Q2 2025 Kimbell Royalty Partners LP Earnings Call
Greetings and welcome to the Kimbell royalty. Partners second quarter earnings conference call.
At this time, all participants are in a listen-only mode.
A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Rick black. Please go ahead, sir.
Thank you, operator and good morning everyone. Welcome to the Kimbell royalty Partners conference call to review financial and operational results for the second quarter which ended June 30 2025.
This call is also being webcast and can be accessed through the audio link on the events and presentations page of the IR section of Kimball rp.com.
Information recorded on on this call speaks only as of today which is August 7th 2025. So please be advised at any time. Sensitive information May no longer be accurate as of the date of any replay listening or transcript of reading.
I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations, or future events, or future. Financial performance are considered for looking statements, made under uh the pursuant to the safe harbors, provision of the private Securities. Litigation Reform, Act of 1995. We will be making forward-looking statements as part of today's call which by their nature are uncertain and out of the company's control actual results May differ materially.
Please refer to today's earnings press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.
Management will also refer to non-gaap measures including adjusted Ava and cash available for distribution, reconciliations to the nearest Gap measures. Can be found at the end of today's earnings press release, Kimball assumes. No obligation to publicly update or revise, any of these 4 looking statements? I would now like to turn the call over to Bob ravenous Kimbo Realty, Partners, chairman and chief executive officer. Bob,
Operating Officer and Blaine Rheinberger, our Controller.
We are pleased to report solid results for the second quarter with strong cash flow continued Debt, Pay down and lower cash GNA costs per Boe.
Our rig count remains robust and our market share of overall us land rigs. Actively drilling increased by 1% to 17%.
In addition, while the overall U.S. land rig count dropped by 7% quarter over quarter as operators, primarily in the Permian, slowed drilling activity, our overall rig count dropped by only 2% to 88 rigs actively drilling on our acreage in the Permian Basin. Our rig count actually increased by 4 rigs in Haynesville and by 5 rigs in the Mid-Con, while the Mid-Con experienced a decline in drilling activity.
That ducks increased by 9% quarter of a quarter. Led by the peryam Basin which bodes well for near-term production contributions from this region.
Finally cash GNA per Boe came in below the low end of guidance reflecting, operator, discipline and positive operating Leverage.
Today, we announced a 38% distribution for common units as we continue to focus on returning value to unitholders. We remain encouraged by the opportunities we see in 2025 and beyond to continue to grow and expand our industry-leading portfolio of assets to generate long-term unitholder value.
And now I'll turn the call over to Davis.
Thanks Bob and good morning everyone.
I'm now start by reviewing our financial results for the second quarter.
Oil natural gas and NGL revenues totaled 75 million during the second quarter and run rate. Production was 25,355 Boe per day.
On the expense side second quarter General and administrative expenses were 9.6 million.
5.4 million of which was Cash GNA expense
or $2.36 per Boe.
Total second quarter Consolidated, adjusted Eva was 63.8 Million.
You will find a Reconciliation of both Consolidated. Adjusted Ava.
And cash available for distribution at the end of our news release.
This morning, we announced a cash distribution of 38 cents for a common unit for the second quarter. And we estimate that approximately 100% of this distribution is expected to be considered return of capital and not subject to Dividend taxes.
Further enhancing the after tax return to our common unit holders.
This represents a cash distribution payment to common unit holders that equates to 75%.
Of cash available for distribution. And the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimble's secured. Revolving credit facility.
Moving now to our balance sheet of liquidity.
At June 30, 2025, we had approximately $462 million in debt outstanding under our secured revolving credit facility.
Which represented a net debt to trailing 12 months Consolidated, adjusted Eva of approximately 1.6 times.
We also had approximately 163 million dollars.
An undrawn capacity under the secured revolving credit facility, as of June 30th.
As a reminder on May 1st 2025.
the borrowing base in aggregate commitments on our secured revolving credit facility were increased from 550 million to 625 million in connection with our spring redetermination
in addition, on May 7th 2025
We redeemed 50% of the outstanding series of cumulative convertible preferred units to further simplify our capital structure and reduce our cost of capital.
We continue to maintain a conservative balance sheet and remain very comfortable with our strong financial position. The support of our expanding Bank Syndicate and our financial flexibility.
Today, we are also affirming our financial and operational guidance ranges for 2025.
As a reminder, our full 2025 guidance Outlook was included in the Q4. 2024 earnings release.
We remain confident about the prospects for continued robust development as he progressed through 2025.
Specially in the puran as well as our line of sight. Wells, materially exceeding. Our maintenance well count
We continue to believe that the overall demand for energy and our well established and diversified asset portfolio will continue to enhance value for our unit holders for years to come.
