FORT WORTH, Texas, April 27,
2020 /PRNewswire/ -- Kimbell Royalty Partners, LP
(NYSE: KRP) ("Kimbell"), a leading owner of oil and natural gas
mineral and royalty interests in more than 96,000 gross wells
across 28 states, today announced that the Board of Directors
of Kimbell Royalty GP, LLC, Kimbell's general partner (the "Board
of Directors") approved a cash distribution payment of 50% of
projected cash available for distribution for the first quarter of
2020, or $0.17 per common unit.
The distribution will be payable on May 11,
2020 to common unitholders of record at the close of
business on May 4, 2020.
"We are pleased to announce that the company performed very well
in the first quarter of this year with expected record production,
as well as strong cash provided by operating activities and
consolidated Adjusted EBITDA, in each case after giving effect to a
full quarter of Springbok. We had 70 active rigs operating on
our properties as of April 17, 2020,
which represents an increased market share of all land drilling
rigs in the continental United
States compared to year-end 2019," commented Robert Ravnaas, Chairman and Chief Executive
Officer of Kimbell's general partner.
In light of the unprecedented global economic impact resulting
from the COVID-19 pandemic, the related impact to the United States oil market and the potential
for curtailments of production in the coming months, Kimbell's
management has recommended, and the Board of Directors has
approved, the allocation of 50% of Kimbell's projected cash
available for distribution for the first quarter of 2020, together
with certain cash received at the closing of the Springbok
acquisition and other cash reserves, for the repayment of
$15 million in outstanding borrowings
under Kimbell's revolving credit facility.
"We believe that, in light of the enormous uncertainty in the
economy right now, particularly in the oil and gas sector, paying
down a portion of our indebtedness is prudent. Having
additional "dry powder" in this challenging environment provides
additional financial strength. We believe that we are well
positioned to weather this storm, with approximately 60% of our
estimated first quarter production coming from natural gas, for
which the outlook looks increasingly strong, one of the lowest PDP
decline rates (and amongst the highest PDP reserves to production
ratios) in the industry, our robust hedge position and our low
leverage," concluded Robert
Ravnaas.
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Kimbell -
Supplemental Distribution Data
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Percent
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Q4 2019
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Q1 2020
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Change
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WTI Average Crude Oil
Price(1)
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$56.96
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$45.76
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(19.7%)
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Henry Hub Average
Natural Gas Price (1)
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$2.40
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$1.91
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(20.4%)
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Common Unit
Distribution Declared
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$0.38
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$0.17
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(55.3%)
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Debt
Paydown
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-
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$15,000,000
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Annualized Cash
Yield (2)
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10.7%
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Cash Received from
Lease Bonuses and Other Income
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$163,597
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$229,319
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SUBSTANTIALLY ALL
OF THE DISTRIBUTION TO COMMON UNITHOLDERS FOR THE FIRST QUARTER OF
2020
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EXPECTED TO BE
FREE OF DIVIDEND INCOME TAXES AND INSTEAD CONSIDERED A RETURN OF
CAPITAL(3)
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(1)
Average commodity prices are from the
Energy Information Administration. Crude oil prices are in
dollars per barrel and natural gas prices are in dollars per
million Btu.
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(2)
Based on the closing price of Kimbell
common units on April 24, 2020.
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(3)
This estimate is based upon assumptions
Kimbell has made regarding, among other things, Kimbell Royalty
Operating, LLC's income and depletion expenses and production from
the mineral and royalty interests Kimbell acquired in the
acquisition of Springbok Energy Partners, LLC and Springbok Energy
Partners II, LLC (the "Springbok acquisition"), which closed on
April 17, 2020, and ignores the effect of any possible acquisitions
of additional assets (other than the Springbok acquisition).
This estimate is based on current tax law and tax reporting
positions that Kimbell has adopted and with which the Internal
Revenue Service could disagree. This estimate is not a fact,
and no assurances can be made regarding this estimate.
