Stock Monitor: Seadrill Partners Post Earnings Reporting
LONDON, UK / ACCESSWIRE / May 31, 2018 / If you want access to our free research report on Kimbell Royalty Partners, L.P. (NYSE: KRP) ("Kimbell"), all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/?symbol=KRP as the Company's latest news hit the wire. On May 29, 2018, the Company disclosed that it plans to acquire the mineral and royalty interests held by Houston-based Haymaker Minerals & Royalties, LLC and Haymaker Resources, LP (jointly referred to as "Haymaker"). The stock plus cash deal is valued at approximately $404 million. Register today and get access to over 1,000 Free Research Reports by joining our site below:
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Commenting on acquiring the mineral and royalty interests from Haymaker, Bob Ravnaas, Chairman and Chief Executive Officer (CEO) of Kimbell, said:
"Through this combination of highly complementary minerals portfolios, Kimbell is uniquely positioned to be a major participant in the best-performing, highest-growth oil and gas basins in the Lower 48."
Karl Brensike, CEO of Haymaker, added:
"We believe this acquisition will kick off a new phase of consolidation across the sector, as private equity looks to divest their mineral interests to longer-term holders. Kimbell's diversified asset base and access to capital through their proposed tax structure will position them to continue to make accretive acquisitions over the coming years."
Details of the Transaction
The acquisition is a layered transaction wherein Kimbell has agreed to acquire certain subsidiaries of both Haymaker Resources, LP (owned by KKR & Co. L.P. and Haymaker management) and Haymaker Minerals and Royalties LLC (owned by Haymaker management and other investors). As part of this transaction, Kimbell will acquire the mineral and royalty interests held by Haymaker. The entire transaction is valued at $404 million, of which the mineral and royalty interests are valued at approximately $242 million. Kimbell will pay approximately $210 million in cash and 10 million common units of Kimbell. The Kimbell units are valued at approximately $194 million based on Kimbell's unit price of $19.40 at the time of closing on May 25, 2018. The Boards of Directors of both Kimbell and Haymaker have approved the transaction. The deal is effective from April 01, 2018, and is expected to close in Q3 2018, subject to regulatory approvals and other closing conditions.
At the close of the acquisition, Haymaker's private equity sponsors, KKR & Co. L.P., Kayne Anderson Capital Advisors, L.P., and Haymaker management will jointly own approximately 37% stake in Kimbell.
The combined Company will be managed by Kimbell's management team under the leadership of Bob Ravnaas, the current CEO of Kimbell, on completion of the deal.
Financing for the Acquisition
Kimbell plans to finance the cash portion of the deal using a mix of equity sale plus fresh debt. Accordingly, Kimbell has partnered with an affiliate of Apollo Global Management, LLC ("Apollo") to raise $110 million via a private placement of 7.00% Series A Cumulative Convertible Preferred Units. The highlight of these preferred units is that they will offer a 7% cash distribution which will be payable quarterly in arrears. The Company can redeem the Series A Preferred Units at any time for cash. Once the transaction completes two years, Apollo has the option of converting some or all of the Series A Preferred Units if the unit price is at a 30% premium to its offer price. These units will have voting rights once they are converted to common units of Kimbell.
The Company has also finalized a fully-underwritten $200 million revolving credit facility with Frost Bank, Wells Fargo Bank, and Credit Suisse AG. The Company plans to use $114 million from this revolving credit facility to finance the cash portion of the deal. Once the transaction is completed, the Company will have approximately $64 million as credit available under the new revolving credit facility, which will help the Company's overall liquidity position.
Benefits of the Deal
Once the acquisition is completed, the Company will have a total of 11.1 million gross acre position across 73 active rigs on its properties. This represents 7% of total active rigs in the US and 95% of all rigs in the Lower 48 are located in counties where Kimbell will hold mineral interest positions. The deal allows Kimbell to strengthen its position in the Permian Basin with the addition of mineral interests in the Midland Basin.
The deal is expected to be accretive to the Company's distributable cash flows immediately. The deal is expected to result in a 12% increase in Kimbell's free cash flow on a pro-forma basis in Q1 2018. The deal is also expected to increase production by over 50% on a per unit basis and result in general and administrative (G&A) expenses savings of 50% per Boe on a run-rate basis.
The acquisition is highly beneficial to Kimbell and will increase the Company's net royalty acres per unit by 10% on a pro-forma basis.
Proposal to Become a Taxable Entity
The Company has proposed to change its tax status to that of a taxable entity. The change in tax status will allow the Company to attract large domestic and international investors, which will increase its liquidity and support its growth strategy. KKR, Kayne, Haymaker management, and Apollo who constitute a majority of unitholders in the Company required to approve the change in tax status have agreed to vote in favor of the change. The Board of Directors at Kimbell will finalize the actual tax structure and file the details with the Securities and Exchange Commission (SEC) and also distribute the information to its other unitholders.
About Kimbell Royalty Partners LP
Fort Worth, Texas-based Kimbell was formed in 1998 and is an oil and gas mineral and royalty variable rate master limited partnership. Kimbell is managed by its general partner, Kimbell Royalty GP, LLC. The Company owns mineral and royalty interests in approximately 5.7 million gross acres in twenty states and across every major onshore basin in the continental US, including ownership in more than 50,000 gross producing wells with over 30,000 wells in the Permian Basin.
Stock Performance Snapshot
May 30, 2018 - At Wednesday's closing bell, Kimbell Royalty Partners' stock marginally dropped 0.95%, ending the trading session at $20.80.
Volume traded for the day: 87.67 thousand shares, which was above the 3-month average volume of 27.98 thousand shares.
Stock performance in the last month - up 17.18%; previous three-month period - up 9.47%; past twelve-month period - up 4.79%; and year-to-date - up 28.00%
After yesterday's close, Kimbell Royalty Partners' market cap was at $351.73 million.
The stock has a dividend yield of 5.77%.
The stock is part of the Basic Materials sector, categorized under the Oil & Gas Drilling & Exploration industry. This sector was up 2.5% at the end of the session.
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