Breaking Down Kimbell Royalty Partners, LP (KRP) Financial Health: Key Insights for Investors

You're an income-focused investor watching the energy sector, and Kimbell Royalty Partners, LP (KRP) is defintely on your radar with its eye-catching double-digit yield. The recent Q3 2025 earnings report, released in early November, gave us a lot to unpack: the company posted consolidated Adjusted EBITDA of $62.3 million on oil, natural gas, and NGL revenues of approximately $76.8 million, driven by a modest 1% organic production increase to 25,530 BOE per day. That operational strength translated into a distribution of $0.35 per common unit, keeping the annualized yield hovering near the 10-13% mark, which is a powerful draw for any portfolio.

But here's the quick math: while the company is managing its debt well with a net debt to trailing twelve months (TTM) Adjusted EBITDA around 0.9x as of Q1 2025, the analyst consensus remains a 'Hold' with an average price target of $17.20, suggesting the market sees a ceiling on capital appreciation. We need to look past the headline yield and see if the projected full-year 2025 revenue of approximately $336.65 million can sustain that payout long-term without relying on ever-increasing commodity prices.

Revenue Analysis

You need a clear picture of where Kimbell Royalty Partners, LP (KRP) makes its money, especially with the volatility we've seen in the energy sector. The direct takeaway is that KRP's revenue is fundamentally stable because it's a pure-play royalty business, but the mix of where that revenue comes from-gas versus oil-has seen a dramatic, near-term shift in 2025, which is defintely the most important trend to watch.

Kimbell Royalty Partners, LP (KRP) operates an asset-light model, meaning its primary revenue source is Mineral and Royalty Interests. This means KRP collects passive royalty payments from operators like ConocoPhillips and ExxonMobil who do the actual drilling on KRP's acreage. This shields KRP from the high capital expenditures and operational risks of direct exploration and production (E&P).

For the 2025 fiscal year, KRP's revenue has been mixed quarter-to-quarter, largely due to fluctuating commodity prices and production mix. Total revenue for the third quarter of 2025 (Q3 2025) was approximately $80.6 million. This figure includes revenues from oil, natural gas, and natural gas liquids (NGLs) sales, which totaled $76.8 million.

Here's the quick math on the near-term performance: the trailing twelve months (TTM) revenue ending Q3 2025 was $315.52 million. However, this TTM figure was down -4.19% year-over-year. Also, Q3 2025 total revenue fell 3.8% year-over-year. This decline reflects softer commodity pricing compared to the prior year, even as production volumes have remained robust, with Q3 2025 run-rate daily production at 25,530 barrels of oil equivalent per day (Boe/d).

The most significant change in KRP's revenue streams in 2025 is the commodity mix. Historically, KRP was heavily weighted toward oil. But by the end of Q2 2025, the breakdown showed a major shift:

• Revenue from natural gas operators accounted for about 67% of the bulk.
• Revenue from oil production payments made up the remaining 33%.

This is a major pivot from 2024, where the majority of revenue came from oil drilling rigs (about 71%). This shift validates KRP's diversification strategy, helping it mitigate risk from localized price drops. The Permian Basin remains the single largest contributor, generating about 54% of its revenue in Q2 2025. Plus, the strategic acquisition of interests in the Midland Basin in early 2025 was a key move, projected to generate $30.9 million in cash flow for the year.

What this estimate hides is the potential for derivative losses, which can partially offset realized price improvements, as seen in Q1 2025 with a loss of $(6.05) million on commodity derivatives. If you want a deeper dive into the company's full financial picture, you can find more insights in Breaking Down Kimbell Royalty Partners, LP (KRP) Financial Health: Key Insights for Investors.

Your action item is to monitor the Q4 2025 earnings release for the final full-year revenue and the continued stability of the natural gas contribution, as that mix is currently the primary support for the revenue base.

Profitability Metrics

You need to know how efficiently Kimbell Royalty Partners, LP (KRP) turns its revenue into profit, and the short answer is: very efficiently, especially at the gross level. Their asset-light, pure-play mineral and royalty business model gives them a structural profitability advantage over traditional exploration and production (E&P) companies. This is your key takeaway.

For the first nine months of 2025 (9M 2025), KRP demonstrated solid profitability, though margins fluctuate with commodity prices. We can look at the core margins to see where the money is made and where costs are controlled. This is defintely a high-margin business.

