Kimbell Royalty Partners, LP current report, 11 April 2023

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Business Context and Reporting Period

Company: Kimbell Royalty Partners, LP (KRP)
Filing Type: Form 8-K (Current Report)
Date of Report: April 11, 2023
Event: Entry into a Material Definitive Agreement to acquire mineral and royalty interests in Howard and Borden Counties, Texas (Northern Midland Basin).

Key Financial Metrics and Transaction Details

Transaction Consideration:

  • Cash: Approximately $48.8 million.
  • Equity: Issuance of 5,369,218 OpCo Common Units (exchangeable for Class B Units) and 557,302 KRP Common Units to Sellers.
Acquired Asset Metrics (as of March 31, 2023):
  • Net Royalty Acres (NRA): Approximately 806.
  • Gross Unit Acres: Approximately 60,000.
  • Proved Reserves: Estimated 5.3 MMBoe.
  • Net Revenue Interest: Average 1.55% per unit.
  • Daily Production (as of April 1, 2023): 1,901 Boe/d (77% oil, 11% NGLs, 12% natural gas).
  • Drilling Activity: 3 active rigs; estimated 2.06 net drilled but uncompleted wells and net permitted locations.
Operational Impact:
  • Expected to reduce general and administrative expenses (net of non-cash unit-based compensation) by approximately 11%.
  • Expected to increase oil weighting in daily production mix from 29% to 34%.
Liquidity and Debt: The filing text does not provide specific values for the company's current debt levels, liquidity position, or cash flow metrics outside of the transaction cash consideration.

Material Changes and Outlook

Closing Timeline: Expected to close in the second quarter of 2023, with an effective date of April 1, 2023. The agreement may be terminated if not closed by June 17, 2023.
Equity Restrictions: Sellers (other than MB Minerals) are restricted from disposing of KRP Common Units for 45 days post-closing or until a registration statement is effective. MB Minerals is restricted for 120 days.
Reserve Estimates: Current reserve estimates are preliminary. Final proved reserve estimates for the acquired assets will be prepared by Ryder Scott Company, L.P., as of December 31, 2023, and may differ from current management estimates.

Risks and Contingencies

  • Closing Conditions: Completion is subject to customary closing conditions, including governmental approvals and satisfaction of representations and warranties.
  • Integration Risk: No assurance that anticipated benefits (e.g., expense reduction, production mix improvement) will be realized.
  • Operational Risks: Includes risks inherent in oil and gas drilling, such as price volatility, drilling delays, environmental hazards, and borrowing base redeterminations.
  • Forward-Looking Statements: The filing contains forward-looking statements regarding the acquisition's benefits and timing, which are subject to risks and uncertainties.

Investor Verification Checklist

  • Verify the final closing date and whether all conditions precedent were satisfied.
  • Review the final proved reserve report by Ryder Scott Company, L.P., expected as of December 31, 2023, to confirm the 5.3 MMBoe estimate.
  • Monitor the effectiveness of the Shelf Registration Statement for the resale of issued securities.
  • Assess the actual impact on G&A expenses and production mix in subsequent quarterly reports.
  • Confirm the final consideration amount, as it is subject to adjustments per the Purchase Agreement.