Viper Energy (VNOM) Valuation Update - May 7

[dan_s]

At the time of this post VNOM was trading at $39.85.

I have updated my forecast/valuation model for their strong Q1 2025 results and their updated guidance for the rest of 2025.
My updated valuation is $58.00.

TipRanks: "In the last 3 months, 12 ranked analysts set 12-month price targets for VNOM. The average price target among the analysts is $53.82." < The 12 price targets range from $48 to $62. Four analysts updated their price targets on 5-6-2025 to $49, $52, $57 and $62, by Piper Sandler. All four of the fresh reports rate VNOM a BUY.

Viper is the largest of four minerals companies in our High Yield Income Portfolio. Its relationship with Diamondback Energy (FANG) make it the most predictable. Viper's production increased 19.7% in 2022, 16.6% in 2023, 26.9% in 2024 and they are on pace for ~54% YOY production growth in 2025,

Based on my forecast, Viper's fixed + variable dividends should be $2.49 this year for annualized yield of ~6.25%.

Current production mix is approximately 55% crude oil, 24% natural gas and 21% NGLs.

I consider Viper a "Growth + Income" stock.
The other 3 minerals companies (BSM, KRP and STR) are more "Income + Growth" stocks.
BSM and KRP are more heavily weighted to natural gas. They have double digit dividend yields, but much lower production growth than Viper.
BSM is a Master Limited Partnership.

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

[KGardiner]

Over the past few years I've seen a number of these scary warnings on Seeking Alpha on energy stocks.
This one from yesterday regarding VNOM Viper Energy has me scratching my head.

Can anyone explain to me what this is about?
Or is this simply a case of some automated moron that doesn't understand the business model.
What am I missing?

https://seekingalpha.com/warnings/4446247-warning-vnom-is-at-high-risk-of-performing-badly

Thanks
Kevin Gardiner

[dan_s]

I don't have access to Seeking Alpha.

You really cannot trust anything on Seeking Alpha. They do not confirm the accuracy of what is posted there.

Viper's revenues are heavily weighted to oil and its growth is tied directly to Diamondback's aggressive drilling program. Most of Diamondback's active drilling rigs are working on areas where Viper owns the minerals.

Viper has no direct drilling risk.

Viper and all of our minerals companies (BSM, KRP, STR and VNOM) generate a lot of free cash flow. It pays quarterly variable dividends that based my forecast model, should total around $2.50 this year.

Of the four, Viper has the most growth potential. The other three have higher dividend yield and more exposure to rising natural gas prices.

[KGardiner]

Thanks Dan