Kimbell Royalty Partners, LP [KRP] Filings

10-Q 1 krp-20240930x10q.htm 10-Q

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 September 30, 2024 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 (§232.405 of this chapter) 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 November 1, 2024, the registrant had outstanding 80,969,651 common units representing limited partner interests and 14,524,120 Class B units representing limited partner interests.

KIMBELL ROYALTY PARTNERS, LP

FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited):	1
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Changes in Unitholders’ Equity	3
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	38


PART II – OTHER INFORMATION
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 5. Other Information	40
Item 6. Exhibits	40
Signatures	42

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30,		December 31,
	2024		2023
ASSETS
Current assets
Cash and cash equivalents	$	34,706,176	$	30,992,670
Oil, natural gas and NGL receivables		48,975,028		59,020,471
Derivative assets		6,817,989		11,427,735
Accounts receivable and other current assets		1,670,697		1,699,536
Total current assets		92,169,890		103,140,412
Property and equipment, net		361,205		589,895
Oil and natural gas properties
Oil and natural gas properties, using full cost method of accounting ($117,838,676 and $222,712,844 excluded from depletion at September 30, 2024 and December 31, 2023, respectively)		2,048,711,692		2,048,690,088
Less: accumulated depreciation, depletion and impairment		(936,054,155)		(827,033,944)
Total oil and natural gas properties, net		1,112,657,537		1,221,656,144
Right-of-use assets, net		1,928,951		2,189,243
Derivative assets		1,763,609		2,888,051
Loan origination costs, net		5,789,882		7,325,471
Total assets	$	1,214,671,074	$	1,337,789,216

LIABILITIES, MEZZANINE EQUITY AND UNITHOLDERS' EQUITY
Current liabilities
Accounts payable	$	6,865,296	$	6,594,736
Other current liabilities		10,874,999		6,173,314
Derivative liabilities		—		208,710
Total current liabilities		17,740,295		12,976,760
Operating lease liabilities, excluding current portion		1,604,893		1,887,693
Derivative liabilities		2,295		60,094
Long-term debt		252,159,776		294,200,000
Other liabilities		104,169		197,917
Total liabilities		271,611,428		309,322,464
Commitments and contingencies (Note 16)
Mezzanine equity:
Series A preferred units (325,000 units issued and outstanding as of September 30, 2024 and December 31, 2023)		315,607,500		314,423,572
Kimbell Royalty Partners, LP unitholders' equity:
Common units (80,969,651 units and 73,851,458 units issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)		531,293,639		555,809,000
Class B units (14,524,120 units and 20,847,295 units issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)		726,206		1,042,365
Total Kimbell Royalty Partners, LP unitholders' equity		532,019,845		556,851,365
Non-controlling interest in OpCo		95,432,301		157,191,815
Total unitholders' equity		627,452,146		714,043,180
Total liabilities, mezzanine equity and unitholders' equity	$	1,214,671,074	$	1,337,789,216

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

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KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue
Oil, natural gas and NGL revenues	$	71,069,593	$	69,237,603	$	235,528,275	$	183,635,976
Lease bonus and other income		3,162,656		2,543,240		4,261,432		5,021,766
Gain (loss) on commodity derivative instruments, net		9,553,190		(4,576,570)		2,802,568		6,215,265
Total revenues		83,785,439		67,204,273		242,592,275		194,873,007
Costs and expenses
Production and ad valorem taxes		4,346,922		4,986,878		16,455,621		14,669,037
Depreciation and depletion expense		32,155,040		23,060,163		103,345,780		60,280,666
Impairment of oil and natural gas properties		—		—		5,963,575		—
Marketing and other deductions		3,607,040		3,508,500		11,997,630		9,177,998
General and administrative expense		9,472,117		10,358,674		29,172,121		26,562,100
Consolidated variable interest entities related:
General and administrative expense		—		—		—		927,699
Total costs and expenses		49,581,119		41,914,215		166,934,727		111,617,500
Operating income		34,204,320		25,290,058		75,657,548		83,255,507
Other (expense) income
Interest expense		(6,492,127)		(6,680,661)		(20,740,037)		(18,485,183)
Loss on extinguishment of debt		—		—		—		(480,244)
Other expense		—		—		—		(180,765)
Consolidated variable interest entities related:
Interest earned on marketable securities in trust account		—		—		—		3,508,691
Net income before income taxes		27,712,193		18,609,397		54,917,511		67,618,006
Income tax expense		1,906,746		128,359		4,588,596		2,440,399
Net income		25,805,447		18,481,038		50,328,915		65,177,607
Distribution and accretion on Series A preferred units		(5,296,282)		(1,040,572)		(15,795,573)		(1,040,572)
Net income and distributions and accretion on Series A preferred units attributable to non-controlling interests		(3,119,340)		(3,839,401)		(5,522,549)		(13,700,261)
Distribution on Class B units		(14,524)		(20,854)		(56,218)		(67,939)
Net income attributable to common units of Kimbell Royalty Partners, LP	$	17,375,301	$	13,580,211	$	28,954,575	$	50,368,835

