Kimbell Royalty Partners, LP (KRP): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/KRP

Headline

Field	Value
Ticker	KRP
Company	Kimbell Royalty Partners, LP
Current price	$14.75/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	5.7%
Operating margin today	36.5%
Margin compression (value-band)	-30.8pp
Implied growth	4.7%
Multiple paid	14x operating income

The operating-margin figure is value-band context at year 5: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~5.9pp.

How unusual the bet is: within-range (limited comparison data)

Reference	Value
vs own history	-0.65σ
implied end-window share	0%

Valuation X-Ray

The price is supported by earnings-power and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	—	0	—
Earnings	0.72x	5	justifies
Relative	1.43x	5	expensive
Growth	1.14x	3	expensive

Families that justify the price: Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.

Per-Model Detail (n=13)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$28.89	0.51x	yes	FCF base $0.2B, growth 3% (input: historical growth), terminal g 2.7%, WACC 7.5%, 5yr projection
DCF Exit Multiple	Growth	$12.96	1.14x	yes	Exit EV/EBITDA: 4.0x / 7.9x / 12.9x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$10.32	1.43x	yes	P/E 12.43x (blended: static sector reference 10x + trailing (TTM) 18x), scenarios: 9.3x / 12.4x / 14.9x (bear / base = reference held flat / bull), EV/EBITDA 6x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	—	—	no	—
Two-Stage Excess Return	Asset	—	—	no	—
Discounted Future Market Cap	Growth	$6.47	2.28x	yes	Rev $0.3B, growth 3% (input: historical growth; tapered), Terminal P/S: 3.5x / 4.6x / 5.6x (bear / base = today's held flat / bull, cap 6x)
Peter Lynch Fair Value	Relative	$28.50	0.52x	yes	EPS $0.81, growth 35% (input: historical EPS growth), PEG=0.52 (Undervalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$4.72	3.13x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.10B × (1−9%) / WACC 7.5% → EPV (no growth)
Residual Income	Asset	—	—	no	—
Graham Number	Asset	—	—	no	—
EV/EBITDA Relative	Relative	$10.20	1.45x	yes	EBITDA $0.24B × sector EV/EBITDA 6.0x
FCF Yield	Earnings	$22.17	0.67x	yes	FCF $241.7M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	$20.36	0.72x	yes	SBC-adj FCF $0.23B (FCF $0.24B − SBC $0.02B) capitalized at Kₑ
Ben Graham Formula	Earnings	$26.27	0.56x	yes	EPS $0.81 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	$3.81	3.87x	yes	Revenue $0.32B × sector P/S 1.2x
PEG Fair Value	Relative	$30.54	0.48x	yes	EPS $0.81 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$8.80	1.68x	yes	EPS $0.81 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net cash	$37.2m
Net debt / NOPAT (after-tax)	-0.36x (net cash)
Net debt / operating income (pre-tax)	-0.32x (net cash)
Interest coverage	3.2x
Burning cash	no

Bullet Takeaways

• Kimbell owns mineral and royalty interests, not wells, so it collects a cut of production from over 129,000 gross wells across 28 states without ever paying to drill a single one, the asset-light end of the oil patch.
• The defining feature is the payout, not the price: the quarterly distribution of $0.41 per unit runs near an 11% annualized yield, roughly three-quarters of it treated as return of capital, and it floats with cash flow rather than being promised.
• Watch commodity prices and rig activity: with 85 rigs running on its acreage, about 16% of all US land rigs, the royalty stream tracks oil and gas prices directly, so the next few quarters of distributions move with the strip.

Bull Case

The moat here is structural and unusual: Kimbell never spends a dollar to drill. It owns the mineral rights underneath other companies' wells, so when an operator produces oil or gas on Kimbell's acreage, a slice of the revenue flows to Kimbell off the top, before drilling costs, before operating expense, before anything. The 10-K describes interests located "in 28 states and in every major onshore basin across the continental United States and include ownership in over 129,000 gross wells, including over 50,000 wells in the Permian Basin," with substantially all of those leases held by production. That breadth is the diversification: no single well, operator, or basin can sink the cash flow, and the operators bear all the capital risk while Kimbell collects the royalty. An operating margin near 36% is what a business with almost no cost of goods looks like.

The debt-light structure is the second pillar, and it is rare in energy. The company carries essentially no net debt, holding more cash than borrowings, which means the royalty checks are not first claimed by lenders before unitholders see them. The 10-K is explicit that Kimbell does "not have a minimum quarterly distribution or employ structures intended to consistently maintain or increase distributions over time" and that the payout "will significantly correlate to the cash we generate." That honesty is the model working as designed: rather than borrowing to smooth a dividend, Kimbell passes through what it earns, and the absence of leverage means a soft commodity quarter trims the distribution rather than threatening solvency.

