Kimbell Royalty Partners · NYSE:KRP

Kimbell Royalty Partners — Investor Presentation (May 2019)

36 slides from Kimbell Royalty Partners's investor presentation, May 2019

  1. Slide 1: Summer 2019 Investor Presentation

    SUMMER 2019 INVESTOR PRESENTATION CONFIDENTIAL | NOT FOR DISTRIBUTION

  2. Slide 2: Disclaimer

    Disclaimer This presentation includes forward-looking statements relating to the business, financial performance, results, plans, objectives and expectations of Kimbell Royalty Partners, LP (“KRP” or “Kimbell”). Statements that do not describe historical or current facts, including statements about

  3. Slide 3: Table of Contents

    Table of Contents Section I Company Overview and History Section II Detailed Asset Overview Section III Mineral Market Opportunity 3

  4. Slide 4: Section I – Company Overview and History

    Section I – Company Overview and History 4

  5. Slide 5: Kimbell Overview

    Kimbell Overview Q1’19 Combined Production from the Most Company Overview Economic Areas (Boe/d)(8)  Over 13 million gross acres and approximately 144,100 net Permian Other 13% royalty acres in the lower 48 with significant positions in some of 23% the highest growth basins(1)  Royalty interests i

  6. Slide 6: Company Highlights

    Company Highlights  Net Royalty Acre position of approximately 144,100 acres(1) across multiple producing basins provides diversified scale − Key basins include the Permian and Mid-Con where 44% of the Net Royalty Acres are located High-Quality Asset Base  ~95% of all rigs in the Lower 48 are in c

  7. Slide 7: Consistent Organic Growth over the Last Years

    Consistent Organic Growth over the Last 20 Years Kimbell’s assets have proven resilient through multiple commodity price cycles and geopolitical events KRP Pro Forma Organic Net Production Growth (1999-2018)(1) 1,900,000 OPEC fails to U.S. production reaches 10mm bbl/d 19,000,000 agree on cut 1,700,

  8. Slide 8: Expected Favorable Tax Treatment of Earnings

    Expected Favorable Tax Treatment of Earnings(1) On May 12, 2019, Kimbell announced the expected favorable federal income tax treatment of its future earnings and distributions paid to common unitholders for at least the next seven years  Kimbell expects that:  For the next seven years (2019 to 202

  9. Slide 9: Active Rigs Drilling on Kimbell’s Acreage (as of 3/31/2019)

    Active Rigs Drilling on Kimbell’s Acreage (as of 3/31/2019) Kimbell has 89 active rigs (88% horizontal) drilling on our acreage at no cost to us Permian Mid-Continent Bakken Well Name Operator County/State Well Name Operator County/State Well Name Operator County/State 1 MEANS SAN ANDRES UNIT EXXON

  10. Slide 10: Kimbell’s Track Record Since IPO

    Kimbell’s Track Record Since IPO Production Growth (Boe/d)(1) Net Royalty Acres(2) 11,958 144,117 10,066 131,909 115,256 115,256 8,546 69,807 69,807 71,336 71,276 62,992 3,297 3,508 3,650 3,633 3,116 3,067 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19(4) 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3

  11. Slide 11: Growth in Market Capitalization and Enterprise Value

    Growth in Market Capitalization and Enterprise Value From our IPO in February 2017 through today, the market capitalization and enterprise value for KRP have increased 169% and 227%, respectively Market Capitalization ($mm) Enterprise Value ($mm) $1,054.4 $857.0 $784.9 $706.7 $526.6 $509.4 $370.8 $4

  12. Slide 12: History

    History Kimbell has a strong track record of success as a natural consolidator in the mineral and royalty industry Completed Closed Phillips March 2019 February 2017 September 2018 conversion acquisition for With a to C-Corp $172 million in 1998 handshake for taxation equity agreement in purposes; c

  13. Slide 13: Public Company Yield Comparison

    Public Company Yield Comparison Kimbell Distribution Yield vs. Selected Public Market Minerals Companies(1) 14.0% 12.0% 10.0% Distribution Yield 8.7% FLMN 8.6% BSM 8.0% 8.2% KRP 6.0% 4.8% VNOM 4.0% 4.1% PSK 2.0% – Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 (1) Company fili

