Exhibit 99.1
NEWS RELEASE
Kimbell Royalty Partners Announces Record Fourth Quarter and
Full Year 2022 Results
Record Full-Year Oil, Natural Gas and Natural Gas Liquids Revenue and Net Income
Record Q4 22 Run-Rate Daily Production; Post-Hatch Acquisition Quarterly Production Exceeds 17,000 Boe/d (6:1) for First Time
Record Number of Net DUCs and Permits; Record Rig Count of 92 Active Rigs Drilling
Updated Detailed Portfolio Review Includes 10,763 Gross and 66.94 Net Major Upside Locations1 and Estimated 19 Years of Drilling Inventory2
Superior Five-Year Annual Average PDP Decline Rate of 12% Requires Only an Estimated 4.5 Net Wells Annually to Maintain Flat Production
Increase in Borrowing Base on Secured Revolving Credit Facility to $350 Million; Conservative Balance Sheet with Net Debt to Trailing Twelve Month Consolidated Adjusted EBITDA of 0.9x
Announces Q4 2022 Cash Distribution of $0.48 per Common Unit
FORT WORTH, Texas, February 23, 2023 – Kimbell Royalty Partners, LP (NYSE: KRP) (“Kimbell” or the “Company”), a leading owner of oil and natural gas mineral and royalty interests in over 124,000 gross wells across 28 states, today announced financial and operating results for the quarter ended and year ended December 31, 2022.
Fourth Quarter 2022 Highlights
| · | Record Q4 2022 run-rate daily production of 15,394 barrels of oil equivalent (“Boe”) per day (6:1) |
| · | Includes 17 days of production from the Company’s $270.7 million acquisition of mineral and royalty interests held by Austin-based Hatch Royalty LLC (the “Acquired Production”) that closed on December 15, 2022 |
| · | Including a full Q4 2022 impact of the Acquired Production, the revenues from which will be received by the Company, run-rate production was 17,176 Boe per day (6:1) |
| · | Q4 2022 oil, natural gas and NGL revenues of $64.4 million, a decrease of 12.8% from Q3 2022, primarily attributable to a decline in realized commodity prices |
1 These figures include Kimbell's major properties and do not include locations from Kimbell's minor properties, which generally include properties with less than a 0.1% net revenue interest and are time consuming to quantify, but in the estimation of Kimbell's management could add up to an additional 20% to Kimbell's net inventory in the aggregate.
2 Based on estimated major and minor upside net locations of 83.68 divided by estimated 4.5 net wells completed per year to maintain flat production.
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| · | Q4 2022 net income of approximately $35.2 million and net income attributable to common units of approximately $28.4 million, as compared to $43.8 million and $38.3 million, respectively, from Q3 2022 |
| · | Q4 2022 consolidated Adjusted EBITDA of $46.2 million, as compared to $47.5 million in Q3 2022 |
| · | As of December 31, 2022, Kimbell’s major properties3 had 6.94 net drilled but uncompleted wells (“DUCs”) and net permitted locations on its acreage (3.67 net DUCs and 3.27 net permitted locations), a new record, compared to an estimated 4.5 net wells needed to maintain flat production |
| · | As of December 31, 2022, Kimbell had a record 92 rigs actively drilling on its acreage, up from 79 rigs in Q3 2022 and representing 12.1%4 market share of all rigs drilling in the continental United States as of such time |
| · | On December 15, 2022, the borrowing base and aggregate commitments on Kimbell's secured revolving credit facility were increased from $300 million to $350 million in connection with its fall redetermination |
| · | Announced a Q4 2022 cash distribution of $0.48 per common unit, reflecting a payout ratio of 75% of cash available for distribution; implies a 13.2% annualized yield based on the February 22, 2023 closing price of $14.59 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 2023 guidance with estimated daily production at is mid-point projected at 17,200 Boe/d for the year; oil-weighting projected to increase relative to 2022 guidance provided in the Q4 2021 earnings release due to the Acquired Production in the Permian Basin |
Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell Royalty GP, LLC, Kimbell’s general partner (the “General Partner”), commented, “2022 was another very strong year for Kimbell, which included several new records for revenue, EBITDA, distributable cash flow per unit and net income during the year. In addition, we completed a highly attractive and accretive acquisition in one of the highest quality and most active parts of the Permian Basin in December, which reestablished 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 commitment on the Company’s revolving credit facility increased to $350 million, further enhancing our liquidity and conservative capital structure. In fact, the Company’s leverage ratio is now at the lowest level it has been in years at 0.9x Net Debt to trailing twelve month consolidated Adjusted EBITDA. Finally, the Company paid out $1.88 in tax-advantaged quarterly distributions during 2022 and paid down approximately $41.5 million on its credit facility by allocating 25% of cash available for distribution for debt-paydown.
