| ACQUISITIONS, JOINT VENTURE AND SPECIAL PURPOSE ACQUISITION COMPANY |
NOTE 4—ACQUISITIONS, JOINT VENTURE AND SPECIAL PURPOSE ACQUISITION COMPANY Acquisitions On May 17, 2023, the Partnership completed the acquisition of certain mineral and royalty assets held by MB Minerals, L.P. and certain of its affiliates (the “MB Minerals Acquisition”). The aggregate consideration for the MB Minerals Acquisition consisted of (i) approximately $48.8 million in cash and (ii) the issuance of (a) 5,369,218 OpCo Common Units and an equal number of Class B units representing limited partnership interests in the Partnership (“Class B Units”) and (b) 557,302 common units. The Partnership funded the cash payment of the purchase price with borrowings under its secured revolving credit facility. The assets acquired in the MB Minerals Acquisition are located in Howard and Borden Counties, Texas. The MB Minerals Acquisition was accounted for as an asset acquisition and the allocation of the purchase price was $60.8 million to proved properties and $74.9 million to unevaluated properties. On December 15, 2022, the Partnership completed the acquisition of certain mineral and royalty assets held by Hatch Royalty LLC (the “Hatch Acquisition”). The aggregate consideration for the Hatch Acquisition consisted of (i) approximately $150.4 million in cash and (ii) the issuance of 7,272,821 OpCo common units and an equal number of Class B units. The Partnership funded the cash payment of the purchase price with borrowings under its secured revolving credit facility. The assets acquired in the Hatch Acquisition are located in the Permian Basin and the Partnership estimates that the assets consisted of approximately 889 net royalty acres on approximately 230,000 gross acres. The Hatch Acquisition was accounted for as an asset acquisition and the allocation of the purchase price was $56.4 million to proved properties and $204.7 million to unevaluated properties. Joint Venture On June 19, 2019, the Partnership entered into a joint venture (the “Joint Venture”) with Springbok SKR Capital Company, LLC and Rivercrest Capital Partners, LP, a related party. The Partnership’s ownership in the Joint Venture was 49.3%. During the year ended December 31, 2022, the Joint Venture completed the sale of its royalty, mineral and overriding interests and similar non-cost bearing interests in oil and gas properties for a total purchase price of $15.0 million. Net proceeds distributed to the Partnership were $6.5 million during the year ended December 31, 2022, the majority of which was used to repay debt on the Partnership’s secured revolving credit facility. The Joint Venture was dissolved on November 1, 2022. Special Purpose Acquisition Company On July 29, 2021, TGR, the Partnership’s recently dissolved special purpose acquisition company and subsidiary, filed a registration statement on Form S-1 with the SEC. On February 8, 2022, TGR consummated its initial public offering (the “TGR IPO”) of 23,000,000 units (each a “unit” and, collectively, the “units”), including 3,000,000 additional units issued pursuant to the underwriter’s exercise in full of its over-allotment option, at $10.00 per unit, generating proceeds of approximately $230,000,000 and incurring offering costs of approximately $12,650,000, inclusive of $8,050,000 in deferred underwriting commissions. Each unit consisted of one share of Class A common stock, par value $0.0001 (the “TGR Class A common stock”), and one-half of one redeemable warrant. Each whole warrant was exercisable for one share of Class A common stock at a price of $11.50 per share. Certain members of our management and members of the Board of Directors were members of the sponsor of TGR, TGR Sponsor. TGR was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Under the terms of TGR’s governing documents, TGR had until May 8, 2023 (15 months from the closing of the TGR IPO) to complete the Business Combination, subject to TGR Sponsor’s option to extend such deadline by three months up to two times. In connection with the closing of the TGR IPO, TGR completed the sale of 14.1 million private placement warrants (the “private placement warrants”) to TGR Sponsor, which was a subsidiary of the Partnership, for a purchase price of $1.00 per private placement warrant, generating gross proceeds of $14.1 million. Each private placement warrant was exercisable to purchase for $11.50 one share of TGR Class A common stock. In addition, TGR incurred $12.7 million of fees and expenses, of which $8.1 million were deferred underwriting commissions that became payable to the underwriters solely in the event that TGR completed the Business Combination, which were included in deferred underwriting commissions on the accompanying unaudited