10-K: Kimbell Royalty Partners Reports Strong 2025 Growth, Increased Reserves

Kimbell Royalty Partners achieved significant production and reserve growth in 2025, driven by strategic acquisitions and increased natural gas prices, despite a decline in oil prices.

Summary

• Kimbell Royalty Partners (KRP) is a Delaware limited partnership formed in 2015, owning and acquiring mineral and royalty interests in oil and natural gas properties across the United States.
• The company's primary business objective is to provide increasing cash distributions to unitholders through acquisitions and organic growth from continued development by working interest owners.
• As of December 31, 2025, KRP owned mineral and royalty interests in approximately 12.3 million gross acres and overriding royalty interests in approximately 4.7 million gross acres, with 54% located in the Permian Basin and Mid-Continent.
• Over 99% of the acreage subject to mineral and royalty interests was leased to working interest owners, and substantially all leases were held by production.
• Estimated proved oil, natural gas, and NGL reserves attributable to KRP's interests were 72,944 MBoe (51.2% liquids) as of December 31, 2025, an increase from 67,541 MBoe in 2024.
• All reserves were classified as proved developed reserves, with an average estimated yearly decline rate of 13.5% during the initial five years for PDP reserves.
• Total revenues for the year ended December 31, 2025, were $333.8 million, up from $309.3 million in 2024 and $294.1 million in 2023.
• Net income for 2025 was $99.7 million, a significant increase from $11.1 million in 2024 and $83.0 million in 2023.
• Oil, natural gas, and NGL revenues increased to $317.5 million in 2025 from $304.6 million in 2024, primarily due to higher natural gas prices and increased production volumes.
• Average daily production for 2025 was 25,760 Boe/d, an increase of 3.3% from 24,868 Boe/d in 2024.
• The increase in production volumes for 2025 was primarily due to the Boren Acquisition.
• Average realized prices in 2025 were $63.84 per Bbl for oil (down from $75.98 in 2024) and $2.93 per Mcf for natural gas (up from $1.82 in 2024).
• KRP recorded a gain on commodity derivative instruments of $12.1 million in 2025, compared to a loss of $1.3 million in 2024.
• The company did not record an impairment on oil and natural gas properties in 2025, following impairments of $62.1 million in 2024 and $18.2 million in 2023.
• Cash flows provided by operating activities were $246.5 million in 2025, a slight decrease from $250.9 million in 2024.
• KRP completed the Boren Acquisition for approximately $230.4 million in January 2025, funded by borrowings and a public equity offering.
• The secured revolving credit facility was amended and restated on December 16, 2025, increasing the maximum principal amount to $1.5 billion with an initial borrowing base of $625.0 million and extending the maturity to December 16, 2030.
• Outstanding borrowings under the secured revolving credit facility were $441.5 million as of December 31, 2025.
• The Board of Directors declared a quarterly cash distribution of $0.37 per common unit for Q4 2025, payable on March 25, 2026.
• The Board approved allocating 25% of cash available for distribution on common units for Q4 2025 ($13.4 million) to debt repayment.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant increases in net income, reserves, and production, alongside strategic acquisitions and improved financial flexibility. While commodity price volatility and increased interest expense are noted, the overall operational and financial results for 2025 are robust.

Positives

• Net income significantly increased to $99.7 million in 2025 from $11.1 million in 2024.
• Total revenues grew to $333.8 million in 2025 from $309.3 million in 2024.
• Oil, natural gas, and NGL revenues increased by $12.9 million in 2025, driven by higher natural gas prices and increased production.
• Total proved reserves increased to 72,944 MBoe in 2025 from 67,541 MBoe in 2024, with a 163% PDP reserve replacement rate.
• Average daily production increased by 3.3% to 25,760 Boe/d in 2025.
• The Boren Acquisition in January 2025 added significant mineral and royalty interests, contributing to production and reserve growth.
• KRP recorded a $12.1 million gain on commodity derivative instruments in 2025, reversing a loss from 2024.
• No impairment on oil and natural gas properties was recorded in 2025, indicating stable asset valuation compared to prior years.
• The secured revolving credit facility was extended to December 2030 and its maximum principal amount increased to $1.5 billion, enhancing financial flexibility.
• KRP maintains a diversified portfolio across 28 states and every major onshore basin, reducing reliance on any single region.
• The company benefits from continued development of its acreage by working interest owners without incurring drilling and completion costs, lease operating expenses, or plugging and abandonment costs.
• Management's assessment concluded that internal controls over financial reporting were effective as of December 31, 2025.

