Viper Energy (VNOM) Valuation Update - May

[dan_s]

I have updated my forecast/valuation model for Viper (a C-Corp.) for their solid Q1 results and updated guidance on April 30.
My valuation increases by $2 to $44/share.

Viper is one of four minerals/royalties companies in our High Yield Income Portfolio. Of the four, it is the most heavily weighted to crude oil. More importantly, Viper's production growth is virtually guaranteed by Diamondback Energy's aggressive drilling program.

TipRanks 5-6-2024: "In the last 3 months, 8 ranked analysts set 12-month price targets for VNOM. The average price target among the analysts is $43.38. The 8 price targets range from $39 (dated 2/22/24) to $53 (dated 5/2/2024)." < All 8 analysts rate it a BUY.

Viper's most recent Fixed + Variable dividend was $0.59/share. Based on my forecast, Viper's dividends should total $2.42/share in 2024 for annualized yield of ~6.3% based on today's share price.

My 2025 forecast assumes that Diamondback will be dropping down a lot of mineral interests into Viper soon after they close the merger with Endeavor Energy. My WAG is that Viper's production will jump from ~50,000 Boepd at the end of 2024 to ~75,000 Boepd in 2025 with a mix of 56% crude oil, 22% NGLs and 22% natural gas.

We will be publishing an updated profile on Diamondback Energy (DVN) tomorrow. To fully understand the potential of Viper, you need to understand the relationship with Diamondback. If my 2025 forecast is accurate, Viper's dividends could jump to over $4.00/share next year.

My updated forecasts for Viper and Diamondback are now available on the EPG website.