Kimbell Royalty Partners Announces Record Third Quarter 2018 Results; Sixth Consecutive Quarterly Distribution Increase
FORT WORTH, Texas, Nov. 8, 2018 /PRNewswire/ -- Kimbell Royalty Partners, LP (NYSE: KRP) ("Kimbell Royalty Partners" or "Kimbell"), a leading owner of oil and natural gas mineral and royalty interests across 28 states, today announced financial and operating results for the third quarter ended September 30, 2018.
Third Quarter Highlights
Third quarter results include the acquisition of certain subsidiaries of Haymaker Minerals & Royalties, LLC and Haymaker Properties, L.P. (together, "Haymaker"), which closed on July 12, 2018.
-- Q3 distribution of $0.45 per common unit, up $0.02 or 5% per unit from
Q2 and up 45% compared with Q3 last year
-- Average daily production of 8,546 Boe per day, up 135% from Q2 and up
159% from Q3 last year, with total Q3 2018 production of 731,253 Boe
consisting of 176,789 Bbls of oil, 2,766,750 Mcf of natural gas and
93,339 Bbls of natural gas liquids
-- Oil, natural gas and NGL revenues of $21.1 million, up 94% from Q2 and
up 158% from Q3 last year
-- Net loss of $3.8 million, compared to net income of $1.4 million from Q2
and $0.1 million from Q3 last year
-- Adjusted EBITDA of $14.0 million, up 82% from Q2 and up 166% from Q3
last year
Recent Developments
-- Completed change in Kimbell's status from a pass-through partnership to
a taxable entity, enabling Kimbell to target a significantly larger
investor base
-- Distributions will be substantially return of capital, which is
non-taxable to unitholders
-- Completed a follow-on equity offering of 3.45 million common units at a
price of $19.00 per common unit in October 2018
-- Paid down $61.0 million on $200.0 million revolving credit facility with
the net proceeds from the follow-on equity offering, with a current
revolving credit facility balance of $87.3 million and $112.7 million of
availability
"We delivered another record quarter in terms of production, revenues, adjusted EBITDA and cash available for distribution. The Haymaker acquisition is proving to be the transformational acquisition that we had envisioned. The full integration will be completed this year ahead of schedule and the asset performance to date is excellent," said Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell Royalty Partners' general partner.
"We completed our first follow-on equity offering in early October, which not only helped de-lever our balance sheet, but also significantly increased our public float. Our average daily trading volume is up more than 300% since we completed our equity offering and we expect this to continue to improve over time. We also completed our conversion to a corporation for tax purposes, which we believe will be a significant driver of increased investor interest within the energy yield space. Management continues to be very bullish about the royalty sector and the number of acquisitions we are seeing is now at an all-time high. And, finally, we recently announced our sixth consecutive distribution increase. It has been a very busy 2018 and we look forward to more positive developments in the months and years to come."
Third Quarter 2018 Distribution
On October 26, 2018, Kimbell announced a distribution of $0.45 per common unit, payable on November 12, 2018 to common unitholders of record on November 5, 2018. Kimbell began recording revenues from the Haymaker assets in its the third quarter financials from and after the closing date, as permitted under generally accepted accounting principles in the United States ("GAAP"). In addition, since Kimbell was entitled to revenues from the Haymaker assets from the effective date of April 1, 2018, Kimbell's cash available for distribution in the third quarter of 2018 includes revenues attributable to the Haymaker assets from the beginning of the quarter, and a portion of such revenues have been included in the third quarter distribution. Additional revenues received from the effective date of the Haymaker acquisition are expected to be used to pay down borrowings under the revolving credit facility in the fourth quarter of 2018.
Financial Highlights
Third quarter results include the Haymaker acquisition, which closed on July 12, 2018. Total revenue increased 72% from the prior quarter to $18.4 million, and was up from $8.4 million from the third quarter last year. Third quarter net loss was $3.8 million, compared to net income of $1.4 million in the prior quarter and net income of $0.1 million in the third quarter last year. Third quarter net loss attributable to common units was $3.7 million, or $0.15 per common unit. In connection with the conversion to a taxable entity, Kimbell reported a non-cash tax provision of $2.0 million in the third quarter of 2018.
Adjusted EBITDA for the quarter totaled $14.0 million, versus $7.7 million in the prior quarter and $5.3 million in the third quarter last year. (Adjusted EBITDA is a non-GAAP measure. Please see a reconciliation to the nearest GAAP measures at the end of this news release). Average realized price per barrel (Bbl) for oil was $64.77, natural gas per thousand cubic feet (Mcf) was $2.56, and natural gas liquids (NGLs) per Bbl was $27.45.
Production
Third quarter average daily production increased 135% from the prior quarter with 8,546 barrels of oil equivalent (Boe) per day, for total production of 731,253 Boe. Revenues were derived 65% from liquids (53% from oil and 12% from NGLs), 33% from natural gas and 2% from lease bonuses. Production was composed of approximately 37% liquids (24% oil and 13% NGLs) and 63% natural gas on a 6:1 basis.