The capital-return discipline rounds out the case. Kimbell distributes roughly 75% of cash available for distribution to unitholders and applies the remaining 25% to debt reduction, and in the first quarter began a $100 million unit repurchase program, buying back 500,000 units for about $7.3 million. The current payout runs near an 11% annualized yield with about 72% treated as return of capital, which lowers the tax drag for the holder. With 85 rigs active on its acreage, about 16% of all US land rigs, the production base feeding those distributions is broad and continuously replenished by operators drilling on Kimbell's minerals. Against energy peers like Magnolia Oil and Gas and Mach Natural Resources, the royalty model carries the least capital risk and the most direct path from commodity price to cash in the unitholder's hands.

Bear Case

The structural fact a holder should weigh first is that this is a depleting asset whose cash flow rises and falls entirely with commodity prices, and neither lever is in management's control. The first quarter showed it plainly: revenue fell to $65.5 million from $84.2 million a year earlier, and net income dropped to $6.9 million from $25.9 million, dragged by hedge losses as the oil and gas strip moved. The 10-K is candid that oil and gas prices "have been historically volatile and may continue to be volatile in the future," and because the distribution "will significantly correlate to the cash we generate," the yield that draws investors in is exactly the figure that shrinks when prices fall. An 11% distribution is only an 11% distribution until the strip rolls over.

The balance sheet, while light, is not the fortress the headline suggests, and the financing of the buyback shows the strain. Kimbell repurchased units in the first quarter, but it funded that repurchase through borrowings on its secured revolving credit facility rather than out of surplus cash. A company that returns 75% of its cash to unitholders and another 25% to debt has, by design, no retained buffer, so when it wants to do something extra like buy back units, it has to borrow. That is the trade-off of a full-payout structure: it maximizes the current check at the cost of any cushion, and in a sustained downturn the same revolver that funded the buyback becomes the thing that has to be repaid before distributions recover.

Depletion is the quiet erosion underneath it all. Royalty interests produce until the wells deplete, and unless Kimbell keeps acquiring new minerals, the production base shrinks. Management acknowledged that acquisition volume may stay limited until commodity-price volatility eases and buyers and sellers agree on valuation, which means the replenishment engine is throttled exactly when the cash to fund it is tightest. Production was essentially flat in the quarter, so the model is currently treading water rather than growing. The relative-multiple lens already reads the units as expensive against the energy cohort, and the bear case is that paying a premium multiple for a depleting, price-taking royalty stream works only as long as commodity prices and acquisition opportunities both cooperate, and neither is promised.

Valuation

The price is making a modest, value-oriented bet rather than a growth one. At today's level the market pays roughly 14 times Kimbell's operating income, which inverts to about 4.6% annual operating-profit growth held for five years, a pace within what the royalty stream has recently delivered. The honest framing is that the stretch is duration, not rate: 4.6% is unremarkable, and the question is simply whether the depleting asset base, refreshed by acquisitions, can hold that pace as wells deplete and prices swing.

The method families split in a way that fits a debt-free, high-margin royalty business. The earnings-power lens and the growth-oriented cash-flow lens both support the price, while the relative-multiple lens reads it as expensive against the energy cohort. The earnings-power methods support the price because a royalty stream with a 36% margin and no drilling capex throws off real cash that capitalizes well; the relative lens reads high because Kimbell trades at a premium to the leveraged exploration-and-production names it sits beside, and it should, since it carries none of their capital risk. That pattern, cash-flow methods supporting the price and only the peer multiple calling it rich, marks this as a value, cash-supported name where the premium is the price of the asset-light structure.

Solvency is a genuine strength rather than a constraint, which is unusual for energy. Kimbell carries essentially no net debt, holding more cash than borrowings, with interest coverage around 3.2 times even at depressed quarterly earnings. The valuation rests less on growth than on the durability of the payout: a roughly 11% distribution funded by a debt-free royalty stream is the product, and the multiple is what the market pays for that combination of yield and low balance-sheet risk. Against peers Magnolia and Mach Natural Resources, Kimbell's premium is earned by its lack of leverage, and a mean analyst target near $17 to $19 sits above today's price. The gap reflects the street crediting a stable-to-recovering commodity backdrop that the conservative peer-multiple lens does not extend, and the reconciliation is the same question the whole name turns on: whether oil and gas prices hold the distribution where it is.

Catalysts

The first-quarter 2026 results, reported in early May, set the tone with a softer print. Revenue fell to $65.5 million from $84.2 million a year earlier and net income dropped to $6.9 million from $25.9 million on hedge losses, though adjusted EBITDA held near $68 million. The board declared a $0.41 per unit cash distribution, running near an 11% annualized yield with roughly 72% treated as return of capital, and emphasized the model passes through cash rather than borrowing to maintain a fixed payout. The next distribution is the cleanest catalyst, because it moves directly with the commodity strip and operator activity.

