Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 02, 2019 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Entity Registrant Name | Kimbell Royalty Partners, LP | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Central Index Key | 0001657788 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Common Units | ||
Entity Common Stock, Shares Outstanding | 23,494,135 | |
Class B | ||
Entity Common Stock, Shares Outstanding | 23,414,342 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 16,887,771 | $ 15,773,987 |
Oil, natural gas and NGL receivables | 18,871,778 | 18,809,170 |
Commodity derivative assets | 1,957,249 | 2,981,117 |
Accounts receivable and other current assets | 376,121 | 50,551 |
Total current assets | 38,092,919 | 37,614,825 |
Property and equipment, net | 816,614 | 429,602 |
Oil and natural gas properties | ||
Oil and natural gas properties, using full cost method of accounting ($351,068,528 and $280,304,353 excluded from depletion at June 30, 2019 and December 31, 2018, respectively) | 987,748,241 | 818,594,943 |
Less: accumulated depreciation, depletion, accretion and impairment | (161,301,065) | (107,779,453) |
Total oil and natural gas properties, net | 826,447,176 | 710,815,490 |
Right-of-use assets, net | 619,944 | |
Commodity derivative assets | 1,246,829 | |
Loan origination costs, net | 2,749,255 | 3,178,627 |
Total assets | 868,725,908 | 753,285,373 |
Current liabilities | ||
Accounts payable | 1,184,477 | 1,331,081 |
Other current liabilities | 4,205,607 | 2,468,945 |
Total current liabilities | 5,390,084 | 3,800,026 |
Operating lease liabilities | 615,516 | |
Commodity derivative liabilities | 291,362 | |
Long-term debt | 87,309,544 | 87,309,544 |
Total liabilities | 93,606,506 | 91,109,570 |
Commitments and contingencies (Note 15) | ||
Mezzanine equity: | ||
Series A preferred units (110,000 units issued and outstanding as of June 30, 2019 and December 31, 2018) | 71,820,563 | 69,449,006 |
Unitholders' equity | ||
Common units (23,094,135 units issued and outstanding as of June 30, 2019 and 18,056,487 units issued and outstanding as of December 31, 2018) | 337,096,345 | 293,992,935 |
Class B units (23,814,342 units issued and outstanding as of June 30, 2019 and 19,453,258 units issued and outstanding as of December 31, 2018) | 1,190,717 | 972,663 |
Total unitholders' equity | 338,287,062 | 294,965,598 |
Noncontrolling interest | 365,011,777 | 297,761,199 |
Total equity | 703,298,839 | 592,726,797 |
Total liabilities, mezzanine equity and unitholders' equity | $ 868,725,908 | $ 753,285,373 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Oil and natural gas properties excluded from depletion | $ 351,068,528 | $ 280,304,353 |
Temporary equity, issued (in units) | 110,000 | 110,000 |
Temporary equity, outstanding (in units) | 110,000 | 110,000 |
Common units, issued (in units) | 23,094,135 | 18,056,487 |
Common units, outstanding (in units) | 23,094,135 | 18,056,487 |
Class B units, issued (in units) | 23,814,342 | 19,453,258 |
Class B units, outstanding (in units) | 23,814,342 | 19,453,258 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
(Gain) loss on commodity derivative instruments | $ 2,733,582 | $ (538,389) | $ (2,236,208) | $ (823,354) |
Total revenues | 31,936,601 | 10,707,898 | 49,883,810 | 21,599,236 |
Costs and expenses | ||||
Production and ad valorem taxes | 1,924,943 | 805,396 | 3,521,337 | 1,621,397 |
Depreciation and depletion expense | 12,311,443 | 3,431,594 | 22,592,451 | 7,887,302 |
Impairment of oil and natural gas properties | 28,146,711 | 0 | 30,948,909 | 54,753,444 |
Marketing and other deductions | 1,749,040 | 609,033 | 3,606,083 | 1,178,875 |
General and administrative expense | 6,220,499 | 4,000,022 | 11,553,865 | 6,770,794 |
Total costs and expenses | 50,352,636 | 8,846,045 | 72,222,645 | 72,211,812 |
Operating (loss) income | (18,416,035) | 1,861,853 | (22,338,835) | (50,612,576) |
Other expense | ||||
Interest expense | 1,441,651 | 483,558 | 2,864,214 | 833,600 |
Net (loss) income before income taxes | (19,857,686) | 1,378,295 | (25,203,049) | (51,446,176) |
Provision for income taxes | 507,801 | 507,801 | ||
Net (loss) income | (20,365,487) | 1,378,295 | (25,710,850) | (51,446,176) |
Distribution and accretion on Series A preferred units | (3,469,584) | (6,939,168) | ||
Net loss and distributions and accretion on Series A preferred units attributable to noncontrolling interests | 12,100,511 | 17,252,020 | ||
Distribution on Class B units | (23,814) | (47,628) | ||
Net (loss) income attributable to common units | $ (11,758,374) | $ 1,378,295 | $ (15,445,626) | $ (51,446,176) |
Net (loss) income attributable to common units | ||||
Net (loss) income attributable to common units per unit (basic) (in dollar per share) | $ (0.54) | $ 0.08 | $ (0.78) | $ (3.14) |
Net (loss) income attributable to common units per unit (diluted) (in dollar per share) | $ (0.54) | $ 0.08 | $ (0.78) | $ (3.14) |
Weighted average number of common units outstanding | ||||
Weighted average number of common units outstanding Basic (in units) | 21,727,185 | 16,377,476 | 19,859,618 | 16,361,619 |
Weighted average number of common units outstanding Diluted (in units) | 21,727,185 | 16,809,149 | 19,859,618 | 16,361,619 |
Oil, natural gas and NGL revenues | ||||
Revenue | $ 27,913,975 | $ 10,847,677 | $ 50,747,368 | $ 21,655,856 |
Lease bonus and other income | ||||
Revenue | $ 1,289,044 | $ 398,610 | $ 1,372,650 | $ 766,734 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS' EQUITY - USD ($) | Limited PartnersCommon Units | Limited PartnersClass B Common Units | Non Controlling Interest | Total |
Unitholders' capital, beginning balance at Dec. 31, 2017 | $ 262,065,434 | $ 262,065,434 | ||
Unitholders' capital, beginning balance (in units) at Dec. 31, 2017 | 16,509,799 | |||
Increase (Decrease) in Unitholders' Capital | ||||
Unit-based compensation | $ 668,934 | 668,934 | ||
Distributions to unitholders | $ (6,061,123) | (6,061,123) | ||
Restricted units granted, net of forfeitures (in units) | 325,185 | |||
Net loss | $ (52,824,471) | (52,824,471) | ||
Unitholders' capital, ending balance at Mar. 31, 2018 | $ 203,848,774 | 203,848,774 | ||
Unitholders' capital, ending balance (in units) at Mar. 31, 2018 | 16,834,984 | |||
Unitholders' capital, beginning balance at Dec. 31, 2017 | $ 262,065,434 | 262,065,434 | ||
Unitholders' capital, beginning balance (in units) at Dec. 31, 2017 | 16,509,799 | |||
Increase (Decrease) in Unitholders' Capital | ||||
Net loss | (51,446,176) | |||
Unitholders' capital, ending balance at Jun. 30, 2018 | $ 198,879,415 | 198,879,415 | ||
Unitholders' capital, ending balance (in units) at Jun. 30, 2018 | 16,839,462 | |||
Unitholders' capital, beginning balance at Mar. 31, 2018 | $ 203,848,774 | 203,848,774 | ||
Unitholders' capital, beginning balance (in units) at Mar. 31, 2018 | 16,834,984 | |||
Increase (Decrease) in Unitholders' Capital | ||||
Unit-based compensation | $ 723,039 | 723,039 | ||
Distributions to unitholders | $ (7,070,693) | (7,070,693) | ||
Restricted units granted, net of forfeitures (in units) | 4,478 | |||
Net loss | $ 1,378,295 | 1,378,295 | ||
Unitholders' capital, ending balance at Jun. 30, 2018 | $ 198,879,415 | 198,879,415 | ||
Unitholders' capital, ending balance (in units) at Jun. 30, 2018 | 16,839,462 | |||
Unitholders' capital, beginning balance at Dec. 31, 2018 | $ 293,992,935 | $ 972,663 | $ 297,761,199 | $ 592,726,797 |
Unitholders' capital, beginning balance (in units) at Dec. 31, 2018 | 18,056,487 | 19,453,258 | 18,056,487 | |
Increase (Decrease) in Unitholders' Capital | ||||
Units issued for Phillips Acquisition | $ 470,000 | 171,550,000 | $ 172,020,000 | |
Units issued for Phillips Acquisition (in units) | 9,400,000 | |||
Conversion of Class B units to common units | $ 23,507,402 | $ (71,946) | (23,507,402) | (71,946) |
Conversion of Class B units to common units (in units) | 1,438,916 | (1,438,916) | ||
Unit-based compensation | $ 1,770,410 | 1,770,410 | ||
Distributions to unitholders | (15,003,898) | (15,003,898) | ||
Distributions and accretion on Series A preferred units | (1,441,938) | (2,027,646) | (3,469,584) | |
Distribution on Class B units | (23,814) | (23,814) | ||
Net loss | (2,221,500) | (3,123,863) | (5,345,363) | |
Unitholders' capital, ending balance at Mar. 31, 2019 | $ 300,579,597 | $ 1,370,717 | 440,652,288 | 742,602,602 |
Unitholders' capital, ending balance (in units) at Mar. 31, 2019 | 19,495,403 | 27,414,342 | ||
Unitholders' capital, beginning balance at Dec. 31, 2018 | $ 293,992,935 | $ 972,663 | 297,761,199 | $ 592,726,797 |
Unitholders' capital, beginning balance (in units) at Dec. 31, 2018 | 18,056,487 | 19,453,258 | 18,056,487 | |
Increase (Decrease) in Unitholders' Capital | ||||
Net loss | $ (25,710,850) | |||
Unitholders' capital, ending balance at Jun. 30, 2019 | $ 337,096,345 | $ 1,190,717 | 365,011,777 | $ 703,298,839 |
Unitholders' capital, ending balance (in units) at Jun. 30, 2019 | 23,094,135 | 23,814,342 | 23,094,135 | |
Unitholders' capital, beginning balance at Mar. 31, 2019 | $ 300,579,597 | $ 1,370,717 | 440,652,288 | $ 742,602,602 |
Unitholders' capital, beginning balance (in units) at Mar. 31, 2019 | 19,495,403 | 27,414,342 | ||
Increase (Decrease) in Unitholders' Capital | ||||
Restricted units used for tax withholding | $ (21,036) | (21,036) | ||
Restricted units used for tax withholding (in units) | (1,268) | |||
Conversion of Class B units to common units | $ 63,540,000 | $ (180,000) | (63,540,000) | (180,000) |
Conversion of Class B units to common units (in units) | 3,600,000 | (3,600,000) | ||
Unit-based compensation | $ 2,112,764 | 2,112,764 | ||
Distributions to unitholders | (17,356,606) | (17,356,606) | ||
Distributions and accretion on Series A preferred units | (1,708,157) | (1,761,427) | (3,469,584) | |
Distribution on Class B units | (23,814) | (23,814) | ||
Net loss | (10,026,403) | (10,339,084) | (20,365,487) | |
Unitholders' capital, ending balance at Jun. 30, 2019 | $ 337,096,345 | $ 1,190,717 | $ 365,011,777 | $ 703,298,839 |
Unitholders' capital, ending balance (in units) at Jun. 30, 2019 | 23,094,135 | 23,814,342 | 23,094,135 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net loss | $ (20,365,487) | $ (25,710,850) | $ (51,446,176) |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||
Depreciation and depletion expense | 12,311,443 | 22,592,451 | 7,887,302 |
