[Context: On February 7, EnCap announced the sale of mineral and royalty assets held by Phillips Energy Partners I, II and III to Kimbell Royalty Partners (NSYE: KRP) for $151.3m. Further details, advisors and related links are below.]
Kimbell Royalty Partners Announces $151.3 Million Mineral and Royalty Acquisition from EnCap Investments L.P. in an All-Equity Transaction
FORT WORTH, Texas, Feb. 7, 2019 /PRNewswire/ — Kimbell Royalty Partners, LP (NYSE: KRP) (“Kimbell Royalty Partners” or “Kimbell”), a leading owner of oil and natural gas mineral and royalty interests across 28 states, today announced that it has agreed to acquire certain oil and gas royalty assets from EnCap Investments L.P. (“EnCap”) for approximately $151.3 million (the “Acquisition”) in a 100% equity transaction.
>>Includes oil and natural gas mineral and royalty interests controlled by EnCap through Phillips Energy Partners, Phillips Energy Partners II and Phillips Energy Partners III
>>Expected to close in late March 2019 and be immediately accretive to distributable cash flow per unit
>>Includes diversified package of royalty interests with over 64% of production (6:1) from the Eagle Ford Shale, Permian Basin, Haynesville Shale and Powder River Basin
>>Purchase price is composed of 9.4 million newly issued units in Kimbell Royalty Operating, LLC; further reduces Kimbell’s leverage ratio due to 100% equity used to fund the purchase price
>>Adds approximately 1,600 Boe/d of production (6:1)
>>Seventeen rigs actively drilling on the acreage
>>Liquids-focused asset base with approximately 77% of revenue from oil and natural gas liquids
>>Production mix on a 6:1 basis of approximately 38% oil, 48% natural gas and 14% natural gas liquids
>>Adds approximately 12,200 net royalty acres, increasing Kimbell’s total net royalty acre position by 9% to approximately 144,100 net royalty acres across the continental U.S.
>>Maintains Kimbell’s five-year PDP decline rate – pro forma approximately 12%
>>Provides support for a further increase in the borrowing base under Kimbell’s revolving credit facility, adding to already strong liquidity position
>>Effective date of January 1, 2019, with Kimbell entitled to revenues from production on and after such date
“With this acquisition, we have now completed over $700 million in acquisitions in less than six months and have positioned ourselves as one of the leading consolidators within the U.S. royalty and minerals space. We are gratified that EnCap is willing to put their trust in us and our business model by taking 100% equity in the transaction. Like the Haymaker acquisition and the recent dropdown transaction, we believe this acquisition is an excellent fit with our existing portfolio of mineral and royalty assets. We expect not only immediate cash flow accretion in the near term, but also additional future development from an outstanding list of leading operators,” said Bob Ravnaas, Chief Executive Officer of Kimbell’s general partner.
“Furthermore, this acquisition kicks off what we believe will be another year of consolidation within the oil and gas mineral and royalty space in the U.S. After giving effect to this transaction, we have nearly quadrupled our production since our IPO and will have royalty interests in approximately 95,000 wells across the U.S. I want to once again thank our team and advisors for their hard work in completing these transactions.”
“EnCap is excited about this transaction and our expanding relationship with Kimbell. We have known Bob Ravnaas for over two decades and think very highly of him, his management team and the portfolio of mineral interests they have acquired at Kimbell. Kimbell’s track record of success and proven growth trajectory paired with its low PDP decline rate is compelling. We believe that Kimbell is the right strategic partner for the Philips assets and that the combination represents a best-in-class diversified mineral company, which is well positioned to continue to make accretive acquisitions within the large and highly fragmented U.S. mineral and royalty market. EnCap has elected to receive 100% equity in this transaction, demonstrating our commitment to partner with the Kimbell team as they continue to execute on their impressive growth strategy,” said Marty Phillips, Managing Partner and Founder of EnCap.
Baker Botts L.L.P. acted as legal advisor to Kimbell Royalty Partners in connection with the Acquisition. RBC Richardson Barr acted as exclusive financial advisor and Vinson & Elkins LLP acted as legal advisor to the sellers in the Acquisition. The sellers in the Acquisition will be subject to a 120 day lockup after the closing, which is expected to occur in late March 2019. The closing of the Acquisition remains subject to the satisfaction of certain closing conditions, and there can be no assurance that it will be completed as planned or at all.
About Kimbell Royalty Partners, LP
Kimbell (NYSE: KRP) is an oil and gas mineral and royalty limited partnership based in Fort Worth, Texas. Kimbell is managed by its general partner, Kimbell Royalty GP, LLC. Kimbell owns mineral and royalty interests in approximately 12.1 million gross acres in 28 states and in nearly every major onshore basin in the continental United States, including ownership in more than 86,000 gross producing wells, with over 38,000 wells in the Permian Basin.