Kimbell Royalty Partners

Kimbell Royalty Partners (NYSE: KRP) is a mineral and royalty company focused on the oil and gas sector. It holds mineral and royalty interests across more than 17 million gross acres in 28 states, including ownership in over 129,000 gross wells. Its properties span major regions such as the Permian Basin, Mid-Continent, Appalachian, Eagle Ford, Bakken, Terryville/Cotton Valley/Haynesville, and DJ Basin/Rockies/Niobrara.

Recent Business and Financial Updates

• Production Metrics and Financial Performance: In the second quarter of 2024, Kimbell Royalty Partners achieved a run-rate daily production of 24,110 barrels of oil equivalent (Boe), calculated on a 6:1 basis. The company generated revenues from oil, natural gas, and natural gas liquids (NGLs) amounting to USD 77.0 million during this period. Net income was approximately USD 15.2 million, with net income attributable to common units reported at around USD 8.4 million. Consolidated Adjusted EBITDA for Q2 2024 was recorded at USD 65.8 million.
• Operational Efficiency: Kimbell Royalty Partners noted a record low cash general and administrative (G&A) expense per Boe of USD 2.34 in Q2 2024, demonstrating the company’s commitment to operational discipline and effective leverage. As of June 30, 2024, the company’s major properties featured 7.96 net drilled but uncompleted wells (DUCs) and net permitted locations, exceeding the estimated 5.8 net wells required to sustain flat production levels.
• Rig Count and Market Share: As of June 30, 2024, Kimbell operated 91 active drilling rigs on its acreage, reflecting a 16.3% market share of all land rigs drilling in the continental United States. The Permian Basin remains the leading area of activity, hosting 47 of these rigs at the end of Q2 2024. The company’s robust rig count ensures a strong pipeline of future production.
• Distribution Announcement and Financial Strategy: The Board of Directors approved a cash distribution of USD 0.42 per common unit for Q2 2024, translating to a payout ratio of 75% of cash available for distribution. This distribution indicates a potential annualized yield of 10.2%, based on the closing price of USD 16.48 per common unit on July 31, 2024. The remaining 25% of cash available for distribution will be utilized to reduce outstanding borrowings under Kimbell's revolving credit facility.
• Debt Management and Financial Stability: Kimbell Royalty Partners maintains a conservative balance sheet, with a net debt to trailing twelve-month consolidated Adjusted EBITDA ratio of 0.9x. As of June 30, 2024, the company had approximately USD 265.8 million in outstanding debt under its secured revolving credit facility, alongside USD 284.2 million in undrawn capacity, ensuring financial flexibility.
• Revenue Breakdown and Pricing: Kimbell reported an average realized price of USD 79.99 per barrel for oil, USD 1.81 per Mcf for natural gas, and USD 25.05 per barrel for NGLs during Q2 2024. The combined average realized price per Boe was USD 35.14. Total revenues for the quarter reached USD 76.6 million, marking a substantial increase from the previous year.
• Operational Insights: As of June 30, 2024, Kimbell’s major properties contained 762 gross DUCs and 672 gross permitted locations. The company’s strategic focus on its major properties enhances operational efficiency and production sustainability. The robust inventory of DUCs positions Kimbell favourably for future production growth.
• Hedging Strategy and Market Outlook: Kimbell's hedging portfolio remains integral to its financial strategy, with fixed price swaps in place for future production. The company’s hedging activities aim to stabilize revenues amidst fluctuating market conditions, thereby providing a safeguard for its financial performance in upcoming quarters. Kimbell Royalty Partners reaffirms its financial and operational guidance for 2024, consistent with previous disclosures. The company remains poised for growth, supported by its disciplined operational strategies and strong market positioning.
• Earnings Announcement: Kimbell Royalty Partners, LP (NYSE: KRP), a prominent owner of oil and natural gas mineral and royalty interests across more than 129,000 gross wells in 28 states, has announced its plan to release its financial results for the third quarter of 2024 on Thursday, November 7, 2024, prior to the market opening. Concurrently, the company will declare its distribution for the third quarter of 2024.

Technical Observation (on the daily chart):

KRP's stock price has encountered resistance at crucial levels and has since declined, demonstrating strong momentum that suggests a potential consolidation phase with a bearish inclination. The 14-day Relative Strength Index (RSI) is falling below the midpoint, further reinforcing this negative outlook. Moreover, the stock price is currently below its 21-day simple moving averages, indicating that these averages could serve as important resistance in the short term.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘WATCH’ rating has been given to Kimbell Royalty Partners (NYSE: KRP) at the closing price of USD 15.99 as of October 29,2024.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is October 29,2024 . The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.