10-Q 1 krp-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38005

Kimbell Royalty Partners, LP

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

1311
(Primary Standard Industrial
Classification Code Number)

47-5505475
(I.R.S. Employer
Identification No.)

777 Taylor Street, Suite 810

Fort Worth, Texas 76102

(817) 945-9700

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading symbol(s)

Name of exchange on which registered:

Common Units Representing Limited Partner Interests

KRP

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of April 29, 2022, the registrant had outstanding 57,331,833 common units representing limited partner interests and 8,211,579 Class B units representing limited partner interests.

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

1

KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31, 

December 31, 

2022

2021

ASSETS

Current assets

Cash and cash equivalents

$

10,587,893

$

7,052,414

Oil, natural gas and NGL receivables

41,556,172

35,147,145

Derivative assets

2,102,159

166,307

Accounts receivable and other current assets

2,320,933

3,051,593

Total current assets

56,567,157

45,417,459

Property and equipment, net

1,529,693

1,888,247

Investment in affiliate (equity method)

4,560,360

4,738,822

Oil and natural gas properties

Oil and natural gas properties, using full cost method of accounting ($134,586,442 and $153,284,173 excluded from depletion at March 31, 2022 and December 31, 2021, respectively)

1,204,805,739

1,204,395,484

Less: accumulated depreciation, depletion and impairment

(673,991,373)

(663,603,142)

Total oil and natural gas properties, net

530,814,366

540,792,342

Right-of-use assets, net

2,766,972

2,844,997

Derivative assets

3,457,466

1,590,501

Loan origination costs, net

3,942,281

4,214,484

Assets of consolidated variable interest entities:

Cash

2,953,876

Investments held in trust

237,001,386

Prepaid expenses

490,485

Total assets

$

844,084,042

$

601,486,852

LIABILITIES, MEZZANINE EQUITY AND UNITHOLDERS' EQUITY

Current liabilities

Accounts payable

$

1,893,672

$

811,019

Other current liabilities

3,782,668

3,319,495

Derivative liabilities

43,316,700

24,190,678

Total current liabilities

48,993,040

28,321,192

Operating lease liabilities, excluding current portion

2,482,028

2,561,274

Derivative liabilities

7,548,566

4,190,776

Long-term debt

226,515,911

217,115,911

Other liabilities

416,667

447,918

Liabilities of consolidated variable interest entities:

Accounts payable

60,995

Other current liabilities

465,607

Deferred underwriting commissions

8,050,000

Total liabilities

294,532,814

252,637,071

Commitments and contingencies (Note 14)

Mezzanine equity:

Redeemable noncontrolling interest in Kimbell Tiger Acquisition Corporation

236,900,000

Kimbell Royalty Partners, LP unitholders' equity:

Common units (57,290,923 units and 47,162,773 units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively)

462,220,882

328,717,841

Class B units (8,253,660 and 17,611,579 units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively)

412,683

880,579

Total Kimbell Royalty Partners, LP unitholders' equity

462,633,565

329,598,420

Noncontrolling (deficit) interest in OpCo

(149,982,337)

19,251,361

Total equity

312,651,228

348,849,781

Total liabilities, mezzanine equity and unitholders' equity

$

844,084,042

$

601,486,852

The accompanying notes are an integral part of these consolidated financial statements.

2

KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended March 31, 

2022

2021

Revenue

Oil, natural gas and NGL revenues

$

65,083,903

$

36,368,510

Lease bonus and other income

654,130

186,308

Loss on commodity derivative instruments, net

(31,983,520)

(14,135,728)

Total revenues

33,754,513

22,419,090

Costs and expenses

Production and ad valorem taxes

4,020,911

2,431,830

Depreciation and depletion expense

10,759,164

7,911,148

Marketing and other deductions

3,508,066

3,295,286

General and administrative expense

6,589,259

6,796,385

Consolidated variable interest entities related:

General and administrative expense

739,459

Total costs and expenses

25,616,859

20,434,649

Operating income

8,137,654

1,984,441

Other income (expense)

Equity income in affiliate

249,408

185,080

Interest expense

(2,877,855)

(2,095,098)

Other income

3,068,450

462,771

Consolidated variable interest entities related:

Interest earned on marketable securities in trust account

101,386

Net income before income taxes

8,679,043

537,194

Provision for income taxes

271,799

Net income

8,407,244

537,194

Distribution and accretion on Series A preferred units

(1,577,968)

Net (income) loss and distributions and accretion on Series A preferred units attributable to noncontrolling interests in OpCo

(1,058,677)

357,179

Distribution on Class B units

(17,610)

(20,780)

Net income (loss) attributable to common units of Kimbell Royalty Partners, LP

$

7,330,957

$

(704,375)

Net loss per unit attributable to common units of Kimbell Royalty Partners, LP

Basic

$

(0.20)

$

(0.02)

Diluted

$

(0.20)

$

(0.02)

Weighted average number of common units outstanding

Basic

45,942,829

37,693,469

Diluted

45,942,829

37,693,469

The accompanying notes are an integral part of these consolidated financial statements.