  14. Slide 14: Section II – Detailed Asset Overview

    Section II – Detailed Asset Overview 14

  15. Slide 15: Scale Across Lower 48

    Scale Across Lower 48 13.0 million gross acres across 28 states and in every major producing basin(1) ~95% of all rigs in the Lower 48 are in counties where Kimbell holds mineral interests positions(2) (1) Includes the Phillips assets. 15 (2) Based on DrillingInfo rig count as of 3/31/2019 and inc

  16. Slide 16: Kimbell’s Permian Position

    Kimbell’s Permian Position  ~2.6 million gross and ~23,500 net royalty acres represent approximately 20% and 16%, respectively, of Kimbell’s acreage portfolio  26 rigs operating on KRP’s Permian acreage  Q1’19 production of 1,570 Boe/d − Represents 13% of Q1’19 production  ~40,200 producing well

  17. Slide 17: Kimbell’s Mid-Continent Position

    Kimbell’s Mid-Continent Position  ~3.6 million gross and ~40,600 net royalty acres represent approximately 28% and 28%, respectively, of Kimbell’s acreage portfolio  19 rigs operating on KRP’s Mid-Con acreage  Q1’19 production of 1,523 Boe/d − Represents 13% of Q1’19 production  ~10,100 producin

  18. Slide 18: Kimbell’s Haynesville Position

    Kimbell’s Haynesville Position  ~745,700 gross and ~7,100 net royalty acres represent approximately 6% and 5%, respectively, of Kimbell’s acreage portfolio  10 rigs operating on KRP’s Haynesville acreage  Q1’19 production of 1,639 Boe/d − Represents 14% of Q1’19 production  ~8,500 producing well

  19. Slide 19: Kimbell’s Appalachia Position

    Kimbell’s Appalachia Position  ~721,700 gross and ~23,100 net royalty acres represent approximately 6% and 16%, respectively, of Kimbell’s acreage portfolio  4 rigs operating on KRP’s Appalachia acreage  Q1’19 production of 1,676 Boe/d − Represents 14% of Q1’19 production  ~3,000 producing wells

  20. Slide 20: Kimbell’s Eagle Ford Position

    Kimbell’s Eagle Ford Position  ~532,100 gross and ~6,300 net royalty acres represent approximately 4% and 4%, respectively, of Kimbell’s acreage portfolio  11 rigs operating on KRP’s Eagle Ford acreage  Q1’19 production of 1,624 Boe/d − Represents 14% of Q1’19 production  ~2,400 producing wells

  21. Slide 21: Kimbell’s Bakken Position

    Kimbell’s Bakken Position  ~1.6 million gross and ~6,000 net royalty acres represent approximately 12% and 4%, respectively, of Kimbell’s acreage portfolio  12 rigs operating on KRP’s Bakken acreage  Q1’19 production of 516 Boe/d − Represents 4% of Q1’19 production  ~3,800 producing wells  Lead

  22. Slide 22: Acreage Focused in High Return Basins

    Acreage Focused in High Return Basins Kimbell has a weighted average breakeven price of $42 across its acreage position(1) 26% of production from the high growth, high margin Permian and Mid-Continent areas(3) ~77% of production from the 7 premier U.S. onshore resource plays(3) $70 (2) WTI Price:

  23. Slide 23: Section III – Mineral Market Opportunity

    Section III – Mineral Market Opportunity 23

  24. Slide 24: Tremendous Consolidation Opportunity

    Tremendous Consolidation Opportunity National minerals market is approximately 2x larger than the entire Permian working interest market with only 1/32nd of the public consolidation National Minerals Market Permian Basin Working Interest Market Total Market Size(1): ~$500 billion Total Market Size(3

  25. Slide 25: Minerals have Outperformed Other Broad Sectors

    Minerals have Outperformed Other Broad Sectors In recent years, the minerals market has significantly outperformed other major sectors in regards to total return Total Return by Sector (1/1/18 – Present) 35.0% 31.4% 25.0% 18.7% 18.3% 15.0% 10.7% 10.6% 6.2% 5.0% 1.4% 0.1% (0.3%) (5.0%) (3.4%) (9.4%)

