Kimbell Royalty Partners Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: Achieved record revenues of $103 million from oil, natural gas, and NGLs, marking the first time revenues exceeded $100 million.

Production: Average daily production reached 25,830 BOE per day, increasing to 26,967 BOE per day post-Mesa Royalties acquisition.

Adjusted EBITDA: Recorded a consolidated adjusted EBITDA of $84.9 million, a new high for the company.

Distribution: Declared a cash distribution of $0.47 per common unit, a 15% increase from Q1 2026, with approximately 47% considered return on capital.

G&A Expenses: General and administrative expenses totaled $10.2 million, with cash G&A at $2.50 per BOE, below guidance midpoint.

Debt: Net debt to trailing 12 months adjusted EBITDA stands at approximately 1.4x, with $478.7 million in debt and $181.3 million in undrawn capacity under the credit facility.

2Strategic Updates and Business Highlights

Acquisitions: Successfully closed the Mesa Royalties acquisition, contributing positively to results. Another drop-down acquisition is expected to close soon, anticipated to enhance cash flow and production.

Market Position: Kimbell maintains a strong market share with 91 active rigs on its acreage, representing 16% of U.S. land rigs.

Operational Discipline: Continued focus on operational efficiency and maintaining a conservative balance sheet while pursuing growth opportunities.

3Forward Guidance and Outlook

Production Growth: Management is optimistic about production growth from the upcoming drop-down acquisition and expects continued activity in oil-weighted basins.

Market Conditions: Anticipates higher oil prices will support increased activity, despite recent volatility due to geopolitical tensions.

Guidance Affirmation: Financial and operational guidance for 2026 remains unchanged, with updates expected post-drop-down acquisition.

4Bad News, Challenges, or Points of Concern

Market Volatility: Oil prices have shown volatility, influenced by geopolitical events, which could impact future operations and profitability.

Competitive Pressures: Intense competition in the Permian Basin has led to inflated acquisition bids, making it challenging to secure desirable assets without overpaying.

Rig Count Variability: While the Permian rig count increased, other basins like the Mid-Con saw a decline, indicating uneven market dynamics.

5Notable Q&A Insights

Acquisition Strategy: Management remains selective in acquisitions, focusing on diversified portfolios rather than solely Permian assets, where competition is fierce.

Lease Bonuses: Increased lease bonuses were noted, driven by higher oil prices and renewed interest in deeper zones, with expectations for continued activity.

Liquidity Management: Emphasis on maintaining liquidity and a conservative leverage profile, with plans to opportunistically redeem preferred units while managing debt levels.

Market Activity: The company is actively monitoring the acquisition and divestiture market, noting a high level of ongoing opportunities, particularly in multi-basin portfolios. Overall, Kimbell Royalty Partners reported a strong quarter with record financial metrics and strategic acquisitions, while also navigating competitive pressures and market volatility. The outlook remains positive, with a focus on growth and operational efficiency.