Kimbell to Bolster Permian Position with $231 Million Acquisition

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Kimbell to Bolster Permian Position with $231 Million Acquisition

Kimbell Royalty Partners LP has signed a deal to acquire Boren Minerals’ oil and natural gas mineral and royalty interests in the Permian Basin for about $231 million. “Kimbell estimates that, as of September 30, 2024, the Acquired Assets produced 1,842 Boe/d (1,125 Bbl/d of oil, 410 Bbl/d of NGLs, and 1,842 Mcf/d of natural gas) […]

Kimbell Royalty Partners LP has signed a deal to acquire Boren Minerals’ oil and natural gas mineral and royalty interests in the Permian Basin for about $231 million.

“Kimbell estimates that, as of September 30, 2024, the Acquired Assets produced 1,842 Boe/d (1,125 Bbl/d of oil, 410 Bbl/d of NGLs, and 1,842 Mcf/d of natural gas) (on a 6:1 basis), which is expected to increase Kimbell’s average daily net production as of September 30, 2024 by approximately eight percent and further balance Kimbell’s commodity mix”, Fort Worth, Texas-based Kimbell said in a regulatory filing. In 2025 it expects the acquisition to maintain the same level of total production.

The purchase involves approximately 6,953 net royalty acres in the Mabee Ranch of the Midland sub-basin. Upon completion, Kimbell expects to have about 158,350 net royalty acres, 130,238 gross wells and 92 active rigs, which would comprise about 16 percent of the total active land rigs in the continental United States, the company said.

“Kimbell estimates that the Acquired Assets will reduce Kimbell’s general and administrative expense, net of non-cash unit-based compensation, by approximately seven percent per Boe [barrel of oil equivalent]”, Kimbell told the U.S. Securities and Exchange Commission (SEC).

“As of September 30, 2024, there were two active rigs drilling on the acquired assets’ acreage.

“Additionally, Kimbell estimates that, as of September 30, 2024, the acquired assets consisted of 1.22 net drilled but uncompleted wells and net permitted locations, which is [sic] expected to increase Kimbell’s total net drilled but uncompleted wells and permitted location inventory by approximately 16 percent to a total of 9.06 net wells.

“The acquired assets consisted of 6.06 net (513 gross) upside locations, which is [sic] expected to increase Kimbell’s major net drilling inventory by 19 percent in the Permian Basin”.

Bob Ravnaas, chair and chief executive of Kimbell’s general partner, said in a press release, “The acquired assets are located on one of the largest family-owned tracts in the heart of the Midland Basin, and enhance Kimbell’s Permian footprint with excellent reservoir quality, near-term cash flow and long-term production growth”.

“Headlined by PDP production from approximately 875 gross producing wells, excellent rig activity and line of sight wells, premier E&P [exploration and production] operators, and substantial undeveloped drilling inventory, the acquisition is expected to be immediately accretive to distributable cash flow per unit, with accelerated accretion anticipated in future years”, Ravnaas added.

Kimbell may pay Boren entirely in cash or a combination of $207 million in cash and the issuance of over 1.43 million common units representing limited partnership interests in Kimbell.

Subject to customary closing conditions, the transaction is expected to close this quarter.

Concurrently it announced an agreement to issue 10 million common units, with an option for an additional 1.15 million common units, to a group of underwriters to settle outstanding borrowings under a revolving credit facility. Kimbell plans to draw from the facility, which is provided by the same underwriters, to fund the cash portion of the acquisition from Boren.

The underwriters are Citigroup Global Markets Inc., JP Morgan Securities LLC, BofA Securities Inc., Mizuho Securities USA LLC, PNC Capital Markets LLC, Keybanc Capital Markets Inc. and Capital One Securities Inc., according to a separate SEC filing.

The public offering price is $14.9 per common unit. Kimbell expects $149 million in gross proceeds, which it intends to transfer to its operating company, Kimbell Royalty Operating LLC, in exchange for 10 million common units in the operating company. The operating company has agreed to use the proceeds to settle dues under the revolving credit facility.

Citigroup, JP Morgan, RBC Capital Markets, BofA Securities and Mizuho are joint bookrunning managers in the offering. PNC Capital Markets, KeyBanc Capital Markets, Capital One Securities and TCBI Securities are co-managers.

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