Kimbell Royalty Partners, LP (KRP Quick QuoteKRP - Free Report) emphasized stronger oil-price exposure, record production and expanding drilling opportunities during its third-quarter 2026 earnings call.

The company reported third-quarter earnings of $0.12 per share, lagging the Zacks Consensus Estimate of $0.24. Revenues of $86.33 million also missed the consensus estimate of $101.90 million. Management nevertheless maintained its fourth-quarter outlook, citing acquisition-driven growth and strengthening development activity.

Kimbell Royalty Price, Consensus and EPS Surprise

Kimbell Royalty price-consensus-eps-surprise-chart | Kimbell Royalty Quote

KRP Anticipates Stronger Q4 Cash Flow

Chairman and CEO Bob Ravnaas expects a material increase in fourth-quarter cash flow, supported by higher oil prices and recent acquisitions.

Approximately 84% of estimated fourth-quarter oil production remains unhedged, providing substantial exposure to commodity-price movements. Ravnaas expects development activity across the Lower 48 to remain strong into 2027.

President and CFO Davis Ravnaas reaffirmed Kimbell's previously announced fourth-quarter 2026 financial and operational guidance ranges, citing robust drilling activity and production visibility.

Kimbell Reports Record Production and Drilling Visibility

Average daily production reached a record 27,565 barrels of oil equivalent, increasing 7% sequentially. Results included 41 days of production from recently acquired assets.

Davis Ravnaas highlighted record drilling inventory, with 9.37 net drilled-but-uncompleted wells and permitted locations compared with approximately 8.20 net wells required to maintain flat production.

Bob Ravnaas noted that 93 rigs were actively drilling across Kimbell's acreage, two more than in the previous quarter. These represented approximately 16% of active U.S. land rigs.

KRP Maintains Disciplined Acquisition Strategy

Kimbell completed $367 million in acquisitions since June 2026, expanding its royalty portfolio and future production opportunities.

During the question-and-answer session, a KeyBanc Capital Markets analyst asked whether management would pursue acquisitions emphasizing longer-term development potential instead of immediate cash flow accretion.

Davis Ravnaas reiterated that immediate accretion remains central to acquisition underwriting. However, the company increasingly recognizes value in additional geological formations where development activity is becoming established.

Kimbell Identifies Untapped Growth on Legacy Acreage

A KeyBanc Capital Markets analyst also questioned whether increasing drilling inventory could support faster production growth during 2027.

Davis Ravnaas highlighted 10 new permits in Loving County associated with the company's earlier LongPoint acquisition. These wells carry nearly 20% net revenue interests and were excluded from the original acquisition underwriting assumptions.

Management expects these wells to begin production around the fourth quarter of 2027, although typical permitting timelines range from six to 18 months. Continued developments of this nature could support stronger production expectations for 2027 and 2028.

KRP Sees Continued Permian Leasing Activity

A Texas Capital analyst sought clarification regarding lease bonus trends and potential emerging areas of development.

Davis Ravnaas explained that leasing revenues fluctuate substantially between quarters and generally strengthen alongside higher oil prices. He recommended using a trailing four-quarter average for conservative modeling.

The Permian Basin remains the primary contributor to leasing activity, particularly as operators explore additional geological formations. Management estimated that recent drilling inventory growth was divided approximately equally between acquisitions and existing properties.

Kimbell Prioritizes Distributions and Balance Sheet Flexibility

Davis Ravnaas announced a third-quarter distribution of $0.45 per common unit, representing 75% of cash available for distribution.

The remaining 25% will support debt repayment. Kimbell reported net debt of approximately 1.5 times trailing 12-month consolidated adjusted EBITDA.

Management also highlighted the increase in revolving credit commitments from $660 million to $750 million and its planned redemption of half the remaining Series A preferred units.

KRP Reinforces Its Long-Term Operating Priorities

Management's commentary reflected confidence in expanded production capacity, commodity-price exposure and the development potential of acquired and existing assets.

Kimbell remains focused on immediately accretive acquisitions, maintaining financial flexibility and supporting unitholder distributions while pursuing additional royalty consolidation opportunities.

Kimbell’s Zacks Rank & Style Scores Signal Mixed Prospects

KRP currently sports a Zacks Rank #1 (Strong Buy), indicating favorable earnings-estimate revision trends and stronger near-term performance potential. However, its Value Score of D, Growth Score of F, Momentum Score of F and VGM Score of F indicate unfavorable characteristics across these investment styles. You can see the complete list of today’s Zacks #1 Rank stocks here.

The weak Style Scores temper the positive signal from its Zacks Rank, particularly because the Zacks framework favors combining top-ranked stocks with Style Scores of A or B. The Zacks Rank can change as analysts revise their earnings estimates following the third-quarter results