Kimbell Royalty Partners(KRP) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, oil, natural gas, and NGL revenues totaled $76 million, with run rate production at 25,627 BOE per day, exceeding guidance [9] - The Q4 distribution was declared at $0.37 per common unit, a 6% increase from Q3 2025, with total distributions for the year amounting to $1.60 per common unit [5][10] - Adjusted EBITDA for Q4 was reported at $64.8 billion, with cash G&A expenses at $2.63 per BOE [9][10] - Proved developed reserves increased approximately 8% in 2025 to nearly 73 million BOE [5] Business Line Data and Key Metrics Changes - The company reported strong organic production growth in Q4, with an active rig count of 85, representing a 16% market share of U.S. land rigs [5] - The line of sight wells exceeded the number needed to maintain flat production, indicating resilience in production levels [5] Market Data and Key Metrics Changes - The company maintains a conservative balance sheet with approximately $441.5 million in debt outstanding and a net debt to trailing twelve-month Adjusted EBITDA ratio of about 1.5 times [11] - The company has approximately $183.5 million in undrawn capacity under its secured revolving credit facility as of December 31, 2025 [11] Company Strategy and Development Direction - Kimbell Royalty Partners aims to be a leading consolidator in the fragmented U.S. oil and natural gas royalty sector, which is estimated to exceed $650 billion [12] - The company is focused on diversifying its portfolio of high-quality royalty assets across leading U.S. basins, with a particular emphasis on the Permian Basin [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing development and stability of production, with guidance for 2026 production remaining unchanged at 25,500 BOE per day [12] - The company anticipates significant growth opportunities from the development of the Woodford Barnett area, which is expected to drive production growth without additional costs [39][42] Other Important Information - The company redeemed 50% of the Series A Cumulative Convertible Preferred Units in 2025, simplifying its capital structure and lowering the cost of capital [4] - The company has seen a favorable dynamic in the MidCon area, with recent consolidation and improvements in gas and NGL prices [20] Q&A Session Summary Question: Regarding 2026 guidance and expected production cadence - Management indicated a relatively stable production cadence for 2026, acknowledging the unpredictability of development [18] Question: Competitive landscape for M&A post-industry consolidation - Management highlighted their ability to target meaningful deals in the $100 million-$500 million range across various basins, positioning them competitively [19] Question: Increase in net line-of-sight maintenance well assumption - Management explained that the increase was due to the acquisition of high upside properties, leading to a modest increase in maintenance levels [26] Question: Addressing net debt and mezzanine equity - Management anticipates redeeming some mezzanine equity in the latter half of the year while balancing cash interest expenses [30] Question: Natural gas and NGL realizations - Management provided insights on seasonal differentials, noting that natural gas realizations increased from 18% to 24% in Q4 [35] Question: Impact of Waha price inflection in 2027 - Management expects significant improvements in differentials and production growth from the continued development of the Woodford Barnett area [39]