Kimbell Royalty Partners(KRP) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Second quarter total revenues were $25.7 million, with net income of approximately $3.7 million and net income attributable to common units of approximately $1.5 million, or $0.04 per common unit [15][20] - Consolidated adjusted EBITDA reached a new record of $28.1 million, an increase of 8% compared to the prior quarter [20] - Cash available for distribution resulted in a 15% increase in quarterly distribution to $0.31 per common unitholder, reflecting a 75% payout of cash available for distribution [6][20] Business Line Data and Key Metrics Changes - Average daily production for Q2 was 14,393 BOE per day, with a run rate production of 14,011 BOE per day, up 2% sequentially from Q1 [6][19] - The production composition was approximately 61% from natural gas and 39% from liquids, with 26% from oil and 13% from NGLs [19] - The company had 50 active rigs at the end of Q2, up from 49 in Q1, indicating increased operational activity [19] Market Data and Key Metrics Changes - Oil prices are well above pre-COVID levels, while natural gas prices are at multi-year highs, driven by increased power demand and surging LNG exports [8] - The U.S. land rig count is 39% below year-end 2019 levels, indicating a disciplined approach to drilling despite higher commodity prices [7][8] Company Strategy and Development Direction - The company aims to remain a major consolidator in the fragmented U.S. oil and gas royalty sector, focusing on assembling a high-quality, low PDP decline, and diversified royalty portfolio [12] - Kimbell plans to continue its long-term focus on sustainability and growth, with a strong track record of organic growth and strategic acquisitions [11][12] - The company is optimistic about the energy sector's recovery and the potential for industry consolidation, which could benefit Kimbell specifically [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, citing improved fundamentals across the U.S. energy sector and a favorable outlook for production due to high natural gas prices [23][34] - The company does not expect to pay a material amount of federal income taxes from 2021 to 2027, providing a competitive advantage in generating superior after-tax returns [9][10] - Management noted that the current market conditions have made it challenging to pursue large-scale mineral acquisitions, but they remain open to opportunities [27][28] Other Important Information - The company successfully redeemed 55% of the outstanding Series A cumulative convertible preferred units for $36.1 million, simplifying its capital structure [21] - Kimbell Tiger Acquisition Corporation, a newly formed SPAC sponsored by Kimbell, will search for a target in the energy and natural resources industry [13] Q&A Session Summary Question: Update on mineral acquisition front - Management noted that while they have historically been active in acquisitions, the current market has made it difficult to find significant opportunities due to undervaluation of public mineral companies [27][28] Question: Outlook for the first half of next year - Management expressed a positive outlook, particularly due to high natural gas prices, which are expected to drive increased activity [34] Question: Rig count market share trends - Management indicated that the slight dip in market share is likely temporary, with expectations of an increase in rig count based on recent trends [38][39] Question: Lease bonuses and new activity - Management highlighted increased lease bonuses in Q2, particularly in Martin County, Texas, indicating a positive sign for future activity [41]