Impairment of oil and natural gas properties | 28,146,711 | 30,948,909 | 54,753,444 |
Amortization of right-of-use assets | 22,578 | ||
Amortization of loan origination costs | 518,149 | 31,250 | |
Unit-based compensation | 3,883,174 | 1,391,973 | |
Loss on commodity derivative instruments, net of settlements | 2,562,059 | 681,530 | |
Changes in operating assets and liabilities: | |||
Oil, natural gas and NGL receivables | 3,893,763 | 195,074 | |
Accounts receivable and other current assets | (325,570) | 10,032 | |
Accounts payable | (949,806) | 1,204,349 | |
Other current liabilities | 1,736,663 | (519,935) | |
Operating lease liabilities | (27,006) | ||
Net cash provided by operating activities | 39,144,514 | 14,188,843 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Purchase of property and equipment | (406,761) | (31,304) | |
Proceeds from sale of oil and natural gas properties | 10,576,595 | ||
Deposits on oil and natural gas properties | (21,005,000) | ||
Purchase of oil and natural gas properties | (998,550) | (17,585) | |
Net cash used in investing activities | (1,405,311) | (10,477,294) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Contributions from Class B unitholders | 470,000 | ||
Redemption of Class B contributions on converted units | (9,862) | ||
Issuance costs paid on Series A preferred units | (717,612) | ||
Distributions to unitholders | (32,360,504) | (13,131,816) | |
Distributions on Series A preferred units | (3,850,000) | ||
Distributions to Class B unitholders | (47,628) | ||
Borrowings on long-term debt | 0 | 0 | 19,000,000 |
Repayments on long-term debt | 0 | 0 | (6,870,596) |
Payment of loan origination costs | (88,777) | ||
Restricted units used for tax withholding | (21,036) | ||
Net cash used in financing activities | (36,625,419) | (1,002,412) | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,113,784 | 2,709,137 | |
CASH AND CASH EQUIVALENTS, beginning of period | 15,773,987 | 5,625,495 | |
CASH AND CASH EQUIVALENTS, end of period | $ 16,887,771 | 16,887,771 | 8,334,632 |
Supplemental cash flow information: | |||
Cash paid for interest | 2,685,994 | 977,487 | |
Noncash investing and financing activities: | |||
Right-of-use assets obtained in exchange for operating lease liabilities | 642,522 | ||
Capital expenditures and consideration payable included in accounts payable and other liabilities | 35,382 | $ 3,718,237 | |
Oil and natural gas property acquisition costs in accounts payable | 104,031 | ||
Units issued in exchange for oil and natural gas properties | 171,550,000 | ||
Non-cash deemed distribution to Series A preferred units | 3,089,168 | ||
Redemption of Class B contributions on converted units in accounts payable | $ 242,084 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2019 | |
ORGANIZATION AND BASIS OF PRESENTATION | |
ORGANIZATION AND BASIS OF PRESENTATION | Unless the context otherwise requi NOTE 1—ORGANIZATION Organization Kimbell Royalty Partners, LP is a Delaware limited partnership formed in 2015 to own and acquire mineral and royalty interests in oil and natural gas properties throughout the United States. Effective as of September 24, 2018, the Partnership has elected to be taxed as a corporation for United States federal income tax purposes. As an owner of mineral and royalty interests, the Partnership is entitled to a portion of the revenues received from the production of oil, natural gas and associated natural gas liquids (“NGL”) from the acreage underlying its interests, net of post-production expenses and taxes. The Partnership is not obligated to fund drilling and completion costs, lease operating expenses or plugging and abandonment costs at the end of a well’s productive life. The Partnership’s primary business objective is to provide increasing cash distributions to unitholders resulting from acquisitions from third parties, its Sponsors and the Contributing Parties and from organic growth through the continued development by working interest owners of the properties in which it owns an interest. Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10‑Q and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. As a result, the accompanying unaudited interim condensed consolidated financial statements do not include all disclosures required for complete annual financial statements prepared in conformity with GAAP. Accordingly, the accompanying unaudited interim condensed consolidated financial statements and related notes should be read in conjunction with the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018, which contains a summary of the Partnership’s significant accounting policies and other disclosures. In the opinion of the Partnership’s management, the unaudited interim condensed consolidated financial statements contain all adjustments necessary to fairly present the financial position and results of operations for the interim periods in accordance with GAAP and all adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Preparation of the Partnership’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates. Segment Reporting The Partnership operates in a single operating and reportable segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The Partnership’s chief operating decision maker allocates resources and assesses performance based upon financial information of the Partnership as a whole. Restructuring, Tax Election and Related Transactions On July 24, 2018, the Partnership entered into a Recapitalization Agreement (the "Recapitalization Agreement") with Haymaker Minerals & Royalties, LLC, EIGF Aggregator III LLC, TE Drilling Aggregator LLC, Haymaker Management, LLC (collectively, the “Haymaker Holders”), the Kimbell Art Foundation, Haymaker Resources, LP, the General Partner and the Operating Company pursuant to which (a) the Partnership's equity interest in the Operating Company was recapitalized into 13,886,204 newly issued common units of the Operating Company ("OpCo Common Units") and 110,000 newly issued Series A Cumulative Convertible Preferred Units in the Operating Company and (b) the 10,000,000 and 2,953,258 common units held by the Haymaker Holders and the Kimbell Art Foundation, respectively, were exchanged for (i) 10,000,000 and 2,953,258 newly issued Class B common units representing limited partner interests of the Partnership ("Class B Units"), respectively, and (ii) 10,000,000 and 2,953,258 newly issued OpCo Common Units, respectively. The Class B Units and OpCo Common Units are exchangeable together into an equal number of common units of the Partnership. In May 2018, the General Partner’s Board of Directors (the “Board of Directors”) unanimously approved a change of the Partnership’s federal income tax status from that of a pass-through partnership to that of a taxable entity via a “check the box” election (the “Tax Election”). The Tax Election became effective on September 24, 2018. For each Class B Unit issued, five cents has been paid to the Partnership as additional consideration (the “Class B Contribution”). Holders of the Class B Units are entitled to receive cash distributions equal to 2.0% per quarter on their respective Class B Contribution, subsequent to distributions on the Series A Preferred Units (as defined in Note 7—Long-Term Debt) but prior to distributions on the common units. Following the effectiveness of the Tax Election and the completion of the related transactions, the Partnership’s royalty and minerals business continues to be conducted through the Operating Company, which is taxed as a partnership for federal and state income tax purposes. The Operating Company passes income to the noncontrolling interest and the Partnership, which is treated as a corporation for federal and state income tax purposes. As of August 2, 2019, 50.1% of the OpCo Common Units were held by the Partnership and 49.9% were held by third parties. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant Accounting Policies For a description of the Partnership’s significant accounting policies, see Note 2 of the consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as the items noted below. There have been no substantial changes in such policies or the application of such policies during the six months ended June 30, 2019, other than those discussed below in Recently Adopted Accounting Pronouncements. Reclassification of Prior Period Presentation Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on previously reported net income (loss), total cash flows from operations or working capital. New Accounting Pronouncements Recently Adopted Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016‑02, “Leases.” ASU 2016‑02 requires the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases currently classified as operating leases and makes certain changes to the way lease expenses are accounted for. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted. The Partnership adopted this update using the modified retrospective approach, effective January 1, 2019. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. The Partnership evaluated whether its contractual arrangements contain leases at the inception of such arrangements. Specifically, the Partnership considered whether it can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. Substantially all of the Partnerships leases are long-term operating leases with fixed payment terms and will terminate in October 2028. The Partnership’s ROU operating lease assets represent its right to use an underlying asset for the lease term, and its operating lease liabilities represent its obligation to make lease payments. ROU operating lease assets and operating lease liabilities are included in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019. Short term operating lease liabilities are included in other current liabilities. The weighted average remaining lease term as of June 30, 2019 was 9.09 years. Both the ROU operating lease assets and liabilities are recognized at the present value of the remaining lease payments over the lease term and do not include lease incentives. The Partnership’s leases do not provide an implicit rate that can readily be determined; therefore, the Partnership used a discount rate based on its incremental borrowing rate, which is determined by the information available in the Amended Credit Agreement, as defined in Note 7—Long-Term Debt, as of January 1, 2019. The incremental borrowing rate reflects the estimated rate of interest that the Partnership would pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. The weighted average discount rate used for the operating lease was 6.75% for the six months ended June 30, 2019. