Kimbell Royalty Partners, LP (KRP): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Kimbell Royalty Partners, LP (KRP) right now, and honestly, the competitive landscape is a study in contrasts as we close out 2025. On one hand, Kimbell's asset-light model is delivering solid results-think $62.3 million in Adjusted EBITDA for Q3 2025-but that success is constantly shadowed by external forces. We see high power from the operators who control the drill bit, intense rivalry from larger peers like Viper Energy (which just bought Sitio Royalties for $4.1 billion in Q2 2025), and the looming, existential threat of the energy transition hanging over every barrel produced. You need to see how these five forces-from supplier leverage to the threat of substitutes-are shaping KRP's strategy to understand if that $0.35 per unit distribution is truly secure. Let's break down the pressure points below.

Kimbell Royalty Partners, LP (KRP) - Porter's Five Forces: Bargaining power of suppliers

You're looking at Kimbell Royalty Partners, LP (KRP) from the perspective of who supplies them with the assets that generate their revenue-the mineral and royalty interests themselves, and the operators who drill on that acreage. Honestly, the power dynamic here is split between the sellers of land parcels and the operators who control the drill bit.

Fragmented mineral ownership limits individual seller power in acquisitions. Kimbell Royalty Partners, LP owns interests across approximately 17 million gross acres in 28 states, encompassing over 131,000 gross wells as of late 2024. When Kimbell Royalty Partners, LP buys assets, they are often dealing with numerous, smaller sellers, which inherently keeps any single seller's leverage low in a negotiation.

Major E&P operators like ConocoPhillips control the pace of drilling on acreage. Kimbell Royalty Partners, LP's business model is asset-light; they rely on others to spend the capital to develop the resource. For instance, the January 2025 acquisition of Mabee Ranch assets involved interests operated by world-class E&P operators, including ConocoPhillips.

Operators have high power; Kimbell Royalty Partners, LP cannot force development decisions. Kimbell Royalty Partners, LP's revenue stream is entirely dependent on the drilling schedules and capital allocation decisions made by these E&P firms. As of the third quarter of 2025, Kimbell Royalty Partners, LP had 86 rigs actively drilling across its acreage, representing about a 16% market share of U.S. land rigs. This number reflects operator activity, not Kimbell Royalty Partners, LP's mandate.

Competition for new assets drives up acquisition prices, increasing KRP's cost. Kimbell Royalty Partners, LP remains an active acquiror, evidenced by the $231 million Midland Basin acquisition closed in the first quarter of 2025. This deal was priced at an estimated transaction multiple of approximately 7.5x based on projected $30.9 million of cash flow for 2025 from those specific assets.

Here's a quick look at how Kimbell Royalty Partners, LP's scale contrasts with the power dynamics in the supplier landscape:

The power of the E&P operators is clear because Kimbell Royalty Partners, LP has no say in their capital plans. Still, the competition among buyers for quality assets means the sellers of those assets-the mineral rights owners-can command higher prices. You see this tension play out in the acquisition multiples Kimbell Royalty Partners, LP must pay to grow its asset base.

The bargaining power of the sellers of mineral interests is generally low due to fragmentation, but the bargaining power of the operators who develop the resource is high. Kimbell Royalty Partners, LP's strategy is to manage this by ensuring its portfolio is spread across many operators. For example, in Q3 2025, Kimbell Royalty Partners, LP's run-rate production was 25,530 Boe per day.

The key takeaways on supplier power are:

• Mineral ownership is highly fragmented across 28 states.
• Major operators like ConocoPhillips dictate development pace.
• Acquisition multiples, like the 7.5x seen in January 2025, reflect competitive buying pressure.
• Kimbell Royalty Partners, LP cannot compel operators to drill faster.

Finance: draft 13-week cash view by Friday.

Kimbell Royalty Partners, LP (KRP) - Porter's Five Forces: Bargaining power of customers

You're looking at Kimbell Royalty Partners, LP (KRP) through the lens of customer power, and honestly, it's a bit different than a typical manufacturer. Kimbell Royalty Partners' revenue is tied to volatile global commodity prices, not direct customer sales, because they don't sell the oil or gas themselves. They own the mineral and royalty interests, which means their cash flow is a function of what the operators produce and what the market pays for that production.

This direct link to the commodity market is why you see such price sensitivity. For instance, Kimbell Royalty Partners' Q3 2025 realized oil price of $64.21 per Bbl clearly shows how a swing in the underlying wellhead price directly impacts their top line. That sensitivity is the real lever here, not a direct negotiation with a downstream buyer.

