JamesBrey Kimbell Royalty Partners, LP (NYSE: NYSE: KRP ) is a pure play mineral company, which offers a protected dividend yield of 11.3%. KRP's asset base consists of high-quality oil and gas investments across almost every major basin in the U.
S., where as of Q1, 2024 the company had a 16+ years of drilling inventory remaining in its portfolio. What is quite unique about KRP is the way how it generates cash.
As opposed to other energy companies that are exposed to natural gas and oil investments / assets, KRP is a royalty-based business, which automatically implies the two structural things: The underlying business operations do not require a significant maintenance CapEx. The organic upside potential is relatively limited and driven by factors, which KRP cannot directly influence (e.g.
, realized volumes by the asset users and the commodity prices). This means that the only notable way how KRP can generate incremental value is mostly through M&A. Before I elaborate on why I view KRP as a compelling investment case, let's take a quick look at KRP's total return performance.
YCharts As we can see in the chart above, KRP has delivered relatively correlated total returns with the broader midstream segment, which is only logical as the returns for both KRP and midstream players are driven by the same underlying factors - i.e., natural gas and oil volumes and their prices.
Plus, the chart indicates that KRP has starting from mid-2021 outperformed the midstream index, albeit at n.
