Kimbell Royalty Partners Reports Record Q2 Results, Raises Distribution 15%

Kimbell Royalty Partners (NYSE: KRP ) reported second-quarter financial results on Friday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Kimbell Royalty Partners reported an outstanding second quarter for 2026, achieving records in oil, natural gas, and NGL revenues, net income, Adjusted EBITDA, and daily production, boosted by the Mesa Royalties acquisition. 47 per common unit, a 15% increase from Q1, reflecting an annualized tax-advantaged yield of approximately 13%. Production increased to 25,830 BOE per day, with a projected rise to 26,967 BOE per day post-Mesa acquisition, while maintaining cash G&A expenses below guidance midpoint, demonstrating operational efficiency. 4x.

S. oil and natural gas royalty industry, planning further acquisitions to expand its portfolio, and expects higher oil prices to drive incremental activity in its oil-weighted basins. Management expressed confidence in continued growth through strategic acquisitions and maintaining a diversified portfolio to enhance cash flow generation and unitholder value. Full Transcript OPERATOR Greetings and welcome to the Kimbell Royalty Partners second quarter 2026 earnings call.

At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. As a reminder, this conference is being recorded.

I'd now like to turn the call over to your host, Zach Vaughn with Investor Relations. Thank you. You may begin. Zach Vaughn, Investor Relations Thank you, operator, and good morning, everyone.

Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the second quarter, which ended June 30, 2026. com. Information recorded on this call speaks only as of today, August 7, 2026. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.

I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are considered forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call, which by their nature are uncertain and outside of the company's control. Actual results may differ materially. Please refer to today's earnings release for our disclosure on forward-looking statements.

These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures including Adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements.

I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners' Chairman and Chief Executive Officer. Bob Ravnaas, Chief Executive Officer Bob, thank you, Zach, and good morning, everyone. We appreciate you joining us this morning. With me today are several members of our senior management team including R.

Davis Ravnaas, our President and Chief Financial Officer, Matthew Daly, our Chief Operating Officer, and Blayne Rhynsburger, our Controller. To start off, we are pleased to report an outstanding quarter for Kimbell, which includes records for oil, natural gas and NGL revenues, net income, consolidated Adjusted EBITDA, lease bonuses, average daily production and cash available for distribution. We also closed on our previously announced Mesa Royalties acquisition in June, which has begun to contribute nicely to our overall results. And last month we announced the second drop-down acquisition since our IPO.

Both of these transactions are expected to add meaningful production and drive cash flow growth for years to come. Production during the quarter grew both organically and through acquisitions, resulting in oil, natural gas and NGL revenues exceeding $100 million for the first time, while cash G&A per BOE remained below the midpoint of guidance, generating positive operating leverage and distribution growth. S. land rigs at 16%.

47 per common unit, up 15% from Q1 2026, as we continue to focus on returning value to unitholders. This distribution reflects an annualized tax-advantaged yield of approximately 13% based on yesterday's closing price. Looking ahead, we are excited to layer in production from our drop-down acquisition which is slated to close later this month, and are confident in the potential of the combined company on a go-forward basis. We expect both transactions to expand our scale and enhance our cash flow generation for years to come.

We also continue to expect higher oil prices to support a modest uptick in activity across our oil-weighted basins. While oil prices have been especially volatile in recent weeks due to the stops and starts of the Middle East conflict, they remain elevated relative to historical levels and we believe the current forward strip is conducive to incremental activity over time. S. oil and natural gas royalty industry and our role as a leading consolidator in the sector, as evidenced by our announcement of over $360 million in acquisitions over the last 90 days.

S. oil and natural gas royalties remains in the beginning stages and we are encouraged by the opportunities in front of us. We intend to build on this recent activity as we strive to expand our industry-leading portfolio of assets. I'd like to thank all of our employees for their hard work and dedication in driving Kimbell forward and for their role in helping to generate long-term unitholder value.