3

KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS’ EQUITY

(Unaudited)

Three Months Ended March 31, 2022

Noncontrolling

Noncontrolling

   

Common Units

   

Amount

   

Class B Units

   

Amount

Interest in OpCo

Interest in TGR

Total

Balance at January 1, 2022

47,162,773

$

328,717,841

17,611,579

$

880,579

$

19,251,361

$

$

348,849,781

Costs associated with equity offering

(325,508)

(325,508)

Conversion of Class B units to common units

9,357,919

161,424,103

(9,357,919)

(467,896)

(161,424,103)

(467,896)

Restricted units repurchased for tax withholding

(193,604)

(3,344,828)

(3,344,828)

Unit-based compensation

963,835

2,194,342

2,194,342

Distributions to unitholders

(17,450,226)

(6,516,284)

(23,966,510)

Distribution on Class B units

(17,610)

(17,610)

Proceeds from issuance of TGR public warrants

11,500,000

11,500,000

Accretion of redeemable noncontrolling interest in Kimbell Tiger Acquisition Corporation

(16,325,799)

(2,351,988)

(11,500,000)

(30,177,787)

Net income

7,348,567

1,058,677

8,407,244

Balance at March 31, 2022

57,290,923

$

462,220,882

8,253,660

$

412,683

$

(149,982,337)

$

$

312,651,228

Three Months Ended March 31, 2021

Noncontrolling

   

Common Units

   

Amount

   

Class B Units

   

Amount

Interest in OpCo

Total

Balance at January 1, 2021

38,918,689

$

257,593,307

20,779,781

$

1,038,989

$

77,002,442

$

335,634,738

Restricted units repurchased for tax withholding

(85,360)

(923,587)

(923,587)

Unit-based compensation

936,567

2,692,494

2,692,494

Distributions to unitholders

(7,394,551)

(3,948,160)

(11,342,711)

Distribution and accretion on Series A preferred units

(1,036,432)

(541,536)

(1,577,968)

Distribution on Class B units

(20,780)

(20,780)

Net income

352,837

184,357

537,194

Balance at March 31, 2021

39,769,896

$

251,263,288

20,779,781

$

1,038,989

$

72,697,103

$

324,999,380

The accompanying notes are an integral part of these consolidated financial statements.

4

KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended March 31, 

2022

   

2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

8,407,244

$

537,194

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and depletion expense

10,759,164

7,911,148

Amortization of right-of-use assets

78,025

71,785

Amortization of loan origination costs

442,399

371,487

Equity income in affiliate

(249,408)

(185,080)

Cash distribution from affiliate

385,326

216,738

Unit-based compensation

2,194,342

2,692,494

Loss on derivative instruments, net of settlements

18,680,995

12,674,172

Changes in operating assets and liabilities:

Oil, natural gas and NGL receivables

(6,409,027)

(7,215,335)

Accounts receivable and other current assets

730,660

(583,862)

Accounts payable

1,082,653

153,681

Other current liabilities

463,173

(1,092,287)

Operating lease liabilities

(79,246)

(71,142)

Consolidated variable interest entities related:

Interest earned on marketable securities in trust account

(101,386)

Other assets and liabilities

(352,441)

Net cash provided by operating activities

36,032,473

15,480,993

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(43,628)

(373,947)

Purchase of oil and natural gas properties

(410,257)

(492,743)

Cash distribution from affiliate

42,544

55,039

Consolidated variable interest entities related:

Investments in marketable securities

(236,900,000)

Net cash used in investing activities

(237,311,341)

(811,651)

CASH FLOWS FROM FINANCING ACTIVITIES

Costs associated with equity offering

(325,508)

Redemption of Class B contributions on converted units

(467,896)

Distributions to common unitholders

(17,450,226)

(7,394,551)

Distribution to OpCo unitholders

(6,516,284)

(3,948,160)

Distribution and accretion on Series A preferred units

(962,503)

Distribution on Class B units

(17,610)

(20,780)

Borrowings on long-term debt

19,100,000

484,089

Repayments on long-term debt

(9,700,000)

(3,500,000)

Payment of loan origination costs

(170,196)

(84,492)

Restricted units repurchased for tax withholding

(3,344,828)

(923,587)

Consolidated variable interest entities related:

Proceeds from initial public offering of Kimbell Tiger Operating Company

227,585,000

Payment of underwriting commissions with equity offering of Kimbell Tiger Operating Company

(924,229)

Net cash provided by (used in) financing activities

207,768,223

(16,349,984)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

6,489,355

(1,680,642)

CASH AND CASH EQUIVALENTS, beginning of period

7,052,414

9,804,977

CASH AND CASH EQUIVALENTS, end of period

$

13,541,769

$

8,124,335

Supplemental cash flow information:

Cash paid for interest

$

2,240,972

$

1,673,361

Non-cash investing and financing activities:

Noncash deemed distribution to Series A preferred units

$

$

615,465

Recognition of tenant improvement asset

$

31,250

$

Consolidated variable interest entities related:

Deferred underwriting commissions

$

8,050,000

$

5

KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS —(Continued)

(Unaudited)

Three Months Ended March 31, 

2022

   

2021

Reconciliation of Cash and Cash Equivalents and Cash Held at Consolidated Variable Interest Entities to the Consolidated Statements of Cash Flows

Cash and cash equivalents

$

10,587,893

$

8,124,335

Cash held at consolidated variable interest entities

2,953,876

$

13,541,769

$

8,124,335

The accompanying notes are an integral part of these consolidated financial statements.

6

Unless the context otherwise requires, references to “Kimbell Royalty Partners, LP,” the “Partnership,” or like terms refer to Kimbell Royalty Partners, LP and its subsidiaries. References to the “Operating Company” or “OpCo” refer to Kimbell Royalty Operating, LLC. References to the “General Partner” refer to Kimbell Royalty GP, LLC. References to “Kimbell Operating” refer to Kimbell Operating Company, LLC, a wholly owned subsidiary of the General Partner. References to the “Sponsors” refer to affiliates of the Partnership’s founders, Ben J. Fortson, Robert D. Ravnaas, Brett G. Taylor and Mitch S. Wynne, respectively. References to the “Contributing Parties” refer to all entities and individuals, including certain affiliates of the Sponsors, that contributed, directly or indirectly, certain mineral and royalty interests to the Partnership.

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

Organization

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. Effective as of September 24, 2018, the Partnership has elected to be taxed as a corporation for United States federal income tax purposes. As an owner of mineral and royalty interests, the Partnership is entitled to a portion of the revenues received from the production of oil, natural gas and associated natural gas liquids (“NGL”) from the acreage underlying its interests, net of post-production expenses and taxes. The Partnership is not obligated to fund drilling and completion costs, lease operating expenses or plugging and abandonment costs at the end of a well’s productive life. The Partnership’s primary business objective is to provide increasing cash distributions to unitholders resulting from acquisitions from third parties, its Sponsors and the Contributing Parties, and from organic growth through the continued development by working interest owners of the properties in which it owns an interest.

