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 third quarter ended September 30, 2017.
HIGHLIGHTS
- Q3 2017 cash distribution of $0.337 per common unit, up 63%
year over year and highest in Company history; implies a 7.4%
annualized yield based on October 23 unit closing price of
$18.16
- Q3 2017 production of 12,611 boe/d (68% oil), up 20% over Q2
2017 and 102% year over year
- Q3 2017 net income of $26.6 million and distributable cash flow
(as defined below) of $38.3 million
- Initiating average production guidance for Q4 2017/Q1 2018 of
13,000 to 14,000 boe/d, up 7% from Q3 production
- Increasing full year 2017 production guidance to 11,000 to
11,500 boe/d, up 7% from the midpoint of prior guidance range of
10,000 to 11,000 boe/d and up 75% from full year 2016
production
- Closed 17 acquisitions for an aggregate of approximately $179
million in Q3 2017, increasing Viper's mineral assets by 1,677 net
royalty acres to 9,173 total net royalty acres; up 66% year over
year
- Nine gross horizontal wells completed on Viper's Spanish Trail
mineral interests during Q3 2017 (12.2% average royalty
interest)
- There are approximately 319 active well permits and 22 active
rigs currently on Viper's mineral acreage
- Over 100 wells in Midland Basin (9.1% estimated average royalty
interest) and over 50 wells in Delaware Basin (1.2% estimated
average royalty interest) in various stages of drilling or waiting
on completion across Viper's mineral acreage
“During the third quarter, Viper continued to
expand its footprint in the most attractive areas of the Permian
Basin via multiple large strategic acquisitions, while also
continuing to see sustained volume outperformance on its existing
acreage. As a mineral owner, Viper is uniquely positioned to
grow production in line with premier Permian E&P operators
without the burden of capital costs, providing superior free cash
flow generation that is returned to unitholders in quarterly cash
distributions,” stated Travis Stice, Chief Executive Officer of
Viper’s general partner.
Mr. Stice continued, “Viper continues to be
pleased with the outperformance of recent acquisitions, as volumes
and activity levels have exceeded underwriting assumptions in the
Delaware Basin. Viper looks to continue to be active in acquiring
minerals with near term visibility and accretive cash flow growth.
With activity levels continuing to increase across our Tier 1
properties, we have introduced guidance for Q4 2017 and Q1 2018
that implies 7% growth relative to third quarter production.”
FINANCIAL UPDATE
Viper's third quarter 2017 average realized
prices were $45.33 per barrel of oil, $2.55 per Mcf of natural gas
and $19.10 per barrel of natural gas liquids, resulting in a total
equivalent price of $36.38/boe, up 5% year over year from
$34.74/boe in Q3 2016 and down 3% from the Q2 2017 total equivalent
price of $37.64/boe.
During the third quarter of 2017, the Company
recorded total operating income of $42.5 million and net income of
$26.6 million. Operating income was up 16% quarter over quarter and
113% year over year. Net income was up 20% quarter over quarter and
161% year over year.
As of September 30, 2017, the Company had a cash
balance of $4 million and approximately $280 million available
under its revolving credit facility.
THIRD QUARTER 2017 CASH
DISTRIBUTION
The Board of Directors of Viper's general
partner has declared a cash distribution for the three months ended
September 30, 2017 of $0.337 per common unit, up 2% quarter over
quarter and 63% year over year. The distribution is payable on
November 14, 2017 to unitholders of record at the close of
business on November 7, 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 third quarter of 2017, Viper acquired
1,677 net royalty acres in the Delaware Basin for an aggregate
purchase price of approximately $179 million, subject to
post-closing adjustments. As of September 30, 2017, Viper had
acquired approximately 2,769 net royalty acres year-to-date for an
aggregate of approximately $305 million, bringing Viper's footprint
of mineral interests in the Permian Basin to a total of 9,173 net
royalty acres. Diamondback, EOG Resources, Occidental Petroleum,
Concho Resources and RSP Permian serve as primary operators on the
recently acquired assets.
