Kimbell Royalty Partners, LP (NYSE:KRP) Q4 2023 Earnings Conference Call February 21, 2024 11:00 AM ET
Company Participants
Rick Black – IR
Bob Ravnaas – Chairman & CEO
Davis Ravnaas – President & CFO
Blayne Rhynsburger – Controller
Matthew Daly – COO
Conference Call Participants
Neal Dingmann – Truist Securities
Jon Mardini – KeyBanc Capital Markets
Derrick Whitfield – Stifel
Paul Diamond – Citi
Grant Adkins – Raymond James
Aaron Bilkoski – TD Cowen
Operator
Welcome to the Kimbell Royalty Partners Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Rick Black, with Investor Relations. Thank you, sir. You may begin.
Rick Black
Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners conference call to review financial and operational results for the fourth quarter 2023 ended on December 31, 2023.
This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, February 21, 2024. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.
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 considered forward-looking statements made pursuant to the safe harbor’s provision of the Private Securities Litigation Reform Act of 1995. We will be making statements that are forward-looking 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 earnings release for our disclosure on forward-looking statements. These factors and other uncertainties and risks are detailed 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 release. Kimbell assumes no obligation to publicly update or revise any forward-looking statements.
And with that, I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners’ Chairman and Chief Executive Officer. Bob?
Bob Ravnaas
Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call this morning. With me today are several 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.
We are very pleased to announce another record year for Kimball. In 2023, we completed our largest acquisition to date, which was immediately accretive to distributable cash flow per common unit and the acquisition substantially bolstered the Permian as our leading basin in terms of production, active rig count, DUCs, permits and undrilled inventory.
In addition, we increased the borrowing base and elected commitments on our revolving credit facility to $550 million, further enhancing our liquidity and conservative capital structure. We are also very pleased to report that we paid out $1.73 per common unit in tax advantage quarterly distributions during 2023 and paid down approximately $49.9 million on our credit facility.
We ended the year with a strong fourth quarter that reflected significant sequential organic growth over the third quarter due to a number of high interest wells coming online in the Permian and Haynesville. We expect to continue this operational momentum as we progress through 2024, given that our rig count remains near record highs with 98 rigs actively drilling in the U.S.
Turning now to production growth. It is remarkable to reflect on our growth since our IPO, as we have now grown production from 3,116 BOE per day to 24,332 BOE per day, an increase of 681%. As evidenced by our significant acquisition activity in 2023, we expect to continue our role as a major consolidator in the highly fragmented U.S. oil and natural gas royalty sector. And we estimate the total size of the market to be nearly $1 trillion. As I’ve stated in the past, there are only a handful of public entities in the U.S. and Canada that have the financial resources, infrastructure, network and technical expertise to complete large-scale multi-basin acquisitions.
We believe that we are still in the early stages of this consolidation and will actively seek out targets that fit within our acquisition profile. We are very excited about the opportunities to expand in the future and deliver unitholder value for years to come.
I’ll now turn the call over to Davis and Matt.
Davis Ravnaas
Thanks, Bob, and good morning, everyone. I’d like to start by reiterating the sentiment that Bob expressed. This was a great year for Kimbell as we finished 2023 with a very strong fourth quarter as well as setting new records in several of our financial and operating metrics.
I’ll start by reviewing our financial results from the fourth quarter, beginning with oil, natural gas and NGL revenues of $83.9 million, an increase of 21.2% compared to the third quarter and a record for the company.
In the fourth quarter, we generated record daily production that marked another significant milestone for Kimball. Run rate production for Q4 2023 was a record at 24,332 BOE per day on a 6 to 1 basis which reflected 3.4% organic growth from Q3 2023 run rate production. As of December 31, 2023, Kimbell’s major properties had 807 gross or 4.55 net DUCs and 727 gross or 3.83 net permitted locations on our acreage.
Not including minor properties, which we estimate could add an additional 15%. In addition, we exited the quarter with 98 rigs actively drilling on our acreage, which represents approximately 16.3% market share of all land rigs drilling in the continental United States.
On the expense side, fourth quarter general and administrative expenses were $9.1 million, $5.8 million of which was cash G&A expense. Excluding the impact of approximately $0.8 million and integration-related expenses associated with the third quarter acquired production, cash G&A per BOE was $2.25. Fourth quarter net income was approximately $17.8 million of net income attributable to common units was approximately $9.8 million as compared to $18.5 million and $13.6 million, respectively, from last quarter.
