| Snowflake Score | |
|---|---|
| Valuation | 3/6 |
| Future Growth | 3/6 |
| Past Performance | 3/6 |
| Financial Health | 4/6 |
| Dividends | 2/6 |
KRP Stock Overview
Kimbell Royalty Partners, LP, together with its subsidiaries, acquires and owns mineral and royalty interests in oil and natural gas properties in the United States.
Kimbell Royalty Partners, LP Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$17.89 |
| 52 Week High | US$20.08 |
| 52 Week Low | US$10.00 |
| Beta | 1.57 |
| 1 Month Change | 9.15% |
| 3 Month Change | 0.62% |
| 1 Year Change | 74.20% |
| 3 Year Change | 20.15% |
| 5 Year Change | 15.42% |
| Change since IPO | -13.32% |
Recent News & Updates
Kimbell Royalty Partners Q2 2022 Earnings Preview
Kimbell Royalty Partners (NYSE:KRP) is scheduled to announce Q2 earnings results on Thursday, August 4th, before market open. The consensus EPS Estimate is $0.45 (+1025.0% Y/Y) and the consensus Revenue Estimate is $53.68M (+108.9% Y/Y). Over the last 3 months, EPS estimates have seen 3 upward revisions and 1 downward. Revenue estimates have seen 3 upward revisions and 0 downward.
Kimbell Royalty Partners Units Remain A Bargain Amid The Crude Oil Selloff
We’re reiterating our Buy rating on KRP units. KRP’s distributable cash flow is likely to increase amid current commodity prices. Increased distributions and capital appreciation are likely to follow. Our price target is $22.50. We're reiterating our Buy rating on Kimbell Royalty Partners, LP (KRP) units. We believe the recent energy equity selloff has created an attractive entry point for long-term income investors. Over the twelve months ending March 31, KRP generated $107.8 million in free cash flow. Over that time, WTI averaged $77.11 per barrel and natural gas averaged $4.18 per Mcf. We believe significantly higher commodity prices will boost KRP's distributable cash flow ((DCF)) over the coming quarters and years. At today's oil and gas prices, we estimate that KRP is capable of generating more than $200 million of DCF on an annual basis. Management is likely to use the higher DCF to increase KRP's quarterly distribution, which would be supportive of its equity price. Estimating KRP's Distributable Cash Flow We estimate normalized DCF by using different commodity price scenarios and applying different weightings to each scenario. Our commodity price scenarios are shown in the following table. HFI Research Applying a 50% weighting to our Base Case, a 25% weighting to our Bear Case, and a 25% weighting to current commodity prices, our normalized DCF estimate is $2.40 per unit. At today's $15.75 market price, that is equivalent to a 15.2% DCF yield. KRP tends to pay out around 75% of its DCF as common distributions. Reducing our DCF estimate by 75% results in normalized DCF of $1.80 per unit. This represents an 11.4% yield, still high relative to today's midstream sector average of 8.1%. Our normalized distribution estimate of $1.80 is slightly below KRP's current distribution of $1.88. However, we believe our normalized estimate is conservative and that KRP's current distribution is safe unless oil and gas prices are sustained below our Base Case assumptions for several months. As long as commodity prices are sustained at or above our Base Case price assumptions, we believe KRP units are trading in bargain territory. At today's actual commodity prices - which are significantly higher than our Base Case - KRP is generating record levels of DCF. We estimate the figure to be approximately $3.18 per unit on an annualized basis, which equates to a 20.2% DCF yield. Valuing KRP Units We value KRP units in the range of $20.00 to $25.00. Our price target is the midpoint of the range, or $22.50. Our price target is 42.9% above the units' current price of $15.75. HFI Research Given the near absence of capital expenditures for a mineral interest owner like KRP, DCF approximates free cash flow. We, therefore, use the $150 million DCF estimate in our Base Case scenario as our free cash flow estimate. Our discounted cash flow valuation implies the units are worth $22.89, which is 45% higher than their current price. HFI Research Next, we look at free cash flow over the next five years. If we assume free cash flow stays flat from our Base Case of $150 million, and if we assume further that KRP pays out 75% of free cash flow in distributions each year, the implied return in 2022 is 68.2%. By 2026, the implied return increases to 103.4%, which equates to a 15.25% compound annual return. HFI Research We can also use a reserves-based approach to obtain a rough valuation of KRP units. Our estimates indicate