Kimbell Royalty Partners · NYSE:KRP
Kimbell Royalty Partners — Q3 2020 Earnings Presentation
34 slides from Kimbell Royalty Partners's earnings presentation, Nov 6, 2020
Slide 1: Winter 2020 Investor Presentation
WINTER 2020 INVESTOR PRESENTATION CONFIDENTIAL | NOT FOR DISTRIBUTION
Slide 2: Disclaimer
Disclaimer This presentation includes forward-looking statements relating to the business, financial performance, results, plans, objectives and expectations of Kimbell Royalty Partners, LP (“KRP” or “Kimbell”). Statements that do not describe historical or current facts, including statements about
Slide 3: Table of Contents
Table of Contents Section I Company Overview and History Section II Detailed Asset Overview Section III Mineral Market Opportunity 3
Slide 4: Section I – Company Overview and History
Section I – Company Overview and History 4
Slide 5: Kimbell Overview
Kimbell Overview Company Overview Q3’20 Revenue by Basin Pure play mineral company with diverse portfolio of interests in the highest growth Rockies shale basins and stable conventional fields with shallow decline rates Bakken 5% Over 96,000 gross wells across over 13 million gross acres in the
Slide 6: Consistent Organic Growth over the Last Years
Consistent Organic Growth over the Last 20 Years Kimbell’s assets have proven resilient through multiple commodity price cycles and geopolitical events KRP Organic Net Production Growth (2000-2019)(1) 2,300,000 22,000,000 2,100,000 20,500,000 OPEC fails to 1,900,000 agree on cut 19,000,000 1,700,000
Slide 7: Minerals are Subsurface Real Estate
Minerals are Subsurface Real Estate Kimbell’s 8% organic PDP reserve growth for 2019 is akin to adding additional floors to a subsurface building 40,912 MBoe Acquisitions 4,661 MBoe 33,633 MBoe Plus: Revisions PDP Reserves 7,134 MBoe Acquisitions 17,473 MBoe PDP Reserves Less: Production Plus: Revis
Slide 8: Sustainable PDP Reserves
Sustainable PDP Reserves Kimbell has one of the best historical reserve-to-production ratios in the minerals industry (and overall energy sector) at 8.7 years 2019 Year-End PDP Reserves/Q4 2019 Annualized Daily Production(1) 8.7 7.3 Years of PDP Reserves 4.5 3.7 3.5 Kimbell Peer 1 Peer 2 Peer 3 Peer
Slide 9: Expected Favorable Tax Treatment of Earnings and Distributions
Expected Favorable Tax Treatment of Earnings and Distributions(1) Kimbell expects that: The company will pay no material amount of federal corporate income taxes from 2020 through 2026 (less than 5% of Kimbell’s estimated pre-tax distributable cash flow for such years) Substantially all distri
Slide 10: Kimbell’s Track Record Since IPO
Kimbell’s Track Record Since IPO Production Growth (Boe/d)(1)(2) Net Royalty Acres(2)(3) 14.1 14.2 143.2 143.2 143.2 143.8 143.8 145.9 145.9 12.8 12.8 12.6 131.9 12.0 11.8 115.3 115.3 10.1 8.5 69.8 69.8 71.3 71.3 63.0 3.3 3.5 3.7 3.6 3.1 3.1 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'1
Slide 11: DUC and Permit Inventory
DUC and Permit Inventory As of September 30, 2020, Kimbell had 794 gross (2.62 net) drilled but uncompleted wells (“DUCs”) and 573 gross (1.84 net) permitted locations on its acreage(1) Basin Gross DUCs(2) Gross Permits(2) Net DUCs(2) Net Permits(2) Permian 235 201 0.75 0.61 Mid-Continent 109 70 0.2
Slide 12: Kimbell’s Rig Count Growth Over Time
Kimbell’s Rig Count Growth Over Time Active Rigs on Acreage by Basin(1) Rig Count Change since Q1 2017 Eagle Ford Rockies 3% Bakken 3% 7% Appalachia Permian 3% 40% 30 Rigs 2 Haynesville 27% Mid-Continent 17% Kimbell’s Rig Count and Market Share Growth 11.6% 12.0% 9.8% 10.4% 10.6% 9.1% 9.6% 6.9% 7.3%
Slide 13: Active Rigs Drilling on Kimbell’s Acreage (as of 9/30/2020)
Active Rigs Drilling on Kimbell’s Acreage (as of 9/30/2020) Kimbell has 30 active rigs (97% horizontal) drilling on our acreage at no cost to us Permian Mid-Continent Well Name Operator County/State Well Name Operator County/State 1 SOTO 43-7 (ALLOC-3SH)-3LB GUIDON MARTIN, TX 21 EULA MAE-6-26-23XHW
Slide 14: Kimbell has an Optimal Balance of Unconventional and Conventional Assets
Kimbell has an Optimal Balance of Unconventional and Conventional Assets Kimbell has approximately 25% of its overall production from conventional assets including certain Enhanced Oil Recovery (EOR) projects. This conventional production provides a base level of production stability that helps faci
Slide 15: 5-Year PDP Decline Forecast
5-Year PDP Decline Forecast Shallow decline rates from both its conventional and unconventional assets help to create Kimbell’s superior overall PDP decline rate of 13%. This is in contrast to many of the working interest companies and some mineral peers that have PDP decline rates of over 30%. Tota
Slide 16: Company Highlights
Company Highlights Net Royalty Acre position of approximately 146,000 acres(1) across multiple producing basins provides diversified scale − Key basins include the Permian and Mid-Con where 44% of the Net Royalty Acres are located ~94% of all onshore rigs in the Lower 48 are in counties where Ki
Slide 17: Section II – Detailed Asset Overview
Section II – Detailed Asset Overview 17
Slide 18: Scale Across Lower 48