Liquidity
At September 30, 2018, Kimbell had $148.3 million outstanding under its $200.0 million revolving credit facility and was in compliance with all related financial covenants. After giving effect to the pay down of borrowings under the revolving credit facility with net proceeds from the equity offering in early October, the current balance was $87.3 million and total debt to Adjusted EBITDA ratio was 1.4x.
Hedging
Kimbell hedges its daily production in manner that approximates the amount of debt and/or preferred equity as a percent of its enterprise value. As of September 30, 2018, Kimbell had hedged daily oil and natural gas production of approximately 30% of its production. After giving effect to the pay down of borrowings under the revolving credit facility in early October 2018, Kimbell has hedged daily oil and natural gas production of approximately 25% of its production. Please see the supplemental schedule at the end of this news release for hedging details.
Conference Call
Kimbell will host a conference call and webcast today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss third quarter results. To access the call live by phone, dial (201) 389-0869 and ask for the Kimbell call at least 10 minutes prior to the start time. A telephonic replay will be available through November 15th by calling (201) 612-7415 and using pass code 13683436#. A webcast of the call will also be available live and for later replay on Kimbell's website at http://kimbellrp.investorroom.com under Events and Presentations.
About Kimbell Royalty Partners, LP
Kimbell (NYSE: KRP) is a limited partnership based in Fort Worth, Texas, and is managed by its general partner, Kimbell Royalty GP, LLC. Kimbell owns mineral and royalty interests in approximately 11.1 million gross acres in 28 states and in nearly every major onshore basin in the continental United States, including ownership in more than 84,000 gross producing wells, with over 38,000 wells in the Permian Basin. To learn more, visit http://www.kimbellrp.com.
Forward-Looking Statements
This news release includes forward-looking statements. These forward-looking statements involve risks and uncertainties, including risks relating to Kimbell's change to a taxable entity, business, prospects for growth and acquisitions and the securities markets generally. 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 Securities and Exchange Commission ("SEC"). These include risks that the anticipated benefits of the election to change to a taxable entity are not realized, 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 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 regarding 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 assets acquired in the Haymaker Acquisition; and other risks described in Kimbell's Annual Report on Form 10-K and other filings with 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.
Contact:
Rick Black
Dennard Lascar Investor Relations
krp@dennardlascar.com
(713) 529-6600
- Financial statements follow -
Kimbell Royalty Partners, LP
Condensed Consolidated Balance Sheet
(Unaudited, in thousands)
September 30,
2018
Assets:
Current assets
Cash and cash
equivalents $
16,528
Oil, natural gas and NGL
receivables 17,498
Other current assets 427
Total current assets 34,453
Property and equipment,
net 453
Oil and natural gas
properties
Oil and natural gas
properties (full cost
method) 731,085
Less: accumulated
depreciation, depletion
and accretion (85,533)
Total oil and natural
gas properties 645,552
Loan origination costs,
net 3,436
Total assets $
683,894
===
Liabilities, mezzanine
equity and unitholders'
equity:
Current liabilities
Accounts
payable $
1,502
Other current
liabilities 3,995
Commodity derivative
liabilities 770
Total current
liabilities 6,267
Commodity derivative
liabilities 3,045
Deferred tax liability 1,475
Long-term debt 148,310
Total liabilities 159,097
Commitments and
contingencies
Mezzanine equity:
Series A preferred units 67,904
Equity:
Additional paid in
capital 36,608
Common units 210,186
Class B units 648
Total unitholders equity 247,442
Noncontrolling interest 209,451
Total equity 456,893
Total
liabilities,
mezzanine
equity, and
equity $
683,894
===
Kimbell Royalty Partners, LP
Condensed Consolidated Statement of Operations
(Unaudited, in thousands, except per-unit data and unit count)
Three Months Ended Three Months Ended
September 30, 2018 September 30, 2017
Revenue
Oil, natural gas and
NGL revenues 21,085 $
8,174
Lease bonus and
other income 358 177
Loss on commodity
derivative
instruments (3,036)
Total revenues 18,407 8,351
Costs and expenses
Production and ad
valorem taxes 1,410 779
Depreciation,
depletion and
accretion expenses 7,607 4,489
Marketing and other
deductions 1,690 424
General and
administrative
expenses 4,879 2,315
---
Total costs and
expenses 15,586 8,007
Operating income 2,821 344
Other expense
Interest expense 1,843 225
Net income (loss)
before income taxes 978 119
Provision for income
taxes 1,977
Net (loss) income
before distribution
and accretion on (999) 119
Series A preferred units
Distribution and
accretion on Series
A preferred units (2,840)
Net (loss) income (3,839) 119
Net loss
attributable to
noncontrolling
interests (141)
Net (loss) income
attributable to
Kimbell Royalty
Partners LP (3,698) 119
Distribution on
Class B units (13)
Net (loss) income