Here is a quick breakdown of the core profitability margins for KRP, primarily based on the latest available 2025 quarterly results:

• Gross Profit Margin: This is where KRP shines. The company is a royalty owner, not an operator, so it pays very little in direct operating costs. In the fourth quarter of 2024, KRP reported an exceptionally high gross profit margin of approximately 94.4%. This margin is a direct reflection of their low-cost structure, as their 'cost of goods sold' is minimal, consisting mainly of production and ad valorem taxes.
• Operating Profit Margin: This margin accounts for general and administrative (G&A) expenses. For the third quarter of 2025 (Q3 2025), KRP maintained a strong operating margin of 36.59%. This shows effective cost management against their operational overhead, even as commodity prices saw some volatility.
• Net Profit Margin: This is the bottom line after all expenses, including interest and taxes. Based on the first nine months of 2025 (Q1-Q3 2025), KRP generated a total Net Income of approximately $74.9 million on total revenues of approximately $247.5 million, resulting in a Net Profit Margin of about 30.26%.

The trend in profitability over time is closely tied to commodity prices, but KRP's operational efficiency has remained strong. For context, KRP's full-year 2024 Net Income was $51.35 million, which was lower than the 9M 2025 figure, indicating a strong rebound in 2025 performance driven by robust production and strategic acquisitions, such as the one in the Permian Basin completed in January 2025.

Operational Efficiency and Industry Comparison

KRP's operational efficiency is best measured by its cost management, particularly its cash General and Administrative (G&A) expense per barrel of oil equivalent (Boe). In Q2 2025, KRP's cash G&A per Boe improved to $2.36, which was below the low end of their full-year 2025 guidance range. This focus on cost discipline, even while expanding their footprint, is a clear sign of management effectiveness. You can read more about their strategy in the Mission Statement, Vision, & Core Values of Kimbell Royalty Partners, LP (KRP).

When you compare KRP to the broader, more capital-intensive oil and gas exploration and production (E&P) sector, the difference is stark. While the average net profit margin for the general E&P sector can be highly volatile, swinging from low single digits to around 30% during peak price cycles, KRP's royalty model consistently delivers high gross margins. Their Q3 2025 Operating Margin of 36.59% is a premium indicator of their asset-light structure, allowing them to capture a larger share of revenue as profit without bearing the heavy capital expenditure (CapEx) burden of drilling and operating wells.

Here's the quick math on how KRP's asset-light model translates to superior operational performance compared to a typical E&P firm:

What this estimate hides is the impact of non-cash items like depletion, depreciation, and amortization (DD&A), which can significantly reduce GAAP Net Income, especially for royalty companies. Still, the high Gross Margin and consistent low Cash G&A per Boe show a fundamentally efficient operation that is well-positioned to convert revenue into distributable cash flow (CAD).

Debt vs. Equity Structure

Kimbell Royalty Partners, LP (KRP) maintains a moderate amount of leverage for an energy company, a structure that balances growth-fueling debt with a significant equity base. This is a common approach in the mineral and royalty space, but you need to watch their debt-to-equity ratio against the broader industry. The company's strategy is clear: use debt for accretive acquisitions, then pay it down quickly with operating cash flow.

As of the second quarter of 2025, Kimbell Royalty Partners, LP (KRP) reported total long-term debt of approximately $462.096 million, primarily drawn from its secured revolving credit facility. Short-term obligations, categorized as total current liabilities, stood at a manageable $16.185 million. This means nearly all of their debt is long-term, which is a good sign for near-term liquidity, but still represents a significant capital commitment.

Here's the quick math: Kimbell Royalty Partners, LP (KRP)'s debt-to-equity (D/E) ratio is approximately 0.72, based on recent 2025 data. To be fair, this is higher than the average for the upstream Oil & Gas Exploration and Production (E&P) sector, which typically sits around 0.50. KRP is more leveraged than its average E&P peer, but the ratio is still well below the 1.0 mark, indicating that equity still funds a larger portion of assets than debt. It's a comfortable position, but defintely something to monitor as they pursue more acquisitions.