Total fourth quarter consolidated adjusted EBITDA was a record at $69 million which was up approximately 24% from last quarter. You will find a reconciliation of both consolidated adjusted EBITDA and cash available for distribution at the end of our news release.
Today, we announced a cash distribution of $0.43 per common unit for the fourth quarter. This represents a cash distribution payment to common unitholders that equates to 75% of cash available for distribution, and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell’s secured revolving credit facility.
Moving now to our balance sheet and liquidity. As a reminder, on December 8, we increased the borrowing base and aggregate commitments under our secured revolving credit facility from $400 million to $550 million in connection with the fall redetermination. At December 31, 2023, we had an approximately $294.2 million in debt outstanding under our secured revolving credit facility. We continue to maintain a conservative balance sheet with net debt to trailing 12-months consolidated adjusted EBITDA of 1 times.
Kimbell had approximately $255.8 million and undrawn capacity under its secured revolving credit facility as of December 31. We are very comfortable with our strong financial position, the support of our expanding bank syndicate and our financial flexibility. We are also releasing 2024 guidance, which includes daily production at its midpoint of 24,000 BOE per day. We feel very confident about the prospects for continued robust development given the number of rigs actively drilling on our acreage as well as the commentary we are hearing from several operators about their expected development activity in 2024, especially in the Permian.
We remain very bullish about our industry and our company as we see a long horizon for continued growth and opportunities to enhance shareholder value.
I’d like to thank the incredibly hard-working, dedicated and talented team here at Kimball for continually driving growth and enhancing the value of our organization for all stakeholders. In addition, we work with the best advisers and financial institutions in the business. And we greatly appreciate these partnerships that contribute to the company’s success.
With that, operator, we are now ready for questions.
Question-and-Answer Session
Operator
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Neal Dingmann with Truist Securities. Please proceed with your question.
Neal Dingmann
You all just talk about activity and what you’re thinking for this year and focus area. Thank you. I think I was on mute. Joe, a nice quarter. My question is around —
Davis Ravnaas
Hey, Neal. You might be on mute. Operator?
Operator
Okay. We can go to the next question while we wait for Neal and bring them back in. Our next question is from Tim Rezvan with KeyBanc. Please proceed with your question.
Jon Mardini
Hi. This is Jon Mardini on for Tim. You mentioned earlier in your press release –
Davis Ravnaas
Hi.
Jon Mardini
Hey, you mentioned earlier that the industry is in early stages of consolidation that you’re excited about the opportunities to expand. Can you just talk about what you’re seeing in the marketplace now and why you’re so confident?
Davis Ravnaas
Sure. Happy to do that. I would say that every year since our IPO and even before that, we’ve been surprised by M&A volume. Last year was an enormous year across the entire sector for consolidation within Minerals. Continues to surprise us to the positive. We’re seeing more teams. Most recently, a trend we’ve seen is a lot of family offices that are getting increasingly involved in minerals. That’s driving consolidation, particularly amongst smaller deals that are being rolled up into the larger portfolios.
We are regularly in contact with those groups. We’re meeting new groups constantly. Nearly all of them have a plan to exit at some point in the future. And so that’s why we continue to believe that larger institutional buyers like ourselves, specifically the public companies will continue to benefit from a robust seller pipeline.
It’s tough getting deals done in this space, but we continue to see that trend as being a positive one. We think it will continue, and we think it will grow as things continue. I mean if you look at just the overall market that’s been captured by the public companies, it’s still de minimis, low single digits of the overall market size. So we just think it’s inevitable that consolidation continues.
Jon Mardini
No, that’s great. Thanks for the details. And so the Permian is clearly your organic growth opportunity today. You talked about this a little bit, but can you just expand on what you’re saying from operators and in terms of activity and cycle times. Are you seeing any stock builds or is activity still proceeding at the normal rate?
Davis Ravnaas
Yeah. Good question. So we feel better today than we ever have about the near-term catalyst for development on our acreage. So we have net DUCs and permits of 8.4 compared to 5.8 needed to maintain flat production on our asset profile. So that would suggest that we have ample opportunity here to not only keep production volumes flat, but particularly for them to grow.
