KRP Investor Presentation2020... · 2020. 5. 6. · This presentation includes forward-looking...

CONFIDENTIAL | NOT FOR DISTRIBUTION

SUMMER 2020 INVESTOR PRESENTATION

2

DisclaimerThis presentation includes forward-looking statements relating to the business, financial performance, results, plans, objectives and expectations of Kimbell RoyaltyPartners, LP (“KRP” or “Kimbell”). Statements that do not describe historical or current facts, including statements about beliefs and expectations and statements aboutthe federal income tax treatment of future earnings and distributions, future production, the anticipated benefits of the Springbok acquisition, Kimbell’s business,prospects for growth and acquisitions, and the securities markets generally are forward-looking statements. Forward-looking statements may be identified by wordssuch as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would,could, or similar variations. Except as required by law, KRP undertakes no obligation and does not intend to update these forward-looking statements to reflect eventsor circumstances occurring after the date of this presentation. When considering these forward-looking statements, you should keep in mind the risk factors and othercautionary statements in KRP’s filings with the Securities and Exchange Commission (“SEC”). These include risks inherent in oil and natural gas drilling andproduction activities, including risks with respect to low or declining prices for oil and natural gas, including as a result of the ongoing COVID-19 outbreak and decisionsregarding production and pricing by the Organization of Petroleum Exporting Countries and other foreign, oil-exporting countries, that could result in downwardrevisions to the value of proved reserves or otherwise cause operators to delay or suspend planned drilling and completion operations or reduce production levels,which would adversely impact cash flow; risks relating to the impairment of oil and natural gas properties; risks relating to the availability of capital to fund drillingoperations that can be adversely affected by adverse drilling results, production declines and declines in oil and natural gas prices; risks regarding Kimbell’s ability tomeet financial covenants under its credit agreement or its ability to obtain amendments or waivers to effect such compliance; risks relating to KRP’s hedging activities;risks of fire, explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other operating and productionrisks, which may temporarily or permanently reduce production or cause initial production or test results to not be indicative of future well performance or delay thetiming of sales or completion of drilling operations; risks relating to delays in receipt of drilling permits; risks relating to unexpected adverse developments in the statusof properties; risks relating to borrowing base redeterminations by Kimbell’s lenders; risks relating to the absence or delay in receipt of government approvals or third-party consents; risks related to acquisitions, dispositions and drop downs of assets; risks relating to Kimbell's ability to realize the anticipated benefits from and tointegrate acquired assets, including those acquired in the Springbok acquisition; and other risks described in KRP’s Annual Report on Form 10-K and other filings withthe SEC, available at the SEC’s website at www.sec.gov. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as ofthe date of this presentation.

This presentation includes financial measures that are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), includingConsolidated Adjusted EBITDA. KRP believes Consolidated Adjusted EBITDA is useful because it allows management to more effectively evaluate KRP’s operatingperformance and compare the results of KRP’s operations period to period without regard to KRP’s financing methods or capital structure. In addition, KRP’smanagement uses Consolidated Adjusted EBITDA to evaluate cash flow available to pay distributions to its unitholders. KRP defines Consolidated Adjusted EBITDAas net income (loss), net of non-cash unit-based compensation, change in fair value of open commodity derivative instruments, impairment of oil and natural gasproperties, distributions from equity investments, equity income in affiliates, income taxes, interest expense and depreciation and depletion expense. KRP excludes theforegoing items from net income (loss) in arriving at Consolidated Adjusted EBITDA because these amounts can vary substantially from company to company within itsindustry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Certain items excludedfrom Consolidated Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost ofcapital and tax structure, as well as historic costs of depreciable assets, none of which are components of Consolidated Adjusted EBITDA.

Consolidated Adjusted EBITDA is not a measure of net income (loss) or net cash provided by operating activities as determined by GAAP. Consolidated AdjustedEBITDA should not be considered an alternative to net income, oil, natural gas and natural gas liquids revenues or any other measure of financial performance orliquidity presented in accordance with GAAP. You should not consider Consolidated Adjusted EBITDA in isolation or as a substitute for an analysis of KRP’s results asreported under GAAP. Because Consolidated Adjusted EBITDA may be defined differently by other companies in KRP’s industry, KRP’s computations of ConsolidatedAdjusted EBITDA may not be comparable to other similarly titled measures of other companies, thereby diminishing its utility.

Unless otherwise provided for in this presentation, the financial, operational and other information contained herein does not reflect the acquisition of Springbok EnergyPartners I, LLC and Springbok Energy Partners II, LLC (collectively, "Springbok"), which was effective on October 1, 2019 and closed on April 17, 2020.

