Business Context and Reporting Period
This Form 8-K Current Report, dated February 6, 2019, details a material definitive agreement entered into by Kimbell Royalty Partners, LP (the "Partnership") and its operating subsidiary, Kimbell Royalty Operating, LLC ("Opco"). The filing announces the execution of a Securities Purchase Agreement to acquire oil and natural gas mineral and royalty interests from three sellers: PEP I Holdings, LLC, PEP II Holdings, LLC, and PEP III Holdings, LLC.
Key Financial Metrics and Transaction Terms
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period. The primary financial metric disclosed relates to the consideration for the acquisition:
- Consideration: 9,400,000 Opco Common Units and an equal number of Class B Units in the Partnership.
- Exchangeability: The Opco Common Units and Class B Units are exchangeable for an equal number of Common Units representing limited partner interests in the Partnership.
- Transaction Type: Private placement exempt from registration requirements under Section 4(a)(2) of the Securities Act of 1933.
- Effective Date: January 1, 2019.
Material Changes and Transaction Status
The material change is the entry into the acquisition agreement. The transaction is expected to close in the first quarter of 2019, subject to customary closing conditions. The agreement includes a termination date of April 24, 2019, if the acquisition has not closed by that time. The consideration is subject to certain adjustments as defined in the Purchase Agreement.
Guidance, Risks, and Contingencies
Lock-Up Period: Sellers have agreed not to dispose of the issued Opco Common Units or Class B Units for 120 days following the closing of the acquisition.
Registration Rights: The Partnership must file a shelf registration statement within 30 days of closing and use reasonable best efforts to have it become effective within 120 days of closing to permit the resale of the securities.
Risks and Termination: The agreement may be terminated by either party for breaches of representations, warranties, or covenants, or if a governmental authority issues a final order prohibiting the consummation of the acquisition.
Management Commentary: The filing states that representations and warranties in the agreement were made as of the signing date and are qualified by confidential disclosure schedules. Investors are advised not to rely on these representations as characterizations of actual facts.
Key Facts for Investor Verification
- Verify the final closing date and whether the transaction closes within the first quarter of 2019 as expected.
- Confirm the final number of units issued after any purchase price adjustments are calculated.
- Monitor the filing and effectiveness of the required shelf registration statement for the resale of the new units.
- Review the confidential disclosure schedules (if available) to understand exceptions to the sellers' representations and warranties.
- Assess the impact of the 120-day lock-up period on future liquidity and trading volume of the Partnership's units.