Viper financed the recent acquisitions with cash
on hand, borrowings under its revolving credit facility and
proceeds from its July 2017 common equity offering. Viper intends
to finance potential future acquisitions through a combination of
cash on hand, borrowings under its revolving credit agreement and,
subject to market conditions and other factors, proceeds from one
or more capital markets transactions, which may include debt or
equity offerings.
GUIDANCE UPDATE
Below is Viper's updated guidance, which has been adjusted to
reflect higher full year production attributable to its mineral
interests. Additionally, the Company expects average production for
Q4 2017 and Q1 2018 to be between 13,000 to 14,000 boe/d, up 7%
from Q3 2017 production.
|
|
|
|
|
Viper Energy Partners |
| |
|
| Total 2017 Net
Production – MBoe/d |
11.0 – 11.5 (from 10.0 – 11.0) |
| Q4 2017/Q1 2018 Net
Production – MBoe/d |
13.0 - 14.0 |
| |
|
| Unit costs ($/boe) |
|
| Lease Operating
Expenses |
n/a |
| Gathering &
Transportation |
$0.15 - $0.20 (from $0.15 - $0.25) |
| DD&A |
$9.00 - $10.00 (from $8.00 - $10.00) |
| G&A |
|
| Cash
G&A |
$0.75 - $1.25 (from $0.50 - $1.50) |
| Non-Cash
Unit-Based Compensation
|
$0.50 - $1.00 (from $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 third quarter of 2017 on Wednesday, October
25, 2017 at 9:00 a.m. CT. Participants should call
(844) 400-1537 (United States/Canada) or (703) 326-5198
(International) and use the confirmation code 99807989. A
telephonic replay will be available from 12:00 p.m.
CT on Wednesday, October 25,
2017 through Wednesday, November 1,
2017 at 12:00 p.m. CT. To access the replay, call
(855) 859-2056 (United States/Canada) or (404) 537-3406
(International) and enter confirmation code 99807989. 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 any pending, completed or future 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 EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
| |
2017 |
2016 |
|
2017 |
2016 |
| |
(In thousands) |
| Operating
income: |
|
|
|
|
|
| Royalty
income |
$ |
42,211 |
|
$ |
19,992 |
|
|
$ |
110,194 |
|
$ |
50,914 |
|
| Lease
bonus |
322 |
|
5 |
|
|
2,613 |
|
309 |
|
| Total
operating income |
42,533 |
|
19,997 |
|
|
112,807 |
|
51,223 |
|
| Costs and
expenses: |
|
|
|
|
|
|
Production and ad valorem taxes |
2,825 |
|
1,429 |
|
|
7,668 |
|
4,134 |
|
| Gathering
and transportation |
205 |
|
70 |
|
|
492 |
|
247 |
|
|
Depletion |
11,068 |
|
6,751 |
|
|
28,587 |
|
21,485 |
|
|
Impairment |
— |
|
— |
|
|
— |
|
47,469 |
|
| General
and administrative expenses |
1,368 |
|
1,153 |
|
|
5,064 |
|
4,109 |
|
| Total
costs and expenses |
15,466 |
|
9,403 |
|
|
41,811 |
|
77,444 |
|
| Income (loss)
from operations |
27,067 |
|
10,594 |
|
|
70,996 |
|
(26,221 |
) |
| Other income
(expense): |
|
|
|
|
|
| Interest
expense |
(859 |
) |
(658 |
) |
|
(2,114 |
) |
(1,544 |
) |
| Other
income |
399 |
|
266 |
|
|
526 |
|
612 |
|
| Total
other income (expense), net |
(460 |
) |
(392 |
) |
|
(1,588 |
) |
(932 |
) |
| Net income
(loss) |
$ |
26,607 |
|
$ |
10,202 |
|
|
$ |
69,408 |
|
$ |
(27,153 |
) |
| |
