KRP

• Quarterly Records and Acquisition Progress

  • The company achieved multiple quarterly records: total oil, natural gas, and NGL revenue exceeding $100 million for the first time, net income, consolidated adjusted EBITDA, lease bonuses, average daily production, and cash available for distribution.
  • The previously announced Mesa Royalty acquisition closed in June 2026 and has already begun contributing positively to results. A second post-IPO drop-down acquisition was announced in July 2026, scheduled to close later in August 2026, and is expected to add meaningful production and drive long-term cash flow growth.

• Operational Activity

  • At quarter end, 91 rigs were actively drilling on the company's acreage, representing a 16% share of all US land rigs, indicating robust activity despite broader geopolitical uncertainty.
  • Permian basin rig count increased 23% quarter-over-quarter, while Mid-Con basin rig count fell 24% as operators reallocated capital away from natural gas-weighted plays amid weak gas prices. Most other basins (Hainesville, Appalachia, Bakken, Eagleford) held steady on activity and rig counts.
  • Lease bonus activity increased significantly driven by higher commodity prices and renewed interest in deeper undeveloped zones across the company's portfolio; the company owns full depth rights to nearly all its assets, creating potential future upside from new drilling activity.

• Capital Return and Balance Sheet

  • A Q2 2026 distribution of $0.47 per common unit was declared, representing a 15% increase from Q1 2026, equal to an annualized tax-advantaged yield of ~13% based on the prior day's closing price. Approximately 47% of this distribution is classified as return of capital, exempt from regular dividend tax.
  • The distribution payout equals 75% of cash available for distribution, with the remaining 25% allocated to pay down revolving credit facility debt.
  • The company repurchased and canceled 500,000 common units for $7.4 million at an average price of $14.70 per unit, reflecting management's view that units trade below intrinsic value and repurchases represent an efficient use of capital while maintaining balance sheet discipline.
  • The company expanded its secured revolving credit facility borrowing base from $625 million to $660 million prior to quarter end, increasing financial flexibility for future growth initiatives. At quarter end, $478.7 million in debt was outstanding, with $181.3 million in undrawn capacity, maintaining a conservative leverage profile.

• Management affirms the full-year 2026 financial and operational guidance ranges initially released in Q4 2025, with no upward or downward revision in this call.
• Guidance will be updated after the announced drop-down acquisition closes later in August 2026.
• Management remains confident in 2026 performance supported by high active rig counts on the company's acreage, elevated commodity prices, and a well count that exceeds required maintenance levels to sustain production.

Kimbell Royalty Partners operates as a single consolidated royalty business focused on oil, natural gas, and NGL production. For the second quarter of 2026, total oil, natural gas, and NGL revenue reached a record $103 million (including 9 days of contribution from the closed Mesa Royalty acquisition). Average daily production was 25,830 BOE per day; post-Mesa acquisition closing, run-rate production increased to 26,967 BOE per day. Total consolidated adjusted EBITDA hit a record $84.9 million. General and administrative expenses totaled $10.2 million, with cash G&A of $5.9 million ($2.50 per BOE). Net debt as of quarter end was $478.7 million, equating to a net debt-to-trailing 12 months adjusted EBITDA ratio of 1.4x. Lease bonuses also reached a quarterly record in the period. Revenue contribution is not broken out across discrete product segments in the provided transcript.

• Forward-looking statements are inherently uncertain, and actual results may differ materially from expectations due to factors outside the company's control; detailed risk disclosures are included in the company's SEC filings and Q2 2026 earnings release.
• Geopolitical volatility, particularly related to the ongoing Middle East conflict, has driven significant recent oil price volatility, creating uncertainty for future activity levels and commodity realizations.
• Competition for Permian-only royalty acquisition targets is extremely intense, with some buyers submitting bids up to 75% above the company's valuation based on its cost of capital, limiting deal flow and acquisition opportunity in that high-demand basin.
• Natural gas prices have been weak through 2026, leading operators to reallocate capital away from natural gas-weighted basins, which could slow production growth in those areas for the company.
• Title diligence risks are higher for royalty assets in the Appalachian basin, adding incremental risk to potential acquisitions in that region.

Q: Do the new Mesa and drop-down acquisitions have similar production profiles to Kimbell's legacy assets, and can investors expect the same steady long-term CAGR seen on legacy assets going forward? / A: All new acquisitions are specifically selected to be complementary and aligned with the growth and inventory characteristics of existing legacy assets. All completed and future acquisitions are structured to be immediately accretive to cash flow and accretive to DCF over the long term, so investors can expect the same steady growth profile as the company expands its scale.

Q: How is Kimbell managing liquidity after the recent credit facility expansion, and what is the strategy for trade-offs between balance sheet leverage and redeeming outstanding preferred units? / A: The recent borrowing base increase only incorporates the closed Mesa acquisition, and an additional increase will be processed after the upcoming drop-down closes to add more liquidity. Management intends to gradually reduce the face value of outstanding preferred units over time while maintaining a conservative leverage target of ~1.5x net debt to adjusted EBITDA, which is very low for a royalty company, and will opportunistically redeem more preferred if it makes strategic sense without endangering leverage covenants.

Q: What is the current state of the A&D market for royalty assets, and how actively is Kimbell pursuing new transactions today? / A: The A&D market remains very active, with new acquisition opportunities appearing weekly after many sellers brought assets to market following this year's rise in oil prices. Competition for Permian-only packages is extremely intense, with rival buyers willing to pay up to 75% more than Kimbell's valuation, so Kimbell will walk away from overpriced deals. The company will remain active and selective, focused on completing deals that meet its return hurdles after a year of A&D activity that has already surpassed internal expectations.

Q: How will the well and permit backlog trend after the drop-down closes, and what inventory level is needed to maintain steady production? / A: The relative balance between maintenance production requirements and excess backlog inventory will remain unchanged after the acquisition closes, consistent with historical trends. Kimbell only discloses discrete, confirmed well inventory in its public reporting, but the company's large diversified portfolio of millions of royalty interests regularly generates unanticipated new royalty interests that act as an unquantified buffer for production growth.