“Reflecting on our growth since our IPO, we have now grown production from 3,116 Boe/d to 17,176 Boe/d, an increase of 451%. 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.”
3 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 20% to Kimbell’s net inventory.
4 Based on Kimbell rig count of 92 and Baker Hughes U.S. land rig count of 762 as of December 31, 2022.
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“While the U.S. rig count increased during the year and is now approaching pre-COVID levels, we do not expect much in the way of significant oil production growth from U.S. operators. A primary reason for this is that the number of DUCs in the U.S., one of the best indicators for near-term production growth, has dropped precipitously since 2020. In fact, in the Permian Basin alone, DUCs have dropped from a peak of over 3,500 in July 2020 to just over 1,000 today – levels not seen since 2015. While many companies will focus on replenishing their DUC inventories in the short-term, we believe that inflationary pressures in the drilling, completion and labor side of their businesses will continue to temper oil production growth during 2023. Production stability, profitability and quality of inventory will continue to be the primary themes of energy investing rather than the hyper-growth models of the past. With our high-quality, low-PDP decline and diversified royalty portfolio with substantial upside drilling locations, Kimbell was built for these conditions. We are very excited about the opportunities to expand in the future and deliver unitholder value for years to come.”
Fourth Quarter 2022 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 2022, or $0.48 per common unit. The distribution will be payable on March 16, 2023 to common unitholders of record at the close of business on March 9, 2023. Kimbell plans to utilize the remaining 25% of cash available for distribution for the fourth quarter of 2022 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 2022 projected cash available for distribution), Kimbell has paid down approximately $86.1 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 68% of its fourth quarter 2022 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 2023. Kimbell believes these estimates are reasonable based on currently available information, but they are subject to change.
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Financial Highlights
Kimbell’s fourth quarter 2022 average realized price per Bbl of oil was $82.04, per Mcf of natural gas was $5.02, per Bbl of NGLs was $30.55 and per Boe combined was $43.65.
During the fourth quarter of 2022, the Company’s total revenues were $68.7 million, net income was approximately $35.2 million and net income attributable to common units was approximately $28.4 million, or $0.48 per common unit.
Total fourth quarter 2022 consolidated Adjusted EBITDA was $46.2 million (consolidated Adjusted EBITDA is a non-GAAP financial measure. Please see a reconciliation to the nearest GAAP financial measures at the end of this news release).
In the fourth quarter of 2022, G&A expense was $7.2 million, $4.2 million of which was Cash G&A expense, or $2.97 per Boe (Cash G&A and Cash G&A per Boe are non-GAAP financial measures. Please see definition under Non-GAAP Financial Measures in the Supplemental Schedules included in this news release). Unit-based compensation in the fourth quarter of 2022, which is a non-cash G&A expense, was $3.0 million or $2.11 per Boe.
On December 15, 2022, the borrowing base and aggregate commitments under its secured revolving credit facility were increased from $300 million to $350 million in connection with its fall redetermination.
As of December 31, 2022, Kimbell had approximately $233.0 million in debt outstanding under its secured revolving credit facility, had net debt to fourth quarter 2022 trailing twelve month consolidated Adjusted EBITDA of approximately 0.9x and was in compliance with all financial covenants under its secured revolving credit facility. Kimbell had approximately $117.0 million in undrawn capacity under its secured revolving credit facility as of December 31, 2022.
As of December 31, 2022, Kimbell had outstanding 64,231,833 common units and 15,484,400 Class B units. As of February 23, 2023, Kimbell had outstanding 65,229,995 common units and 15,484,400 Class B units.
Production
Fourth quarter 2022 average daily run-rate production was 15,394 Boe per day (6:1) and was composed of approximately 61% from natural gas (6:1) and approximately 39% from liquids (26% from oil and 13% from NGLs). Including a full Q4 2022 impact of the Acquired Production, the revenues from which will be received by the Company, run-rate production was 17,176 Boe per day (6:1).
Operational Update
As of December 31, 2022, Kimbell’s major properties had 882 gross (3.67 net) DUCs and 675 gross (3.27 net) permitted locations on its acreage. In addition, as of December 31, 2022, Kimbell had 92 rigs actively drilling on its acreage, which represents an approximate 12.1% market share of all land rigs drilling in the continental United States as of such time.
