How is Kimbell managing liquidity given the current draw on the credit facility, and what are the trade-offs regarding redeeming preferred units?

Management expects another borrowing base increase post-drop-down acquisition. They aim to opportunistically redeem preferred units while maintaining a conservative leverage profile (targeting 1.5x net debt/EBITDA or lower) and ensuring ample liquidity. “We would expect another increase in the borrowing base as a result of the drop-down, so that'll add additional liquidity. And going forward, we want to be opportunistic on redeeming the preferred units.”

What are the current dynamics in the A&D market, particularly regarding competition, and how actively is Kimbell looking to transact?

The Permian market is extremely competitive, with bids often 75-100% higher than Kimbell's. Kimbell is more competitive on diversified, multi-basin portfolios. They remain active and selective, seeking accretive deals without overpaying. “On the Permian-only deals, that's where we can see competition get out of control. We've been on a couple of large marketed packages recently in the Permian and got absolutely destroyed.”

What drove the increase in lease bonuses, and what are the trends in leasing interest and competition across acreage, especially in specific basins?

Increased lease bonuses were driven by higher oil prices and renewed interest in deeper zones, particularly in the Permian. Management expects this trend to continue, highlighting the value of their "all zones, all depths" ownership. “What we have seen, as you rightly identified, with the increase in oil prices and renewed interest in deeper zones... we have seen an uptick in lease bonus activity.”

KRP

Kimbell Royalty Partners (KRP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 7, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year 2026 financial and operational guidance	Affirmed high materiality	FY26	High
Update to 2026 guidance	Expected upon closing of drop-down acquisition medium materiality	Q3 · FY26	High

Deals & partnerships

Mesa Royalties Acquisition of royalty assets

Previously announced acquisition, closed in June 2026.

Undisclosed Second drop-down acquisition of royalty assets

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

Risks & headwinds

Geopolitical uncertainty and oil price volatility recent 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 prices this 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 market recent

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

Drop-down acquisition closing and impact

next quarter

Current Announced July 17, 2026, slated to close later this month (August 2026).

Target Acquisition 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.

Find out whether KRP delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.