Viper Energy Partners LP (NASDAQ:VNOM) ("Viper" or the “Company”),
a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG)
("Diamondback"), today announced financial and operating results
for the second quarter ended June 30, 2017.
HIGHLIGHTS
- Q2 2017 cash distribution of $0.332 per common unit, up 76%
year over year and highest in Company history; implies a 7.8%
annualized yield based on July 31 unit closing price of $17.00
- Q2 2017 production of 10,491 boe/d (73% oil), up 23% over Q1
2017 and 95% year over year
- Increasing full year 2017 production guidance to 10,000 to
11,000 boe/d, up 17% from the midpoint of prior guidance range of
8,500 to 9,500 boe/d and up 63% from full year 2016 production at
the midpoint
- Initial 2H 2017 production guidance of 11,250 to 12,250 boe/d,
including approximately 1,500 boe/d contribution from recent and
pending acquisitions
- Since the end of Q1 2017, Viper has closed 53 deals for an
aggregate of approximately $195 million and signed additional
agreements for approximately $87 million, increasing Viper's pro
forma mineral assets by 2,446 net royalty acres to 8,963 total net
royalty acres; up 101% year over year
- 14 gross horizontal wells completed on Viper's Spanish Trail
mineral interests during Q2 2017 (22.1% average royalty
interest)
- There are approximately 349 active well permits and 18 active
rigs currently on Viper's mineral acreage
- Over 70 wells in Midland Basin (7% estimated average royalty
interest) and over 80 wells in Delaware Basin (1.5% estimated
average royalty interest) in various stages of drilling or waiting
on completion across Viper's mineral acreage
“Viper has transformed itself in the past twelve
months, doubling production and more than doubling its asset base.
Distributions have increased over 75% year over year while public
float has increased by 31 million units over the same period. The
Company's proven track record of growth will continue as the
largely undeveloped properties we have purchased in proven Tier 1
areas are developed over the coming years. Viper is growing as fast
as the premier E&P operators of the Permian Basin while not
having to reinvest cash flow to grow; it is instead distributed
directly to unitholders,” stated Travis Stice, Chief Executive
Officer of Viper’s general partner.
Mr. Stice continued, “Viper remains active on
the acquisition front, primarily focused on Diamondback operated
properties, where we see the greatest cash flow visibility and
opportunities to maximize Viper's present value. We will also
continue to buy minerals in Tier 1 areas with high visibility to
cash flow growth operated by well capitalized third parties. Our
acquisition strategy seeks to accomplish the Company's goals of
increasing distributions, production, reserves and resource life on
a per unit basis. We feel we are uniquely positioned to execute
this acquisition strategy given our relationship with Diamondback
and our combined ability to source and evaluate deals."
FINANCIAL UPDATE
Viper's second quarter 2017 average realized
prices were $45.43 per barrel of oil, $2.66 per Mcf of natural gas
and $16.63 per barrel of natural gas liquids, resulting in a total
equivalent price of $37.64/boe, up 9% year over year from
$34.39/boe in Q2 2016 and down 10% from the Q1 2017 total
equivalent price of $41.80/boe.
During the second quarter of 2017, the Company
recorded total operating income of $36.6 million and net income of
$22.1 million, up 9% and 7% quarter over quarter, respectively.
As of July 24, 2017, the Company had a cash
balance of $82 million and no outstanding borrowings under its $315
million revolving credit facility following Viper's July 2017
equity offering.
SECOND QUARTER 2017 CASH
DISTRIBUTION
The Board of Directors of Viper's general
partner has declared a cash distribution for the three months ended
June 30, 2017 of $0.332 per common unit, up 10% quarter over
quarter. The distribution is payable on August 24, 2017 to
unitholders of record at the close of business on August 17,
2017.
This release serves as qualified notice to
nominees as provided for under Treasury Regulation Section
1.1446-4(b)(4) and (d). Please note that 100 percent of Viper’s
distributions to foreign investors are attributable to income that
is effectively connected with a United States trade or business.
Accordingly, all of Viper’s distributions to foreign investors are
subject to federal income tax withholding at the highest effective
tax rate for individuals or corporations, as applicable. Nominees,
and not Viper, are treated as withholding agents responsible for
withholding distributions received by them on behalf of foreign
investors.
