Greetings, and welcome to the Kimbell Royalty Partners Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you, sir. You may begin.

Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the third quarter 2019. This call is also being webcast and can be accessed through the audio link on the Events & Presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, November 7, 2019. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call, which, by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to today's press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings press release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners' Chairman and Chief Executive Officer. Bob?

Thank you, Rick, and good morning, everyone. I'm here with several other members of our senior management team, including Davis Ravnaas, our President and Chief Financial Officer; Matt Daly, our Chief Operating Officer; and Blayne Rhynsburger, our Controller. I would like to begin by discussing our record-breaking performance in the third quarter. Then I'll ask Davis to cover our financial performance and review our updated guidance. After that, we'll take your questions. This was an excellent quarter, generating record high revenue, production and consolidated adjusted EBITDA and further proving the strength of our business model and strategy. The sequential production growth in the third quarter of 8% was entirely organic, which is a testament to the high degree of activity on our acreage, coupled with our best-in-class PDP decline rate. We remain very pleased with the cash flow generation, production stability and growth potential across our asset base. In addition, revenue growth, particularly year-over-year, reflects strong performance from acquisitions made in the past 12 months despite lower realized commodity prices. In addition, in the third quarter, we had receipts of nearly $1 million in lease bonuses. Based on our strong third quarter results and expectations for the remainder of the year, we are raising our Q4 2019 production guidance. Our production in the third quarter was very strong. Average run rate daily production was 12,785 Boe per day, a new record. Total production for the quarter was 14,838 Boe per day, which includes 2,053 Boe per day relating to prior period production recognized in Q3. Davis will comment further in his section about the realized pricing and prior period production. Taking a closer look at our business model, it is important to point out that we maintain a broad, stable and diverse portfolio of royalty assets across all the major…

Thanks, Bob, and good morning, everyone. I will start by reviewing our record-breaking production in the quarter, followed by a recap of our financial results before discussing our 2019 guidance update. As Bob mentioned, Q3 average run rate daily production was 12,785 Boe per day, a robust 8% quarter-over-quarter growth rate. The revenue mix of this production was approximately 64% liquids, 57% from oil and 7% from NGLs and 36% from natural gas. On top of this record production, we received an additional 2,053 Boe per day of production, reflecting prior period adjustments related to the company receiving additional production data on wells that came online very late in Q2 as well as production that we proactively discovered was in suspense, specifically related to some Oxy-operated wells in the Permian. We have hired a new resource in our land department to spend virtually all of his time searching for production and cash that is in suspense across our massive acreage footprint, and we expect this to continue to unlock value for the company. So far this year, we have found over $600,000 in suspense and we believe this will be an ongoing lucrative effort for us over time. Please remember that as we find production in suspense, we not only get a nice catch up payment, but we also get ongoing and future production payments as these wells continue to produce. So it's not just a one-off effect. This is one of the ways in which we're unlocking value from our massive and diverse asset base for our shareholders. We also view this as a testament to our conservative accrual estimates. Interestingly, we see other companies report prior period true-ups that are negative, more often than not, not positive as ours was for the quarter. Total third quarter revenues increased…

[Operator Instructions] Our first question comes from the line of John Freeman with Raymond James.

Davis, if you could just give a little bit more color and detail on this topic of sort of the prior period production revisions? And I guess more importantly, kind of this suspense payment, I guess, retrieval type process. I guess, just sort of like examples of kind of how it happens, steps that you can take to kind of be able to recoup it if there's like things internally that can be done to kind of accelerate the process? Just some additional color because we're definitely -- I mean, it's a positive surprise, we definitely have not seen this or expected it?