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expense in the accompanying unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2019. The total operating lease expense recorded for the three and six months ended June 30, 2019 was de minimis. Currently, the most substantial contractual arrangement that the Partnership has classified as an operating lease is the main office space used for operations. In July 2019, the Partnership became the lessee in several other related lease agreements for additional office space. In addition, the Partnership was involved in the construction and design of the underlying asset. The underlying assets were capitalized in July 2019 upon commencement of the lease. Future minimum lease commitments at June 30, 2019 were as follows: Remainder of Total 2019 2020 2021 2022 2023 Thereafter Operating leases $ 835,775 $ 45,822 $ 90,078 $ 90,078 $ 90,487 $ 87,463 $ 431,847 Less: Imputed Interest (220,259) Total $ 615,516 In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” This update provides clarification and corrects unintended application of the guidance in various sections. This update is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases.” This update provides clarification and corrects unintended application of certain sections in the new lease guidance. This update is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. In July 2018, the FASB issued ASU 2018-11, “Lease (Topic 842): Targeted Improvements.” This update provides another transition method of allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This update is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update modifies the fair value measurement disclosure requirements specifically related to Level 3 fair value measurements and transfers between levels. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update will be applied prospectively. The Partnership is currently evaluating the impact of the adoption of this update, but does not believe it will have a material impact on its financial position, results of operations or liquidity. |
ACQUISITIONS, JOINT VENTURES AN
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES | 6 Months Ended |
Jun. 30, 2019 | |
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES | |
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES | NOTE 3—ACQUISITIONS, JOINT VENUTURES AND DIVESTITURES Acquisitions On March 25, 2019, the Partnership acquired all of the equity interests in subsidiaries of PEP I Holdings, LLC, PEP II Holdings, LLC and PEP III Holdings, LLC that own oil and natural gas mineral and royalty interests (the “Phillips Acquisition”). The aggregate consideration for the Phillips Acquisition consisted of 9,400,000 OpCo Common Units and an equal number of Class B Units, valued at approximately $171.6 million based on the closing price of $18.25 on March 25, 2019. The assets acquired in the Phillips Acquisition consist of approximately 866,528 gross acres and 12,210 net royalty acres. The following unaudited pro forma results of operations reflect the Partnership’s results as if the acquisition of the equity interests in certain subsidiaries owned by Haymaker Minerals & Royalties, LLC and Haymaker Properties, LP (the “Haymaker Acquisition”), the acquisition of certain overriding royalty, royalty and other mineral interests from Rivercrest Capital Partners LP, the Kimbell Art Foundation, and Cupola Royalty Direct, LLC, as well as all of the equity interests of a subsidiary of Rivercrest Royalties Holdings II, LLC (the “Dropdown”), and the Phillips Acquisition had occurred on January 1, 2018. In the Partnership’s opinion, all significant adjustments necessary to reflect the effects of the Haymaker Acquisition, Dropdown and Phillips Acquisition have been made. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Total revenues $ 31,936,601 $ 31,306,192 $ 54,892,396 $ 61,437,506 Net (loss) income attributable to common units $ (11,758,374) $ 5,319,058 $ (10,972,888) $ (15,566,172) Net (loss) income attributable to common units Basic $ (0.51) $ 0.23 $ (0.48) $ (0.67) Diluted $ (0.51) $ 0.23 $ (0.48) $ (0.67) Joint Ventures On June 19, 2019, the Partnership entered into a joint venture (the “Joint Venture”) with Springbok SKR Capital Company, LLC and Rivercrest Capital Partners, LP. The Partnership’s ownership in the Joint Venture is 49.3% and its total capital commitment will not exceed $15.0 million. The Joint Venture will be managed by Springbok Operating Company, LLC. The purpose of the Joint Venture will be to make direct or indirect investments in royalty, mineral and overriding royalty interests and similar non-cost bearing interests in oil and gas properties, excluding leasehold or working interests. As of June 30, 2019, no investments had been made by the Joint Venture and the Partnership had not funded any amounts under its capital commitment. Divestitures In May 2018, the Partnership executed two purchase and sale agreements to sell a small portion of its Delaware Basin acreage for $10.6 million, which was recorded as a reduction in the full-cost pool, with no gain or loss recorded on the sale. At the time of the divestiture, the sales represented approximately 29 barrels of equivalent (“Boe”) per day of production, less than 0.8% of total production and 59 net royalty acres, approximately 0.08% of total net royalty acres. |
DERIVATIVES
DERIVATIVES | 6 Months Ended |
Jun. 30, 2019 | |
DERIVATIVES | |
DERIVATIVES | NOTE 4—DERIVATIVES The Partnership’s ongoing operations expose it to changes in the market price for oil and natural gas. To mitigate the inherent commodity price risk associated with its operations, the Partnership uses oil and natural gas commodity derivative financial instruments. From time to time, such instruments may include variable-to-fixed-price swaps, costless collars, fixed-price contracts, and other contractual arrangements. The Partnership enters into oil and natural gas derivative contracts that contain netting arrangements with each counterparty. As of June 30, 2019 , the Partnership’s commodity derivative contracts consisted of fixed price swaps, under which the Partnership receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume. The Partnership hedges its daily production based on the amount of debt and/or preferred equity as a percent of its enterprise value. This amount constitutes approximately 20% of daily oil and natural gas production. The Partnership’s oil fixed price swap transactions are settled based upon the average daily prices for the calendar month of the contract period, and its natural gas fixed price swap transactions are settled based upon the last day settlement of the first nearby month futures contract of the contract period. Settlement for oil derivative contracts occurs in the succeeding month and natural gas derivative contracts are settled in the production month. The Partnership has not designated any of its derivative contracts as hedges for accounting purposes. The Partnership records all derivative contracts at fair value. Changes in the fair values of the Partnership’s derivative instruments are presented on a net basis in the accompanying unaudited condensed consolidated statements of operations and consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Beginning fair value of commodity derivative instruments $ (937,938) (531,287) $ 4,227,946 $ (318,829) Gain (loss) on commodity derivative instruments 2,733,582 (538,389) (2,236,208) (823,354) Net cash (received) paid on settlements of derivative instruments (129,757) 69,317 (325,851) 141,824 Ending fair value of commodity derivative instruments $ 1,665,887 $ (1,000,359) $ 1,665,887 $ (1,000,359) The following table presents the fair value of the Partnership’s derivative contracts as of June 30, 2019 and December 31, 2018: June 30, December 31, Classification Balance Sheet Location 2019 2018 Assets: Current asset Commodity derivative assets $ 1,957,249 $ 2,981,117 Long-term asset Commodity derivative assets — 1,246,829 Liabilities: Current liability Commodity derivative liabilities — — Long-term liability Commodity derivative liabilities (291,362) — $ 1,665,887 $ 4,227,946 As of June 30, 2019, the Partnership’s open commodity derivative contracts consisted of the following: Oil Price Swaps Notional Weighted Average Range (per Bbl) Volumes (Bbl) Fixed Price (per Bbl) Low High June 2019 - December 2019 131,396 $ 61.47 $ 53.07 $ 63.47 January 2020 - December 2020 224,356 $ 55.48 $ 50.45 $ 61.43 January 2021 - June 2021 110,993 $ 55.25 $ 54.52 $ 56.10 Natural Gas Price Swaps Notional Weighted Average Range (per MMBtu) Volumes (MMBtu) Fixed Price (per MMBtu) Low High July 2019 - December 2019 1,945,432 $ 2.74 $ 2.74 $ 2.76 January 2020 - December 2020 3,582,862 $ 2.64 $ 2.51 $ 2.94 January 2021 - June 2021 1,562,411 $ 2.62 $ 2.43 $ 2.85 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2019 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 5—FAIR VALUE MEASUREMENTS The Partnership measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the levels of the fair value hierarchy noted below. The carrying values of cash, oil, natural gas and NGL receivables, accounts receivable and other current assets and current and long-term liabilities included in the unaudited condensed consolidated balance sheets approximated fair value as of June 30, 2019 and December 31, 2018. As a result, these financial assets and liabilities are not discussed below. · Level 1— Unadjusted quoted prices for identical assets or liabilities in active markets. · Level 2—Quoted prices for similar assets or liabilities in non-active markets, or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. · Level 3—Measurement based on prices or valuations models that require inputs that are both unobservable and significant to the fair value measurement (including the Partnership’s own assumptions in determining fair value). Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Partnership recognizes transfers between fair value hierarchy levels as of the end of the reporting period in which the event or change in circumstances causing the transfer occurred. The Partnership did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements during the three and six months ended June 30, 2019 and 2018. The Partnership’s commodity derivative instruments are classified within Level 2. The fair values of the Partnership’s oil and natural gas fixed price swaps are based upon inputs that are either readily available in the public market, such as oil and natural gas futures prices, volatility factors and discount rates, or can be corroborated from active markets. |
