Kimbell Royalty NYSE: KRP reported record daily production in the third quarter of 2026 and declared a $0.45-per-unit distribution, as acquisitions and drilling activity on its acreage helped lift output 7% from the prior quarter.
Oil, natural gas and natural gas liquids revenue totaled $96.9 million for the quarter ended September 30, including 41 days of contribution from acquired production, President and Chief Financial Officer Davis Ravnaas said on the company’s November 5 earnings call. Average daily production was 27,565 barrels of oil equivalent per day.
Chairman and Chief Executive Officer Bob Ravnaas said Kimbell had closed $367 million in acquisitions since June. He said the deals are expected to add production and increase cash available for distribution per unit.
The company recorded $80.4 million in consolidated adjusted EBITDA. General and administrative expenses totaled $10.7 million, including $6.3 million in cash expenses, or $2.48 per barrel of oil equivalent.
Distribution and balance sheet
The third-quarter distribution represents 75% of cash available for distribution, with the remaining 25% to be used to reduce borrowings under Kimbell’s secured revolving credit facility, Davis Ravnaas said.
The CFO estimated that approximately 76% of the distribution would be considered a return of capital and not subject to dividend taxes. Bob Ravnaas said the distribution represented an annualized tax-advantaged yield of approximately 11%.
At September 30, Kimbell had $535.8 million outstanding under its credit facility and $124.2 million in undrawn capacity. Net debt was approximately 1.5 times trailing 12-month consolidated adjusted EBITDA, Davis Ravnaas said.
On October 15, the company increased the facility’s borrowing base and elected commitments to $750 million from $660 million. Kimbell also gave notice on October 16 that it would redeem 50% of its remaining Series A Cumulative Convertible Preferred Units, with the redemption expected to close November 16.
Drilling activity and outlook
Kimbell had 93 rigs actively drilling across its acreage at quarter end, up two rigs and representing approximately 16% of all U.S. land rigs, according to Bob Ravnaas. He said the company also had a record number of line-of-sight wells, supporting management’s confidence in production through year-end and into 2027.
The company reaffirmed its fourth-quarter financial and operational guidance, which it had issued in August. Bob Ravnaas said Kimbell expects a material increase in fourth-quarter cash flow from higher oil prices, with approximately 84% of its estimated oil production for the quarter unhedged. He identified the Permian as the company’s largest basin by revenue, production, rig count, drilled-but-uncompleted wells and permits.
In response to an analyst’s question about production prospects beyond this year, Davis Ravnaas highlighted 10 new permits in Loving County associated with the LongPoint acquisition made several years ago. He said Kimbell has nearly a 20% net revenue interest in each permit and currently expects the wells to come online in the fourth quarter of 2027, though timing could be earlier or later.
If similar activity continues, Davis Ravnaas said, it could support a more bullish outlook for 2027 and 2028. He estimated that the recent increase in Kimbell’s well inventory was roughly evenly split between acquisitions and legacy properties, while noting that he did not have an exact breakdown.
Acquisition strategy
Asked whether Kimbell would consider royalty acquisitions that are not immediately accretive but offer longer-term value from deeper Permian formations, Davis Ravnaas said the company intends to maintain its existing approach.
“It’s important to us that every time we make an acquisition, that it’s immediately accretive to cash flow,” he said. He added that Kimbell would assign increasing value to geological zones where development is underway, while continuing to underwrite conservatively where those zones have not yet been developed.
Davis Ravnaas said leasing activity and bonuses remain concentrated in the Permian, although the company is seeing increased activity elsewhere. For modeling purposes, he suggested using a trailing four-quarter average for lease bonuses, with a possible bias toward more activity, because the amounts can vary considerably between quarters.
About Kimbell Royalty (NYSE:KRP)
Kimbell Royalty Partners, LP NYSE: KRP is a publicly traded oil and natural gas mineral and royalty company. It owns mineral, royalty, overriding royalty, and non-operated working interests in producing and undeveloped properties across the onshore United States.
The partnership generates revenue primarily from its share of oil, natural gas, and natural gas liquids produced from properties operated by third-party exploration and production companies. Its asset base is concentrated in major U.S.
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