Kimbell Royalty Partners, LP Fair Value Disclosure
NOTE 5—FAIR VALUE MEASUREMENTS
The Partnership measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the levels of the fair value hierarchy noted below. The carrying values of cash, oil, natural gas and NGL receivables, accounts receivable and other current assets and current and long-term liabilities included in the consolidated balance sheets approximated fair value at December 31, 2025 and 2024 due to their short-term duration and variable interest rates that approximate prevailing interest rates as of each reporting period. As a result, these financial assets and liabilities are not discussed below.
| ● | Level 1—Unadjusted quoted market prices for identical assets or liabilities in active markets. |
| ● | Level 2—Quoted prices for similar assets or liabilities in non-active markets, or inputs that are observable for the asset or liability either directly or indirectly, for substantially the full term of the asset or liability. |
| ● | Level 3— Measurement based on prices or valuations models that require inputs that are both unobservable and significant to the fair value measurement (including the Partnership’s own assumptions in determining fair value). |
Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Partnership recognizes transfers between fair value hierarchy levels as of the end of the reporting period in which the event or change in circumstances causing the transfer occurred. The Partnership did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements during the years ended December 31, 2025 and 2024.
The Partnership’s commodity derivative instruments are classified within Level 2. The fair values of the Partnership’s oil and natural gas fixed price swaps are based upon inputs that are either readily available in the public market, such as oil and natural gas futures prices, volatility factors and discount rates, or can be corroborated from active markets.
The following tables summarize the Partnership’s assets and liabilities measured at fair value on a recurring basis by the fair value hierarchy:
Fair Value Measurements Using | |||||||||||||||
Level 1 | Level 2 | Level 3 | Effect of | Total | |||||||||||
(In thousands) | |||||||||||||||
December 31, 2025 | |||||||||||||||
Assets | |||||||||||||||
Commodity derivative contracts | $ | — | $ | 9,686 | $ | — | $ | (595) | $ | 9,091 | |||||
Liabilities | |||||||||||||||
Commodity derivative contracts | $ | — | $ | (623) | $ | — | $ | 595 | $ | (28) | |||||
December 31, 2024 | |||||||||||||||
Assets | |||||||||||||||
Commodity derivative contracts | $ | — | $ | 4,476 | $ | — | $ | (1,506) | $ | 2,970 | |||||
Liabilities | |||||||||||||||
Commodity derivative contracts | $ | — | $ | (2,640) | $ | — | $ | 1,506 | $ | (1,134) | |||||
Asset and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis in certain circumstances. These assets and liabilities can include mineral and royalty interests acquired in asset acquisitions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 12, 2019 | |
| 2017 | Mar 9, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.