Kimbell Royalty Partners(KRP) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) The unaudited consolidated financial statements for the period ended June 30, 2025, reflect total assets growing to $1.28 billion and net income more than doubling to $52.5 million, primarily driven by acquisition activity and an equity offering Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1.28 billion from $1.12 billion at year-end 2024, with total liabilities rising to $483.5 million due to increased long-term debt Consolidated Balance Sheet Summary (In thousands) | Balance Sheet Item | June 30, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | Total Assets | $1,284,936 | $1,119,915 | | Total Oil and natural gas properties, net | $1,186,185 | $1,024,822 | | Total Liabilities | $483,533 | $256,420 | | Long-term debt | $462,096 | $239,160 | | Total Unitholders' Equity | $643,008 | $547,493 | Consolidated Statements of Operations Q2 2025 total revenues increased to $86.5 million and net income rose to $26.7 million, though net income attributable to common units decreased to $2.0 million after distributions Consolidated Statements of Operations (Q2, In thousands) | Metric (Q2) | Three Months Ended June 30, 2025 (In thousands) | Three Months Ended June 30, 2024 (In thousands) | | :--- | :--- | :--- | | Total Revenues | $86,548 | $76,573 | | Operating Income | $37,786 | $23,892 | | Net Income | $26,672 | $15,187 | | Net Income Attributable to Common Units | $2,007 | $8,410 | | Basic EPS | $0.02 | $0.11 | Consolidated Statements of Operations (H1, In thousands) | Metric (H1) | Six Months Ended June 30, 2025 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | | :--- | :--- | :--- | | Total Revenues | $170,757 | $158,807 | | Operating Income | $71,363 | $41,453 | | Net Income | $52,525 | $24,524 | | Net Income Attributable to Common Units | $19,869 | $11,579 | | Basic EPS | $0.22 | $0.16 | Consolidated Statements of Changes in Unitholders' Equity Total unitholders' equity increased from $547.5 million to $643.0 million in H1 2025, driven by a $163.6 million equity offering and net income, partially offset by distributions - In the first six months of 2025, the company issued 11.5 million common units through an equity offering, raising $163.6 million in capital[17] - Total distributions to unitholders amounted to $43.2 million for the six months ended June 30, 2025[17] Consolidated Statements of Cash Flows H1 2025 saw $126.5 million net cash from operations, $223.3 million used in investing, and $97.2 million provided by financing, resulting in a $0.4 million net increase in cash Consolidated Statements of Cash Flows (H1 2025, In thousands) | Cash Flow Activity (H1 2025) | Amount (In thousands) | | :--- | :--- | | Net cash provided by operating activities | $126,474 | | Net cash used in investing activities | $(223,291) | | Net cash provided by financing activities | $97,173 | | Net increase in cash | $356 | - Key financing activities in H1 2025 included $163.6 million from an equity offering, $254.1 million in new debt, a $179.9 million redemption of Series A preferred units, and $81.3 million in distributions to common unitholders[21] Notes to Consolidated Financial Statements Key notes detail the $230.4 million Boren Acquisition, $182.3 million preferred unit redemption, a $625 million credit facility increase, and a $0.38 per common unit Q2 2025 distribution - On January 17, 2025, the Partnership completed the Boren Acquisition of mineral and royalty interests for approximately $230.4 million, funded by borrowings and proceeds from the 2025 Equity Offering[39] - On May 1, 2025, the borrowing base and aggregate elected commitments under the A&R Credit Agreement were increased from $550.0 million to $625.0 million[60] - The Partnership redeemed 162,500 Series A preferred units (50% of those outstanding) on May 7, 2025, for an aggregate price of $182.3 million[66] - Subsequent to the quarter's end, on August 7, 2025, the Board declared a Q2 2025 cash distribution of $0.38 per common unit[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of the Boren Acquisition on production and financial results, noting a slight Q2 2025 revenue decrease due to lower commodity prices, and outlines liquidity strategies including debt repayment Overview and Recent Developments The company holds interests in 17.0 million gross acres, with recent developments including a $163.6 million equity offering, the $230.4 million Boren Acquisition, and a $182.3 million preferred unit redemption - As of June 30, 2025, the company owned interests in approximately 17.0 million gross acres and over 131,000 gross wells, with the Permian Basin being the largest contributor to production[98][99] - Major corporate actions in H1 2025 included the 2025 Equity Offering ($163.6 million net proceeds), the Boren Acquisition (~$230.4 million), and a partial redemption of preferred units ($182.3 million)[102][103][104] Results of Operations Q2 2025 oil and gas revenues decreased by $2.3 million to $74.7 million due to lower oil prices, despite increased production, while H1 operating income rose to $71.4 million from $41.5 million - Q2 2025 production volumes increased to 25,355 Boe/d from 24,110 Boe/d in Q2 2024, primarily due to the Boren Acquisition[139] - The average realized oil price in Q2 2025 was $63.52/Bbl, a 17.7% decrease from $77.20/Bbl in Q2 2024[140] - For H1 2025, the company recorded a $3.3 million gain on commodity derivatives, compared to a $6.8 million loss in H1 2024[137] Non-GAAP Financial Measures Q2 2025 Consolidated Adjusted EBITDA was $63.8 million, a slight decrease, while Cash Available for Distribution on common units increased slightly to $47.1 million Non-GAAP Metric Summary (In thousands) | Non-GAAP Metric | Q2 2025 (In thousands) | Q2 2024 (In thousands) | H1 2025 (In thousands) | H1 2024 (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Consolidated Adjusted EBITDA | $63,844 | $65,821 | $139,377 | $139,934 | | Cash available for distribution on common units | $47,121 | $46,058 | $104,280 | $94,936 | Liquidity and Capital Resources The company funded acquisitions and preferred unit redemption in H1 2025 through an equity offering and credit facility, with $13.6 million of Q2 2025 cash available for distribution allocated to debt repayment - The Board of Directors allocated 25% of cash available for distribution for Q2 2025, amounting to $13.6 million, for the repayment of outstanding borrowings under the secured revolving credit facility[165] - On May 1, 2025, the company's credit facility borrowing base was increased to $625.0 million[163][177] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages commodity price and interest rate risks, with a 1% interest rate increase estimated to raise annual interest expense by $4.6 million on $462.1 million in floating-rate debt - The company's main market risk is commodity price volatility, which it mitigates using fixed-price swap derivative contracts for oil and natural gas[184][185] - With $462.1 million in outstanding debt, a 1% increase in interest rates is estimated to increase annual interest expense by approximately $4.6 million[190] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2025)[192] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[193] PART II – OTHER INFORMATION Item 1. Legal Proceedings As of June 30, 2025, the company is not aware of any legal proceedings or contingencies that would materially affect its financial condition or operations - As of June 30, 2025, management is not aware of any legal proceedings that would materially impact the Partnership's financial condition or operations[85][195] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, were reported - The report refers to the risk factors disclosed in the 2024 Form 10-K, indicating no material updates during the quarter[196] Item 5. Other Information No directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the reporting period[197] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreement amendments, and CEO/CFO certifications - Key exhibits filed include Amendment No. 3 to the Amended and Restated Credit Agreement, and CEO/CFO certifications pursuant to the Securities Exchange Act of 1934 and Sarbanes-Oxley Act[199]