OIL AND NATURAL GAS PROPERTIES
OIL AND NATURAL GAS PROPERTIES | 6 Months Ended |
Jun. 30, 2019 | |
OIL AND NATURAL GAS PROPERTIES | |
OIL AND NATURAL GAS PROPERTIES | NOTE 6—OIL AND NATURAL GAS PROPERTIES Oil and natural gas properties consists of the following: June 30, December 31, 2019 2018 Oil and natural gas properties Proved properties $ 636,679,713 $ 538,290,590 Unevaluated properties 351,068,528 280,304,353 Less: accumulated depreciation, depletion and impairment (161,301,065) (107,779,453) Total oil and natural gas properties $ 826,447,176 $ 710,815,490 Costs associated with unevaluated properties are excluded from the full cost pool until a determination as to the existence of proved reserves is able to be made. The inclusion of the Partnership’s unevaluated costs into the amortization base is expected to be completed within five years of the date of acquisition of the unevaluated properties. The Partnership assesses all items classified as unevaluated property on an annual basis for possible impairment. The Partnership assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: operators’ intent to drill; remaining lease term; geological and geophysical evaluations; operators’ drilling results and activity; the assignment of proved reserves; and the economic viability of operator development if proved reserves are assigned. During any period in which these factors indicate an impairment, all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization. The Partnership recorded an impairment on its oil and natural gas properties of $28.1 million for the three months ended June 30, 2019 primarily as a result of a decline in the 12-month average price of oil and natural gas. No impairment expense was recorded for the three months ended June 30, 2018. The Partnership recorded an impairment on its oil and natural gas properties of $30.9 million and $54.8 million during the six months ended June 30, 2019 and 2018, respectively, as a result of its quarterly full cost ceiling analysis and due to a decline in the 12-month average price of oil and natural gas. |
LONG-TERM DEBT
LONG-TERM DEBT | 6 Months Ended |
Jun. 30, 2019 | |
LONG-TERM DEBT. | |
LONG-TERM DEBT | NOTE 7—LONG-TERM DEBT In connection with its initial public offering (“IPO”), on January 11, 2017, the Partnership entered into a credit agreement (the “2017 Credit Agreement”) with Frost Bank, as administrative agent, and the lenders party thereto. On July 12, 2018, in connection with the Haymaker Acquisition, the Partnership entered into an amendment (the “Credit Agreement Amendment”) to the Partnership’s 2017 Credit Agreement ( the 2017 Credit Agreement as amended by the Credit Agreement Amendment, the “Amended Credit Agreement”), by and among the Partnership, certain subsidiaries of the Partnership, as guarantors, Frost Bank, as administrative agent, and the other lenders party thereto. The Credit Agreement Amendment amends the 2017 Credit Agreement to provide for, among other things, (i) the addition of the subsidiaries the Partnership acquired in the Haymaker Acquisition, as well as the Operating Company, as guarantors under the Amended Credit Agreement, (ii) limitations on the Partnership’s ability to incur certain debt or issue preferred equity, (iii) limitations on redemptions of the Series A Cumulative Convertible Preferred Units (“Series A Preferred Units”) and the ability of the Partnership and the restricted subsidiaries of the Partnership to make distributions and other restricted payments, in each case, unless certain conditions are satisfied, (iv) increased limitations on the Partnership’s ability to dispose of certain assets or encumber certain assets, (v) a decrease in the applicable margin under the 2017 Credit Agreement, which varies based upon the level of borrowing base usage, by 0.25% for each applicable level as set forth in the Amended Credit Agreement, such that the applicable margin will range from 1.00% to 2.00% in the case of ABR Loans (as defined in the Amended Credit Agreement) and 2.00% to 3.00% in the case of LIBOR Loans (as defined in the Amended Credit Agreement) and (vi) the addition of certain restrictions on the Partnership’s and the Operating Company’s ability to take certain actions or amend their organizational documents. The Amended Credit Agreement contains various affirmative, negative and financial maintenance covenants. These covenants limit the Partnership’s ability to, among other things, incur or guarantee additional debt, make distributions on, or redeem or repurchase, common units, make certain investments and acquisitions, incur certain liens or permit them to exist, enter into certain types of transactions with affiliates, merge or consolidate with another company and transfer, sell or otherwise dispose of assets. The Amended Credit Agreement also contains covenants requiring the Partnership to maintain the following financial ratios or to reduce the Partnership’s indebtedness if the Partnership is unable to comply with such ratios: (i) a Debt to EBITDAX Ratio (as defined in the secured revolving credit facility) of not more than 4.0 to 1.0 and (ii) a ratio of current assets to current liabilities of not less than 1.0 to 1.0. The Amended Credit Agreement also contains customary events of default, including non‑payment, breach of covenants, materially incorrect representations, cross‑default, bankruptcy and change of control. The Credit Agreement Amendment increased commitments under the Amended Credit Agreement from $50.0 million to $200.0 million. Under the Amended Credit Agreement, availability under the secured revolving credit facility will equal the lesser of the aggregate maximum commitments of the lenders and the borrowing base. The borrowing base under the Amended Credit Agreement was set at $200.0 million. The Amended Credit Agreement permits aggregate commitments under the secured revolving credit facility to be increased to $500.0 million, subject to the satisfaction of certain conditions and the procurement of additional commitments from new or existing lenders. The borrowing base will be redetermined semiannually on May 1 and November 1 of each year based on the value of the Partnership’s oil and natural gas properties and the oil and natural gas properties of the Partnership’s wholly owned subsidiaries. During the three and six months ended June 30, 2019, the Partnership did not incur or repay any borrowings under the secured revolving credit facility. As of June 30, 2019, the Partnership’s outstanding balance was $87.3 million. The Partnership was in compliance with all covenants included in the secured revolving credit facility as of June 30, 2019. As of June 30, 2019, borrowings under the secured revolving credit facility bore interest at LIBOR plus a margin of 2.25% or Prime Rate (as defined in the secured revolving credit facility) plus a margin of 1.25%. For the six months ended June 30, 2019, the weighted average interest rate on the Partnership’s outstanding borrowings was 4.74%. |
PREFERRED UNITS
PREFERRED UNITS | 6 Months Ended |
Jun. 30, 2019 | |
PREFERRED UNITS | |
PREFERRED UNITS | NOTE 8—PREFERRED UNITS In July 2018, in connection with the closing of the Haymaker Acquisition, the Partnership completed the private placement of 110,000 Series A Preferred Units to certain affiliates of Apollo Capital Management, L.P. (the “Series A Purchasers”) for $1,000 per Series A Preferred Unit, resulting in gross proceeds to the Partnership of $110.0 million. Until the conversion of the Series A Preferred Units into common units or their redemption, holders of the Series A Preferred Units are entitled to receive cumulative quarterly distributions equal to 7.0% per annum plus accrued and unpaid distributions. In connection with the issuance of the Series A Preferred Units, the Partnership granted holders of the Series A Preferred Units board observer rights beginning on the third anniversary of the original issuance date, and board appointment rights beginning the fourth anniversary of the original issuance date and in the case of events of default with respect to the Series A Preferred Units. The Series A Preferred Units are convertible by the Series A Purchasers after two years at a 30% discount to the issue price, subject to certain conditions. The Partnership may redeem the Series A Preferred Units at any time. The Series A Preferred Units may be redeemed for a cash amount per Series A Preferred Unit equal to the product of (a) the number of outstanding Series A Preferred Units multiplied by (b) the greatest of (i) an amount (together with all prior distributions made in respect of such Series A Preferred Unit) necessary to achieve the Minimum IRR (as defined below), (ii) an amount (together with all prior distributions made in respect of such Series A Preferred Unit) necessary to achieve a return on investment equal to 1.2 times with respect to such Series A Preferred Unit and (iii) the Series A issue price plus accrued and unpaid distributions. For purposes of the Series A Preferred Units , "Minimum IRR" means as of any measurement date: (a) prior to the fifth anniversary of the July 12, 2018 (the “Series A Issuance Date”), a 13.0% internal rate of return with respect to the Series A Preferred Units; (b) on or after the fifth anniversary of the Series A Issuance Date and prior to the sixth anniversary of the Series A Issuance Date, a 14.0% internal rate of return with respect to the Series A Preferred Units; and (c) on or after the sixth anniversary of the Series A Issuance Date, a 15.0% internal rate of return with respect to the Series A Preferred Units. The following table summarizes the changes in the number of the Series A Preferred Units: Series A Preferred Units Balance at December 31, 2018 110,000 Balance at June 30, 2019 110,000 |
UNITHOLDERS' EQUITY AND PARTNER
UNITHOLDERS' EQUITY AND PARTNERSHIP DISTRIBUTIONS | 6 Months Ended |
Jun. 30, 2019 | |
