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    KRP
    Earnings call· Jun 2026(Q2 FY26)

    Kimbell Royalty Partners Q2 FY26 earnings call KRP

    Aug 7, 2026 Source

    Executive summary

    Kimbell Royalty Partners Q2 FY26 — Record Production, Revenues, and EBITDA Driven by Acquisitions

    Kimbell Royalty Partners delivered a record-setting quarter, driven by strong operational performance and the contribution from the Mesa Royalties acquisition. The company achieved new highs in revenues, production, and adjusted EBITDA, enabling a significant increase in unit distributions and share repurchases. While the Permian A&D market remains highly competitive, Kimbell continues to pursue accretive, diversified acquisitions, maintaining a conservative balance sheet and affirming its full-year guidance ahead of a second drop-down acquisition.

    Highlights

    5

    • Achieved record oil, natural gas, and NGL revenues of $103 million.

    • Reported record consolidated adjusted EBITDA of $84.9 million.

    • Increased Q2 2026 distribution by 15% to $0.47 per common unit.

    • Repurchased 500,000 common units for $7.4 million at an average price of $14.70 per unit.

    • Maintained strong balance sheet with net debt to trailing 12-month adjusted EBITDA of 1.4x and $181.3 million undrawn capacity.

    Concerns

    2

    • Experienced intense competition in the Permian A&D market, losing bids by significant margins (up to 75-100% higher).

    • Mid-Con rig count decreased by 24% quarter-over-quarter, and Haynesville production was down about 11% due to disappointing natural gas prices.

    Guidance & targets

    2
    CategoryTargetConfidence
    Full-year 2026 financial and operational guidance
    Affirmed
    high materiality
    High
    Update to 2026 guidance
    Expected upon closing of drop-down acquisition
    medium materiality
    High

    Operational metrics

    23
    Oil, natural gas, and NGL revenues
    $103 millionrecord
    Q2 FY26

    First time exceeding $100 million.

    Average daily production
    25,830record
    Q2 FY26

    Average daily production for the second quarter.

    Run rate production
    26,967
    Q2 FY26

    Run rate production increased following the closing of the Mesa Royalties acquisition.

    Cash G&A expense
    $5.9 million
    Q2 FY26

    Part of total G&A expenses of $10.2 million.

    Cash G&A expense per BOE
    $2.50below the midpoint of guidance
    Q2 FY26

    Reflects continued operational discipline.

    Consolidated adjusted EBITDA
    $84.9 millionrecord
    Q2 FY26

    Total consolidated adjusted EBITDA for the second quarter.

    Distribution per common unit
    $0.47up 15% from Q1 2026
    Q2 FY26

    Declared cash distribution for Q2 2026.

    Distribution as percentage of cash available for distribution
    75%
    Q2 FY26

    Represents the cash distribution payment to common unit holders.

    Distribution considered return of capital
    47%
    Q2 FY26

    Estimated portion of distribution not subject to dividend taxes.

    Units repurchased
    500,000
    Q2 FY26

    Common stock units repurchased and canceled during the second quarter.

    Aggregate purchase price for repurchases
    $7.4 million
    Q2 FY26

    Total cost for repurchased units.

    Average price per unit repurchased
    $14.70
    Q2 FY26

    Average price paid for common units repurchased.

    Secured Revolving Credit Facility borrowing base
    $660 millionincreased from $625 million
    Q2 FY26

    Increased borrowing base and aggregate commitments on the facility as of June 24, 2026.

    Debt outstanding under credit facility
    $478.7 million
    Q2 FY26

    Debt outstanding under the secured revolving credit facility as of June 30, 2026.

    Undrawn capacity under credit facility
    $181.3 million
    Q2 FY26

    Undrawn capacity under the secured revolving credit facility at quarter end.

    Net debt to trailing 12 months consolidated adjusted EBITDA
    1.4 times
    Q2 FY26

    Leverage ratio as of June 30, 2026.

    Active rigs on acreage
    91
    Q2 FY26

    Number of rigs actively drilling on Kimbell's acreage at quarter end.

    Market share of U.S. land rigs
    16%
    Q2 FY26

    Market share represented by active rigs on Kimbell's acreage.

    Permian rig count change
    23%QoQ
    Q2 FY26

    Uptick in activity in the Permian basin.

    Mid-Con rig count change
    -24%QoQ
    Q2 FY26

    Decrease in rig count, likely due to disappointing natural gas prices.

    Haynesville production change
    -11%QoQ
    Q2 FY26

    Decrease in production, management hopes operators will wait for better natural gas prices.

    Bakken production change
    high single digitsQoQ
    Q2 FY26

    Production was surprisingly up despite perceptions of the basin being played out.