And now I'll turn the call over to Davis. R. Davis Ravnaas, President and Chief Financial Officer Thanks, Bob, and good morning, everyone. As Bob mentioned, this was another very strong quarter for Kimbell.

We generated several new quarterly records for oil, natural gas and NGL revenues, net income, consolidated Adjusted EBITDA, lease bonuses, average daily production and cash available for distribution. I'll now start by reviewing our financial results for the second quarter. Oil, natural gas and NGL revenues totaled $103 million during the second quarter, which includes nine days of contribution from the acquired production, and it's a new record for Kimbell. Second quarter average daily production was 25,830 BOE per day.

Following the closing of the Mesa Royalties acquisition, run-rate production increased to 26,967 BOE per day. 50 per BOE, below the midpoint of our guidance range and a reflection of our continued operational discipline. 9 million. You will find a reconciliation of both consolidated Adjusted EBITDA and cash available for distribution at the end of our news release.

47 per common unit for the second quarter, an increase of 15% from the prior quarter. We estimate that approximately 47% of this distribution is expected to be considered return of capital and not subject to dividend taxes, further enhancing the after-tax return to our common unitholders. This represents a cash distribution payment to common unitholders and equates to 75% of cash available for distribution, and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell's secured revolving credit facility. 70 per unit.

This reflects our confidence in the underlying strength of the business and our view that the shares continue to trade below intrinsic value, making the repurchase an efficient use of capital while maintaining balance sheet discipline. Moving now to our balance sheet and liquidity. Prior to quarter end, on June 24, 2026, we increased the borrowing base and aggregate commitments on Kimbell's secured revolving credit facility from $625 million to $660 million. This expansion both enhances our financial flexibility and supports our ongoing growth initiatives.

4 times. 3 million in undrawn capacity under the secured revolving credit facility at quarter end. We continue to maintain a conservative balance sheet and remain very comfortable with our strong financial position, financial flexibility and the ongoing support of our bank partners. Today we are also affirming our financial and operational guidance ranges for 2026.

As a reminder, our full 2026 guidance outlook was included in the Q4 2025 earnings release. We can expect to update guidance upon the closing of the drop-down acquisition that was announced on July 17, 2026. We remain confident about the prospects for continued development in 2026 given the number of rigs actively drilling on our acreage, especially in the Permian, higher commodity prices, as well as our line-of-sight wells exceeding our maintenance well counts. S.

oil and natural gas royalty sector, which we estimate at approximately $800 billion in size. S. S. basins.

With that, operator, we are now ready for questions. OPERATOR Thank you. If you'd like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

You may press Star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We ask that you each keep to one question and one follow-up. Thank you.

Our first question comes from the line of Tim Rezvan with KeyBanc Capital Markets. Please proceed with your question. Tim Rezvan, Analyst at KeyBanc Capital Markets Good morning, folks. Thanks for taking our questions.

Bob Ravnaas, Chief Executive Officer Morning, Tim. R. Davis Ravnaas, President and Chief Financial Officer Good morning. Tim Rezvan, Analyst at KeyBanc Capital Markets I thought I'd start—you know, I thought we might get a guidance update today.

It sounds like we'll have to wait for the drop-down to close in a couple weeks, but as we look and see production kind of about to hit, you know, 30,000 a day on equivalents. Can you talk about, you know, the acquisitions you're bringing in? Do they have similar kind of production profiles to the legacy assets? And kind of where I'm going, I know you won't give us a number, but should we sort of expect from this pro forma business kind of a steady growth CAGR like we've seen on the legacy assets?

Bob Ravnaas, Chief Executive Officer Yes. The short answer to that, Tim, is yes. We're always looking to add to our portfolio assets which we think are very complementary and in line with what we already own. And then we obviously want to add those in such a way that it's immediately accretive to our cash flow and accretive to DCF over time.

So, yeah, I would just assume that acquisitions that we make just continue to expand the size of the company with very similar growth and inventory characteristics. Tim Rezvan, Analyst at KeyBanc Capital Markets Okay. Okay, thank you. As a follow-up, you know, we did see the 5% increase in the credit facility.

