Viper (VNOM) Update - July 24

[dan_s]

SECOND QUARTER 2020 UPDATE

> Q2 2020 average production of 14,453 bo/d (24,508 boe/d) < Compares to my forecast of 22,000 Boepd for Q2.

> Q2 2020 hedged realized prices of $22.39 per barrel of oil, $7.69 per barrel of natural gas liquids and ($1.01) per Mcf of natural gas, resulting in a total equivalent price of $13.60 per boe. Viper realized total hedging losses of ($2.1) million.

> Q2 2020 unhedged realized prices of $21.00 per barrel of oil, $7.69 per barrel of natural gas liquids and $0.46 per Mcf of natural gas, resulting in a total equivalent price of $14.55 per boe

“Viper had limited completion activity on our acreage in the second quarter as operators reacted quickly to oil price volatility by cutting capital expenditures, ceasing completions and, in some cases, curtailing existing production. However, as commodity prices have improved in recent months, nearly all our curtailed production has come back online. Most importantly for Viper, Diamondback has recently brought three completion crews back to work after taking an almost three-month break from all completion activity in the second quarter of 2020. Looking toward the second half of 2020, Diamondback expects to focus its completion activity on areas where Viper has significant mineral ownership, which will allow Viper’s oil production to grow in the back half of the year from the second quarter lows. This activity should lead to strong fourth quarter 2020 exit rate production that we believe will continue throughout 2021 as Diamondback’s plans contemplate completing wells where Viper owns a significant royalty interest,” stated Travis Stice, Chief Executive Officer of Viper’s general partner.

My updated forecast/valuation model for VNOM has been posted to the EPG website. The stock closed at $10.52 on July 24. First Call's price target of $15.08 is reasonable if WTI averages $50/bbl in 2021. I think WTI will go much higher in 2H 2021, so now is a good time to pick up this high quality dividend paying C-Corp.