With that operator, we are now ready for questions.
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In our first question will come from Tim risvan with keybanc, capital markets,
Good morning, folks. Thank you for, uh, taking our questions.
Good morning, Tim.
I wanted to start, um,
I'm sure you you gave this a review as we did the, the city of Viper 14c filing that came out recently ahead of that merger closing. Uh, this month. Um, it was pretty clear from that, that publication that studio was actively looking for an upstream partner, um, to sort of bolster the minerals production and, and it made me think of the SPAC you all had. And if I recall, when you wound that down in 2023, he said we're winding down the SPAC, but we're still very much supportive of of that. Um,
To the role that a partnership could have. So, I was curious kind of, you know, speaking on behalf of the board where is that on the sort of priority list for for the company? Is it a back burner, wish, list item? Or do you feel the need in mid consolidation? Like is there more of a greater urgency to to look to create some sort of partnership?
Yeah. Tim I I'd say that um, that's an option that that we've explored in the past, we continue to explore that. We have resources internally that continue to look for operator Partnerships. I wouldn't put it at the front of our list of priorities we have as you know you know a dozen plus years of inventory so we can grow organically and we continue to see an incredible opportunity set for m&a.
Particularly for deals under $500 million, which is, uh, you know, the vast majority of royalties transactions, deals of that size can meaningfully move the needle for a company like us in terms of acquisition creation. So, we, we, we continue to maintain, uh, just a business as usual approach to making acquisitions, but certainly an operating partnership, um, if it makes sense for us, would be a wonderful thing.
Hey Tim. This is Bob.
I also like to just add right now, you know, as a placeholder um, through the years I've talked to a number of people and everyone uh, that has talked about Chris at video, has always said, what a great guy is. And in reading the filings, uh it certainly shows that he also works really hard. I've known Dax over there, going back to the days of Brigham and
He's a fantastically talented guy too. So I'd just like to wish Chris and Dax the best of luck, and everybody else from our city. They should be proud of what they built.
thanks for those comments and then, um,
As as a follow-up it sounds like um in this environment where oil production is starting to roll. Um you all feel like maybe organically you can sort of outperform that a little bit. Um but given kind of increasing recount on the gas side. Um
How are you? You know, you've been basically permanent focused and I and I know you give the a good answer that we're agnostic. We look at returns but there's clearly been a permanent Focus. So are you sort of, um,
Resetting sort of how you're looking at at opportunities out there given that the puran is potentially on the cusp of an oil decline, just kind of curious that, um, how you're rethinking A and D opportunities. Thank, you know, it's a, it's a great, it's a great question. And, and, uh, you know, the same answer as always. We're, we're always going to look at opportunities based on. What makes the most sense across every Basin in the United States? We didn't deliberately get your absolutely correct. We have made. Um, you know, I would say an outsized
Permanent acquisition, um, uh, move in the last few years. That's really just been where the opportunity set was the vast majority of private Equity, Capital beginning, 5 to 10 years ago, really went into the puran. And so as those portfolios started to mature, they came to Market and became a creative candidates for acquisition for us. Uh, we we weren't specifically, you know, saying that we wanted to buy permanent assets. That's just where we saw the opportunity set, we've had a harder time in recent years, making natural gas acquisitions.
We were able to make um you know, at the time our largest acquisition which was uh Haymaker back in 2018, that was back when gas prices were 2 bucks and nobody really wanted to be in the Haynesville. People were more focused on the permanent, so it it really is. You know, it's it's not a contrarian strategy, I would say but it's more of a where, where do we see the opportunity set? And, and let's use the benefit of the fact that we've made successful Acquisitions in every Basin. And from that experience, just allocate. Um, you know, our time and resources to the basins where we can benefit our shareholders. The most is really the answer
Okay, to see. I mean Tim I was surprised to see, you know, there is a, you know, your I mean, of course, you're correct about permanent activity and and all the the headlines there. And the news that we're reading we were surprised to see 5 rigs added to our permanent acreage quarter of a quarter. We had 4 added to the Haynesville, the mid-con slipped a little bit. Um but you know I think your your point is the initial outset was well taken, which is we do expect. Just based on the data we're seeing
That we will, you know, outperform at least on a relative basis. Um, you know, other folks not only in the term end but but but outside there just based on what we're seeing in rig data.
Okay, that's helpful. And then just to follow up. You said, you know, you focus on the permit because that's where the opportunity set was, is that still the case today relative to the last 2 or 3 years.
