for the three months ended March 31, 2020, up from $10.3 million in 2019, attributed to acquisitions adding approximately $45.5 million of depletable costs [137]. - General and administrative expenses rose to $6.5 million for the three months ended March 31, 2020, an increase of $1.2 million from $5.3 million in 2019, partly due to increased salaries and executive bonuses [142]. Cash Flow and Financing - The company reported net cash provided by operating activities of $20.8 million for the three months ended March 31, 2020, an increase of $5.0 million compared to $15.8 million for the same period in 2019 [155]. - Cash flows used in investing activities increased by $10.3 million to $11.2 million for the three months ended March 31, 2020, primarily due to funding deposits on oil and natural gas properties [156]. - Cash flows used in financing activities were $9.3 million for the three months ended March 31, 2020, a decrease of $7.9 million compared to $17.2 million for the same period in 2019 [157]. - The company had an outstanding balance of $101.2 million under its secured revolving credit facility as of March 31, 2020, with $123.8 million of available capacity [161]. - Total commitments under the secured revolving credit facility are set at $225.0 million, with a borrowing base of $300.0 million, which can be increased to $500.0 million under certain conditions [160]. Distribution and Debt Management - A quarterly cash distribution of $0.17 per common unit was declared for the quarter ended March 31, 2020, to be paid on May 11, 2020 [99]. - The Board of Directors allocated 50% of available cash for distribution in Q1 2020 for the repayment of $15.0 million in outstanding borrowings under the secured revolving credit facility [147]. - The company does not currently maintain a material reserve of cash for stability or growth in quarterly distributions [148]. - The company intends to finance acquisitions largely through external sources, including borrowings under the secured revolving credit facility and the issuance of equity and debt securities [149]. Risk Management - The company has entered into commodity derivative contracts to mitigate the impact of oil and natural gas price volatility on revenues [166]. - The company evaluates the credit standing of counterparties to its derivative contracts, which includes reviewing credit ratings and financial information [170]. - The company has one counterparty to its derivative contracts, which is also a lender under its credit facility [170]. - Changes in fair values of derivative contracts will be recognized as gains and losses in current period earnings, significantly affecting earnings [169]. - The company does not currently have any interest rate hedges in place, exposing it to interest rate risk [172].