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Kimbell Royalty Partners, LP (KRP)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 topline was mixed: total revenues were $80.62M (-6.8% q/q; -3.8% y/y), driven by $76.81M oil, gas & NGL sales and $3.43M derivative gains; diluted EPS to common was $0.19 (vs $0.02 in Q2; $0.22 y/y) and consolidated Adjusted EBITDA was $62.27M (-2.5% q/q; -1.4% y/y) .
  • Versus S&P Global consensus, KRP delivered a material EPS beat but a revenue miss on the Street’s revenue definition (sales + lease income, excludes derivative gains): Primary EPS $0.21 vs $0.16 estimate; revenue $77.19M vs $79.98M estimate (4 estimates) (Values retrieved from S&P Global)*.
  • Operationally, run-rate production rose ~1% q/q to 25,530 Boe/d, above the midpoint of 2025 guidance; activity remained resilient with 86 rigs on KRP acreage (~16% of U.S. land rigs) and line‑of‑sight wells (7.07 net DUCs+permits) near maintenance needs (6.5) .
  • Capital return remains central: Q3 distribution of $0.35/unit (75% payout of CAFD) is expected to be ~100% return of capital; remaining 25% retained to reduce revolver debt; leverage stands at ~1.6x net debt/TTM Adjusted EBITDA with $176.5M undrawn capacity .
  • Management reaffirmed full‑year 2025 financial and operational guidance and emphasized portfolio diversification benefits (Mid‑Continent/Haynesville gas activity) amid a mixed macro tape; marketing deductions were elevated on mix and expected to normalize “in between” recent quarters .

What Went Well and What Went Wrong

  • What Went Well

    • “Production increased organically by approximately 1% between Q2 and Q3 2025, exceeding the midpoint of guidance,” underscoring the low‑decline, diversified base and steady rig activity (86 rigs; ~16% market share) .
    • Cash G&A of $2.51/BOE was below the midpoint of guidance, reflecting discipline and operating leverage; consolidated Adjusted EBITDA was $62.27M .
    • CFO on basin mix tailwinds: stronger Mid‑Continent/Haynesville activity with gas >$4 should bias contribution from gas‑weighted areas, validating diversification strategy .

  • What Went Wrong

    • Revenue missed Street on the SPGI definition (ex‑derivative gains): $77.19M actual vs $79.98M estimate (4 ests); total revenues fell 6.8% q/q on lower derivative gains (Values retrieved from S&P Global).
    • Marketing and other deductions rose to $5.05M; CFO attributed the increase to strong Mid‑Continent volumes (higher marketing costs), indicating mix‑driven cost volatility .
    • Line‑of‑sight inventory cushion narrowed (7.07 net DUCs+permits vs 6.5 maintenance wells), though management expects the maintenance level to trend lower when updated, mitigating risk .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Oil, Gas & NGL Revenues ($M)$71.07 $89.95 $74.70 $76.81
Lease Bonus & Other ($M)$3.16 $0.31 $2.51 $0.38
Derivative Gain/(Loss) ($M)$9.55 $(6.05) $9.34 $3.43
Total Revenues ($M)$83.79 $84.21 $86.55 $80.62
Net Income ($M)$25.81 $25.85 $26.67 $22.32
Net Income Attrib. to Common ($M)$17.38 $17.86 $2.01 $17.01
Diluted EPS to Common ($)$0.22 $0.20 $0.02 $0.19
Consolidated Adjusted EBITDA ($M)$63.12 $75.53 $63.84 $62.27
CAFD per Common Unit ($)$0.55 $0.61 $0.50 $0.47
Distribution Declared ($)$0.41 $0.47 $0.38 $0.35
Margins (on Total Revenues)Q3 2024Q1 2025Q2 2025Q3 2025
Net Income Margin %30.8% 30.7% 30.8% 27.7%
Adjusted EBITDA Margin %75.3% 89.7% 73.8% 77.3%

Notes: Adjusted EBITDA margins computed using consolidated Adjusted EBITDA divided by total revenues as reported; revenue definitions differ from SPGI consensus which excludes derivative gains .

Operational KPIs

KPIQ1 2025Q2 2025Q3 2025
Run‑Rate Production (Boe/d, 6:1)25,501 25,355 25,530
Mix: Gas / Liquids48% / 52% 47% / 53% 48% / 52%
Active Rigs on Acreage90 88 86
Market Share of U.S. Land Rigs~16% ~17% ~16%
Net DUCs4.67 5.10 4.30
Net Permits3.43 2.89 2.77
Net DUCs + Permits8.10 7.99 7.07
Cash G&A per BOE ($)$2.52 $2.36 $2.51
Distribution Payout (% of CAFD)75% 75% 75%
Net Debt ($M)$274.00 $437.10 $423.50
Net Debt / TTM Consolidated Adj. EBITDA0.9x 1.6x 1.6x
Undrawn Revolver Capacity ($M)$251.0 $162.9 $176.5
Q4’25 Hedges: Oil bbl @ $/bbl146,372 @ $68.26 ——
Q4’25 Hedges: Gas MMBtu @ $/MMBtu1,291,680 @ $3.68 ——

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
2025 Financial & Operational GuidanceFY 2025Ranges provided in Q4’24 release (not reiterated here)Reaffirmed ranges; no numerical updates in Q3 releaseMaintained
Distribution Payout PolicyOngoing75% of CAFD to unitholders; 25% to debt reductionReiteratedMaintained
Maintenance Wells Needed to Hold FlatOngoing~6.5 net wellsNo update; management expects maintenance level likely to decrease in next annual updateCommentary only
Q3 Distribution Tax TreatmentQ3 2025n/a~100% expected return of capitaln/a

