Kimbell Royalty Partners, LP is a Delaware limited partnership formed in 2015 to own and acquire mineral and royalty interests in oil and natural gas properties throughout the United States. The company has elected to be taxed as a corporation for United States federal income tax purposes. As an owner of mineral and royalty interests, it receives a portion of revenues from the production of oil, natural gas, and associated NGLs from the acreage underlying its interests, net…
Kimbell Royalty Partners, LP is a Delaware limited partnership formed in 2015 to own and acquire mineral and royalty interests in oil and natural gas properties throughout the United States. The company has elected to be taxed as a corporation for United States federal income tax purposes. As an owner of mineral and royalty interests, it receives a portion of revenues from the production of oil, natural gas, and associated NGLs from the acreage underlying its interests, net of post‑production expenses and taxes. It is not obligated to fund drilling and completion costs, lease operating expenses, or plugging and abandonment costs. Its primary business objective is to provide increasing cash distributions to unitholders resulting from acquisitions from third parties, its sponsors and contributing parties, and from organic growth through continued development by working interest owners of the properties in which it holds an interest.
The company generates revenue primarily from royalty payments it receives from operators of its properties based on the sale of oil, natural gas, and NGLs extracted from natural gas during processing. As of December 31, 2025, approximately 1,300 operators were actively producing on its acreage, with its top ten operators—Conoco Phillips, Vital Energy, EOG Resources, Inc., Occidental Petroleum, Diamondback E&P LLC, CPX Energy Operating LLC, Pioneer Natural Resources Company, Devon Energy Production Company, Ovintiv Exploration Inc., and Verdun Oil Company—together accounting for about 47.1% of its revenues. For the year ended December 31, 2025, oil sales contributed 62% of total revenue, natural gas sales contributed 25%, and NGL sales contributed 13%. The company does not believe the loss of any individual purchaser would have a material adverse effect due to the broad base of active producers.
The company operates through the following segments:
• Mineral interests: This segment includes mineral and nonparticipating royalty interests that grant ownership of oil and natural gas below the surface, the right to explore, drill, and produce, or to lease such rights to third parties. As of December 31, 2025, the company owned mineral and royalty interests in approximately 12.3 million gross acres, with over 99% of that acreage leased to working interest owners. The segment also includes ownership in over 133,000 gross wells, of which more than 53,000 are located in the Permian Basin.
• Overriding royalty interests: This segment consists of overriding royalty interests that burden the working interests of a lease and provide a fixed, cost‑free percentage of production or revenue from the lease. As of December 31, 2025, the company held overriding royalty interests in approximately 4.7 million gross acres, with virtually all of that acreage producing and leased to working interest owners. The segment contributes to the company’s royalty income in a manner similar to its mineral interests.
Kimbell Royalty Partners, LP holds a diversified position in the oil and natural gas industry, with a low‑decline asset base spread across multiple resource plays. The company competes with other entities for the acquisition of mineral and royalty interests, many of which have greater financial and operational resources. Its competitive advantages include a broad geographic footprint covering 28 states and every major onshore basin, exposure to leading plays such as the Permian Basin, Mid‑Continent, and others, and a conservative capital structure that provides financial flexibility for strategic acquisitions. The management team and board of directors possess extensive oil and gas experience, with a track record of executing over 160 acquisitions, which enhances its ability to source, evaluate, and manage high‑quality mineral and royalty assets.
The company’s customer base consists primarily of oil and natural gas operators that pay royalties for production from its leased acreage. As of December 31, 2025, there were approximately 1,300 active operators, with the top ten being Conoco Phillips, Vital Energy, EOG Resources, Inc., Occidental Petroleum, Diamondback E&P LLC, CPX Energy Operating LLC, Pioneer Natural Resources Company, Devon Energy Production Company, Ovintiv Exploration Inc., and Verdun Oil Company. These operators represent a significant portion of its revenue, but the large number of producers reduces reliance on any single customer.
