Business Context and Reporting Period
Company: Kimbell Royalty Partners, LP (KRP)
Filing Type: Form 8-K (Current Report)
Date of Report: June 13, 2023
Event: Entry into a Material Definitive Agreement (Amended and Restated Credit Agreement).
Key Financial Metrics and Debt Structure
This filing details the restructuring of the company's credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
| Metric | Value |
|---|---|
| Facility Type | Senior Secured Reserve-Based Revolving Credit Facility |
| Maximum Principal Amount | $750,000,000 |
| Initial Borrowing Base | $400,000,000 |
| Initial Aggregate Elected Commitments | Up to $400,000,000 |
| Letters of Credit Sub-facility | Up to $10,000,000 |
| Maturity Date | June 7, 2027 |
| Interest Rate (SOFR) | SOFR + 2.75% to 3.75% (based on utilization) |
| Interest Rate (Base Rate) | Base Rate + 1.75% to 2.75% (based on utilization) |
| Commitment Fee | 0.50% per annum on unused portion |
Material Changes Versus Prior Period
- Agreement Restatement: The new agreement amends and restates the existing Credit Agreement originally dated January 11, 2017 (with prior amendments in 2018, 2020, and 2022).
- Maturity Extension: The maturity date has been extended to June 7, 2027.
- Borrowing Base: Established an initial borrowing base of $400.0 million, subject to semi-annual redeterminations (May 1 and November 1).
- Collateral: The facility is collateralized by substantially all assets, including mortgages on at least 75% of the PV-9 of proved reserves.
Guidance, Covenants, and Risks
Financial Covenants (Effective Q2 2023):
- Debt to EBITDAX Ratio: Must not exceed 3.5 to 1.0.
- Current Ratio: Current assets to current liabilities must not be less than 1.0 to 1.0.
Liquidity and Prepayment Requirements:
- Cash balances above $30.0 million must be applied weekly to prepay loans unless reduced in a permitted manner.
- Mandatory prepayments are required for certain asset sales, equity sales, debt issuances, or swap terminations.
Risks and Contingencies:
- Default: Failure to comply with covenants may result in immediate payment of all outstanding amounts and termination of unfunded commitments.
- Collateral Risk: The borrowing base is tied to the value of oil and natural gas properties; declines in reserve values could reduce borrowing capacity.
Investor Verification Checklist
- Verify the full text of the Amended and Restated Credit Agreement filed as Exhibit 10.1.
- Confirm the company's current Debt to EBITDAX ratio and Current Ratio against the new 3.5:1 and 1.0:1 covenants.
- Review the most recent reserve report to understand the PV-9 valuation underpinning the $400 million borrowing base.
- Monitor the first scheduled borrowing base redetermination date (November 1, 2023) for potential adjustments to the borrowing base.
- Assess the impact of the mandatory prepayment clause on cash balances exceeding $30.0 million.