On February 8, 2022, the Partnership announced the $230 million initial public offering of its special purposed acquisition corporation, Kimbell Tiger Acquisition Corporation (NYSE: TGR).

Kimbell Tiger Acquisition Corporation (“TGR”) was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Kimbell Tiger Acquisition Sponsor, LLC (“TGR Sponsor”), which is a subsidiary of the Partnership, was created to assist TGR in sourcing, analyzing and consummating acquisition opportunities for that initial business combination.

TGR Sponsor and TGR have been consolidated in the financial statements of the Partnership beginning in the year ended December 31, 2021. This resulted in the consolidation of $240.4 million of assets, $8.6 million of liabilities, $236.9 million of redeemable noncontrolling interests and $16.3 million of common equity and $2.4 million of noncontrolling interests related to TGR and TGR Sponsor as of March 31, 2022. Further details on the impacts of the consolidation of TGR and TGR Sponsor can be found in Note 3.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). As a result, the accompanying unaudited interim consolidated financial statements do not include all disclosures required for complete annual financial statements prepared in conformity with GAAP. Accordingly, the accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), which contains a summary of the Partnership’s significant accounting policies and other disclosures. In the opinion of management of the General Partner, the unaudited interim consolidated financial statements contain all adjustments necessary to fairly present the financial position and results of operations for the interim periods in accordance with GAAP and all adjustments are of a normal recurring nature. The accompanying unaudited interim consolidated financial statements include the accounts of the Partnership and its consolidated subsidiaries. All material intercompany balances and transactions are eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

7

Use of Estimates

Preparation of the Partnership’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates.

Segment Reporting

The Partnership operates in a single operating and reportable segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The Partnership’s chief operating decision maker allocates resources and assesses performance based upon financial information of the Partnership as a whole.

COVID-19 Pandemic and Impact on Global Demand for Oil and Natural Gas

Coronavirus (“COVID-19”) remains a global health crisis and there continues to be considerable uncertainty regarding the extent to which COVID-19 and its variants will continue to spread. Despite improvements in global economic activity levels and higher energy demand compared to 2021, the impacts of COVID-19 continue to be unpredictable, including the impacts of new virus strains, the risk of renewed restrictions and the uncertainty of successful administration of effective treatments and vaccines. The Partnership is unable to reasonably estimate the period of time that related conditions could exist or the extent to which they could impact the Partnership’s business, results of operations, financial condition or cash flows. Commodity prices have risen from 2021; however, further negative impacts from COVID-19 may require the Partnership to adjust its business plan.

The ultimate impacts of COVID-19 and the volatility in the oil and natural gas markets on the Partnership’s business, cash flows, liquidity, financial condition and results of operations remain dependent on a number of factors, such as the duration and scope of the pandemic, the length and severity of the worldwide economic downturn, the ability of the Organization of Petroleum Exporting Countries, Russia and other crude oil producing nations to manage the global crude oil supply, additional actions by businesses and governments in response to the pandemic, the economic downturn and the decrease in crude oil demand, the speed and effectiveness of responses to combat the virus and the time necessary to balance crude oil supply and demand to restore crude oil pricing. Although prices have recovered, the ongoing impact of COVID-19 on our business, employees and operations, including supply chain concerns, among others still continues to affect our industry.

Russia / Ukraine Conflict

In February 2022, Russia invaded Ukraine and is still engaged in active armed conflict against the country. The conflict and the sanctions imposed in response have led to regional instability and caused dramatic fluctuations in global financial markets and have increased the level of global economic and political uncertainty, including uncertainty about world-wide oil supply and demand, which in turn has increased volatility in commodity prices.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

For a description of the Partnership’s significant accounting policies, see Note 2 of the consolidated financial statements included in the Partnership’s 2021 Form 10-K, as well as the items noted below. There have been no substantial changes in such policies or the application of such policies during the three months ended March 31, 2022.

Consolidation

The Partnership analyzes whether it has a variable interest in an entity and whether that entity is a variable interest entity (“VIE”) to determine whether it is required to consolidate those entities. The Partnership performs the variable interest analysis for all entities in which it has a potential variable interest, which primarily consist of all entities where the Partnership serves as the sponsor, general partner or managing member, and general partner entities not wholly owned by

8

the Partnership. If the Partnership has a variable interest in the entity and the entity is a VIE, it will also analyze whether the Partnership is the primary beneficiary of this entity and whether consolidation is required.

In evaluating whether it has a variable interest in the entity, the Partnership reviews the equity ownership and the extent to which it absorbs risk created and distributed by the entity, as well as whether the fees charged to the entity are customary and commensurate with the level of effort required to provide services. Fees received by the Partnership are not variable interests if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services, (ii) the service arrangement includes only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length and (iii) the Partnership’s other economic interests in the VIE held directly and indirectly through its related parties, as well as economic interests held by related parties under common control, where applicable, would not absorb more than an insignificant amount of the entity’s losses or receive more than an insignificant amount of the entity’s benefits. Evaluation of these criteria requires judgment.

For entities determined to be VIEs, the Partnership must then evaluate whether it is the primary beneficiary of such VIEs. To make this determination, the Partnership evaluates its economic interests in the entity specifically determining if the Partnership has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE (the “benefits”). When making the determination on whether the benefits received from an entity are significant, the Partnership considers the total economics of the entity, and analyzes whether the Partnership’s share of the economics is significant. The Partnership utilizes qualitative factors, and, where applicable, quantitative factors, while performing the analysis.

VIEs for which the Partnership is the primary beneficiary have been included in the Partnership’s consolidated financial statements. The portion of the consolidated subsidiaries owned by third parties and any related activity is eliminated through non-controlling interests in the consolidated balance sheets and income (loss) attributable to non-controlling interests in the consolidated statements of operations.