Here's a quick look at the key Q3 2025 metrics that frame this dynamic:

Now, let's talk about the operators-these are Kimbell Royalty Partners' direct counterparties, the ones actually drilling and selling the product. Operators' production volumes directly determine Kimbell Royalty Partners' royalty income, giving them a degree of influence, even if they aren't 'customers' in the traditional sense. If an operator slows down drilling or production on Kimbell Royalty Partners' acreage, Kimbell's cash flow takes a direct hit, regardless of the commodity price.

We see this operational dependency reflected in their asset base. As of September 30, 2025, Kimbell Royalty Partners had 86 rigs actively drilling on its acreage, representing an approximate 16.2% market share of all land rigs drilling in the continental United States at that time. This activity level is key to maintaining the royalty stream.

The ultimate buyers of oil and gas dictate the market price for the royalty stream, which is the macro pressure point. Kimbell Royalty Partners' revenue stream is a derivative of these global supply and demand dynamics. Think about the components of their Q3 2025 production:

• Oil: A significant portion of the liquids component.
• Natural Gas: 48% of run-rate production (6:1 basis).
• NGLs: The remainder of the liquids component.

The demand from end-users-think refineries, chemical plants, or power generators-sets the price that the upstream operators receive, and that price, in turn, determines the value of Kimbell Royalty Partners' royalty payments. It's a passive, but highly exposed, position. If global demand for natural gas weakens, Kimbell Royalty Partners feels it through lower realized prices, even if the operators are running at full capacity.

Kimbell Royalty Partners, LP (KRP) - Porter's Five Forces: Competitive rivalry

Rivalry centers on the acquisition of new assets, not the day-to-day production itself. Kimbell Royalty Partners, LP (KRP) operates in a market where larger entities have structural advantages in deploying capital for mergers and acquisitions (M&A). For instance, larger peers like Viper Energy (VNOM) and Texas Pacific Land (TPL) are noted as having a lower cost of capital than Kimbell Royalty Partners, LP (KRP). This difference in funding cost directly impacts the price Kimbell Royalty Partners, LP (KRP) can competitively structure for a deal.

The intensity of this rivalry is evidenced by the significant M&A activity from these larger players. Texas Pacific Land (TPL) completed two minerals acquisitions totaling $396 million in 2024 and followed that with an all-cash $474M deal in November 2025. Kimbell Royalty Partners, LP (KRP), by contrast, is using free cash flow to pay down its credit facility, which limits its immediate M&A firepower.

Kimbell Royalty Partners, LP (KRP)'s scale places it at a disadvantage when going head-to-head with well-capitalized buyers, including private equity firms and hedge funds seeking new assets. Kimbell Royalty Partners, LP (KRP)'s Q3 2025 consolidated Adjusted EBITDA was $62.3 million. This figure is smaller when compared to the scale of some integrated rivals who benefit from greater financial flexibility. Kimbell Royalty Partners, LP (KRP)'s net debt to trailing 12 months consolidated Adjusted EBITDA stood at approximately 1.6x as of September 30, 2025.

The market appears to price in this scale difference, which reinforces the competitive dynamic in asset pricing. You can see this reflected in valuation multiples from late 2024 data, where Kimbell Royalty Partners, LP (KRP) traded at an EV/EBITDA of 7.5x, while Viper Energy Partners (VNOM) commanded a multiple of 11.3x. Kimbell Royalty Partners, LP (KRP)'s active rig count on its acreage represented a market share of U.S. land rigs at 16% as of the end of Q3 2025.

Here's a quick look at how Kimbell Royalty Partners, LP (KRP) stacks up against a major peer based on available data:

Kimbell Royalty Partners, LP (KRP) is definitely fighting an uphill battle for premium assets when larger players can finance acquisitions more cheaply. The company's ability to compete for new inventory is directly tied to its balance sheet management, as seen by its plan to use 25% of its cash available for distribution to pay down borrowings under its secured revolving credit facility following the Q3 2025 distribution.

The competitive environment forces Kimbell Royalty Partners, LP (KRP) to focus on operational discipline to maintain profitability, evidenced by its Cash G&A per BOE of $2.51 in Q3 2025, which was below the midpoint of guidance. Still, the higher cost of capital remains a persistent structural headwind in the acquisition market.