attributable to
common units (3,711) $
119
===
Basic (0.15) $
0.01
===
Diluted (0.15) $
0.01
===
Weighted average number of common units outstanding
Basic 24,079,289 16,337,985
===
Diluted 24,079,289 16,503,664
===
Kimbell Royalty Partners, LP
Supplemental Schedules
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations period to period without regard to our financing methods or capital structure. In addition, management uses Adjusted EBITDA to evaluate cash flow available to pay distributions to our unitholders. We define Adjusted EBITDA as net income (loss) before interest expense, net of capitalized interest, non-cash unit-based compensation, unrealized gains and losses on commodity derivative instruments, impairment of oil and natural gas properties, income taxes and depreciation, depletion and accretion expense. Adjusted EBITDA is not a measure of net income (loss) or net cash provided by operating activities as determined by generally accepted accounting principles in the United States ("GAAP"). We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our 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. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We expect that cash available for distribution for each quarter will generally equal our 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 Royalty Partners, LP
Supplemental Schedule
(Unaudited, in thousands, except per unit data and unit count)
Three Months Ended Three Months Ended
September 30, 2018 September 30, 2017
---
Reconciliation of net cash provided by
operating activities
to Adjusted EBITDA
Net cash provided by
operating activities $
685 $
5,387
Interest expense 1,843 225
Current income tax expense 501
Amortization of loan origination costs (177) (15)
Unit-based compensation (751) (434)
Change in fair value of open commodity
derivative instruments (2,814)
Changes in operating assets and
liabilities:
Oil, natural gas and NGL revenues
receivable 8,977 556
Other receivables 200 65
Accounts payable 3,750 228
Other current liabilities (1,786) (1,179)
EBITDA $
10,428 $
4,833
---
Add:
Unit-based compensation 751 434
Change in fair value of open commodity
derivative instruments 2,814
Adjusted EBITDA $
13,993 $
5,267
===
Kimbell Royalty Partners, LP
Supplemental Schedule
(Unaudited, in thousands)
Three Months Ended
September 30, 2018
Net loss before
distribution and
accretion on Series
A preferred units $
(999)
Depreciation, depletion and
accretion expenses 7,607
Interest expense 1,843
Provision for income taxes 1,977
EBITDA $
10,428
---
Unit-based compensation 751
Change in fair value of open
commodity derivative instruments 2,814
Adjusted EBITDA $
13,993
---
Adjustments to reconcile Adjusted
EBITDA to cash available
for distribution
Cash interest expense 1,243
Cash distributions on Series A
preferred units 706
Cash distributions on Class B
units 13
Cash available for
distribution $
12,031
===
Units outstanding on September
30, 2018 26,839,462
Cash available for
distribution per
common unit
outstanding $
0.45
Units outstanding on November 5,
2018 Record Date(1) 30,289,462
Third quarter 2018
distribution
declared $
0.45
(1)Includes 3.45 million
common units issued in
public offering.
Kimbell Royalty Partners, LP
Supplemental Schedule
(Unaudited, in thousands)
Three Months Ended
June 30, 2018
Net income $
1,378
Depreciation, depletion and
accretion expenses 3,432
Interest expense 484
EBITDA $
5,294
---
Transaction costs 1,189
Unit-based compensation 723
Unrealized loss on commodity
derivative instruments 469
Adjusted EBITDA $
7,675
---
Adjustments to reconcile
Adjusted EBITDA to cash
available
for distribution
Cash interest expense 502
Cash available for
distribution $
7,173
===
Limited partner units
outstanding 16,839,462
Cash available for
distribution per
common unit
outstanding $
0.43
Limited partner units
outstanding on August 6, 2018
Record Date(1) 26,839,462
Second quarter 2018
distribution
declared(2) $
0.42
(1)Includes 10 million units
issued as partial consideration
in the Haymaker Acquisition.
(2)Includes allocated post-April
1, 2018 effective date cash
receipts from the acquired
Haymaker assets.
Kimbell Royalty Partners, LP
Supplemental Schedule
(Unaudited, in thousands)
Three Months Ended
September 30, 2017
Net income $
119
Depreciation, depletion and
accretion expenses 4,489
Interest expense 225
EBITDA $
4,833
---
Unit-based compensation 434
Adjusted EBITDA $
5,267
---
Adjustments to reconcile
Adjusted EBITDA to cash
available
for distribution
Cash interest expense 167
Cash available for
distribution $
5,100
===
Limited partner units
outstanding(1) 16,509,799
Cash available for
distribution per
common unit
outstanding $
0.31
Third quarter 2017
distribution
declared $
0.31
(1) As of the record date
of November 6, 2017.
Kimbell Royalty Partners, LP
Supplemental Schedule
(Unaudited)
Fixed Price Swaps as of September 30, 2018
---
Weighted Average
Volumes Fixed Price
Oil Nat Gas
Oil
Nat Gas
---
BBL
MMBTU
$/BBL
$/MMBTU
---
3Q 2018 18,423 $66.18
$ -
4Q 2018 56,488 972,716 $64.28 $2.83
---
1Q 2019 55,260 951,570 $61.47 $2.74
2Q 2019 55,874 962,143 $61.47 $2.74
3Q 2019 56,488 972,716 $61.47 $2.74
4Q 2019 56,488 972,716 $61.47 $2.74
---
1Q 2020 55,874 962,143 $60.22 $2.89
2Q 2020 55,874 962,143 $60.68 $2.51
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SOURCE Kimbell Royalty Partners, LP