ACQUISITION UPDATE
During the second quarter of 2017, Viper entered
into agreements for and acquired 989 net royalty acres for an
aggregate purchase price of $117 million. To date in the third
quarter of 2017, Viper has acquired mineral interests underlying
24,102 gross (747 net royalty) acres in the Delaware Basin for
approximately $77.7 million. Additionally, the Company has entered
into separate purchase agreements with unrelated third-party
sellers to acquire an additional 49,935 gross (711 net royalty)
acres in the Delaware Basin for approximately $87.3 million. The
pending acquisitions are all expected to close during the third
quarter of 2017; however, these transactions remain subject to
completion of due diligence and satisfaction of other closing
conditions, and there can be no assurance that it will be completed
as planned or at all. If completed as planned, these transactions
will increase Viper's pro forma footprint to a total of 8,963 net
royalty acres. Diamondback, EOG Resources, Occidental Petroleum,
Concho Resources and RSP Permian serve as primary operators on the
announced and acquired assets.
Viper financed the recent acquisitions with
borrowings under its revolving credit facility and proceeds from
its recently completed 16.1 million common unit offering. Viper
intends to finance the pending and potential future acquisitions,
through a combination of cash on hand, borrowings under its
revolving credit agreement and, subject to market conditions and
other factors, proceeds from one or more capital markets
transactions, which may include debt or equity offerings.
FULL YEAR 2017 GUIDANCE
Below is Viper's full year 2017 guidance, which has been updated
to reflect higher full year production attributable to its mineral
interests. Additionally, the Company expects production for the
second half of 2017 to be between 11,250 to 12,250 boe/d.
|
|
|
Viper Energy Partners |
|
|
Total Net Production –
MBoe/d |
10.0 – 11.0 (from 8.5 – 9.5) |
2H 2017 Net Production
– MBoe/d |
11.25 - 12.25 |
|
|
Unit costs ($/boe) |
|
Lease Operating
Expenses |
n/a |
Gathering &
Transportation |
$0.15 - $0.25 (from $0.25 - $0.50) |
DD&A |
$8.00 - $10.00 |
G&A |
|
Cash
G&A |
$0.50 - $1.50 |
Non-Cash
Unit-Based Compensation |
$0.50 - $1.50 |
|
|
Production and Ad
Valorem Taxes (% of Revenue) (a) |
7% |
|
|
Capital Budget ($ -
Million) |
|
2017 Capital Spend |
n/a |
(a) Includes production taxes of 4.6% for crude oil and 7.5% for
natural gas and NGLs and ad valorem taxes.
CONFERENCE CALL
Viper will host a conference call and webcast
for investors and analysts to discuss its financial and operating
results for the second quarter of 2017 on Wednesday, August 2,
2017 at 8:30 a.m. CT. Participants should call
(844) 400-1537 (United States/Canada) or (703) 326-5198
(International) and use the confirmation code 59249026. A
telephonic replay will be available from 11:30 a.m.
CT on Wednesday, August 2,
2017 through Wednesday, August 9, 2017 at 11:30
a.m. CT. To access the replay, call (855) 859-2056 (United
States/Canada) or (404) 537-3406 (International) and enter
confirmation code 59249026. A live broadcast of the earnings
conference call will also be available via the internet at
www.viperenergy.com under the “Investor Relations” section of
the site. A replay will also be available on the website following
the call.
About Viper Energy Partners LP
Viper is a limited partnership formed by
Diamondback to own, acquire and exploit oil and natural gas
properties in North America, with a focus on oil-weighted basins,
primarily the Permian Basin in West Texas.
About Diamondback Energy, Inc.
Diamondback is an independent oil and natural
gas company headquartered in Midland, Texas focused on the
acquisition, development, exploration and exploitation of
unconventional, onshore oil and natural gas reserves in the Permian
Basin in West Texas. Diamondback's activities are primarily focused
on the horizontal exploitation of multiple intervals within the
Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline
formations.
Forward-Looking Statements
This news release contains forward-looking
statements within the meaning of the federal securities laws. All
statements, other than historical facts, that address activities
that Viper assumes, plans, expects, believes, intends or
anticipates (and other similar expressions) will, should or may
occur in the future are forward-looking statements. The
forward-looking statements are based on management’s current
beliefs, based on currently available information, as to the
outcome and timing of future events, including specifically the
statements regarding the pending and potential acquisitions
discussed above. These forward-looking statements involve certain
risks and uncertainties that could cause the results to differ
materially from those expected by the management of Viper.
