Kimbell Royalty Partners Announces Record Fourth Quarter and Full Year 2023 Results
KRP
+0.52%
Wed, February 21, 2024 at 6:00 AM CST
In this article:
Record Q4 23 Run-Rate Daily Production of 24,332 Boe/d (6:1) Exceeds High End of Guidance; Represents Organic Growth of 3.4% Between Q3 2023 and Q4 2023
Activity on Acreage Remains Robust with 98 Active Rigs Drilling Representing 16%1 Market Share of U.S. Land Rig Count
Superior Five-Year Annual Average PDP Decline Rate of 14% Requires Only an Estimated 5.8 Net Wells Annually to Maintain Flat Production Compared to 8.4 Net Line-of-Site Wells
Increase in Borrowing Base on Secured Revolving Credit Facility to $550 Million; Conservative Balance Sheet with Net Debt to Trailing Twelve Month Consolidated Adjusted EBITDA of 1.0x
Announces Q4 2023 Cash Distribution of $0.43 per Common Unit
FORT WORTH, Texas, Feb. 21, 2024 /PRNewswire/ -- Kimbell Royalty Partners, LP (NYSE: KRP) ("Kimbell" or the "Company"), a leading owner of oil and natural gas mineral and royalty interests in over 129,000 gross wells across 28 states, today announced financial and operating results for the quarter ended and year ended December 31, 2023.
Fourth Quarter 2023 Highlights
Record Q4 2024 run-rate daily production of 24,332 barrels of oil equivalent ("Boe") per day (6:1)
Record Q4 2023 oil, natural gas and NGL revenues of $83.9 million, an increase of 21.2% from Q3 2023
Q4 2023 net income of approximately $17.8 million and net income attributable to common units of approximately $9.8 million, as compared to $18.5 million and $13.6 million, respectively, from Q3 2023
Record Q4 2023 consolidated Adjusted EBITDA of $69.0 million, an increase of 23.7% from Q3 2023
As of December 31, 2023, Kimbell's major properties2 had 8.38 net drilled but uncompleted wells ("DUCs") and net permitted locations on its acreage (4.55 net DUCs and 3.83 net permitted locations) compared to an estimated 5.8 net wells needed to maintain flat production
As of December 31, 2023, Kimbell had 98 rigs actively drilling on its acreage, down 1 rig from Q3 2023 and representing 16.3% market share of all rigs drilling in the continental United States as of such time
On December 8, 2023, the borrowing base and aggregate commitments on Kimbell's secured revolving credit facility were increased from $400 million to $550 million in connection with its Fall redetermination
Announced a Q4 2023 cash distribution of $0.43 per common unit, reflecting a payout ratio of 75% of cash available for distribution; implies a 11.2% annualized yield based on the February 20, 2024 closing price of $15.38 per common unit; Kimbell intends to utilize the remaining 25% of its cash available for distribution to repay a portion of the outstanding borrowings under Kimbell's revolving credit facility
Initiated full year 2024 guidance with estimated daily production at its mid-point projected at 24,000 Boe/d for the year
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1 Based on Kimbell rig count of 98 and Baker Hughes U.S. land rig count of 602 as of December 31, 2023.
2 These figures pertain only to Kimbell's major properties and do not include possible additional DUCs and permits from Kimbell's minor properties, which generally have a net revenue interest of 0.1% or below and are time consuming to quantify but, in the estimation of Kimbell's management, could add an additional 15% to Kimbell's net inventory.
Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell Royalty GP, LLC, Kimbell's general partner (the "General Partner"), commented, "2023 was another record year for Kimbell. We completed our largest acquisition to date during 2023, which was not only immediately accretive to distributable cash flow per common unit, but also bolstered the Permian as the leading basin for the Company in terms of production, active rig count, DUCs, permits and undrilled inventory. Furthermore, the borrowing base and elected commitments on the Company's revolving credit facility increased to $550 million, further enhancing our liquidity and conservative capital structure. Finally, the Company paid out $1.73 per common unit in tax-advantaged quarterly distributions during 2023 and paid down approximately $49.9 million on its credit facility by allocating 25% of cash available for distribution for debt-paydown.
"Q4 2023 reflected significant organic growth relative to Q3 2023 due to a number of high interest wells coming online in the Permian and Haynesville. We expect to continue this operational momentum as we progress through 2024 given that our rig count remains near record highs with 98 rigs actively drilling in the U.S.
"Reflecting on our growth since our IPO, we have now grown production from 3,116 Boe/d to 24,332 Boe/d, an increase of 681%. As evidenced by our significant acquisition activity in 2023, we expect to continue our role as a major consolidator in the highly fragmented U.S. oil and natural gas royalty sector, which we estimate to be over $700 billion in size. And, as I have stated in the past, there are only a handful of public entities in the U.S. and Canada that have the financial resources, infrastructure, network and technical expertise to complete large-scale, multi-basin acquisitions. We believe that we are still in the early stages of this consolidation and will actively seek out targets that fit within our acquisition profile. We are very excited about the opportunities to expand in the future and deliver unitholder value for years to come."
Fourth Quarter 2023 Distribution and Debt Repayment
Today, the Board of Directors of the General Partner (the "Board of Directors") approved a cash distribution payment to common unitholders of 75% of cash available for distribution for the fourth quarter of 2023, or $0.43 per common unit. The distribution will be payable on March 20, 2024 to common unitholders of record at the close of business on March 13, 2024. Kimbell plans to utilize the remaining 25% of cash available for distribution for the fourth quarter of 2023 to pay down a portion of the outstanding borrowings under its secured revolving credit facility. Since May 2020 (excluding the expected upcoming pay-down from the remaining 25% of Q4 2023 projected cash available for distribution), Kimbell has paid down approximately $136.0 million of outstanding borrowings under its secured revolving credit facility by allocating a portion of its cash available for distribution for debt pay-down.
Kimbell expects that approximately 93% of its fourth quarter 2023 distribution should not constitute dividends for U.S. federal income tax purposes, but instead are estimated to constitute non-taxable reductions to the basis of each distribution recipient's ownership interest in Kimbell common units. The reduced tax basis will increase unitholders' capital gain (or decrease unitholders' capital loss) when unitholders sell their common units. The Form 8937 containing additional information may be found at www.kimbellrp.com under "Investor Relations" section of the site. Kimbell currently believes that the portion that constitute dividends for U.S. federal income tax purposes will be considered qualified dividends, subject to holding period and certain other conditions, which are subject to a tax rate of 0%, 15% or 20% depending on the income level and tax filing status of a unitholder for 2024. Kimbell believes these estimates are reasonable based on currently available information, but they are subject to change.