The company has been actively managing its capital structure in 2025, using both debt and equity to execute its growth strategy. In January 2025, KRP successfully priced an upsized public offering of 10 million common units, raising roughly $149.0 million in gross proceeds. This equity infusion was used to pay down outstanding borrowings, a classic move to de-lever after a large acquisition.

The debt side saw significant activity in May 2025, which shows their commitment to maintaining financial flexibility. Exploring Kimbell Royalty Partners, LP (KRP) Investor Profile: Who's Buying and Why?

• Increased credit facility borrowing base from $550 million to $625 million on May 1, 2025.
• Redeemed 50% of outstanding Series A Cumulative Convertible Preferred Units on May 7, 2025, simplifying the capital structure.
• Commits 25% of quarterly cash available for distribution to debt paydown.

This disciplined approach to debt repayment, using a quarter of their cash flow, is what keeps their leverage in check even as they take on new debt for acquisitions. It's a predictable mechanism that investors can model easily.

Liquidity and Solvency

You need to know if Kimbell Royalty Partners, LP (KRP) can comfortably cover its short-term bills and manage its debt load. The quick answer is yes, their immediate liquidity is defintely strong, but their current strategy is wisely focused on paying down the revolving credit facility to shore up the balance sheet.

The company's royalty-based, asset-light model means they don't carry the massive capital expenditure (CapEx) burdens of traditional oil and gas producers. This structure naturally leads to robust liquidity positions, which you can see clearly in the latest 2025 figures.

Current and Quick Ratios: A Strong Buffer

Kimbell Royalty Partners, LP's liquidity ratios for the most recent quarter (MRQ) in 2025 show a significant ability to meet short-term obligations. The current ratio, which measures current assets against current liabilities, sits at an impressive 5.39. The quick ratio, a tougher test that excludes less-liquid assets like inventory, is also 5.39.

Here's the quick math: A ratio above 1.0 is generally good, so 5.39 means Kimbell Royalty Partners, LP has over five dollars of liquid assets for every dollar of short-term debt. This is a massive buffer. For a deeper dive into the ownership structure behind these numbers, you might want to read Exploring Kimbell Royalty Partners, LP (KRP) Investor Profile: Who's Buying and Why?

Working Capital Trends and Management

While the high ratios suggest excellent liquidity, the company is actively managing its working capital (current assets minus current liabilities) with a focus on debt reduction. The key trend here isn't a massive pile of cash, but rather a deliberate allocation of cash flow toward deleveraging. Specifically, Kimbell Royalty Partners, LP's Board has committed to allocating 25% of its distributable cash flow to pay down outstanding borrowings on its secured revolving credit facility.

This action is a clear signal of management's priority: maintaining balance sheet health over maximizing immediate distributions. As of June 30, 2025, the company had approximately $462.1 million in debt outstanding on this facility, but it also had $162.9 million in undrawn capacity. That unused credit is your true liquidity safety net.

Cash Flow Statements Overview (TTM 2025)

The cash flow statement for the trailing twelve months (TTM) ending in 2025 paints a picture of a business generating strong operational cash flow that is primarily being used for growth-focused acquisitions and debt service.

• Operating Cash Flow (OCF): This was a robust $245.81 million (TTM). This is the lifeblood of the business, showing the cash generated from royalty payments, and it remains strong.
• Investing Cash Flow (ICF): This shows a net outflow of -$223.44 million (TTM). This is largely due to the company's acquisition strategy, including the $230.4 million acquisition of Midland Basin interests completed in Q1 2025.
• Financing Cash Flow (FCF): This reflects the company's distribution payments to unitholders and its debt management activities. The key trend is the intentional debt repayment, which reduces future interest expense and strengthens long-term solvency.

The fact that OCF comfortably covers the significant CapEx for acquisitions is a huge positive. It means the company is funding its growth from its own operations, not just new debt or equity.

Potential Liquidity Concerns or Strengths

The primary strength is the high-margin, asset-light model that delivers consistent operating cash flow and those stellar liquidity ratios. The company has ample room on its credit facility, which acts as an immediate liquidity backstop. The biggest near-term risk remains the volatility of commodity prices, which directly impacts royalty revenue, but the company's diversified asset base across multiple basins helps mitigate this.

The proactive debt reduction strategy is a major strength, reducing the debt-to-equity ratio, which stood at 0.72 in Q3 2025. This focus on a conservative balance sheet is what you want to see, especially in the cyclical energy sector.

