![Kimbell Royalty Partners Closes Permian Acquisition, Boosts Production Guidance](/sites/default/files/styles/hart_news_article_image_640/public/image/2023/05/kimbell-royalty-partners-closes-permian-acquisition-boosts-production-guidance.jpg?itok=qqjGeiJR)
Kimbell Royalty Partners anticipates hitting record oil and gas production this year after completing an acquisition in the Permian Basin. (Source: Shutterstock.com)
Kimbell Royalty Partners anticipates hitting record oil and gas production this year after completing an acquisition in the Permian Basin.
Fort Worth-based Kimbell closed a deal to scoop up about 806 net royalty acres in the Northern Midland Basin on May 17. The acquired assets are concentrated in northern Howard County, Texas, and southern Borden County, Texas.
Kimbell purchased the mineral and royalty interests from MB Minerals LP, a subsidiary of EnCap-backed Sabalo Holdings LLC, for approximately $140.8 million.
The deal included a $48.8 million cash payment, which accounted for about 35% of the total consideration. Kimbell also issued about 5.4 million common units valued at $83.4 million from Kimbell Royalty Operating LLC, and around 600,000 newly issued KRP units valued at $8.7 million.
The total price reflects Kimbell’s $15.53 per unit closing price as of May 17, the company said. The transaction was valued at $143.1 million when first announced in April.
![KRP Midland Basin Map](/sites/default/files/inline-images/KRP%20Midland%20Basin%20Map.png)
RELATED: Kimbell Royalty Partners Boosts Midland Basin Position with $143 Million Deal
Boosting production guidance
After closing the Midland Basin acquisition, Kimbell is raising its outlook for oil and gas production this year.
The company expects production from the acquired Midland assets to average 1,459 barrels per day (bbl/d) of crude oil, 219 bbl/d of NGL and 1,338 cubic feet per day of natural gas (1,901 boe/d) over the next twelve months.
The Permian deal also moves up the oil weighting of Kimbell’s portfolio from 29% to 34% of daily production.
“This acquisition again reinforces our Permian Basin position as our leading basin in terms of production, active rig count, DUCs, permits and undrilled inventory,” said Robert Ravnaas, co-founder, chairman and CEO at Kimbell, on the company’s first-quarter earnings call on May 3.
For the remainder of the second quarter, Kimbell is guiding for net production of between 17,500 boe/d and 19,300 boe/d.
That’s up 7% at the midpoint over the company’s previous guidance of between 16,300 boe/d and 18,100 boe/d for 2023.
Production in the third and fourth quarters is expected to grow to between 18,100 boe/d and 19,900 boe/d—up 10% at the midpoint over previous guidance. Crude oil production should range between 32% and 36% of total output during the back half of the year, Kimbell said.
Natural gas will still make up more than half of the company’s total production this year; NGL output is expected to range between 12% and 16% of production.
Despite a collapse in U.S. natural gas prices, rig activity led by private operators on Kimbell’s core acreage in the gassy Haynesville Shale increased over the first quarter, Ravnaas said.
“In addition, we realized natural gas prices that were substantially higher than Henry Hub across several basins during Q1, led by the D-J Basin and Bakken, which highlights the strength of our diversified royalty model,” he said.
![KRP Haynesville Map](/sites/default/files/inline-images/KRP%20Haynesville%20Map.png)
Henry Hub natural gas prices are forecast to average $2.91/MMBtu in 2023, down more than 50% from 2022’s average of $6.42/MMBtu, according to the latest estimates from the U.S. Energy Information Administration.
Given the low commodity price environment, it wouldn’t be unsurprising for Kimbell to see deferred completions on its acreage that could ultimately impact production, Ravnaas said.
“We don’t see evidence of that currently,” he said. “It’s just we don’t have control, obviously, as a mineral company over the timing of those completions.”
Recommended Reading
Diversified to Buy East Texas NatGas Assets from Crescent Pass
2024-07-10 - Diversified Energy’s $106 million deal with Crescent Pass Energy comes during a prolonged dip in natural gas prices that some analysts expect to rebound as demand ramps up for LNG exports and power demand.
TotalEnergies Joins Ruwais LNG Project in UAE
2024-07-11 - French energy giant TotalEneriges joined the two-train 9.6 million tonnes per annum Ruwais LNG project in the United Arab Emirates with a 10% interest. The LNG project is expected to start sending out cargos in the second half of 2028.
KKR in Exclusive Talks to Buy Eni's Biofuel Unit for Up to $13.6B
2024-07-23 - KKR enters exclusive talks to buy stake in Eni's biofuel unit although the Italian energy producer said the global investment firm was not the only potential buyer.
Woodside to Emerge as Global LNG Powerhouse After Tellurian Deal
2024-07-24 - Woodside Energy's acquisition of Tellurian Inc., which struggled to push forward Driftwood LNG, could propel the company into a global liquefaction powerhouse and the sixth biggest public player in the world.
Texas LNG, EQT Sign a 2-mtpa LNG Tolling Agreement
2024-07-24 - EQT will supply natural gas to Texas LNG, a 4- million tonnes per annum LNG export terminal planned for the Port of Brownsville, Texas.