Business Context and Reporting Period
Company: Kimbell Royalty Partners, LP (KRP)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Model: KRP is a Delaware limited partnership that owns and acquires mineral and royalty interests in oil and natural gas properties across the United States. It is taxed as a corporation. The company does not fund drilling or completion costs; instead, it receives a cost-free percentage of production revenues from third-party operators. As of December 31, 2025, KRP held interests in approximately 12.3 million gross acres and over 133,000 gross wells, with 54% of acreage located in the Permian Basin and Mid-Continent.
Key Financial Metrics
| Metric | 2025 | 2024 | 2023 |
|---|---|---|---|
| Total Revenues | $333.8 million | $309.3 million | $294.1 million |
| Oil, Gas & NGL Revenues | $317.5 million | $304.6 million | $267.6 million |
| Net Income | $99.7 million | $11.1 million | $83.0 million |
| Net Income Attributable to Common Units | $56.0 million | $(8.8) million | $60.1 million |
| Operating Cash Flow | $246.5 million | $250.9 million | $174.3 million |
| Adjusted EBITDA (Consolidated) | $266.5 million | $262.8 million | $212.1 million |
| Cash Available for Distribution (Common Units) | $194.6 million | $180.7 million | $140.8 million |
| Long-Term Debt Outstanding | $441.5 million | $239.2 million | N/A |
| Proved Reserves (MBoe) | 72,944 | 67,541 | 65,409 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 8% to $333.8 million in 2025 compared to 2024. This was driven by a 61% increase in average natural gas prices ($2.93/Mcf vs. $1.82/Mcf) and higher production volumes (9.4 million Boe vs. 9.1 million Boe), partially offset by a 16% decrease in average oil prices ($63.84/Bbl vs. $75.98/Bbl).
- Profitability Surge: Net income attributable to common units rebounded significantly to $56.0 million in 2025 from a net loss of $8.8 million in 2024. The 2024 loss was heavily impacted by a $62.1 million impairment charge on oil and natural gas properties due to declining commodity prices. No impairment was recorded in 2025.
- Acquisition Activity: In 2025, KRP completed the acquisition of mineral and royalty interests from Boren Minerals for approximately $230.4 million, funded by debt and a $163.6 million equity offering. This contrasts with 2024, which had minimal acquisition activity ($0.2 million).
- Debt Levels: Borrowings under the secured revolving credit facility increased to $441.5 million at year-end 2025 from $239.2 million in 2024, reflecting funding for the Boren Acquisition and partial redemption of Series A preferred units.
- Reserve Growth: Proved reserves increased to 72,944 MBoe in 2025 from 67,541 MBoe in 2024, driven by revisions to previous estimates and the Boren Acquisition.
Guidance, Outlook, and Risks
- Distribution Policy: The Board declared a quarterly cash distribution of $0.37 per common unit for Q4 2025. The Board intends to continue allocating a portion of cash available for distribution to repay outstanding borrowings under the credit facility.
- Capital Structure: KRP maintains a conservative capital structure but increased leverage in 2025. The company has a $625 million borrowing base under its credit facility. It does not intend to retain cash for replacement capital expenditures, relying instead on operator development and external financing for growth.
- Commodity Price Risk: Revenues are highly sensitive to oil and natural gas prices. While natural gas prices improved significantly in 2025, oil prices declined. The company uses derivative instruments (swaps) to hedge a portion of its production, which resulted in a $12.1 million gain in 2025.
- Regulatory and Environmental Risks: The filing highlights risks related to climate change legislation, hydraulic fracturing regulations, and potential changes in U.S. trade policy and tariffs. The company notes that the U.S. withdrew from the Paris Agreement effective January 27, 2026, though the impact on future regulations remains uncertain.
- Operator Dependency: KRP relies entirely on third-party operators for exploration and development. Approximately 47% of revenues in 2025 came from the top ten operators.
Key Facts for Investor Verification
- Debt Covenants: Verify compliance with the Debt to EBITDAX ratio covenant (maximum 3.5 to 1.0) and the current assets to current liabilities ratio (minimum 1.0 to 1.0) under the Second Amended and Restated Credit Agreement.
- Series A Preferred Units: Confirm the status of the remaining 162,500 Series A preferred units (50% redeemed in May 2025) and their impact on cash available for common unitholders (6.0% annual distribution rate).
- Reserve Revisions: Review the Ryder Scott reserve report to understand the drivers behind the 10,211 MBoe increase in reserves due to revisions in 2025, specifically regarding price assumptions and technical updates.
- Derivative Exposure: Assess the volume and pricing of open commodity derivative contracts (fixed price swaps for oil and natural gas extending through 2027) and their potential impact on future earnings if market prices diverge significantly from strike prices.
- Acquisition Integration: Monitor the production performance and cost integration of the Boren Acquisition assets in the Midland Basin to ensure they meet projected cash flow expectations.