Kimbell Royalty Partners, LP Common Units (KRP) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture. Financial performance is stable but lacks growth indicators. Product development is steady, with some positive outlook in Mid-Con and Haynesville. Market strategy is conservative with no major partnerships or innovations. Expenses are managed well, but there's no significant improvement in financial health. Shareholder returns are stable but not increasing. The Q&A reveals cautious optimism but no major catalysts. Overall, the sentiment is neutral with no strong positive or negative factors to significantly impact the stock price.
Key Financial Performance
Oil, natural gas and NGL revenues $76.8 million during the third quarter, with no specific year-over-year change or reasons mentioned.
Run rate production 25,530 BOE per day, with no specific year-over-year change or reasons mentioned.
General and administrative expenses $10.1 million in the third quarter, $5.9 million of which was cash G&A expense or $2.51 per BOE. No year-over-year change or reasons mentioned.
Consolidated adjusted EBITDA $62.3 million in the third quarter, with no specific year-over-year change or reasons mentioned.
Cash distribution $0.35 per common unit for the third quarter, representing 75% of cash available for distribution. No year-over-year change or reasons mentioned.
Debt outstanding under secured revolving credit facility $448.5 million as of September 30, 2025, representing a net debt to trailing 12 months consolidated adjusted EBITDA of approximately 1.6x. No year-over-year change or reasons mentioned.
Undrawn capacity under secured revolving credit facility $176.5 million as of September 30, 2025, with no specific year-over-year change or reasons mentioned.
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Operating Highlights
Production Increase: Production increased organically by approximately 1% over Q2, exceeding the midpoint of 2025 guidance.
Boren Acquisition Impact: Production averaged 25,574 BOE per day for the first 9 months of 2025, including a full first quarter of production from the Boren acquisition.
Market Share in U.S. Land Rigs: Active rig count remains strong with 86 rigs, representing a 16% market share of U.S. land rigs.
Operational Discipline: Cash G&A per BOE was below the midpoint of guidance, reflecting operational discipline and positive operating leverage.
Financial Position: Net debt to trailing 12 months consolidated adjusted EBITDA was approximately 1.6x, with $176.5 million in undrawn capacity under the secured revolving credit facility.
M&A Strategy: Operational success attributed to targeted M&A strategy across leading U.S. basins.
Distribution Strategy: Declared Q3 2025 distribution of $0.35 per common unit, with 75% of cash available for distribution paid to unitholders and 25% used to reduce outstanding borrowings.
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Risk or Challenges
Market Conditions: General slowdown among U.S. oil and natural gas operators, which could impact production and revenue growth.
Debt Levels: Approximately $448.5 million in debt outstanding under the secured revolving credit facility, which could pose financial risks if market conditions worsen.
Operational Costs: General and administrative expenses totaled $10.1 million in Q3, with $5.9 million as cash G&A expense, which could pressure margins if revenues decline.
Regulatory and Taxation Risks: Uncertainty around future regulatory changes and taxation policies, though not explicitly mentioned, could impact operations and distributions.
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Guidance & Outlook
Production Guidance: Production for 2025 is expected to remain strong, with active rig count at 86 rigs and line-of-site wells exceeding the number needed to maintain flat production. This indicates confidence in production stability as the year concludes.
Financial Guidance: The company reaffirmed its financial and operational guidance ranges for 2025, maintaining a conservative balance sheet with a net debt to trailing 12 months consolidated adjusted EBITDA of approximately 1.6x.
Market Trends: The company anticipates long-term growth in demand for U.S. energy and is positioned to benefit from this trend due to its diversified portfolio of high-quality royalty assets across leading U.S. basins.
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Shareholder Return Plan
Q3 2025 distribution: $0.35 per common unit
Tax treatment of distribution: Approximately 100% of the distribution is expected to be considered a return of capital and not subject to dividend taxes
Percentage of cash available for distribution paid out: 75% of cash available for distribution paid to common unitholders
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Key Q&A
Q:Can you talk about what you're seeing across your footprint regarding production and the macro environment, especially in light of a slowdown in the Permian?
A:The company is proud of delivering steady production from its portfolio. Rig activity has been relatively flat, and the DUC inventory fluctuates quarter-over-quarter. They do not see any major trends indicating a slowdown in the Permian and expect production to remain flat or grow slightly. The company is paying a 10% dividend and sees consistent rig activity across its acreage.
Q:What are you seeing in the Mid-Con and Haynesville areas, and how do they contribute to your portfolio?
A:The Mid-Con has been surprisingly active quarter-over-quarter, benefiting from higher gas prices. The company expects greater production growth contributions from the Mid-Con and Haynesville due to their balanced portfolio, which is designed to deliver steady results despite fluctuations in oil and gas prices.
Q:Why was the marketing and other deductions expense abnormally high this quarter, and what should we expect going forward?