UNITHOLDERS' EQUITY AND PARTNERSHIP DISTRIBUTIONS | |
UNITHOLDERS' EQUITY AND PARTNERSHIP DISTRIBUTIONS | NOTE 9—UNITHOLDERS’ EQUITY AND PARTNERSHIP DISTRIBUTIONS The Partnership has limited partner units. As of June 30, 2019, the Partnership had a total of 23,094,135 common units issued and outstanding and 23,814,342 Class B Units outstanding. The following table summarizes the changes in the number of the Partnership’s common units: Common Units Balance at December 31, 2018 18,056,487 Conversion of Class B Units 5,038,916 Restricted units used for tax withholding (1,268) Balance at June 30, 2019 23,094,135 The following table presents information regarding the common unit cash distributions approved by the Board of Directors for the periods presented: Amount per Date Unitholder Payment Common Unit Declared Record Date Date Q1 2019 $ 0.37 April 26, 2019 May 6, 2019 May 13, 2019 Q2 2019 $ 0.39 July 26, 2019 August 5, 2019 August 12, 2019 Q1 2018 $ 0.42 April 27, 2018 May 7, 2018 May 14, 2018 Q2 2018 $ 0.43 July 27, 2018 August 6, 2018 August 13, 2018 The following table summarizes the changes in the number of the Partnership’s Class B Units: Class B Units Balance at December 31, 2018 19,453,258 Class B Units issued for Phillips Acquisition 9,400,000 Conversion of Class B Units (5,038,916) Balance at June 30, 2019 23,814,342 Holders of the Class B Units, are entitled to receive cash distributions equal to 2% per quarter on their respective Class B Contribution, subsequent to distributions on the Series A Preferred Units but prior to distributions on the common units and OpCo Common Units. The Class B Units and OpCo Common Units are exchangeable together into an equal number of common units of the Partnership. |
EARNINGS (LOSS) PER UNIT
EARNINGS (LOSS) PER UNIT | 6 Months Ended |
Jun. 30, 2019 | |
EARNINGS (LOSS) PER UNIT | |
EARNINGS (LOSS) PER UNIT | NOTE 10—EARNINGS (LOSS) PER UNIT Basic earnings (loss) per unit (“EPU”) is calculated by dividing net income (loss) attributable to common units by the weighted-average number of common units outstanding during the period. Diluted net income (loss) per common unit gives effect, when applicable, to unvested restricted units granted under the Kimbell Royalty GP, LLC 2017 Long-Term Incentive Plan (“LTIP”) for its employees, directors and consultants and potential conversion of Class B Units. The following table summarizes the calculation of weighted average common units outstanding used in the computation of diluted earnings (loss) per unit: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net (loss) income attributable to common units $ (11,758,374) $ 1,378,295 $ (15,445,626) $ (51,446,176) Weighted average number of common units outstanding: Basic 21,727,185 16,377,476 19,859,618 16,361,619 Effect of dilutive securities: Series A preferred units — — — — Class B units — — — — Restricted units — 431,673 — — Diluted 21,727,185 16,809,149 19,859,618 16,361,619 Net (loss) income attributable to common units Basic $ (0.54) $ 0.08 $ (0.78) $ (3.14) Diluted $ (0.54) $ 0.08 $ (0.78) $ (3.14) The calculation of diluted net loss per unit for the three and six months ended June 30, 2019 excludes the conversion of Series A Preferred Units to common units, the conversion of the Class B Units to common units and 976,684 of unvested restricted units because their inclusion in the calculation would be anti-dilutive. The calculation of diluted net loss per unit for the six months ended June 30, 2018 excludes 438,785 unvested restricted units because their inclusion in the calculation would be anti-dilutive. |
UNIT-BASED COMPENSATION
UNIT-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2019 | |
UNIT-BASED COMPENSATION | |
UNIT-BASED COMPENSATION | NOTE 11—UNIT-BASED COMPENSATION On September 23, 2018, the General Partner entered into the First Amendment to the LTIP, which increased the number of common units eligible for issuance under the LTIP by 2,500,000 common units for a total of 4,541,600 common units. The Partnership’s LTIP authorizes grants to its employees, directors and consultants. The restricted units issued under the Partnership’s LTIP generally vest in one-third installments on each of the first three anniversaries of the grant date, subject to the grantee’s continuous service through the applicable vesting date. Compensation expense for such awards will be recognized over the term of the service period on a straight-line basis over the requisite service period for the entire award. Management elects not to estimate forfeiture rates and to account for forfeitures in compensation cost when they occur. Compensation expense for consultants is treated in the same manner as that of the employees and directors. Distributions related to the restricted units are paid concurrently with the Partnership’s distributions for common units. The fair value of the Partnership’s restricted units issued under the LTIP to the Partnership’s employees, directors and consultants is determined by utilizing the market value of the Partnership’s common units on the respective grant date. The following table presents a summary of the Partnership’s unvested restricted units. Weighted Weighted Average Average Grant-Date Remaining Fair Value Contractual Units per Unit Term Unvested at December 31, 2018 1,157,924 $ 18.054 2.696 years Vested (181,240) 18.752 — Unvested at June 30, 2019 976,684 $ 17.924 1.744 years |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2019 | |
INCOME TAXES | |
INCOME TAXES | NOTE 12—INCOME TAXES In May 2018, the Board of Directors unanimously approved a change of the Partnership’s federal income tax status from that of a pass-through partnership to that of a taxable entity, which became effective on September 24, 2018. Subsequent to the Partnership’s change in tax status, the Partnership’s provision for income taxes is based on the estimated annual effective tax rate plus discrete items. Prior to September 24, 2018, the effective date of the Partnership’s change in income tax status, the Partnership was organized as a pass-through entity for income tax purposes. As a result, the Partnership’s partners were responsible for federal income taxes on their share of the Partnership’s taxable income with the exception of any entity-level income taxes such as the Texas Margins Tax. The Partnership recorded a provision for income taxes of $0.5 million for the three and six months ended June 30, 2019. The tax payment made by the Partnership for the three and six months ended June 30, 2019 was generated by a gross income allocation related to the Series A Preferred Units, which were issued in connection with the Haymaker Acquisition. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2019 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 13—RELATED PARTY TRANSACTIONS In connection with the IPO, the Partnership entered into a management services agreement with Kimbell Operating, which entered into separate services agreements with each of BJF Royalties, LLC (“BJF Royalties”), Steward Royalties, LLC (“Steward Royalties”), Taylor Companies Mineral Management, LLC (“Taylor Companies”), K3 Royalties, LLC (“K3 Royalties”), Nail Bay Royalties, LLC (“Nail Bay Royalties”) and Duncan Management, LLC (“Duncan Management”) pursuant to which they and Kimbell Operating provide management, administrative and operational services to the Partnership. In addition, under each of their respective services agreements, affiliates of the Partnership’s Sponsors will identify, evaluate and recommend to the Partnership acquisition opportunities and negotiate the terms of such acquisitions. Amounts paid to Kimbell Operating and such other entities under their respective services agreements will reduce the amount of cash available for distribution to the Partnership’s unitholders. During the three and six months ended June 30, 2019, no monthly services fee was paid to BJF Royalties or Steward Royalties. During the three months ended June 30, 2019, the Partnership made payments to Taylor Companies, K3 Royalties, Nail Bay Royalties and Duncan Management in the amount of $131,714, $30,000, $81,918 and $124,576, respectively. During the six months ended June 30, 2019, the Partnership made payments to Taylor Companies, K3 Royalties, Nail Bay Royalties and Duncan Management in the amount of $263,428, $60,000, $163,836 and $249,152, respectively. Certain consultants who provide services under management services agreements are granted restricted units under the Partnership’s LTIP. As of June 30, 2019, the Partnership had an outstanding receivable from a former employee of $86,747, which is included in accounts receivable and other current assets in the accompanying audited consolidated balance sheet. As of the filing of this Quarterly Report on Form 10-Q, all such amounts have been collected from such employee by the Partnership. |
ADMINISTRATIVE SERVICES
ADMINISTRATIVE SERVICES | 6 Months Ended |
Jun. 30, 2019 | |
ADMINISTRATIVE SERVICES | |