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Table of Contents

Section I Company Overview and History

Section II Detailed Asset Overview

Section III Mineral Market Opportunity

4

Section I – Company Overview and History

5

$22.7mm

12,602 Boe/d

Company Overview Q1’20 Revenue by Basin(10)

Kimbell Overview

Royalty interests in over 96,000 gross wells across 13 million gross acres (approximately 146,000 net royalty acres) in the lower 48, with significant positions in some of the highest growth basins(1)

Highly tax advantaged distributions(2)

Leading consolidator in highly fragmented oil and gas royalty space – completed approximately $875mm in accretive acquisitions between July 2018 and April 2020

Balanced between oil and natural gas production (60% natural gas, 27% oil and 13% natural gas liquids (“NGLs”)(3)

75 rigs drilling on Kimbell acreage at no cost to the company(4)

Superior proved developed producing (“PDP”) decline rate of approximately 12%, which is one of the lowest in the mineral and royalty industry(5)

28% of production is from enhanced oil recovery (“EOR”) units and conventional fields with shallow declines(6)

Q1’20 Production from the Most Economic Areas (Boe/d)(3)Capitalization Table(7)

(1) Includes the assets acquired from Springbok, which closed on 4/17/2020.(2) See page 9 of this presentation for information concerning the assumptions and estimates underlying the expected tax treatment of distributions.(3) Shown on a 6:1 basis. Q1’20 run-rate average daily production excludes prior period production recognized in Q1’20.(4) Rig count as of 3/31/2020. The combined rig count including the Springbok assets as of 4/17/2020 was 70.(5) Estimated 5-Year PDP average decline rate on a 6:1 basis.

(6) Reflects estimated production from internal reserve report as of 3/31/2020.(7) Unit price and yield calculated as of 5/4/2020. All other financial and operational information are as of 3/31/2020.(8) A Class B unit is exchangeable together with a common unit of Kimbell’s operating company for a KRP common unit.(9) Reflects the annualized Q1’20 distribution.(10) Q1’20 run-rate oil, natural gas and NGL revenues excludes prior period production recognized in Q1’20.

Haynesville15%

Appalachia15%

Mid-Continent14%Permian

16%

Eagle Ford13%

Bakken5%

Rockies3%

Other19%

Permian22%

Eagle Ford19%

Mid-Continent12%

Haynesville9%

Appalachia9%

Bakken8%

Rockies3%

Other18%

Common Units Outstanding 34,378,849Class B Units Outstanding(8) 20,644,047

Total Units Outstanding 55,022,896

Unit Price $7.50Market Capitalization $412,671,720

Debt $101,223,602Series A Cumulative Convertible Preferred Units 55,000,000

Enterprise Value $568,895,322

Tax Status: 1099-DIV/ No K-1Annualized Cash Yield(9) 9.1%

6

7,000,000

8,500,000

10,000,000

11,500,000

13,000,000

14,500,000

16,000,000

17,500,000

19,000,000

100,000

300,000

500,000

700,000

900,000

1,100,000

1,300,000

1,500,000

1,700,000

1,900,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Oil

+ N

GLs

(BB

L)/Y

ear G

as (MC

F)/Year

Kimbell Organic Net Production Growth (2000-2019)(1)

Oil & NGLs Gas

Consistent Organic Growth over the Last 20 Years

(1) Reflects the compound annual growth rate attributable to Kimbell’s currently owned mineral and royalty interests as if it had acquired all of such interests on January 1, 2000, excluding the recently acquired Springbok assets.

September 11, 2001

U.S. declares war on Iraq

OPEC fails to agree on cut

Global financial crisis U.S. production

reaches 10mm bbl/d

Kimbell’s assets have proven resilient through multiple commodityprice cycles and geopolitical events

Time Frame Oil+NGLs Gas Total (6:1) Total (20:1)20-Year 4.5% 4.3% 4.4% 4.4%10-Year 7.5% 5.7% 6.3% 6.9%5-Year 1.5% 4.9% 3.5% 2.6%1-Year (1.3%) 15.0% 8.3% 3.6%

Kimbell Organic Growth

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Minerals are Subsurface Real EstateKimbell’s 8% organic PDP reserve growth for 2019 is akin to adding

additional floors to a subsurface building

PDP ReservesLess: Production

2,213 MBoe

PDP Reserves

Source: Company filings and Bloomberg.(1) Kimbell and the US REIT Index (^RMZ) yield rates are as of 5/4/2020.