Net income per unit attributable to common units of Kimbell Royalty Partners, LP
Basic	$	0.22	$	0.20	$	0.38	$	0.80
Diluted	$	0.22	$	0.19	$	0.38	$	0.78
Weighted average number of common units outstanding
Basic		78,977,450		68,540,786		75,321,486		64,807,590
Diluted		116,414,205		94,969,077		116,240,192		85,739,813

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

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KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS’ EQUITY

(Unaudited)


	Nine Months Ended September 30, 2024
									Non-controlling
	Common Units		Amount		Class B Units		Amount		Interest in OpCo		Total
Balance at January 1, 2024		73,851,458	$	555,809,000		20,847,295	$	1,042,365	$	157,191,815	$	714,043,180
Restricted units repurchased for tax withholding		(292,484)		(4,914,149)		—		—		—		(4,914,149)
Unit-based compensation		1,087,502		3,684,080		—		—		—		3,684,080
Distributions to unitholders		—		(32,097,985)		—		—		(9,462,525)		(41,560,510)
Distribution and accretion on Series A preferred units		—		(4,108,784)		—		—		(1,147,503)		(5,256,287)
Distribution on Class B units		—		(20,847)		—		—		—		(20,847)
Change in ownership of consolidated subsidiaries, net		—		1,192,335		—		—		(1,192,335)		—
Net income		—		7,298,587		—		—		2,038,352		9,336,939
Balance at March 31, 2024		74,646,476		526,842,237		20,847,295		1,042,365		147,427,804		675,312,406
Conversion of Class B units to common units		6,323,175		44,716,200		(6,323,175)		(316,159)		(44,716,200)		(316,159)
Unit-based compensation		—		5,108,318		—		—		—		5,108,318
Distributions to unitholders		—		(36,576,773)		—		—		(10,215,175)		(46,791,948)
Distribution and accretion on Series A preferred units		—		(4,445,570)		—		—		(797,434)		(5,243,004)
Distribution on Class B units		—		(20,847)		—		—		—		(20,847)
Change in ownership of consolidated subsidiaries, net		—		(3,824,049)		—		—		3,824,049		—
Net income		—		12,876,735		—		—		2,309,794		15,186,529
Balance at June 30, 2024		80,969,651		544,676,251		14,524,120		726,206		97,832,838		643,235,295
Unit-based compensation		—		3,829,593		—		—		—		3,829,593
Distributions to unitholders		—		(34,007,253)		—		—		(6,100,130)		(40,107,383)
Distribution and accretion on Series A preferred units		—		(4,490,744)		—		—		(805,538)		(5,296,282)
Distribution on Class B units		—		(14,524)		—		—		—		(14,524)
Change in ownership of consolidated subsidiaries, net		—		(580,253)		—		—		580,253		—
Net income		—		21,880,569		—		—		3,924,878		25,805,447
Balance at September 30, 2024		80,969,651	$	531,293,639		14,524,120	$	726,206	$	95,432,301	$	627,452,146

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KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS’ EQUITY — (Continued)

(Unaudited)


