The Energy Report
Source: Streetwise Reports 03/14/2019
A Raymond James report provided reasons for the upward revision and detailed areas of potential growth for this Texas-based entity.
In a March 8 research note, analyst John Freeman reported that Raymond James increased its target price to $24 per share from $22 and reiterated its Strong Buy recommendation on Kimbell Royalty Partners LP (KRP:NYSE), whose stock is currently trading at around $18.15 per share.
“We remain highly confident in Kimbell’s long-term outlook, particularly following the recently completed acquisitions last year and the roughly $151 million deal with Phillips Energy/EnCap set to close later this month,” Freeman explained.
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Specifically, the analyst noted, highlights going forward are the limited partnership’s (LP’s) mineral interest business model, the low declines rates of its proven developed producing (PDP) reserves base and its solid track record in acquiring accretive assets. Raymond James anticipates “continued strength in operator activity on Kimbell acreage along with an improved commodity price environment,” added Freeman.
He noted two major areas in which Kimbell could grow. One is acquisitions. Kimbell’s management has stated it is looking to make accretive acquisitions regardless of size and currently is reviewing about 3050 possible transactions of a smaller scale, in the $1020 million range. However, because competition for mineral assets in key resource plays is increasing, Raymond James expects to see Kimbell making and structuring deals in this market creatively, such as partnering with smaller firms, such as in a joint venture arrangement, to improve the economics.
The second area of potential growth for Kimbell is building on its solid foundation of proven developed reserves, 33.6 million barrels of oil equivalent worth at year-end 2018, a 118% year-over-year increase. “Kimbell replaced about 9x production last year and maintains a reserve life of approximately 15 years,” Freeman commented.
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Disclosures from Raymond James, Kimbell Royalty Partners LP, March 8, 2019
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( Companies Mentioned: KRP:NYSE,