KRP

Kimbell Royalty Partners, LP - 10-Q Summary (Q2 2026)

Business Context and Reporting Period

This report covers the quarterly period ended June 30, 2026. Kimbell Royalty Partners, LP is a Delaware limited partnership owning mineral and royalty interests in oil and natural gas properties across the United States. The Partnership is taxed as a corporation. As of June 30, 2026, the Partnership held interests in approximately 12.5 million gross acres, with over 99% leased and substantially all held by production. The portfolio spans 28 states, with significant exposure to the Permian Basin and Mid-Continent regions.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues for the six months ended June 30, 2026, increased by 4.3% compared to the same period in 2025. This was driven primarily by a 26.8% increase in average realized oil prices ($84.12/Bbl vs. $66.36/Bbl), partially offset by a 16.1% decrease in natural gas prices.
• Profitability: Net income attributable to common units surged 113% year-over-year for the six-month period ($42.4M vs. $19.9M). This significant improvement is largely due to the redemption of 50% of Series A preferred units in May 2025, which reduced the accretion and distribution burden on common unitholders in the current period.
• Acquisitions: The Partnership completed the Mesa Acquisition on June 22, 2026, valued at approximately $146.1 million. Consideration included $44.0 million in cash and the issuance of 6.9 million OpCo common units and Class B units. This contrasts with the Boren Acquisition completed in January 2025.
• Debt Utilization: Long-term debt increased to $478.7 million from $441.5 million at year-end 2025, reflecting borrowings to fund the Mesa Acquisition and working capital needs. The borrowing base was increased to $660.0 million in May 2026.

Guidance, Outlook, and Risks

• Distributions: The Board declared a quarterly cash distribution of $0.47 per common unit for Q2 2026, payable August 24, 2026. This represents an increase from the $0.38 per unit distribution in Q2 2025.
• Repurchase Program: A $100 million common unit repurchase program was approved in March 2026. As of June 30, 2026, the Partnership repurchased 1.0 million units for approximately $14.7 million. Approximately $85.4 million remains available under the program.
• Pending Transactions: The Partnership entered into an agreement for a "Dropdown" acquisition from Rivercrest Capital Partners valued at approximately $75.0 million in cash plus 9.5 million OpCo/Class B units, expected to close in August 2026.
• Risks: Key risks include volatility in commodity prices driven by global conflicts (specifically U.S. military action in Iran and the Russia-Ukraine conflict), regulatory changes under the Trump administration (tariffs, executive orders), and the potential for impairment charges if commodity prices decline significantly. The Partnership has not recorded impairments in the current period.
• Tax Legislation: The "One Big Beautiful Bill Act" enacted in July 2025 resulted in a permanent reduction of the corporate tax rate and modifications to interest expense limitations, reducing current income tax expense.

Investor Verification Checklist

• Verify the impact of the Series A preferred unit redemption on the comparability of Net Income attributable to common units between 2025 and 2026.
• Confirm the closing status and final consideration of the pending Rivercrest Capital "Dropdown" acquisition expected in August 2026.
• Monitor commodity price volatility and the effectiveness of the Partnership's derivative hedging program (fixed price swaps) in stabilizing cash flows.
• Review the utilization of the $100 million share repurchase program and its impact on outstanding unit count and EPS.
• Assess the Debt to EBITDAX ratio and compliance with the $660 million borrowing base covenant following the Mesa Acquisition.