	Nine Months Ended September 30, 2023
									Non-controlling
	Common Units		Amount		Class B Units		Amount		Interest in OpCo		Total
Balance at January 1, 2023		64,231,833	$	463,751,910		15,484,400	$	774,220	$	111,983,546	$	576,509,676
Restricted units repurchased for tax withholding		(279,662)		(4,851,962)		—		—		—		(4,851,962)
Unit-based compensation		998,162		3,170,000		—		—		—		3,170,000
Distributions to unitholders		—		(31,176,160)		—		—		(7,436,615)		(38,612,775)
Distribution on Class B units		—		(15,484)		—		—		—		(15,484)
Change in ownership of consolidated subsidiaries, net		—		1,323,777		—		—		(1,323,777)		—
Net income		—		23,336,120		—		—		5,563,418		28,899,538
Balance at March 31, 2023		64,950,333		455,538,201		15,484,400		774,220		108,786,572		565,098,993
Units issued for acquisition		557,302		8,654,900		5,369,218		268,461		83,383,956		92,307,317
Unit-based compensation		—		3,289,740		—		—		—		3,289,740
Distributions to unitholders		—		(22,732,617)		—		—		(5,349,476)		(28,082,093)
Distribution on Class B units		—		(31,601)		—		—		—		(31,601)
Accretion of redeemable non-controlling interest in Kimbell Tiger Acquisition Corporation and write-off of deferred underwriting commissions		—		1,192,969		—		—		379,768		1,572,737
Change in ownership of consolidated subsidiaries, net		—		34,071,637		—		—		(34,071,637)		—
Net income		—		13,499,589		—		—		4,297,442		17,797,031
Balance at June 30, 2023		65,507,635		493,482,818		20,853,618		1,042,681		157,426,625		651,952,124
Common units issued for equity offering		8,337,500		110,711,383		—		—		—		110,711,383
Conversion of Class B units to common units		6,323		47,733		(6,323)		(316)		(47,733)		(316)
Unit-based compensation		—		3,325,891		—		—		—		3,325,891
Distributions to unitholders		—		(28,799,603)		—		—		(8,132,911)		(36,932,514)
Distribution and accretion on Series A preferred units		—		(811,497)		—		—		(229,075)		(1,040,572)
Distribution on Class B units		—		(20,854)		—		—		—		(20,854)
Change in ownership of consolidated subsidiaries, net		—		(11,246,340)		—		—		11,246,340		—
Net income		—		14,412,562		—		—		4,068,476		18,481,038
Balance at September 30, 2023		73,851,458	$	581,102,093		20,847,295	$	1,042,365	$	164,331,722	$	746,476,180

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

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KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	50,328,915	$	65,177,607
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and depletion expense		103,345,780		60,280,666
Impairment of oil and natural gas properties		5,963,575		—
Amortization of right-of-use assets		260,292		251,175
Amortization of loan origination costs		1,592,712		1,414,074
Loss on extinguishment of debt		—		480,244
Unit-based compensation		12,621,991		9,785,631
Loss (gain) on derivative instruments, net of settlements		5,467,679		(11,002,749)
Changes in operating assets and liabilities:
Oil, natural gas and NGL receivables		10,045,443		(14,326,575)
Accounts receivable and other current assets		28,839		707,259
Accounts payable		270,708		1,014,264
Other current liabilities		4,701,685		5,631,591
Operating lease liabilities		(282,800)		(258,430)
Consolidated variable interest entities related:
Interest earned on marketable securities in trust account		—		(3,508,691)
Other assets and liabilities		—		(687,353)
Net cash provided by operating activities		194,344,819		114,958,713
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(154,203)		(107,420)
Purchase of oil and natural gas properties		(21,605)		(490,135,551)
Proceeds from trust of variable interest entity		—		930,850
Consolidated variable interest entities related:
Cash paid for transaction costs		—		31,553
Cash received from investments held in trust		—		243,167,434
Net cash used in investing activities		(175,808)		(246,113,134)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of Series A preferred units, net of issuance costs		—		313,950,000
Proceeds from equity offering, net of issuance costs		—		110,711,383
Contributions from Class B unitholders		—		268,461
Redemption of Class B contributions on converted units		(316,159)		(316)
Distribution to common unitholders		(102,682,011)		(82,708,380)
Distribution to OpCo unitholders		(25,777,830)		(20,919,002)
Distribution on Series A preferred units		(14,611,791)		—
Distribution on Class B units		(56,218)		(67,939)
Borrowings on long-term debt		4,959,776		201,084,089
Repayments on long-term debt		(47,000,000)		(123,700,000)
Payment of loan origination costs		(57,123)		(4,942,188)
Restricted units repurchased for tax withholding		(4,914,149)		(4,851,962)
Consolidated variable interest entities related:
Redemption of Kimbell Tiger Acquisition Corporation equity units		—		(243,167,434)
Net cash (used in) provided by financing activities		(190,455,505)		145,656,712
NET INCREASE IN CASH AND CASH EQUIVALENTS		3,713,506		14,502,291
CASH AND CASH EQUIVALENTS, beginning of period		30,992,670		25,026,568
CASH AND CASH EQUIVALENTS, end of period	$	34,706,176	$	39,528,859

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KIMBELL ROYALTY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Supplemental cash flow information:
Cash paid for interest	$	19,366,963	$	16,920,473
Non-cash investing and financing activities:
Units issued in exchange for oil and natural gas properties	$	—	$	92,038,856
Noncash deemed distribution to Series A preferred units	$	1,183,928	$	78,929
Distribution on Series A preferred units in accounts payable	$	4,901,639	$	—
Recognition of tenant improvement asset	$	93,750	$	93,750
Consolidated variable interest entities related:
Reduction of deferred underwriting commission associated with redemption of Kimbell Tiger Acquisition Corporation equity units	$	—	$	(8,050,000)

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

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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. 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.