Kimbell Royalty Partners, LP (KRP) - Porter's Five Forces: Threat of substitutes

The long-term energy transition to renewables is the main existential threat to oil and gas, which underpins Kimbell Royalty Partners, LP (KRP)'s entire asset base. While global oil demand is forecast to reach 103.81 million barrels per day in 2025, Ambitious Climate scenarios project oil consumption falling to roughly 25 mb/d by 2050, implying an average annual decline of more than 4% through that year. This structural shift means the long-term revenue trajectory for KRP's underlying assets faces significant headwinds.

Natural gas, about 48% of KRP's Q3 2025 production, is a key transition fuel, but even its long-term outlook suggests substitution. Natural gas use is predicted to peak in the mid-2020s and decline to 1,750 billion m3 in 2050, representing an average annual decline of just under 3% per year. This positions natural gas as a bridge fuel rather than a permanent staple, directly impacting the value of KRP's gas-heavy royalty streams.

Government policy and regulation increasingly favor non-fossil fuel alternatives, accelerating this substitution risk. Globally, 72% of people support a rapid transition from fossil fuels to clean energy, and renewable energy is now the most cost-effective option for new power generation; in 2024, solar PV was 41% cheaper than the lowest-cost fossil-fuel options. Policy discussions in the US for 2025 include implementing a Clean Electricity Standard (CES) or a carbon fee, which would further pressure fossil fuel economics.

Substitution risk is high, but the long-life nature of Kimbell Royalty Partners, LP's assets defintely mitigates near-term impact. KRP's Winter 2025 Investor Presentation noted that the company has 14+ years of drilling inventory remaining, which provides a substantial buffer against immediate volume shocks. Furthermore, KRP's Q3 2025 operational results showed organic production growth of approximately 1% over Q2 2025, demonstrating resilience in the current development environment.

Here is a quick look at the Q3 2025 production and financial metrics that frame Kimbell Royalty Partners, LP's current exposure:

The immediate threat is somewhat softened by Kimbell Royalty Partners, LP's financial structure, which includes a conservative leverage profile with Net Debt to TTM Consolidated Adjusted EBITDA at approximately 1.6x as of September 30, 2025. This financial discipline helps the partnership weather commodity price volatility driven by the transition. However, the long-term value of the underlying reserves is directly correlated with the pace at which these substitutes-like solar and wind, which are now 91% of new renewable projects being cheaper than fossil-fuel alternatives-displace hydrocarbons in the global energy mix.

You should monitor these key indicators as you assess the long-term viability of Kimbell Royalty Partners, LP's cash flows:

• Pace of decline in US natural gas demand projections.
• Shifts in US federal climate policy proposals for 2026.
• Kimbell Royalty Partners, LP's success in M&A to offset natural decline.
• The realized price per Mcf of natural gas versus oil in future quarters.
• The percentage of cash flow used for debt repayment versus distribution.

Finance: review the sensitivity of the 1.6x Net Debt/EBITDA ratio to a sustained 4% annual decline in gas-equivalent volumes starting in 2026.

Kimbell Royalty Partners, LP (KRP) - Porter's Five Forces: Threat of new entrants

High capital is required to acquire a diversified, large-scale royalty portfolio.

New entrants face the hurdle of deploying significant capital to match the established scale necessary for competitive sourcing and deal flow. For instance, Kimbell Royalty Partners completed a cash transaction valued at approximately $230 million in January 2025 to acquire mineral and royalty interests in the Midland Basin alone.

Kimbell Royalty Partners' portfolio spans 28 states and over 131,000 gross wells.

The current scale of Kimbell Royalty Partners, LP is substantial, providing an immediate barrier to entry for smaller players attempting to replicate its geographic and operational diversification.

Established players benefit from a reputation and scale advantage in M&A sourcing.

The history of large-scale transactions by Kimbell Royalty Partners demonstrates the financial muscle required to secure premium assets, which smaller entrants often cannot match in terms of funding capacity or deal execution speed. Kimbell Royalty Partners' Net Debt / TTM Consolidated Adjusted EBITDA was 1.6x as of September 30, 2025.

New, smaller entrants struggle against Kimbell Royalty Partners' aggressive consolidation strategy.

Kimbell Royalty Partners' ongoing M&A activity, such as the $230 million acquisition in January 2025, signals a commitment to consolidation that smaller, less capitalized entities find difficult to counter. Kimbell Royalty Partners' Q3 2025 revenues were $76.8 million.

• Kimbell Royalty Partners' Q3 2025 Consolidated Adjusted EBITDA was $62.3 million.
• The January 2025 acquisition increased Kimbell Royalty Partners' daily production by about 8%.
• Kimbell Royalty Partners' Q2 2025 Total Revenues were $86.5 million.