Investments Held in Trust by Consolidated Variable Interest Entities

Investments held in trust represent an actively-traded money market fund of TGR, a consolidated special purpose acquisition company, which investments are invested in U.S. Treasury securities purchased with funds raised through the TGR IPO (as defined below). Investments held in trust are classified as trading securities and are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in other income (expense)—interest income on the accompanying unaudited interim consolidated statements of operations. The estimated fair values of investments held in the trust account are determined using quoted prices in an active market and therefore are classified in Level 1 of the fair value hierarchy, as described in Note 5— Fair Value Measurements.

Redeemable Non-Controlling Interest

Redeemable non-controlling interests represent the shares of TGR Class A common stock (as defined below) sold in the TGR IPO (as defined below) that are redeemable for cash by the public shareholders in the event of TGR’s failure to complete a business combination or a tender offer. The redeemable non-controlling interests are initially recorded at their original issue price, net of issuance costs and the initial fair value of separately traded warrants. The carrying amount was accreted to its full redemption value at March 31, 2022.

NOTE 3ACQUISITIONS, JOINT VENTURE AND SPECIAL PURPOSE ACQUISITION COMPANY

Acquisitions

On December 7, 2021, the Partnership completed the acquisition of all of the equity interests in certain subsidiaries owned by Caritas Royalty Fund LLC and certain of its affiliates (the “Cornerstone Acquisition”) for an aggregate purchase price of approximately $54.6 million. The Partnership funded the payment of the purchase price with borrowings under its secured revolving credit facility. The assets acquired in the Cornerstone Acquisition consisted of

9

approximately 26,000 gross producing wells across the Permian, Mid-Continent, Haynesville and other leading United States basins.

Joint Venture

On June 19, 2019, the Partnership entered into a joint venture (the “Joint Venture”) with Springbok SKR Capital Company, LLC and Rivercrest Capital Partners, LP, a related party. The Partnership’s ownership in the Joint Venture is 49.3% and its total capital commitment will not exceed its current investment of $5.1 million, as noted below. The Joint Venture is managed by Springbok Operating Company, LLC (“Springbok Operating”). While certain members of Springbok Operating are affiliated with the entities acquired as part of the acquisition of all of the equity interests in Springbok Energy Partners, LLC and Springbok Energy Partners II, LLC (the “Springbok Acquisition”), none of the assets held by the Joint Venture were included in the Springbok Acquisition. The purpose of the Joint Venture is to make direct or indirect investments in royalty, mineral and overriding royalty interests and similar non-cost bearing interests in oil and gas properties, excluding leasehold or working interests. The Partnership utilizes the equity method of accounting for its investment in the Joint Venture. As of March 31, 2022, the Partnership had paid approximately $5.1 million under its capital commitment. On April 29, 2022, the Joint Venture completed the sale of all of its royalty, mineral and overriding interests. See Note 15—Subsequent Events, for further discussion.

Special Purpose Acquisition Company

On July 29, 2021, TGR, the Partnership’s special purpose acquisition company and subsidiary, filed a registration statement on Form S-1 with the SEC. On February 8, 2022, TGR consummated its initial public offering (the “TGR IPO”) of 23,000,000 units (each a “unit” and, collectively, the “units”), including 3,000,000 additional units issued pursuant to the underwriter’s exercise in full of its over-allotment option, at $10.00 per unit, generating proceeds of approximately $230,000,000 and incurring offering costs of approximately $12,650,000, inclusive of $8,050,000 in deferred underwriting commissions. Each unit consists of one share of Class A common stock, par value $0.0001 (the “TGR Class A common stock”), and one-half of one redeemable warrant. Each whole warrant may be exercised for one share of Class A common stock at a price of $11.50 per share. Certain members of our management and members of the Board of Directors are members of the sponsor of TGR, TGR Sponsor. TGR was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Under the terms of TGR’s governing documents, TGR has 15 months (or up to 21 months under certain circumstances) from the closing of the TGR IPO to complete the Business Combination.

In connection with the closing of the TGR IPO, TGR completed the sale of 14.1 million private placement warrants (the “private placement warrants”) to TGR Sponsor, which is a subsidiary of the Partnership, for a purchase price of $1.00 per private placement warrant, generating gross proceeds of $14.1 million. Each private placement warrant is exercisable to purchase for $11.50 one share of TGR Class A common stock.

In addition, TGR incurred $12.7 million of fees and expenses, of which $8.1 million were deferred underwriting commissions that will become payable to the underwriters solely in the event that TGR completes the Business Combination, which were included in deferred underwriting commissions on the accompanying unaudited interim consolidated balance sheet at March 31, 2022.

In May 2021, prior to TGR’s IPO, TGR Sponsor paid $25,000 in exchange for the issuance of (i) 5,750,100 shares of TGR’s Class B common stock, par value $0.0001 per share (the “TGR Class B common “stock”), and (ii) 2,500 shares of TGR Class A common stock, for an aggregate purchase price of $25,000. Additionally, in May 2021, TGR paid $25,000 to Kimbell Tiger Operating Company (“TGR Opco”) in exchange for the issuance of 2,500 Class A units of TGR Opco. Also in May 2021, TGR Sponsor received 100 Class A units of TGR Opco in exchange for $1,000 and 5,750,000 Class B units of TGR Opco. The shares of TGR Class B common stock and corresponding number of Class B units of TGR Opco (or the Class A units of TGR Opco into which such Class B units will convert) are collectively referred to as the “Founders Shares.” The Founders Shares will be exchangeable for shares of TGR Class A common stock upon completion of the Business Combination on a one-for-one basis, subject to certain adjustments. Class A units and Class B units of TGR Opco are substantially similar, other than certain distribution rights, and are entitled to vote together as a single class on all matters submitted for stockholder vote.

