Kimbell Royalty Partners LP

Greetings and welcome to the Kimball Royalty Partners Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the 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 with Investor Relations. Thank you, Rick, and you may begin.

Thank you, operator, and good morning, everyone. Welcome to the Kimball Realty Partners conference call to review financial and operational results for the fourth quarter and year-end 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 today, February 24th, 2022, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading. 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 provision of the Private Securities Litigation Reform Act of 1995. We will 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 disclosures on forward-looking statements. These factors, as well as 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 gap 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. Now, I would 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 on the call this morning. With me today are several members of our senior management team, including Davis Ravenous, our President and Chief Financial Officer, Matt Daly, our chief operating officer, and Blaine Reinsberger, our controller. I will begin today's discussion by providing comments about the year and the quarter before turning the call over to Davis to walk you through our financials in more detail. We are very pleased with the company's performance in 2021. This year marked another very strong year of new milestones for Kimball, including multiple records for production, revenue, adjusted EBITDA, distributable cash flow per unit, and net income. We also completed a highly attractive and accretive acquisition in December, increased the company's borrowing base and elected commitment on the credit facility, increased our PDP reserves, and completed the full redemption of the Series A preferred stock. In addition, perhaps most importantly, I'm very proud of the release of our detailed portfolio review in May, which identified approximately 19 years of drilling inventory at 4.5 net wells completed per year, the level at which we believe our production remains flat. Finally, we paid out $1.14 in tax-advantaged quarterly distributions in 2021 and paid down approximately $23.3 million on our credit facility by allocating 25% of cash available for distribution for debt paydown. Turning now to the fourth quarter, we achieved record oil, natural gas, and natural grass liquids revenue and net income. As of December 31st, 2021, Kimball had 61 rigs actively drilling on our acreage, up from 60 rigs in the third quarter, and representing 10.7% market share of all rigs drilling in the continental United States. Tailwinds continue in the global energy sector, and fundamentals across the U.S. energy complex continue to improve. Inventory levels are low, rig count growth is tepid, and operators continue to focus on balance sheet strength and free cash flow generation. Having said that, we do see drilling activity from private operators outpacing that of public company operators as they move more quickly to capitalize on higher commodity pricing and build scale. As of the end of the fourth quarter, private operators comprised 43% and public operators 57% of our active rig count. We were positively impacted by surging commodity prices, especially natural gas, which contributed to our record quarter and the operational momentum we experienced in the second half of 2021 has Kimball in an excellent position entering 2022. The oil and natural gas royalty sector is particularly well positioned to benefit from the inflationary cycle that has recently accelerated in the U.S. since royalty companies participate in the upside from commodity price inflation and do not experience the significant service cost inflation currently impacting the upstream sectors. As we enter 2022, we see a bright future as we continue to act as a major consolidator in the U.S. oil and natural gas royalty sector. The asset class for mineral and royalties is enormous at over $700 billion in market size with only a handful of public entities in the U.S. and Canada that have the financial resources, infrastructure, and technical expertise to complete large-scale multi-basin acquisitions. We believe that we are still in the early innings of this consolidation and will actively seek out targets that fit within our stringent acquisition profile. Furthermore, all data points from the U.S. land rig count, which is still well below pre-pandemic levels, to commentary from major EMPs indicate U.S. oil production will once again be roughly flat during 2022. Our current view of this new world is that production stability and flat decline rates will be the new theme of energy investing rather than the hyper-growth models of the past. With our high quality, low PDP decline, and diversified royalty portfolio, Kimball was built for these conditions. We are very excited about the opportunities to expand in the future and deliver unit holder value for years to come. And with that, I'll now turn the call over to Davis.