Kimbell Royalty Partners, LP (KRP) is a new addition - Aug 1

[dan_s]

KRP is being added to our High Yield Income Portfolio. It is a minerals company that has elected to be taxed as a C-Corp. (no K-1).

This one is a "gasser": Second quarter 2022 average daily production was 14,948 Boe per day (6:1), which was composed of approximately 63% from natural gas (6:1) and approximately 37% from liquids (24% from oil and 13% from NGLs).

Q2 2022 was record financial results for the Company.
Their most recent quarterly dividend was $0.55/unit for annualized yield of 12.4%. < All five of the minerals/royalties companies in the EPG High Yield Income Portfolio pay "variable dividends" that are a high percentage (50% to 75%) of their operating cash flow.

Notes below from RBC Capital on 8-15-2022 with my comments in blue:
RBC rates it as Outperform with a price target of $26/share. KRP closed yesterday at $17.62.

Kimbell Royalty Partners (KRP)
• 2Q was a nice beat, particularly the focus on organic production growth driving improved
results. We increase our 2022 production and EBITDA estimates by 2%. For 2023, we increase
our production and EBITDA estimates by 3% and 1%, respectively.
• KRP handily beat Street EBITDA estimates by 17%, as drilling on its acreage resulted in new
production on high-interest wells in the Haynesville, which drove organic growth and an
increased distribution of $0.55/unit (75% payout ratio). < The Haynesville is the key for KRP and PHX (in our Small-Cap Growth Portfolio) because it has the best access to the Gulf Coast LNG export market. Sweet 16 member Comstock Resources (CRK) is one of the top upstream companies working in the Haynesville..
• Higher producer activity has resulted in additional DUCs and Permits, further improving KRP’s
line-of-sight inventory for future production, and should result in continued organic growth as
net wells remain above the level needed to keep production flat.
• Given its heavy natural gas weighted production, we believe KRP should continue to benefit
from the strength in natural gas prices, which should incentivize producers to remain active.

In addition to RBC, Raymond James and Stifel Nickolas also rate KRP a BUY with price targets of $26 and $23.

I still have some work to do on my forecast/valuation model for KRP, which I hope to finish this weekend.

[dan_s]

KRP is replacing Rattler Midstream (RTLR) that recently merged back into Diamondback Energy (FANG).