10

In determining the accounting treatment of the Partnership’s equity interest in TGR, management concluded that TGR is a VIE as defined by Accounting Standards Codification (“ASC”) Topic 810, “Consolidation.” A VIE is an entity in which equity investors at risk lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, the party who has both the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, as well as the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the entity. TGR Sponsor is the primary beneficiary of TGR as it has, through its equity interest, the right to receive benefits or the obligation to absorb losses from TGR, as well as the power to direct a majority of the activities that significantly impact TGR’s economic performance, including identification of a target for its Business Combination. As such, TGR is consolidated into the Partnership’s financial statements through TGR Sponsor.

Proceeds of $236.9 million were deposited in a trust account established for the benefit of TGR’s public unitholders consisting of certain proceeds from the TGR IPO and certain proceeds from the sale of the private placement warrants, net of underwriters’ discounts and commissions and other costs and expenses. A minimum balance of $236.9 million, representing the number of TGR units sold at a redemption value of $10.30 per unit, is required by the underwriting agreement to be maintained in the trust account. The proceeds held in the trust account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act that invest only in direct U.S. government treasury obligations. In connection with the trust account, the Partnership reported investments held in trust of $237.0 million on the accompanying unaudited interim consolidated balance sheet at March 31, 2022.

The public unitholders’ ownership of TGR Class A common stock represents a redeemable non-controlling interest to the Partnership, which is classified outside of permanent unitholders’ equity as the TGR Class A common stock is redeemable at the option of the public unitholders in connection with the Business Combination. The carrying amount of the redeemable non-controlling interest is equal to the greater of (i) the initial carrying amount, increased or decreased for the redeemable non-controlling interest’s share of TGR’s net income or loss and distributions or (ii) the redemption value. The public unitholders of TGR Class A common stock will be entitled in certain circumstances to redeem their shares of TGR Class A common stock for a pro rata portion of the amount in the trust account at $10.30 per share of TGR Class A common stock held, plus any pro rata interest earned on the funds held in the trust account. As of March 31, 2022, the carrying amount of the redeemable non-controlling interest was recorded at its redemption value of $236.9 million. Remeasurements to the redemption value of the redeemable non-controlling interest are recognized as a deemed dividend and are recorded directly to unitholders’ equity on the accompanying unaudited interim consolidated balance sheets.

If TGR has not completed the Business Combination within such 15-month period (or 18-month or 21-month period, as applicable, if TGR Sponsor exercises its extension options), TGR will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (less an amount required to satisfy taxes of TGR and TGR Opco and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares and TGR Class A units of Opco (other than those held by TGR), which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to TGR’s warrants, which will expire worthless if TGR fails to complete the Business Combination within such 15-month period (or 18-month or 21-month period, as applicable, if the TGR Sponsor exercises its extension options).

As of March 31, 2022, the Partnership owned approximately 20% of the common stock of TGR and the net loss and net assets of TGR were consolidated with the Partnership’s financial statements. The remaining approximately 80% of the consolidated net loss and net assets of TGR, representing the percentage of economic interest in TGR held by public shareholders of TGR through their ownership of TGR common stock, were allocated to redeemable non-controlling interest. The total assets of TGR are $240.4 million and total liabilities are $8.6 million as of March 31, 2022. The assets of TGR held outside of trust can only be used to settle obligations of TGR and there is no recourse to the Partnership for TGR’s liabilities. All warrants and TGR Class B common stock held by the Partnership are eliminated in consolidations. Also, all transactions between TGR and the Partnership, as well as related financial statement impacts, eliminate in consolidation.

11

NOTE 4DERIVATIVES

Commodity Derivatives

The Partnership’s ongoing operations expose it to changes in the market price for oil and natural gas. To mitigate the inherent commodity price risk associated with its operations, the Partnership uses oil and natural gas commodity derivative financial instruments. From time to time, such instruments may include variable-to-fixed-price swaps, costless collars, fixed-price contracts, and other contractual arrangements. The Partnership enters into oil and natural gas derivative contracts that contain netting arrangements with each counterparty.

As of March 31, 2022, the Partnership’s commodity derivative contracts consisted of fixed price swaps, under which the Partnership receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume. The Partnership hedges its production based on the amount of debt and/or preferred equity as a percent of its enterprise value. As of March 31, 2022, these economic hedges constituted approximately 29% of daily oil and natural gas production.

The Partnership’s oil fixed price swap transactions are settled based upon the average daily prices for the calendar month of the contract period, and its natural gas fixed price swap transactions are settled based upon the last day settlement of the first nearby month futures contract of the contract period. Settlement for oil derivative contracts occurs in the succeeding month and natural gas derivative contracts are settled in the production month. Changes in the fair values of the Partnership’s commodity derivative instruments are recognized as gains or losses in the current period and are presented on a net basis within revenue in the accompanying unaudited interim consolidated statements of operations.

Interest Rate Swaps

On January 27, 2021, the Partnership entered into an interest rate swap with Citibank, N.A., New York (“Citibank”), which fixed the interest rate on $150.0 million of the notional balance on our secured revolving credit facility (which represented approximately 66% of our outstanding balance as of March 31, 2022), at approximately 3.9% for the period ending on January 29, 2024. The Partnership uses an interest rate swap for the management of interest rate risk exposure, as the interest rate swap effectively converts a portion of the Partnership’s secured revolving credit facility from a floating to a fixed rate. Changes in the fair values of the Partnership’s interest rate swaps are recognized as gains or losses in the current period and are presented on a net basis within other income in the accompanying unaudited interim consolidated statements of operations. As of March 31, 2022, the interest rate swap had a total notional amount of $150.0 million and a fair value of $5.6 million.

