Kimbell Royalty Partners Stock: Overlooked 13.7%-Yielder’s Price Has 41% Upside
February 9, 2024
KRP Stock Has Never Missed a Quarterly Payout
Energy stocks took a big hit in 2020, which wasn’t a big surprise. The 2020 COVID-19 crisis shuttered the global economy, so the demand for oil and gas cratered. To preserve cash, many energy companies cut or suspended their dividends.
However, one often-ignored energy company that hasn’t missed a beat when it comes to paying quarterly dividends is Kimbell Royalty Partners LP (NYSE:KRP).
Although the price of Kimbell Royalty Partners stock was kicked off a cliff during the opening months of the 2020 pandemic, the company still paid quarterly dividends throughout that year.
Note that, as an energy play, KRP stock’s payouts fluctuate based on supply/demand and pricing, so its quarterly dividends were lower in 2020 than in 2019. They rebounded relatively quickly, though, and have been going up ever since.
In fact, in November 2023, Kimbell Royalty paid out $0.51 per unit, its second-highest quarterly dividend since the partnership went public in 2017. Moreover, that $0.51 payout was up by 31% from the $0.39 per unit the company paid out in August 2023. (Source: “Distribution History,” Kimbell Royalty Partners LP, last accessed January 29, 2024.)
Kimbell Royalty Partners stock’s $0.51 dividend works out to a yield of 13.72% (as of this writing).
Of note, KRP stock’s November 2023 distribution accounted for 75% of the partnership’s cash available for distribution in the third quarter. Kimbell Royalty Partners LP said it will use the remaining 25% of its cash available for distribution to pay down a portion of its outstanding borrowing under its secured revolving credit facility.
Since May 2020 (excluding the expected paydown from the third quarter of 2023), the company has paid down approximately $119.8 million of the outstanding borrowings under its secured revolving credit facility.
| Period | Dividend Per Unit |
| 2023 Q1–Q3 | $1.25 |
| 2022 | $1.99 |
| 2021 | $1.32 |
| 2020 | $0.68 |
| 2019 | $1.56 |
| 2018 | $1.70 |
| 2017 | $1.20 |
(Source: Ibid.)
About Kimbell Royalty Partners LP
Kimbell Royalty Partners and its subsidiaries own mineral and royalty interests in oil and natural gas properties in the U.S.
The company’s portfolio includes interests in more than 127,000 gross wells across 17 million gross acres in 28 states, including the highest-growth shale basins and stable conventional energy fields. (Source: “Winter 2023 Investor Presentation,” Kimbell Royalty Partners LP,” November 2, 2023.)
Roughly 97% of all onshore rigs in the Lower 48 states are in counties where Kimbell has mineral interests.
Three of the partnership’s well-known operators are Exxon Mobil Corp (NYSE:XOM), Occidental Petroleum Corp (NYSE:OXY), and Pioneer Natural Resources Co (NYSE:PXD).
As a limited partnership, Kimbell Royalty Partners LP doesn’t pour money into new wells. Instead, it milks the positions it already has. The company’s high-quality, diverse asset base has (with the current technology) more than 17 years of drilling inventory across its major properties.
As of the end of the third quarter of 2023, the partnership had 99 active rigs on its acreage at no cost to the company. It lets the operators do all the heavy lifting and spending. Of those rigs, 57% were being operated by publicly traded companies and 43% were being operated by private businesses.
Kimbell Royalty Partners LP is always growing. Since its initial public offering (IPO) in 2017, the company has completed more than $1.8 billion worth of merger-and-acquisition transactions, grown its run-rate average daily production by more than six times, and returned 54% of its $18.00/unit IPO price via quarterly cash dividends.
$455-Million Acquisition of Mineral & Royalty Interests
In September 2023, Kimbell Royalty Partners closed on its previously announced $455.0-million acquisition of mineral and royalty interests in the Permian Basin and Mid-Continent oil field. Those interests were held by a private seller. (Source: “Kimbell Royalty Partners Closes $455 Million Acquisition of Permian and Mid-Con Mineral and Royalty Interests in Cash Transaction,” Kimbell Royalty Partners LP, September 13, 2023.)
As part of the agreement, Kimbell Royalty Partners became entitled to all of the cash flow from the production attributable to the acquired assets since June 1, 2023. The revenues and certain other operating statistics were to be recorded for the acquisition beginning on the closing date of September 13, 2023.
Kimbell Royalty Partners LP estimated that, as of June 1, 2023, the acquired assets produced about 4,840 barrels of oil equivalent per day (BOE/d). The company also estimated that the acquired assets will produce about 5,049 BOE/d in 2024.
Management Reported Record Q3 Results
Investors never get tired of hearing a company report record-high results. Kimbell Royalty Partners unitholders got to hear the company report record first-quarter, second-quarter, and third-quarter results.
For the third quarter ended September 30, 2023, management reported record-high run-rate production of 19,777 BOE/d. That total included 18 days of production from the company’s aforementioned acquisition of mineral and royalty interests from a private seller. (Source: “Kimbell Royalty Partners Announces Record Third Quarter 2023 Results,” Kimbell Royalty Partners LP, November 2, 2023.)
The partnership’s third-quarter oil, natural gas, and natural gas liquid (NGL) revenues increased by 21.5% quarter-over-quarter to $69.2 million.
Kimbell Royalty Partners LP reported third-quarter net income attributable to common units of $13.6 million, or $0.20 per unit, compared to $13.5 million, or $0.24 per unit, in the second quarter of 2023.
The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the third quarter of 2023 were $55.8 million, up by 24% from $45.0 million in the previous quarter.
“We are very pleased to announce another record quarter with new all-time highs set in production, rig count, [drilled but uncompleted wells] and permits,” said Robert Ravnaas, the chairman and CEO of Kimbell Royalty GP, LLC, which is Kimbell Royalty Partners LP’s general partner. (Source: Ibid.)
“Activity on our acreage remains strong and we now have the highest market share ever recorded by Kimbell of the overall U.S. land rig count at 17%.”
The odds of Kimbell Royalty Partners LP reporting record fourth-quarter 2023 results are looking good, but we won’t know for sure until February 21, when management announces those results before the markets open.
Management boosted its production guidance for the fourth quarter to the range of 22,500–24,300 BOE/d.
Kimbell Royalty Partners LP also projects that its fourth-quarter 2023 oil production as a percentage of the company’s net production climbed to the range of 32%–36%, its natural gas production as a percentage of its net production grew to the range of 48%– 52%, and its NGL production as a percentage of its net production advanced to the range of 14%–18%.
KRP Units Have 41% Upside
Kimbell Royalty Partners units have traded in a tight range over the last year, between $12.76 and $16.56 per unit.
While the price of KRP units is up by just 3.8% over the last six months and 1.01% year-over-year (as of this writing), Wall Street analysts see a brighter future for Kimbell Royalty Partners stock.
Of the analysts who’ve been providing a 12-month price forecast for KRP stock, their low estimate is $20.00, their average estimate is $20.25, and their high estimate is $21.00. This points to potential gains in the range of approximately 34% to 41%.
Chart courtesy of StockCharts.com
The Lowdown on Kimbell Royalty Partners Stock
Kimbell Royalty Partners LP is a great energy play that’s been announcing strategic acquisitions, record-high financial results, and strong guidance.
Thanks to energy industry tailwinds and the company’s high cash generation, it has been able to strengthen its balance sheet and pay reliable, high-yield, inflation-crushing dividends.