Information concerning these risks and other factors can be found
in Viper’s filings with the Securities and Exchange Commission,
including its Forms 10-K, 10-Q and 8-K, which can be obtained free
of charge on the Securities and Exchange Commission’s web site at
http://www.sec.gov. Viper undertakes no obligation to update or
revise any forward-looking statement.
Viper Energy Partners LP |
Consolidated Statements of
Operations |
(unaudited, in thousands, except per unit
data) |
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
2016 |
|
2017 |
2016 |
|
(In thousands) |
Operating
income: |
|
|
|
|
|
Royalty
income |
$ |
35,933 |
|
$ |
16,836 |
|
|
$ |
67,983 |
|
$ |
30,922 |
|
Lease
bonus |
689 |
|
196 |
|
|
2,291 |
|
304 |
|
Total
operating income |
36,622 |
|
17,032 |
|
|
70,274 |
|
31,226 |
|
Costs and
expenses: |
|
|
|
|
|
Production and ad valorem taxes |
2,773 |
|
1,403 |
|
|
4,843 |
|
2,705 |
|
Gathering
and transportation |
144 |
|
91 |
|
|
287 |
|
177 |
|
Depletion |
9,672 |
|
6,584 |
|
|
17,519 |
|
14,734 |
|
Impairment |
— |
|
21,458 |
|
|
— |
|
47,469 |
|
General
and administrative expenses |
1,554 |
|
1,207 |
|
|
3,696 |
|
2,956 |
|
Total
costs and expenses |
14,143 |
|
30,743 |
|
|
26,345 |
|
68,041 |
|
Income (loss)
from operations |
22,479 |
|
(13,711 |
) |
|
43,929 |
|
(36,815 |
) |
Other income
(expense): |
|
|
|
|
|
Interest
expense |
(643 |
) |
(456 |
) |
|
(1,255 |
) |
(886 |
) |
Other
income |
313 |
|
147 |
|
|
127 |
|
346 |
|
Total
other income (expense), net |
(330 |
) |
(309 |
) |
|
(1,128 |
) |
(540 |
) |
Net income
(loss) |
$ |
22,149 |
|
$ |
(14,020 |
) |
|
$ |
42,801 |
|
$ |
(37,355 |
) |
|
|
|
|
|
|
Net income
attributable to common limited partners per unit: |
|
|
|
|
|
Basic and
Diluted |
$ |
0.23 |
|
$ |
(0.18 |
) |
|
$ |
0.44 |
|
$ |
(0.47 |
) |
Weighted
average number of limited partner units outstanding: |
|
|
|
|
|
Basic |
97,677 |
|
79,728 |
|
|
96,377 |
|
79,727 |
|
Diluted |
97,677 |
|
79,728 |
|
|
96,382 |
|
79,727 |
|
|
|
|
|
|
|
|
|
|
|
Viper Energy Partners LP |
|
|
|
Selected Operating Data |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
2016 |
|
2017 |
2016 |
Production
Data: |
|
|
|
|
|
Oil (Bbls) |
699,341 |
|
371,730 |
|
|
1,283,195 |
|
805,271 |
|
Natural gas (Mcf) |
735,283 |
|
345,432 |
|
|
1,224,186 |
|
693,715 |
|
Natural gas liquids
(Bbls) |
132,765 |
|
60,258 |
|
|
234,107 |
|
129,361 |
|
Combined volumes
(BOE)(1) |
954,653 |
|
489,560 |
|
|
1,721,333 |
|
1,050,251 |
|
Daily combined volumes
(BOE/d) |
10,491 |
|
5,380 |
|
|
9,510 |
|
5,771 |
|
% Oil |
73 |
% |
76 |
% |
|
75 |
% |
77 |
% |
|
|
|
|
|
|
Average sales
prices: |
|
|
|
|
|
Oil,
realized ($/Bbl) |
$ |
45.43 |
|
$ |
41.73 |
|
|
$ |
47.24 |
|
$ |
35.31 |
|
Natural
gas realized ($/Mcf) |
2.66 |
|
1.56 |
|
|
2.70 |
|
1.66 |
|
Natural
gas liquids ($/Bbl) |
16.63 |
|
13.03 |
|
|
17.37 |
|
10.30 |
|
Average
price realized ($/BOE) |
37.64 |
|
34.39 |
|
|
39.49 |
|
29.44 |
|
|
|
|
|
|
|
Average Costs
(per BOE) |
|
|
|
|
|
Production and ad valorem taxes |
$ |
2.90 |
|
$ |
2.87 |
|
|
$ |
2.81 |
|
$ |
2.58 |
|
Gathering
and transportation expense |
0.15 |
|
0.19 |
|
|
0.17 |
|
0.17 |
|
General
and administrative - cash component |
0.88 |
|
0.51 |
|
|
1.25 |
|
0.98 |
|
Total
operating expense - cash |
$ |
3.93 |
|
$ |
3.57 |
|
|
$ |
4.23 |
|
$ |
3.73 |
|
|
|
|
|
|
|
General
and administrative - non-cash component |
$ |
0.75 |
|
$ |
1.96 |
|
|
$ |
0.90 |
|
$ |
1.83 |
