Kimbell Royalty Partners, LP (NYSE:KRP) Q4 2023 Earnings Call Transcript
Kimbell Royalty Partners, LP (NYSE:KRP) Q4 2023 Earnings Call Transcript February 21, 2024
Kimbell Royalty Partners, LP misses on earnings expectations. Reported EPS is $0.08 EPS, expectations were $0.32. KRP isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Kimbell Royalty Partners Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, with Investor Relations. Thank you, sir. You may begin.
Rick Black: Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the fourth quarter 2023 ended on December 31, 2023. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, February 21, 2024. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are considered forward-looking statements made pursuant to the safe harbor's provision of the Private Securities Litigation Reform Act of 1995.
We will be making statements that are forward-looking as part of today's call, which by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to today's earnings release for our disclosure on forward-looking statements. These factors and other uncertainties and risks are detailed in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements. And with that, I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners' Chairman and Chief Executive Officer.
Bob?
Bob Ravnaas : Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call this morning. With me today are several members of our senior management team, including Davis Ravnaas, our President and Chief Financial Officer; Matt Daly, our Chief Operating Officer; and Blayne Rhynsburger, our Controller. We are very pleased to announce another record year for Kimball. In 2023, we completed our largest acquisition to date, which was immediately accretive to distributable cash flow per common unit and the acquisition substantially bolstered the Permian as our leading basin in terms of production, active rig count, DUCs, permits and undrilled inventory. In addition, we increased the borrowing base and elected commitments on our revolving credit facility to $550 million, further enhancing our liquidity and conservative capital structure.
We are also very pleased to report that we paid out $1.73 per common unit in tax advantage quarterly distributions during 2023 and paid down approximately $49.9 million on our credit facility. We ended the year with a strong fourth quarter that reflected significant sequential organic growth over the third quarter due to a number of high interest wells coming online in the Permian and Haynesville. We expect to continue this operational momentum as we progress through 2024, given that our rig count remains near record highs with 98 rigs actively drilling in the U.S. Turning now to production growth. It is remarkable to reflect on our growth since our IPO, as we have now grown production from 3,116 BOE per day to 24,332 BOE per day, an increase of 681%.
As evidenced by our significant acquisition activity in 2023, we expect to continue our role as a major consolidator in the highly fragmented U.S. oil and natural gas royalty sector. And we estimate the total size of the market to be nearly $1 trillion. As I've stated in the past, there are only a handful of public entities in the U.S. and Canada that have the financial resources, infrastructure, network and technical expertise to complete large-scale multi-basin acquisitions. We believe that we are still in the early stages of this consolidation and will actively seek out targets that fit within our acquisition profile. We are very excited about the opportunities to expand in the future and deliver unitholder value for years to come. I'll now turn the call over to Davis and Matt.
Davis Ravnaas: Thanks, Bob, and good morning, everyone. I'd like to start by reiterating the sentiment that Bob expressed. This was a great year for Kimbell as we finished 2023 with a very strong fourth quarter as well as setting new records in several of our financial and operating metrics. I'll start by reviewing our financial results from the fourth quarter, beginning with oil, natural gas and NGL revenues of $83.9 million, an increase of 21.2% compared to the third quarter and a record for the company. In the fourth quarter, we generated record daily production that marked another significant milestone for Kimball. Run rate production for Q4 2023 was a record at 24,332 BOE per day on a 6 to 1 basis which reflected 3.4% organic growth from Q3 2023 run rate production.
As of December 31, 2023, Kimbell's major properties had 807 gross or 4.55 net DUCs and 727 gross or 3.83 net permitted locations on our acreage. Not including minor properties, which we estimate could add an additional 15%. In addition, we exited the quarter with 98 rigs actively drilling on our acreage, which represents approximately 16.3% market share of all land rigs drilling in the continental United States. On the expense side, fourth quarter general and administrative expenses were $9.1 million, $5.8 million of which was cash G&A expense. Excluding the impact of approximately $0.8 million and integration-related expenses associated with the third quarter acquired production, cash G&A per BOE was $2.25. Fourth quarter net income was approximately $17.8 million of net income attributable to common units was approximately $9.8 million as compared to $18.5 million and $13.6 million, respectively, from last quarter.
Total fourth quarter consolidated adjusted EBITDA was a record at $69 million which was up approximately 24% from last quarter. You will find a reconciliation of both consolidated adjusted EBITDA and cash available for distribution at the end of our news release. Today, we announced a cash distribution of $0.43 per common unit for the fourth quarter. This represents a cash distribution payment to common unitholders that equates to 75% of cash available for distribution, and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell's secured revolving credit facility. Moving now to our balance sheet and liquidity. As a reminder, on December 8, we increased the borrowing base and aggregate commitments under our secured revolving credit facility from $400 million to $550 million in connection with the fall redetermination.
At December 31, 2023, we had an approximately $294.2 million in debt outstanding under our secured revolving credit facility. We continue to maintain a conservative balance sheet with net debt to trailing 12-months consolidated adjusted EBITDA of 1 times. Kimbell had approximately $255.8 million and undrawn capacity under its secured revolving credit facility as of December 31. We are very comfortable with our strong financial position, the support of our expanding bank syndicate and our financial flexibility. We are also releasing 2024 guidance, which includes daily production at its midpoint of 24,000 BOE per day. We feel very confident about the prospects for continued robust development given the number of rigs actively drilling on our acreage as well as the commentary we are hearing from several operators about their expected development activity in 2024, especially in the Permian.
We remain very bullish about our industry and our company as we see a long horizon for continued growth and opportunities to enhance shareholder value. I'd like to thank the incredibly hard-working, dedicated and talented team here at Kimball for continually driving growth and enhancing the value of our organization for all stakeholders. In addition, we work with the best advisers and financial institutions in the business. And we greatly appreciate these partnerships that contribute to the company's success. With that, operator, we are now ready for questions.
Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Neal Dingmann with Truist Securities. Please proceed with your question.
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