2023-03-07 12:54:32 ET
Kimbell Royalty Partners ( NYSE: KRP ) +1.1% in Tuesday's trading as KeyBanc upgraded units to Overweight from Sector Weight with a $21 price target, reflecting its conviction on 2023 production given increased scale in the Permian Basin and an improving leverage profile, following relative weakness in 2022.
KeyBanc's Tim Rezvan said he has "high conviction" on near term royalty production from Kimbell ( KRP ), as a result of the increasing pivot to the Permian Basin and a low 12% base decline rate.
Another key factor in the upgrade is the improvement in Kimbell's ( KRP ) liquidity and leverage profile following the issuance of 6.9M units in November to fund the cash portion of the Hatch acquisition, according to Rezvan.
Kimbell's ( KRP ) balance sheet strength and liquidity "used to be negative differentiators... but management has addressed these shortfalls, further supporting our decision to raise our rating," Rezvan wrote.
The KeyBanc analyst also downgraded Black Stone Minerals ( NYSE: BSM ) to Sector Weight from Overweight, also with a $21 PT, saying it has a more cautious view on royalty production given heavy natural gas exposure.
Rezvan said he is concerned about reduction in Haynesville shale activity anticipated in H2 2023 and FY 2024.
Weak near-term natural gas prices likely will weigh on Kimbell Royalty Partners' ( KRP ) 2023 results, Elephant Analytics writes in an analysis posted recently on Seeking Alpha .
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Kimbell Royalty Partners raised, Black Stone Minerals cut at KeyBanc