Kimbell Royalty Partners(KRP) - 2025 Q1 - Quarterly Report

Part I Consolidated Financial Statements (Unaudited) For the first quarter of 2025, the company reported a significant increase in net income to $25.9 million, up from $9.3 million in the prior-year period, driven by higher natural gas revenues and the absence of property impairment charges. Total assets grew to $1.33 billion, primarily due to the $230.4 million Boren Acquisition, which was funded through an equity offering and increased debt. Cash flow from operations decreased to $54.2 million from $69.0 million year-over-year Consolidated Balance Sheets Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $35,627,785 | $34,168,424 | | Total current assets | $99,380,622 | $85,267,081 | | Total oil and natural gas properties, net | $1,216,414,461 | $1,024,822,208 | | Total assets | $1,325,867,709 | $1,119,914,763 | | Total current liabilities | $16,522,371 | $12,745,863 | | Long-term debt | $298,996,274 | $239,159,776 | | Total liabilities | $322,201,380 | $256,420,228 | | Total unitholders' equity | $687,269,543 | $547,492,392 | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (Unaudited) | Account | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Oil, natural gas and NGL revenues | $89,951,203 | $87,499,509 | | Total revenues | $84,208,766 | $82,233,944 | | Depreciation and depletion expense | $31,118,095 | $38,166,806 | | Impairment of oil and natural gas properties | $0 | $5,963,575 | | Operating income | $33,576,732 | $17,560,837 | | Net income | $25,853,195 | $9,336,939 | | Net income attributable to common units | $17,862,084 | $3,168,956 | | Basic EPS | $0.20 | $0.04 | | Diluted EPS | $0.20 | $0.04 | Consolidated Statements of Cash Flows Consolidated Cash Flow Highlights (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,152,677 | $69,045,616 | | Net cash used in investing activities | ($222,949,985) | ($91,368) | | Net cash provided by (used in) financing activities | $170,256,669 | ($60,267,298) | | Net increase in cash and cash equivalents | $1,459,361 | $8,686,950 | - Investing activities in Q1 2025 were dominated by a $222.6 million purchase of oil and natural gas properties[21] - Financing activities in Q1 2025 included $163.6 million in net proceeds from an equity offering and net borrowings of $59.8 million on long-term debt[21] Notes to Consolidated Financial Statements - The Partnership's business model is to own and acquire mineral and royalty interests in oil and natural gas properties, entitling it to revenue from production without the obligation to fund drilling, completion, or operating expenses[23] Disaggregated Revenue (Q1 2025 vs Q1 2024) | Revenue Source | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Oil revenue | $51,934,492 | $61,627,873 | | Natural gas revenue | $25,637,994 | $14,554,573 | | NGL revenue | $12,378,717 | $11,317,063 | | Total | $89,951,203 | $87,499,509 | - On January 17, 2025, the Partnership completed the Boren Acquisition of mineral and royalty interests in the Midland Basin for approximately $230.4 million[40] - The Partnership did not record an impairment on oil and gas properties in Q1 2025, compared to a $6.0 million impairment in Q1 2024 which was attributed to a decline in the 12-month average commodity prices[53] - Subsequent to the quarter end, on May 1, 2025, the Partnership increased its credit facility's borrowing base to $625.0 million and on May 7, 2025, redeemed 50% of its outstanding Series A preferred units for $182.3 million[100][102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 2.9% year-over-year increase in Q1 2025 oil, gas, and NGL revenues to significantly higher natural gas prices, which offset a 9.6% decrease in realized oil prices and an 8.1% decline in total production volumes. The company completed the $230.4 million Boren Acquisition and a $163.6 million equity offering. Adjusted EBITDA remained stable at $75.5 million, while cash available for distribution to common unitholders increased to $57.2 million. The company's liquidity is primarily sourced from operating cash flow and its revolving credit facility, which was expanded subsequent to the quarter Overview and Recent Developments - As of March 31, 2025, the Partnership owned interests in approximately 17.0 million gross acres across 28 states, with ownership in over 131,000 gross wells[112][113] - In January 2025, the company completed a $163.6 million equity offering to partially fund the Boren Acquisition, which added properties in the Midland Basin[116][117] - A quarterly cash distribution of $0.47 per common unit was declared for Q1 2025[118] Results of Operations - Oil, natural gas, and NGL revenues increased by $2.5 million (2.9%) in Q1 2025 compared to Q1 2024, primarily due to a 97.4% increase in the average realized price of natural gas, which offset lower production volumes and a 9.6% decrease in realized oil prices[146][148] Production Data (Q1 2025 vs Q1 2024) | Product | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Oil (Bbls) | 749,744 | 804,589 | | Natural gas (Mcf) | 6,618,953 | 7,413,069 | | NGLs (Bbls) | 442,187 | 458,247 | | Combined (Boe) | 2,295,090 | 2,498,348 | - Depreciation and depletion expense decreased by $7.1 million to $31.1 million in Q1 2025, mainly due to a lower depletable base following impairments recorded in 2024[153] - No impairment was recorded in Q1 2025, in contrast to a $6.0 million impairment charge in Q1 2024, which was caused by a decline in the 12-month average commodity prices[155] Non-GAAP Financial Measures Reconciliation of Net Income to Adjusted EBITDA and Cash Available for Distribution | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net income | $25,853,195 | $9,336,939 | | Consolidated Adjusted EBITDA | $75,533,036 | $74,113,012 | | Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $65,387,425 | $57,933,362 | | Cash available for distribution on common units | $57,159,352 | $48,877,514 | Liquidity and Capital Resources - Primary sources of liquidity are cash from operations and financing activities. The company's credit facility borrowing base was increased to $550.0 million in December 2023[160] - The Board of Directors allocated 25% of cash available for distribution from Q1 2025 ($16.9 million) to repay outstanding borrowings under the secured revolving credit facility[162] - Cash from operations decreased to $54.2 million in Q1 2025 from $69.0 million in Q1 2024, impacted by changes in commodity prices and production volumes[167] - As of March 31, 2025, the outstanding balance on the secured revolving credit facility was $299.0 million[68] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is commodity price volatility for oil, natural gas, and NGLs, which it mitigates through the use of fixed-price swap derivative contracts. It also faces interest rate risk on its variable-rate debt, with a hypothetical 1% rate increase projected to raise annual interest expense by approximately $3.0 million. Counterparty credit risk is managed by evaluating the financial standing of its derivative counterparties, who are also lenders under its credit facility - The main market risk exposure is the pricing of oil, natural gas, and NGLs. The company uses commodity derivative contracts, specifically fixed-price swaps, to reduce price volatility[182][183] - The company is exposed to interest rate risk on its $299.0 million of outstanding debt. A 1% increase in interest rates would result in an approximate $3.0 million increase in annual interest expense[188][189] - Counterparty risk on derivative contracts is present. As of March 31, 2025, the company had seven counterparties, all of whom are also lenders under its secured revolving credit facility[186] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. No material changes to internal control over financial reporting occurred during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[191] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[192] Part II – Other Information Legal Proceedings The company is not aware of any legal, environmental, or other commitments or contingencies that would materially affect its financial condition, results of operations, or liquidity as of March 31, 2025 - Management is not aware of any legal proceedings that would have a material effect on the Partnership's financial condition or operations[98][194] Risk Factors This section supplements the risk factors from the 2024 Form 10-K, specifically highlighting the potential adverse effects of changes in U.S. trade policy and tariffs. Such changes could lead to market volatility, increased costs, and limited access to capital, which may materially impact the business and its results - The report supplements previous risk disclosures, emphasizing that changes in U.S. trade policy, including tariffs and trade restrictions, could have a material adverse effect on the business and results of operations[196][197] - Potential impacts from trade policy changes include financial market volatility, declining consumer confidence, inflation, and increased volatility in commodity prices, which could increase costs of capital and limit access to financing[198] Unregistered Sales of Equity Securities and Use of Proceeds In February 2025, the company issued a total of 32,580 common units in two separate transactions to existing OpCo unitholders in exchange for an equal number of OpCo common units and Class B units. These issuances were exempt from registration under Section 4(a)(2) of the Securities Act. Additionally, 315,276 common units were withheld to satisfy tax obligations related to vested restricted units - In February 2025, the Partnership issued a combined 32,580 common units to OpCo unitholders in exchange for OpCo common units and Class B units, in transactions exempt from registration under Section 4(a)(2) of the Securities Act[200][201] - During Q1 2025, 315,276 common units were withheld to satisfy tax-withholding obligations related to the vesting of restricted units[202]