PDP Reserves15,403 MBoe

YE 2017 YE 2018 YE 2019

Plus: Revisions2,970 MBoe

Kimbell’s PDP oil and gas reserves grew organically at a 5% rate in 2018 and an 8% rate in 2019, at no cost to us, as operators continued to develop our acreage with 75 active rigs drilling as of 3/31/2020

As you can see above, drilling rig activity on our properties has resulted in positive revisions to our PDP reserves that more than offset natural production decline

Our sub-surface real estate continues to grow and our ~9% yield is nearly 2x the yield of the US REIT Index at ~5%(1)

Acquisitions17,473 MBoe

33,633 MBoe

40,912 MBoe

Acquisitions4,661 MBoe

Plus: Revisions7,134 MBoe

PDP ReservesLess: Production

4,516 MBoe

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Sustainable PDP Reserves

2019 Year-End PDP Reserves/Q4 2019 Annualized Daily Production(1)

Kimbell has one of the best historical reserve-to-production ratios in the minerals industry(and overall energy sector) at 8.7 years

Year

s of

PD

P R

eser

ves

Source: Company filings.(1) Calculation of years involves the net PDP reserves (MBoe) as of 12/31/2019, divided by the annualized Q4 2019 average daily production (MBoe). Peer list includes BSM, FLMN, MNRL and VNOM.

8.7

7.3

4.5 3.7 3.5

Kimbell Peer 1 Peer 2 Peer 3 Peer 4

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Expected Favorable Tax Treatment of Earnings and Distributions(1)

Kimbell expects that:

The company will pay no material amount of federal corporate income taxes from 2020 through 2026 (less than 5% of Kimbell’s estimated pre-tax distributable cash flow for such years)

Substantially all distributions paid to common unitholders from 2020 to 2023 will not be taxable dividend income

For 2024 through 2025, less than 25% of distributions paid to common unitholders will be taxable dividend income

Distributions in excess of the amount taxable as dividend income will reduce an investor's tax basis in its common units or produce capital gain to the extent such distributions exceed an investor's tax basis, and the reduced tax basis will increase an investor's capital gain or reduce an investor’s capital loss when it sells its common units

(1) This expected favorable tax treatment is the result of certain non-cash expenses (principally depletion) substantially offsetting the company's taxable income and tax "earnings and profit.” The company's estimates of the tax treatment of company earnings and distributions are based upon assumptions regarding the capital structure and earnings of our operating company, the capital structure of the company and the amount of the earnings of our operating company allocated to the company. Many factors may impact these estimates, including changes in drilling and production activity, commodity prices, future acquisitions, or changes in the business, economic, regulatory, legislative, competitive or political environment in which the company operates. These estimates are based on current tax law and tax reporting positions that we have adopted and with which the Internal Revenue Service could disagree. These estimates are not fact and should not be relied upon as being necessarily indicative of future results, and no assurances can be made regarding these estimates. Investors are encouraged to consult with their tax advisor on this matter.

Kimbell believes that this expected favorable federal income tax treatment will enhance theafter-tax returns to Kimbell common unitholders

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$0.23 $0.30

$0.31 $0.36

$0.42

$0.43 $0.45

$0.40

$0.37 $0.39

$0.42 $0.38

$0.17

1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20

Prior Cumulative Distributions Quarterly Distributions

Source: Company filings and presentations.(1) Shown on a 6:1 basis.(2) Q1’20 run-rate production excludes prior period production recognized in Q1’20. Includes a full quarter of production attributable to the Springbok assets as the effective date of the Springbok acquisition was October 1, 2019. (3) Acreage numbers include mineral interests and overriding royalty interests. Q1’20 acreage includes the Springbok assets.(4) Stub distribution from 2/8/2017 to 3/31/2017.

Kimbell’s Track Record Since IPOProduction Growth (Boe/d)(1) Net Royalty Acres(3)

Distribution Growth

We have returned ~26% of our $18.00/unit IPO price via cash dividends in just over three years

Cash G&A per Boe

(4)$0.23 $0.53

$0.84 $1.20$1.62

$2.05$2.50

$0.53$0.23

$0.84$1.20

$1.62

$2.05

$2.50$2.90

$2.90

$3.66

$3.27

$3.27

$3.66

$4.08

(2)

$4.46

$4.08$4.46

$4.63

$7.47 $7.33

$6.20 $6.99

$6.40 $6.32 $5.65

$4.50 $3.95 $3.82

$3.30 $3.12 $3.20

1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20(2)