  26. Slide 26: Kimbell’s Performance vs. Mineral Companies

    Kimbell’s Performance vs. Mineral Companies Total Return YTD 2019(1) 50.0% 40.0% 39.3% KRP 30.0% 24.4% VNOM 20.0% 16.0% BSM 10.0% 8.5% PSK – (1.4%) FLMN (10.0%) (20.0%) Jan-19 Feb-19 Mar-19 Apr-19 May-19 Total Return 2018(2) 100.0% 80.0% 60.0% 40.0% 20.0% 20.7% VNOM – (6.2%) KRP (6.3%) BSM (20.0%) (

  27. Slide 27: Kimbell’s Performance vs. Index

    Kimbell’s Performance vs. Index Total Return YTD 2019(1) 39% 14% KRP XOP 1/1/19 2/15/19 3/31/19 5/15/19 Total Return 2018(2) (6%) KRP XOP (28%) 1/1/18 5/3/18 9/1/18 12/31/18 Source: Company filings and S&P Capital IQ. (1) KRP returns based on unit price of $14.00 as of 1/2/2019, year-to-date distrib

  28. Slide 28: Minerals are Subsurface Real Estate

    Minerals are Subsurface Real Estate Kimbell’s 5% organic proved developed producing (PDP) reserve growth is akin to adding additional floors to a subsurface building Positive PDP Reserves Revisions YE 2018 PDP Reserves Production YE 2017  89 active rigs drilling at no cost to Kimbell creates “addit

  29. Slide 29: Public Minerals Market Landscape

    Public Minerals Market Landscape Minerals Yield Security Comparison C-Corp Structure      Drop-down Potential      Demonstrated Meaningful Growth through Acquisitions      Majority of Acreage is Leased      No Capex or LOE      Geographic Diversification      Diversifie

  30. Slide 30: Appendix

    KIMBELL ROYALTY PARTNERS Appendix 30

  31. Slide 31: Production and Net Royalty Acreage Overview

    Production and Net Royalty Acreage Overview Q1’19 Combined Production from the Most Net Royalty Acres(2) Economic Areas (Boe/d)(1) Permian Other Other 13% 26% Mid-Continent 23% 28% Mid-Continent 13% Rockies <1% Rockies 11,958 Boe/d 144,117 5% Eagle Ford 4% Bakken Eagle Ford Haynesville 4% 14% 14% Pe

  32. Slide 32: KRP Unitholders

    KRP Unitholders Total KRP Units 46,909,745(1) Common Units Class B Units 23,095,403 23,814,342 Top Common Unitholders Top Class B Unitholders 1. Wellington Management 1. EnCap Investments LP 2. FMR LLC 2. KKR 3. Yorktown Company 3. Kimbell Art Foundation 4. Lancaster Investment Management 4. Rivercr

  33. Slide 33: Defining a Net Royalty Acre

    Defining a Net Royalty Acre The calculation of a Net Royalty Acre differs across industry participants  Kimbell calculates its Net Royalty Acres(1) as follows: Net Mineral Acres x Royalty Interest(2) − This methodology provides a clear and easily understandable view of Kimbell’s acreage position Ro

  34. Slide 34: Mineral Interests Generally Senior to All Claims in Capital Structure

    Mineral Interests Generally Senior to All Claims in Capital Structure In many states, mineral and royalty interests are considered by law to be real property interests and are thus afforded additional protections under bankruptcy law Mineral Interest owner entitled to ~15-25% of production revenue S

  35. Slide 35: Overview of Mineral & Royalty Interests

    Overview of Mineral & Royalty Interests Minerals NPRIs ORRIs  Perpetual real-property interests that  Nonparticipating royalty interests  Overriding royalty interests grant oil and natural gas ownership under a tract of land  Royalty interests that are carved out  Royalty interests that burden

  36. Slide 36: Historical Selected Financial Data

    Historical Selected Financial Data Non-GAAP Reconciliation (in thousands) Three Months Ended March 31, 2019 Reconciliation of net cash provided by operating activities to Adjusted EBITDA Net cash provided by operating activities $ 15,812 Interest expense 1,423 Impairment of oil and natural gas prope

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