Negatives

• Average realized oil prices decreased by 16.0% to $63.84 per Bbl in 2025 from $75.98 per Bbl in 2024.
• Lease bonus and other income decreased by $1.7 million in 2025 compared to 2024.
• Interest expense increased to $34.5 million in 2025 from $26.7 million in 2024, primarily due to higher debt balances from acquisitions and preferred unit redemption.
• Cash flows provided by operating activities slightly decreased by $4.4 million in 2025 compared to 2024.
• The Baker Hughes United States rotary rig count decreased by 8.0% to 527 active land rigs at December 31, 2025, indicating a slowdown in drilling activity.
• KRP's General Partner and its affiliates have conflicts of interest, and the partnership agreement limits unitholder remedies for actions that might otherwise be breaches of fiduciary duty.
• The partnership agreement requires distribution of all available cash, which could limit the ability to grow and make acquisitions without external financing.
• KRP does not intend to retain cash for replacement capital expenditures, meaning a portion of distributions may represent a return of capital if reserves are not replenished through other means.
• The market price of common units may decline due to sales of substantial amounts by Sponsors and other selling unitholders.

Risks

• Volatility of realized prices for oil, natural gas, and NGLs, including as a result of actions by OPEC and other foreign, oil-exporting countries.
• Ability to replace reserves through acquisitions and development of properties.
• Ability to make, consummate, and integrate acquisitions of assets or businesses and realize benefits.
• Level of production on properties and drilling/completion activity by operators.
• Regional supply and demand factors, delays or interruptions of production.
• Industry, economic, business, or political conditions, including energy and environmental proposals by federal and other regulating bodies.
• Revisions to reserve estimates due to changes in commodity prices, decline curves, and other uncertainties.
• Impacts of impairment expense on financial statements, particularly during periods of low commodity prices.
• Intense competition in the oil and natural gas industry, potentially affecting operators' ability to obtain capital or financing.
• Title defects in properties where KRP acquires an interest.
• Availability or cost of rigs, completion crews, equipment, raw materials, supplies, oilfield services, or personnel to operators.
• Restrictions on or availability of water use in operators' businesses.
• Availability of transportation facilities for oil and natural gas production.
• Operators' ability to comply with governmental laws and regulations and obtain permits/approvals.
• Federal and state legislative and regulatory initiatives relating to the environment, hydraulic fracturing, tax laws, and climate change.
• Uncertainties regarding United States federal income tax law, including treatment of future earnings and distributions.
• Ability to maintain effective internal controls over financial reporting and disclosure controls and procedures.
• Insufficient available cash to pay quarterly distributions on common units, as preferred and Class B units have distribution preferences.
• Restrictions in the secured revolving credit facility and future debt agreements limiting growth or ability to pay distributions.
• Significant reduction in borrowing base under the secured revolving credit facility.
• Debt levels limiting flexibility to obtain additional financing and pursue business opportunities.
• Dependence on unaffiliated operators for all exploration, development, and production on properties.
• Inability to terminate leases if operators declare bankruptcy or experience delays in replacing non-paying operators.
• Inaccuracies in estimated reserves, which are based on many assumptions.
• Reliance on a few key individuals whose absence or loss could materially adversely affect the business.
• Loss of KRP's or operators' information and computer systems due to cyber-attacks or other failures.
• Potential drilling locations identified by operators are susceptible to uncertainties that could alter drilling occurrence or timing.
• Risk of losing acreage through lease expirations if operators fail to drill sufficient wells.
• Operating hazards and uninsured risks resulting in substantial losses to operators.
• Suspension of royalty payments by operators due to title or other issues.
• Increased costs of capital due to higher interest rates or changes in lending practices.
• Terrorist attacks or armed conflicts harming the business and reducing demand for oil and natural gas.
• Ineffective internal controls impacting business and operating results.