Scale Across Lower 48 Over 13.0 million gross acres across 28 states and in every major producing basin ~94% of all onshore rigs in the Lower 48 are in counties where Kimbell holds mineral interests positions(1) (1) Based on DrillingInfo rig count as of 9/30/2020. 18
Slide 19: Kimbell’s Permian Position
Kimbell’s Permian Position ~2.7 million gross and ~23,100 net royalty acres represent approximately 20% and 16%, respectively, of Kimbell’s acreage portfolio 12 rigs operating on KRP’s Permian acreage Q3’20 production of 2,756 Boe/d − Represents 20% of Q3’20 production 41% conventional produ
Slide 20: Kimbell’s Mid-Continent Position
Kimbell’s Mid-Continent Position ~4.0 million gross and ~41,500 net royalty acres represent approximately 29% and 28%, respectively, of Kimbell’s acreage portfolio 5 rigs operating on KRP’s Mid-Con acreage Q3’20 production of 1,729 Boe/d − Represents 12% of Q3’20 production 28% conventional
Slide 21: Kimbell’s Haynesville Position
Kimbell’s Haynesville Position ~786,400 gross and ~7,700 net royalty acres represent approximately 6% and 5%, respectively, of Kimbell’s acreage portfolio 8 rigs operating on KRP’s Haynesville acreage Q3’20 production of 3,284 Boe/d − Represents 23% of Q3’20 production 5% conventional produc
Slide 22: Kimbell’s Appalachia Position
Kimbell’s Appalachia Position ~741,300 gross and ~23,200 net royalty acres represent approximately 5% and 16%, respectively, of Kimbell’s acreage portfolio 1 rig operating on KRP’s Appalachia acreage Q3’20 production of 1,936 Boe/d − Represents 14% of Q3’20 production 15% conventional produc
Slide 23: Kimbell’s Eagle Ford Position
Kimbell’s Eagle Ford Position ~624,100 gross and ~6,700 net royalty acres represent approximately 5% and 5%, respectively, of Kimbell’s acreage portfolio 1 rig operating on KRP’s Eagle Ford acreage Q3’20 production of 1,706 Boe/d − Represents 12% of Q3’20 production 5% conventional productio
Slide 24: Kimbell’s Bakken Position
Kimbell’s Bakken Position ~1.6 million gross and ~6,100 net royalty acres represent approximately 12% and 4%, respectively, of Kimbell’s acreage portfolio 2 rigs operating on KRP’s Bakken acreage Q3’20 production of 671 Boe/d − Represents 5% of Q3’20 production 11% conventional production, 8
Slide 25: Section III – Mineral Market Opportunity
Section III – Mineral Market Opportunity 25
Slide 26: Positioned for Growth Through Acquisitions
Positioned for Growth Through Acquisitions Acquisitions from Current Sponsors Sizing the Minerals Market Existing Kimbell Sponsors’ remaining assets have Total Minerals Market Size(1): ~$338 billion production and reserve characteristics similar to Kimbell’s existing portfolio Total Public Company
Slide 27: Highest Cash Flow Yield Across Multiple Sectors
Highest Cash Flow Yield Across Multiple Sectors U.S. oil and gas royalty companies offer an attractive 7.2% yield versus the rest of the public space, including integrated companies and large cap E&Ps. In addition, royalty companies offer far superior cash yields as compared to the precious metals a
Slide 28: Appendix
KIMBELL ROYALTY PARTNERS Appendix 28
Slide 29: History
History Kimbell has a strong track record of success as a natural consolidator in the mineral and royalty industry With a Closed Closed drop Entered Closed $36 million 1998 February 2017 July 2018 December 2018 June 2019 December 2019 handshake acquisition of down into joint acquisition of agreement
Slide 30: Production and Net Royalty Acreage Overview
Production and Net Royalty Acreage Overview Q3’20 Production from Some of the Most Net Royalty Acres(2) Economic Areas (Boe/d)(1) Rockies Bakken Other 5% 5% 25% Mid-Continent Haynesville 28% Other 23% 9% Rockies <1% Eagle Ford 14,160 Boe/d Eagle Ford 145,918 12% Permian 5% 20% Bakken 4% Permian Mid-
Slide 31: Defining a Net Royalty Acre
Defining a Net Royalty Acre The calculation of a Net Royalty Acre differs across industry participants Kimbell calculates its Net Royalty Acres(1) as follows: Net Mineral Acres x Royalty Interest(2) − This methodology provides a clear and easily understandable view of Kimbell’s acreage position Ro
Slide 32: Mineral Interests Generally Senior to All Claims in Capital Structure
Mineral Interests Generally Senior to All Claims in Capital Structure In many states, mineral and royalty interests are considered by law to be real property interests and are thus afforded additional protections under bankruptcy law Mineral Interest owner entitled to ~15-25% of production revenue S
Slide 33: Overview of Mineral & Royalty Interests
Overview of Mineral & Royalty Interests Minerals NPRIs ORRIs Perpetual real-property interests that Nonparticipating royalty interests Overriding royalty interests grant oil and natural gas ownership under a tract of land Royalty interests that are carved out Royalty interests that burden
Slide 34: Historical Selected Financial Data
Historical Selected Financial Data Non-GAAP Reconciliation (in thousands) Three Months Ended September 30, 2020 Net loss $ (25,677) Depreciation and depletion expense 10,705 Interest expense 1,603 Benefit from income taxes (694) Consolidated EBITDA $ (14,063) Impairment of oil and natural gas proper
Kimbell Royalty Partners — Q3 2020 Earnings Presentation on 6ix