Viper Energy (VNOM) Q4 Results - Feb 21

[dan_s]

FOURTH QUARTER HIGHLIGHTS

Q4 2023 average production of 24,533 bo/d (43,783 boe/d) < Beat my forecast of 43,750 Boepd)
Received $2.4 million in lease bonus income
Q4 2023 consolidated net income (including non-controlling interest) of $125.9 million < Beat my forecast of $100 million net income because of the $8.2 million non-cash MTM gain on their hedges, which I do not consider in all of my forecast models. Plus, Viper booked a $7 million decline in their Deferred Income tax liability. I have no idea what that's about, but it did increase GAAP Net Income.
Net income attributable to Viper Energy, Inc. of $57.0 million, or $0.70 per common share

Q4 2023 cash available for distribution to Viper’s common shares (as defined and reconciled below) of $63.8 million, or $0.74 per Class A common share
Declared Q4 2023 base cash dividend of $0.27 per Class A common share; implies a 3.1% annualized yield based on the February 16, 2024 share closing price of $35.40
Q4 2023 variable cash dividend of $0.29 per Class A common share; total base-plus-variable dividend of $0.56 per Class < Matched my forecast.
A common share implies a 6.3% annualized yield based on the February 16, 2024 share closing price of $35.40

Repurchased 1.0 million Class A common shares in Q4 2023 for $28.7 million, excluding excise tax (average price of $28.70 per share)
Total Q4 2023 return of capital of $61.9 million, or $0.72 per Class A common share, represents 97% of cash available for distribution from share repurchases and the declared base-plus-variable dividend

As previously announced, closed acquisition of certain mineral and royalty interests from affiliates of Warwick Capital Partners and GRP Energy Capital (the “GRP acquisition”) on November 1, 2023

As previously announced, on November 13, 2023 completed the conversion from a Delaware limited partnership to a Delaware corporation

246 total gross (3.0 net 100% royalty interest) horizontal wells turned to production on Viper’s acreage during Q4 2023 with an average lateral length of 10,688 feet

FULL YEAR 2023 HIGHLIGHTS
Full year 2023 average production of 21,995 bo/d (39,244 boe/d)
Received $109.7 million in lease bonus income < This is much higher than what I was forecasting heading into 2024
Full year 2023 consolidated net income (including non-controlling interest) of $501.3 million; net income attributable to Viper Energy, Inc. of $200.1 million, or $2.69 per Class A common share

Declared dividends of $1.82 per Class A common share during the full year 2023
Repurchased 3.4 million common shares during the full year 2023 for $95.2 million (average price of $28.08 per share)
Generated full year 2023 consolidated adjusted EBITDA (as defined and reconciled below) of $757.5 million

Proved reserves as of December 31, 2023 of 179,249 Mboe (80% PDP, 89,903 Mbo), up 20% year over year with oil up 14% from year end 2022
982 total gross (20.9 net 100% royalty interest) horizontal wells turned to production on Viper’s acreage during 2023 with an average lateral length of 10,869 feet

2024 OUTLOOK
Initiating average daily production guidance for Q1 2024 of 25,000 to 25,500 bo/d (44,750 to 45,500 boe/d)

Initiating full year 2024 average daily production guidance of 25,500 to 27,500 bo/d (45,500 to 49,000 boe/d) < The BIG UPSIDE for VNOM is post-merger with Endeavor because I anticipate that Diamondback will drop down all of Endeavor's minerals into Viper. Endeavor's current production from its minerals is ~26,000 Boepd.

As of December 31, 2023, there were approximately 787 gross horizontal wells in the process of active development on Viper’s acreage in which Viper expects to own an average 1.7% net royalty interest (13.4 net 100% royalty interest wells)

Approximately 762 gross (20.0 net 100% royalty interest) line-of-sight wells on Viper’s acreage that are not currently in the process of active development, but for which Viper has visibility to the potential of future development in coming quarters, based on Diamondback’s current completion schedule and third-party operators’ permits. < Endeavor is also actively drilling on Viper's minerals.

“The fourth quarter wrapped up a milestone year for Viper. For the full year, average oil production increased 13% compared to the previous year while our average share count was reduced by one percent over the same period. As a result of continued strong organic production growth, accretive acquisitions, and an opportunistic share repurchase program, the fourth quarter of 2023 represented the eighth consecutive quarter of increased production per share for Viper Energy,” stated Travis Stice, Chief Executive Officer of Viper.

Mr. Stice continued, “There were several strategic initiatives completed during 2023 that marked important steps in the growth and evolution of Viper. Our GRP acquisition, which closed during the fourth quarter, clearly laid out the framework we look for in large scale M&A: accretive on all relevant financial metrics, high quality undeveloped inventory that supports our long-term growth profile and provides clear visibility to future development, and significant scale that results in a pro forma business that is both bigger and better. Additionally, Viper completed its conversion into a Delaware corporation, a step which we believe has delivered increased governance rights for our shareholders and positions Viper to continue to grow the business and fully highlight the advantaged nature of mineral and royalty ownership.”

Mr. Stice continued, “Looking ahead to 2024, we have initiated production guidance for both Q1 and the full year. While Q1 is expected to be the
weakest quarter of the year, primarily as a result of the timing of large pads, we continue to see strong activity levels across our acreage position and expect significant growth to occur throughout the year with Q4 2024 expected to be at, or above, the high-end of our guidance range. This continued production growth, along with our best-in-class cost structure, should enable Viper to continue to return a substantial amount of capital to our shareholders, primarily through our base-plus-variable dividend.”