Viper (VNOM) Updated Valuation - Aug 14

[dan_s]

Viper Energy Partners (VNOM) is one of my Top Picks in our High Yield Income Portfolio for those of you that believe high oil and gas prices are here to stay for awhile. It is a minerals partnership that has elected to be taxed as a C-Corp., so no K-1.

What I like the most is that Viper's production growth is tied directly to Diamondback Energy's (FANG) aggressive drilling program. Very little of Viper's oil is hedged and none of their natural gas is hedged beyond this year. Viper consistently beats their production guidance.

Viper pays a "Fixed + Variable" quarterly dividends that were $0.67/unit in Q1 and $0.81/unit in Q2.
Based on my forecast, dividends should total $3.20 this year for annualized yield of ~10% based on the August 12 closing price of $31.72.
My dividend forecast for 2023 is $3.80.

My updated current valuation is $45/unit.

TipRanks: "In the last 3 months, 10 ranked analysts set 12-month price targets for VNOM. The average price target among the analysts is $38.90. The 10 price targets range from $32 to $47." "On 8/2/2022 Truist Securities analyst Nela Dingmann lowered the price target on Viper Energy (NASDAQ: VNOM) to $46.00 (from $48.00) while maintaining a Buy rating."

My updated forecast/valuation model for Viper has been posted to the EPG website.