12

The Partnership has not designated any of its derivative contracts as hedges for accounting purposes. Changes in fair value consisted of the following:

Three Months Ended March 31, 

2022

2021

Beginning fair value of derivative instruments

$

(26,624,646)

$

(6,280,863)

Loss on derivative instruments

(28,238,415)

(13,672,957)

Net cash paid on settlements of derivative instruments

9,557,420

998,785

Ending fair value of derivative instruments

$

(45,305,641)

$

(18,955,035)

The following table presents the fair value of the Partnership’s derivative contracts for the periods indicated:

March 31, 

December 31, 

Classification

Balance Sheet Location

2022

2021

Assets:

Current assets

Derivative assets

$

2,102,159

$

166,307

Long-term assets

Derivative assets

3,457,466

1,590,501

Liabilities:

Current liabilities

Derivative liabilities

(43,316,700)

(24,190,678)

Long-term liabilities

Derivative liabilities

(7,548,566)

(4,190,776)

$

(45,305,641)

$

(26,624,646)

As of March 31, 2022, the Partnership’s open commodity derivative contracts consisted of the following:

Oil Price Swaps

Notional

Weighted Average

Range (per Bbl)

Volumes (Bbl)

Fixed Price (per Bbl)

Low

High

April 2022 - December 2022

368,522

$

43.69

$

41.77

$

46.00

January 2023 - December 2023

303,411

$

59.35

$

53.38

$

63.00

January 2024 - March 2024

54,509

$

76.32

$

76.32

$

76.32

Natural Gas Price Swaps

Notional

Weighted Average

Range (per MMBtu)

Volumes (MMBtu)

Fixed Price (per MMBtu)

Low

High

April 2022 - December 2022

4,659,509

$

2.41

$

2.23

$

2.58

January 2023 - December 2023

4,245,899

$

2.90

$

2.52

$

3.28

January 2024 - March 2024

823,186

$

4.15

$

4.15

$

4.15

NOTE 5—FAIR VALUE MEASUREMENTS

The Partnership measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the levels of the fair value hierarchy noted below. The carrying values of cash, oil, natural gas and NGL receivables, accounts receivable and other current assets and current and long-term liabilities included in the unaudited interim consolidated balance sheets approximated fair value as of March 31, 2022 and December 31, 2021 due to their short-term duration and variable interest rates that approximate prevailing interest rates as of each reporting period. As a result, these financial assets and liabilities are not discussed below.

Level 1— Unadjusted quoted market prices for identical assets or liabilities in active markets.
Level 2—Quoted prices for similar assets or liabilities in non-active markets, or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3—Measurement based on prices or valuations models that require inputs that are both unobservable and significant to the fair value measurement (including the Partnership’s own assumptions in determining fair value).

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Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Partnership recognizes transfers between fair value hierarchy levels as of the end of the reporting period in which the event or change in circumstances causing the transfer occurred. The Partnership did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements during the three months ended March 31, 2022 and 2021.

The estimated fair values of investments held in the trust account are determined using quoted prices in an active market and therefore are classified in Level 1 of the fair value hierarchy. Both the Partnership’s commodity derivative instruments and interest rate swap are classified within Level 2. The fair values of the Partnership’s oil and natural gas fixed price swaps are based upon inputs that are either readily available in the public market, such as oil and natural gas futures prices, volatility factors and discount rates, or can be corroborated from active markets.

The following tables summarize the Partnership’s assets and liabilities measured at fair value on a recurring basis by the fair value hierarchy:

Fair Value Measurements Using

Level 1

Level 2

Level 3

Effect of
Counterparty Netting

Total

March 31, 2022

Assets

Interest rate swap contracts

$

$

5,559,625

$

$

$

5,559,625

Investments held in trust

$

237,001,386

$

$

$

$

237,001,386

Liabilities

Commodity derivative contracts

$

$

(50,865,266)

$

$

$

(50,865,266)

December 31, 2021

Assets

Interest rate swap contracts

$

$

1,756,808

$

$

$

1,756,808

Liabilities

Commodity derivative contracts

$

$

(28,381,454)

$

$

$

(28,381,454)

NOTE 6—OIL AND NATURAL GAS PROPERTIES

Oil and natural gas properties consist of the following:

    

March 31, 

December 31, 

2022

2021

Oil and natural gas properties

Proved properties

$

1,070,219,297

$

1,051,111,311

Unevaluated properties

134,586,442

153,284,173

Less: accumulated depreciation, depletion and impairment

(673,991,373)

(663,603,142)

Total oil and natural gas properties

$

530,814,366

$

540,792,342

The Partnership assesses all unevaluated properties on a periodic basis for possible impairment. The Partnership assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: economic and market conditions, operators’ intent to drill, remaining lease term, geological and geophysical evaluations, operators’ drilling results and activity, the assignment of proved reserves and the economic viability of operator development if proved reserves are assigned. Costs associated with unevaluated properties are excluded from the full cost pool until a determination as to the existence of proved reserves is able to be made. During any period in which these factors indicate an impairment, all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization and to the full cost ceiling test.

14

After evaluating certain external factors, the Partnership determined that it did not have reasonable certainty as to the timing of the development of the proved undeveloped (“PUD”) reserves and, therefore did not book PUD reserves in its total estimated proved reserves as of March 31, 2022 or December 31, 2021 and it does not intend to book PUD reserves going forward.

The Partnership did not record an impairment on its oil and natural gas properties for either of the three-month periods ended March 31, 2022 or March 31, 2021.

NOTE 7—LEASES

Substantially all of the Partnership’s leases are long-term operating leases with fixed payment terms and will terminate in June 2029. The Partnership’s right-of-use (“ROU”) operating lease assets represent its right to use an underlying asset for the lease term, and its operating lease liabilities represent its obligation to make lease payments. ROU operating lease assets and operating lease liabilities are included in the accompanying unaudited interim consolidated balance sheets. Short term operating lease liabilities are included in other current liabilities. The weighted average remaining lease term as of March 31, 2022 is 7.10 years.

