Kimbell Royalty Partners
This is another royalty idea that makes sense for investors now. Kimbell Royalty Partners L.P. (NYSE: KRP) acquires and owns mineral and royalty interests in oil and natural gas properties in the United States.
As of December 31, 2021, it owned mineral and royalty interests in approximately 11.4 million gross acres and overriding royalty interests in approximately 4.7 million gross acres. The company’s mineral and royalty interests are located in 28 states and include ownership in approximately 122,000 gross wells, including approximately 46,000 wells in the Permian Basin. It serves as the general partner of the company.
Last Friday, after posing stellar results earlier in the week, the company priced a 6-million share secondary offering at $17.50, which was very well received, especially after its quarterly report. The total gross proceeds of the offering, before underwriters’ discounts and estimated offering expenses, will be approximately $106.5 million. Kimbell has granted the underwriters an option to purchase up to 900,000 additional common units at the public offering price less the underwriting discount and commissions.
Investors receive a 10.29% distribution. Citigroup has a Buy rating with a $24 target price. The consensus target is $23.67. Friday’s close was at $18.27, in a 52-week trading range of $12.68 to $20.08.
USA Compression Partners
This company posted huge third-quarter results last week. USA Compression Partners L.P. (NYSE: USAC) is a growth-oriented Delaware limited partnership that provides natural gas compression services in terms of total compression fleet horsepower.
The company offers compression services to oil companies and independent producers, processors, gatherers and transporters of natural gas and crude oil, as well as operates stations. It primarily focuses on providing natural gas compression services to infrastructure applications, including centralized natural gas gathering systems and processing facilities.
The company’s stellar report for the third quarter highlighted total revenues of $179.6 million, compared to $158.6 million for the year-ago period. Net income was $9.6 million, up from $4.1 million year over year. Net cash provided by operating activities was $49.2 million, compared to $45.3 million a year ago.
Investors take home an 11.67% distribution. Mizuho’s Neutral rating includes an $18 target price, while the consensus target is $17.50. The shares closed above both levels Friday at $18.27.
These four top companies offer reasonably safe and reliable distributions and are solid players in the energy infrastructure and royalty arena. Investors looking for solid total return potential can do well owning these MLP leaders. Note though that MLP distributions may contain return of principal. Investors looking to avoid the pesky K-1s can always purchase shares in the ALPS Alerian MLP exchange-traded fund (NYSE: AMLP) and receive a form 1099 instead.
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