Production and capital returns are the operating catalysts to track. Run-rate daily production was about 25,522 Boe and essentially flat at 2.30 million Boe for the quarter, with 85 rigs active on Kimbell's acreage, about 16% of all US land rigs, which keeps the production base continuously replenished. The company also began a $100 million unit repurchase program and bought back 500,000 units for about $7.3 million, funded through its revolving credit facility, a signal management sees the units as undervalued even as it leans on the revolver to act on it.

Mergers and acquisitions are the growth lever, and it is currently throttled. Management indicated that acquisition volume may remain limited until commodity-price volatility eases and buyers and sellers converge on valuation, which matters because acquisitions are how a royalty company offsets natural depletion. The sell side is constructive, with a Buy consensus and a mean price target near $17 to $19 above today's price, but that target leans on a commodity recovery that the most recent revenue decline has not yet confirmed.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• DMLP (Dorchester Minerals, L.P.)
• FY2025 10-K: …competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil and natural gas but also carry on midstream and refining operations and market petroleum and other products on a regional, national, or worldwide basis. These companies may be…
• FY2025 10-K: …which could limit our ability to pursue a business strategy of acquiring oil and natural gas properties. We compete with other companies and producers for acquisitions of oil and natural gas interests. Many of these competitors have substantially greater financial flexibility and other resources than we do. Any…
• MGY (Magnolia Oil & Gas Corp)
• FY2025 10-K: 31%, 24%, and 12% of the Company's combined oil, natural gas, and NGL revenue. For the year ended December 31, 2023, three customers, including their subsidiaries, accounted for 25%, 22%, and 11% of the Company's combined oil, natural gas, and NGL revenue. No other purchaser accounted for 10% or more of Magnolia's…
• FY2025 10-K: …expires on June 30, 2027, which provides an outlet for Magnolia to sell oil production via pipeline from the Karnes area to third-party purchasers at market prices. The majority of the remaining oil production is transported from the lease via trucks at market prices with terms of 12 months or less. The NGL…
• MNR (Mach Natural Resources LP)
• FY2025 10-K: …reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected. Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties, market natural gas, secure trained personnel and raise additional…
• FY2025 10-K: …to continue exploration activities during periods of low natural gas market prices. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In…
• KOS (KOSMOS ENERGY LTD.)
• FY2025 10-K: …and cannot be predicted at this time. Competition The oil and gas industry is competitive. We encounter strong competition from other independent operators and from major oil companies in acquiring licenses and leases. Many of these competitors have financial and technical resources and staff that are substantially…
• FY2025 10-K: …burdens resulting from changes in relevant laws and regulations, which could adversely affect our competitive position. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable licenses and to consummate transactions in a…
• GPOR (Gulfport Energy Corporation)
• FY2025 10-K: …the month in which such ownership change occurs. In general, an ownership change will occur if there is a cumulative increase in our ownership of more than 50 percentage points by one or more "5% shareholders" (as defined in the Internal Revenue Code) at any time during a rolling three-year period. Industry, Business…
• FY2025 10-K: …prices for extended time periods are likely to have a material adverse effect on our business. • Our commodity price risk management activities may limit the benefit we would receive from increases in commodity prices and involve risk that our counterparties may be unable to satisfy their obligations to us. • Our…
• TALO (Talos Energy Inc.)
• FY2025 10-K: …such as an index or spot price, price regulations, distance from the well to the pipeline, commodity quality and prevailing supply and demand conditions. We enter into derivative contracts on our oil and natural gas production primarily to stabilize cash flows and reduce the risk and financial impact of downward…
• FY2025 10-K: …gas business is highly competitive in the exploration for and acquisition of reserves, the acquisition of oil and natural gas leases, equipment and personnel required to find and produce reserves and in the gathering and marketing of oil, natural gas and NGLs. We compete with large integrated oil and natural gas…
• NOG (NORTHERN OIL & GAS, INC.)
• FY2025 10-K: …either a discount or premium to the NYMEX benchmark price. Using our commodity hedging program, from time to time we enter into financial hedging contracts to help mitigate pricing risk and volatility with respect to differentials. Competition The oil and natural gas industry is intensely competitive and we compete…
• FY2025 10-K: …market, their financial resources, their degree of geological, geophysical, engineering and management expertise and capabilities, their pricing policies, their ability to develop properties on time and on budget, their ability to select, acquire and develop reserves and their ability to foster and maintain…
• BKV (BKV CORPORATION)
• FY2025 10-K: …and personnel during the spring and summer months, which could lead to shortages and increase costs or delay our operations. Similarly, winter months may bring about delays in operational capabilities and efficiency of execution related to new and existing supply. Competition The oil and gas industry is very…
• FY2025 10-K: …assets. As a result, after a sale, we may remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations. We may be unable to compete effectively with larger companies, which may adversely affect our ability to generate sufficient…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Kimbell Q1 2026 results, May 2026 · Kimbell Q1 2026 distribution, May 2026 · Kimbell Q1 2026 earnings call, May 2026 · TipRanks and Benzinga analyst consensus, 2026