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 United States 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, 2023, as amended (the “2023 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.

Revision of Prior Period Consolidated Financial Statements

In connection with the preparation of the Partnership’s unaudited interim consolidated financial statements for the three and nine months ended September 30, 2024, the Partnership identified an error in its application of accounting guidance related to the changes in ownership of OpCo. The Partnership previously accounted for the changes in ownership of OpCo by reallocating the non-controlling interest associated with such changes at fair value. Under ASC 810-10, changes in ownership of a consolidated subsidiary that is less than wholly owned (such as OpCo) should be accounted for by adjusting the carrying value of such non-controlling interests to reflect the change in ownership interest in the subsidiary. Any difference between fair value of consideration received or paid and the amount by which the non-controlling interest is adjusted should be recognized in equity attributable to the parent.

The Partnership has corrected these errors and determined that the related impact was not material to its financial statements for any prior annual or interim period. The Partnership has corrected these errors in the Consolidated Financial Statements for all prior periods presented herein. See Note 18, “Correction of Immaterial Errors”

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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.

Global Conflicts

In February 2022, Russia invaded Ukraine and is still engaged in active armed conflict against the country. In October 2023, armed active conflict escalated in the Middle East between Israel and Hamas and is still active. In April 2024, Iran launched an attack on Israel, further escalating the regional conflict in the Middle East. These conflicts 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. To date, the Partnership has not experienced a material impact to operations or the consolidated financial statements as a result of these conflicts; however, the Partnership will continue to monitor for events that could materially impact them.

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 2023 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 and nine months ended September 30, 2024.

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 with respect to which the Partnership serves as the sponsor, general partner or managing member, and general partner entities not wholly owned by 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

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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 of 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 represented funds raised by Kimbell Tiger Acquisition Corporation (“TGR”), a consolidated special purpose acquisition company, through TGR’s initial public offering. These funds were held in an actively-traded money market fund, which invested in U.S. Treasury securities. Investments held in trust were classified as trading securities and were 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 earned on marketable securities in trust account on the accompanying unaudited interim consolidated statements of operations. Interest earned on marketable securities in trust account was $3.5 million for the nine months ended September 30, 2023. As discussed further in Note 4, the Partnership completed the dissolution and deconsolidation of TGR (along with related entities) on June 30, 2023.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, “Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures.” The amendments in this update apply to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in this update should be applied retrospectively to all prior periods presented in the financial statements. The Partnership is currently evaluating the impact of the adoption of this update but does not believe it will have a material impact on its financial position, results of operations or liquidity.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this update apply to all entities that are subject to Topic 740, Income Taxes. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted and should be applied either prospectively or retrospectively. The Partnership is currently evaluating the impact of the adoption of this update, but does not believe it will have a material impact on its financial position, results of operations or liquidity.

NOTE 3—REVENUE FROM CONTRACTS WITH CUSTOMERS

The Partnership has the right to receive revenues from oil, natural gas and NGL sales obtained by the operator of the wells in which the Partnership owns a mineral or royalty interest. Revenue is recognized at the point control of the product is transferred to the purchaser. Virtually all of the pricing provisions in the Partnership’s contracts are tied to a market index.

The Partnership’s oil, natural gas and NGL sales contracts are generally structured whereby the producer of the properties in which the Partnership owns a mineral or royalty interest sells the Partnership’s proportionate share of oil, natural gas and NGL production to the purchaser and the Partnership collects its percentage royalty based on the revenue generated by the sale of the oil, natural gas and NGL. In this scenario, the Partnership recognizes revenue when control transfers to the purchaser at the wellhead or at the gas processing facility based on the Partnership’s percentage ownership share of the revenue, net of any deductions for gathering and transportation.

