Fort Worth Report , November 16,2022
FORT WORTH, Texas, Nov. 3, 2022 /PRNewswire/ — Kimbell Royalty Partners, LP (NYSE: KRP) (“Kimbell” or the “Company”), a leading owner of oil and gas mineral and royalty interests in approximately 16 million gross acres in 28 states, today announced that it has agreed to acquire mineral and royalty interests (the “acquired assets”) held by Austin-based Hatch Royalty LLC (“Hatch Resources” or “Hatch”) in a cash and unit transaction valued at approximately $290 million, subject to purchase price adjustments and other customary closing adjustments (the “Acquisition”). The purchase price for the Acquisition is comprised of $150 million in cash (approximately 52% of the total consideration) and approximately 7.3 million common units of Kimbell Royalty Operating, LLC, which are valued at $140 million (approximately 48% of the total consideration).
Kimbell estimates that, as of October 1, 2022, the acquired assets produce approximately 2,072 Boe/d (1,198 Bbl/d of oil, 372 Bbl/d of NGLs, and 3,012 Mcf/d of natural gas) (6:1)5. For the full year 2023, Kimbell estimates that the acquired assets will produce approximately 2,522 Boe/d (1,439 Bbl/d of oil, 461 Bbl/d of NGLs, and 3,730 Mcf/d of natural gas) (6:1). Hatch’s acreage is located in the Permian Basin, with high interest locations concentrated in the Texas Delaware Basin (82%), New Mexico Delaware Basin (8%) and Midland Basin (10%). The Board of Directors of Kimbell’s general partner and the governing bodies of Hatch have each unanimously approved the Acquisition, which is expected to close in the fourth quarter of 2022, subject to customary closing conditions. The effective date of the Acquisition is expected to be October 1, 2022.
Bob Ravnaas, Chairman and Chief Executive Officer of Kimbell’s general partner, said, “Providing our unitholders with exposure to the top-tier Delaware Basin, the purchase of the acquired assets represents Kimbell’s largest transaction since 2018. This acquisition uniquely fits Kimbell’s acquisition strategy with an optimal balance of currently accretive cashflow combined with significant remaining proven drilling inventory. We have known and respected James Murchison for over a decade and the Hatch team has clearly demonstrated a skilled investment approach. We would like to thank the Hatch and Kimbell teams, and advisors, for working diligently to consummate this mutually beneficial transaction.”
James Murchison, Chief Executive Officer of Hatch Resources, said, “I want to thank the entire Hatch team for their dedication in assembling a Permian portfolio of minerals and royalty interests with a hyper focus on quality of rock within the Permian, near-term cash flow, and long-term production growth. We view this transaction as a great outcome for us, our financial sponsor, Ridgemont Equity Partners, and Kimbell. We have enjoyed working with the Kimbell team, and we are excited to partner with them as they continue to scale and consolidate the U.S. royalty sector.”
Asset Highlights: Acquisition offers Kimbell unitholders world-class exposure to the Delaware Basin
- Premier mineral and royalty assets of scale, with approximately 889 Net Royalty Acres6 on 230,000 gross acres located in the Delaware Basin (90%) and Midland Basin (10%)
- High interest position with 0.8% average tract Net Revenue Interest
- Core rock quality spanning the assets with reservoir quality in up to five proven, de-risked zones in the Delaware Basin and up to four proven de-risked zones in the Midland Basin
- Management estimates 14.7 MMBoe in total proved reserves, reflecting a purchase price of approximately $19.80 per total proved Boe
- Clear line of sight on development underpinned by healthy inventory of 185 Gross / 1.18 Net DUCs and 127 Gross / 1.06 Net permitted locations
- Expected to increase Kimbell’s total Net DUC / Net permitted location inventory by 41% to a total of 7.68 net wells
- Expected to increase Kimbell’s Permian Basin Net DUC / Net permitted location inventory by 117% to a total of 4.15 net wells
- Acquired Net DUC / Net permitted inventory supports up to 22% growth in average Hatch production in 2023
- Expected to strengthen Kimbell’s oil weighting from 25% to 29% of daily production mix
- Attractive growth profile supported by strong rig activity on acreage
- 11 active rigs on the acreage as of October 1, 2022
- 98% of the acquired acreage is leased by a diversified mix of best-in-class public and private operators, including Occidental Petroleum, ConocoPhillips, Devon Energy, Coterra Energy, Mewbourne Oil Company, Permian Resources Corporation, Diamondback Energy, bpx energy, ExxonMobil and Callon Petroleum Company, among others
- 94% of the acreage is Held-By-Production
Kimbell Continues Its Role as a Leading Consolidator in the U.S. Oil and Gas Royalty Sector
Assuming the Acquisition is consummated as described in this news release, Kimbell is expected to have over 16 million gross acres, 123,000 gross wells and a total of 90 active rigs on its properties, which represents approximately 12%7 of the total active land rigs drilling in the continental United States. In addition, over 97% of all rigs in the continental United States are located in counties where Kimbell is expected to hold mineral interest positions following the consummation of the Acquisition.
Citi served as exclusive financial advisor and White & Case LLP acted as legal counsel to Kimbell. TPH&Co., the energy business of Perella Weinberg Partners, served as exclusive financial advisor and Kirkland & Ellis LLP served as legal advisor to Hatch Resources.