Kimbell Royalty Partners(KRP) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues from oil, natural gas, and NGLs reached $75 million in Q2 2025, with a run rate production of 25,355 Boe per day [7] - General and administrative expenses for Q2 were $9.6 million, with cash G&A expenses at $5.4 million or $2.36 per BOE, reflecting a decrease in costs [8][10] - Consolidated adjusted EBITDA for the second quarter was $63.8 million, indicating strong cash flow [8] - The company announced a cash distribution of $0.38 per common unit, equating to 75% of cash available for distribution [9] Business Line Data and Key Metrics Changes - The overall rig count decreased by 2% to 88 rigs actively drilling, while the US land rig count dropped by 7% [5] - In the Permian Basin, the rig count increased by four rigs, and in Haynesville, it increased by five rigs, indicating localized growth despite broader declines [5] Market Data and Key Metrics Changes - The company’s market share of US land rigs actively drilling increased by 1% to 17% [5] - Net DUCs (drilled but uncompleted wells) rose by 9% quarter over quarter, primarily driven by the Permian Basin [5] Company Strategy and Development Direction - The company remains focused on organic growth opportunities and is exploring M&A opportunities, particularly for deals under $500 million [15][16] - The management emphasized a conservative approach to acquisitions, with a focus on maintaining a strong balance sheet and financial flexibility [10] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the prospects for continued robust development through 2025, supported by active drilling on their acreage [11] - The company noted a slowdown in Permian packages coming to market, which may affect future acquisition opportunities [27] Other Important Information - The company redeemed 50% of the outstanding Series A cumulative convertible preferred units, simplifying its capital structure [10] - Approximately 100% of the announced distribution is expected to be considered a return of capital, enhancing after-tax returns for unitholders [9] Q&A Session Summary Question: Inquiry about potential upstream partnerships - Management indicated that while exploring partnerships is an option, it is not a top priority due to a strong organic growth pipeline [15][16] Question: Discussion on rig activity resilience - Management attributed the resilience of rig activity to the quality and diversified nature of their asset base, which has shown more stickiness compared to the broader market [33] Question: Expectations for natural gas growth - Management anticipates a slight increase in natural gas production, with a potential shift towards a gassier production mix if natural gas continues to outperform oil [35][36] Question: Changes in M&A market valuations - Management noted that acquisition valuations are likely to decrease as sellers adjust expectations in response to a less favorable growth environment [44] Question: Factors driving lower G&A expenses - Lower professional fees contributed to reduced G&A expenses, with expectations to maintain costs at the lower end of guidance moving forward [46]