KRP

Kimbell Royalty Partners, LP - Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 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 March 31, 2026, it held interests in approximately 17 million gross acres, with over 54% located in the Permian Basin and Mid-Continent regions.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased by approximately 22% year-over-year. While oil, natural gas, and NGL production volumes increased slightly (2.3 million Boe vs. 2.3 million Boe), realized revenues dropped due to lower average prices for natural gas and NGLs and a significant mark-to-market loss on commodity derivatives.
• Derivative Losses: The Partnership recorded a net loss on commodity derivative instruments of $18.7 million in Q1 2026, compared to $6.1 million in Q1 2025. This was driven by an increase in strip pricing relative to the previous quarter.
• Profitability: Net income attributable to common units fell to $4.0 million from $17.9 million, primarily due to the derivative losses and lower commodity revenues.
• Capital Allocation: The Partnership initiated a $100 million common unit repurchase program in March 2026. During the quarter, it repurchased 500,000 units for $7.3 million. Additionally, 5.4 million Class B units were converted to common units.
• Debt Activity: The Partnership borrowed an additional $12.8 million and repaid $13.4 million under its secured revolving credit facility during the quarter.

Guidance, Outlook, and Risks

• Distributions: The Board declared a quarterly cash distribution of $0.41 per common unit for Q1 2026, payable May 27, 2026. This is a decrease from the $0.47 per unit distribution in Q1 2025.
• Repurchase Program: The Board authorized a repurchase program through December 31, 2027. Subsequent to the quarter end (April 2026), the Partnership purchased an additional 500,000 units.
• Regulatory Environment: Management notes uncertainty regarding new executive orders and potential tariffs under the current administration, which could impact commodity prices and supply chains. The "One Big Beautiful Bill Act" enacted in July 2025 resulted in a reduction of current income tax expense due to changes in interest expense limitations.
• Market Risks: The filing highlights significant volatility in oil and natural gas prices due to global conflicts (Russia-Ukraine, Middle East) and OPEC actions. The Partnership uses fixed-price swaps to hedge a portion of its production through March 2028.

Investor Verification Checklist

• Derivative Exposure: Verify the impact of the $18.7 million derivative loss on future cash flows and the specific terms of the fixed-price swaps extending into 2028.
• Debt Covenants: Confirm compliance with the Debt to EBITDAX ratio (max 3.5x) and current asset to current liability ratio (min 1.0x) under the Second Amended and Restated Credit Agreement.
• Production Volumes vs. Prices: Analyze the divergence between slightly increased production volumes and decreased revenues to understand the sensitivity to natural gas and NGL price differentials.
• Repurchase Execution: Monitor the pace of the $100 million buyback program and its impact on liquidity and distribution coverage.
• Tax Status: Review the implications of the Partnership's corporate tax election and the impact of the new tax law on future effective tax rates.