ADMINISTRATIVE SERVICES | NOTE 14—ADMINISTRATIVE SERVICES Management Services Agreement The Partnership relies upon its officers, directors, Sponsors and outside consultants to further its business efforts. The Partnership also hires independent contractors and consultants involved in land, technical, regulatory and other disciplines to assist its officers and directors. Certain administrative services are being provided by individuals on the Board of Directors and their affiliated entities. See Note 13―Related Party Transactions. Transition Services Agreement On March 25, 2019, in connection with the Phillips Acquisition, the Partnership entered into a Transition Services Agreement (the “Transition Services Agreement”) with Fortis Administrative Services, LLC (“Fortis”). Pursuant to the Transition Services Agreement, Fortis provided certain administrative services and accounting assistance on a transitional basis for total compensation of $300,000 from April 1, 2019 through June 1, 2019, at which point, the Transition Services Agreement was terminated. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | NOTE 15—COMMITMENTS AND CONTINGENCIES During the normal course of business, the Partnership may experience situations where disagreements occur relating to the ownership of certain mineral or overriding royalty interest acreage. The Partnership is currently assessing such a situation relating to certain non-producing acreage in its portfolio, the resolution of which is not expected to have a material impact on the Partnership’s condensed consolidated financial statements, and no amounts have been accrued as of June 30, 2019. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2019 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 16—SUBSEQUENT EVENTS The Partnership has evaluated events that occurred subsequent to June 30, 2019 in the preparation of its condensed consolidated financial statements. In July 2019, in connection with the Joint Venture, the Partnership paid capital contributions of $2.2 million. On July 29, 2019, Haymaker Minerals & Royalties, LLC exchanged 400,000 OpCo Common Units and Class B Units, together, for an equal number of common units of the Partnership. On August 7, 2019, the Operating Company paid a quarterly cash distribution of $0.411452 to holders of OpCo Common Units. As to the Partnership, $0.021452 of the distribution corresponds to a tax payment made by the Partnership from cash reserves in the second quarter of 2019. The second quarter 2019 tax payment made by the Partnership was generated by a gross income allocation related to the Series A Preferred Units, which were issued in connection with the Haymaker Acquisition. Under the limited liability company agreement of the Operating Company, the Partnership is not reimbursed by the Operating Company for federal income taxes paid by the Partnership. On August 9, 2019, the Partnership will pay a quarterly cash distribution on the Series A Preferred Units of $1.9 million for the quarter ended June 30, 2019. On August 9, 2019, the Partnership will pay a quarterly cash distribution to each Class B unitholder equal to 2.0% of such unitholder’s respective Class B Contribution, resulting in a total quarterly distribution of approximately $23,414 for the quarter ended June 30, 2019 . On July 26, 2019 the Board of Directors declared a quarterly cash distribution of $0.39 per common unit for the quarter ended June 30, 2019. The distribution will be paid on August 12, 2019 to common unitholders of record as of the close of business on August 5, 2019. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Reclassification of Prior Period Presentation | Reclassification of Prior Period Presentation Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on previously reported net income (loss), total cash flows from operations or working capital. |
New Accounting Pronouncements | New Accounting Pronouncements Recently Adopted Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016‑02, “Leases.” ASU 2016‑02 requires the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases currently classified as operating leases and makes certain changes to the way lease expenses are accounted for. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year, with early adoption permitted. The Partnership adopted this update using the modified retrospective approach, effective January 1, 2019. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. The Partnership evaluated whether its contractual arrangements contain leases at the inception of such arrangements. Specifically, the Partnership considered whether it can control the underlying asset and have the right to obtain substantially all of the economic benefits or outputs from the asset. Substantially all of the Partnerships leases are long-term operating leases with fixed payment terms and will terminate in October 2028. The Partnership’s ROU operating lease assets represent its right to use an underlying asset for the lease term, and its operating lease liabilities represent its obligation to make lease payments. ROU operating lease assets and operating lease liabilities are included in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2019. Short term operating lease liabilities are included in other current liabilities. The weighted average remaining lease term as of June 30, 2019 was 9.09 years. Both the ROU operating lease assets and liabilities are recognized at the present value of the remaining lease payments over the lease term and do not include lease incentives. The Partnership’s leases do not provide an implicit rate that can readily be determined; therefore, the Partnership used a discount rate based on its incremental borrowing rate, which is determined by the information available in the Amended Credit Agreement, as defined in Note 7—Long-Term Debt, as of January 1, 2019. The incremental borrowing rate reflects the estimated rate of interest that the Partnership would pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. The weighted average discount rate used for the operating lease was 6.75% for the six months ended June 30, 2019. Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expense in the accompanying unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2019. The total operating lease expense recorded for the three and six months ended June 30, 2019 was de minimis. Currently, the most substantial contractual arrangement that the Partnership has classified as an operating lease is the main office space used for operations. In July 2019, the Partnership became the lessee in several other related lease agreements for additional office space. In addition, the Partnership was involved in the construction and design of the underlying asset. The underlying assets were capitalized in July 2019 upon commencement of the lease. Future minimum lease commitments at June 30, 2019 were as follows: Remainder of Total 2019 2020 2021 2022 2023 Thereafter Operating leases $ 835,775 $ 45,822 $ 90,078 $ 90,078 $ 90,487 $ 87,463 $ 431,847 Less: Imputed Interest (220,259) Total $ 615,516 In July 2018, the FASB issued ASU 2018-09, “Codification Improvements.” This update provides clarification and corrects unintended application of the guidance in various sections. This update is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases.” This update provides clarification and corrects unintended application of certain sections in the new lease guidance. This update is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. In July 2018, the FASB issued ASU 2018-11, “Lease (Topic 842): Targeted Improvements.” This update provides another transition method of allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This update is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this update did not have a material impact on the Partnership’s financial statements or results of operations for the three and six months ended June 30, 2019. Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This update modifies the fair value measurement disclosure requirements specifically related to Level 3 fair value measurements and transfers between levels. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update will be applied prospectively. The Partnership is currently evaluating the impact of the adoption of this update, but does not believe it will have a material impact on its financial position, results of operations or liquidity. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of future minimum lease commitments | Future minimum lease commitments at June 30, 2019 were as follows: Remainder of Total 2019 2020 2021 2022 2023 Thereafter Operating leases $ 835,775 $ 45,822 $ 90,078 $ 90,078 $ 90,487 $ 87,463 $ 431,847 Less: Imputed Interest (220,259) Total $ 615,516 |
ACQUISITIONS, JOINT VENTURES _2
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES | |
Schedule of pro forma results | Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Total revenues $ 31,936,601 $ 31,306,192 $ 54,892,396 $ 61,437,506 Net (loss) income attributable to common units $ (11,758,374) $ 5,319,058 $ (10,972,888) $ (15,566,172) Net (loss) income attributable to common units Basic $ (0.51) $ 0.23 $ (0.48) $ (0.67) Diluted $ (0.51) $ 0.23 $ (0.48) $ (0.67) |
DERIVATIVES (Tables)
DERIVATIVES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
DERIVATIVES | |
Schedule of changes in fair value of derivative instruments | Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Beginning fair value of commodity derivative instruments $ (937,938) (531,287) $ 4,227,946 $ (318,829) Gain (loss) on commodity derivative instruments 2,733,582 (538,389) (2,236,208) (823,354) Net cash (received) paid on settlements of derivative instruments (129,757) 69,317 (325,851) 141,824 Ending fair value of commodity derivative instruments $ 1,665,887 $ (1,000,359) $ 1,665,887 $ (1,000,359) |
Schedule of derivative contracts | June 30, December 31, Classification Balance Sheet Location 2019 2018 Assets: Current asset Commodity derivative assets $ 1,957,249 $ 2,981,117 Long-term asset Commodity derivative assets — 1,246,829 Liabilities: Current liability Commodity derivative liabilities — — Long-term liability Commodity derivative liabilities (291,362) — $ 1,665,887 $ 4,227,946 |
Schedule of commodity derivative contracts | As of June 30, 2019, the Partnership’s open commodity derivative contracts consisted of the following: Oil Price Swaps Notional Weighted Average Range (per Bbl) Volumes (Bbl) Fixed Price (per Bbl) Low High June 2019 - December 2019 131,396 $ 61.47 $ 53.07 $ 63.47 January 2020 - December 2020 224,356 $ 55.48 $ 50.45 $ 61.43 January 2021 - June 2021 110,993 $ 55.25 $ 54.52 $ 56.10 Natural Gas Price Swaps Notional Weighted Average Range (per MMBtu) Volumes (MMBtu) Fixed Price (per MMBtu) Low High July 2019 - December 2019 1,945,432 $ 2.74 $ 2.74 $ 2.76 January 2020 - December 2020 3,582,862 $ 2.64 $ 2.51 $ 2.94 January 2021 - June 2021 1,562,411 $ 2.62 $ 2.43 $ 2.85 |
OIL AND NATURAL GAS PROPERTIES
OIL AND NATURAL GAS PROPERTIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
OIL AND NATURAL GAS PROPERTIES | |
Schedule of oil and natural gas properties | June 30, December 31, 2019 2018 Oil and natural gas properties Proved properties $ 636,679,713 $ 538,290,590 Unevaluated properties 351,068,528 280,304,353 Less: accumulated depreciation, depletion and impairment (161,301,065) (107,779,453) Total oil and natural gas properties $ 826,447,176 $ 710,815,490 |
PREFERRED UNITS (Tables)
PREFERRED UNITS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Series A Preferred Units | |
Preferred units | |
Summary of the changes in the number of the Series A Preferred Units | Series A Preferred Units Balance at December 31, 2018 110,000 Balance at June 30, 2019 110,000 |
UNITHOLDERS' EQUITY AND PARTN_2
