Viper Energy Partners LP (VNOM) Q1 Results - May 5
Posted: Tue May 05, 2020 5:01 pm
Viper Energy Partners LP (VNOM), a subsidiary of Diamondback Energy, Inc. (FANG) announced financial and operating results for the first quarter ended March 31, 2020.
Viper is a "variable" dividend paying company that was paying out ~95% of cash flow from operation each quarter. It paid dividends of $1.76 during 2019.
FIRST QUARTER HIGHLIGHTS
> Q1 2020 cash distribution of $0.10 per common unit; implies a 4.7% annualized yield based on the May 1, 2020 unit closing price of $8.60. Due to the current uncertainty in the commodity markets, Viper is temporarily reducing its distribution policy to 25% of cash available for distribution from 100% previously with retained cash flow expected to be used to strengthen the balance sheet; the Board of Directors of Viper’s General Partner intends to review this distribution policy quarterly.
> Q1 2020 consolidated net loss (including non-controlling interest) of $(123.9) million including a $142.5 million reduction of the Company’s deferred tax asset; adjusted net income of $14.2 million
> Consolidated adjusted EBITDA of $70.2 million and cash available for distribution to Viper’s common limited partner units of $26.2 million < Compares to my EBITDA forecast of $64.3 million for Q1.
> Q1 2020 average production of 17,441 bo/d (27,575 boe/d), an increase of 6% from Q4 2019 average daily oil production < Compares to my Q1 production forecast of 25,500 Boepd.
> 192 total gross (4.6 net 100% royalty interest) horizontal wells turned to production on Viper’s acreage during Q1 2020 with an average lateral length of 9,306 feet
> Closed 35 acquisitions for an aggregate purchase price of approximately $63.4 million in Q1 2020, increasing Viper’s mineral and royalty interests to a total of 24,714 net royalty acres at March 31, 2020
> Initiating average production guidance for Q2 2020 and Q3 2020 of 13,500 to 15,000 bo/d (22,000 to 24,500 boe/d)
> Reaffirming previously revised full year 2020 average production guidance of 14,000 to 17,000 bo/d (22,500 to 27,000 boe/d)
> As of April 22, 2020, there were approximately 569 gross horizontal wells currently in the process of active development on Viper’s acreage, in which Viper expects to own an average 1.7% net royalty interest (9.5 net 100% royalty interest wells)
> Approximately 429 gross (8.2 net 100% royalty interest) line-of-sight wells which have not yet begun the process of active development, but for which we have visibility to the potential of future development in coming quarters, based on Diamondback’s current completion schedule and third party operators’ permits
>Q4 2019 and Q1 2020 distributions reasonably estimated to not constitute dividends for U.S. federal income tax purposes; instead should generally constitute non-taxable reductions to the tax basis
“First of all, and most importantly, our thoughts and prayers go out to all of those affected by the COVID-19 pandemic. The first half of 2020 will be in the history books forever, for all of the wrong reasons, but our business must go on and we have taken swift and decisive action to adapt to rapidly changing circumstances and preserve our strength through this cycle,” stated Travis Stice, Chief Executive Officer of Viper’s general partner.
Mr. Stice continued, “Viper’s business performed well in the first quarter, but that has been overshadowed by the dramatic decline in commodity prices that began in March and has continued through today. Viper took action and hedged almost 100% of expected 2020 oil production and over 50% of expected 2021 oil production with collars, putting a floor under our future oil price realizations. We have also made the decision to retain 75% of cash available for distribution to preserve balance sheet strength. Viper is fortunate to have free cash flow even at these commodity prices and will take advantage of that free cash flow to fortify our balance sheet through these uncertain times.”
Viper is a "variable" dividend paying company that was paying out ~95% of cash flow from operation each quarter. It paid dividends of $1.76 during 2019.
FIRST QUARTER HIGHLIGHTS
> Q1 2020 cash distribution of $0.10 per common unit; implies a 4.7% annualized yield based on the May 1, 2020 unit closing price of $8.60. Due to the current uncertainty in the commodity markets, Viper is temporarily reducing its distribution policy to 25% of cash available for distribution from 100% previously with retained cash flow expected to be used to strengthen the balance sheet; the Board of Directors of Viper’s General Partner intends to review this distribution policy quarterly.
> Q1 2020 consolidated net loss (including non-controlling interest) of $(123.9) million including a $142.5 million reduction of the Company’s deferred tax asset; adjusted net income of $14.2 million
> Consolidated adjusted EBITDA of $70.2 million and cash available for distribution to Viper’s common limited partner units of $26.2 million < Compares to my EBITDA forecast of $64.3 million for Q1.
> Q1 2020 average production of 17,441 bo/d (27,575 boe/d), an increase of 6% from Q4 2019 average daily oil production < Compares to my Q1 production forecast of 25,500 Boepd.
> 192 total gross (4.6 net 100% royalty interest) horizontal wells turned to production on Viper’s acreage during Q1 2020 with an average lateral length of 9,306 feet
> Closed 35 acquisitions for an aggregate purchase price of approximately $63.4 million in Q1 2020, increasing Viper’s mineral and royalty interests to a total of 24,714 net royalty acres at March 31, 2020
> Initiating average production guidance for Q2 2020 and Q3 2020 of 13,500 to 15,000 bo/d (22,000 to 24,500 boe/d)
> Reaffirming previously revised full year 2020 average production guidance of 14,000 to 17,000 bo/d (22,500 to 27,000 boe/d)
> As of April 22, 2020, there were approximately 569 gross horizontal wells currently in the process of active development on Viper’s acreage, in which Viper expects to own an average 1.7% net royalty interest (9.5 net 100% royalty interest wells)
> Approximately 429 gross (8.2 net 100% royalty interest) line-of-sight wells which have not yet begun the process of active development, but for which we have visibility to the potential of future development in coming quarters, based on Diamondback’s current completion schedule and third party operators’ permits
>Q4 2019 and Q1 2020 distributions reasonably estimated to not constitute dividends for U.S. federal income tax purposes; instead should generally constitute non-taxable reductions to the tax basis
“First of all, and most importantly, our thoughts and prayers go out to all of those affected by the COVID-19 pandemic. The first half of 2020 will be in the history books forever, for all of the wrong reasons, but our business must go on and we have taken swift and decisive action to adapt to rapidly changing circumstances and preserve our strength through this cycle,” stated Travis Stice, Chief Executive Officer of Viper’s general partner.
Mr. Stice continued, “Viper’s business performed well in the first quarter, but that has been overshadowed by the dramatic decline in commodity prices that began in March and has continued through today. Viper took action and hedged almost 100% of expected 2020 oil production and over 50% of expected 2021 oil production with collars, putting a floor under our future oil price realizations. We have also made the decision to retain 75% of cash available for distribution to preserve balance sheet strength. Viper is fortunate to have free cash flow even at these commodity prices and will take advantage of that free cash flow to fortify our balance sheet through these uncertain times.”