Kimbell Royalty Partners (KRP) Update - Jan 24

[dan_s]

KRP is a partnership that has elected to be taxed as a C-Corp.: no K-1 and a good fit for an IRA.

I spent several hours today updating my forecast model for KRP, one of the minerals companies in our High Yield Income Portfolio.

KRP closed three significant acquisitions in 2023 that increased the Company's production from 17,215 Boepd Q1 2023 to ~23,500 Boepd in Q4 2023.

They pay variable quarterly dividends based on a high percentage of their free cash flow. The most recent quarterly dividend of $0.51/share (called "units") based on Q3 results was paid on 11/20/2023. Based on my forecast, dividends paid during 2024 should be within the range of $1.80 to $1.90.

KRP was trading today at $14.86, so dividend yield should be approximately 12.5% this year.

I've built some "cushions" into my forecast model, so the dividends look solid to me unless we see a significant decline in oil, gas and NGL prices. On a BOE basis, KRP's production is approximately 50% natural gas, 34% crude oil and 16% NGLs. For 2024, ~76% of their revenues should come from the sale of liquids. KRP has a hedging program that does lower their commodity price risk.

TipRanks: "In the last 3 months, 3 ranked analysts set 12-month price targets for KRP. The average price target among the analysts is $20.00. All three of the analysts rate it a BUY." TipRanks' 2024 consensus forecast is actually higher than my forecast.

In addition to double digit dividend yield, KRP is a "growth company" with production up 7.7% in 2022, 31.7% in 2023 and should be up over 30% in 2024.

If your primary investment goal is dividend yield, our four minerals companies (BSM, KRP, STR and VNOM) are good choices.