FORT WORTH, Texas, March 25,
2019 /PRNewswire/ -- Kimbell Royalty Partners, LP (NYSE:
KRP) ("Kimbell") today announced that it has closed the
previously announced purchase of certain oil and gas royalty
assets from EnCap Investments L.P. ("EnCap") for 9.4 million newly
issued units in Kimbell Royalty Operating, LLC valued at
approximately $171.6 million (the
"Acquisition"). Kimbell is entitled to the cash flow from
production attributable to the Acquisition beginning on and after
January 1, 2019. Revenues and
certain other operating statistics under generally accepted
accounting principles ("GAAP") will be recorded for the Acquisition
beginning on the closing date of March
25, 2019.
The Acquisition includes oil and natural gas mineral and royalty
interests previously controlled by EnCap through Phillips Energy
Partners, Phillips Energy Partners II and Phillips Energy Partners
III and is expected to be immediately accretive to distributable
cash flow per unit. The Acquisition includes a diversified
package of royalty interests with approximately 77% of revenues
from oil and natural gas liquids and over 64% of production (6:1)
from the Eagle Ford Shale, Permian Basin, Haynesville Shale and
Powder River Basin. The Acquisition also adds approximately
1,600 Boe/d of production (6:1), as well as seventeen rigs that are
actively drilling on the acreage. In addition, the
Acquisition adds approximately 12,200 net royalty acres, increasing
Kimbell's total net royalty acre position by 9% to 144,100 net
royalty acres across the continental U.S. Finally, the
Acquisition maintains Kimbell's five-year PDP decline rate – pro
forma at approximately 12%.
"With the closing of this acquisition, we are off to a great
start to 2019. We continue to see strong activity across our
acreage position as evidenced by the 90 rigs currently drilling on
our acreage, which is approximately 9% of the entire U.S. lower 48
active drilling fleet. As a result, our guidance for the
second quarter through the fourth quarter of 2019, at its midpoint,
implies approximately 15% percent growth from our fourth quarter
2018 average daily net production rate1, without any
incremental capital spending required. Kimbell offers a
unique investment opportunity with solid growth coupled with an
approximate 9% distribution yield, which we expect to be
substantially tax-free in 2019. We remain extremely focused
on executing our business plan and creating long-term value for our
unitholders," said Bob Ravnaas,
Chief Executive Officer of Kimbell's general
partner.
2019 Guidance
Below is Kimbell's guidance for the full year of 2019. The
guidance for the first quarter of 2019 reflects only seven days of
production and operating statistics from the Acquisition following
the closing based on management estimates, while the remaining
quarters of 2019 reflect full quarters of production and operating
statistics from the Acquisition based on management estimates:
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Kimbell
Royalty
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Partners
LP
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Q1
2019:
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Net Production -
Mboe/d (6:1)
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9.60
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-
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10.20
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Oil Production - % of
Net Production
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22%
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-
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26%
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Natural Gas
Production - % of Net Production
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60%
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-
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64%
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Natural Gas Liquids
Production - % of Net Production
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12%
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-
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16%
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Unit Costs
($/boe)
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Marketing and other
deductions
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$2.00
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-
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$2.75
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Depreciation,
depletion and accretion expenses
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$10.00
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-
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$13.00
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G&A
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Cash
G&A
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$3.95
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-
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$4.15
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Non-Cash
G&A
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$1.90
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-
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$2.25
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Production and ad
valorem taxes
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6.0%
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-
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8.0%
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Q2 - Q4
2019:
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Net Production -
Mboe/d (6:1)
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11.00
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-
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12.20
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Oil Production - % of
Net Production
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24%
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-
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28%
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Natural Gas
Production - % of Net Production
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59%
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63%
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Natural Gas Liquids
Production - % of Net Production
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11%
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15%
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Unit Costs
($/boe)
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Marketing and other
deductions
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$2.00
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-
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$2.75
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Depreciation,
depletion and accretion expenses
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$10.00
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-
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$13.00
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G&A
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Cash
G&A
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$3.65
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$3.85
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Non-Cash
G&A
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$1.60
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$1.80
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Production and ad
valorem taxes
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6.0%
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-
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8.0%
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Taxation of Distributions Paid by Kimbell to Common
Unitholders
Kimbell expects that a substantial portion of all distributions
paid to common unitholders in 2019, including the distribution with
respect to the fourth quarter of 2018, will be a return of capital
for tax purposes. Return of capital distributions are
not taxable dividend income reportable on the recipients' 2019
1099-DIV, but instead generally reduce the recipient's tax basis in
its units. However, many factors may impact this assessment
of the extent to which our distributions are currently taxable,
including changes in commodity prices, future acquisitions and
changes in tax law. No assurances can be made regarding this
tax treatment and investors are encouraged to consult with their
tax advisor on this matter.
Forward-Looking Statements
This news release includes forward-looking statements, in
particular statements relating to Kimbell's future operating and
production results and the tax treatment of Kimbell's
distributions. These and other forward-looking statements involve
risks and uncertainties, including risks and uncertainties 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 (the "SEC"). These
include risks that the anticipated benefits of the 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; 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 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 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;
risks relating to tax matters; 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.
About Kimbell Royalty Partners
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 13 million gross acres in 28 states and in every
major onshore basin in the continental United States, including ownership in more
than 92,000 gross producing wells with over 39,000 wells in the
Permian Basin. To learn more, visit http://www.kimbellrp.com.
Contact:
Rick Black
Dennard Lascar Investor
Relations
krp@dennardlascar.com
(713) 529-6600
1 Based on daily production of 10,066 Boe/d
during the period from December 20,
2018 through year-end 2018 after giving effect to the drop
down transaction.
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SOURCE Kimbell Royalty Partners, LP