Kimbell Royalty Partners Announces Fourth Quarter 2018 Results; Record Production and Revenue
FORT WORTH, Texas, March 7, 2019 /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 fourth quarter ended December 31, 2018.
Fourth Quarter 2018 Highlights
-- Q4 2018 distribution of $0.40 per common unit (expected to be
substantially tax free), up $0.04 or 11% per common unit from Q4 2017;
implies an 9.1% annualized yield based on the March 6, 2019 closing
price of $17.50 per common unit
-- 2018 full year distribution of $1.70 per common unit; implies a 9.7%
yield based on the March 6, 2019 closing price of $17.50 per common unit
-- Average daily production of 10,066 barrels of oil equivalent ("Boe") per
day[1], up 18% from Q3 2018 and up 187% from Q4 2017, with total Q4 2018
production of 823,311[2] Boe, consisting of 196,196 barrels ("Bbls") of
oil, 3,123,599 thousand cubic feet ("Mcf") of natural gas and 106,522
Bbls of natural gas liquids ("NGLs")
-- Proved developed reserves increased by 118% year-over-year
-- Q4 2018 oil, natural gas and NGL revenues of $23.0 million, up 9% from
Q3 2018 and up 143% from Q4 2017
-- Q4 2018 consolidated net loss (including non-controlling interest) of
$3.3 million, primarily due to a non-cash impairment of $12.6 million,
compared to consolidated net loss of $3.8 million in Q3 2018 and
consolidated net income of $1.1 million in Q4 2017
-- Q4 2018 consolidated Adjusted EBITDA (as defined and reconciled below)
of $14.9 million, up 6% from Q3 2018 and up 135% from Q4 2017
[1] Reflects average daily
production during the period
from December 20, 2018
through year-end 2018 after
giving effect to the Drop
Down transaction.
[2] Includes production
attributable to the assets
acquired in the Drop Down for
the period from December 20,
2018 through year-end 2018.
On December 20, 2018, Kimbell closed the acquisition of certain oil and gas royalty assets from certain affiliated sellers (the "Drop Down") for approximately $90.0 million. Even though Kimbell was entitled to cash flows from these assets as of October 1, 2018, under accounting principles generally accepted in the United States ("GAAP"), Kimbell may only record production, revenues, net income and other financial measures as of and from the closing date. Thus, the above fourth quarter 2018 highlights only include eleven days of operational activity from the Drop Down assets.
Recent Development
As previously disclosed, on February 6, 2019, Kimbell agreed to acquire certain oil and gas royalty assets owned by certain affiliates of EnCap Investments L.P. for approximately $151.3 million (the "Phillips Acquisition"). The Phillips Acquisition is expected to close in late March 2019. The closing of the Phillips Acquisition remains subject to the satisfaction of certain closing conditions, and there can be no assurance that it will be completed as planned or at all.
"The fourth quarter generated record high production and revenues, providing an excellent close to the year as we continue to build on this momentum in 2019," said Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell Royalty Partners' general partner. "Since our initial public offering in February 2017, we have more than tripled our production and are poised for continued growth in 2019.
"With our recently announced Phillips Acquisition, we will have announced or completed approximately $700 million in acquisitions in just over six months. These acquisitions have transformed our company and positioned Kimbell as one of the leading consolidators within the U.S. royalty and minerals space.
"The assets we acquired in 2018 from Haymaker and through the Drop Down are outperforming our expectations. Most notably, the Haymaker assets experienced significant growth from new wells coming online in the Haynesville shale during the fourth quarter of 2018. Moreover, the Drop Down assets generated production growth from new wells that came online in the Eagle Ford shale. We are experiencing the best of both worlds - organic growth from our recently acquired assets, coupled with the stability of the PDP decline rate from Kimbell's legacy assets.
"In 2019, we continue to see positive trends in the royalty sector, including potential opportunities for additional accretive acquisitions as deal-flow remains high. Our company is performing at a high level, and we will continue to work hard to enhance value for our unitholders."
Fourth Quarter 2018 Distribution
On January 25, 2019, Kimbell announced a cash distribution of $0.40 per common unit. This represented an 11% increase from the fourth quarter of last year. Since our initial public offering ("IPO") in February 2017, we have paid total cash distributions of $2.90 per common unit. In addition, we expect this distribution to be substantially tax free.