That being said, everybody is aware of what’s been happening in the natural gas space recently. You’re correct that we have pivoted, not necessarily deliberately, but we have pivoted and just benefited from some really nice acquisitions in the Permian Basin over the last two years. So our companies become increasingly oil-weighted, were less dependent on line and specifically the Haynesville for our growth versus where we were a few years ago.
I think that’s a good place to be right now, just given the dynamics in the natural gas space, I kind of wish that some of these operators would bring back drilling to a certain extent and maybe keep the gas in the ground on our acreage and theirs until natural gas accommodates a more positive price here.
But we think that the Permian producers are going to keep production flat as a general theme, some will be growing production. I think our acreage will grow better than the average producers will, just by evidence of the number of DUCs we have relative to our PDP decline maintenance level. So feel good about the Permian the Haynesville is a smaller position that we have today, but still feel good about the Haynesville. We have a lot of DUCs there. So overall, feel good about the direction of the company.
I think what you see in our guidance like always, is a conservative view on development. It’s just always challenging as a mineral owner with no developmental control over the assets to pinpoint exactly what growth is going to be, particularly in such a volatile environment like we’re in today on the natural gas side and even oil but more recently. So a conservative guide, feel good about it though. We don’t think it’s unduly conservative and feel very confident in our assets in the near term horizon for them.
Jon Mardini
No that’s great. Thanks for having that up. I’ll hand it back.
Operator
Our next question comes from Derek Woodfield with Stifel. Please proceed with your question.
Derrick Whitfield
Thanks and good morning, all.
Davis Ravnaas
Good morning, Derrick.
Derrick Whitfield
Hey, good morning. Given the considerable M&A we’ve witnessed across the Permian and Haynesville over the last six months. I wanted to ask your thoughts on the impacts it could have on your business?
Davis Ravnaas
That’s a great question. Immediate reaction to that is that we’ll see a more disciplined approach to growth. So I think if I had to guess, I’d say that growth will be — we will feel more confident about those combined companies on a consolidated basis for their ability to maintain production levels. I think that what you’ll see less of is the hyperbolic shale growth of prior years, unless, of course, we see some sort of material macro event that increases oil and gas prices. We tend to see that happen pretty quickly on our acreage.
But overall, we’re absolutely sans the [ph] consolidation. We get that question all the time. And we view it as we’d rather have our assets developed by folks with stronger balance sheets, with more liquidity in their stock, access to capital markets, investment-grade ratings, all those wonderful things that support a healthy operator. We continue to believe that, that ongoing consolidation story on the operator side will ultimately benefit mineral owners like ourselves and everyone else.
Derrick Whitfield
Makes sense. And then for my follow-up, I wanted to focus more specifically on Long Point. Now that you’ve onboarded these assets, are you seeing more ground game or collection opportunities and by collection opportunities. I’m speaking to operate payment, et cetera.
Davis Ravnaas
Sorry, just to clarify, are you asking, are we seeing more small-scale acquisition opportunities on the mineral front? Or I’m not misunderstanding the question?
Derrick Whitfield
No, you’ve got it. That’s correct. So more mineral opportunities based on the new assets you’ve onboarded through Long Point? And then secondarily, just collection, revenue collection opportunities? Are you seeing any situations where they were operated under payment just now that you’ve got the assets in-house?
Davis Ravnaas
Yeah. Great question. Very happy with the ease at which we were able to integrate the Long Point asset. They have a phenomenal team and have been incredibly well organized and very supportive of, frankly, just getting us fully integrated and getting all the cash to where it needs to go. Not seeing necessarily a pickup in the smaller M&A game. We continue to be disappointed by the price — the clearing prices for smaller acquisitions. I was kind of speaking earlier to the fact that there just continues to be more and more attention to the space, more money coming into it, new teams constantly coming in.
And what I think that’s done is made ground game acquisitions, smaller deals, more expensive. Candidly, some of the larger opportunities that we’ve seen over the last couple of years have been counterintuitively more efficient from a pricing perspective, larger packages having better pricing than smaller ones, which just seems totally counterproductive or counter intuitive to anybody from a corporate finance standpoint.