Sector:EnergySector rationaleThe company's sole business is owning mineral and royalty interests in oil and natural gas properties, receiving revenue from the sale of oil, natural gas, and NGLs. This aligns exactly with the 'Oil and Gas Royalties' industry listed within the Energy sector.Industry:Oil and Gas RoyaltiesEnergyPrimaryKimbell Royalty Partners owns mineral and royalty interests and receives a share of production revenue from oil, natural gas, and NGLs without funding drilling or operating costs. The profile explicitly states it is not obligated to fund drilling, completion, or lease operating expenses, which is the defining characteristic of the Oil and Gas Royalties industry.Classified using BQ-MICSCIK: 0001657788
Investment Thesis
▲ Bull case
Kimbell Royalty Partners is positioned to capitalize on accelerating DUC conversion timelines driven by sustained higher oil prices, with management noting that historical six-month conversion periods could shorten significantly in the current commodity environment, and their net DUC and permit inventory may understate actual opportunity by up to 20% when including minor properties, creating a hidden production growth engine not fully reflected in current guidance or market expectations. This is underscored by the company's active rig count of 85 representing 16% of U.S. land rigs and activity expanding beyond the Permian into the Bakken, Eagle Ford, and Mid-Con, signaling broader basin diversification that reduces reliance on any single region and enhances resilience to localized price or regulatory shocks, while the line-of-sight wells exceeding maintenance levels provide a clear path to production growth without requiring new capital intensive drilling programs.
The recent Mesa Royalties acquisition, valued at $147 million and expected to close in Q2 2026, adds approximately 1,390 Boe/d of production by June 1, 2026, with over 98% of U.S. land rigs operating in counties where Kimbell will hold mineral interests post-close, dramatically increasing geographic coverage and scale in core basins like the Delaware and Midland, and this strategic bolt-on aligns with their role as a leading consolidator in a fragmented $850+ billion sector, where management’s active evaluation of sizable packages suggests further M&A potential once price volatility subsides, creating a runway for accretive growth that the market may be underestimating given the current focus on quarterly results rather than long-term consolidation upside.
Kimbell’s capital allocation strategy demonstrates disciplined flexibility, with 75% of cash available for distribution directed to unitholders (72% as tax-advantaged return of capital) and 25% dedicated to debt paydown, maintaining a conservative net debt to EBITDA ratio of 1.6x while retaining $184.1 million in undrawn credit capacity, and the authorization to repurchase up to an additional $92.7 million in units at prices below intrinsic value—evidenced by the Q1 repurchase of 500,000 units at $14.60—provides dual levers to enhance unitholder value through yield accretion and debt reduction without compromising distribution stability, a balance that supports both income generation and balance sheet strength in a volatile commodity environment.
Kimbell Royalty Partners is positioned to capitalize on accelerating DUC conversion timelines driven by sustained higher oil prices, with management noting that historical six-month conversion periods could shorten significantly in the current commodity environment, and their net DUC and permit inventory may understate actual opportunity by up to 20% when including minor properties, creating a hidden production growth engine not fully reflected in current guidance or market expectations. This is underscored by the company's active rig count of 85 representing 16% of U.S. land rigs and activity expanding beyond the Permian into the Bakken, Eagle Ford, and Mid-Con, signaling broader basin diversification that reduces reliance on any single region and enhances resilience to localized price or regulatory shocks, while the line-of-sight wells exceeding maintenance levels provide a clear path to production growth without requiring new capital intensive drilling programs.
The recent Mesa Royalties acquisition, valued at $147 million and expected to close in Q2 2026, adds approximately 1,390 Boe/d of production by June 1, 2026, with over 98% of U.S. land rigs operating in counties where Kimbell will hold mineral interests post-close, dramatically increasing geographic coverage and scale in core basins like the Delaware and Midland, and this strategic bolt-on aligns with their role as a leading consolidator in a fragmented $850+ billion sector, where management’s active evaluation of sizable packages suggests further M&A potential once price volatility subsides, creating a runway for accretive growth that the market may be underestimating given the current focus on quarterly results rather than long-term consolidation upside.