Valuation Analysis

You are looking at Kimbell Royalty Partners, LP (KRP) because a royalty trust with a double-digit yield is hard to ignore, but the valuation metrics tell a complex story. The direct takeaway is that KRP appears inexpensive on a cash-flow basis, but its negative earnings (net income) signal a fundamental risk that requires careful due diligence.

As of November 2025, the stock trades around $13.25 per share. Over the last 12 months, the price has actually decreased by approximately 17.40%, moving within a 52-week range from a low of $10.98 to a high of $16.78. This volatility is typical for energy-related investments, but still a clear headwind for investors seeking stability.

Here is a quick look at the key valuation ratios for KRP, which show a split picture:

• Price-to-Earnings (P/E) Ratio: The P/E ratio is currently negative, around -189.14. This isn't a valuation metric you can use for comparison; it's a warning sign, indicating the company had a net loss over the trailing twelve months.
• Enterprise Value-to-EBITDA (EV/EBITDA): This is the better metric for a royalty trust. KRP's TTM EV/EBITDA sits at approximately 7.61. This is defintely lower than many exploration and production (E&P) peers, suggesting the company is relatively cheap based on its operating cash flow (earnings before interest, taxes, depreciation, and amortization).
• Price-to-Book (P/B) Ratio: The P/B ratio is around 2.28. This means the market values the company at over twice its book value (assets minus liabilities), which is a moderate premium that reflects the value of its long-life, non-depleting mineral reserves not fully captured on the balance sheet.

The dividend story is where KRP shines, but also where the P/E ratio's warning becomes critical. The current dividend yield is compelling, hovering between 12.08% and 13.04%, with an annualized payout of roughly $1.60 per share. However, because of the negative net income, the Payout Ratio based on earnings is highly negative.

You must look at the cash-based payout ratio instead. For the second quarter of 2025, Kimbell Royalty Partners, LP announced a cash distribution of $0.38 per common unit, representing a payout of 75% of its cash available for distribution. The remaining 25% is used for debt repayment, a prudent move that supports long-term financial health. You need to understand the Mission Statement, Vision, & Core Values of Kimbell Royalty Partners, LP (KRP) to appreciate their focus on capital structure.

Analyst consensus leans toward caution. Out of seven research firms covering the stock, the average rating is a 'Hold.' This is a neutral stance. The consensus 12-month price target is $17.20, which implies a potential upside of about 29.8% from the current price, but the majority of analysts are waiting for clearer earnings stability before issuing a 'Buy.'

The clear action here is to treat KRP as an income play, not a growth stock, and monitor its cash flow (EBITDA) and debt reduction, not its reported net income. Finance: Track the quarterly 'cash available for distribution' payout ratio by the next earnings call to confirm dividend sustainability.

Risk Factors

You're looking at Kimbell Royalty Partners, LP (KRP) because of its royalty model and yield, but honestly, the financial health picture for 2025 shows a few clear risks you need to map out. The biggest external challenge is what always hits energy: commodity price volatility. KRP's revenue is directly tied to the price of oil and natural gas, which is completely outside their control. A general slowdown in the U.S. oil and natural gas sector is already a reality, even though KRP managed a 1% organic production increase in Q3 2025.

The financial risks are more nuanced, stemming from their distribution policy and leverage. The dividend payout ratio is high-a concerning 5.36-which raises sustainability questions, especially with a 3-year revenue growth rate sitting at -2.9%. That's a defintely high number for a royalty company. Their balance sheet, while generally strong with a current ratio of 5.45, has a moderate debt-to-equity ratio of 0.65. The Altman Z-Score is at 2.01, which analysts consider the grey area, signaling potential financial stress if market conditions worsen.

Here's the quick math on their leverage: KRP's net debt to trailing 12 months consolidated Adjusted EBITDA is approximately 1.6 times, with $448.5 million in debt outstanding under their credit facility as of Q3 2025. That's manageable, but it still means interest rate hikes or a prolonged commodity price slump would quickly make that debt more expensive to service. The company is already seeing a declining revenue per share.

