Kimbell Royalty Partners(KRP) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Kimbell Royalty Partners reported oil, natural gas, and NGL revenues of $69.1 million for Q4 2024, excluding acquired production, with record run-rate production of 25,946 BOE per day [14][15] - Consolidated adjusted EBITDA for Q4 2024 was $59.8 million, excluding acquired production [15] - The company announced a cash distribution of $0.40 per common unit for Q4 2024, equating to 75% of cash available for distribution [16] Business Line Data and Key Metrics Changes - The company maintained a strong drilling activity with 91 rigs actively drilling on its acreage, representing approximately 16% market share of all land rigs in the continental U.S. [10][14] - The five-year annual average PDP decline rate is 14%, requiring only an estimated 6.5% net wells annually to maintain flat production [11] Market Data and Key Metrics Changes - Kimbell Royalty Partners has a conservative balance sheet with net debt to trailing twelve-month consolidated adjusted EBITDA of approximately 0.8 times [17] - The company had approximately $310.8 million in undrawn capacity under its secured revolving credit facility as of December 31, 2024 [17] Company Strategy and Development Direction - Kimbell aims to continue as a major consolidator in the U.S. oil and gas royalty sector, which is estimated to be over $700 billion in size [20] - The company is focused on larger acquisitions, targeting $100 million-plus deals, to avoid increasing leverage from smaller transactions [73][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the prospects for continued robust development in 2025, supported by the number of rigs actively drilling on their acreage, especially in the Permian Basin [19] - The new administration's support for increased domestic energy output is seen as beneficial for the company as a mineral owner [30] Other Important Information - Kimbell has grown production from 3,116 BOE per day to 25,946 BOE per day since its IPO eight years ago, an increase of 733% [20] - The company plans to redeem about half of its preferred shares in May 2025, while continuing to use 25% of cash flow to pay down debt [44][50] Q&A Session Summary Question: Are there any particular basins where you're seeing an abundance of opportunity to add acreage? - Management noted that while the Permian continues to see the most consolidation, opportunities are being explored across the U.S. without targeting a specific basin [25][26] Question: Has the new administration's regulatory changes affected opportunities? - Management indicated that the administration has been supportive of increased domestic energy output, which benefits the company [30] Question: Can you discuss the 2025 guidance and the quality of acquired assets? - Management stated that the guidance reflects flat growth, with a strong line of sight inventory and confidence in the quality of acquired assets [38][41] Question: What are the plans for redeeming preferred shares? - Management confirmed plans to redeem about half of the preferred shares in May and will consider financing options for future acquisitions [44][50] Question: How does the competitive landscape for M&A look? - Management emphasized a focus on high-quality properties regardless of commodity price movements, and noted that consolidation tends to be a net positive for mineral owners [62][67]