Kimbell Royalty Partners · NYSE:KRP
Kimbell Royalty Partners — Q2 2020 Earnings Presentation
34 slides from Kimbell Royalty Partners's earnings presentation, Aug 7, 2020
Slide 1: Fall 2020 Investor Presentation
FALL 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 Q2’20 Revenue by Basin(10) Pure play mineral company with diverse portfolio of interests in the highest growth shale basins and stable conventional fields with shallow decline rates Other Permian 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)(5) 14.1 143.2 143.2 143.2 143.8 143.8 145.9 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'19 3Q'19 4Q'
Slide 11: DUC and Permit Inventory
DUC and Permit Inventory As of June 30, 2020, Kimbell had 806 gross (2.98 net) drilled but uncompleted wells (“DUCs”) and 611 gross (2.25 net) permitted locations on its acreage(1) Basin Gross DUCs(2) Gross Permits(2) Net DUCs(2) Net Permits(2) Permian 202 187 0.83 0.65 Mid-Continent 106 94 0.28 0.0
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 Rockies Eagle Ford 7% 4% Permian 38% Bakken 17% 29 Rigs 2 Appalachia 10% Haynesville Mid-Continent 17% 7% Kimbell’s Rig Count and Market Share Growth 11.6% 9.6% 9.8% 10.4% 10.6% 9.1% 6.9% 7.3% 89 8
Slide 13: Active Rigs Drilling on Kimbell's Acreage
Active Rigs Drilling on Kimbell’s Acreage (as of 6/30/2020) Kimbell has 29 active rigs (93% horizontal) drilling on our acreage at no cost to us Permian Appalachia Well Name Operator County/State Well Name Operator County/State 1 MALDIVES 15-27 FED COM-234H DEVON EDDY, NM 22 BEHREND-ROSS-10H SWN BRA
Slide 14: Optimal Balance of Unconventional and Conventional Assets
Kimbell has an Optimal Balance of Unconventional and Conventional Assets Kimbell has approximately 24% 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 ~95% 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 ~95% 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 6/30/2020. 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 11 rigs operating on KRP’s Permian acreage Q2’20 run-rate production of 2,387 Boe/d − Represents 17% of Q2’20 run-rate production 40%
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 2 rigs operating on KRP’s Mid-Con acreage Q2’20 run-rate production of 1,826 Boe/d − Represents 13% of Q2’20 run-rate production
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 5 rigs operating on KRP’s Haynesville acreage Q2’20 run-rate production of 2,530 Boe/d − Represents 18% of Q2’20 run-rate production 5% c
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 3 rigs operating on KRP’s Appalachia acreage Q2’20 run-rate production of 2,077 Boe/d − Represents 15% of Q2’20 run-rate production 15%
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 Q2’20 run-rate production of 1,594 Boe/d − Represents 11% of Q2’20 run-rate production 5% conv
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 5 rigs operating on KRP’s Bakken acreage Q2’20 run-rate production of 760 Boe/d − Represents 5% of Q2’20 run-rate production 10% conventi
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): ~$330 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 6.4% 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 Q2’20 Production from Some of the Most Net Royalty Acres(2) Economic Areas (Boe/d)(1) Other Other 25% Haynesville Mid-Continent 17% 18% 28% Rockies 4% Rockies <1% Bakken Appalachia Eagle Ford 145,918 5% 14,069 Boe/d 15% 5% Bakken Eagle Ford 4% 11% Permian
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 June 30, 2020 Net loss $ (76,790) Depreciation and depletion expense 12,026 Interest expense 1,666 Consolidated EBITDA $ (63,098) Impairment of oil and natural gas properties 65,536 Unit-based compensation 2
Kimbell Royalty Partners — Q2 2020 Earnings Presentation on 6ix