Kimbell Royalty Partners Closes $230 Million Acquisition of Midland Basin Mineral and Royalty Interests in Cash Transaction

Rhea-AI Summary

Kimbell Royalty Partners (NYSE: KRP) has completed the previously announced $230 million acquisition of mineral and royalty interests in the Midland Basin. The transaction, funded through a combination of public offering of common units and credit facility borrowings, includes assets producing approximately 1,842 Boe/d as of October 1, 2024.

The Acquired Assets are located under the historic Mabee Ranch, with interests concentrated in Martin County (63%) and Andrews County (37%). The production mix includes 1,125 Bbl/d of oil, 410 Bbl/d of NGLs, and 1,842 Mcf/d of natural gas. Kimbell will receive all cash flow from production since October 1, 2024, while accounting recognition begins January 17, 2025.

Positive

• Acquisition adds significant daily production of 1,842 Boe/d to portfolio
• Strategic expansion in prime Midland Basin location
• Immediate cash flow benefits from October 1, 2024 production

Negative

• Increased debt through credit facility borrowings
• Potential dilution from public offering of common units

Insights

Financial Analyst

The $230 million acquisition significantly strengthens KRP's position in the prolific Midland Basin. The deal's metrics are compelling - at $124,864 per flowing BOE/d, it's competitively priced for premium Permian Basin assets. The strategic funding mix through equity offering and credit facility demonstrates prudent capital management while maintaining financial flexibility.

The Mabee Ranch assets are particularly valuable due to their prime location in Martin and Andrews counties, which are among the most productive areas in the Midland Basin. The production mix of 61% oil, 22% NGLs and 17% natural gas is favorable, as it's weighted toward higher-margin liquids. This acquisition is expected to be immediately accretive to distributable cash flow per unit.

The retroactive economic effective date to October 2024 means KRP will capture additional cash flows, enhancing the deal's overall economics. With a current market cap of $1.45 billion, this acquisition represents about 16% of KRP's enterprise value, making it a transformative transaction that meaningfully expands their scale and presence in one of North America's premier oil basins.

Energy Market Analyst

The Midland Basin acquisition positions KRP strategically in one of the most economically viable shale plays in North America. The Mabee Ranch assets are particularly valuable because they sit in the sweet spot of the basin, where well productivity and returns are consistently strong. Martin County, which comprises 63% of the acquired assets, is known for some of the best well economics in the Permian.

The production profile of 1,842 BOE/d is material, but what's more important is the location quality. These mineral rights in Martin and Andrews counties typically command premium valuations due to their proven productivity and extensive remaining drilling inventory. The high oil cut in the production mix (61%) is particularly advantageous in the current commodity price environment.

For those less familiar with energy terminology: Think of mineral rights like owning the deed to underground resources - KRP collects 'rent' (royalties) from oil companies drilling on their land, without bearing the direct costs of drilling. This acquisition is like buying premium real estate in Manhattan - it's all about location and long-term value appreciation.

FORT WORTH, Texas, Jan. 17, 2025 /PRNewswire/ -- Kimbell Royalty Partners, LP (NYSE: KRP) ("Kimbell" or the "Company"), a leading owner of oil and gas mineral and royalty interests in over 17 million gross acres in 28 states, today announced that it has closed the previously announced purchase of mineral and royalty interests (the "Acquired Assets") held by a private seller in a cash transaction valued at approximately $230 million, subject to post-closing adjustments (the "Acquisition").  The purchase price of the Acquisition was funded through a combination of an underwritten public offering of common units and borrowings under its revolving credit facility.  Kimbell is entitled to all cash flow from production attributable to the Acquired Assets since October 1, 2024.  Revenues and certain other operating statistics under generally accepted accounting principles will be recorded for the Acquisition beginning on the closing date of January 17, 2025. 

Kimbell estimates that, as of October 1, 2024, the Acquired Assets produced approximately 1,842 Boe/d (1,125 Bbl/d of oil, 410 Bbl/d of NGLs, and 1,842 Mcf/d of natural gas) (6:1)¹.  For the full year 2025, Kimbell estimates that the Acquired Assets will produce approximately 1,842 Boe/d (1,104 Bbl/d of oil, 424 Bbl/d of NGLs, and 1,881 Mcf/d of natural gas) (6:1).  The Acquired Assets are located under the historic Mabee Ranch in the Midland Basin, with oil and gas minerals and royalty interests concentrated in Martin County (63%) and Andrews County (37%).

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 17 million gross acres in 28 states and in every major onshore basin in the continental United States, including ownership in more than 130,000 gross wells with over 51,000 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, which include statements regarding the anticipated benefits of the Acquisition and operational data with respect to the Acquisition, involve risks and uncertainties, including risks that the anticipated benefits of the Acquisition are not realized; risks relating to Kimbell's integration of the Acquisition assets; and risks relating to 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 Securities and Exchange Commission ("SEC").  These include 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 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 assets acquired in the Acquisition; and other risks described in Kimbell's Annual Report on Form 10-K, as amended, 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

1 Shown on 6:1 basis.  Based on estimated Q4 2024 run-rate production for the Acquired Assets as of October 1, 2024, which is the effective date of the Acquisition.

 

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SOURCE Kimbell Royalty Partners, LP

FAQ

What is the value of KRP's Midland Basin acquisition?

Kimbell Royalty Partners' Midland Basin acquisition is valued at approximately $230 million, subject to post-closing adjustments.

How much daily production will KRP gain from the Mabee Ranch assets?

The acquired assets are estimated to produce approximately 1,842 Boe/d, including 1,125 Bbl/d of oil, 410 Bbl/d of NGLs, and 1,842 Mcf/d of natural gas.

How did KRP finance the $230 million Midland Basin acquisition?

The acquisition was funded through a combination of an underwritten public offering of common units and borrowings under Kimbell's revolving credit facility.

When will KRP begin receiving cash flows from the Midland Basin assets?

KRP is entitled to all cash flow from production attributable to the acquired assets since October 1, 2024, although accounting recognition begins January 17, 2025.

What is the geographic distribution of KRP's newly acquired Midland Basin assets?

The acquired assets are located in the Midland Basin's Mabee Ranch, with 63% in Martin County and 37% in Andrews County.