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| Basin | Gross
DUCs as of December 31, 2022(1) | Gross
Permits as of December 31, 2022(1) | Net
DUCs as of December 31, 2022(1) | Net
Permits as of December 31, 2022(1) | ||||||||||||
| Permian | 455 | 365 | 1.55 | 1.60 | ||||||||||||
| Eagle Ford | 82 | 62 | 0.63 | 0.52 | ||||||||||||
| Haynesville | 102 | 45 | 0.89 | 0.55 | ||||||||||||
| Mid-Continent | 110 | 52 | 0.27 | 0.12 | ||||||||||||
| Bakken | 102 | 132 | 0.23 | 0.35 | ||||||||||||
| Appalachia | 6 | 9 | 0.01 | 0.02 | ||||||||||||
| Rockies | 25 | 10 | 0.09 | 0.11 | ||||||||||||
| Total | 882 | 675 | 3.67 | 3.27 | ||||||||||||
(1) 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 20% to Kimbell's net inventory.
Reserves
Ryder Scott Company, L.P. prepared an estimate of Kimbell’s proved reserves as of December 31, 2022. Average prices of $93.67 per barrel of oil and $6.36 per MMBtu of natural gas were used in accordance with applicable rules of the Securities and Exchange Commission (the “SEC”). Realized prices with applicable differentials were $90.94 per barrel of oil, $5.37 per Mcf of natural gas and $36.42 per barrel of NGLs.
Proved developed reserves at year-end 2022 increased by approximately 2% year-over-year to over 46 MMBoe, reflecting the acquisitions Kimbell made during the year along with continued development by the operators of Kimbell’s acreage.
| Crude
Oil and Condensate (MBbls) | Natural
Gas (MMcf) | Natural
Gas Liquids (MBbls) | Total (MBOE) | |||||||||||||
| Net proved developed reserves at December 31, 2021 | 12,511 | 157,764 | 6,669 | 45,474 | ||||||||||||
| Revisions of previous estimates | (58 | ) | 17,119 | 759 | 3,554 | |||||||||||
| Purchases of minerals in place | 1,328 | 5,726 | 707 | 2,989 | ||||||||||||
| Production | (1,426 | ) | (20,311 | ) | (747 | ) | (5,558 | ) | ||||||||
| Net proved developed reserves at December 31, 2022 | 12,355 | 160,298 | 7,388 | 46,459 | ||||||||||||
Results of Updated Portfolio Review
Kimbell completed an updated review of its portfolio including the Acquired Production, which as of December 31, 2022, identified 10,763 gross and 66.94 net (100% NRI) major total upside drilling locations. These locations only include Kimbell's major properties and do not include Kimbell's minor properties, which generally have less than a 0.1% net revenue interest and are time consuming to quantify, but in the estimation of Kimbell's management could add up to an additional 20% to Kimbell's net inventory in the aggregate. Including both the estimated major and minor upside locations, the Company believes it has a total of 83.68 net locations, or approximately 19 years of drilling inventory based on 4.5 net wells per year needed to maintain flat production.
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Approximately 79% of the total estimated undrilled net inventory is located in the Permian, Eagle Ford and Haynesville, which have some of the best economic returns and lowest break-even costs in the U.S. In addition, Kimbell's superior five-year average PDP decline rate of only 12% requires only an estimated 4.5 net wells each year to keep production flat.
| Basin | Gross
Major Locations as of December 31, 2022(1) | Net
Major Locations as of December 31, 2022(1) | Avg.
Gross Horizontal Wells/DSU(2) | |||||||||
| Permian | 4,190 | 23.71 | 12.0 | |||||||||
| Eagle Ford | 1,672 | 15.50 | 6.9 | |||||||||
| Haynesville | 1,093 | 13.76 | 5.9 | |||||||||
| Mid-Continent | 1,402 | 6.36 | 6.8 | |||||||||
| Bakken | 1,956 | 3.98 | 8.5 | |||||||||
| Appalachia | 251 | 2.16 | 7.6 | |||||||||
| Rockies | 199 | 1.47 | 10.5 | |||||||||
| Total | 10,763 | 66.94 | 8.3 | |||||||||
(1) Locations include permits, proven undeveloped (PUD), probable, and possible (per SPE-PRMS reserve definitions based on interenal reserves database as of December 31, 2022). In addition, these figures pertain only to Kimbell's major properties and do not include additional locations 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 20% to Kimbell's net inventory in the aggregate.
(2) Gross horizontal wells per drilling spacing unit (“DSU”) from internal reserves database as of December 31, 2022. DSUs vary in size.
