Kimbell Royalty Partners(KRP) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Kimbell Royalty Partners reported oil, natural gas, and NGL revenues of $69.1 million for Q4 2024, excluding acquired production, with record run-rate production of 25,946 BOE per day including acquired production [14][15] - Consolidated adjusted EBITDA for Q4 2024 was$ 59.8 million, excluding acquired production [15] - The company announced a cash distribution of $0.40 per common unit for Q4 2024, with approximately 100% expected to be a return of capital [16] Business Line Data and Key Metrics Changes - The company maintained a strong drilling activity with 91 rigs actively drilling on its acreage, representing a 16% market share of all land rigs drilling in the continental U.S. [10][14] - The five-year annual average PDP decline rate is 14%, requiring only an estimated 6.5% net wells annually to maintain flat production [11] Market Data and Key Metrics Changes - Kimbell Royalty Partners has a conservative balance sheet with net debt to trailing twelve-month consolidated adjusted EBITDA of approximately 0.8 times [17] - The company had approximately$ 310.8 million in undrawn capacity under its secured revolving credit facility as of December 31, 2024 [17] Company Strategy and Development Direction - Kimbell aims to continue as a major consolidator in the fragmented U.S. oil and gas royalty sector, which is estimated to be over $700 billion in size [20] - The company is focused on larger acquisitions, targeting$ 100 million-plus deals, while remaining agnostic to commodity price movements [73][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the prospects for continued robust development in 2025, supported by the number of rigs actively drilling on their acreage, especially in the Permian Basin [19] - The company believes it is well-positioned for continued growth and enhancing unitholder value in the future [12] Other Important Information - Kimbell completed a $230 million acquisition last month and introduced 2025 guidance with expected production at a new record guidance level [11][18] - The company plans to redeem about half of its preferred shares in May and will continue to use 25% of cash flow to pay down debt [44][50] Q&A Session Summary Question: Are there any particular basins where you're seeing an abundance of opportunity to add acreage? - Management noted that while the Permian continues to see the most consolidation, they are looking at opportunities across the U.S. without targeting a specific basin [25][26] Question: Has the new administration's regulatory changes affected opportunities? - Management indicated that the new administration has been supportive of increased domestic energy output, which benefits them as mineral owners [30] Question: Can you discuss the 2025 guidance and the quality of acquired assets? - Management stated that the guidance reflects flat growth for the year, with a strong line of sight inventory and confidence in the quality of acquired assets [38][41] Question: What are the plans for redeeming preferred shares? - Management confirmed plans to redeem about half of the preferred shares in May and will consider financing options for future acquisitions [44][50] Question: How does the competitive landscape for M&A look? - Management emphasized that they focus on high-quality properties at reasonable prices and do not plan to shift focus based on commodity price movements [62][63] Question: What is the opportunity set for future acquisitions? - Management indicated a focus on larger acquisitions, with a preference for$ 100 million-plus deals, as the mineral market continues to consolidate [75][78]