Kimbell Royalty NYSE: KRP reported record second-quarter results, supported by higher production, contributions from acquisitions and record oil, natural gas and NGL revenue. The company also raised its quarterly common-unit distribution by 15% from the first quarter while maintaining its 2026 guidance ahead of an expected update following the close of a separate drop-down acquisition later in August.
Chairman and Chief Executive Officer Bob Ravnaas said the company set quarterly records for oil, natural gas and NGL revenue, net income, adjusted EBITDA, lease bonuses, average daily production and cash available for distribution. Kimbell closed its previously announced Mesa Royalties acquisition in June, and Bob Ravnaas said the acquired assets had begun contributing to results.
“Production during the quarter grew both organically and through acquisitions,” Bob Ravnaas said, adding that the company had announced more than $360 million in acquisitions over the previous 90 days. He said Kimbell sees the transition of U.S. oil and gas royalties from private to public ownership as still being in its early stages.
Revenue, Production and Distribution
President and Chief Financial Officer Davis Ravnaas said second-quarter oil, natural gas and NGL revenue totaled a record $103 million, including nine days of production contribution from the Mesa acquisition. Average daily production reached 25,830 barrels of oil equivalent per day, while run-rate output rose to 26,967 BOE per day after the Mesa acquisition closed.
Consolidated adjusted EBITDA was a record $84.9 million, according to the company. General and administrative expense totaled $10.2 million, including $5.9 million of cash G&A expense, or $2.50 per BOE. Davis Ravnaas said that figure was below the midpoint of Kimbell’s guidance range.
Kimbell declared a second-quarter cash distribution of $0.47 per common unit, up 15% from the prior quarter. The distribution represents 75% of cash available for distribution, with the remaining 25% designated for debt repayment under the company’s secured revolving credit facility.
The company estimates that approximately 47% of the distribution will be treated as return of capital and not subject to dividend taxes. Bob Ravnaas said the distribution represented an annualized tax-advantaged yield of about 13%, based on the prior day’s closing price.
Balance Sheet and Capital Allocation
Before the end of the quarter, Kimbell increased the borrowing base and aggregate commitments under its secured revolving credit facility to $660 million from $625 million. At June 30, the company had $478.7 million of debt outstanding and $181.3 million of undrawn capacity.
Net debt to trailing 12-month consolidated adjusted EBITDA stood at about 1.4 times. Davis Ravnaas described the company’s balance sheet as conservative and said the Mesa acquisition had been incorporated into the borrowing-base increase. He added that Kimbell expects another borrowing-base increase following the anticipated close of its drop-down acquisition.
During the quarter, Kimbell repurchased and canceled 500,000 common units for approximately $7.4 million, or an average of $14.70 per unit. Davis Ravnaas said management viewed the units as trading below intrinsic value and characterized the repurchase as an efficient capital use while maintaining balance-sheet discipline.
On preferred units, he said Kimbell expects to reduce the outstanding balance over time while preserving conservative leverage and sufficient liquidity. The company could modestly increase leverage to redeem additional preferred units if it determines doing so is in its best interest, he said.
Activity Across Basins
Kimbell had 91 rigs actively drilling on its acreage at quarter-end, representing 16% of U.S. land rigs, according to Bob Ravnaas. The company expects higher oil prices to support a modest increase in activity in its oil-weighted basins over time, though management noted recent oil-price volatility tied to developments in the Middle East.
Davis Ravnaas said Kimbell’s Permian rig count increased 23% sequentially during the quarter, while its Mid-Continent rig count declined from 17 to 13. He attributed the Mid-Continent decline, in part, to weaker natural gas prices making the region relatively less competitive for operator capital spending.
- Permian production increased meaningfully during the quarter, management said.
- Mid-Continent production declined by mid-single digits.
- Haynesville production fell about 11%.
- Appalachia production rose slightly.
- Bakken production increased by high single digits.
- Rig counts in the Haynesville, Appalachia, Bakken and Eagle Ford were described as flat.
Davis Ravnaas said Kimbell’s disclosed backlog of drilled but uncompleted wells and permits remains above the level needed to maintain production. He expects the relative relationship between maintenance-level inventory and actual inventory to remain similar after the drop-down acquisition closes. He also noted that the company’s extensive portfolio can generate new revenue interests that are not always captured in its identified inventory figures.
Acquisition Outlook and Guidance
Kimbell affirmed its existing 2026 financial and operational guidance ranges, with Davis Ravnaas saying the company expects to update guidance when the July 17 drop-down acquisition closes later this month.
Management said it aims to acquire assets complementary to its existing portfolio that are immediately accretive to cash flow and support distributable cash flow over time. Davis Ravnaas said future acquisitions should expand the company while carrying similar growth and inventory characteristics to Kimbell’s legacy asset base.
The company remains active in the acquisitions market, but management said Permian-focused packages have been particularly competitive. Davis Ravnaas said Kimbell had submitted bids for several large Permian packages but encountered bids substantially above what it was willing to pay.
Rather than overpay for Permian-only assets, Kimbell said it sees greater opportunity in diversified, multi-basin portfolios. Davis Ravnaas said the company is basin- and commodity-agnostic, seeking the highest return for the lowest risk, while expressing interest in positions across the Permian, Mid-Continent, Haynesville, Appalachia and Eagle Ford. He said Kimbell remains cautious on pursuing a significant transaction in the Western Haynesville.
About Kimbell Royalty (NYSE:KRP)
Kimbell Royalty Partners LP NYSE: KRP is a mineral and royalty company focused on acquiring and managing oil and natural gas royalty interests in the United States. As a master limited partnership, Kimbell Royalty generates fee-like revenues by collecting royalties and overriding royalty interests on production volumes, without directly bearing the capital or operating costs of drilling and completion activities. The partnership's business model emphasizes steady cash flows and limited downside exposure to commodity price fluctuations.
The company's asset portfolio spans multiple onshore basins, with a core concentration in Texas and New Mexico.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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