3,116 3,067 3,297 3,508 3,650 3,633

8,546

10,066

11,958 11,807 12,785 12,828

15,188

1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20

62,992 69,807 69,807 71,336 71,276

115,256 115,256

131,909 143,166 143,166 143,166 143,758 145,939

1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20

11

24 24 21 19 23 25

71 77 89 89 82 81 75 3.0% 2.6% 2.3% 2.1% 2.4% 2.5%

6.9% 7.3% 9.1% 9.6% 9.8% 10.4% 10.6%

1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20

Total KRP Rig Count KRP Market Share %

15 30

13

4

8 11

1

8

3

2 3

1 24

75

1Q'17 1Q'20Permian Mid-Continent Haynesville BakkenEagle Ford Rockies Appalachia Other

75 RigsPermian

40%

Mid-Continent17%

Haynesville10%

Appalachia4%

Bakken15%

Eagle Ford11%

Rockies3%

Kimbell’s Rig Count Growth Over Time

Active Rigs on Acreage by Basin(1) Rig Count Change since Q1 2017

Kimbell’s Rig Count and Market Share Growth

(1) Rig count as of 3/31/2020. The combined rig count including the Springbok assets as of 4/17/2020 was 70.(2) Defined as total rigs running on Kimbell acreage divided by the Baker Hughes US Lower 48 onshore rig count published the last Friday prior to the end of the first quarter of 2020.

(2)

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Active Rigs Drilling on Kimbell’s Acreage (as of 3/31/2020)

Kimbell has 75 active rigs (97% horizontal) drilling on our acreage at no cost to us

Rockies

Appalachia

Permian

Well Name Operator County/State1 NORTH HOBBS G/SA UNIT-689 OCCIDENTAL LEA, NM2 TOM-CORSON E41K-11H PIONEER GLASSCOCK, TX3 TRENTINO 36-37 (ALLOC-C)-3SS LAREDO HOWARD, TX4 GARON 27-22-4AH SABALO HOWARD, TX5 STANLEY UNIT 48-01-5SH SURGE HOWARD, TX6 FARMAR DD-S548H TRIPLE IRION, TX7 WILLIE THE WILDCAT 3-15 A-1WA BIRCH MARTIN, TX8 WILLIE THE WILDCAT 3-15 E-7LS BIRCH MARTIN, TX9 MIDNIGHT MATADOR 12-24 C-4 BIRCH MARTIN, TX

10 SOTO 43-7 (ALLOC-1SH)-1LB GUIDON MARTIN, TX11 FRANCES 12-1-F-2712H PARSLEY MARTIN, TX12 FRANCES 12-1-C-4406H PARSLEY MARTIN, TX13 FRANCES 12-1-C-2806VH PARSLEY MARTIN, TX14 PARKS FIELD UNIT 2-2001BH COG MIDLAND, TX15 ACTINIDE E-5BB CROWNQUEST MIDLAND, TX16 VALENCE-8HA CROWNQUEST MIDLAND, TX17 LB EPLEY 34-46 A-101WA DIAMONDBACK MIDLAND, TX18 LB EPLEY 34-46 C-202WB DIAMONDBACK MIDLAND, TX19 LB EPLEY 34-46 D-504LS DIAMONDBACK MIDLAND, TX20 SHACKELFORD W40C-3H PIONEER MIDLAND, TX21 SHACKELFORD W40F-6H PIONEER MIDLAND, TX22 GERMANIA W41D-4H PIONEER MIDLAND, TX23 GERMANIA E41A-1H PIONEER MIDLAND, TX24 JAMES K 45-50-4311H DOUBLE EAGLE REAGAN, TX25 STATE SKY HOOK 57-T2-24-W115H BPX REEVES, TX26 SACROC UNIT-1098ST KINDER MORGAN SCURRY, TX27 HIRSCH E 29-17-A-4402H PARSLEY UPTON, TX28 BROOK D-W31D-104H PIONEER UPTON, TX29 BROOK D-C31B-202H PIONEER UPTON, TX30 ADELY 14-28WB SUMMIT UPTON, TX

