Kimbell Royalty Partners LP (KRP) Valuation Update - Apr 9

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Kimbell Royalty Partners LP (KRP) Valuation Update - Apr 9

Post by dan_s »

Yesterday (April 8) I finally found enough time to update my forecast/valuation model for KRP and finish the profile update. I have posted the updates to the EPG website home page or you can find them under the High Yield Tab.

KRP closed on April 6 at $15.32

Despite being "gassy", this minerals company is in very good shape and will be reporting a significant increase in production from Q4 to Q1.
I have increased my current valuation by $1.50 to $20.50.
TipRanks: "In the last 3 months, 5 ranked analysts set 12-month price targets for KRP. The average price target among the analysts is $21.40. All 5 analysts rate it a BUY and their price targets range from $19 to $25."

KRP is a limited partnership that has elected to be taxed as a C-Corp., so it is appropriate to put it in an IRA account.

If you are long-term bullish on natural gas prices (like I am), this is definitely one you should take a hard look at. Current production is ~58% natural gas, but with production expected to increase by ~17% year-over-year, they should be able to pay 2023 dividends that total close to $1.38 (per my model) for annualized yield of ~9%. If natural gas prices rebound to $3.50/mcf in 2024, KRP should climb to over $20/share.

With very low maintenance capex, KRP is able to pay out ~75% of operating cash flow as dividends. All four of the minerals/royalties companies in our High Yield Income Portfolio have very low cash expenses.

The KRP profile will be emailed to all of our members on Monday morning.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Kimbell Royalty Partners LP (KRP) Valuation Update - Apr 9

Post by dan_s »

My To Do List for this coming week:

April 12: Houston Luncheon hosted by Surge Energy (you must register to attend). I upgraded to the Texas BBQ Buffet (my favorite).

Finish updating profiles for:
InPlay Oil (hosting Houston luncheon on April 18)
Talos Energy
Solaris Oilfield Infrastructure
ROK Resources (hosting Houston luncheon on April 19)
Hemisphere Energy

Build forecast models for:
Baytex Energy (BTE) based on proforma for merger with Ranger Oil (ROCC) < Possible addition to our Small-Cap Growth Portfolio.
Civitas Resources (CIVI) which pays a quarterly "Fixed + Variable Dividend" that was $2.15 in March. < Possible addition to our High Yield Income Portfolio.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Kimbell Royalty Partners LP (KRP) Valuation Update - Apr 9

Post by dan_s »

Kimbell Royalty Partners, LP Announces $143.1 Million Midland Basin Mineral and Royalty Acquisition
Wed, April 12, 2023 at 6:30 AM CDT
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Kimbell Royalty Partners LP (KRP) Valuation Update - Apr 9

Post by dan_s »

Stifel's take:

Kimbell Royalty Partners, LP (KRP, $16.17, Buy; Target $19.00) - Announces
accretive Midland Basin acquisition - Derrick Whitfield - Before the open, Kimbell
announced the acquisition of MB Minerals, L.P. for $143.1mm, including $48.8mm
in cash. The acquired assets include ~806 net royalty acres in the Northern Midland
Basin with an average NRI of 1.55%, expected net 12 month production of 1,901
boepd (77% oil), and over 300 producing wells. There were three active rigs on the
acreage as of March 31, 2023, and the company expects to add 2.06 net DUCs and
net permitted locations to Kimbell's inventory from the transaction. The transaction
is expected to close in Q223. We are positive on the acquisition and estimate it is
accretive to our NAV, the acreage was purchased at an attractive implied acreage
value of ~$59,000/net royalty acre (assuming $60,000/flowing bbl and $3,000/flowing
mcfe), and we estimate the transaction is deleveraging on 2024 Fwd. ND/EBITDA
Dan Steffens
Energy Prospectus Group
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