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Hedging Update
The following provides information concerning Kimbell’s hedge book as of December 31, 2022:
| Fixed Price Swaps as of December 31, 2022 | |||||||||||||||||
| Weighted Average | |||||||||||||||||
| Volumes | Fixed Price | ||||||||||||||||
| Oil | Nat Gas | Oil | Nat Gas | ||||||||||||||
| BBL | MMBTU | $/BBL | $/MMBTU | ||||||||||||||
| 1Q 2023 | 91,854 | 1,204,308 | $ | 53.38 | $ | 2.73 | |||||||||||
| 2Q 2023 | 70,889 | 998,179 | $ | 61.16 | $ | 2.52 | |||||||||||
| 3Q 2023 | 72,680 | 1,047,880 | $ | 61.70 | $ | 3.09 | |||||||||||
| 4Q 2023 | 67,988 | 995,532 | $ | 63.00 | $ | 3.28 | |||||||||||
| 1Q 2024 | 54,509 | 823,186 | $ | 76.32 | $ | 4.15 | |||||||||||
| 2Q 2024 | 56,511 | 809,354 | $ | 82.40 | $ | 4.31 | |||||||||||
| 3Q 2024 | 48,576 | 785,588 | $ | 69.30 | $ | 4.45 | |||||||||||
| 4Q 2024 | 68,448 | 811,164 | $ | 70.02 | $ | 4.48 | |||||||||||
2023 Guidance
Kimbell is providing financial and operational guidance ranges for 2023 as follows:
| Kimbell Royalty Partners LP | ||||||
| 2023 | ||||||
| Net Production - Mboe/d (6:1) | 16.3 | - | 18.1 | |||
| Oil Production - % of Net Production | 26% | - | 30% | |||
| Natural Gas Production - % of Net Production | 56% | - | 60% | |||
| Natural Gas Liquids Production - % of Net Production | 12% | - | 16% | |||
| Unit Costs ($/boe) | ||||||
| Marketing and other deductions | $2.10 | - | $2.90 | |||
| Depreciation, depletion and accretion expenses | $6.00 | - | $10.00 | |||
| G&A | ||||||
| Cash G&A | $2.90 | - | $3.10 | |||
| Non-Cash G&A | $2.00 | - | $2.40 | |||
| Production and ad valorem taxes - % of Oil, Natural Gas and NGL Revenues | 6.0% | - | 8.0% | |||
| Payout Ratio (1) | 75% | |||||
(1) The Company intends to pay out 75% of its projected cash available for distribution in quarterly distributions and utilize 25% of projected cash available for distribution to pay down a portion of the outstanding borrowings under its secured revolving credit facility each quarter.
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Conference Call
Kimbell Royalty Partners will host a conference call and webcast today at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss fourth quarter 2022 results. To access the call live by phone, dial 201-389-0869 and ask for the Kimbell Royalty Partners call at least 10 minutes prior to the start time. A telephonic replay will be available through March 2, 2023 by dialing 201-612-7415 and using the conference ID 13734773#. A webcast of the call will also be available live and for later replay on Kimbell’s website at http://kimbellrp.investorroom.com under the Events and Presentations tab.
Presentation
On February 23, 2023, Kimbell posted an updated investor presentation on its website. The presentation may be found at http://kimbellrp.investorroom.com under the Events and Presentations tab. Information on Kimbell’s website does not constitute a portion of this news release.
About Kimbell Royalty Partners, LP
Kimbell (NYSE: KRP) is a leading oil and gas mineral and royalty company based in Fort Worth, Texas. Kimbell owns mineral and royalty interests in over 16 million gross acres in 28 states and in every major onshore basin in the continental United States, including ownership in more than 124,000 gross wells. To learn more, visit http://www.kimbellrp.com.
Forward-Looking Statements
This news release includes forward-looking statements, in particular statements relating to Kimbell’s financial, operating and production results and prospects for growth, drilling inventory, growth potential, identified locations and all other estimates and predictions resulting from Kimbell’s portfolio review, the tax treatment of Kimbell's distributions, changes in Kimbell’s capital structure, future natural gas and other commodity prices and changes to supply and demand for oil, natural gas and NGLs. These and other forward-looking statements involve risks and uncertainties, including risks that the anticipated benefits of acquisitions are not realized and uncertainties relating to Kimbell’s business, prospects for growth and acquisitions and the securities markets generally, as well as risks inherent in oil and natural gas drilling and production activities, including risks with respect to potential declines in prices for oil and natural gas that could result in downward revisions to the value of proved reserves or otherwise cause operators to delay or suspend planned drilling and completion operations or reduce production levels, which would adversely impact cash flow, risks relating to the impairment of oil and natural gas properties, risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in oil and natural gas prices, risks relating to Kimbell’s ability to meet financial covenants under its credit agreement or its ability to obtain amendments or waivers to effect such compliance, risks relating to Kimbell’s hedging activities, risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations, risks relating to delays in receipt of drilling permits, risks relating to unexpected adverse developments in the status of properties, risks relating to borrowing base redeterminations by Kimbell’s lenders, risks relating to the absence or delay in receipt of government approvals or third-party consents, risks relating to acquisitions, dispositions and drop downs of assets, risks relating to Kimbell's ability to realize the anticipated benefits from and to integrate acquired assets, including the Acquired Production, risks relating to tax matters, and other risks described in Kimbell's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”), available at the SEC's website at www.sec.gov. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Except as required by law, Kimbell undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this news release. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Kimbell's filings with the SEC.