Mid-Continent

Well Name Operator County/State31 HIGH LINE-1-11-2XHW CONTINENTAL CARTER, OK32 SEAPORT-1-14-23XHW CONTINENTAL CARTER, OK33 SANDRA-0304 1H-9X NEWFIELD GARVIN, OK34 ANGELA-4-27X22X21X16H GULFPORT GRADY, OK35 FRICK-3-23X14H GULFPORT GRADY, OK36 BARTON-1709 3H-13X OVINTIV KINGFISHER, OK37 FSB-1508 5H-26X OVINTIV KINGFISHER, OK38 JUANITA FED 1508-8H-14X OVINTIV KINGFISHER, OK39 JUANITA FIU 1508-2H-14X OVINTIV KINGFISHER, OK40 QUIDDITCH BIA 31-30-16N-7W PALOMA KINGFISHER, OK41 AURORA-1-15-10-3XHW CONTINENTAL LOVE, OK42 CONDIT-5-5-32XHW CONTINENTAL STEPHENS, OK43 MILLEDGE-PSHIGODA 28/37 A-M MEWBOURNE OCHILTREE, TX

Bakken

Well Name Operator County/State44 CROSBY CREEK-4-5H SINCLAIR DUNN, ND45 ANGUS FEDERAL-8-9H1 CONTINENTAL MCKENZIE, ND46 BW-SPRING CREEK149-99-1201H-4 HESS MCKENZIE, ND47 EDGAR-10-3 5H ZAVANNA MCKENZIE, ND48 EN-LABAR154-94-1003H-7 HESS MOUNTRAIL, ND49 IRGENS REXALL-3-19H CONTINENTAL WILLIAMS, ND50 CPEUSC TAMI-11-8-5-157N-99W CRESCENT POINT WILLIAMS, ND51 BL-IVERSON C155-96-2314H-9 HESS WILLIAMS, ND52 WM BROWN-157-99-1B-12-6B KRAKEN WILLIAMS, ND53 MCGINNITY E-159-95-31-30-20TF LIBERTY WILLIAMS, ND54 HBU MULLER-31X-12A XTO WILLIAMS, ND

Haynesville

Well Name Operator County/State55 HA RA SUBB;WYRHAEUSER 26-35 COMSTOCK BIENVILLE, LA56 GILMR33&28-15-14HC;-001-ALT CHESAPEAKE DE SOTO, LA57 DESOTO FAM 15-22 HC; HA RC SUB VINE DE SOTO, LA58 JUR RA SUF;BRUSHY 32-5 HC-004 VINE DE SOTO, LA59 CV RB SU70;MURRAY 37-34-27 HC AETHON RED RIVER, LA60 OLYMPIA MIN 36-1 H-001 GEP SABINE, LA61 FLANAGAN-JERNIGAN HV UNIT D ROCKCLIFF PANOLA, TX62 JORDAN-CALDWELL HV UNIT B-2H ROCKCLIFF PANOLA, TX

Eagle Ford

Well Name Operator County/State63 PHILIP-1HE TREADSTONE BURLESON, TX64 W LESKE UNIT A-8 BURLINGTON DEWITT, TX65 GROHL B-2H EOG GONZALES, TX66 BONGO HUNTER UNIT-8H PENN VIRGINIA GONZALES, TX67 J HANDY D-4H ENCANA KARNES, TX68 RIDLEY FARMS 01-03H ENSIGN KARNES, TX69 JASIK-GARCIA ALLOC C-12H CALLON LA SALLE, TX70 NAYLOR JONES 46 C-3H EOG MCMULLEN, TX

Well Name Operator County/State71 MCMAHON-8H SWN BRADFORD, PA72 DIAZ M-066 CABOT SUSQUEHANNA, PA73 BETTY SCHAFER MSH 8H SWN MARSHALL, WV

Well Name Operator County/State74 TRINITY FED-3469-9-N3XH ANADARKO CONVERSE, WY75 EDENBERG FED-3875-9-4-1FH SM CONVERSE, WY

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Kimbell has an Optimal Balance of Unconventional and Conventional Assets

Oil Gas

NGL

Conventional EOR Non-EORUnconventional

Conventional EOR Non-EORUnconventional Conventional EOR Non-EORUnconventional

Kimbell has approximately 28% of its overall production from conventional assets including certain Enhanced Oil Recovery (EOR) projects. This conventional production provides a base level of production stability that helps

facilitate overall organic production growth as new unconventional wells come online. In addition, EOR oil production has been notably flat over the last 20 years (0.2% 20-Year CAGR).

Total Production (Boe)(1)

Conventional EOR Non-EORUnconventional

Note: Graphs reflect estimated production from internal reserve report as of 3/31/2020.(1) Shown on a 6:1 basis.