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3 2025)Trend
Production & Rig Activity90 rigs (Q1; 16% share); 88 rigs (Q2; 17% share); line‑of‑sight wells > maintenance 86 rigs (~16% share); production +~1% q/q, above guidance midpoint Stable to slightly lower rig count; steady production
Line‑of‑Sight vs MaintenanceNet DUC+permits: 8.10 (Q1) → 7.99 (Q2) 7.07 vs maintenance need 6.5; maintenance benchmark likely to decrease with update Cushion narrowed but likely adequate
Gas‑Weighted ExposureQ2: Permian +4 rigs; Haynesville +5; confidence in resilience Mid‑Continent/Haynesville more active; gas >$4 supports mix Tilt to gas basins
Costs & DeductionsCash G&A $2.36/BOE (Q2) below guidance low end Cash G&A $2.51/BOE below midpoint; marketing deductions elevated on mix, should normalize “in between” Operating discipline; variable marketing costs
Capital Allocation & LeverageRedeemed 50% preferred; revolver to $625M; payout 75% Payout 75% (100% ROC); 25% to debt; 1.6x net debt/TTM Adj. EBITDA Balanced return/deleveraging
M&A DisciplineClosed $230M Permian deal in Jan (Boren) Reviewed >200 assets YTD; executed one (Boren); bar remains high Selective, disciplined

Management Commentary

  • CEO: “Production increased organically by approximately 1% between Q2 and Q3 2025, exceeding the midpoint of guidance…Our active rig count remains strong with 86 rigs…line‑of‑sight wells continue to be above the number needed to maintain flat production.” .
  • CFO: “Total third‑quarter consolidated Adjusted EBITDA was $62.3 million…We announced a cash distribution of $0.35 per common unit…approximately 100%…expected to be…return of capital…We are also reaffirming our financial and operational guidance ranges for 2025.” .
  • CFO on basin mix and gas: “Almost surprised…how active the Mid‑Continent has been…gas prices now above $4…we would probably expect a greater contribution from the Mid‑Continent, the Haynesville, and other areas…” .

Q&A Highlights

  • Macro/production outlook: Line‑of‑sight inventory down but rig activity steady; management expects flat to increasing production into H1’26, citing recurring “positive surprises” from expansive footprint and conservative metrics .
  • Marketing & other deductions: Elevated this quarter on Mid‑Continent mix; for modeling, expect a level “somewhere in between” last two quarters .
  • Maintenance wells: Current 6.5 net wells metric will be updated annually and likely to “slightly go down,” improving maintenance cushion .
  • M&A environment: Public competitor count shrinking helps, but competition mostly from privates; KRP reviewed >200 assets, completed Boren; bar remains “extremely high” for deals .
  • Capital management: Cash buildup vs revolver is timing around distributions; revolver paydown occurs immediately after distribution .

Estimates Context

Metric (SPGI definition)Consensus*Actual*Surprise
Primary EPS (Q3’25)$0.16 (2 ests)*$0.21*Beat (+$0.05)
Revenue ex‑derivatives (Q3’25)$79.98M (4 ests)*$77.19M*Miss (‑$2.79M; ‑3.5%)

Notes: SPGI “Revenue” includes oil, gas & NGL revenues plus lease/other income, and excludes derivative gains/losses; KRP total revenues including derivatives were $80.62M . Values retrieved from S&P Global*.

Implications: Street models may lift EPS assumptions (mix, cost control, tax shield), while trimming revenue if modeling ex‑derivative sales; marketing deductions guidance likely moderated to mid‑range assumptions .

Key Takeaways for Investors

  • Defensive royalty model continues to deliver steady organic production with diversified basin exposure; management reaffirmed 2025 guidance despite mixed industry signals .
  • Cash return framework is intact and tax efficient: $0.35/unit with ~100% ROC this quarter; 25% retained for deleveraging supports flexibility at ~1.6x net debt/TTM Adj. EBITDA .
  • Gas‑levered upside emerging: greater activity in Mid‑Continent/Haynesville and commentary around >$4 gas price sensitivity support constructive gas contributions into 2026 .
  • Watch revenue definitions: EPS beat was clear; revenue miss is partly a function of Street’s ex‑derivative convention—important for model alignment; total revenues including derivatives declined q/q .
  • Costs: Cash G&A remained disciplined; marketing deductions were mix‑driven and expected to normalize between Q2 and Q3 levels—model mid‑range rather than Q3 spike .
  • Inventory cushion vs maintenance remains adequate and may improve when KRP refreshes its maintenance‑well benchmark lower, per management .
  • Near‑term catalysts: sustained gas strength, realization of DUC drawdowns, incremental line‑of‑sight well turn‑ins, and continued deleveraging; investor day/presentation updates could refine 2026 outlook .

Guidance Changes

  • Reaffirmed all 2025 financial and operational guidance ranges (numeric ranges not reiterated in this release). Distribution policy remains 75% of CAFD with 25% to debt reduction .

Additional Notes

  • Production/operations snapshot: 86 active rigs; ~16% U.S. land rig share; net DUCs 4.30 and net permits 2.77 (7.07 total), above estimated 6.5 maintenance wells; production mix ~48% gas / 52% liquids .
  • Hedging: For Q4’25, 146,372 bbl oil swaps at $68.26 and 1,291,680 MMBtu gas swaps at $3.68 help underpin cash flows .

Footnote: Values marked with an asterisk (*) were retrieved from S&P Global.