Financial Highlights
Total fourth quarter 2018 revenues increased 64% from the prior quarter to $30.3 million and were up $20.6 million from the fourth quarter of last year. Fourth quarter 2018 net loss attributable to common units was $1.6 million, or $0.10 per common unit, compared to net loss attributable to common units of $3.7 million in the prior quarter and net income attributable to common units of approximately $1.1 million in the fourth quarter of last year. Fourth quarter 2018 consolidated net loss was $3.3 million, compared to consolidated net loss of $3.8 million in the prior quarter and consolidated net income of $1.1 million in the fourth quarter of last year.
Consolidated Adjusted EBITDA for the quarter totaled $14.9 million, versus $14.0 million in the prior quarter and $6.3 million in the fourth quarter of last year. (Adjusted EBITDA is a non-GAAP financial measure. Please see a reconciliation to the nearest GAAP financial measures at the end of this news release). Average realized price per Bbl for oil was $53.77, natural gas per Mcf was $3.21, and NGLs per Bbl was $22.39.
Kimbell recorded a $12.6 million non-cash impairment expense in the fourth quarter of 2018 as a result of the full-cost ceiling limitation. This non-cash impairment expense is not expected to impact the cash flow available for distribution generated by Kimbell, nor its liquidity or ability to make acquisitions in the future. We will reflect such impairment in our financial statements filed with our upcoming Form 10-K for the year ended December 31, 2018.
General and administrative ("G&A") expenses were $5.2 million in Q4 2018, of which $4.2 million was cash G&A expense and included $0.9 million in costs associated with the Transition Services Agreement (the "TSA"), which relates to the integration of the acquisition of certain subsidiaries of Haymaker Minerals & Royalties, LLC and Haymaker Properties, L.P. (the "Haymaker Acquisition"). The TSA expired at year-end 2018, and no further costs will be incurred relating to the TSA.
As of December 31, 2018, Kimbell had outstanding 18,056,487 common units and 19,453,258 Class B units.
Production
Fourth quarter 2018 average daily production increased 18% from the prior quarter to 10,066 Boe per day (reflects average daily production during the period from December 20, 2018 through year-end after giving effect to the Drop Down transaction), for total production of 823,311 Boe. Fourth quarter 2018 average daily production for the full quarter was 8,949 Boe per day. Revenues were derived 56% from liquids (46% from oil and 10% from NGLs) and 44% from natural gas. Production was composed of approximately 37% liquids (24% oil and 13% NGLs) and 63% natural gas on a 6:1 basis.
Reserves
Ryder Scott Company, L.P. prepared an estimate of Kimbell's proved reserves as of December 31, 2018. Average prices of $65.56 per Bbl of oil and $3.10 per MMBtu of natural gas were used in accordance with applicable rules of the Securities and Exchange Commission (the "SEC"). Realized prices with applicable differentials were $60.60 per Bbl of oil, $2.24 per Mcf of natural gas and $20.78 per Bbl of natural gas liquids.
Proved developed reserves at year-end 2018 increased by approximately 118% year-over-year to almost 34 MMBoe, reflecting the acquisitions Kimbell made during the year along with continued development by the operators of Kimbell's acreage.
Crude Oil and Natural Gas
Natural Gas Total (MBOE)
Condensate (MMcf) Liquids (MBbls)
(MBbls)
Net proved developed
reserves at December
31, 2017 5,284 47,501 2,202 15,403
Revisions of previous
estimates 761 7,229 1,005 2,971
Purchases of minerals in
place 3,729 69,465 2,166 17,473
Production (591) (7,874) (310) (2,213)
Net proved developed
reserves at December
31, 2018 9,183 116,321 5,063 33,634
Liquidity
At December 31, 2018, Kimbell's consolidated debt to consolidated Adjusted EBITDA was 1.2x (reflecting a full quarter of the Drop Down assets) based on Q4 2018 annualized consolidated Adjusted EBITDA.
At December 31, 2018, Kimbell had $87.3 million outstanding under its $200.0 million revolving credit facility. As of December 31, 2018, Kimbell was in compliance with all related financial covenants.
Hedging
Kimbell hedges its daily production in a manner that approximates the amount of debt and/or preferred equity as a percent of its enterprise value. As of December 31, 2018, Kimbell had hedged daily oil and natural gas production of approximately 24% of its production. Please see the supplemental schedule at the end of this news release for hedging details.
2019 Guidance
Kimbell plans to issue 2019 guidance after the closing of the Phillips Acquisition, which we anticipate to occur on or around March 29, 2019.