UNITHOLDERS' EQUITY AND PARTNERSHIP DISTRIBUTIONS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Common units | |
Schedule of distributions approved by the Board of Directors | Amount per Date Unitholder Payment Common Unit Declared Record Date Date Q1 2019 $ 0.37 April 26, 2019 May 6, 2019 May 13, 2019 Q2 2019 $ 0.39 July 26, 2019 August 5, 2019 August 12, 2019 Q1 2018 $ 0.42 April 27, 2018 May 7, 2018 May 14, 2018 Q2 2018 $ 0.43 July 27, 2018 August 6, 2018 August 13, 2018 |
Common Units | |
Common units | |
Schedule of changes in Partnership's units | Common Units Balance at December 31, 2018 18,056,487 Conversion of Class B Units 5,038,916 Restricted units used for tax withholding (1,268) Balance at June 30, 2019 23,094,135 |
Class B | |
Common units | |
Schedule of changes in Partnership's units | Class B Units Balance at December 31, 2018 19,453,258 Class B Units issued for Phillips Acquisition 9,400,000 Conversion of Class B Units (5,038,916) Balance at June 30, 2019 23,814,342 |
EARNINGS (LOSS) PER UNIT (Table
EARNINGS (LOSS) PER UNIT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
EARNINGS (LOSS) PER UNIT | |
Schedule of earnings (loss) per unit | Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net (loss) income attributable to common units $ (11,758,374) $ 1,378,295 $ (15,445,626) $ (51,446,176) Weighted average number of common units outstanding: Basic 21,727,185 16,377,476 19,859,618 16,361,619 Effect of dilutive securities: Series A preferred units — — — — Class B units — — — — Restricted units — 431,673 — — Diluted 21,727,185 16,809,149 19,859,618 16,361,619 Net (loss) income attributable to common units Basic $ (0.54) $ 0.08 $ (0.78) $ (3.14) Diluted $ (0.54) $ 0.08 $ (0.78) $ (3.14) |
UNIT-BASED COMPENSATION (Tables
UNIT-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
UNIT-BASED COMPENSATION | |
Schedule of unvested restricted stock activity | Weighted Weighted Average Average Grant-Date Remaining Fair Value Contractual Units per Unit Term Unvested at December 31, 2018 1,157,924 $ 18.054 2.696 years Vested (181,240) 18.752 — Unvested at June 30, 2019 976,684 $ 17.924 1.744 years |
ORGANIZATION AND BASIS OF PRE_2
ORGANIZATION AND BASIS OF PRESENTATION (Details) | Jul. 24, 2018$ / sharesshares | Jun. 30, 2019segment | Aug. 02, 2019 |
Segment Reporting | |||
Number of operating units | segment | 1 | ||
Number of reporting units | segment | 1 | ||
OpCo Units | |||
Organization | |||
Ownership interest by Company (as a percent) | 50.10% | ||
Ownership interest by third party (as a percent) | 49.90% | ||
Haymaker Holdings | Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Number of units held by investor that were exchanged (in units) | 10,000,000 | ||
Haymaker Holdings | Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Number of units held by investor that were exchanged (in units) | 10,000,000 | ||
Haymaker Holdings | Class B Common Units | |||
Organization | |||
Additional consideration paid per unit (in dollars per unit) | $ / shares | $ 0.05 | ||
Distribution rate (as a percent) | 2.00% | ||
Haymaker Holdings | Class B Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 10,000,000 | ||
Haymaker Holdings | Class B Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 2,953,258 | ||
Haymaker Holdings | OpCo Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 10,000,000 | ||
Haymaker Holdings | OpCo Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 10,000,000 | ||
Haymaker Foundation | Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Number of units held by investor that were exchanged (in units) | 2,953,258 | ||
Haymaker Foundation | Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Number of units held by investor that were exchanged (in units) | 2,953,258 | ||
Haymaker Foundation | Class B Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 2,953,258 | ||
Haymaker Foundation | Class B Common Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 10,000,000 | ||
Haymaker Foundation | OpCo Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 2,953,258 | ||
Haymaker Foundation | OpCo Units | Kimbell Royalty Operating, LLC | |||
Organization | |||
Units issued (in units) | 2,953,258 | ||
Kimbell Royalty Operating, LLC | Series A Preferred Units | |||
Organization | |||
Units owned in subsidiary (in units) | 110,000 | ||
Kimbell Royalty Operating, LLC | Common Units | |||
Organization | |||
Units owned in subsidiary (in units) | 13,886,204 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | Jun. 30, 2019USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Operating lease weighted average remaining lease term | 9 years 1 month 2 days |
Operating lease weighted average discount rate (as a percent) | 6.75% |
Remainder of 2019 | $ 45,822 |
2020 | 90,078 |
2021 | 90,078 |
2022 | 90,487 |
2023 | 87,463 |
Thereafter | 431,847 |
Total operating leases | 835,775 |
Less Imputed Interest | (220,259) |
Total | $ 615,516 |
ACQUISITIONS, JOINT VENTURES _3
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES - Acquisitions (Details) $ / shares in Units, $ in Millions | Jun. 19, 2019USD ($) | Mar. 25, 2019USD ($)a$ / sharesshares | Jun. 30, 2019USD ($) |
Phillips Acquisition | |||
Acquisitions | |||
Purchase price units value | $ 171.6 | ||
Share price (in dollars per unit) | $ / shares | $ 18.25 | ||
Gross acres acquired (in acres) | a | 866,528 | ||
Net royalty acres acquired (in acres) | a | 12,210 | ||
Phillips Acquisition | OpCo Units | |||
Acquisitions | |||
Purchase price units (in units) | shares | 9,400,000 | ||
Phillips Acquisition | Class B | |||
Acquisitions | |||
Purchase price units (in units) | shares | 9,400,000 | ||
Springbok SKR Capital Company, LLC and Rivercrest Capital Partners, LP. | |||
Acquisitions | |||
Ownership interest (as a percent) | 49.30% | ||
Investments | $ 0 | ||
Springbok SKR Capital Company, LLC and Rivercrest Capital Partners, LP. | Maximum | |||
Acquisitions | |||
Purchase price units value | $ 15 |
ACQUISITIONS, JOINT VENTURES _4
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES - Pro forma (Details) - Phillips Acquisition - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Pro forma results | ||||
Total revenue | $ 31,936,601 | $ 31,306,192 | $ 54,892,396 | $ 61,437,506 |
Net income (loss) attributable to common units | $ (11,758,374) | $ 5,319,058 | $ (10,972,888) | $ (15,566,172) |
Net income (loss) attributable to common units - basic (in dollar per unit) | $ (0.51) | $ 0.23 | $ (0.48) | $ (0.67) |
Net income (loss) attributable to common units - Diluted (in dollar per unit) | $ (0.51) | $ 0.23 | $ (0.48) | $ (0.67) |
ACQUISITIONS, JOINT VENTURES _5
ACQUISITIONS, JOINT VENTURES AND DIVESTITURES - Divestitures (Details) - Delaware Basin acreage - Disposed of by sale | 1 Months Ended |
May 31, 2018USD ($)aitem | |
Disposal | |
Number of purchase and sale agreements executed | item | 2 |
The sale price of asset | $ | $ 10,600,000 |
Gain loss on sale | $ | $ 0 |
Number of Boe per day sold | item | 29 |
Boe per day sold to total Boe per day (as a percent) | 0.80% |
Net royalty acres land sold (in acres) | a | 59 |
Net royalty acres land sold to total net royalty acres land (as a percent) | 0.08% |
DERIVATIVES (Details)
DERIVATIVES (Details) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)$ / bblMMBbls | Dec. 31, 2018USD ($) | |
Derivatives | ||||||
Daily oil and natural gas production before Phillips acquisition hedged (as a percent) | 20.00% | |||||
Change in fair values of derivative instruments | ||||||
Beginning fair value of commodity derivative instruments | $ | $ (937,938) | $ (531,287) | $ 4,227,946 | $ (318,829) | ||
Loss on commodity derivative instruments | $ | 2,733,582 | (538,389) | (2,236,208) | (823,354) | ||
Net cash (received) paid on settlements of derivative instruments | $ | (129,757) | 69,317 | (325,851) | 141,824 | ||
Ending fair value of commodity derivative instruments | $ | 1,665,887 | (1,000,359) | 1,665,887 | (1,000,359) | ||
Assets: | ||||||
Current asset | $ | $ 1,957,249 | $ 2,981,117 | ||||
Long-term asset | $ | 1,246,829 | |||||
Liabilities: | ||||||
Long-term liability | $ | (291,362) | |||||
Derivative assets (liabilities) | $ | $ (937,938) | $ (531,287) | $ 4,227,946 | $ (318,829) | $ 1,665,887 | $ 4,227,946 |
Oil Price Swaps - June 2019 - December 2019 | ||||||
Derivatives | ||||||
Notional Volumes | MMBbls | 131,396 | |||||
Weighted Average Fixed Price | 61.47 | |||||
Oil Price Swaps - January 2020 - December 2020 | ||||||
Derivatives | ||||||
Notional Volumes | MMBbls | 224,356 | |||||
Weighted Average Fixed Price | 55.48 | |||||
Oil Price Swaps - January 2021 - June 2021 | ||||||
Derivatives | ||||||
Notional Volumes | MMBbls | 110,993 | |||||
Weighted Average Fixed Price | 55.25 | |||||
Natural Gas Price Swaps - July 2019 - December 2019 | ||||||
Derivatives | ||||||
Notional Volumes | MMBbls | 1,945,432 | |||||
Weighted Average Fixed Price | 2.74 | |||||
Natural Gas Price Swaps - January 2020 - December 2020 | ||||||
Derivatives | ||||||
Notional Volumes | MMBbls | 3,582,862 | |||||
Weighted Average Fixed Price | 2.64 | |||||
Natural Gas Price Swaps - January 2021 - June 2021 | ||||||
Derivatives | ||||||
Notional Volumes | MMBbls | 1,562,411 | |||||
Weighted Average Fixed Price | 2.62 | |||||
Minimum | Oil Price Swaps - June 2019 - December 2019 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 53.07 | |||||
Minimum | Oil Price Swaps - January 2020 - December 2020 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 50.45 | |||||
Minimum | Oil Price Swaps - January 2021 - June 2021 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 54.52 | |||||
Minimum | Natural Gas Price Swaps - July 2019 - December 2019 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 2.74 | |||||
Minimum | Natural Gas Price Swaps - January 2020 - December 2020 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 2.51 | |||||
Minimum | Natural Gas Price Swaps - January 2021 - June 2021 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 2.43 | |||||
Maximum | Oil Price Swaps - June 2019 - December 2019 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 63.47 | |||||
Maximum | Oil Price Swaps - January 2020 - December 2020 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 61.43 | |||||
Maximum | Oil Price Swaps - January 2021 - June 2021 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 56.10 | |||||