Future Outlook

Kimbell Royalty Partners expects to continue pursuing opportunistic acquisitions of mineral and royalty interests with substantial resource and organic growth potential. The company anticipates benefiting from the continued development of its acreage by working interest owners through infill drilling, horizontal drilling, hydraulic fracturing, recompletions, and secondary/tertiary recovery methods. KRP aims to maintain a conservative capital structure and leverage its secured revolving credit facility, internally generated cash, and access to capital markets to fund expansion. The Board of Directors intends to continue allocating a portion of cash available for distribution to debt repayment in future quarters. The company does not currently intend to retain cash from operations for replacement capital expenditures, relying on continued development by operators to offset natural production declines.

Management Comments

• Our primary business objective is to provide increasing cash distributions to unitholders resulting from acquisitions from third parties, our Sponsors and the Contributing Parties and from organic growth through the continued development by working interest owners of the properties in which we own an interest.
• We believe this arrangement will give us access to third party acquisition opportunities we might not otherwise be in a position to pursue.
• We believe our Sponsors and the Contributing Parties view our partnership as part of their growth strategy.
• We believe that our conservative capital structure will permit us to maintain financial flexibility that will allow us to opportunistically purchase strategic mineral and royalty interests.
• We believe that we will be able to expand our asset base through acquisitions utilizing our secured revolving credit facility, internally generated cash from operations and access to capital markets.
• We believe that we will continue to benefit from these cost-free additions to production and reserves for the foreseeable future as a result of technological advances and continuing interest by third party producers in development activities on our acreage.
• We expect the operators of our properties to continue to drill new wells and to complete drilled but uncompleted wells on our acreage, which we believe should substantially offset the natural production declines from our existing wells.
• We believe that our operators have significant drilling inventory remaining on the acreage underlying our mineral or royalty interests in multiple resource plays.
• To date, we have not experienced a material impact to operations or the consolidated financial statements as a result of these conflicts; however, we will continue to monitor for events that could materially impact us.

Industry Context

StockSavvy.ai notes that Kimbell Royalty Partners operates in a highly competitive and volatile oil and natural gas industry. The company's strategy of acquiring mineral and royalty interests provides exposure to leading resource plays like the Permian Basin and Mid-Continent, which are among the most active areas in the U.S. The decrease in the Baker Hughes U.S. rotary rig count by 8.0% in 2025 suggests a broader industry slowdown in drilling activity, likely influenced by fluctuating commodity prices and global uncertainties. KRP's ability to increase production and reserves despite this trend, partly through acquisitions, highlights its strategic positioning. The significant increase in natural gas prices in 2025, while oil prices declined, reflects the dynamic nature of commodity markets, influenced by geopolitical events and supply-demand imbalances. The industry also faces increasing regulatory scrutiny regarding environmental matters, hydraulic fracturing, and climate change, which could impact operational costs and demand for fossil fuels.

Comparison to Industry Standards

• Kimbell Royalty Partners' 163% PDP reserve replacement rate in 2025 is a strong indicator of successful asset management and acquisition strategy, potentially outperforming many E&P companies that struggle to replace reserves organically.
• The average estimated yearly decline rate of 13.5% for PDP reserves over the initial five years is relatively low for the industry, suggesting a stable asset base compared to companies with steeper decline curves.
• The increase in natural gas prices by 61.0% for KRP's operators in 2025, compared to the EIA average increase of 60.7%, indicates that KRP's pricing aligns closely with broader market trends for natural gas.
• The 16.0% decrease in KRP's average realized oil price in 2025, compared to the EIA average decrease of 14.7%, shows a slightly larger decline than the market average, which could be due to specific differentials or regional market conditions.
• KRP's exposure to over 133,000 gross wells across 28 states and every major onshore basin provides a level of diversification that may exceed many smaller, regionally focused royalty companies, mitigating localized operational risks.
• The company's reliance on third-party operators (approximately 1,300 active operators) is typical for a royalty interest model, but the concentration of 47.1% of revenues from its top ten operators is a notable point of dependence, though less concentrated than some smaller royalty players.

Corporate Governance

Legal Proceedings

• Management is not aware of any legal, environmental, or other commitments or contingencies that would have a material effect on the Partnership's financial condition, results of operations, or liquidity as of December 31, 2025.