Conference Call
Kimbell Royalty Partners will host a conference call and webcast today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss fourth quarter 2018 results. To access the call live by phone, dial 201-389-0869 and ask for the Kimbell Royalty Partners call at least 10 minutes prior to the start time. A telephonic replay will be available through March 14, 2019 by dialing 201-612-7415 and using the conference ID 13685988#. A webcast of the call will also be available live and for later replay on Kimbell Royalty Partners' website at http://kimbellrp.investorroom.com under Events and Presentations.
About Kimbell Royalty Partners, LP
Kimbell (NYSE: KRP) is an oil and gas mineral and royalty limited partnership based in Fort Worth, Texas. Kimbell is managed by its general partner, Kimbell Royalty GP, LLC. Kimbell owns mineral and royalty interests in approximately 12.2 million gross acres in 28 states and in nearly every major onshore basin in the continental United States, including ownership in more than 86,000 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 the tax treatment of Kimbell's fourth quarter 2018 distribution, the expected timing of the closing of the Phillips Acquisition, Kimbell's 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 SEC. These include risks that the anticipated benefits of the Phillips Acquisition 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, the Drop Down and the Phillips Acquisition (if completed); 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)
December 31,
2018
Assets:
Current assets
Cash and
cash
equivalents $
15,774
Oil, natural gas and
NGL receivables 18,809
Commodity derivative
assets 2,981
Other current assets 50
Total current assets 37,614
Property and equipment,
net 430
Oil and natural gas
properties
Oil and natural gas
properties (full cost
method) 818,595
Less: accumulated
depreciation,
depletion and
accretion (107,780)
Total oil and natural
gas properties 710,815
Commodity derivative
assets 1,247
Loan origination costs,
net 3,179
Total assets $
753,285
===
Liabilities, mezzanine
equity and
unitholders' equity:
Current liabilities
Accounts
payable $
1,331
Other current
liabilities 2,469
Total current
liabilities 3,800
Long-term debt 87,310
Total liabilities 91,110
Commitments and
contingencies
Mezzanine equity:
Series A preferred
units 69,449
Unitholders' Equity:
Common units 293,993
Class B units 972
Total unitholders'
equity 294,965
Noncontrolling interest 297,761
Total equity 592,726
Total
liabilities,
mezzanine
equity, and
equity $
753,285
===
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
December 31, 2018 December 31, 2017
---
Revenue
Oil, natural gas and
NGL revenues $
22,972 $
9,464
Lease bonus and other income 89 544
Gain (loss) on commodity
derivative instruments 7,190 (319)
Total revenues 30,251 9,689
Costs and expenses
Production and ad valorem taxes 1,368 850
Depreciation, depletion and
accretion expenses 9,718 4,390
Impairment of oil and natural gas
properties 12,558
Marketing and other deductions 1,784 580
General and administrative
expenses 5,197 2,485
Total costs and expenses 30,625 8,305
Operating income (loss) (374) 1,384
Other expense
Interest expense 1,415 323
Net income (loss) before income
taxes (1,789) 1,061
Benefit from income taxes (1,952)
Net income before distribution
and accretion on 163 1,061
Series A preferred units
Distribution and accretion on
Series A preferred units (3,470)
Net income (loss) (3,307) 1,061
Net income (loss) attributable to
noncontrolling interests (1,715)
Net income (loss) attributable to
Kimbell Royalty Partners LP (1,592) 1,061
Distribution on Class B units (18)
Net income (loss)
attributable to
common units $
(1,610) $
1,061
===
Basic $
(0.10) $
0.06
===
Diluted $
(0.10) $
0.06
===
Weighted average number of common
units outstanding
Basic 16,898,563 16,342,228
Diluted 16,898,563 16,509,799
Kimbell Royalty Partners, LP
Condensed Consolidated Statement of Operations
(Unaudited, in thousands, except per-unit data and unit count)
Twelve Months Ended
December 31, 2018
Revenue
Oil, natural gas and
NGL revenues $
65,713
Lease bonus and other income 1,213
Gain (loss) on commodity
derivative instruments 3,332
Total revenues 70,258
Costs and expenses
Production and ad valorem taxes 4,400
Depreciation, depletion and
accretion expenses 25,213
Impairment of oil and natural gas
properties 67,312
Marketing and other deductions 4,652
General and administrative
expenses 16,847
Total costs and expenses 118,424