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Contact:
Rick Black
Dennard Lascar Investor Relations
krp@dennardlascar.com
(713) 529-6600
– Financial statements follow –
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Kimbell Royalty Partners, LP
Condensed Consolidated Balance Sheet
(Unaudited, in thousands)
| December 31, | ||||
| 2022 | ||||
| Assets: | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 24,636 | ||
| Oil, natural gas and NGL receivables | 46,993 | |||
| Accounts receivable and other current assets | 3,563 | |||
| Total current assets | 75,192 | |||
| Property and equipment, net | 954 | |||
| Oil and natural gas properties | ||||
| Oil and natural gas properties (full cost method) | 1,465,986 | |||
| Less: accumulated depreciation, depletion and impairment | (712,717 | ) | ||
| Total oil and natural gas properties, net | 753,269 | |||
| Right-of-use assets, net | 2,525 | |||
| Derivative assets | 755 | |||
| Loan origination costs, net | 3,004 | |||
| Assets of consolidated variable interest entities: | ||||
| Cash | 391 | |||
| Investments held in trust | 240,621 | |||
| Prepaid expenses | 35 | |||
| Total assets | $ | 1,076,746 | ||
| Liabilities and unitholders' equity: | ||||
| Current liabilities | ||||
| Accounts payable | $ | 1,210 | ||
| Other current liabilities | 4,910 | |||
| Derivative liabilities | 12,647 | |||
| Total current liabilities | 18,767 | |||
| Operating lease liabilities, excluding current portion | 2,236 | |||
| Derivative liabilities | 432 | |||
| Long-term debt | 233,016 | |||
| Other liabilities | 323 | |||
| Liabilities of consolidated variable interest entities: | ||||
| Other current liabilities | 513 | |||
| Deferred underwriting commissions | 8,050 | |||
| Total liabilities | 263,337 | |||
| Commitments and contingencies | ||||
| Mezzanine equity: | ||||
| Redeemable noncontrolling interest in Kimbell Tiger Acquisition Corporation | 236,900 | |||
| Kimbell Royalty Partners, LP unitholders' equity: | ||||
| Common units | 601,842 | |||
| Class B units | 774 | |||
| Total Kimbell Royalty Partners, LP unitholders' equity | 602,616 | |||
| Noncontrolling deficit interest in OpCo | (26,107 | ) | ||
| Total equity | 576,509 | |||
| Total liabilities, mezzanine equity and unitholders' equity | $ | 1,076,746 | ||
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Kimbell Royalty Partners, LP
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per-unit data and unit counts)
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Revenue | ||||||||
| Oil, natural gas and NGL revenues | $ | 64,421 | $ | 52,243 | ||||
| Lease bonus and other income | 1,034 | 306 | ||||||
| Gain on commodity derivative instruments, net | 3,216 | 3,128 | ||||||
| Total revenues | 68,671 | 55,677 | ||||||
| Costs and expenses | ||||||||
| Production and ad valorem taxes | 2,697 | 2,380 | ||||||
| Depreciation and depletion expense | 16,726 | 11,721 | ||||||
| Marketing and other deductions | 2,744 | 3,206 | ||||||
| General and administrative expenses | 7,190 | 6,730 | ||||||
| Consolidated variable interest entities related: | ||||||||
| General and administrative expenses | 447 | — | ||||||
| Total costs and expenses | 29,804 | 24,037 | ||||||
| Operating income | 38,867 | 31,640 | ||||||
| Other income (expense) | ||||||||
| Equity (loss) income in affiliate | (989 | ) | 400 | |||||
| Interest expense | (3,950 | ) | (2,489 | ) | ||||
| Other income | — | 1,247 | ||||||
| Consolidated variable interest entities related: | ||||||||
| Interest earned on marketable securities in trust account | 2,208 | — | ||||||
| Net income before income taxes | 36,136 | 30,798 | ||||||
| Income tax expense | 888 | 74 | ||||||
| Net income | 35,248 | 30,724 | ||||||
| Distribution and accretion on Series A preferred units | — | (3,244 | ) | |||||
| Net income attributable to noncontrolling interests | (6,847 | ) | (7,472 | ) | ||||
| Distributions on Class B units | (8 | ) | (18 | ) | ||||
| Net income attributable to common units of Kimbell Royalty Partners, LP | $ | 28,393 | $ | 19,990 | ||||
| Basic | $ | 0.48 | $ | 0.46 | ||||
| Diluted | $ | 0.48 | $ | 0.44 | ||||
| Weighted average number of common units outstanding | ||||||||
