FORT WORTH, Texas - Kimbell Royalty Partners, LP (NYSE: NYSE:KRP), a prominent owner of oil and gas mineral and royalty interests with a market capitalization of $1.55 billion, announced the acquisition of mineral and royalty interests from a private seller for approximately $231 million. The transaction, which is expected to close in the first quarter of 2025, includes interests under the Mabee Ranch in the Midland Basin, spanning over 68,000 gross acres. According to InvestingPro data, KRP maintains impressive gross profit margins of 93.2% and currently trades near its 52-week high, reflecting strong market confidence in its business model.
The acquired assets, currently producing about 1,842 barrels of oil equivalent per day (Boe/d), are expected to be immediately accretive to Kimbell's distributable cash flow per unit. The company anticipates that the acquisition will enhance its daily production by roughly 8% and decrease cash general and administrative expenses per Boe by about 7%. With a solid dividend yield of 10.12% and strong financial health metrics according to InvestingPro, Kimbell continues to demonstrate its commitment to shareholder returns while maintaining operational efficiency. With this move, Kimbell aims to bolster its position in the Permian Basin, which is already the company's leading production area.
The acquisition brings additional net drilled but uncompleted wells (DUCs) and net permitted locations, representing an estimated 16% increase in Kimbell's major net well inventory. The addition of these assets is projected to increase Kimbell's net wells needed to maintain flat production slightly, from 5.8 to 6.5 net wells.
Bob Ravnaas, CEO of Kimbell's general partner, highlighted the strategic nature of the acquisition, noting the excellent reservoir quality and long-term production growth potential of the assets. The assets are operated by leading E&P companies, including ConocoPhillips (NYSE:COP), Diamondback (NASDAQ:FANG) Energy, and ExxonMobil (NYSE:XOM), offering potential for development and production growth.
The transaction will be funded through a combination of cash and common units of Kimbell Royalty Partners, with the final mix to be determined at closing. Following the acquisition, Kimbell's total acreage will exceed 17 million gross acres, with over 130,000 gross wells and 92 active rigs, representing about 16% of the total active land rigs in the continental United States. The company's strong operational position is complemented by robust financial metrics, including a healthy current ratio of 5.2 and impressive revenue growth of 30.47% over the last twelve months. For detailed analysis and additional insights, investors can access comprehensive research reports and financial metrics through InvestingPro's extensive database of over 1,400 US equities.
This acquisition is based on a press release statement and is subject to customary closing conditions. The effective date of the transaction is expected to be October 1, 2024. Kimbell has emphasized that the acquisition is in line with its strategy as a leading consolidator in the U.S. oil and gas royalty sector.
In other recent news, Kimbell Royalty Partners reported strong Q3 2024 results, demonstrating a healthy balance sheet and operational growth. The company announced a cash distribution of $0.41 per common unit, marking significant cumulative distributions since its IPO. Q3 revenues reached $71.1 million, with net income around $25.8 million, and adjusted EBITDA at $63.1 million. They also reported a 34% increase in net drilled but uncompleted wells, primarily in the Permian Basin.
Kimbell Royalty Partners further revealed plans to redeem at least half of the Apollo Preferred Stock by May 2025. Management maintained a positive outlook for production and future acquisitions, with a strategic focus on capital deployment and development opportunities, particularly in the Permian and Appalachian Basins. The company confirmed the 2024 production guidance with a daily production midpoint of 24,000 BOE per day.
These recent developments highlight Kimbell's commitment to reducing preferred stock liabilities and its strategic growth plans. The company is strategically focusing on capital deployment in the Permian Basin and exploring opportunities in less competitive areas like the Appalachian Basin. However, they remain cautious about competitive dynamics and balance sheet impact when considering smaller acquisitions under $5 million.
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