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Kimbell Royalty Partners, LP owns rights to oil and natural gas production from properties across the continental United States’ onshore basins. Independent operators drill and produce on these properties, then pay Kimbell a share of sales of oil, natural gas and natural gas liquids. Oil supplies most of this revenue. Kimbell receives its share after post-production expenses and taxes, but does not fund drilling, well completion, day-to-day well operations or eventual well closure.
Its income depends on commodity prices and on operators’ decisions to develop and keep producing from the properties; Kimbell does not control those decisions. As existing reserves are depleted, it relies on operators developing more production and on acquiring additional interests, with acquisitions intended to be funded mainly through outside debt and equity. Operators must also meet permitting and conservation requirements, including regulatory limits on production.
The risk section is the longest, dullest part of the filing. This keeps only what can really hurt you: where it hits, how hard, when it plays out.
Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
Black Stone Minerals and Kimbell both buy diversified U.S. mineral and royalty interests, collecting a share of operators’ production sales without paying drilling costs. Black Stone’s leasing and production updates offer a comparison for how operators’ development turns those rights into cash for distributions.
Dorchester Minerals offers a close comparison for Kimbell’s production-linked cash flow: both collect royalties from properties where other companies produce and sell oil and gas. Dorchester also receives a share of an operating partnership’s net profits, so distinguish that income from royalty revenue when comparing cash receipts.
Devon Energy produces and sells oil and gas on Kimbell’s acreage as one of its ten largest operators, paying Kimbell a share of sales while both benefit from stronger commodity prices. Watch Devon’s production on that acreage; most of its oil, gas and natural gas liquids sell at market-sensitive prices.
Diamondback Energy’s operating subsidiary is one of Kimbell’s ten largest operators, so its Permian oil and gas production on Kimbell’s acreage generates sales royalties for Kimbell. Watch its drilling pace and production there: Diamondback controls development across most of its Permian acreage.
EOG Resources is one of Kimbell’s ten largest operators, and the oil, natural gas and natural gas liquids it produces and sells from Kimbell’s acreage directly contribute to Kimbell’s royalties. For Kimbell, production updates on that acreage matter more than EOG’s overseas operations.
Ovintiv is one of Kimbell’s ten largest operators, producing and selling oil and gas from Permian and Anadarko properties that support Kimbell’s royalties. Its U.S. production and development updates are the relevant read-through for Kimbell, rather than its Canadian Montney business.
Occidental Petroleum is one of Kimbell’s ten largest operators, and its oil and gas sales from acreage covered by Kimbell’s interests generate royalties for Kimbell. Watch production on that acreage, rather than Occidental’s company-wide sales volumes, which also include international operations.
ConocoPhillips is one of Kimbell’s ten largest operators, so its drilling decisions and oil and gas sales on Kimbell’s acreage directly affect Kimbell’s royalty receipts. Watch production and realized selling prices there; ConocoPhillips generally sells commodities at prevailing market prices.
Northern Oil and Gas and Kimbell both earn from diversified wells run by other operators, but Northern pays its share of development costs for a share of oil and gas sales, while Kimbell collects royalties without funding drilling. Northern’s new-well proposals offer a view of operator activity: it says lower oil prices typically reduce proposals and its participation.
Granite Ridge Resources and Kimbell both receive revenue from diversified wells run by third parties, but Granite Ridge pays its share of well costs to earn oil and gas sales revenue, unlike Kimbell’s drilling-cost-free royalties. Its Permian production offers a basin comparison for Kimbell, while those costs make their cash flows different.
Permian Resources’ development offers a regional signal for Kimbell’s production outlook because it produces and sells oil and gas in the Permian, where Kimbell holds a substantial portion of its royalty wells. Watch its Delaware Basin drilling and production as a basin comparison, not as evidence of direct royalty payments to Kimbell.
EIA Crude Oil Stocks Change (Oct/16)
EIA stock reports track how much crude oil and fuel are held in storage; changes can move oil prices received by operators and, in turn, the oil royalties Kimbell earns.
Read the stock direction as a possible signal for oil royalties: a build can point to looser supply and pressure on oil prices and Kimbell’s receipts, while a draw can point to tighter supply and support them.
Diamondback Energy, Inc. earningsFANG
Diamondback Energy’s report will show its drilling and production on acreage where Kimbell Royalty Partners, LP holds interests, activity that generates Kimbell’s royalties.
Focus on Diamondback’s drilling pace and production on the relevant Permian acreage, not its company-wide figures. More development and output mean more oil and gas available for sale and can support Kimbell’s royalties; slower activity would put production-linked receipts from this major operator under pressure.
Kimbell Royalty Partners, LP earningsThis company
Kimbell Royalty Partners, LP collects royalties as operators produce and sell oil, gas and natural gas liquids, and this report will show how much cash remains for common unitholders after debt payments and preferred-unit distributions.
Read oil, natural gas and NGL revenue and production alongside operating cash flow, debt repayments and preferred-unit distributions. Steady production and cash flow with money left after debt service would show the business can support common-unit distributions; weaker production or prices, or more cash going to debt and preferred claims, would leave less for common unitholders.