| Basic | 59,484,641 | 43,371,258 | ||||||
| Diluted | 69,913,842 | 62,713,187 | ||||||
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Kimbell Royalty Partners, LP
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per-unit data and unit counts)
| Year Ended | Year Ended | |||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Revenue | ||||||||
| Oil, natural gas and NGL revenues | $ | 281,964 | $ | 175,088 | ||||
| Lease bonus and other income | 3,074 | 3,319 | ||||||
| Loss on commodity derivative instruments, net | (36,979 | ) | (42,792 | ) | ||||
| Total revenues | 248,059 | 135,615 | ||||||
| Costs and expenses | ||||||||
| Production and ad valorem taxes | 16,239 | 10,480 | ||||||
| Depreciation and depletion expense | 50,086 | 36,798 | ||||||
| Marketing and other deductions | 13,383 | 12,049 | ||||||
| General and administrative expenses | 29,129 | 26,978 | ||||||
| Consolidated variable interest entities related: | ||||||||
| General and administrative expenses | 2,304 | — | ||||||
| Total costs and expenses | 111,141 | 86,305 | ||||||
| Operating income | 136,918 | 49,310 | ||||||
| Other income (expense) | ||||||||
| Equity income in affiliate | 2,669 | 1,120 | ||||||
| Interest expense | (13,818 | ) | (9,182 | ) | ||||
| Other income | 4,043 | 1,264 | ||||||
| Consolidated variable interest entities related: | ||||||||
| Interest earned on marketable securities in trust account | 3,721 | — | ||||||
| Net income before income taxes | 133,533 | 42,512 | ||||||
| Income tax expense | 2,739 | 74 | ||||||
| Net income | 130,794 | 42,438 | ||||||
| Distribution and accretion on Series A preferred units | — | (11,250 | ) | |||||
| Net income attributable to noncontrolling interests | (18,823 | ) | (8,496 | ) | ||||
| Distributions on Class B units | (42 | ) | (77 | ) | ||||
| Net income attributable to common units of Kimbell Royalty Partners, LP | $ | 111,929 | $ | 22,615 | ||||
| Basic | $ | 1.75 | $ | 0.56 | ||||
| Diluted | $ | 1.72 | $ | 0.51 | ||||
| Weighted average number of common units outstanding | ||||||||
| Basic | 54,112,595 | 40,400,907 | ||||||
| Diluted | 65,837,017 | 60,957,824 | ||||||
Kimbell Royalty Partners, LP – News Release
Page 13
Kimbell
Royalty Partners, LP
Supplemental Schedules
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, Cash G&A and Cash G&A per Boe are used as supplemental non-GAAP financial measures by management and external users of Kimbell’s financial statements, such as industry analysts, investors, lenders and rating agencies. Kimbell believes Adjusted EBITDA is useful because it allows us to more effectively evaluate Kimbell’s operating performance and compare the results of Kimbell’s operations period to period without regard to its financing methods or capital structure. In addition, management uses Adjusted EBITDA to evaluate cash flow available to pay distributions to Kimbell’s unitholders. Kimbell defines Adjusted EBITDA as net income (loss), net of depreciation and depletion expense, interest expense, income taxes, non cash unit based compensation, unrealized gains and losses on derivative instruments, cash distribution from affiliate, equity income (loss) in affiliate, gains and losses on sales of assets and operational impacts of variable interest entities, which include general and administrative expense and interest income. Adjusted EBITDA is not a measure of net income (loss) or net cash provided by operating activities as determined by GAAP. Kimbell excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within Kimbell’s industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Adjusted EBITDA should not be considered an alternative to net income, oil, natural gas and natural gas liquids revenues, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Kimbell’s computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Kimbell expects that cash available for distribution for each quarter will generally equal its Adjusted EBITDA for the quarter, less cash needed for debt service and other contractual obligations, tax obligations, and fixed charges and reserves for future operating or capital needs that the Board of Directors may determine is appropriate.
