Kimbell Royalty Partners, LP (KRP) Bundle
Understanding Kimbell Royalty Partners, LP (KRP) Revenue Streams
Understanding Kimbell Royalty Partners, LP’s Revenue Streams
For the three months ended September 30, 2024, total revenues were $83,785,439, a significant increase from $67,204,273 for the same period in 2023. The year-over-year growth rate for total revenues was approximately 24.8%.
Breakdown of Primary Revenue Sources
- Oil, natural gas, and NGL revenues for Q3 2024 were $71,069,593, up from $69,237,603 in Q3 2023.
- Lease bonus and other income totaled $3,162,656 in Q3 2024, compared to $2,543,240 in Q3 2023.
- The gain on commodity derivative instruments for Q3 2024 was $9,553,190, compared to a loss of ($4,576,570) in Q3 2023.
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenues reached $242,592,275, an increase from $194,873,007 in the same period of 2023, reflecting a growth rate of approximately 24.5%.
Contribution of Different Business Segments to Overall Revenue
The following table illustrates the revenue contributions from various segments for the nine months ended September 30, 2024 and 2023:
| Revenue Source | 9M 2024 Revenue | 9M 2023 Revenue | Percentage Change |
|---|---|---|---|
| Oil, Natural Gas, and NGL Revenues | $235,528,275 | $183,635,976 | 28.3% |
| Lease Bonus and Other Income | $4,261,432 | $5,021,766 | -15.1% |
| Gain (Loss) on Commodity Derivative Instruments, Net | $2,802,568 | $6,215,265 | -55.0% |
Analysis of Significant Changes in Revenue Streams
The increase in oil, natural gas, and NGL revenues was primarily driven by higher production volumes, particularly following acquisitions such as the LongPoint Acquisition. Production volumes totaled 2,193,876 Boe for Q3 2024, an increase of 374,419 Boe from 1,819,457 Boe in Q3 2023.
Average prices received during Q3 2024 were $78.09 per Bbl of oil, $1.60 per Mcf of natural gas, and $21.49 per Bbl of NGL, reflecting a decrease in oil and natural gas prices compared to the previous year.
Overall, the revenue growth trajectory remains strong, supported by acquisitions and increased production efficiency. However, fluctuations in commodity prices and the performance of derivative instruments may impact future revenue streams.
A Deep Dive into Kimbell Royalty Partners, LP (KRP) Profitability
A Deep Dive into Kimbell Royalty Partners, LP's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was calculated as follows:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenues | $83,785,439 | $67,204,273 |
| Total Costs and Expenses | $49,581,119 | $41,914,215 |
| Gross Profit | $34,204,320 | $25,290,058 |
| Gross Profit Margin | 40.8% | 37.5% |
Operating Profit Margin: The operating profit margin for the same periods is detailed below:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Operating Income | $34,204,320 | $25,290,058 |
| Operating Profit Margin | 40.8% | 37.5% |
Net Profit Margin: The net profit margin showcases the overall profitability:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Income | $25,805,447 | $18,481,038 |
| Net Profit Margin | 30.8% | 27.5% |
Trends in Profitability Over Time: Analyzing the profitability metrics over the past year indicates a positive trend:
| Metric | 2024 (YTD) | 2023 (YTD) |
|---|---|---|
| Gross Profit Margin | 40.8% | 37.5% |
| Operating Profit Margin | 40.8% | 37.5% |
| Net Profit Margin | 30.8% | 27.5% |
Comparison with Industry Averages: The following table compares KRP's profitability ratios with industry averages:
| Metric | KRP (Q3 2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 40.8% | 35.0% |
| Operating Profit Margin | 40.8% | 30.0% |
| Net Profit Margin | 30.8% | 20.0% |
Operational Efficiency Analysis: The analysis of operational efficiency reveals the following:
- Cost Management: Total costs for Q3 2024 were $49,581,119 compared to $41,914,215 in Q3 2023, reflecting a 18.1% increase in costs.
- Gross Margin Trends: The gross margin improved from 37.5% in Q3 2023 to 40.8% in Q3 2024, indicating better cost management and increased revenue generation.
Debt vs. Equity: How Kimbell Royalty Partners, LP (KRP) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported total debt levels of $252.2 million under its secured revolving credit facility. This reflects a decrease from prior levels, as the company repaid approximately $47.0 million of outstanding borrowings during the same period .
The debt-to-equity ratio stands at approximately 0.40, calculated by dividing total liabilities of $271.6 million by total unitholders' equity of $627.5 million . This ratio is below the industry average, which typically ranges from 0.5 to 1.0 for companies in the energy sector, indicating a conservative approach to leveraging .
Recent debt activity includes the issuance of 325,000 Series A Cumulative Convertible Preferred Units in September 2023, generating gross proceeds of $325 million. These proceeds were primarily utilized to finance the LongPoint Acquisition . The company's credit rating has been stable, supported by compliance with all covenants in its credit agreements .
The balance between debt financing and equity funding is strategically managed. For instance, cash available for distribution on common units for the third quarter of 2024 was reported at $44.2 million, with 25% allocated for debt repayment . This policy underscores a commitment to maintaining liquidity while pursuing growth opportunities through acquisitions.
| Metric | Amount |
|---|---|
| Total Debt | $252.2 million |
| Total Liabilities | $271.6 million |
| Total Unitholders' Equity | $627.5 million |
| Debt-to-Equity Ratio | 0.40 |
| Series A Preferred Units Issued | 325,000 |
| Proceeds from Series A Preferred Units | $325 million |
| Cash Available for Distribution (Q3 2024) | $44.2 million |
| Percentage of Cash Allocated to Debt Repayment | 25% |
This structured approach to managing debt and equity demonstrates the company’s focus on financial health and growth potential amid a fluctuating market environment.
Assessing Kimbell Royalty Partners, LP (KRP) Liquidity
Assessing Kimbell Royalty Partners, LP's Liquidity
Current Ratio: As of September 30, 2024, the current assets totaled $59,759,000 and current liabilities amounted to $29,859,000, resulting in a current ratio of 2.00.
Quick Ratio: The quick assets, excluding inventories, were $57,759,000, leading to a quick ratio of 1.93.
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. The working capital position as of September 30, 2024, stands at $29,900,000, showing an increase from $20,000,000 reported in September 2023.
Cash Flow Statements Overview
| Cash Flow Category | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $194,344,819 | $114,958,713 |
| Net Cash Used in Investing Activities | $(175,808) | $(246,113,134) |
| Net Cash (Used in) Provided by Financing Activities | $(190,455,505) | $145,656,712 |
| Net Increase in Cash and Cash Equivalents | $3,713,506 | $14,502,291 |
Potential Liquidity Concerns or Strengths
The primary sources of liquidity include cash flows from operations and financing arrangements. For the nine months ended September 30, 2024, the cash flow from operations increased by $79,386,106 compared to the same period in 2023. However, significant cash outflows were noted in financing activities, amounting to $(190,455,505) as distributions paid to unitholders impacted liquidity.
The available cash for distribution on common units for the third quarter of 2024 was calculated at $44,228,532, reflecting a healthy liquidity position despite substantial distributions made during the period.
Is Kimbell Royalty Partners, LP (KRP) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios and metrics, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 16.7 based on a trailing twelve months (TTM) net income of $50.3 million and a market capitalization of approximately $840 million.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 1.6, with total equity of $532 million and total shares outstanding of 80.97 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 6.9, derived from an enterprise value of approximately $1.1 billion and an EBITDA of $179 million for the last twelve months.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $10.50 and a high of $17.00. Currently, the stock is trading at $13.50.
Dividend Yield and Payout Ratios
The dividend yield is currently at 8.0%, based on an annual distribution of $1.08 per share. The payout ratio is 60% of the earnings available for distribution.
Analyst Consensus
Analysts currently have a consensus rating of Hold with a price target averaging $15.00, indicating a potential upside of approximately 11% from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 16.7 |
| P/B Ratio | 1.6 |
| EV/EBITDA Ratio | 6.9 |
| 12-Month Stock Price Range | $10.50 - $17.00 |
| Current Stock Price | $13.50 |
| Dividend Yield | 8.0% |
| Payout Ratio | 60% |
| Analyst Consensus Rating | Hold |
| Average Price Target | $15.00 |
Key Risks Facing Kimbell Royalty Partners, LP (KRP)
Key Risks Facing Kimbell Royalty Partners, LP
Industry Competition: The oil and gas industry is highly competitive, with numerous players competing for the same resources. The company's ability to maintain or grow its market share is challenged by both established firms and new entrants.
Regulatory Changes: The oil and gas sector is subject to extensive regulation at both federal and state levels. Changes in environmental regulations or taxation policies can significantly impact operational costs and profitability.
Market Conditions: Fluctuations in commodity prices directly affect revenue. For instance, the average prices for oil and natural gas saw a decline, with oil prices averaging $77.48 per Bbl and natural gas averaging $2.45 per Mcf as of March 31, 2024, down from $90.97 per Bbl and $5.95 per Mcf a year earlier, representing declines of 14.8% and 58.8% respectively .
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Numerous competitors in the oil and gas sector | Pressure on margins and market share |
| Regulatory Changes | Potential changes in environmental laws and taxes | Increased operational costs |
| Market Conditions | Commodity price volatility | Revenue fluctuations |
Operational Risks: Recent earnings reports noted a $6.0 million impairment on oil and natural gas properties during the nine months ended September 30, 2024, primarily due to decreased average prices . This reflects the operational risks associated with asset valuation under fluctuating market conditions.
Financial Risks: The company reported an increase in interest expense, amounting to $20.7 million for the nine months ended September 30, 2024, compared to $18.5 million in the previous year. This rise is attributed to a higher long-term debt balance .
Strategic Risks: The company's strategy includes growth through acquisitions, such as the MB Minerals and LongPoint acquisitions. These acquisitions pose risks including integration challenges and potential overvaluation of acquired assets.
Mitigation Strategies: The company has undertaken measures to manage its financial risk by adjusting its capital structure and focusing on cash flow generation. The cash available for distribution on common units was reported at $139.2 million for the nine months ended September 30, 2024 .
General and Administrative Expenses: There has been a noted increase in general and administrative expenses, which rose to $29.2 million for the nine months ended September 30, 2024, compared to $26.6 million the previous year .
| Financial Metric | 2024 | 2023 |
|---|---|---|
| Net Income | $50,328,915 | $65,177,607 |
| Adjusted EBITDA | $167,265,259 | $111,778,887 |
| Cash Available for Distribution | $139,163,747 | $98,388,557 |
In summary, the company faces multiple risks that could impact its financial health, including competition, regulatory changes, market conditions, operational challenges, and financial obligations. Its strategies for mitigating these risks include careful management of cash flows and attention to operational efficiencies.
Future Growth Prospects for Kimbell Royalty Partners, LP (KRP)
Future Growth Prospects for Kimbell Royalty Partners, LP
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Acquisitions: The recent MB Minerals Acquisition and LongPoint Acquisition are expected to enhance production volumes significantly. The LongPoint Acquisition has already contributed to a production increase of 374,419 Boe during Q3 2024 compared to the same period in 2023.
- Market Expansion: The company has targeted expanding its mineral and royalty interests in oil and natural gas properties, leveraging its strong position in favorable geological areas.
- Production Innovations: Advancements in extraction technologies and methods are anticipated to boost production efficiency and reduce costs.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, the oil, natural gas, and NGL revenues were $71.1 million, reflecting an increase from $69.2 million in the same quarter of 2023. Total revenues for the nine months ended September 30, 2024, were $242.6 million, up from $194.9 million in 2023.
Adjusted EBITDA for the nine months ended September 30, 2024, was $203.1 million, compared to $143.1 million for the same period in 2023. Net income attributable to common units for the same period was $50.3 million, up from $28.9 million in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on:
- Partnerships with Exploration Companies: Collaborating with exploration companies for joint ventures to explore new territories.
- Investment in Technology: Committing resources to technology that enhances recovery rates and reduces operational costs.
Competitive Advantages That Position the Company for Growth
The company has several competitive advantages:
- Diverse Asset Portfolio: A well-diversified portfolio across various oil and gas properties mitigates risks associated with price volatility.
- Strong Cash Flow Generation: Cash flows from operations for the nine months ended September 30, 2024, were $194.3 million, an increase of $79.3 million from $115.0 million in 2023.
| Financial Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Oil, Natural Gas, and NGL Revenues | $71.1 million | $69.2 million | $242.6 million | $194.9 million |
| Adjusted EBITDA | $63.1 million | $55.8 million | $203.1 million | $143.1 million |
| Net Income Attributable to Common Units | $17.4 million | $13.6 million | $50.3 million | $28.9 million |
| Cash Flow from Operations | $62.4 million | $36.4 million | $194.3 million | $115.0 million |
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Updated on 16 Nov 2024
Resources:
- Kimbell Royalty Partners, LP (KRP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Kimbell Royalty Partners, LP (KRP)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Kimbell Royalty Partners, LP (KRP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.