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Preliminary First Quarter 2020 Financial and Operational
Highlights
- Q1 2020 oil, natural gas and natural gas liquids ("NGL")
revenues between $24.5 million and
$26.5 million, up 12% at its midpoint
as compared to Q1 2019
- Q1 2020 run-rate daily production between 12,500 and 12,700
barrels of oil equivalent ("Boe") per day (6:1), up 5% at its
midpoint as compared to Q1 2019
- Including a full quarter of production attributable to the
Springbok assets, record Q1 2020 run-rate daily production between
15,000 and 15,400 Boe per day (6:1), up 27% at its midpoint as
compared to Q1 2019
- Q1 2020 net cash provided by operating activities between
$19.7 million and $21.9 million, up 32% at its midpoint as compared
to Q1 2019
- Q1 2020 net cash provided by operating activities solely
related to the Springbok assets between $4.2
million and $4.7 million
- Q1 2020 consolidated Adjusted EBITDA between $18.0 million and $20.0
million, up 18% at its midpoint as compared to Q1 2019
- Including a full quarter of revenues attributable to the
Springbok assets, Q1 2020 consolidated Adjusted EBITDA between
$22.2 million and $24.6 million, up 45% at its midpoint as compared
to Q1 201
- 2.96 net (882 gross) drilled but uncompleted wells ("DUCs") and
2.35 net (476 gross) permitted locations on Kimbell's acreage as of
March 31, 2020
- Q1 2020 cash distribution of $0.17 per common unit; implies a 10.7% annualized
yield based on the April 24, 2020
closing price of $6.37 per common
unit
- Completed a public offering of 5 million common units for net
proceeds of approximately $73.3
million, which were used to pre-fund the cash portion of the
Springbok acquisition, which closed on April
17, 2020
- Completed the redemption of 50% of Kimbell's outstanding Series
A Cumulative Convertible Preferred Units for an aggregate
redemption price of $61.1 million on
February 12, 2020
Preliminary First Quarter 2020 Financial and Operational
Results
In light of the significant market volatility associated with
the COVID-19 pandemic, Kimbell is providing preliminary first
quarter 2020 financial and operational results. Revenue,
production and certain other operational statistics for the first
quarter of 2020 are provided in accordance with accounting
principles generally accepted in the
United States ("GAAP") and do not include the recently
acquired Springbok assets, as the transaction closed after
quarter-end on April 17, 2020.
However, under the terms of the Springbok purchase agreement,
Kimbell is entitled to the cash flows from the Springbok assets as
of the effective date of the transaction, which is October 1, 2019.
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Kimbell
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Q1 2020:
(1)
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Oil, natural gas and
NGL revenues ($mm)
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$24.5
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-
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$26.5
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Net Cash Provided by
Operating Activities
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$19.7
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-
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$21.9
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Consolidated Adjusted
EBITDA ($mm)
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$18.0
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-
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$20.0
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Net Production -
Mboe/d (6:1)
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12.5
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-
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12.7
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Oil Production - % of
Net Production
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25%
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-
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29%
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Natural Gas
Production - % of Net Production
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58%
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-
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62%
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NGL Production - % of
Net Production
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11%
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-
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15%
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Unit Costs
($/Boe)
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Marketing and other
deductions
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$1.40
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-
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$1.90
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Depreciation,
depletion and accretion expenses
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$9.00
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-
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$11.00
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G&A
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Cash
G&A
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$3.85
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-
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$3.95
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Non-Cash
G&A
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$1.80
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-
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$2.00
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Production and ad
valorem taxes
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6.0%
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-
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8.0%
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Cash Provided by
Operating Activities from Springbok ($mm)
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$4.2
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-
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$4.7
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Q1 2020
Including Springbok:
(2)
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Consolidated Adjusted
EBITDA ($mm)
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$22.2
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-
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$24.6
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Net Production -
Mboe/d (6:1)
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15.0
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-
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15.4
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Oil Production - % of
Net Production
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26%
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-
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30%
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Natural Gas
Production - % of Net Production
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57%
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-
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61%
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NGL Production - % of
Net Production
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11%
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-
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15%
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(1) Financial
and operating information does not include revenues, production or
other financial or
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operating results
attributable to the Springbok acquisition, which closed after
quarter-end on
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April 17,
2020.
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(2) Includes
financial and operating results attributable to the Springbok
acquisition. Under the
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terms of the
Springbok purchase agreement, Kimbell is entitled to the cash flows
from the Springbok
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assets as of the
effective date of the transaction, which is October 1,
2019.