Related Party Transactions

• Kimbell Holdings, controlled by Messrs. R. Ravnaas, Taylor, and Wynne, owns 0.03% of common units and 100% of the General Partner.
• KRP reimburses its General Partner and affiliates, including Kimbell Operating, for all expenses incurred and payments made on KRP's behalf, with no limit on the amount of reimbursement.
• Kimbell Operating provides management, administrative, operational, and acquisition services to KRP, including through a services agreement with K3 Royalties (controlled by Mr. Wynne).
• Kimbell Operating paid K3 Royalties a monthly services fee of $10,000 for 2025, 2024, and 2023, representing an estimated allocation of projected costs.
• Rand P. Ravnaas (son of Robert D. Ravnaas, brother of R. Davis Ravnaas) serves as Vice President-Business Development and is a partial owner of certain Contributing Parties.
• Peter Alcorn (son-in-law of Mitch Wynne) serves as Vice President-Land and is a partial owner of certain Contributing Parties.
• John Wynne (son of Mitch S. Wynne) acts as KRP's agent at Higginbotham Insurance & Financial Services, deriving commissions of approximately $25,700 in 2025 for placing KRP's director and officer insurance.
• KRP received $187,031 in reimbursements from Rivercrest Capital Management, LLC for shared operating expenses in 2025.

Stakeholder Impact

• **Shareholders (Common Unitholders):** Benefit from increased cash distributions ($0.37/unit for Q4 2025), but face potential dilution from future equity issuances and risks associated with commodity price volatility and dependence on third-party operators. The lack of retained cash for replacement capital expenditures means distributions may include a return of capital.
• **Series A Preferred Unitholders:** Entitled to cumulative quarterly distributions (6.0% per annum) and preferential rights upon liquidation, providing a more stable return compared to common unitholders. Redemption of 50% of Series A preferred units in 2025 indicates active capital management.
• **Class B Unitholders:** Receive cash distributions equal to 2.0% per quarter on their Class B Contribution, ranking after Series A preferred units but before common units.
• **Employees (of Kimbell Operating):** Benefit from competitive compensation, robust benefits, and long-term incentive restricted unit awards tied to performance, fostering retention and alignment with company goals.
• **Operators of KRP's Properties:** Their drilling and production activities directly impact KRP's revenues. They face risks related to commodity prices, capital availability, regulatory compliance, and operating hazards, which can indirectly affect KRP.
• **Creditors (Lenders under Secured Revolving Credit Facility):** Benefit from the extension of the credit facility to 2030 and the increase in maximum principal amount, indicating continued access to capital for KRP. The allocation of cash to debt repayment strengthens KRP's financial position.
• **Regulatory Bodies:** KRP and its operators are subject to extensive federal, state, and local regulations, including environmental, health, safety, and tax laws. Changes in these regulations can impose increased costs and operational restrictions.

Next Steps

• Continue opportunistic acquisitions of mineral and royalty interests from third parties, Sponsors, and Contributing Parties.
• Benefit from reserve, production, and cash flow growth through organic production growth and development of mineral and royalty interests by working interest owners.
• Maintain a conservative capital structure and prudently manage the business for the long term, including allocating cash to debt repayment.
• Pay quarterly cash distribution of $0.37 per common unit for Q4 2025 on March 25, 2026.
• Pay quarterly cash distribution on Series A preferred units of approximately $2.5 million for Q4 2025 subsequent to February 26, 2026, and prior to common unit distribution.
• First scheduled redetermination of the borrowing base under the Second A&R Credit Agreement on or around May 1, 2026.

Key Dates

Recommendation

Kimbell Royalty Partners demonstrates strong operational and financial performance in 2025, marked by a significant increase in net income, robust production growth, and a high PDP reserve replacement rate. The strategic Boren Acquisition and effective management of commodity derivatives contributed positively to results. While the decline in oil prices is a headwind, the substantial increase in natural gas prices and the company's diversified asset base provide resilience. The extension of the credit facility and increased borrowing capacity enhance financial flexibility for future growth. The company's royalty model insulates it from direct drilling and operating costs, making it an attractive investment for long-term income and growth in the energy sector, despite inherent industry risks and related party transactions.

Keywords

Mineral and Royalty Interests, Oil and Gas, Permian Basin, Mid-Continent, Proved Reserves, Production, NGLs, SEC Filing, Energy Sector, Commodity Prices, Acquisitions, Hydraulic Fracturing, Environmental Regulations, Corporate Governance, Debt Financing, Cash Distributions, Exploration and Production, Texas, Oklahoma