#United States #Fort Worth #Kimbell Royalty #Midland Basin #Oil Acquisition

Kimbell Royalty Partners Strengthens Its Position with $231 Million Acquisition

In an exciting development for the oil and gas sector, Kimbell Royalty Partners, LP (NYSE KRP) has made a significant investment in the Midland Basin with a $231 million acquisition of mineral and royalty interests located under the renowned Mabee Ranch. This acquisition spans over 68,000 gross acres and is set to propel Kimbell's operational capabilities to new heights.

Key Highlights of the Acquisition

The acquisition not only enhances Kimbell's asset portfolio but is also anticipated to be immediately accretive to its distributable cash flow per unit. As outlined in the company's reports, the deal is expected to yield an estimated acceleration of cash flow benefits over the next five years. Among the intriguing points about this acquisition:

• - Rich Resource Base: The new interests include approximately 875 producing wells situated in a prime section of the Midland Basin, which is known for its prolific oil and gas production. With these assets, Kimbell expects an average production of around 1,842 barrels of oil equivalent (Boe) per day in 2025, of which 60% will be oil and 17% natural gas.
• - Strategic Operators: Kimbell has secured royalty interests tied to operations conducted by top-tier exploration and production (EP) companies, including ConocoPhillips, Diamondback Energy, and ExxonMobil. This collaboration is likely to strengthen Kimbell's operational efficiencies and output.
• - Physical Portfolio: The acquired assets are located in Martin County (63%) and Andrews County (37%), both known for their rich oil and gas reservoirs.

Financial Overview

Under the terms of the transaction, Kimbell has the option to fund the acquisition through a combination of approximately $207 million in cash and 1.4 million common units valued at around $24 million. This mixed payment approach enables Kimbell to maintain a strong balance sheet while expanding its asset base.

As of October 1, 2024, the acquired assets are projected to provide an income of around $30.9 million at current pricing levels. Analysts suggest that the acquisition will enhance Kimbell's net liquids production weighting from 48% to 51%, showcasing an attractive growth profile over the coming years.

Future Implications

The outlook for Kimbell Royalty Partners post-acquisition is optimistic. With an increase in net drilling inventory of approximately 19%, the company is well-positioned for sustained growth. The effective management of production decline rates, projected to remain around 14% over the next five years, further underscores Kimbell's stability and commitment to maximizing production output.

Bob Ravnaas, Chairman and Chief Executive Officer of Kimbell, underlined the importance of this acquisition, noting its potential to enhance cash flow and production capabilities significantly. He highlighted the strategic advantages offered by the portfolio's features, which include immediate cash generation, long-term growth prospects, and a solid inventory for future development.

As Kimbell Royalty Partners continues its role as a leading consolidator in the U.S. oil and gas industry, this acquisition serves as a testament to its strategic vision and operational expertise. The expected closing of the acquisition is set for the first quarter of 2025, pending customary conditions, setting the stage for a promising future in the Midland Basin.

In summary, Kimbell's move to acquire valuable assets in the Midland Basin not only consolidates its position as a dominant player in the oil and gas industry but also promises substantial growth opportunities in the years to come. With a strong commitment to maximizing resource extraction and maintaining efficient operations, Kimbell is on a trajectory of remarkable expansion and success in the sector.