So I wouldn’t say that the deal definitely went to an increase in smaller deal volumes. But overall, just continue to be happy with how that asset has been developed. And we continue to believe that it’s going to increase in production value. Just by virtue of the number of DUCs and permits on the properties over the next couple of years.
Derrick Whitfield
Very helpful. Thanks for your time.
Davis Ravnaas
Thank you.
Operator
Our next question comes from Neal Dingmann with Truist Securities. Please proceed with your question.
Neal Dingmann
Good morning, guys. Nice quarter. I apologize for the prior background noise in the office. My first question is also on your M&A. It sounds like you all continue to believe there’s ample opportunity. It certainly seems to me as well. And I’m just wondering will you strategically target mostly Permian assets on the heels of your recent successful deal or you all just look at the most accretive. I know you’ll continue to see tons of deals out there. So I’m just wondering how you think about approaching things this year?
Davis Ravnaas
Yeah. Excellent question. Again, one of the more common questions that we get. Strength of ours that’s played out over the last 27 years of us doing this is not having a geographic restriction to what we buy or even a commodity restriction on what we buy. It’s hard enough to make money in this business. It’s a competitive business, minerals. It’s even harder when you restrict yourself to one county or two counties or is it just one basin, I think it can be very challenging with some exceptions, but I think it makes your life more difficult when you’re precluding yourself from looking at the totality of what’s possible to buy as opposed to focusing on one individual basin.
So consistent with our strategy in the past, we believe that, first and foremost, our job when looking at acquisitions is to find assets that generate the best risk-adjusted returns for our investors. And we’re agnostic as to where those opportunities present themselves. So it just so happened in the last couple of years, the Permian has been really hot. There’s been a lot of exits in that space. We have obviously benefited from that. But then going back four, five years ago with our Haymaker acquisition and others, the Haynesville looks an excellent basin for us.
So the these basins tend to be cyclical in nature, and we like to be there opportunistically and try to keep our minds as open as possible on what makes the most sense for us to acquire. So slow start to this year. I mean I will say that. We’re not necessarily seeing huge packages right now that are particularly interesting to us. But that’s not something that surprises us. We’ve seen that same trend over the last couple of years. We — frankly, at this time last year, we thought that 2023 was going to be a quiet year and ended up being the most active year in our company’s history.
So things can change quickly. I think what you’ll see is that a lot of the folks holding natural gas minerals are going to sit on their hands until prices improve to state the obvious. So if I had to guess at this point, I’d say that the balance of the year looks more — it looks more addressable from an oil-weighted perspective than perhaps gas. So I’ll just add that context.
Neal Dingmann
No. I understood. I really like the way you all look at that. And the second question is on activity specifically. Obviously, you can see the rig count seems to be holding up quite well, but just wondering how you all would describe sort of overall expectations for your operators’ remainder of the year besides the attractive, what is it, nearly 9 DUCs and net permitted locations you all talked about?
Davis Ravnaas
Yeah, excellent. And not to kind of repeat a little bit of what I said earlier. I think on balance, what we’re hearing from operators is that they want to maintain production volumes, at least on the oil side in the Permian specifically.
I think on the natural gas side, we’re seeing a little bit of a mixed bag. Some operators when we all see the headlines in the last couple of days about some operators cutting CapEx, cutting production guidance, which we think makes incredibly good sense in this natural gas price environment. But we may see a little bit of a less production growth or less of an ability to replace production on the maintenance front on the natural gas side.
But again, I feel very confident about the oil-weighted asset base roughly, let’s say, just over 50% of our rigs running right now in our acreage are in the Permian. And then we’re pretty well diversified after that with 17% in the Mid-Con, 13% in the Haynesville, 8% of the Eagle Ford, obviously, oil weighted, 6% of the Williston oil weighted and so on and so forth.
So I think what you’ll see is that operators overall are going to — what we’re hearing is that they’re going to maintain production volumes, maybe slight amounts of growth just depending on what’s going on with their drilling programs. But I think that because we’ve happened to have acquired large assets in the last two years with a disproportionate number of DUCs relative to that maintenance production level, we would expect that our portfolio will look quite good on a relative basis to perhaps lower 48 growth overall.
And again, we can’t guarantee that, but we feel we feel very confident about near-term development on our asset and the ability to replace decline production barrels.