    Estimated size of U.S. oil and natural gas royalty sector
    $800 billion
    current

    Management's estimate of the highly fragmented sector.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activity91rigs
    Basin level production volume25,830BOE/d
    Cost of supply unit cash cost$2.50USD/BOE
    FCF shareholder distributionsDistribution of $0.47 per unit; $7.4 millionUSD
    Distributable cash flow per unit share$0.47USD

    Deals & partnerships

    2
    Mesa RoyaltiesAcquisition of royalty assets

    Previously announced acquisition, closed in June 2026.

    UndisclosedSecond drop-down acquisition of royalty assets

    Announced last month (July 2026), slated to close later this month (August 2026).

    Risks & headwinds

    4
    Geopolitical uncertainty and oil price volatilityrecent weeks

    Oil prices especially volatile in recent weeks

    Mitigation: Current forward strength of oil prices is conducive to incremental activity over time.

    Disappointing natural gas pricesthis year

    Natural gas prices disappointing this year; Mid-Con rig count down 24% QoQ; Haynesville production down 11% QoQ

    Mitigation: Operators in Haynesville may put rigs down and wait for better prices, which Kimbell does not mind.

    Intense competition in Permian A&D marketrecent

    Bids nearly two times what Kimbell was paying for multi-hundred million dollar packages

    Mitigation: Kimbell will be very selective and not overpay, focusing on diversified multi-basin portfolios where competition is less intense.

    Title issues in Appalachia

    Adds additional risk to deal process

    Mitigation: Kimbell takes these considerations into account during the deal process.

    What to watch in Q3 FY26

    5

    Drop-down acquisition closing and impact

    next quarter
    CurrentAnnounced July 17, 2026, slated to close later this month (August 2026).
    TargetAcquisition closed, contribution to production and cash flow.

    Why it matters

    This acquisition is expected to expand scale and enhance cash flow generation, and management will update guidance upon its closing.

    Looking ahead, we are excited to layer in production from our drop-down acquisition, which is slated to close later this month, and are confident in the potential of the Kaban company on a go-forward basis. We expect both transactions to expand our scale and enhance our cash flow generation for years to come.

    Q&A highlights

    6

    Will the acquired assets have similar production profiles to legacy assets, and should investors expect steady growth post-acquisition?

    Management confirmed that acquisitions are chosen to be complementary, immediately accretive to cash flow, and contribute to similar growth and inventory characteristics as existing assets.

    “The short answer to that, Tim, is yes. We're always looking to add to our portfolio assets, which we think are very complementary and in line with what we already own.”

    asked by Timothy Rezvan · answered by Unknown Speaker

    2 min read6 chapters

    Detailed Narrative

    01

    Record-Setting Financial Performance

    Kimbell Royalty Partners reported record Q2 FY26 results, including $103 million in oil, natural gas, and NGL revenues, and $84.9 million in consolidated adjusted EBITDA. Average daily production reached 25,830 BOE per day, with run-rate production increasing to 26,967 BOE per day post-Mesa Royalties acquisition. The company also achieved a record in lease bonuses and cash available for distribution.

    02

    Strategic Acquisitions and Growth

    The company successfully closed the Mesa Royalties acquisition in June and announced a second drop-down acquisition slated to close later in August. These transactions are expected to significantly expand scale, enhance cash flow generation, and contribute to production growth for years to come, reinforcing Kimbell's position as a leading consolidator in the U.S. oil and natural gas royalty sector.

    03

    Shareholder Returns and Capital Allocation

    Kimbell declared a Q2 2026 distribution of $0.47 per common unit, a 15% increase from Q1 2026, representing 75% of cash available for distribution. The company also repurchased and canceled 500,000 common units for approximately $7.4 million at an average price of $14.70 per unit, demonstrating confidence in its intrinsic value and commitment to returning value to unit holders.

    04

    Balance Sheet Strength and Liquidity

    The company increased its secured revolving credit facility borrowing base from $625 million to $660 million, enhancing financial flexibility. At quarter-end, net debt to trailing 12-month consolidated adjusted EBITDA stood at a conservative 1.4 times, with $181.3 million in undrawn capacity, supporting ongoing growth initiatives and maintaining balance sheet discipline.

    05

    Robust Acreage Activity and Commodity Outlook

    Activity on Kimbell's acreage remained strong with 91 rigs actively drilling, representing 16% of U.S. land rigs. The Permian basin saw a 23% increase in rig count quarter-over-quarter. Management remains bullish on the U.S. oil and natural gas royalty industry, expecting higher oil prices to support incremental activity, while acknowledging volatility due to geopolitical events.

    06

    A&D Market Dynamics

    Kimbell continues to be active in the A&D market, noting intense competition for Permian-only deals where bids can be significantly higher than their own. The company finds more success and is more competitive in multi-basin portfolios, emphasizing a selective approach to acquisitions to ensure accretive value and avoid overpaying.

    AI-generated summary of the company’s earnings call. Not investment advice.