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The following table disaggregates the Partnership’s oil, natural gas and NGL revenues for the following periods:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Oil revenue	$	51,599,632	$	50,777,614	$	166,632,659	$	123,587,783
Natural gas revenue		10,857,225		12,339,244		39,482,399		43,528,008
NGL revenue		8,612,736		6,120,745		29,413,217		16,520,185
Total Oil, natural gas and NGL revenues	$	71,069,593	$	69,237,603	$	235,528,275	$	183,635,976

NOTE 4—ACQUISITIONS AND SPECIAL PURPOSE ACQUISITION COMPANY

Acquisitions

On September 13, 2023, the Partnership completed the acquisition of all issued and outstanding membership interests of Cherry Creek Minerals LLC pursuant to a securities purchase agreement with LongPoint Minerals II, LLC (the “LongPoint Acquisition”) in a cash transaction valued at approximately $455.0 million. The Partnership funded the cash transaction with borrowings under its secured revolving credit facility and net proceeds from the Preferred Unit Transaction (as defined in Note 10—Preferred Units). The adjusted purchase price of the LongPoint Acquisition includes the total cash consideration of $455.0 million, transactional costs of $7.4 million and less $16.6 million of post-effective net oil, natural gas and NGL revenues earned prior to the closing date. The LongPoint Acquisition was accounted for as an asset acquisition and the allocation of the purchase price was $198.2 million to proved properties and $247.6 million to unevaluated properties.

On May 17, 2023, the Partnership completed the acquisition of certain mineral and royalty assets held by MB Minerals, L.P. and certain of its affiliates (the “MB Minerals Acquisition”). The aggregate consideration for the MB Minerals Acquisition consisted of (i) approximately $48.8 million in cash and (ii) the issuance of (a) 5,369,218 common units of the Operating Company (“OpCo common units”) and an equal number of Class B units representing limited partnership interests in the Partnership (“Class B Units”) and (b) 557,302 common units representing limited partner interests in the Partnership (“common units”). The Partnership funded the cash payment of the purchase price with borrowings under its secured revolving credit facility. The assets acquired in the MB Minerals Acquisition are located in Howard and Borden Counties, Texas. The MB Minerals Acquisition was accounted for as an asset acquisition and the allocation of the purchase price was $60.8 million to proved properties and $74.9 million to unevaluated properties.

Special Purpose Acquisition Company

On February 8, 2022, the Partnership’s previously dissolved special purpose acquisition company and subsidiary, TGR, consummated its $230 million initial public offering. Under the terms of TGR’s governing documents, TGR had until May 8, 2023 to complete a business combination, subject to an option to extend such deadline.

On May 22, 2023, as a result of TGR’s inability to consummate an initial business combination on or prior to May 8, 2023, and pursuant to the terms of its organizational documents, TGR redeemed all of its outstanding shares of Class A common stock of TGR, par value $0.0001 per share (the “Class A common stock”), included as part of the units issued in its initial public offering. The Class A common stock was redeemed on June 22, 2023 and the Partnership completed the dissolution and deconsolidation of TGR (along with related entities) on June 30, 2023 in accordance with the terms of its organizational documents.

NOTE 5—DERIVATIVES

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.

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As of September 30, 2024, 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’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 scheduled trading day for the first nearby month futures contract corresponding to the relevant 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.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Beginning fair value of derivative instruments	$	1,512,955	$	2,776,238	$	14,046,982	$	(12,324,076)
Gain (loss) on commodity derivative instruments, net		9,553,190		(4,576,570)		2,802,568		6,215,265
Net cash (received) paid on settlements of derivative instruments		(2,486,842)		479,005		(8,270,247)		4,787,484
Ending fair value of derivative instruments	$	8,579,303	$	(1,321,327)	$	8,579,303	$	(1,321,327)

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


		September 30,		December 31,
Classification	Balance Sheet Location	2024		2023
Assets:
Current assets	Derivative assets	$	6,817,989	$	11,427,735
Long-term assets	Derivative assets		1,763,609		2,888,051
Liabilities:
Current liabilities	Derivative liabilities		—		(208,710)
Long-term liabilities	Derivative liabilities		(2,295)		(60,094)
		$	8,579,303	$	14,046,982

As of September 30, 2024, 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
October 2024 - December 2024

Kimbell Royalty Partners, LP [KRP] Filings
10-Q	[2024-11-08]
10-Q	[2024-08-01]
10-Q	[2024-05-02]
10-K	[2024-02-21]
10-Q	[2023-11-02]
10-Q	[2023-08-02]
10-Q	[2023-05-03]
10-K	[2023-02-23]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-10]
10-K	[2022-02-25]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-26]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-02-28]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-12]
10-Q	[2018-11-09]
10-Q	[2018-08-10]
10-Q	[2018-05-11]
10-K	[2018-03-09]
10-Q	[2017-11-09]
10-Q	[2017-08-14]
10-Q	[2017-05-12]
10-K	[2017-03-30]
S-1	[2017-01-06]