that KRP's reserve value per unit is significantly higher than its current unit price of $15.75. Using the 2021 reserve report's future net income figure, reducing it by 20% to account for G&A and interest expenses, discounting that value at 10%, and then subtracting KRP's long-term debt results in a reserve value of $15.59 per unit. However, the commodity price inputs used in the 2021 reserve report were significantly below our Base Case price assumptions, so we consider this to be a punitively low estimate of KRP's reserve value. Updating KRP's 2021 reserve value with our Base Case commodity price assumptions results in a per-unit reserve value of $22.79, which is 44.7% above the current unit price. Using our Bear Case price assumptions results in a per-unit value of $17.23, which we view as overly conservative but still 9.4% above the current unit price. We believe the discount between this conservatively estimated reserve value and the current unit price embeds a margin of safety in a purchase of KRP units at their current price. Risks to Our Valuation The biggest risk to our valuation is a protracted decline in oil and gas prices. While we expect prices to remain strong due to the ongoing structural supply shortages, of course, we could be wrong. Still, oil prices would have to fall into the mid-$60s per barrel and natural gas below $3.50 per Mcf and remain at those levels for months before the units' intrinsic value falls below the current market price. Aside from commodity price declines, we believe the biggest risk to value per unit stems from management overpaying for a major acquisition in an effort to increase the company's reserves. Like all mineral and royalty interest owners, KRP faces the challenge of replacing its reserves to maintain its equity value. The company does not own much undeveloped acreage, so it relies heavily on acquisitions to replace its reserves. Management states in KRP's 2021 10-K that its strategy involves making acquisitions of producing acreage and that if it fails to make accretive acquisitions over the long term, its distribution is at risk of being cut. Price is all-important in acquiring oil and gas properties, and the current environment is not favorable for buyers. Other disciplined oil and gas property owners are refraining from acquisitions due to high asking prices. For example, management at Black Stone Minerals (BSM) in the mineral/royalty interest business and Diamondback Energy (FANG) in the E&P business have noted in recent weeks that prices are too high for them to transact without overpaying.
Shareholder Returns
| KRP | US Oil and Gas | US Market | |
|---|---|---|---|
| 7D | -0.8% | 2.7% | 1.1% |
| 1Y | 74.2% | 64.7% | -9.0% |
Return vs Industry: KRP exceeded the US Oil and Gas industry which returned 64.7% over the past year.
Return vs Market: KRP exceeded the US Market which returned -9% over the past year.
Price Volatility
| KRP volatility | |
|---|---|
| KRP Average Weekly Movement | 5.9% |
| Oil and Gas Industry Average Movement | 8.8% |
| Market Average Movement | 7.6% |
| 10% most volatile stocks in US Market | 17.0% |
| 10% least volatile stocks in US Market | 3.1% |
Stable Share Price: KRP is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.
Volatility Over Time: KRP's weekly volatility (6%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 2013 | n/a | Bob Ravnaas | https://www.kimbellrp.com |
Kimbell Royalty Partners, LP, together with its subsidiaries, acquires and owns mineral and royalty interests in oil and natural gas properties in the United States. As of December 31, 2021, it owned mineral and royalty interests in approximately 11.4 million gross acres and overriding royalty interests in approximately 4.7 million gross acres. The company’s mineral and royalty interests are located in 28 states and include ownership in approximately 122,000 gross wells, including approximately 46,000 wells in the Permian Basin.
Kimbell Royalty Partners, LP Fundamentals Summary
| KRP fundamental statistics | |
|---|---|
| Market Cap | US$1.17b |
| Earnings (TTM) | US$49.18m |
| Revenue (TTM) | US$236.73m |
20.9x
P/E Ratio4.3x
P/S RatioIs KRP overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| KRP income statement (TTM) | |
|---|---|
| Revenue | US$236.73m |
| Cost of Revenue | US$14.51m |
| Gross Profit | US$222.22m |
| Other Expenses | US$173.04m |
| Earnings | US$49.18m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 0.86 |
| Gross Margin | 93.87% |
| Net Profit Margin | 20.77% |
| Debt/Equity Ratio | 38.4% |
How did KRP perform over the long term?
See historical performance and comparison