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Kimbell Royalty Partners Announces $107.8 Million Drop Down Acquisition

FORT WORTH, Texas, Nov. 21, 2018 /PRNewswire/ -- Kimbell Royalty Partners, LP (NYSE: KRP) ("Kimbell Royalty Partners" or "Kimbell"), a leading owner of oil and natural gas mineral and royalty interests across 28 states, today announced the purchase of certain oil and gas royalty assets from certain affiliated sellers for approximately $107.8 million (the "Drop Down").

Transaction Highlights

  • Expected to close on or around December 20, 2018 and be immediately accretive to distributable cash flow per unit
  • Includes diversified package of royalty interests with over 70% of production (6:1) from premier resource plays, including the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken Formation
  • Purchase price is composed of 6.5 million newly issued units in Kimbell Royalty Operating, LLC; further reduces Kimbell's leverage ratio due to 100% equity used to fund the purchase price
  • Adds approximately 1,190 Boe/d of production (6:1)
  • Liquids-focused asset base with approximately 80% of revenue from oil and natural gas liquids
  • Production mix on a 6:1 basis of approximately 38% oil, 43% natural gas and 19% natural gas liquids
  • Adds approximately 16,700 net royalty acres, increasing Kimbell's total net royalty acre position by 15% to approximately 131,900 net royalty acres across the continental U.S.
  • Includes significant upside potential from future development with 59% of total proved PV-8 reserves consisting of proved undeveloped reserves
  • Drop down assets have an estimated five-year PDP decline rate of approximately 11%
  • Effective date of October 1, 2018, with Kimbell entitled to revenues from production on and after such date

"We are very pleased to announce our first drop down transaction.  We believe this large and diversified minerals package not only enhances our existing high-quality portfolio, but also adds significantly to Kimbell's future distributable cash flow and production," said Bob Ravnaas, President and Chief Executive Officer of Kimbell's general partner.   

"The drop down assets are predominately located in four of the premier onshore U.S. resource plays, the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken Formation.  With the majority of the reserves classified as proved undeveloped and the recent active drilling on many of the properties, we are confident that the assets will prove to be a significant driver of growth for the company for years to come.  The fact that our contributing parties were willing to accept 100% equity as the purchase price in this transaction demonstrates confidence in the company and allows the company to grow meaningfully without assuming additional debt."

"This acquisition caps off an extraordinary year for the company.  We have announced and completed over $550 million in accretive acquisitions in 2018.  In addition, since our IPO in February 2017 and after giving effect to the Drop Down, we have more than doubled our net royalty acreage footprint across the U.S. and more than tripled our daily production in less than two years.  I want to thank our team and advisors for their hard work in completing these transactions."

The Drop Down was approved by the Conflicts Committee of the Board of Directors of Kimbell Royalty Partners' general partner (the "Conflicts Committee") and the Board of Directors of Kimbell Royalty Partners' general partner on November 20, 2018.  Evercore Group L.L.C. acted as financial advisor to the Conflicts Committee in connection with the Drop Down.  Potter Anderson & Corroon LLP acted as legal advisor to the Conflicts Committee.  Baker Botts L.L.P. acted as legal advisor to Kimbell Royalty Partners in connection with the Drop Down.  UBS Investment Bank acted as financial advisor and Mayer Brown LLP acted as legal advisor to the sellers in the Drop Down.  The sellers in the Drop Down will be subject to a 120 day lockup after the closing, which is expected to occur on or around December 20, 2018.  The closing of the Drop Down remains subject to completion of due diligence and the satisfaction of other closing conditions, and there can be no assurance that it will be completed as planned or at all.  

About Kimbell Royalty Partners, LP

Kimbell (NYSE: KRP) is a limited partnership based in Fort Worth, Texas, and is managed by its general partner, Kimbell Royalty GP, LLC. Kimbell owns mineral and royalty interests in approximately 11.1 million gross acres in 28 states and in nearly every major onshore basin in the continental United States, including ownership in more than 84,000 gross producing wells, with over 38,000 wells in the Permian Basin.  To learn more, visit http://www.kimbellrp.com.

Forward-Looking Statements

This news release includes forward-looking statements. These forward-looking statements, which include statements regarding the anticipated benefits of the Drop Down and the expected timing of the closing of the Drop Down, involve risks and uncertainties, including risks that the anticipated benefits of the Drop Down are not realized; risks relating to Kimbell's integration of the Drop Down assets; risks relating to the possibility that the Drop Down does not close when expected or at all because any conditions to the closing are not satisfied on a timely basis or at all; and risks relating to Kimbell's business and prospects for growth generally. Except as required by law, Kimbell undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this news release. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Kimbell's filings with the Securities and Exchange Commission ("SEC").  These include risks that the anticipated benefits of Kimbell's election to change to a taxable entity are not realized, as well as risks inherent in oil and natural gas drilling and production activities, including risks with respect to low or declining prices for oil and natural gas that could result in downward revisions to the value of proved reserves or otherwise cause operators to delay or suspend planned drilling and completion operations or reduce production levels, which would adversely impact cash flow; risks relating to the impairment of oil and natural gas properties; risks relating to the availability of capital to fund drilling operations that can be adversely affected by adverse drilling results, production declines and declines in oil and natural gas prices; risks relating to Kimbell's hedging activities; risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and production risks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay the timing of sales or completion of drilling operations; risks relating to delays in receipt of drilling permits; risks relating to unexpected adverse developments in the status of properties; risks relating to the absence or delay in receipt of government approvals or third-party consents; risks relating to Kimbell's ability to realize the anticipated benefits from and to integrate acquired assets, including the assets acquired in the Drop Down; and other risks described in Kimbell's Annual Report on Form 10-K and other filings with the SEC, available at the SEC's website at www.sec.gov.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release.

Contact:

Rick Black
Dennard Lascar Investor Relations
krp@dennardlascar.com
(713) 529-6600

 

SOURCE Kimbell Royalty Partners, LP