Kimbell’s capital allocation strategy demonstrates disciplined flexibility, with 75% of cash available for distribution directed to unitholders (72% as tax-advantaged return of capital) and 25% dedicated to debt paydown, maintaining a conservative net debt to EBITDA ratio of 1.6x while retaining $184.1 million in undrawn credit capacity, and the authorization to repurchase up to an additional $92.7 million in units at prices below intrinsic value—evidenced by the Q1 repurchase of 500,000 units at $14.60—provides dual levers to enhance unitholder value through yield accretion and debt reduction without compromising distribution stability, a balance that supports both income generation and balance sheet strength in a volatile commodity environment.
Kimbell Royalty Partners faces significant execution risk in integrating the Mesa Royalties acquisition, as the deal involves issuing 6.9 million new common units valued at $103 million, which could dilute existing unitholders if the anticipated production of 1,390 Boe/d and $45.91/Boe cash margin fail to materialize due to operational delays, lower-than-expected well performance, or integration challenges in stacking pay zones across the Delaware and Midland basins, particularly since the acquired assets include overlapping acreage with existing Kimbell rigs (5 of 13 rigs), potentially creating redundant infrastructure or conflicts in development pacing that management did not adequately address in the Q&A.
The company’s reliance on rising oil prices to drive activity and DUC conversions is a structural vulnerability, as highlighted by management’s acknowledgment that oil price volatility has caused potential sellers to walk away from M&A deals due to divergent price outlooks, and while current WTI at $91 supports optimism, any reversal in macro conditions—such as escalation in the Middle East conflict or demand destruction from global slowdowns—could rapidly reverse the favorable drilling environment, especially given that 53% of production is liquids-weighted and natural gas prices remain subdued at $3.32/Mcf, leaving the portfolio exposed to downside commodity swings without sufficient hedging protection beyond 2027.
Despite strong cash generation, Kimbell’s net debt of $440.9 million and trailing twelve-month adjusted EBITDA of $258.9 million leave limited room for error, with the 1.6x leverage ratio already incorporating the full benefit of recent distribution cuts to unitholders (75% payout ratio), and any deterioration in operating performance—whether from declining well productivity, rising G&A costs beyond the current $2.31/BOE cash G&A, or failure to offset production declines with new drilling—could quickly pressure covenants or force a reduction in distributions, undermining the tax-advantaged yield narrative that currently supports unit valuation, particularly as the market may be ignoring the declining trend in net income attributable to common units, which fell from $0.20 in Q1 2025 to just $0.04 in Q1 2026.
Kimbell Royalty Partners faces significant execution risk in integrating the Mesa Royalties acquisition, as the deal involves issuing 6.9 million new common units valued at $103 million, which could dilute existing unitholders if the anticipated production of 1,390 Boe/d and $45.91/Boe cash margin fail to materialize due to operational delays, lower-than-expected well performance, or integration challenges in stacking pay zones across the Delaware and Midland basins, particularly since the acquired assets include overlapping acreage with existing Kimbell rigs (5 of 13 rigs), potentially creating redundant infrastructure or conflicts in development pacing that management did not adequately address in the Q&A.
The company’s reliance on rising oil prices to drive activity and DUC conversions is a structural vulnerability, as highlighted by management’s acknowledgment that oil price volatility has caused potential sellers to walk away from M&A deals due to divergent price outlooks, and while current WTI at $91 supports optimism, any reversal in macro conditions—such as escalation in the Middle East conflict or demand destruction from global slowdowns—could rapidly reverse the favorable drilling environment, especially given that 53% of production is liquids-weighted and natural gas prices remain subdued at $3.32/Mcf, leaving the portfolio exposed to downside commodity swings without sufficient hedging protection beyond 2027.
Despite strong cash generation, Kimbell’s net debt of $440.9 million and trailing twelve-month adjusted EBITDA of $258.9 million leave limited room for error, with the 1.6x leverage ratio already incorporating the full benefit of recent distribution cuts to unitholders (75% payout ratio), and any deterioration in operating performance—whether from declining well productivity, rising G&A costs beyond the current $2.31/BOE cash G&A, or failure to offset production declines with new drilling—could quickly pressure covenants or force a reduction in distributions, undermining the tax-advantaged yield narrative that currently supports unit valuation, particularly as the market may be ignoring the declining trend in net income attributable to common units, which fell from $0.20 in Q1 2025 to just $0.04 in Q1 2026.