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As of March 31, 2020, Kimbell had
outstanding 34,378,849 common units and 20,644,047 Class B
units. As of April 27, 2020,
Kimbell had outstanding 36,602,811 common units and 23,141,181
Class B units.
Operational Update
As of March 31, 2020, Kimbell had
882 gross (2.96 net) DUCs and 476 gross (2.35 net) permitted
locations on its acreage. In addition, as of April 17, 2020, Kimbell had 70 rigs actively
drilling on its acreage, which represents an approximate
13.7%(1) market share of all land rigs drilling in the
continental United States as of
such time, up from 11.9%(2) at year-end 2019.
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Basin
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Gross DUCs as of
March 31, 2020(3)
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Gross Permits as
of March 31, 2020(3)
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Net DUCs as of
March 31, 2020(3)
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Net Permits as of
March 31, 2020(3)
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Active Rigs as of
April 17, 2020(4)
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Permian
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168
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111
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0.85
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0.53
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33
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Mid-Continent
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142
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88
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0.30
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0.10
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11
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Haynesville
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67
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20
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0.40
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0.19
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9
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Bakken
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221
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86
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0.22
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0.26
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8
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Eagle Ford
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144
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50
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0.88
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0.33
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5
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Appalachia
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51
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54
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0.21
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0.20
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3
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Rockies
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89
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67
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0.10
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0.74
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1
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Total
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882
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476
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2.96
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2.35
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70
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(1)
Based on Kimbell rig count (including Springbok) of 70 and
Baker Hughes U.S. land rig count of 512 as of April 17,
2020.
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(2)
Based on Kimbell rig count (including Springbok) of 93 and
Baker Hughes U.S. land rig count of 781 as of December 27,
2019.
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(3)
Includes combined Kimbell and Springbok assets. These
figures pertain only to Kimbell's major properties and do not
include possible additional DUCs and permits from Kimbell's minor
properties, which are time consuming to quantify but, in the
experience of Kimbell's management, can be significant in the
aggregate.
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(4)
Includes combined Kimbell and Springbok assets.
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Liquidity
At March 31, 2020, Kimbell had
approximately $101.2 million in debt
outstanding under its revolving credit facility and approximately
$123.8 million in undrawn capacity
(or approximately $198.8 million if
aggregate commitments were equal to Kimbell's current borrowing
base, which is $300.0 million).
Increases in commitments pursuant to the accordion feature of the
revolving credit facility are subject to the satisfaction of
certain conditions, including obtaining additional commitments from
new or existing lenders. Kimbell was in compliance with all
financial covenants under its revolving credit facility at
March 31, 2020.
At April 24, 2020, after taking
into account the previously disclosed drawdown to fund the cash
portion of the purchase price in the Springbok acquisition, Kimbell
had approximately $186.7 million in
debt outstanding under its revolving credit facility. After
giving effect to the repayment of $15
million in outstanding borrowings discussed above, which is
anticipated to occur in the second quarter of 2020, Kimbell expects
to have approximately $171.7 million
in outstanding borrowings under its revolving credit facility and a
pro forma total debt to the midpoint of the Q1 2020 annualized
consolidated Adjusted EBITDA, including a full quarter of the
Springbok assets, of approximately 1.8x.
Hedging Update
The following provides information concerning Kimbell's hedge
book as of April 27, 2020:
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Fixed Price Swaps as of April 27,
2020
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Weighted
Average
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Volumes
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Fixed
Price
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Oil
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Nat
Gas
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Oil
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Nat
Gas
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BBL
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MMBTU
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$/BBL
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$/MMBTU
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2Q 2020
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112,989
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1,452,705
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$
44.68
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$
2.27
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3Q 2020
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134,964
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1,735,672
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$
40.62
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$
2.31
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4Q 2020
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134,964
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1,735,672
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$
41.61
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$
2.54
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1Q 2021
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132,030
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1,697,940
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$
44.43
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$
2.83
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2Q 2021
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133,497
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1,716,806
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$
44.60
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$
2.45
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3Q 2021
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134,964
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1,735,672
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$
43.44
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$
2.41
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4Q 2021
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134,964
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1,735,672
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$
44.58
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$
2.49
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1Q 2022
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132,030
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1,697,940
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$
36.76
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$
2.61
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First Quarter 2020 Earnings Release and Conference
Call
Kimbell will release its full first quarter 2020 financial
results on Thursday, May 7, 2020,
before the market opens. In conjunction with the release,
Kimbell has scheduled a conference call, which will be broadcast
live over the Internet the same day, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). Kimbell will
provide further commentary about the effect of the COVID-19
pandemic and the oil market downturn, as well as the impact on
Kimbell's business, at that time.
