Kimbell Royalty Partners(US:KRP)2022-05-10 20:17Production and Operations - As of March 31, 2022, the company owned mineral and royalty interests in approximately 11.4 million gross acres and overriding royalty interests in approximately 4.7 million gross acres, with over 99% of the acreage leased to working interest owners[125] - The company has a total average daily production of 149,589 Boe/d across various basins, with the Permian Basin contributing 23,560 Boe/d from 46,933 wells[126] - The company reported a total of 705 drilled but uncompleted wells (DUCs) and 683 permitted locations, indicating potential future production growth[127] - Approximately 62% of the company's mineral and royalty interests are located in the Permian Basin, Mid-Continent, and Bakken/Williston Basin, highlighting a strategic focus on key oil-producing regions[125] - The company operates in 28 states and has ownership in over 122,000 gross wells, demonstrating a broad operational footprint across the continental United States[125] Financial Performance - Net income for the three months ended March 31, 2022, was $8,407,244, compared to $537,194 for the same period in 2021, indicating a significant increase[154] - Adjusted EBITDA for the three months ended March 31, 2022, was $43,929,146, compared to $25,996,803 for the same period in 2021, reflecting a 69.0% increase[155] - Cash available for distribution on common units for the three months ended March 31, 2022, was $36,421,007, compared to $14,716,397 for the same period in 2021, showing a 147.5% increase[155] - For Q1 2022, the company reported net cash provided by operating activities of $36.0 million, an increase of 132% from $15.5 million in Q1 2021[188] - Cash flows used in investing activities for Q1 2022 were $237.3 million, significantly higher than $0.8 million in Q1 2021, primarily due to $236.9 million in investments held in marketable securities[189] - Cash flows provided by financing activities were $207.8 million in Q1 2022, compared to cash outflows of $16.3 million in Q1 2021, driven by $227.6 million from the initial public offering of TGR[190] Commodity Prices and Market Conditions - The average oil price for the three months ended March 31, 2022, was $95.18 per Bbl, compared to $58.09 per Bbl in the same period of 2021, representing a 63.8% increase[143] - The average natural gas price for the three months ended March 31, 2022, was $4.67 per MMBtu, compared to $3.50 per MMBtu in the same period of 2021, representing a 33.4% increase[143] - The ongoing impacts of COVID-19 and geopolitical conflicts, such as the Russia/Ukraine conflict, continue to create uncertainty in the oil and natural gas markets[139] - Commodity prices for oil, natural gas, and NGL production have been volatile, with expectations for continued volatility due to COVID-19 and supply-demand imbalances[214] Derivative Instruments and Risk Management - The company has entered into commodity derivative agreements extending through March 2024 to stabilize prices for a portion of its oil and natural gas production[148] - The company utilizes commodity derivative contracts to mitigate exposure to price volatility in oil and natural gas[214] - Changes in fair values of derivative contracts will significantly affect current period earnings, as they are recognized as gains and losses[217] - As of March 31, 2022, the company had four counterparties to its derivative contracts, which are also lenders under its secured revolving credit facility[220] Distributions and Shareholder Returns - The company paid a total quarterly distribution of $8,211 to Class B unitholders for the quarter ended March 31, 2022, reflecting a cash distribution of 2.0% per quarter on their respective Class B Contribution[135] - The quarterly cash distribution declared by the Board of Directors was $0.47 per common unit for the quarter ended March 31, 2022[136] - The company expects that substantially all of its Q1 2022 distribution will not constitute taxable dividend income, resulting in a non-taxable reduction to the tax basis of unitholders[199] Expenses and Liabilities - General and administrative expenses were $7.3 million, an increase of $0.5 million from $6.8 million in the prior year, influenced by expenses incurred by TGR[177] - Interest expense increased to $2.9 million for the three months ended March 31, 2022, compared to $2.1 million in the same period of 2021, primarily due to debt incurred for the redemption of Series A preferred units[178] - The company does not currently maintain a material reserve of cash for quarterly distribution stability or growth, nor does it intend to incur debt for distributions[182] - As of March 31, 2022, total borrowings under the secured revolving credit facility amounted to $226.5 million, with a potential annual interest expense increase of approximately $2.3 million for a 1% interest rate rise[222] Strategic Plans and Future Outlook - The company aims to provide increasing cash distributions to unitholders through acquisitions and organic growth from properties in which it holds interests[124] - The company expects to continue pursuing acquisitions of mineral and royalty interests, which may involve significant financial impacts on its operations[160] - The company plans to finance acquisitions of mineral and royalty interests largely through external sources, including borrowings and equity issuance[183] - The company entered into an interest rate swap with Citibank, fixing the interest rate on $150.0 million of the notional balance at approximately 3.9% until January 29, 2024, covering about 66% of the outstanding balance[223]