A:The higher marketing costs were due to tremendous production growth in the Mid-Con, which has higher marketing expenses. For modeling purposes, a level between the historical average and the current quarter's figure is expected in a more normalized environment.
Q:Is the 6.5 net DUC and permits run rate to hold production steady being pressured down, or is it stable?
A:The 6.5 net DUC and permits run rate is updated annually. Over time, as higher decline wells decrease in production mix, the number of wells needed to maintain production should decrease. The company expects this maintenance level to go down slightly in the next update.
Q:Has the removal of Sitio from the M&A landscape shifted the opportunity set?
A:The removal of Sitio is helpful but not a major factor. The competitive dynamic is more influenced by private companies. The company remains disciplined in M&A, focusing on selective and high-bar acquisitions, averaging 1 to 3 deals per year.
Q:How does the company view production outlook for the first half of 2026 compared to 2025 guidance?
A:The company expects production to be flat to increasing. They see no indications of production falling and continue to receive positive surprises from operators drilling on their acreage. Their metrics are conservative, and they aim to deliver steady, tax-advantaged yields to investors.
Q:Why is the company building cash on the balance sheet instead of paying down the revolver?
A:The company pays down the revolver immediately after distributing dividends. The cash build-up is a timing issue.
Q:What is the underlying growth potential of the asset base in the Haynesville and Mid-Con if gas demand increases significantly over the next 5-6 years?
A:The company expects tremendous growth in natural gas production in the Haynesville and Mid-Con if gas prices rise to $4-$5. They highlight their extensive acreage and inventory in these areas but prefer to provide conservative, one-year guidance.
Q:What are the company's thoughts on pursuing organic mineral acquisition opportunities in areas like the Western Haynesville?
A:The company does not focus on small ground game acquisitions due to their labor-intensive nature and limited impact on overall production. They prefer to wait for portfolios to mature and become accretive before pursuing acquisitions.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the underlying growth potential of the asset base in the Haynesville and Mid-Con over the next 5-6 years. They acknowledged the potential for growth but refrained from offering specific projections, citing their conservative approach to guidance.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BOE midpoint
Directors adviser
LLC today
Officer Chairman
Officer Chief
Ravnaas
Relations statement
acquisition midpoint
addition line
adviser role
backdrop headwind
base slowdown
basin rig
confidence production
day production
decline production
employee Directors
end employee
energy sector
gas operator
headwind energy
host Investor
midpoint discipline
midpoint resilience
midpoint success
month production
operator month
production acquisition
production base
production cash
production midpoint
prospect term
quality decline
reading today
resilience quality
result Royalty
result production
sector prospect
sector seed
seed year
slowdown oil
success backdrop
KRP Transcript
Kimbell Royalty Partners, LP Common Units (KRP) Q1 2026 Earnings Call Transcript
Positive5-7
The earnings call summary reveals strong financial performance, with significant year-over-year increases in revenue, net income, and EBITDA. Despite the lack of strategic and operational updates, the positive financial metrics and effective cost management suggest robust company performance. The acknowledgment of uncertainties in forward-looking statements is standard and does not detract from the positive sentiment. Given the company's market cap of approximately $1.2 billion, the positive financial results are likely to lead to a positive stock price movement in the near term.
Kimbell Royalty Partners, LP Common Units (KRP) Q4 2025 Earnings Call Transcript
Positive2-26
The earnings call highlights strong financial performance, with increased revenues and distributions, and a record level of reserves. The Q&A reveals stable production expectations and strategic advantages in M&A. The company's financial health is robust, with low debt levels and significant undrawn capacity. Despite some uncertainties, such as economic conditions and management's vague response on Waha price impact, the overall sentiment is positive. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8% over the next two weeks.
Kimbell Royalty Partners, LP Common Units (KRP) Q3 2025 Earnings Call Transcript
Unknown11-6
The earnings call summary presents a mixed picture. Financial performance is stable but lacks growth indicators. Product development is steady, with some positive outlook in Mid-Con and Haynesville. Market strategy is conservative with no major partnerships or innovations. Expenses are managed well, but there's no significant improvement in financial health. Shareholder returns are stable but not increasing. The Q&A reveals cautious optimism but no major catalysts. Overall, the sentiment is neutral with no strong positive or negative factors to significantly impact the stock price.
Kimbell Royalty Partners, LP Common Units (KRP) Q2 2025 Earnings Call Transcript
Unknown8-7
The earnings call highlights strong financial performance with record revenues and increased cash distribution, which is positive. However, the Q&A reveals concerns about debt levels, strategic risks, and unclear guidance on future growth, especially regarding Permian-focused acquisitions. The lack of a share repurchase program and conservative M&A market further contribute to a balanced outlook. Given the company's market cap, these mixed signals suggest a neutral stock price movement over the next two weeks.
KRP Slides
KRP Report
Frequently Asked Questions
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