Kimbell Royalty Partners LP is acquiring mineral and royalty interests located in core positions of the Permian and Mid-Continent basins held by an undisclosed private seller in a cash transaction valued at approximately $455 million, subject to purchase price adjustments and other customary closing adjustments.
The acreage has high-interest locations, of which 49 percent is in the Delaware Basin, 10 percent is in the Midland Basin, and 41 percent is in the Mid-Continent Basin. Kimbell estimates that as of June 1 the assets produced approximately 4,840 barrels of oil equivalent per day (boepd), comprising 1,619 barrels per day (bpd) of oil, 1,227 bpd of natural gas liquids (NGLs), and 11.97 million cubic feet per day (MMcfpd) of natural gas. For the full-year 2024, Kimbell estimates that the assets will produce approximately 5,049 boepd: 1,682 bpd of oil, 1,312 bpd of NGLs, and 12.33 MMcfpd of natural gas, the company said in a news release Wednesday.
The targeted oil and gas mineral and royalty interests have over 4,000 gross-producing wells on over one million gross acres. Following the transaction, Kimbell expects net wells needed to maintain flat production to modestly increase from 4.9 wells to 5.8 wells, the news release said.
The acquisition is expected to close in the third quarter, subject to customary closing conditions, and its effective date is expected to be June 1. The board of directors of Kimbell’s general partner and the governing body of the seller have approved the acquisition, Kimbell said in the release.
Kimbell intends to fund the purchase through a private placement of six percent Series A Cumulative Convertible Preferred Units to a fund managed by the affiliates of Apollo and borrowings under Kimbell’s $400 million revolving credit facility. The final mix of funding will be determined at closing, according to the release.
“The acquisition represents the largest transaction in company history, and is expected to significantly enhance Kimbell’s positions in the best-performing, highest-growth oil and gas basins in the Lower 48”, Chairman and CEO of Kimbell’s general partner Bob Ravnaas said.
“The targeted portfolio of mineral and royalty interests complements our disciplined approach to M&A, combining excellent reservoir quality, near-term cash flow, and long-term production growth. We expect the Acquisition to be immediately accretive to distributable cash flow per unit, with accelerated accretion anticipated in future years, and look forward to continuing our role as a major consolidator in the oil and natural gas royalty sector,” he added.
The acquisition will build upon existing Kimbell’s Permian Basin position, which remains its leading basin in terms of production, active rig count, DUCs, permits, and undrilled inventory, according to the release. Upon the closing of the acquisition, Kimbell expects to have over 17 million gross acres, 129,000 gross wells, and a total of 100 active rigs on its properties, which represent approximately 15 percent of the total active land rigs drilling in the continental USA, the release said.
In May, Kimbell closed the acquisition of mineral and royalty interests of MB Minerals LP in the Northern Midland Basin in a cash and unit transaction valued at approximately $140.8 million, according to an earlier news release.
The purchase price was composed of $48.8 million in cash, approximately 5.4 million common units of Kimbell Royalty Operating LLC valued at $83.4 million, and approximately 0.6 million newly issued common units of Kimbell Royalty Partners LP valued at $8.7 million.
Kimbell said it is entitled to all cash flow from production attributable to the acquired assets since the effective date of April 1, 2023. For the next twelve months starting April 1, Kimbell estimates that the acquired assets will produce approximately 1,901 boepd consisting of 1,459 bpd of oil, 219 bpd of NGLs, and 1.34 MMcfpd of natural gas. The assets are concentrated in northern Howard County and southern Borden County, the company said.
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