59.6% 24.0% 16.4%40.4% 78.5%

1.5%

19.9%21.5%

66.8%

8.6%

24.6%33.2% 72.2%

8.2%

19.7%27.8%

14

Apr-2

0

Jun-

20

Aug-

20

Oct

-20

Dec

-20

Feb-

21

Apr-2

1

Jun-

21

Aug-

21

Oct

-21

Dec

-21

Feb-

22

Apr-2

2

Jun-

22

Aug-

22

Oct

-22

Dec

-22

Feb-

23

Apr-2

3

Jun-

23

Aug-

23

Oct

-23

Dec

-23

Feb-

24

Apr-2

4

Jun-

24

Aug-

24

Oct

-24

Dec

-24

Feb-

25

Unconventional Conventional - EOR Conventional - Non EOR Total

5-Year PDP Decline Forecast

6% Decline Rate(1)

Tota

l BO

EShallow decline rates from both its conventional and unconventional assets help to create Kimbell’s superior

overall PDP decline rate of 12%. This is in contrast to many of the working interest companies andsome mineral peers that have PDP decline rates of over 30%.

(1) Estimated 5-Year PDP average decline rate on a 6:1 basis.

15

Company Highlights

High-Quality Asset Base

Attractive Tax Structure(5)

Kimbell Positionedas a Natural Consolidator

Source: Company filings and Kimbell management(1) Acreage numbers include mineral interests and overriding royalty interests. Includes the assets acquired from Springbok as of 4/17/20.(2) As of 3/31/2020.(3) Estimated 5-Year PDP average decline rate on a 6:1 basis.(4) Reflects estimated production from internal reserve report as of 3/31/2020.

Prudent Financial Philosophy

Net Royalty Acre position of approximately 146,000 acres(1) across multiple producing basins provides diversified scale

− Key basins include the Permian and Mid-Con where 44% of the Net Royalty Acres are located

~98% of all rigs in the Lower 48 are in counties where Kimbell holds mineral interest positions(2)

Superior PDP decline rate of approximately 12%(3)

28% of production is from EOR units and conventional fields with shallow declines(4)

− EOR oil production has been notably flat for the last twenty years (0.2% 20-Year CAGR)

Kimbell will continue to opportunistically target high-quality positions in the highly fragmented minerals arena

Kimbell can capitalize on weak IPO markets by providing an avenue for sponsors looking to exit minerals investments

Significant consolidation opportunity in the minerals industry, with approximately $300 billion in market size and limited public participants of scale

Kimbell targets long-term leverage of less than 1.5x

− Debt to annualized Consolidated Adjusted EBITDA of 1.3x as of 3/31/2020(6)

Actively hedging for two years representing approximately 19% of current production

Insider ownership of 19.9% ensures shareholder alignment(7)

Kimbell does not expect to pay a material amount of federal corporate income taxes from 2020 through 2026 (less than 5% of Kimbell’s distributable cash flow for such years)

Substantially all distributions paid to common unitholders from 2020 through 2023 are not expected to be taxable dividend income

Less than 25% of distributions paid to common unitholders expected to be taxable dividend income for subsequent two years (2024-2025)

Status as a C-Corp for tax purposes provides a more liquid and attractive security

Energy yield investor market has ~$6.0 trillion in assets under management, ~60x size of the MLP market

(5) See page 9 of this presentation for information concerning the assumptions and estimates underlying theexpected tax treatment of distributions.

(6) Consolidated Adjusted EBITDA is annualized (Q1’20 Consolidated Adjusted EBITDA multiplied by four).(7) As of 3/31/2020. Does not include Kimbell’s Series A preferred units on an as-converted basis.

16

Section II – Detailed Asset Overview

17

Scale Across Lower 48

(1) Based on DrillingInfo rig count as of 3/31/2020.

Over 13.0 million gross acres across 28 states and in every major producing basin~98% of all rigs in the Lower 48 are in counties where Kimbell holds mineral interests positions(1)

18

Kimbell’s Permian Position ~2.6 million gross and ~22,600 net royalty acres represent

approximately 20% and 16%, respectively, of Kimbell’s acreage portfolio

30 rigs operating on KRP’s Permian acreage

Q1’20 run-rate production of 1,947 Boe/d

− Represents 16% of Q1’20 run-rate production

52% conventional production, 48% unconventional production(1)

~40,400 gross wells

Leading E&P operators on KRP’s acreage include:

Note: Q1’20 run-rate average daily production excludes prior period production recognized in Q1’20. Well count, acreage and rig count as of 3/31/2020. Production data shown on a 6:1 basis.(1) Reflects estimated production from internal reserve report as of 3/31/2020.

