Kimbell Royalty Partners LP (KRP) Misses Q3 EPS by 47c, Revenues Miss

Kimbell Royalty Partners LP (NYSE: KRP) reported Q3 EPS of ($0.50), $0.47 worse than the analyst estimate of ($0.03). Revenue for the quarter came in at $18.44 million versus the consensus estimate of $25.41 million.

Third Quarter 2020 Highlights

• Q3 2020 daily production of 14,160 barrels of oil equivalent ("Boe") per day (6:1)
• Q3 2020 production was composed of approximately 59% from natural gas and approximately 41% from liquids (28% from oil and 13% from natural gas liquids ("NGL")) (6:1)
• Q3 2020 oil, natural gas and NGL revenues of $24.3 million, an increase of 45% from Q2 2020, reflecting improved realized commodity prices
• Q3 2020 realized hedging gains of approximately $675,000; substantial portion of projected oil and natural gas production hedged through Q3 2022
• Q3 2020 net loss of $25.7 million and Q3 2020 net loss attributable to common units of $17.8 million. The Q3 2020 net loss amount was primarily due to a non-cash ceiling test impairment expense of $22.2 million related to continued substantial weakness in commodity prices
• Q3 2020 consolidated Adjusted EBITDA of $17.1 million
• As of September 30, 2020, Kimbell's major properties had 794 gross (2.62 net) drilled but uncompleted wells ("DUCs") and 573 gross (1.84 net) permitted locations on its acreage
• As of September 30, 2020, Kimbell had 30 rigs actively drilling on its acreage, which represented 12.0%1 market share of all rigs drilling in the continental United States as of such time
• Announced a Q3 2020 cash distribution of $0.19 per common unit, reflecting a payout ratio of 75% of cash available for distribution; implies a 12.4% annualized yield based on the November 4, 2020 closing price of $6.11 per common unit; Kimbell intends to utilize the remaining 25% of its cash available for distribution to repay a portion of the outstanding borrowings under Kimbell's revolving credit facility

Robert Ravnaas, Chairman and Chief Executive Officer of Kimbell's general partner commented, "I am very pleased with our third quarter 2020 results, once again proving the resilience of our business model. Production curtailments, which were put in place by certain operators during the height of the pandemic earlier this year, were largely reversed in the Permian and Eagle Ford during the third quarter of 2020. However, curtailments were still largely in place on our Bakken assets as of the end of the third quarter of 2020. We are hopeful that these will also reverse in the fourth quarter of 2020 given improved differentials and commodity prices.

We are very excited to see the forecasted improvement in natural gas prices both in the fourth quarter of 2020 and full year 2021 based on the futures curve. With approximately 59% of our daily production from natural gas, this price improvement could have a meaningful positive impact on our future cash flows and quarterly distribution payments. To put this in perspective, natural gas prices have averaged $2.02 per Mcf so far this year. The average forecasted natural gas price for full-year 2021 based on the futures curve is $3.03, which if it materializes would be a 50% improvement over 2020 year-to-date natural gas prices. We have a substantial amount of drilling inventory located across the major natural gas basins in the United States, with a concentration in the core areas of the Haynesville and Marcellus. We hope to benefit from this significant natural gas drilling inventory for years to come. "

For earnings history and earnings-related data on Kimbell Royalty Partners LP (KRP) click here.

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