|
|
|
|
|
| Net income
attributable to common limited partners per unit: |
|
|
|
|
|
| Basic and
Diluted |
$ |
0.24 |
|
$ |
0.12 |
|
|
$ |
0.69 |
|
$ |
(0.33 |
) |
| Weighted
average number of limited partner units outstanding: |
|
|
|
|
|
|
Basic |
110,377 |
|
84,996 |
|
|
101,095 |
|
81,496 |
|
|
Diluted |
110,424 |
|
85,003 |
|
|
101,143 |
|
81,496 |
|
|
|
|
|
|
|
|
|
|
|
|
| Viper Energy Partners LP |
| Selected Operating Data |
| (unaudited) |
| |
|
|
|
|
|
| |
Three Months EndedSeptember 30,
2017 |
|
Three Months EndedJune 30, 2017 |
|
Three Months EndedSeptember 30,
2016 |
| Production
Data: |
|
|
|
|
|
| Oil (Bbls) |
794,375 |
|
|
699,341 |
|
|
430,732 |
|
| Natural gas (Mcf) |
1,236,349 |
|
|
735,283 |
|
|
315,030 |
|
| Natural gas liquids
(Bbls) |
159,806 |
|
|
132,765 |
|
|
92,221 |
|
| Combined volumes
(BOE)(1) |
1,160,239 |
|
|
954,653 |
|
|
575,458 |
|
| Daily combined volumes
(BOE/d) |
12,611 |
|
|
10,491 |
|
|
6,255 |
|
| % Oil |
68 |
% |
|
73 |
% |
|
75 |
% |
| |
|
|
|
|
|
| Average sales
prices: |
|
|
|
|
|
| Oil,
realized ($/Bbl) |
$ |
45.33 |
|
|
$ |
45.43 |
|
|
$ |
41.97 |
|
| Natural
gas realized ($/Mcf) |
2.55 |
|
|
2.66 |
|
|
2.39 |
|
| Natural
gas liquids ($/Bbl) |
19.10 |
|
|
16.63 |
|
|
12.56 |
|
| Average
price realized ($/BOE) |
36.38 |
|
|
37.64 |
|
|
34.74 |
|
| |
|
|
|
|
|
| Average Costs
(per BOE) |
|
|
|
|
|
|
Production and ad valorem taxes |
$ |
2.43 |
|
|
$ |
2.90 |
|
|
$ |
2.48 |
|
| Gathering
and transportation expense |
0.18 |
|
|
0.15 |
|
|
0.12 |
|
| General
and administrative - cash component |
0.75 |
|
|
0.88 |
|
|
0.19 |
|
| Total
operating expense - cash |
$ |
3.36 |
|
|
$ |
3.93 |
|
|
$ |
2.79 |
|
| |
|
|
|
|
|
| General
and administrative - non-cash component |
$ |
0.43 |
|
|
$ |
0.75 |
|
|
$ |
1.81 |
|
| Interest
expense |
0.74 |
|
|
0.67 |
|
|
1.14 |
|
|
Depletion |
9.54 |
|
|
10.13 |
|
|
11.73 |
|
|
|
|
|
|
|
|
|
|
|
(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 and depletion. 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 EndedSeptember 30,
2017 |
|
Three Months Ended June 30, 2017 |
|
Three Months EndedSeptember 30,
2016 |
| Net
income |
$ |
26,607 |
|
|
$ |
22,149 |
|
|
$ |
10,202 |
|
| Interest
expense |
859 |
|
|
643 |
|
|
658 |
|
| Non-cash
unit-based compensation expense |
503 |
|
|
718 |
|
|
1,044 |
|
|
Depletion |
11,068 |
|
|
9,672 |
|
|
6,751 |
|
| Adjusted
EBITDA |
$ |
39,037 |
|
|
$ |
33,182 |
|
|
$ |
18,655 |
|
| |
|
|
|
|
|
| Adjustments to
reconcile Adjusted EBITDA to cash available for
distribution: |
|
|
|
|
|
| Debt service,
contractual obligations, fixed charges and reserves |
(708 |
) |
|
(685 |
) |
|
(556 |
) |
| Cash available
for distribution |
$ |
38,329 |
|
|
$ |
32,497 |
|
|
$ |
18,099 |
|
| |
|
|
|
|
|
| Limited Partner units
outstanding |
113,882 |
|
|
97,764 |
|
|
87,800 |
|
| |
|
|
|
|
|
| Cash available
for distribution per limited partner unit |
$ |
0.337 |
|
|
$ |
0.332 |
|
|
$ |
0.207 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Investor Contact:Adam Lawlis+1
432.221.7467alawlis@viperenergy.com
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