Operating loss (48,166)
Other expense
Interest expense 4,092
Net loss before income taxes (52,258)
Provision for income taxes 25
Net loss before distribution and
accretion on (52,283)
Series A preferred units
Distribution and accretion on
Series A preferred units (6,310)
Net loss (58,593)
Net loss attributable to
noncontrolling interests (1,856)
Net loss attributable to Kimbell
Royalty Partners LP (56,737)
Distribution on Class B units (31)
Net loss
attributable to
common units $
(56,768)
===
Basic $
(3.08)
===
Diluted $
(3.08)
===
Weighted average number of common
units outstanding
Basic 18,442,234
Diluted 18,442,234
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 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 Schedules
(Unaudited, in thousands)
Three Months Ended Three Months Ended
December 31, 2018 December 31, 2017
---
Reconciliation of net cash provided by
operating activities
to Adjusted EBITDA
Net cash provided by
operating activities $
14,611 $
4,608
Interest expense 1,415 323
Current income tax benefit (478)
Impairment of oil and natural gas
properties (12,558)
Amortization of loan origination costs (258) (16)
Unit-based compensation (1,027) (229)
Change in fair value of open commodity
derivative instruments 8,042 (319)
Changes in operating assets and
liabilities:
Oil, natural gas and NGL revenues
receivable (1,740) 1,193
Other receivables (376) (22)
Accounts payable 200 (164)
Other current liabilities 1,513 400
Consolidated EBITDA $
9,344 $
5,774
---
Add:
Impairment of oil and natural gas
properties 12,558
Unit-based compensation 1,027 229
Change in fair value of open commodity
derivative instruments (8,042) 319
Consolidated Adjusted
EBITDA $
14,887 $
6,322
Adjusted EBITDA attributable to non-
controlling interest (7,721)
Adjusted EBITDA
attributable to
Kimbell Royalty
Partners LP $
7,166 $
6,322
===
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited, in thousands)
Three Months Ended
December 31, 2018
Net income before
distribution and
accretion on Series
A preferred units $
163
Depreciation, depletion and
accretion expenses 9,718
Interest expense 1,415
Benefit from income taxes (1,952)
Consolidated EBITDA $
9,344
---
Impairment of oil and natural gas
properties 12,558
Unit-based compensation 1,027
Change in fair value of open
commodity derivative instruments (8,042)
Consolidated
Adjusted EBITDA $
14,887
Adjusted EBITDA attributable to
non-controlling interest (7,721)
Adjusted EBITDA
attributable to
Kimbell Royalty
Partners LP $
7,166
===
Adjustments to reconcile Adjusted
EBITDA to cash available
for distribution
Cash interest expense 672
Cash distributions on Series A
preferred units 927
Cash distributions on Class B
units 18
Cash available for
distribution on
common units $
5,549
===
Common units outstanding on
December 31, 2018 18,056,487
Cash available for
distribution per
common unit
outstanding $
0.31
Common units outstanding on
February 4, 2019 Record Date 19,495,403
Fourth quarter 2018
distribution
declared(1) $
0.40
(1) The difference
between the
declared
distribution and
the cash available
for distribution
is primarily
attributable to
the acquisition of
the Drop Down
assets being
effective on
October 1, 2018,
but only reflected
in the condensed
consolidated
financial
statements from
December 20, 2018
onward.
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited, in thousands)
Three Months Ended
December 31, 2017
Net income $
1,061
Depreciation, depletion and
accretion expenses 4,390
Interest expense 323
EBITDA $
5,774
---
Unit-based compensation 229
Loss on commodity derivative
instruments 319
Adjusted EBITDA $
6,322
---
Adjustments to reconcile
Adjusted EBITDA to cash
available
for distribution
Cash interest expense 179
Capital expenditures
Cash available for
distribution $
6,143
===
Limited partner units
outstanding(1) 16,836,453
Cash available for
distribution per
common unit
outstanding $
0.36
(1) As of fourth quarter 2017 distribution record date of February 7,
2018.
Kimbell Royalty Partners, LP
Supplemental Schedules
(Unaudited)
Fixed Price Swaps as of December 31, 2018
---
Weighted Average
Volumes Fixed Price
Oil Nat Gas Oil Nat Gas
---
BBL MMBTU
$/BBL
$/MMBTU
---
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
3Q 2020 56,304 829,288 $50.45 $2.53
4Q 2020 56,304 829,288 $50.65 $2.63
View original content:http://www.prnewswire.com/news-releases/kimbell-royalty-partners-announces-fourth-quarter-2018-results-record-production-and-revenue-300808301.html
SOURCE Kimbell Royalty Partners, LP
