Kimbell Royalty Partners LP

Greetings and welcome to the Kimbell Royalty Partners second quarter earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Welcome to the Kimball Royalty Partners conference call to review financial and operational results for the second quarter, 2021. This call is also being webcast and can be accessed through the audio link on the events and presentations page of the IR section of kimballrp.com. Information recorded on this call speaks only as of the day, August 5th, 2021. So please be advised that any time sensitive information may no longer be accurate as of the date of any replay. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. While we may be making forward-looking statements as part of today's call, which by their nature are uncertain and outside of the company's control, actual results may differ materially. Please refer to today's press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings press release. Kimball assumes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Bob Ravenous, Kimball Realty Partners Chairman and Chief Executive Officer.

Bob? Thank you, Rick, and good morning, everyone. We appreciate you joining us for this call. I'm joined here on the call with several members of our senior management team, including Davis Ravenous, our President and Chief Financial Officer, Matt Daley, our Chief Operating Officer, Blaine Reinsberger, our Controller. I will begin today's discussion by providing comments about our second quarter before turning the call over to Davis to walk you through our financials in more detail. We were extremely pleased with our operational and financial performance during the quarter. Momentum across all areas of our business continued to improve from the first quarter to the second quarter in terms of both improved pricing and activity. Second quarter average daily production is 14,393 BOE per day on a six to one basis, which consisted of 382 BOE per day related to prior period production recognized in Q2. Excluding this amount, our Q2 run rate production was 14,011 BOE per day, which is up 2% sequentially compared to the first quarter. The combined momentum of improved pricing and production drove positive operating leverage and consolidated adjusted EBITDA to a new record of $28.1 million. Our cash available for distribution was robust during the quarter, resulting in a 15% increase in our quarterly distribution to 31 cents per common unit holder. Operators in the U.S. continue to practice discipline with their drilling activity, even in the face of significantly higher commodity prices. To put this into perspective, oil prices are now well above pre-COVID levels, but the U.S. land rate count is 39% below year-end 2019 levels. Furthermore, natural gas prices are trading at multi-year highs driven primarily by increased power demand in the U.S. and surging exports of LNG to Europe and Asia. Given that a significant portion of our daily production is natural gas, we expect this improved pricing to benefit our cash available for distribution in Q3 2021 and into the winter months based on the current strip pricing. A couple of months ago, we rolled out the results of our deep dive into our inventory by our technical team, which resulted in over 10,160 gross, 68.14 net, upside in major locations and 19 years of drilling inventory holding production flat at four and a half net wells per year. Davis will discuss this further in a moment. Today we are providing updated guidance regarding the expected favorable tax treatment of future earnings and distributions to common unit holders. We are pleased to report that we do not expect Kimball to pay a material amount of federal income taxes this year 2021 through 2027. And also important, we expect that substantially all cash distributions paid to common unit holders from 2021 to 2025 will be free of dividend income taxes and instead be considered a return of capital. We are unaware of any oil and gas company that has given this level of detail with their tax guidance and believe it provides a highly compelling competitive advantage in terms of generating superior after-tax returns to our unit holders. We are seeing signs of increased activity on our acreage this year as evidenced by a recent inflow of lease bonuses in Q2, as well as the moderate increase in the Baker Hughes US rig count in late July. We believe the energy sector is finally enjoying the early stages of some tailwinds after many years of challenges, and we are very excited about the future of Kimball and its prospects for delivering unit holder value for years to come. As we take a broader view of our company, With a backdrop of more positive industry trends and the potential for more industry consolidation benefiting Kimball specifically, we remain confident in our long-term strategic business model. Kimball has consistently demonstrated a strong track record of producing a stable growth profile organically in legacy assets, as well as acquiring strategic acquisitions in a disciplined fashion in the active basins within the lower 48s. We believe our low PDP decline rate and diversified royalty portfolio is a core competitive advantage for our company in the mineral and royalty space that provides long-term stability for Kimball. In addition, we plan to remain focused on our role as a major consolidator in the highly fragmented U.S. oil and gas royalty sector, assembling a high-quality, low PDP decline and diversified royalty portfolio generating recurring cash flow with significant growth potential and no capital requirements. Our vision for Kimball since inception has always been long-term focused on sustainability and growth. I'm also very pleased to announce the launch of Kimball Tiger Acquisition Corporation, which is a newly formed SPAC sponsored by Kimball that will search for a target in the energy and natural resources industry of North America. For more information on Tiger, please review the registration statement located at www.sec.gov. Due to the nature of the rules regarding SPACs, we will not be taking questions about it on this earnings conference call. And with that, I'll now turn the call over to Davis.