Yes. Very glad you asked about it, John. So anybody who's been in the royalty business for a long time and has diversified portfolios kind of knows that when you buy a big portfolio of assets with a big footprint, there's always positive surprises and there's very seldomly negative surprises because everything we buy is already in pay status. So the operators have already done title opinions. So very often, you don't get negative news. The positive news is you own things that you don't know that you own. So operators are required by law to make -- if we send them a letter asking them if there's anything that they haven't suspense on us, they're required by law to get back with us and tell us that, yes, we couldn't really square title here. But if you can help us cure that issue, we can put you in pay status on certain opportunities. So we've tried to keep G&A for the company incredibly low since we've gone public, and we have a very lean staff. But with the addition of -- just the way we've grown over the last couple of years, getting to a critical mass now where we could hire additional resource, we hired a landman [ph] who's really doing a much better job than we even expected him to. And he's just pounding these operators with letters saying, "Look, is there anything in the Haymaker Acquisition, anything for Kimbell legacy, anything for Phillips, these huge diverse millions of acres portfolios" and we're already getting just a bunch of responses from them saying, yes, we've had these wells in suspense for 2 years, and if you can help us cure title, we'll send you some payment. So, it's hard to say -- it's hard to quantify that going forward. But I'd say that of the $600,000, we've already found -- I mean, is that like the last 2 months.

Yes.

Yes. That's just two months of work, and there's another like 70 operators who have not even responded to us that we're going to have to kind of hammer on to. But I think we're going to kind of continue to uncover additional revenue streams going forward. It's tough for me to quantify what that might be. But I think it could be as much as $0.5 million a quarter or something like that going forward. Again, difficult to predict because it's early stages. And the other thing I'd say is, I'll throw a bone to one of our peers. Blackstone Minerals does a terrific job of this. They've got a much larger company and therefore, a larger staff. They make a big effort to be proactive with managing their minerals. And really, this is something that we're only now kind of getting into. So, it's -- we're hopeful that it's going to continue to create kind of some nice positive news for us in the future.

That's great. And then on the quarter, the lease bonus, again, was really strong, which continues to be surprising, given just kind of the overall commodity environment we're in, and you had the $1.5 million last quarter, another $1 million this quarter. And I guess, a couple of thoughts on that. Is that still predominantly driven by the Haymaker Properties? And then just sort of what, if anything, you're seeing on the lease bonus side as we kind of finish the year here?

I'll let Matt answer that.

John, It's Matt Daly. So this quarter, the bulk of the lease bonus, about $0.5 million was from the KRP legacy assets. This is in Howard County operator called Cordero Energy Resources. That's about $0.5 million. And then we had about $200,000 in McKenzie County in the Bakken, about $100,000 in Ward County for Marathon and the rest of them are sort of relatively small lease bonuses. But I'd say across the board, both Haymaker as well as KRP legacy.

Yes. So John, good question, too. I mean, how do we model out? I'm trying to kind of put myself in your shoes. How do we model out the future lease bonuses? I mean, gosh -- I mean, what do you guys think? I mean, there's going to be some quarters where it's basically nothing. And then some quarters, it's $1.5 million to make you guys kind of looking around the room. Do you guys like $0.5 million to $1 million a quarter, something like $0.5 million a quarter, I didn't want to say that. It's tough to guess. But I mean, I'd be conservative, maybe halfway between $250,000 and $500,000 a quarter. Let's call it, $375,000 a quarter on average is kind of what we would expect. Bob, does that sound reasonable to you too?

Yes, yes.

That's great. That helps a lot. Congrats on a great quarter.

Yes. One more thing I'll mention just because we think it's pretty imminent. We're getting pretty close to signing a PSA for an acquisition, and this will be announced, obviously, publicly, but a PSA for an all-stock deal in the Eagle Ford. So it's about 84% oil production. So anyway, that should be positive. It's kind of in the $30 million range. So hoping to announce that shortly. We had a call this morning from someone who was complaining that because of these new Haynesville wells that came online, we're now getting gassier. And so my response was, it's not our fault that people are drilling gas wells on our properties, and do they want us -- do they want us to send the money back, so that we're not getting gassier. I mean, it's a good problem to have. And -- but my counterpoint, the reason I'm bringing up this other deal is that, that oil cut there should help with the oil mix and alleviate concerns, I think, on that front.

[Operator Instructions] As there are no further questions left in the queue. I would like to turn the floor back over to Mr. Bob Ravnaas for any closing remarks.

We thank you all for joining us this morning. I look forward to speaking with you again when we report fourth quarter results. This completes today's call. Thank you, everyone.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.