Yeah. I mean, good again. Great question. I mean, we bought, you know, the boring acquisition back in January, which was core Midland Basin. I I would say good question. No 1's asking that directly recently. I, I would say we're seeing a Slowdown and and permanent packages coming to the market. And I'm not exactly sure what's driving that other than, you know, the obvious, you know, oil and gas prices are oil, prices being 65 and and lower recently, I, I would, I would say that the permanence probably at a lower share of activity from a sell side perspective today than it has been over the last couple of years. So that I think that's a fair statement and a good question.
Okay, thank you for all the details.
Of course, thank you.
And our next question comes from John Annis with Texas Capital Bank.
Hey, good morning all and thanks for taking my questions.
My first 1 morning, digging into your comments on the rig market share what do you attribute to the resilience of rig activity across your acreage relative, to the broader decrease in across industry? Is it just more sticky activity from the large? Whoa, capitalized operators that you highlight on slide 8
It's, it's a good question and I'll and I'll try to answer it with fairness and humility. I I think we have, I think we have an asset base that that is of higher quality than average and it's Diversified nature across the Parian Basin. And so we have seen a little bit more stickiness on our acreage. Specifically, relative to the rest of the Basin and and it's always encouraging to see that um on our footprint. And and mostly that's the result of you know, we have an active acquisition program that goes back you know, 25 years. We've just been very careful over the years to buy in areas that we think are um you know, above average in terms of the results and the development activity that we would expect.
Terrific. For my follow up with the Step Up of gas, directed activity, across your acreage, relative to oil. How should we think about natural gas growth and the second half of 2025 and into 26? And any expectations on how your production mix might evolve over the next couple of quarters?
That's a great question. We're very excited about natural gas, for all the reasons that everybody else is. I would say it's very lumpy. We'll have quarters where we see dramatic increases in natural gas production. We saw that in the Haynesville really over the last several quarters, and then this quarter production went down a little bit, but then we saw, you know, rigs getting added to the Haynesville. So all.
Things all things being equal. If natural gas is a commodity continues to outperform outperform oils. We would expect a a slight um uh you know, slightly gassier mix in our production profile going forward but but nothing quite yet to where I would, I would um I would say it's it's really noteworthy or substantial. It's it's stayed relatively sticky at least for now.
I appreciate the color. Thanks guys.
Thank you.
And our next question comes from Noah hungus with Bank of America.
Now, um, growth isn't a given anymore in the Parian, and then also even basins that were in the plateau is not necessarily a given. Um, could you just touch on how the m&a market has changed in terms of what people, what valuations are starting to look like? Um, all right, are people taking a more conservative approach now or do people still feel comfortable underwriting some level of growth?
So good, good question. Every acquisition is different. Right? So the, the Bourne acquisition, we did in January, they have continuous trolling Clauses and, and, uh, things that help us underwrite growth on the asset or at least maintenance of production. But that's that's unusual. I would say and more unique in nature. Some other Acquisitions. Don't don't have that same profile. So, I think 1 of the reasons that and I think it's because it's 10 to asked me earlier what we're seeing in the puran. I, I think that 1 of the reasons perhaps you're not seeing a lot of permanent packages out there right now is that they want multiples of cash flow that reflect to your point a growth environment where in today's atmosphere we're expecting, you know, flat volumes. If not slightly lower, which would justify a lower cash flow multiple. So, usually these kind of things take time either sellers, don't don't transact or they, they, uh, get enough feedback over a long period of time that they need to expect a lower price. And then they start to, uh,
Run up against, you know, exit, constraints and timing. And those things and and become sellers at at more reasonable valuations.
Um, so it's still early days on on what to expect there, but I would think over time, that necessarily cash flow multiples on Acquisitions are going to have to come down. If you don't see that that same growth profile on the period that you've seen in the past to your point,
Gotcha, that makes sense. Uh, and then for my second question, um, could you guys maybe just give any additional color on what drove uh your GNA solo this quarter and kind of how sticky that is looking forward?
yeah, man, I'll I'll be
Transitioning over to you, to answer that 1.
Yeah, I mean, it was, it was mainly due to lower lower professional fees. Uh, this quarter, uh, obviously nice to see it below the low end of guidance. I, I would say for the rest of the year, you should Target for modeling purposes, sort of the, the lower end of guidance. I believe it's around 2:45, for HBU, we expected it. You know, we're obviously, we're focused on efficiencies and keeping the personal level, uh, you know, constant here as we make Acquisitions. But uh, this is a great quarter on GNA. And again, going forward, probably the low end of guidance is an appropriate level.
Helpful stuff, guys. Thank you.
Thank you.
Thank you. This now, concludes our question and answer session. I would like to turn the floor back over to management for closing comments.
We thank you all for joining us this morning and we look forward to speaking with you again. Next quarter. This completes today's call
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference, you may disconnect your lines and have a wonderful day.