I assume that includes Mesa, which closed, but not the drop-down. So I was wondering if you could just kind of talk bigger picture about managing liquidity. You are over 70% drawn on today's facility. And then maybe how—I know I asked this every quarter—but how you're thinking about the trade-offs of keeping the preferreds on the balance sheet.

R. Davis Ravnaas, President and Chief Financial Officer Yeah, great question. Just to confirm, Tim, the latest borrowing base increase was due to Mesa. We already have that incorporated in this number.

Just unclear. Bob Ravnaas, Chief Executive Officer That's correct, Davis. Okay, great. So, Tim, we would expect another increase in the borrowing base as a result of the dropdown, so that'll add additional liquidity.

And going forward, we want to be opportunistic on redeeming the preferred units. There's obviously a trade-off, like you mentioned, between keeping our leverage profile low for covenant purposes and redeeming the prefs. I think you'll see us just continue to dwindle down on the face value of those preferred units over time while also maintaining conservative leverage. For a royalty company we think one and a half times is low.

We may opportunistically go up very slightly to redeem additional preferred units if we think that's in our best interest. So we think about that all the time. And then on liquidity, great point. That's probably one of the things that we think about the most here.

We want to always make sure that we have plenty of liquidity on the balance sheet, and you won't see us make acquisitions that will increase our leverage profile. If anything, we're delevering by using less leverage, at least on an EBITDA basis going forward. So I think that's a positive. That would help our leverage profile and help us redeem those pref securities faster, if all that makes sense.

Tim Rezvan, Analyst at KeyBanc Capital Markets Yeah, no, that's good context. And then if I could just sneak one last one in. Earlier this year, you were pretty candid about seeing an active A&D market. And obviously you've hit a couple bids here and brought in some additional royalty production.

Keith, talk about your peers have said the market's still hot. What are you seeing and how actively are you looking today? Are you ready and willing to transact again if the right deal presents itself? Bob Ravnaas, Chief Executive Officer Yeah, no, look, great question and I'm always happy that you ask that quarterly.

We are always more competitive, usually on assets that are diversified in nature. On the Permian-only deals, that's where we can see competition get out of control. We've been on a couple of large marketed packages recently in the Permian and got absolutely destroyed. I mean, bids that were nearly two times what we were paying, kind of head scratchers.

They weren't huge deals, but multi-hundred-million-dollar packages, so not insignificant. We will do our best on those, understanding our cost of capital constraints, but if someone else is going to pay 75% more than us for an asset, they can have it. So that's what we're seeing on the bid front is the Permian continues to be very hot. I think what happened was, and I'm sure you've heard this from other companies that you follow, when oil prices started going up this year, a lot of people went to market.

And so we continue to see almost on a weekly basis a new acquisition opportunity for us. So I'd say we've had a great year and, you know, frankly surpassing expectations this year in terms of what we've been able to achieve with our cost of capital. We are still in the market looking for acquisitions. We're only eight months into the year.

There's going to be more to come, but we're going to be very selective and obviously we're not going to overpay. Tim Rezvan, Analyst at KeyBanc Capital Markets Okay. Appreciate all the colors. Thank you.

Bob Ravnaas, Chief Executive Officer Of course. OPERATOR Thank you. Our next question comes from the line of Nicholas Armada with Texas Capital. Please proceed with your question.

Nicholas Armada, Analyst at Texas Capital Good morning all and thanks for taking my questions. Bob Ravnaas, Chief Executive Officer Good morning. Nicholas Armada, Analyst at Texas Capital For my first one, lease bonuses were particularly strong during the quarter. Maybe just what drove the increase?

And given the improved commodity backdrop, what are you seeing in terms of leasing interest and competition across your acreage? Are there any basins where activity is maybe picking up a little bit more meaningfully? Bob Ravnaas, Chief Executive Officer Yeah, great, great question.