Kimbell Royalty Partners, LP (NYSE: KRP), a leading owner of oil and gas mineral and royalty interests in the United States, has reported strong financial and operational results for the first quarter of 2024. The company's performance showcases its ability to capitalize on the robust energy market conditions and deliver value to its unitholders.

Financials

For the first quarter of 2024, Kimbell Royalty reported net income of $9.3 million, compared to $28.9 million in the same period of the previous year. The company's annual net income for 2023 was $66.5 million. Revenue for the quarter reached $82.2 million, up from $66.9 million in Q1 2023, contributing to the company's annual revenue of $273.2 million in 2023.

Kimbell's operating cash flow for the first quarter of 2024 was $69.0 million, compared to $47.1 million in the same period of 2023. The company's annual operating cash flow for 2023 was $174.3 million. However, the company's free cash flow for the quarter was negative $91.4 million, compared to negative $321.6 million in Q1 2023. The company's annual free cash flow for 2023 was negative $316.5 million.

Operational Highlights

Kimbell's production for the first quarter of 2024 averaged 24,678 barrels of oil equivalent per day (BOE/d), a 1.4% increase from the previous quarter and a 5.6% organic growth on an annualized basis. The company's production mix consisted of 70% oil, 17% natural gas, and 13% natural gas liquids.

The company's rig count on its acreage remained strong, with 98 rigs actively drilling as of the end of the first quarter, representing approximately 16.3% of the total land rigs drilling in the Continental United States. This high level of activity reflects the continued development of Kimbell's mineral and royalty interests by its operators.

Quarterly Distribution and Guidance

Kimbell Royalty maintained its quarterly cash distribution of $0.49 per common unit for the first quarter of 2024. The company stated that approximately 79% of this distribution will be considered a return of capital and not subject to dividend taxes, further enhancing the after-tax return to its common unitholders.

The company also affirmed its 2024 guidance, which includes daily production at its midpoint of 24,000 BOE/d. Kimbell's management expressed confidence in the prospects for continued robust development given the number of rigs actively drilling on its acreage and the positive operator sentiment around expected development activity in 2024, especially in the Permian Basin.

Business Overview

Kimbell Royalty Partners, LP is a Delaware limited partnership formed in 2015 to own and acquire mineral and royalty interests in oil and natural gas properties throughout the United States. As of March 31, 2024, the company owned mineral and royalty interests in approximately 12.2 million gross acres and overriding royalty interests in approximately 4.7 million gross acres, with approximately 54% of its aggregate acres located in the Permian Basin and Mid-Continent region.

The company's primary business objective is to provide increasing cash distributions to unitholders resulting from acquisitions from third parties, its Sponsors, and the Contributing Parties, as well as from organic growth through the continued development by working interest owners of the properties in which it owns an interest. Kimbell is not obligated to fund drilling and completion costs, lease operating expenses, or plugging and abandonment costs at the end of a well's productive life.

Geographic Breakdown and Revenue Drivers

Kimbell's mineral and royalty interests are located in 28 states and in every major onshore basin across the continental United States, including the Permian Basin, Mid-Continent, Terryville/Cotton Valley/Haynesville, Appalachian Basin, Bakken/Williston Basin, Eagle Ford, and DJ Basin/Rockies/Niobrara regions.

The company's oil, natural gas, and NGL revenues for the first quarter of 2024 were $87.5 million, an increase of 4.2% compared to the fourth quarter of 2023. This increase was primarily driven by a 1.4% organic growth in production volumes from the previous quarter, as well as higher realized prices for oil and natural gas liquids, which offset a decline in natural gas prices.

Specifically, the company's operators received an average of $76.60 per barrel of oil, $1.96 per Mcf of natural gas, and $24.70 per barrel of NGLs for the volumes sold during the first quarter of 2024, compared to $73.99 per barrel of oil, $3.51 per Mcf of natural gas, and $23.52 per barrel of NGLs in the same period of the previous year.

Liquidity

As of March 31, 2024, Kimbell Royalty had a debt-to-EBITDA ratio of 1.0x, indicating a conservative balance sheet and strong financial position. The company had approximately $264.6 million in undrawn capacity under its secured revolving credit facility, providing ample liquidity to fund future acquisitions and growth initiatives.

Kimbell's current ratio, which measures the company's ability to meet its short-term obligations, stood at 8.48 as of March 31, 2024, further demonstrating its strong liquidity position. The company's quick ratio, which excludes inventory, was also a robust 8.48, indicating its ability to quickly convert its assets into cash to cover short-term liabilities.

Risks and Challenges

Kimbell Royalty's performance is subject to various risks, including volatility in commodity prices, changes in production volumes, and potential impairments of its oil and gas properties. The company's results are also dependent on the drilling and completion activities of the operators on its mineral and royalty interests.

Outlook

However, the company's management remains bullish on the U.S. oil and natural gas industry and its prospects as a leading consolidator in the sector. Kimbell's strong financial position, diversified asset base, and high level of operator activity on its acreage position the company well to continue generating long-term value for its unitholders.

Conclusion

Kimbell Royalty Partners' impressive first-quarter 2024 results, highlighted by record revenue and production, demonstrate its ability to capitalize on the favorable energy market conditions and deliver value to its unitholders. With a conservative balance sheet, ample liquidity, and a positive outlook for continued development activity on its mineral and royalty interests, Kimbell Royalty is well-positioned to build on its success and drive long-term growth.