interim consolidated balance sheet at December 31, 2022. In May 2021, prior to TGR’s IPO, TGR Sponsor paid $25,000 in exchange for the issuance of (i) 5,750,100 shares of TGR’s Class B common stock, par value $0.0001 per share (the “TGR Class B common stock”), and (ii) 2,500 shares of TGR Class A common stock. Additionally, in May 2021, TGR paid $25,000 to Kimbell Tiger Operating Company (“TGR Opco”) in exchange for the issuance of 2,500 Class A units of TGR Opco. Also in May 2021, TGR Sponsor received 100 Class A units of TGR Opco in exchange for $1,000 and 5,750,000 Class B units of TGR Opco. The shares of TGR Class B common stock and corresponding number of Class B units of TGR Opco (or the Class A units of TGR Opco into which such Class B units will convert) are collectively referred to as the “Founders Shares.” The Founders Shares would have been exchangeable for shares of TGR Class A common stock upon completion of the Business Combination on a one-for-one basis, subject to certain adjustments. Class A units and Class B units of TGR Opco were substantially similar, other than certain distribution rights, and were entitled to vote together as a single class on all matters submitted for stockholder vote. In determining the accounting treatment of the Partnership’s equity interest in TGR, management concluded that TGR was a VIE as defined by Accounting Standards Codification Topic 810, “Consolidation.” A VIE is an entity in which equity investors at risk lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, the party who has both the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, as well as the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the entity. TGR Sponsor was the primary beneficiary of TGR as it had, through its equity interest, the right to receive benefits or the obligation to absorb losses from TGR, as well as the power to direct a majority of the activities that significantly impacted TGR’s economic performance, including identification of a target for its Business Combination. As such, TGR was consolidated into the Partnership’s financial statements through TGR Sponsor. Proceeds of $236.9 million were deposited in a trust account established for the benefit of TGR’s public unitholders consisting of certain proceeds from the TGR IPO and certain proceeds from the sale of the private placement warrants, net of underwriters’ discounts and commissions and other costs and expenses. The proceeds held in the trust account were not available to be used by the Partnership at any time. A minimum balance of $236.9 million, representing the number of TGR units sold at a redemption value of $10.30 per unit, was required by the underwriting agreement to be maintained in the trust account. The proceeds held in the trust account were only permitted to be invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act that invest only in direct U.S. government treasury obligations. In connection with the trust account, the Partnership reported investments held in trust of $240.6 million on the accompanying unaudited interim consolidated balance sheet as of December 31, 2022. On May 22, 2023, as a result of TGR’s inability to consummate an initial business combination on or prior to May 8, 2023, and pursuant to the terms of its organizational documents, TGR redeemed all of its outstanding shares of Class A common stock included as part of the units issued in its initial public offering. The per-share redemption price for the TGR public shares was $10.57 and the Partnership remeasured and accreted through equity the redeemable non- controlling interest in TGR to its redemption value of $243.0 million and wrote off the deferred underwriting commissions through equity. The public shares of TGR ceased trading as of the close of business on May 8, 2023. As of the close of business on May 9, 2023, the public shares were deemed cancelled and represented only the right to receive the redemption amount. Following such redemption, TGR (along with TGR Sponsor) was dissolved in accordance with the terms of its organizational documents. There were no redemption rights or liquidating distributions with respect to TGR’s warrants, including the Private Placement Warrants held by TGR Sponsor, which expired worthless. TGR Sponsor waived its redemption rights with respect to TGR’s outstanding common stock issued before TGR’s initial public offering. The Class A common stock was redeemed on June 22, 2023 and the Partnership completed the dissolution and deconsolidation of TGR on June 30, 2023. The net non-cash impact of the deconsolidation of TGR was $1.6 million, which is included in the accompanying unaudited interim consolidated balance sheet as of June 30, 2023.
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