Kimbell Royalty Partners LP

Greetings and welcome to the Kimbell Royalty Partners first 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, sir. You may begin.

Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the first quarter ended March 31, 2022. 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 kimbellrp.com. Information recorded on today's call speaks only as of today, March 5, 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 for future events or future financial performance, are forward-looking statements made pursuant to the safe harbor's 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 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 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 quarter and the current operating environment before turning the call over to Davis to walk you through our financials in more detail. We are very pleased to have started 2022 with an extremely strong quarter that saw record oil, natural gas, and NGL revenues, adjusted EBITDA, and cash available for distribution, which led to a first quarter cash distribution to our unit holders of 47 cents per common unit, which is also a new record for Kimball. Strong commodity prices during the quarter translated into increased activity on our acreage as evidenced by the 20% increase in the rig count actively drilling on our acreage at no cost to us. In addition, line-of-sight inventory from our major properties increased 6% sequentially to 5.03 net ducts and permits. This is notable since we only need approximately 4.5 net wells completed each year to keep production flat. While the Permian led all of the basins in terms of growth and rig count, we believe strong natural gas prices will compel improved activity in the Haynesville, Marcellus, and MidCon as we continue through 2022. In fact, the Haynesville led all of our regions in terms of net ducks at quarter end. The U.S. exited the winter draw season with natural gas in storage of approximately 1.4 trillion cubic feet, well below 2021 levels and the five-year average. This relatively low level of natural gas and inventory coupled with less associated natural gas from oil directed drilling and recent record LNG exports should provide pricing support for natural gas throughout 2022. In fact, Kimball experienced some of the highest realized prices as compared to spot prices in the first quarter 2022 for natural gas that we have seen since our IPO in 2017. Pricing improvements were also strong in the natural gas liquids market with realizations approaching 50% of WTI oil prices. We are fortunate to have some of the highest quality natural gas royalty assets in the U.S., including a substantial portion in the core of the core in the Haynesville, and are poised to benefit from these improved fundamentals as we continue through 2022. As of March 31st, Kimball had 73 rigs actively drilling on its acreage. up 20% compared to the fourth quarter of last year. This presents approximately 11.1% market share of all rigs drilling in the continental United States, an increase from year-end 2021. Tailwinds continue in the global energy sector and fundamentals across the U.S. energy complex continue to improve, with low inventory levels and the overall rig count continuing to improve at a modest pace. We also saw a ramp up in public company drilling on our acreage with public operators making up 67% of our active rig count as compared to 57% at year end. We believe the outlook for our industry sector and for Kimball specifically is very positive and both should benefit from the current strong demand for energy. Kimball's broad and diverse asset portfolio throughout all the major basins in the lower 48 is well positioned for continued strong cash flow generations. The oil and natural gas royalty sector is particularly well positioned to benefit from the inflationary cycle that has 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. It is also important to point out that the asset class for mineral and royalties remains enormous at over $900 billion in market size with only a handful of public entities in the US and Canada that have the financial resources, infrastructure, and technical expertise to complete large-scale multi-basin acquisitions. In addition, this industry consolidation is still much closer to the beginning of the process than even to the midpoint. We believe Kimball is well-positioned to continue its role as a leading consolidator in the years to come. We are thrilled to be off to a great start in 2022 and we remain focused on delivering value for our unit holders. Lastly, we are also pleased to report the successful IPO of Kimball Tiger Acquisition Corporation, a SPAC sponsored by Kimball that will target an acquisition in the energy and natural resources industry in North America. Kimball Tiger is led by Zach Lund, who is a very talented energy executive, and we look forward to providing updates as events dictate. And with that, I'll now turn the call over to Davis.