Kimbell believes Cash G&A and Cash G&A per Boe are useful metrics because they isolate cash costs within overall G&A expense and measure cash costs relative to overall production, which is a widely utilized metric to evaluate operational performance within the energy sector. Cash G&A is defined as general and administrative expenses less unit-based compensation expense. Cash G&A per Boe is defined as Cash G&A divided by total production for a period. Cash G&A should not be considered an alternative to G&A expense presented in accordance with GAAP. Kimbell’s computations of Cash G&A and Cash G&A per Boe may not be comparable to other similarly titled measures of other companies.
Kimbell Royalty Partners, LP – News Release
Page 14
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited, in thousands)
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Reconciliation of net cash provided by operating activities to Adjusted EBITDA and cash available for distribution | ||||||||
| Net cash provided by operating activities | $ | 38,631 | $ | 22,360 | ||||
| Interest expense | 3,950 | 2,489 | ||||||
| Income tax expense | 888 | 74 | ||||||
| Amortization of right-of-use assets | (82 | ) | (77 | ) | ||||
| Amortization of loan origination costs | (491 | ) | (409 | ) | ||||
| Equity (loss) income in affiliate | (989 | ) | 400 | |||||
| Unit-based compensation | (2,982 | ) | (2,436 | ) | ||||
| Gain on derivative instruments, net of settlements | 13,029 | 14,626 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Oil, natural gas and NGL revenues receivable | 606 | 4,464 | ||||||
| Accounts receivable and other current assets | 967 | 1,557 | ||||||
| Accounts payable | (336 | ) | 218 | |||||
| Other current liabilities | 1,509 | 2,016 | ||||||
| Operating lease liabilities | 84 | 78 | ||||||
| Consolidated variable interest entities related: | ||||||||
| Interest earned on marketable securities in Trust Account | 2,208 | — | ||||||
| Other assets and liabilities | (180 | ) | — | |||||
| Consolidated EBITDA | $ | 56,812 | $ | 45,360 | ||||
| Add: | ||||||||
| Unit-based compensation | 2,982 | 2,436 | ||||||
| Gain on derivative instruments, net of settlements | (13,029 | ) | (14,626 | ) | ||||
| Cash distribution from affiliate | 171 | — | ||||||
| Equity loss (income) in affiliate | 989 | (400 | ) | |||||
| Consolidated variable interest entities related: | ||||||||
| Interest earned on marketable securities in Trust Account | (2,208 | ) | — | |||||
| General and administrative expenses | 447 | — | ||||||
| Consolidated Adjusted EBITDA | $ | 46,164 | $ | 32,770 | ||||
| Adjusted EBITDA attributable to noncontrolling interest | (8,967 | ) | (8,910 | ) | ||||
| Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $ | 37,197 | $ | 23,860 | ||||
| Adjustments to reconcile Adjusted EBITDA to cash available for distribution | ||||||||
| Less: | ||||||||
| Cash interest expense | 2,558 | 1,524 | ||||||
| Cash income tax expense | 15 | — | ||||||
| Cash distributions on Series A preferred units | — | 318 | ||||||
| Restricted units repurchased for tax withholding | — | 670 | ||||||
| Distributions on Class B units | 8 | 18 | ||||||
| Cash available for distribution on common units | $ | 34,616 | $ | 21,330 | ||||
Kimbell Royalty Partners, LP – News Release
Page 15
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited, in thousands, except for per-unit data and unit counts)
| Three Months Ended | ||||
| December 31, 2022 | ||||
| Net income | $ | 35,248 | ||
| Depreciation and depletion expense | 16,726 | |||
| Interest expense | 3,950 | |||
| Income tax expense | 888 | |||
| Consolidated EBITDA | $ | 56,812 | ||
| Unit-based compensation | 2,982 | |||
| Gain on derivative instruments, net of settlements | (13,029 | ) | ||
| Cash distribution from affiliate | 171 | |||
| Equity loss in affiliate | 989 | |||
| Consolidated variable interest entities related: | ||||
| Interest earned on marketable securities in Trust Account | (2,208 | ) | ||
| General and administrative expenses | 447 | |||
| Consolidated Adjusted EBITDA | $ | 46,164 | ||
| Adjusted EBITDA attributable to noncontrolling interest | (8,967 | ) | ||
| Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $ | 37,197 | ||
| Adjustments to reconcile Adjusted EBITDA to cash available for distribution | ||||
| Less: | ||||
| Cash interest expense | 2,558 | |||
| Cash income tax expense | 15 | |||
| Distributions on Class B units | 8 | |||
| Cash available for distribution on common units | $ | 34,616 | ||
| Common units outstanding on December 31, 2022 | 64,231,833 | |||
| Cash available for distribution per common unit outstanding | $ | 0.53 | ||
| Common units outstanding on March 9, 2023 Record Date | 65,229,995 | |||
| Fourth quarter 2022 distribution declared (1) | $ | 0.48 | ||
(1) The difference between the declared distribution and the cash available for distribution is primarily attributable to Kimbell allocating 25% of cash available for distribution to pay outstanding borrowings under its secured revolving credit facility. Additionally, Kimbell utilized cash flows received from the Q4 2022 Acquired Production after the effective date of October 1, 2022, but prior to the closing date of December 15, 2022, to pay outstanding borrowings under its credit facility and to distribute the additional cash flows to common unitholders. Revenues, production and other financial and operating results from the Q4 2022 acquisition are reflected in Kimbell's condensed consolidated financial statements from December 15, 2022 onward.