Note Regarding Preliminary Results
The first quarter 2020 financial and operational information
provided in this news release is preliminary, unaudited and subject
to completion and review by the company's independent registered
public accounting firm. Actual first quarter 2020 financial
and operational results may vary.
This information reflects management's current views and may
change as a result of management's continued review of results and
other factors. Such preliminary results for the first quarter
of 2020 are subject to the finalization and closing of Kimbell's
accounting books and records (which have yet to be performed), and
should not be viewed as a substitute for full quarterly financial
statements prepared in accordance with GAAP. Neither
Kimbell's independent registered public accounting firm nor any
other independent registered public accounting firm has audited,
reviewed or compiled, examined or performed any procedures with
respect to the preliminary results, nor have they expressed any
opinion or any other form of assurance on the preliminary
results.
About Kimbell Royalty Partners
Kimbell (NYSE: KRP) is a leading oil and gas mineral and royalty
company based in Fort Worth,
Texas. Kimbell owns mineral and royalty interests in over 13
million gross acres in 28 states and in every major onshore basin
in the continental United States,
including ownership in more than 96,000 gross wells with over
40,000 wells in the Permian Basin. To learn more, visit
kimbellrp.com.
Forward-Looking Statements
This news release includes forward-looking statements, in
particular statements relating to the acquisition of the Springbok
assets, Kimbell's financial, operating and production results and
prospects for growth, the tax treatment of Kimbell's distributions
and the recent COVID-19 outbreak and its impacts on Kimbell and on
the oil and gas industry. These and other forward-looking
statements involve risks and uncertainties, including risks that
the anticipated benefits of the acquisition of the Springbok assets
are not realized, risks relating to Kimbell's integration of the
Springbok assets, risks relating to the COVID-19 outbreak, and
uncertainties relating to Kimbell's business, prospects for growth
and acquisitions and the securities markets generally, as well as
risks inherent in oil and natural gas drilling and production
activities, including risks with respect to low or declining prices
for oil and natural gas that could result in downward revisions to
the value of proved reserves or otherwise cause operators to delay
or suspend planned drilling and completion operations or reduce
production levels, which would adversely impact cash flow, risks
related to the impact of COVID-19 on the global economy and
Kimbell's business, risks relating to the impairment of oil and
natural gas properties, risks relating to the availability of
capital to fund drilling operations that can be adversely affected
by adverse drilling results, production declines and declines in
oil and natural gas prices, risks relating to Kimbell's
ability to meet financial covenants under its credit agreement or
its ability to obtain amendments or waivers to effect such
compliance, risks relating to Kimbell's hedging activities,
risks of fire, explosion, blowouts, pipe failure, casing
collapse, unusual or unexpected formation pressures, environmental
hazards, and other operating and production risks, which may
temporarily or permanently reduce production or cause initial
production or test results to not be indicative of future well
performance or delay the timing of sales or completion of drilling
operations, risks relating to delays in receipt of drilling
permits, risks relating to unexpected adverse developments in the
status of properties, risks relating to borrowing base
redeterminations by Kimbell's lenders, risks relating to the
absence or delay in receipt of government approvals or third-party
consents, risks relating to acquisitions, dispositions and drop
downs of assets, risks relating to Kimbell's ability to realize the
anticipated benefits from and to integrate acquired assets,
including the Springbok assets, risks relating to tax matters, and
other risks described in Kimbell's Annual Report on Form 10-K and
other filings with the Securities and Exchange Commission (the
"SEC"), available at the SEC's website at www.sec.gov. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this news release.
Except as required by law, Kimbell undertakes no obligation and
does not intend to update these forward-looking statements to
reflect events or circumstances occurring after this news release.
When considering these forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in
Kimbell's filings with the SEC.
