Kimbell Royalty Partners LP (NYSE: KRP) said Nov. 21 it purchased a diversified minerals package across major U.S. shale basins set to bring the Fort Worth, Texas-based company’s total deal making for the year to $550 million.
Kimbell will acquire the package of royalty interest predominately located in the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken from certain affiliated sellers for roughly $107.8 million in stock.
“This acquisition caps off an extraordinary year for the company,” Bob Ravnaas, president and CEO of Kimbell’s general partner, said in a statement. “We have announced and completed over $550 million in accretive acquisitions in 2018.”
Earlier this year, Kimbell made headlines with its agreement to acquire the portfolio of Haymaker Minerals & Royalties LLC and Haymaker Resources LP for about $404 million in cash and stock. The acquisition of Houston-based Haymaker’s interests in more than 35,000 producing wells across 26 states closed in July.
Pro forma of its recent acquisition agreement, Ravnaas said Kimbell has more than doubled its net royalty acreage footprint across the U.S. and more than tripled its daily production since its IPO in February 2017.
Kimbell’s latest acquisition adds roughly 16,700 net royalty acres, increasing the company’s total net royalty acre position by 15% to about 131,900 net royalty acres across the continental U.S. Further, the asset base is liquids-focused with about 80% of revenue from oil and NGL production.
The deal also adds about 1,190 barrels of oil equivalent of production with over 70% of the production from premier resource plays, including the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken Formation. Additionally, the production mix on a 6:1 basis is about 38% oil, 43% natural gas and 19% NGL.
The assets have an estimated five-year proved developed producing decline rate of about 11%, according to the company release.
The acquisition also includes significant upside potential from future development with 59% of total proved PV-8 reserves consisting of proved undeveloped reserves.
Ravnaas said he believes the large and diversified minerals package not only enhances Kimbell’s existing portfolio, but also adds significantly to the company's future distributable cash flow and production.
“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,” he said.
Kimbell will acquire the asset package in exchange of 6.5 million newly issued units in Kimbell Royalty Operating, LLC, which the company expects will further reduces its leverage ratio due to 100% equity used to fund the purchase price.
“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,” Ravnaas commented.
The sellers in the transaction will be subject to a 120 day lockup after the closing.
Kimbell expects to close the acquisition by Dec. 20. The transaction will have an effective date of Oct. 1, with Kimbell entitled to revenues from production on and after such date.
Evercore Group LLC acted as financial adviser to the conflicts committee of the board of directors of Kimbell’s general partner in connection with the transaction. Potter Anderson & Corroon LLP was legal adviser to the conflicts committee.
Baker Botts LLP acted as legal advisor to Kimbell for the transaction. UBS Investment Bank was financial adviser and Mayer Brown LLP acted as legal adviser to the sellers.
2024-02-20 - Export demand drives a record fourth quarter as companies including Enterprise Products Partners, MPLX and Williams look to expand in the NGL market.
2023-12-13 - The East Daley Analytics webinar ‘Dirty Little Secrets’ forecasts instability over the mid-term as major changes come to most sectors of the oil and gas industry.
2024-01-11 - U.S. midstream and energy infrastructure has a mixed outlook for 2024, with a possible loss in demand and stronger focus on renewables offset by solid oil prices and a healthy midstream industry with pockets of growth.
2023-12-07 - East Daley Analytics will look at factors driving market volatility in its annual “Dirty Little Secrets” webinar.
2023-12-20 - High demand has prompted Kinder Morgan and Williams to ask FERC for increased natural gas shipments to the western U.S.