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Kimbell Royalty Partners Announces $151.3 Million Mineral and Royalty Acquisition from EnCap Investments L.P. in an All-Equity Transaction

FORT WORTH, Texas, Feb. 7, 2019 /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 that it has agreed to acquire certain oil and gas royalty assets from EnCap Investments L.P. ("EnCap") for approximately $151.3 million (the "Acquisition") in a 100% equity transaction.

Transaction Highlights

  • Includes oil and natural gas mineral and royalty interests controlled by EnCap through Phillips Energy Partners, Phillips Energy Partners II and Phillips Energy Partners III
  • Expected to close in late March 2019 and be immediately accretive to distributable cash flow per unit
  • Includes diversified package of royalty interests with over 64% of production (6:1) from the Eagle Ford Shale, Permian Basin, Haynesville Shale and Powder River Basin
  • Purchase price is composed of 9.4 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 1,600 Boe/d of production (6:1)
  • Seventeen rigs actively drilling on the acreage
  • Liquids-focused asset base with approximately 77% of revenue from oil and natural gas liquids
  • Production mix on a 6:1 basis of approximately 38% oil, 48% natural gas and 14% natural gas liquids
  • Adds approximately 12,200 net royalty acres, increasing Kimbell's total net royalty acre position by 9% to approximately 144,100 net royalty acres across the continental U.S.
  • Maintains Kimbell's five-year PDP decline rate – pro forma approximately 12%
  • Provides support for a further increase in the borrowing base under Kimbell's revolving credit facility, adding to already strong liquidity position
  • Effective date of January 1, 2019, with Kimbell entitled to revenues from production on and after such date

"With this acquisition, we have now completed over $700 million in acquisitions in less than six months and have positioned ourselves as one of the leading consolidators within the U.S. royalty and minerals space.  We are gratified that EnCap is willing to put their trust in us and our business model by taking 100% equity in the transaction.  Like the Haymaker acquisition and the recent dropdown transaction, we believe this acquisition is an excellent fit with our existing portfolio of mineral and royalty assets.  We expect not only immediate cash flow accretion in the near term, but also additional future development from an outstanding list of leading operators," said Bob Ravnaas, Chief Executive Officer of Kimbell's general partner.   

"Furthermore, this acquisition kicks off what we believe will be another year of consolidation within the oil and gas mineral and royalty space in the U.S.  After giving effect to this transaction, we have nearly quadrupled our production since our IPO and will have royalty interests in approximately 95,000 wells across the U.S.  I want to once again thank our team and advisors for their hard work in completing these transactions."

"EnCap is excited about this transaction and our expanding relationship with Kimbell.  We have known Bob Ravnaas for over two decades and think very highly of him, his management team and the portfolio of mineral interests they have acquired at Kimbell.  Kimbell's track record of success and proven growth trajectory paired with its low PDP decline rate is compelling. We believe that Kimbell is the right strategic partner for the Philips assets and that the combination represents a best-in-class diversified mineral company, which is well positioned to continue to make accretive acquisitions within the large and highly fragmented U.S. mineral and royalty market. EnCap has elected to receive 100% equity in this transaction, demonstrating our commitment to partner with the Kimbell team as they continue to execute on their impressive growth strategy," said Marty Phillips, Managing Partner and Founder of EnCap.

Baker Botts L.L.P. acted as legal advisor to Kimbell Royalty Partners in connection with the Acquisition.  RBC Richardson Barr acted as exclusive financial advisor and Vinson & Elkins LLP acted as legal advisor to the sellers in the Acquisition.  The sellers in the Acquisition will be subject to a 120 day lockup after the closing, which is expected to occur in late March 2019.  The closing of the Acquisition remains subject to the satisfaction of certain 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 an oil and gas mineral and royalty limited partnership based in Fort Worth, Texas. Kimbell is managed by its general partner, Kimbell Royalty GP, LLC. Kimbell owns mineral and royalty interests in approximately 12.1 million gross acres in 28 states and in nearly every major onshore basin in the continental United States, including ownership in more than 86,000 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 Acquisition and the expected timing of the closing of the Acquisition, involve risks and uncertainties, including risks that the anticipated benefits of the Acquisition are not realized; risks relating to Kimbell's integration of the Acquisition assets; risks relating to the possibility that the Acquisition 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 Acquisition; 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