Neal Dingmann
Very love to hear that activity. Thank you all.
Davis Ravnaas
Thank you.
Operator
Our next question comes from Paul Diamond with Citi. Please proceed with your question.
Paul Diamond
Thanks. Good morning, all. Thanks for taking my call.
Davis Ravnaas
Good morning.
Paul Diamond
Good morning. I just want to touch quickly on the kind of the opportunities that you guys are seeing for further growth. Is there — as the market sits right now, kind of an ideal scale of the deals you’re looking at? Are those — do those family offices need to get to a certain kind of level before it makes sense for you guys to really talk to? Or is it more just kind of like maintaining that conversation and seeing where things go in the future?
Davis Ravnaas
Yeah. Great question. I haven’t gotten that question addressed in that specific way. I wouldn’t say it’s necessarily the scale of the portfolio size that’s the most important characteristic of making — making assets appealing to ourselves and other larger institutional buyers. I’d say it’s more a sign of waiting until the assets are at a balance of cash flow accretion today, right? We’re not going to buy something for 10 times cash flow that’s immediately dilutive to our cash flow per unit. But then there has to be enough upside on the asset to where it’s not just a declining one.
And the reason for that is that obviously, it could be cash flow accretive today, if you buy something at three times cash flow and then obviously dilutive in a year as the asset runs out without the ability to replace the inventory.
So when we continue to focus folks on that are out there working hard every day, putting together mineral portfolios, is try to think about the exit as you’re putting the assets together, try to think about putting that right balance together of cash flow and drilling inventory, so that somebody like us can pay the price that they need to justify the returns that they want.
And we believe in win-win outcomes. We want the folks that we buy deals from them to make money. And they want us to make money. And that’s — and the reason we say that is because a lot of what we do is buy from repeat sellers and have a report with them or they know that we’re going to do what we say we’re going to do. And — we know that the quality of title and asset that they’re delivering to us is going to be solid because we’ve gone through the diligence process with them before.
So size is relevant. I wouldn’t say it’s as relevant as what I was just alluding to. But on the size aspect, it’s been really tough to find deals that make sense for us, candidly, just from a pricing perspective under $25 million or $50 million. It just seems like that size range, anything under that just attracts an incredible amount of attention from buyers and we’ve just been priced out of those deals.
And I think you’ll see that not just for ourselves but also some of the other public companies, where we’re just a little bit surprised that it looks like some people are just trying to put money to work. And if the expectation is that they can outbid us today for a $25 million asset and maybe put together four of them and then try to bring that to us is a $100 million deal, that’s not going to make a mathematical sense to us.
So continue to be surprised by how competitive the smaller opportunities have been and continue to be pleased by how attractively priced some of the larger deals are.
Paul Diamond
Good. Makes perfect sense. Just a quick follow-up. If I just, if I just look back into a math on the existing permits and DUCs versus production guidance growth. Should I think about that as more of an expectation that you have a similar level of DUCs turned in line and the Permian is kind of progressing as normal, seeing about 40% — like 38%, 40% of the existing going through? Or is it more just in an expectation that there might be some increased volatility in the markets this year. And maybe–
Davis Ravnaas
I think it’s a little bit of both. And I like the way that you framed that. So historically speaking, we expect close to 100% of our net DUCs to be completed over the next, let’s call it, 12 to 18 months, but it’s probably closer to 12 months.
On the permit side, I don’t disagree with the percentage that you just framed there. I don’t have exactly in front of me what historical averages have been on permits, but that sounds reasonable to me. I think that what you’re seeing from us and maybe this is what you’re driving at, is perhaps it looks a little bit conservative on our guidance given that ratio of net DUCs and permits on our acreage to the maintenance level needed to maintain flat production.
Are we being unduly conservative? I just think that in this market environment, we’d rather look at that volatility and say we want to put something out there that makes sense on guidance. We don’t want to be unduly conservative, but we can’t guarantee that a natural gas price environment like this or if oil starts to turn over this year, we don’t want to be overpromising production to our shareholders.
And so I think that what you see is us that’s trying to be — trying to tow that line of giving realistic guidance for the next 12 months and not being unduly conservative but also keeping in mind, obviously, the natural gas was, what, $1.50 a couple of days ago.