Maximum | Natural Gas Price Swaps - July 2019 - December 2019 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 2.76 | |||||
Maximum | Natural Gas Price Swaps - January 2020 - December 2020 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 2.94 | |||||
Maximum | Natural Gas Price Swaps - January 2021 - June 2021 | ||||||
Derivatives | ||||||
Weighted Average Fixed Price | 2.85 |
OIL AND NATURAL GAS PROPERTIE_2
OIL AND NATURAL GAS PROPERTIES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
OIL AND NATURAL GAS PROPERTIES | |||||
Proved properties | $ 636,679,713 | $ 636,679,713 | $ 538,290,590 | ||
Unevaluated properties | 351,068,528 | 351,068,528 | 280,304,353 | ||
Less: accumulated depreciation, depletion, and impairment | (161,301,065) | (161,301,065) | (107,779,453) | ||
Total oil and natural gas properties, net | 826,447,176 | $ 826,447,176 | $ 710,815,490 | ||
Useful life | 5 years | ||||
Impairment of oil and natural gas properties | $ 28,146,711 | $ 0 | $ 30,948,909 | $ 54,753,444 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) - USD ($) | Jul. 12, 2018 | Jun. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | May 31, 2019 | Jul. 11, 2018 | Feb. 08, 2017 |
Long-term debt | |||||||
Borrowings of debt | $ 0 | $ 0 | $ 19,000,000 | ||||
Repayment of debt | 0 | 0 | $ 6,870,596 | ||||
Revolving credit facility | |||||||
Long-term debt | |||||||
Revolving credit facility maximum borrowings | $ 200,000,000 | $ 225,000,000 | $ 50,000,000 | ||||
Revolving credit facility increased maximum borrowing capacity if certain conditions are met | 500,000,000 | ||||||
Revolving credit facility outstanding | $ 87,300,000 | $ 87,300,000 | |||||
Interest rate on outstanding borrowings (as a percent) | 4.74% | 4.74% | |||||
Borrowing base | $ 200,000,000 | $ 300,000,000 | |||||
Amount of applicable margin decrease for each applicable level (as a percent) | 0.25% | ||||||
Revolving credit facility | LIBOR | |||||||
Long-term debt | |||||||
Variable rate | LIBOR | LIBOR | |||||
Margin (as a percent) | 2.25% | ||||||
Revolving credit facility | Prime | |||||||
Long-term debt | |||||||
Variable rate | ABR | Prime Rate | |||||
Margin (as a percent) | 1.25% | ||||||
Revolving credit facility | Maximum | |||||||
Long-term debt | |||||||
Debt to EBITDAX ratio | 400.00% | ||||||
Revolving credit facility | Maximum | LIBOR | |||||||
Long-term debt | |||||||
Margin (as a percent) | 3.00% | ||||||
Revolving credit facility | Maximum | Prime | |||||||
Long-term debt | |||||||
Margin (as a percent) | 2.00% | ||||||
Revolving credit facility | Minimum | |||||||
Long-term debt | |||||||
Current assets to current liabilities ratio | 100.00% | ||||||
Revolving credit facility | Minimum | LIBOR | |||||||
Long-term debt | |||||||
Margin (as a percent) | 2.00% | ||||||
Revolving credit facility | Minimum | Prime | |||||||
Long-term debt | |||||||
Margin (as a percent) | 1.00% |
PREFERRED UNITS - Other (Detail
PREFERRED UNITS - Other (Details) - Affiliates of Apollo Capital Management, L.P. - USD ($) | 1 Months Ended | 6 Months Ended |
Jul. 31, 2018 | Jun. 30, 2019 | |
Preferred units | ||
Series A preferred units issued | 110,000 | |
Share price (in dollars per unit) | $ 1,000 | |
Proceeds from the issuance of preferred units | $ 110,000,000 | |
Distribution rate (as a percent) | 7.00% | |
The period after issuance securities become convertible | 2 years | |
Discount rate to the issue price (as a percent) | $ 30 | |
Percent of redemption price exceeding invested capital for the Partnership to initiate redemption (as a percent) | 120.00% | |
Minimum IRR prior to the fifth anniversary of Series A Issuance Date (as a percent) | 13.00% | |
Minimum IRR on or after the fifth anniversary of Series A Issuance Date (as a percent) | 14.00% | |
Minimum IRR on or after the sixth anniversary of Series A Issuance Date (as a percent) | 15.00% |
PREFERRED UNITS - Rollforward (
PREFERRED UNITS - Rollforward (Details) - shares | Jun. 30, 2019 | Dec. 31, 2018 |
Series A Preferred Units | ||
Preferred units | ||
Balance | 110,000 | 110,000 |
UNITHOLDERS' EQUITY AND PARTN_3
UNITHOLDERS' EQUITY AND PARTNERSHIP DISTRIBUTIONS (Details) - $ / shares | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Common units | |||||||
Units issued (in units) | 23,094,135 | 18,056,487 | |||||
Units outstanding (in units) | 23,094,135 | 18,056,487 | 18,056,487 | 23,094,135 | 18,056,487 | ||
Capital rollforward | |||||||
Unitholders' capital, beginning balance (in units) | 18,056,487 | 18,056,487 | |||||
Unitholders' capital, ending balance (in units) | 23,094,135 | 23,094,135 | |||||
Cash distributions declared and paid (in dollars per unit) | $ 0.39 | $ 0.37 | $ 0.43 | $ 0.42 | |||
Common Units | |||||||
Common units | |||||||
Units issued (in units) | 23,094,135 | ||||||
Units outstanding (in units) | 23,094,135 | 18,056,487 | 18,056,487 | 23,094,135 | 18,056,487 | ||
Capital rollforward | |||||||
Unitholders' capital, beginning balance (in units) | 18,056,487 | 18,056,487 | |||||
Conversion of Class B Units (in units) | 5,038,916 | ||||||
Restricted units used for tax withholding (in units) | (1,268) | ||||||
Unitholders' capital, ending balance (in units) | 23,094,135 | 23,094,135 | |||||
Class B | |||||||
Common units | |||||||
Units outstanding (in units) | 23,814,342 | 19,453,258 | 19,453,258 | 23,814,342 | 19,453,258 | ||
Capital rollforward | |||||||
Unitholders' capital, beginning balance (in units) | 19,453,258 | 19,453,258 | |||||
Units issued to acquisition (in units) | 9,400,000 | ||||||
Conversion of Class B Units (in units) | (5,038,916) | ||||||
Unitholders' capital, ending balance (in units) | 23,814,342 | 23,814,342 | |||||
Cash distributions (as a percent) | 2.00% |
EARNINGS (LOSS) PER UNIT (Detai
EARNINGS (LOSS) PER UNIT (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings per unit | ||||
Net loss attributable to common units | $ (11,758,374) | $ 1,378,295 | $ (15,445,626) | $ (51,446,176) |
Net loss attributable to common units per unit (basic) | $ (0.54) | $ 0.08 | $ (0.78) | $ (3.14) |
Weighted average number of common units outstanding Basic (in units) | 21,727,185 | 16,377,476 | 19,859,618 | 16,361,619 |
Net loss attributable to common units per unit (diluted) | $ (0.54) | $ 0.08 | $ (0.78) | $ (3.14) |
Weighted average number of common units outstanding Diluted (in units) | 21,727,185 | 16,809,149 | 19,859,618 | 16,361,619 |
Restricted Units | ||||
Earnings per unit | ||||
Anti-dilutive options outstanding | 976,684 | 976,684 | 438,785 | |
Weighted average number of common units outstanding (in units) | 431,673 |
UNIT-BASED COMPENSATION (Detail
UNIT-BASED COMPENSATION (Details) - Long-Term Incentive Plan - $ / shares | Sep. 23, 2018 | Jun. 30, 2019 | Dec. 31, 2018 |
Unit-based compensation | |||
Authorized issuance of units | 4,541,600 | ||
Additional common units authorized for issuance | 2,500,000 | ||
Vesting period | 3 years | ||
First Anniversary | |||
Unit-based compensation | |||
Vesting percent | 33.30% | ||
Second Anniversary | |||
Unit-based compensation | |||
Vesting percent | 33.30% | ||
Third Anniversary | |||
Unit-based compensation | |||
Vesting percent | 33.30% | ||
Restricted Units | |||
Unvested Units | |||
Unvested at beginning of period (in units) | 1,157,924 | ||
Vested (in units) | (181,240) | ||
Unvested at end of period (in units) | 976,684 | 1,157,924 | |
Unvested Weighted Average Grant-Date Fair Value | |||
Unvested at beginning of period (in dollars per unit) | $ 18.054 | ||
Vested (in dollars per unit) | (18.752) | ||
Unvested at end of period (in dollars per unit) | $ 17.924 | $ 18.054 | |
Weighted Average Remaining Contractual Term | |||
Unvested contractual term, at end of period | 1 year 8 months 28 days | 2 years 8 months 11 days |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Deferred | ||
Provision for income taxes | $ 507,801 | $ 507,801 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
Related Party Transactions | ||
Outstanding receivable from Rivercrest Capital Management and certain employees | $ 86,747 | $ 86,747 |
BJF Royalties | ||
Related Party Transactions | ||
Payments made to related parties | 0 | 0 |
Steward Royalties | ||
Related Party Transactions | ||
Payments made to related parties | 0 | 0 |
Taylor Companies | ||
Related Party Transactions | ||
Payments made to related parties | 131,714 | 263,428 |
K3 Royalties | ||
Related Party Transactions | ||
Payments made to related parties | 30,000 | 60,000 |
Nail Bay Royalties | ||
Related Party Transactions | ||
Payments made to related parties | 81,918 | 163,836 |
Duncan Management | ||
Related Party Transactions | ||
Payments made to related parties | $ 124,576 | $ 249,152 |
ADMINISTRATIVE SERVICES (Detail
ADMINISTRATIVE SERVICES (Details) | May 31, 2019USD ($) |
Phillips Acquisition | |
Transition Service Agreement amount of administrative services to be received | $ 300,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | Jun. 30, 2019USD ($) |
COMMITMENTS AND CONTINGENCIES. | |
Accrued litigation liability | $ 0 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | Aug. 09, 2019 | Aug. 07, 2019 | Jul. 29, 2019 | Jul. 26, 2019 | Jul. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 |
Subsequent events | ||||||||||
Distributions on Series A redeemable preferred units | $ 3,850,000 | |||||||||
Distributions to Class B unitholders | $ 47,628 | |||||||||
Cash distributions declared and paid (in dollars per unit) | $ 0.39 | $ 0.37 | $ 0.43 | $ 0.42 | ||||||
Subsequent Event | ||||||||||
Subsequent events | ||||||||||
Cash distributions declared (in dollars per unit) | $ 0.39 | |||||||||
Capital contributions paid to joint venture. | $ 2,200,000 | |||||||||
Distributions on Series A redeemable preferred units | $ 1,900,000 | |||||||||
Distributions to Class B unitholders | $ 23,414 | |||||||||
Subsequent Event | OpCo Units | ||||||||||
Subsequent events | ||||||||||
Distributions paid (in dollars per unit) | $ 0.411452 | |||||||||
Distribution paid corresponding to tax payment (in dollars per unit) | $ 0.021452 | |||||||||
Subsequent Event | Class B Common Units | ||||||||||
Subsequent events | ||||||||||
Cash distributions (as a percent) | 2.00% | |||||||||
Haymaker | Subsequent Event | OpCo Units | ||||||||||
Subsequent events | ||||||||||
Conversion of units | 400,000 | |||||||||
Haymaker | Subsequent Event | Class B Common Units | ||||||||||
Subsequent events | ||||||||||
Conversion of units | 400,000 |