Is Kimbell Royalty Partners (KRP) stock Halal?

Kimbell Royalty Partners is a limited partnership focusing on oil and natural gas royalty interests across the United States. Its primary purpose is to generate income through the acquisition and management of these royalty properties, which are collected from a diverse range of operators. Kimbell operates by owning mineral interests that grant it a percentage of the revenue generated from the production of oil, natural gas, and natural gas liquids on its properties, without the responsibility of production costs. Before any of that matters to a Muslim investor, one question comes first: is Kimbell Royalty Partners stock Halal?

Is Kimbell Royalty Partners Shariah compliant?

For a resources company like Kimbell Royalty Partners, AAOIFI Shariah Standard No. 21 has little quarrel with the product; the scrutiny falls on the financing. Heavy machinery and long project cycles are usually funded with debt, and the standard tolerates interest bearing borrowing only below 30% of market capitalisation.

Does Kimbell Royalty Partners pass the business activity test?

The activity screen is only part of the picture this month: Kimbell Royalty Partners currently fails the non-permissible income and interest-bearing debt screens, so the overall verdict is not compliant regardless of the business itself. The activity itself, extracting and selling resources, raises no Shariah objection; the scrutiny belongs to the financing.

Is Kimbell Royalty Partners' income Halal?

No. Kimbell Royalty Partners' income from impermissible sources currently exceeds AAOIFI's 5% revenue ceiling, which makes the stock non-compliant on this screen regardless of the others. The screen is reassessed monthly, so the status can change when new financial statements arrive.

Does Kimbell Royalty Partners meet AAOIFI's debt and investment ratio requirements?

Not in full. Interest bearing debt currently exceeds the 30% cap, while the other ratio stays within it. One breach is enough to fail the screening; the ratios are reassessed monthly under our Shariah Supervisory Board.

Tabadulat is an ADGM regulated brokerage whose license covers Shari'a Compliant Regulated Activities, as the FSRA permission names them. New to the terminology? Gharar and Maysir, Sukuk, Zakat and purification are all explained in plain English.

New to the four screens? Read AAOIFI Standards Explained: What Makes a Stock Halal?