|
Interest
expense |
0.67 |
|
0.93 |
|
|
0.73 |
|
0.84 |
|
Depletion |
10.13 |
|
13.45 |
|
|
10.18 |
|
14.03 |
|
(1) Bbl equivalents are calculated using a conversion rate of
six Mcf per one Bbl.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is a supplemental non-GAAP
financial measure that is used by management and external users of
our financial statements, such as industry analysts, investors,
lenders and rating agencies. Viper defines Adjusted EBITDA as net
income (loss) plus interest expense, non-cash unit-based
compensation expense, depletion and impairment. Adjusted EBITDA is
not a measure of net income (loss) as determined by United States’
generally accepted accounting principles, or GAAP. Management
believes Adjusted EBITDA is useful because it allows it to more
effectively evaluate Viper’s operating performance and compare the
results of its operations from period to period without regard to
its financing methods or capital structure. Adjusted EBITDA should
not be considered as an alternative to, or more meaningful than,
net income as determined in accordance with GAAP or as an indicator
of Viper’s operating performance or liquidity. Certain items
excluded from Adjusted EBITDA are significant components in
understanding and assessing a company’s financial performance, such
as a company’s cost of capital and tax structure, as well as the
historic costs of depreciable assets, none of which are components
of Adjusted EBITDA. Viper defines cash available for distribution
generally as an amount equal to its Adjusted EBITDA for the
applicable quarter less cash needed for debt service and other
contractual obligations and fixed charges and reserves for future
operating or capital needs that the board of directors of Viper’s
general partner may deem appropriate. Viper’s computations of
Adjusted EBITDA and cash available for distribution may not be
comparable to other similarly titled measures of other companies or
to such measure in its credit facility or any of its other
contracts.
The following tables present a reconciliation of
the non-GAAP financial measures of Adjusted EBITDA and cash
available for distribution to the GAAP financial measure of net
income (loss).
Viper Energy Partners LP |
|
|
|
(unaudited, in thousands, except per unit
data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
2016 |
|
2017 |
2016 |
Net income
(loss) |
$ |
22,149 |
|
$ |
(14,020 |
) |
|
$ |
42,801 |
|
$ |
(37,355 |
) |
Interest
expense |
643 |
|
456 |
|
|
1,255 |
|
886 |
|
Non-cash
unit-based compensation expense |
718 |
|
957 |
|
|
1,537 |
|
1,930 |
|
Depletion |
9,672 |
|
6,584 |
|
|
17,519 |
|
14,734 |
|
Impairment |
— |
|
21,458 |
|
|
— |
|
47,469 |
|
Adjusted
EBITDA |
$ |
33,182 |
|
$ |
15,435 |
|
|
$ |
63,112 |
|
$ |
27,664 |
|
|
|
|
|
|
|
Adjustments to
reconcile Adjusted EBITDA to cash available for
distribution: |
|
|
|
|
|
Debt service,
contractual obligations, fixed charges and reserves |
(685 |
) |
(378 |
) |
|
(1,165 |
) |
(718 |
) |
Cash available
for distribution |
$ |
32,497 |
|
$ |
15,057 |
|
|
$ |
61,947 |
|
$ |
26,946 |
|
|
|
|
|
|
|
Limited Partner units
outstanding |
97,764 |
|
79,743 |
|
|
97,764 |
|
79,743 |
|
|
|
|
|
|
|
Cash available
for distribution per limited partner unit |
$ |
0.332 |
|
$ |
0.189 |
|
|
$ |
0.634 |
|
$ |
0.338 |
|
Investor Contact:
Adam Lawlis
+1 432.221.7467
alawlis@viperenergy.com
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