Contact:
Rick Black
Dennard Lascar Investor
Relations
krp@dennardlascar.com
(713) 529-6600
Kimbell Royalty Partners, LP
Supplemental Schedules
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA and Cash G&A are used as a supplemental
non-GAAP financial measures by management and external users of
Kimbell's financial statements, such as industry analysts,
investors, lenders and rating agencies. Kimbell believes
Adjusted EBITDA is useful because it allows us to more effectively
evaluate Kimbell's operating performance and compare the results of
Kimbell's operations period to period without regard to its
financing methods or capital structure. In addition,
management uses Adjusted EBITDA to evaluate cash flow available to
pay distributions to Kimbell's unitholders. In this news
release, Kimbell defines Adjusted EBITDA as net cash provided by
operating activities before interest expense, amortization expense,
equity income from affiliates, non-cash unit-based compensation,
unrealized gains or losses on commodity derivative instruments, net
of settlements, and net change in operating assets and
liabilities. Adjusted EBITDA is not a measure of net income
(loss) or net cash provided by operating activities as determined
by GAAP. Kimbell excludes the items listed above from net
cash provided by operating activities in arriving at Adjusted
EBITDA because these amounts can vary substantially from company to
company within Kimbell's industry depending upon accounting methods
and book values of assets, capital structures and the method by
which the assets were acquired. Certain items excluded from
Adjusted EBITDA are significant components in understanding and
assessing a company's financial performance, such as a company's
cost of capital and tax structure, as well as historic costs of
depreciable assets, none of which are components of Adjusted
EBITDA. Adjusted EBITDA should not be considered an
alternative to net income, oil, natural gas and natural gas liquids
revenues, net cash provided by operating activities or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Kimbell's computations of Adjusted
EBITDA may not be comparable to other similarly titled measures of
other companies. Kimbell expects that cash available for
distribution for each quarter will generally equal its Adjusted
EBITDA for the quarter, less cash needed for debt service and other
contractual obligations and fixed charges and reserves for future
operating or capital needs that the Board of Directors may
determine is appropriate.
Kimbell believes Cash G&A is a useful metric because it
isolates cash costs within overall G&A expense and measure cash
costs relative to overall production, which is a widely utilized
metric to evaluate operational performance within the energy
sector. Cash G&A is defined as general and administrative
expenses less unit-based compensation expense. Cash G&A
should not be considered an alternative to G&A expense
presented in accordance with GAAP. Kimbell's computations of
Cash G&A may not be comparable to other similarly titled
measures of other companies.
Kimbell Royalty
Partners, LP
Supplemental Schedules
(Unaudited, in thousands)
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Reconciliation of
net cash provided by operating activities
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Three Months
Ended
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to Adjusted
EBITDA
|
March 31,
2020
|
Net cash provided by
operating activities
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$
|
19,749
|
-
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$
|
21,877
|
Interest
expense
|
|
1,350
|
-
|
|
1,492
|
Amortization
expense
|
|
(317)
|
-
|
|
(349)
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Equity income in
affiliate
|
|
156
|
-
|
|
172
|
Unit-based
compensation
|
|
(2,003)
|
-
|
|
(2,213)
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Gain on commodity
derivative instruments, net of settlements
|
|
8,530
|
-
|
|
9,428
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Net change in
operating assets and liabilities
|
|
(2,933)
|
-
|
|
(3,242)
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Consolidated
EBITDA
|
$
|
24,532
|
-
|
$
|
27,165
|
Unit-based
compensation
|
|
2,003
|
-
|
|
2,213
|
Gain on commodity
derivative instruments, net of settlements
|
|
(8,530)
|
-
|
|
(9,428)
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Consolidated Adjusted
EBITDA
|
$
|
18,005
|
-
|
$
|
19,950
|
Adjustment to account
for full quarter of Springbok acquisition (1)
|
|
4,214
|
-
|
|
4,658
|
Consolidated Adjusted
EBITDA (including full quarter of Springbok)
|
$
|
22,219
|
-
|
$
|
24,608
|
|
|
|
|
|
|
|
|
|
|
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(1) Includes
cash flow attributable to the Springbok acquisition. Under
the terms of the Springbok purchase agreement, Kimbell is entitled
to the cash flows from the Springbok assets as of the effective
date of the transaction, which is October 1, 2019.
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SOURCE Kimbell Royalty Partners, LP