Kimbell Adds Multi-Basin Scale With $215 Million Drop-Down
The acquired assets are expected to produce 2,347 barrels of oil equivalent a day in the third quarter.
Kimbell Royalty Partners, LP (KRP), a mineral-and-royalty partnership, announced a $215.4 million drop-down acquisition that expanded its holdings across four major U.S. producing regions. The transaction was $68.4 million larger than the Mesa deal announced in May and $69.5 million above that acquisition’s closing value in June.
The purchase broadened Kimbell’s acquired footprint beyond the Permian Basin to include the Eagle Ford, Mid-Continent and Appalachia. The portfolio covered more than 3 million gross acres and over 29,000 gross producing wells, compared with Mesa’s concentration across 16 Permian counties and more than 2,300 producing wells.
Kimbell added 2,568 net royalty acres through the drop-down, more than 3.6 times the 711 net royalty acres acquired in the Mesa transaction. The larger acreage position also came with an estimated 957 barrels of oil equivalent a day more production than Mesa, an increase of about 69%.
The consideration shifted modestly toward cash. Kimbell planned to fund about 35% of the purchase with cash and 65% with newly issued operating-company units, compared with a roughly 30%-cash and 70%-unit mix for Mesa.
Development activity on the new portfolio was lighter despite its larger production base. The acreage had nine active rigs and 177 drilled-but-uncompleted wells and permits, compared with 13 rigs and 364 such locations on the Mesa properties. Kimbell estimated a 13% production decline rate for the acquired assets, below the partnership’s previously reported 14% five-year average decline rate for proved developed producing reserves.
Kimbell expected the transaction to close around Aug. 21, allowing all associated cash flow and accretion to be recognized in the third quarter. Mesa contributed part of its cash flow in the second quarter before reaching a full-quarter contribution in the third.
Kimbell did not update revenue, net income, adjusted earnings before interest, taxes, depreciation and amortization, companywide production or full-year guidance with the transaction announcement. It also omitted a new distribution, leverage measure and cash general-and-administrative cost per barrel, leaving the drop-down’s third-quarter contribution as the principal near-term operating signal.