19

Kimbell’s Mid-Continent Position ~3.9 million gross and ~40,900 net royalty acres represent


13 rigs operating on KRP’s Mid-Con acreage




~10,900 gross wells


Note: Q1’20 run-rate average daily production excludes prior period production recognized in Q1’20. Well count, acreage and rig count as of 3/31/2020. Data represents entire Mid-Con position while map representsKRP’s Oklahoma position in the Mid-Continent. Production data shown on a 6:1 basis.

(1) Reflects estimated production from internal reserve report as of 3/31/2020.

20

Kimbell’s Haynesville Position ~745,800 gross and ~7,100 net royalty acres represent


8 rigs operating on KRP’s Haynesville acreage




~8,500 gross wells



21

Kimbell’s Appalachia Position ~721,700 gross and ~23,100 net royalty acres represent


3 rigs operating on KRP’s Appalachia acreage




~3,100 gross wells



22

Kimbell’s Eagle Ford Position ~618,100 gross and ~6,700 net royalty acres represent


8 rigs operating on KRP’s Eagle Ford acreage




~3,000 gross wells



23

Kimbell’s Bakken Position ~1.6 million gross and ~6,000 net royalty acres represent


11 rigs operating on KRP’s Bakken acreage

Q1’20 run-rate production of 576 Boe/d



~3,900 gross wells



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Section III – Mineral Market Opportunity

25

Positioned for Growth Through Acquisitions

Sizing the Minerals Market

Total Public Company Enterprise Value(2):

2%Market Opportunity:

98%

Total Minerals Market Size(1): ~$300 billion

Source: EIA and S&P Capital IQ.(1) Midpoint of market size estimate range. Based on production data from EIA and spot price as of 4/7/2020. Assumes 20% of royalties are on Federal lands and there is an average royalty burden of 18.75%. Assumes a 10x multiple on cash flows to

derive total market size. Excludes NGL value and overriding royalty interests.(2) Enterprise values of KRP, BSM, FLMN, MNRL and VNOM as of 4/7/2020.

Acquisitions from Current Sponsors

Consolidation of Private Mineral Companies

Existing Kimbell Sponsors’ remaining assets have production and reserve characteristics similar to Kimbell’s existing portfolio

Ownership position in Kimbell incentivizes Kimbell’s Sponsors to offer Kimbell the option to acquire additional mineral and royalty assets

~$300 billion market with minimal amount in publicly traded mineral and royalty companies

− Excludes value derived from Overriding Royalty Interests

Highly fragmented private minerals market with significant capital invested by sponsor-backed mineral acquisition companies

Lack of scale is proving difficult for sponsors to monetize investments via IPOs

Kimbell is uniquely positioned to capitalize on private equity need for liquidity and value enhancement

26

Highest Cash Flow Yield Across Multiple Sectors

Source: Capital IQ and Bloomberg as of 5/4/2020. RoyaltyCo: Average of VNOM, BSM, FLMN, MNRL and KRP distribution yield; Large-Cap E&Ps: Includes APA, COP, HES, MRO, MUR, NBL, OXY, DVN, OVV, COG; Integrateds: Includes CVX, XOM, CNQ, CVE, HSE, IMO, SU; Precious metal producers: Includes ABX, AEM, FCX, NEM, OR, RGLD, WPM.

Distribution/Dividend Yield Comparison

U.S. oil and gas royalty companies offer an attractive 11.3% yield versus the rest of the public space, including integrated companies and large cap E&Ps. In addition, royalty companies offer far superior cash yields as

compared to the precious metals and REIT sectors as well as the S&P 500.

11.3%

9.1%7.3%

5.7% 5.2%

1.3% 1.2%

RoyaltyCo's Integrateds Large-Cap E&P MSCI REIT Index S&P 500 Precious MetalProducers

27

Appendix

28

History

Kimbell has a strong track record of success as a natural consolidator in the mineral and royalty industry

Closed Phillips acquisition from EnCap for $172 million in equity consideration; production nearly quadrupled since IPO

With a handshake agreement in 1998, a small group of Fort Worth based investors laid the groundwork for what is now Kimbell

Kimbell Royalty Partners, LP formed

Kimbell completed IPO

1998 2015 2016 2017 2018 2019 2020

1998

Oct

ober

201

5

Febr

uary

201

7

July

201

8 Closed acquisition of Haymaker assets for $444 million in cash and equity consideration

Dec

embe

r 201

8 Closed drop down acquisition for $90 million in equity consideration

Signed agreement to acquire Haymaker assets

May

201

8

Completed conversion to C-Corp for taxation purposes; completed follow-on equity offering Se

ptem

ber 2

018

Entered into joint venture to aggregate minerals in the micro-market

Closed $36 million acquisition of mineral and royalty interests from Buckhorn Resources in all-equity transaction