Both the ROU operating lease assets and liabilities are recognized at the present value of the remaining lease payments over the lease term and do not include lease incentives. The Partnership’s leases do not provide an implicit rate that can readily be determined; therefore, the Partnership used a discount rate based on its incremental borrowing rate, which is determined by the information available in the secured revolving credit facility. The incremental borrowing rate reflects the estimated rate of interest that the Partnership would pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. The weighted average discount rate used for the operating lease was 6.75% for the three months ended March 31, 2022.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expense in the accompanying unaudited interim consolidated statements of operations for the three months ended March 31, 2022 and 2021. The total operating lease expense recorded for both the three months ended March 31, 2022 and 2021 was $0.1 million.

Currently, the most substantial contractual arrangements that the Partnership has classified as operating leases are the main office spaces used for operations.

Future minimum lease commitments as of March 31, 2022 were as follows:

Total

2022

2023

2024

2025

2026

Thereafter

Operating leases

$

3,565,096

$

364,636

$

487,787

$

488,725

$

497,033

$

507,648

$

1,219,267

Less: Imputed Interest

 

(775,097)

 

Total

$

2,789,999

 

NOTE 8—LONG-TERM DEBT

On January 11, 2017, the Partnership entered into a credit agreement (the “2017 Credit Agreement”) with Frost Bank, as administrative agent, and the lenders party thereto. On July 12, 2018, the Partnership entered into an amendment (the “First Credit Agreement Amendment”) to the Partnership’s 2017 Credit Agreement (the 2017 Credit Agreement as amended by the First Credit Agreement Amendment, the “2018 Amended Credit Agreement”). On December 8, 2020, the Partnership entered into Amendment No. 2 (the “Second Credit Agreement Amendment”) to the 2018 Amended Credit Agreement (the 2018 Amended Credit Agreement as amended by the Second Credit Agreement Amendment, the “Amended Credit Agreement”).

The Second Credit Agreement Amendment amends the 2018 Amended Credit Agreement to, among other things, (i) increase commitments under the Amended Credit Agreement’s senior secured revolving credit facility from $225.0 million to $265.0 million, the availability of which will equal the lesser of the aggregate maximum elected commitments of the lenders up to $500.0 million, subject to the satisfaction of certain conditions and the election of existing lenders to increase commitments or the procurement of additional commitments from new lenders, and the borrowing base, (ii) extend the maturity date under the 2018 Amended Credit Agreement from February 8, 2022 to June 7, 2024, (iii) reflect

15

the change in administrative agent from Frost to with Citibank under the Amended Credit Agreement, (iv) increase the applicable margin under the 2018 Amended Credit Agreement, which varies based upon the level of borrowing base usage, by 1.00% for each applicable level as set forth in the Amended Credit Agreement, such that the applicable margin will range from 2.00% to 3.00% in the case of ABR Loans (as defined in the Amended Credit Agreement) and 3.00% to 4.00% in the case of LIBOR Loans (as defined in the Amended Credit Agreement), (v) provide for a LIBOR (as defined in the Amended Credit Agreement) floor of 0.25%, (vi) modify the Debt to EBITDAX Ratio (as defined in the Amended Credit Agreement) financial covenant to permit the numerator of the Debt to EBITDAX Ratio (as defined in the Amended Credit Agreement) to be calculated as Total Debt (as defined in the Amended Credit Agreement) minus up to $25 million in unrestricted cash held by the Partnership and its restricted subsidiaries and to decreases the maximum permitted Debt to EBITDAX Ratio (as defined in the Amended Credit Agreement) from 4.0 to 1.0 to 3.5 to 1.0, and (vii) modify the conditions permitting restricted distributions to holders of Kimbell Common Units (as defined in the Amended Credit Agreement) including, among other things, a limitation on such distributions to not be in excess of the Partnership’s Projected Cash Available For Distribution (as defined in the Amended Credit Agreement). We are obligated to pay a quarterly commitment fee of 0.50% annualized rate on the unused portion of the borrowing base, depending on the amount of the borrowings outstanding in relation to the borrowing based. In connection with our entry into the Second Credit Agreement Amendment, the borrowing base was set at $265.0 million. The borrowing base will be redetermined semi-annually on or about May 1 and November 1 of each year, beginning May 1, 2021, based on the value of the Partnership’s oil and natural gas properties and the oil and natural gas properties of the Partnership’s wholly owned subsidiaries. In connection with the November 1, 2021 redetermination under the secured revolving credit facility, the borrowing base was increased to $275.0 million. The May borrowing base redetermination is currently being conducted and is expected to be finalized by the end of May 2022.

The Amended Credit Agreement contains various affirmative, negative and financial maintenance covenants. These covenants limit the Partnership’s ability to, among other things, incur or guarantee additional debt, make distributions on, or redeem or repurchase, common units representing limited partner interests in the Partnership (“common units”) and common units of the Operating Company (“OpCo common units”), make certain investments and acquisitions, incur certain liens or permit them to exist, enter into certain types of transactions with affiliates, merge or consolidate with another company and transfer, sell or otherwise dispose of assets. The Amended Credit Agreement also contains covenants requiring the Partnership to maintain the following financial ratios or to reduce the Partnership’s indebtedness if the Partnership is unable to comply with such ratios: (i) a Debt to EBITDAX Ratio (as defined in the Amended Credit Agreement) of not more than 3.5 to 1.0; and (ii) a ratio of current assets to current liabilities of not less than 1.0 to 1.0. The Amended Credit Agreement also contains customary events of default, including non-payment, breach of covenants, materially incorrect representations, cross default, bankruptcy and change of control.

During the three months ended March 31, 2022, the Partnership borrowed an additional $19.1 million under the secured revolving credit facility and repaid approximately $9.7 million of the outstanding borrowings. As of March 31, 2022, the Partnership’s outstanding balance was $226.5 million. The Partnership was in compliance with all covenants included in the secured revolving credit facility as of March 31, 2022.

As of March 31, 2022, borrowings under the secured revolving credit facility bore interest at LIBOR plus a margin of 3.75% or the ABR (as defined in the Amended Credit Agreement) plus a margin of 2.75%. For the three months ended March 31, 2022, the weighted average interest rate on the Partnership’s outstanding borrowings was 4.10%.