So it’s a tough environment, specifically right now to be providing guidance, but I think that’s something that’s going to be tough for any mineral owner, obviously, that doesn’t have developmental control over their assets.
Paul Diamond
Got it. Understood. I appreciate the time. I’ll leave it there.
Davis Ravnaas
Thank you.
Operator
Our next question comes from Grant Adkins with Raymond James. Please proceed with your question.
Grant Adkins
Hey, guys. Thanks for taking the call.
Davis Ravnaas
Good morning, Grant.
Grant Adkins
So this is going to be kind of on the macro side. But given the kind of activity reductions we’ve seen from some operators in both Appalachia and the Haynesville. Do you all see that as kind of I guess you kind of mentioned that you don’t really want necessarily those assets to be drilled up right now, but how do you think that affects your kind of gas production or does it moving forward into ’24?
Davis Ravnaas
I’m not too worried about gas production or asset in 2024, just because of the amount of DUCs that we have in gas basins currently. So I think what you’ll see is that those alone with some permits will be able to keep our production more or less flat, absent even increased drilling on the acreage. That’s really more focused on the Haynesville, which is now only let’s say, 13% of our rigs that are running today. So a little bit less relevant than it was for our business, even just a couple of years ago, which you enjoy is just kind of amazes me to look at how the portfolio has changed.
Appalachia, less significant portion of our production, obviously, so less focused on that. But what we are hearing overall from operators there is get maintenance production levels, are going to be what we’re going to see here over the next 12 to 18 months. So I don’t feel — your point well taken. I think that’s baked into our guidance and kind of echo some of the comments that I’ve made on previous questions, which is that we feel very good about our DUCs and permits relative to maintenance activity that needs to happen to keep production flat. But our guidance does reflect a realistic and conservative view of the fact that at a recognition that natural gas prices are very low and very volatile and therefore, difficult to predict in terms of activity levels, so.
Grant Adkins
Awesome. Thank you. And then a follow-up, this is going to shift gears a little bit. So you all have a pretty distinct advantage with the like tax structure on your distribution. The last announcement that 93% was non-taxable. Can you give any color on like what — where you expect that to be for the coming year, just like an average kind of what your tax yield is going to be there.
Davis Ravnaas
Blayne, do we have anything that we can share on that now? Or any thoughts on that? Blayne Rhynsburger is our Controller.
Blayne Rhynsburger
Yeah. So we used to give tax guidance going forward, and we stopped doing that just given the volatility of pricing. I would just say if you want to benchmark it, I would take what pricing is today and then you can kind of — it’s going to ride whatever natural gas and oil prices do for the rest of the year. So I would take whatever we have for Q4 and maybe use that as a benchmark and then whatever you think whatever the strip price of oil and natural gas is kind of — the movement of that is going to be what’s going to dictate what our tax shield is going to be.
Grant Adkins
Okay, awesome. Thank you, guys.
Davis Ravnaas
Thank you.
Operator
Our next question comes from Aaron Bilkoski, with TD Cowen. Please proceed with your question.
Aaron Bilkoski
Hi, good morning, guys. I know there’s been a lot of focus on this call around M&A. But I would say the one thing that I like about your business is that it can replenish itself organically? And my question is sort of on that front. I noticed that your Eagle Ford activity picked up quite a lot in Q4. I think it was up 5 or 6 rigs quarter-over-quarter. Do you have any color on what’s driving that?
Davis Ravnaas
That is an excellent question, Aaron. Good morning, by the way.
Matthew Daly
Yeah. Aaron, this is Matt Daly. I noticed that, too. The operators in the Eagle Ford is interesting. There’s only one public operator at EOG, the rest of the folks in the Eagle Ford are all private operators. So we had quarter-over-quarter, we had six rigs drop off the Permian but six rigs added to the Eagle Ford. So that was nice to see that sort of pop in the Eagle Ford drilling activity, but it’s mainly private operators there.
Aaron Bilkoski
Perfect I guess that’s the benefit of the diversified royalty business.
Davis Ravnaas
Thank you, Aaron.
Operator
This concludes our question-and-answer session. I would now like to turn the floor back over to management for closing remarks.
Bob Ravnaas
Thank you all for joining us this morning, and we look forward to speaking with you again next quarter. This completes today’s call.
Operator
Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines, and have a wonderful day.