Kimbell Royalty Partners, LP – News Release
Page 16
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited, in thousands, except for per-unit data and unit counts)
| Three Months Ended | ||||
| December 31, 2021 | ||||
| Net income | $ | 30,724 | ||
| Depreciation and depletion expense | 11,721 | |||
| Interest expense | 2,489 | |||
| Cash distribution from affiliate | 352 | |||
| Income tax expense | 74 | |||
| Consolidated EBITDA | $ | 45,360 | ||
| Unit-based compensation | 2,436 | |||
| Gain on commodity derivative instruments, net of settlements | (14,626 | ) | ||
| Equity income in affiliate | (400 | ) | ||
| Consolidated Adjusted EBITDA | $ | 32,770 | ||
| Adjusted EBITDA attributable to noncontrolling interest | (8,910 | ) | ||
| Adjusted EBITDA attributable to Kimbell Royalty Partners, LP | $ | 23,860 | ||
| Adjustments to reconcile Adjusted EBITDA to cash available for distribution | ||||
| Less: | ||||
| Cash interest expense | 1,524 | |||
| Cash distributions on Series A preferred units | 318 | |||
| Restricted units repurchased for tax withholding | 670 | |||
| Distributions on Class B units | 18 | |||
| Cash available for distribution on common units | $ | 21,330 | ||
| Common units outstanding on December 31, 2021 | 47,162,773 | |||
| Cash available for distribution per common unit outstanding | $ | 0.45 | ||
| Common units outstanding on January 31, 2022 Record Date | 47,162,773 | |||
| Fourth quarter 2021 distribution declared (1) | $ | 0.37 | ||
(1) The difference between the declared distribution and the cash available for distribution is primarily attributable to Kimbell allocating 25% of cash available for distribution to pay outstanding borrowings under its revolving credit facility. Additionally, Kimbell utilized cash flows received from the Q4 2021 acquired production after the cash cutoff date of November 1, 2021, but prior to the closing date of December 7, 2021, to pay outstanding borrowings under its credit facility and to distribute the additional cash flows to common unitholders. Revenues, production and other financial and operating results from the Q4 2021 acquisition are reflected in Kimbell's condensed consolidated financial statements from December 7, 2021 onward.
Kimbell Royalty Partners, LP – News Release
Page 17
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited, in thousands)
| Three Months Ended | ||||
| December 31, 2022 | ||||
| Net income | $ | 35,248 | ||
| Depreciation and depletion expense | 16,726 | |||
| Interest expense | 3,950 | |||
| Income tax expense | 888 | |||
| Consolidated EBITDA | $ | 56,812 | ||
| Unit-based compensation | 2,982 | |||
| Gain on derivative instruments, net of settlements | (13,029 | ) | ||
| Cash distribution from affiliate | 171 | |||
| Equity loss in affiliate | 989 | |||
| Consolidated variable interest entities related: | ||||
| Interest earned on marketable securities in Trust Account | (2,208 | ) | ||
| General and administrative expenses | 447 | |||
| Consolidated Adjusted EBITDA | $ | 46,164 | ||
| Q1 2022 - Q3 2022 Consolidated Adjusted EBITDA (1) | 175,560 | |||
| Trailing Twelve Month Consolidated Adjusted EBITDA | $ | 221,724 | ||
| Long-term debt (as of 12/31/22) | 233,016 | |||
| Cash and cash equivalents (as of 12/31/22) | (25,027 | ) | ||
| Net debt (as of 12/31/22) | $ | 207,989 | ||
| Net Debt to Trailing Twelve Month Consolidated Adjusted EBITDA | 0.9 | x | ||
(1) Consolidated Adjusted EBITDA for each of the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 was previously reported in a news release relating to the applicable quarter, and the reconciliation of net income to consolidated Adjusted EBITDA for each quarter is included in the applicable news release. This also includes the trailing twelve months pro forma results from the Q4 2022 acquisition that closed in December 2022 in accordance with Kimbell's secured revolving credit facility.