The 1-week and 2-month U.S. dollar LIBOR settings ceased to be published after December 31, 2021 and the U.K. Financial Conduct Authority intends to stop persuading or compelling banks to submit LIBOR rates for the remaining U.S. dollar settings after June 30, 2023. The Partnership’s secured revolving credit facility has the option of using the 1-month, 3-month or 6-month LIBOR setting and includes provisions to determine a replacement rate for LIBOR if necessary during its term, based on the secured overnight financing rate published by the Federal Reserve Bank of New York. The Partnership currently do not expect the transition from LIBOR to have a material impact on them.

NOTE 9—PREFERRED UNITS

In July 2018, the Partnership completed the private placement of 110,000 Series A preferred units (the “Series A preferred units”) to certain affiliates of Apollo Capital Management, L.P. (the “Series A Purchasers”) for $1,000 per Series A preferred unit, resulting in gross proceeds to the Partnership of $110.0 million.

16

On February 12, 2020, the Partnership completed the redemption of 55,000 Series A preferred units, representing 50% of the then-outstanding Series A preferred units. The Series A preferred units were redeemed at a price of $1,110.72 per Series A preferred unit for an aggregate redemption price of $61.1 million. As the consideration transferred by the Partnership to redeem the Series A preferred units was greater than 50% of the carrying value of the Series A preferred units as of the redemption date and 50% of the original intrinsic value of the beneficial conversion feature, a deemed dividend distribution of $5.7 million was recognized in unitholders’ equity and non-controlling interest during the year ended December 31, 2020.

On July 7, 2021, the Partnership completed the redemption of 30,000 Series A preferred units, representing 55% of the then-outstanding Series A preferred units, with 25,000 Series A preferred units still outstanding. The Series A preferred units were redeemed at a price of $1,202.51 per Series A preferred unit for an aggregate redemption price of $36.1 million. As the consideration transferred by the Partnership to redeem the Series A preferred units was greater than the carrying value of the Series A preferred units as of the redemption date and the redeemed portion of the original intrinsic value of the beneficial conversion feature, a deemed dividend distribution of $3.8 million was recognized in unitholders’ equity and non-controlling interest during the year ended December 31, 2021.

On December 7, 2021, the Partnership completed the redemption of the remaining 25,000 Series A preferred units. The Series A preferred units were redeemed at a price of $1,240.25 per Series A preferred unit for an aggregate redemption price of $31.0 million. As the consideration transferred by the Partnership to redeem the Series A preferred units was greater than the carrying value of the Series A preferred units as of the redemption date and the remaining intrinsic value of the beneficial conversion feature, a deemed dividend distribution of $3.6 million was recognized in unitholders’ equity and non-controlling interest during the year ended December 31, 2021.

As of December 31, 2021 and March 31, 2022, no preferred units remain outstanding.

NOTE 10—UNITHOLDERS’ EQUITY AND PARTNERSHIP DISTRIBUTIONS

The Partnership has issued units representing limited partner interests. As of March 31, 2022, the Partnership had a total of 57,290,923 common units issued and outstanding and 8,253,660 Class B units outstanding.

In November 2021, the Partnership completed an underwritten public offering of 4,312,500 common units for net proceeds of approximately $57.7 million (the “2021 Equity Offering”). The Partnership used the net proceeds from the 2021 Equity Offering to purchase OpCo common units. The Operating Company in turn used the net proceeds to repay approximately $56.0 million of the outstanding borrowings under the Partnership’s secured revolving credit facility.

The following table summarizes the changes in the number of the Partnership’s common units:

Common Units

Balance at December 31, 2021

47,162,773

Conversion of Class B units

9,357,919

Common units issued under the LTIP (1)

963,835

Restricted units repurchased for tax withholding

(193,604)

Balance at March 31, 2022

57,290,923

(1)Includes restricted units granted to certain employees, directors and consultants under the Kimbell Royalty GP, LLC 2017 Long-Term Incentive Plan (as amended, the “LTIP”) on February 24, 2022.

17

The following table presents information regarding the common unit cash distributions approved by the General Partner’s Board of Directors (the “Board of Directors”) for the periods presented:

Amount per

Date

Unitholder

Payment

Common Unit

Declared

Record Date

Date

Q1 2022

$

0.47

April 22, 2022

May 2, 2022

May 9, 2022

Q1 2021

$

0.27

April 23, 2021

May 3, 2021

May 10, 2021

The following table summarizes the changes in the number of the Partnership’s Class B units:

Class B Units

Balance at December 31, 2021

17,611,579

Conversion of Class B units

(9,357,919)

Balance at March 31, 2022

8,253,660

For each Class B unit issued, five cents has been paid to the Partnership as additional consideration (the “Class B Contribution”). Holders of the Class B units are entitled to receive cash distributions equal to 2.0% per quarter on their respective Class B Contribution, subsequent to distributions on the Series A preferred units but prior to distributions on the common units and OpCo common units.

The Class B units and OpCo common units are exchangeable together into an equal number of common units of the Partnership.

NOTE 11—EARNINGS (LOSS) PER COMMON UNIT

Basic earnings (loss) per common unit is calculated by dividing net income (loss) attributable to common units by the weighted-average number of common units outstanding during the period. Diluted net income (loss) per common unit gives effect, when applicable, to unvested restricted units granted under the Partnership’s LTIP for its employees, directors and consultants and potential conversion of Class B units.

18

The following table summarizes the calculation of weighted average common units outstanding used in the computation of diluted earnings (loss) per common unit:

Three Months Ended March 31, 

2022

2021

Net income (loss) attributable to common units of Kimbell Royalty Partners, LP

$

7,330,957

$

(704,375)

Accretion of redeemable noncontrolling interest in Kimbell Tiger Acquisition Corporation

(16,325,799)

Net loss attributable to common units of Kimbell Royalty Partners, LP after accretion of redeemable noncontrolling interest in Kimbell Tiger Acquisition Corporation

(