Closed the acquisition of various mineral and royalty interests in Oklahoma for $10 million

June

201

9

Mar

ch 2

019

Dec

embe

r 201

9

Nov

embe

r 201

9 Closed $123 million acquisition of mineral and royalty interests from Springbok for cash and equity considerationAp

ril 2

020

29

Mid-Continent28%

Permian16%

Appalachia16%

Haynesville5%

Bakken4%

Eagle Ford5%

Rockies<1%

Other25%

Haynesville15%

Appalachia15%

Mid-Continent14%

Permian16%

Eagle Ford13%

Bakken5%

Rockies3%

Other19%

Q1’20 Production from Some of the Most Economic Areas (Boe/d)(1)

12,602 Boe/d

Production and Net Royalty Acreage Overview

Net Royalty Acres(2)

(1) Shown on a 6:1 basis. Q1’20 run-rate average daily production excludes prior period production recognized in Q1’20.(2) Acreage as of 3/31/2020.

143,777

30

(1) Net Royalty Acres derived from ORRIs are calculated by multiplying Gross Acres and ORRIs.(2) Royalty Interest is inclusive of all other burdens.(3) Acreage as of 3/31/2020.

Defining a Net Royalty Acre

The calculation of a Net Royalty Acre differs across industry participants

Kimbell calculates its Net Royalty Acres(1) as follows: Net Mineral Acres x Royalty Interest(2)

− This methodology provides a clear and easily understandable view of Kimbell’s acreage position

Kimbell Acreage Under Both Methodologies(3)

Net Mineral Acres Royalty Interest Net Royalty Acres

Many companies use a 1/8th convention which assumes eight royalty acres for every mineral acre

− This convention overstates a company’s net royalty interest in its total mineral acreage position as shown below

Net Royalty Acres

Net Royalty Acres (normalized to 1/8th) 1,150,216

143,777

31

In many states, mineral and royalty interests are considered by law to be real property interests and are thus afforded additional protections under bankruptcy law

Mineral Interest owner entitled to ~15-25% of production revenue

Working Interest owner entitled to ~75-85% of production revenue and bears 100% of

development cost and lease operating expense

Senior Secured Debt

Senior Debt

Subordinated Debt

Equity

Mineral Interests Generally Senior to All Claims in Capital Structure

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Overview of Mineral & Royalty Interests

Minerals

Perpetual real-property interests that grant oil and natural gas ownership under a tract of land

Represent the right to either explore, drill, and produce oil and natural gas or lease that right to third parties for an upfront payment (i.e. lease bonus) and a negotiated percentage of production revenues

NPRIs

Nonparticipating royalty interests

Royalty interests that are carved out of a mineral estate

Perpetual right to receive a fixed cost-free percentage of production revenue

Do not participate in upfront payments (i.e. lease bonus)

ORRIs

Overriding royalty interests

Royalty interests that burden the working interests of a lease

Right to receive a fixed, cost-free percentage of production revenue (term limited to life of leasehold estate)

Illustrative Mineral Revenue Generation

Unleased MineralsRevenue Share KRP: 100% Operator: 0%

Cost Share KRP: 100% Operator: 0%

Lease Termination Upon termination of a lease,

all future development rights revert to KRP to explore or lease again

KRP Issues a Lease KRP receives an upfront

cash bonus payment and customarily a 20-25% royalty on production revenues

In return, KRP delivers the right to explore and develop with the operator bearing 100% of costs for a specified lease term

Leased MineralsRevenue Share KRP: 20-25% Operator: 75-80%

Cost Share KRP: 0% Operator: 100%

1 2 3 4

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Historical Selected Financial DataNon-GAAP Reconciliation (in thousands)

Net loss $ (59,784) Depreciation and depletion expense 13,271 Interest expense 1,421

Consolidated EBITDA $ (45,092) Impairment of oil and natural gas properties 70,925 Unit-based compensation 2,107 Gain on commodity derivative instruments, net of settlements (8,979) Cash distribution from equity method investee 18 Equity income in affiliate (163)

Consolidated Adjusted EBITDA $ 18,816

Annualized Consolidated Adjusted EBITDA $ 75,264 Long-term debt (as of 3/31/20) 101,224 Debt to Consolidated Adjusted EBITDA 1.3x

Three Months EndedMarch 31, 2020

KRP Investor Presentation2020... · 2020. 5. 6. · This presentation includes forward-looking...

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