Operational risks are also starting to show up in the filings. A general slowdown among U.S. operators is impacting future production growth, plus there's a noted decrease in their 'line of sight' wells-the ones they expect to start producing soon. Also, competition from private mineral companies is fierce, which can push acquisition pricing higher and erode returns. To be fair, KRP is managing costs well; their cash General and Administrative (G&A) expense per barrel of oil equivalent (BOE) was a low $2.36 in Q2 2025.

What this estimate hides is the impact of unpredictable costs, like the abnormally high marketing and other deductions expense they saw in Q3 2025. Still, management has a clear mitigation plan for the financial side: they are prioritizing debt reduction, allocating 25% of their cash available for distribution to pay down debt. This is a smart, clear action that strengthens the balance sheet. They also maintain a strong operational footprint, with 86 active rigs drilling on their acreage as of Q3 2025, which represents a significant market share of U.S. land rigs.

The key risks and mitigation strategies break down like this:

• External Risk: Commodity price volatility (oil/gas prices).
• Financial Risk: High dividend payout ratio (5.36) and moderate leverage.
• Operational Risk: Slowdown in new drilling activity and competition.
• Mitigation Strategy: Debt repayment (25% of distributable cash) and diversified asset base across major U.S. basins.

For a deeper dive into the valuation and strategic frameworks, you should check out the full post: Breaking Down Kimbell Royalty Partners, LP (KRP) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking at Kimbell Royalty Partners, LP (KRP) and wondering where the next wave of growth comes from, which is defintely the right question for a royalty company. The short answer is that KRP's growth is a clear two-part strategy: smart, accretive acquisitions and organic production increases driven by a massive, high-quality asset base that operators love to drill.

We just saw KRP post strong Q3 2025 results, with consolidated Adjusted EBITDA hitting $62.3 million and run-rate daily production at 25,530 Boe/d. The full-year 2025 sales estimate sits at a solid $336.65 million, which frames the starting point for their forward trajectory. That's the quick math on their current scale.

• Acquisition-Driven Expansion:

The company's primary growth engine is its disciplined M&A (Mergers and Acquisitions) strategy. In January 2025, KRP closed a key $230 million acquisition of mineral and royalty interests in the Midland Basin, part of the Permian. This single deal is projected to generate roughly $30.9 million in cash flow for 2025, immediately boosting their footprint and revenue base. KRP focuses on deals over $100 million that are equity accretive, meaning they add more to per-unit earnings than they dilute, and help pay down debt.

• Organic Production and Inventory:

KRP's organic growth-the production that comes from their existing properties-is resilient, showing a 1% organic production increase from Q2 to Q3 2025. This is driven by their massive, diversified portfolio, which spans over 131,000 gross wells across 28 states. At the end of Q3 2025, there were 86 active rigs drilling on KRP's acreage, representing approximately 16% of the entire U.S. land rig count. That high level of activity provides a strong foundation for future royalty checks, plus they have a deep inventory of DUCs (Drilled but Uncompleted wells) and permitted locations.

• Strategic Financial and Commodity Focus:

The company is not just buying assets; they're cleaning up the balance sheet, too. A key strategic initiative in 2025 was the redemption of 50% of the Series A convertible preferred units in May, which simplifies their capital structure and lowers their cost of capital. Plus, they are committed to using 25% of their cash available for distribution to repay debt, a very prudent move. On the commodity side, KRP is well-positioned for the natural gas upswing, with natural gas operators contributing about 67% of their Q2 2025 revenue. Analysts project KRP's earnings per share (EPS) to grow by over 55% in the next year, from $0.65 to $1.01 per share, which is a huge tailwind.

• Competitive Edge: The Asset-Light Model:

KRP's biggest competitive advantage is its asset-light business model. As a royalty owner, KRP benefits from all the drilling activity and technological advances of the operators without having to spend any of the capital or incur the operating costs. They just collect the royalty. This model delivered a phenomenal gross profit margin of 94.4% in Q4 2024. Also, unitholders get a tax-advantaged distribution via a 1099-DIV, not a complicated K-1, with an estimated 70% of the Q1 2025 distribution considered a return of capital. That's a real differentiator for income investors. If you want to dig deeper into who is buying this story, you should check out Exploring Kimbell Royalty Partners, LP (KRP) Investor Profile: Who's Buying and Why?.

Here's a quick look at the core growth drivers and their 2025 impact: