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, 2022.
Additionally, the Company announced today that
beginning in the third quarter of 2022, the Board of Directors of
Viper’s General Partner (the “Board”) has approved a base annual
distribution of $1.00 per common unit as well as a return of
capital commitment of at least 75% of cash available for
distribution. Viper’s base distribution is expected to be
supplemented by additional return of capital in the form of
variable distributions and opportunistic unit repurchases. As part
of this enhanced capital return program, the Board also increased
the authorization of its common unit repurchase program to $750.0
million, up from $250.0 million previously.
SECOND QUARTER HIGHLIGHTS
- Q2 2022 average production of
19,758 bo/d (33,560 boe/d), an increase of 9% from Q1 2022 and 20%
year over year
- Q2 2022 consolidated net income
(including non-controlling interest) of $171.6 million; net income
attributable to Viper Energy Partners LP of $34.0 million, or $0.44
per common unit
- Adjusted net income (as defined and
reconciled below) of $167.0 million, or $2.18 per common unit
- Q2 2022 cash distribution of $0.81
per common unit, representing approximately 70% of total cash
available for distribution (as defined and reconciled below) of
$1.16 per common unit; $0.81 distribution is up 21% quarter over
quarter and implies a 10.5% annualized yield based on the July 29,
2022 unit closing price of $30.74
- Repurchased 1.0 million common
units in Q2 2022 for an aggregate of $28.9 million (average
price of $28.38 per unit); repurchased 0.8 million common units to
date in Q3 2022 for $20.1 million (average price of $26.51 per
unit)
- Q2 2022 Consolidated Adjusted
EBITDA (as defined and reconciled below) of $215.1 million and cash
available for distribution to Viper’s common units (as defined and
reconciled below) of $88.0 million
- Ended the second quarter of 2022
with total long-term debt of $680.4 million and net debt (as
defined and reconciled below) of $676.0 million
- 180 total gross (5.7 net 100%
royalty interest) horizontal wells turned to production on Viper’s
acreage during Q2 2022 with an average lateral length of 9,785
feet
- Initiating average daily production
guidance for Q3 2022 and Q4 2022 of 19,250 to 20,250 bo/d (32,750
to 34,500 boe/d)
- Increasing full year 2022 average
daily production guidance to 19,000 to 19,750 bo/d (32,500 to
33,750 boe/d), an increase of 4.0% at the midpoint
- As of July 13, 2022, there were
approximately 550 gross horizontal wells in the process of active
development on Viper’s acreage in which Viper expects to own an
average 1.6% net royalty interest (9.0 net 100% royalty interest
wells)
- Approximately 558 gross (12.5 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
- Approximately 55% of distributions
paid in 2022 are expected to be reasonably estimated to constitute
non-taxable reductions to the tax basis, and not dividends, for
U.S. federal income tax purposes
ENHANCED CAPITAL RETURN
PROGRAM
- Implementing base annual
distribution of $1.00 per unit; implies a 3.3% annualized yield
based on the July 29, 2022 unit closing price of $30.74
- Increasing return of capital
commitment to at least 75% of cash available for distribution,
inclusive of the base distribution, variable distributions and
opportunistic unit repurchases
- Increasing authorization for common
unit repurchase program to $750.0 million, up from $250.0 million
previously
“The second quarter was an outstanding quarter
for Viper as oil production grew nine percent quarter over quarter,
which, combined with the benefit of increasing commodity prices and
no inflationary cost pressures, resulted in a 20% increase in cash
available for distribution. Importantly, the significant increase
in production was driven primarily by a record 4.8 net wells being
turned to production by Diamondback during the quarter. As a result
of Diamondback’s consistent focus on developing Viper’s high
concentration royalty acreage, primarily in the Northern Midland
Basin, as well as continued strong activity levels by third party
operators, Viper is increasing our guidance for oil production for
the full year 2022 by 4% at the midpoint,” stated Travis Stice,
Chief Executive Officer of Viper’s General Partner.
Mr. Stice continued, “Additionally, Viper today
announced the next step in the evolution of our capital return
program. The Board has approved, beginning in the third quarter, an
annual base distribution of $1.00 per unit, which provides a
competitive yield of 3.3% at today’s unit price, and which would
represent an annual distribution roughly equal to 50% of our
estimated cash available for distribution assuming $50 WTI. The
Board also approved an increase to our return of capital commitment
to at least 75% of cash available for distribution. To meet this
commitment, our base distribution is expected to be supplemented by
additional return of capital in the form of variable distributions
and opportunistic unit repurchases.”
Mr. Stice continued, “The enhanced return of
capital framework announced today, along with the increase in the
unit repurchase authorization, displays the confidence we have in
our forward outlook. The optionality provided by the variable
return of capital beyond our base distribution will allow greater
flexibility in taking advantage of extreme market volatility and
the current dislocation from the long-term intrinsic value of our
asset base. Going forward, we remain committed to generating the
highest value proposition for our unitholders, whether that be
allocating capital to a growing base distribution, variable
distribution or opportunistic unit repurchases.”
FINANCIAL UPDATE
Viper’s second quarter 2022 average unhedged
realized prices were $106.34 per barrel of oil, $6.10 per Mcf of
natural gas and $39.28 per barrel of natural gas liquids, resulting
in a total equivalent realized price of $78.20/boe.
Viper’s second quarter 2022 average hedged
realized prices were $105.59 per barrel of oil, $4.72 per Mcf of
natural gas and $39.28 per barrel of natural gas liquids, resulting
in a total equivalent realized price of $75.99/boe.
During the second quarter of 2022, the Company
recorded total operating income of $239.3 million and consolidated
net income (including non-controlling interest) of $171.6 million.
Through the first half of 2022, Viper generated $441.2 million in
operating income and $299.7 million in consolidated net income.
During the second quarter of 2022, the Company
repurchased $49.6 million of the outstanding principal of its
5.375% Senior Notes due 2027 at an average cost of 98.7% of par, or
$49.0 million in aggregate.
As of June 30, 2022, the Company had a cash
balance of $4.3 million and total long-term debt outstanding
(excluding debt issuance, discounts and premiums) of $680.4
million, resulting in net debt (as defined and reconciled below) of
$676.0 million. Viper’s outstanding long-term debt as of
June 30, 2022 consisted of $430.4 million in aggregate
principal amount of its 5.375% Senior Notes due 2027 and $250.0
million in borrowings on its revolving credit facility, leaving
$250.0 million available for future borrowings and $254.3 million
of total liquidity.
SECOND QUARTER 2022 CASH DISTRIBUTION
& CAPITAL RETURN PROGRAM
The Board declared a cash distribution for the
three months ended June 30, 2022 of $0.81 per common unit. The
distribution is payable on August 23, 2022 to eligible common
unitholders of record at the close of business on August 16, 2022.
This distribution represents approximately 70% of total cash
available for distribution.
On May 19, 2022, Viper made a cash distribution
to its common unitholders and subsequently has reasonably estimated
that a portion of that distribution, as well as a portion of the
distribution payable on August 23, 2022, should not constitute
dividends for U.S. federal income tax purposes. Rather,
approximately 55% of distributions that have been paid, or which
are expected to be paid, in 2022 are estimated to constitute
non-taxable reductions to the tax basis of each distribution
recipient’s ownership interest in Viper. The Form 8937 containing
additional information may be found on www.viperenergy.com under
the “Investor Relations” section of the site.
During the second quarter of 2022, Viper
repurchased 1.0 million common units for an aggregate purchase
price of $28.9 million (average price of $28.38 per unit).
From the end of the second quarter through July 29, 2022, the
Company repurchased an additional 0.8 million common units for an
aggregate purchase price of $20.1 million (average price of $26.51
per unit). In total through July 29, 2022, the Company repurchased
8.0 million common units for an aggregate of $158.4 million,
reflecting an average price of $19.75 per unit.
Additionally, the Company announced today that
the Board increased the authorization of its common unit repurchase
program to $750.0 million, up from $250.0 million previously. Viper
has expended approximately 21% of the increased authorized amount,
leaving approximately $591.6 million remaining on the increased
authorization as of July 29, 2022.
OPERATIONS UPDATE
During the second quarter of 2022, Viper
estimates that 180 gross (5.7 net 100% royalty interest) horizontal
wells with an average royalty interest of 3.2% were turned to
production on its acreage position with an average lateral length
of 9,785 feet. Of these 180 gross wells, Diamondback is the
operator of 54 gross wells, with an average royalty interest of
8.9%, and the remaining 126 gross wells, with an average royalty
interest of 0.7%, are operated by third parties.
The following table summarizes Viper’s gross well
information:
|
Diamondback Operated |
|
Third Party Operated |
|
Total |
Horizontal wells
turned to production (second quarter
2022)(1): |
|
|
|
|
|
Gross wells |
54 |
|
126 |
|
180 |
Net 100% royalty interest wells |
4.8 |
|
0.9 |
|
5.7 |
Average percent net royalty interest |
8.9% |
|
0.7% |
|
3.2% |
|
|
|
|
|
|
Horizontal producing
well count (as of July 13, 2022): |
|
|
|
|
|
Gross wells |
1,451 |
|
4,521 |
|
5,972 |
Net 100% royalty interest wells |
109.7 |
|
61.9 |
|
171.6 |
Average percent net royalty interest |
7.6% |
|
1.4% |
|
2.9% |
|
|
|
|
|
|
Horizontal active
development well count (as of July 13, 2022): |
|
|
|
|
|
Gross wells |
75 |
|
475 |
|
550 |
Net 100% royalty interest wells |
4.2 |
|
4.8 |
|
9.0 |
Average percent net royalty interest |
5.6% |
|
1.0% |
|
1.6% |
|
|
|
|
|
|
Line of sight wells
(as of July 13, 2022): |
|
|
|
|
|
Gross wells |
145 |
|
413 |
|
558 |
Net 100% royalty interest wells |
8.3 |
|
4.2 |
|
12.5 |
Average percent net royalty interest |
5.7% |
|
1.0% |
|
2.2% |
(1) |
Average
lateral length of 9,785 feet. |
|
|
The 550 gross wells currently in the process of
active development are those wells that have been spud and are
expected to be turned to production within approximately the next
six to eight months. Further in regard to the active development on
Viper’s asset base, there are currently 47 gross rigs operating on
Viper’s acreage, seven of which are operated by Diamondback. The
558 line-of-sight wells are those that are not currently in the
process of active development, but for which Viper has reason to
believe that they will be turned to production within approximately
the next 15 to 18 months. The expected timing of these
line-of-sight wells is based primarily on permitting by third party
operators or Diamondback’s current expected completion schedule.
Existing permits or active development of Viper’s royalty acreage
does not ensure that those wells will be turned to production.
GUIDANCE UPDATE
Below is Viper’s updated guidance for the full
year 2022, as well as average production guidance for Q3 2022 and
Q4 2022.
|
|
|
Viper Energy Partners |
|
|
Q3 2022 / Q4 2022 Net
Production - MBo/d |
19.25 - 20.25 |
Q3 2022 / Q4 2022 Net
Production - MBoe/d |
32.75 - 34.50 |
Full Year 2022 Net Production
- MBo/d |
19.00 - 19.75 |
Full Year 2022 Net Production
- MBoe/d |
32.50 - 33.75 |
|
|
Unit costs ($/boe) |
|
Depletion |
$9.75 - $10.75 |
Cash G&A |
$0.60 - $0.80 |
Non-Cash Unit-Based
Compensation |
$0.10 - $0.20 |
Interest Expense(1) |
$3.25 - $3.75 |
|
|
Production and Ad Valorem Taxes (% of Revenue) (2) |
7% |
Cash Tax Rate (% of Pre-Tax
Income Attributable to Viper Energy Partners LP)(3) |
13% - 18% |
Q3 2022 Cash Taxes ($ -
million)(4) |
$6.0 - $10.0 |
(1) |
Includes actual interest expense for the first half of 2022 plus
expected interest for the remainder of 2022 assuming $430.0 million
in principal of senior notes and current revolver balance. |
(2) |
Includes production taxes of 4.6% for crude oil and 7.5% for
natural gas and natural gas liquids and ad valorem taxes. |
(3) |
Pre-tax income attributable to Viper Energy Partners LP is
reconciled below. |
(4) |
Attributable to Viper Energy Partners LP. |
|
|
CONFERENCE CALL
Viper will host a conference call and webcast
for investors and analysts to discuss its results for the second
quarter of 2022 on Tuesday, August 2, 2022 at 11:00 a.m. CT. Access
to the live audio-only webcast, and replay which will be available
following the call, may be found here. The live webcast of the
earnings conference call will also be available via Viper’s website
at www.viperenergy.com under the “Investor Relations” section of
the site.
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 owning and acquiring
mineral and royalty interests in oil-weighted basins, primarily the
Permian Basin. For more information, please visit
www.viperenergy.com.
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 primarily in
the Permian Basin in West Texas. For more information, please visit
www.diamondbackenergy.com.
Forward-Looking Statements
This news release contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act, which involve risks,
uncertainties, and assumptions. All statements, other than
statements of historical fact, including statements regarding
Viper’s: future performance; business strategy; future operations;
estimates and projections of operating income, losses, costs and
expenses, returns, cash flow, and financial position; production
levels on properties in which Viper has mineral and royalty
interests, developmental activity by other operators; reserve
estimates and Viper’s ability to replace or increase reserves;
anticipated benefits of strategic transactions (including
acquisitions and divestitures); and plans and objectives of
(including Diamondback’s plans for developing Viper’s acreage and
Viper’s cash distribution policy and common unit repurchase
program) are forward-looking statements. When used in this news
release, the words “aim,” “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “forecast,” “future,” “guidance,”
“intend,” “may,” “model,” “outlook,” “plan,” “positioned,”
“potential,” “predict,” “project,” “seek,” “should,” “target,”
“will,” “would,” and similar expressions (including the negative of
such terms) as they relate to Viper are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. Although Viper believes
that the expectations and assumptions reflected in its
forward-looking statements are reasonable as and when made, they
involve risks and uncertainties that are difficult to predict and,
in many cases, beyond its control. Accordingly, forward-looking
statements are not guarantees of Viper’s future performance and the
actual outcomes could differ materially from what Viper expressed
in its forward-looking statements.
Factors that could cause the outcomes to differ
materially include (but are not limited to) the following: changes
in supply and demand levels for oil, natural gas, and natural gas
liquids, and the resulting impact on the price for those
commodities; the impact of public health crises, including epidemic
or pandemic diseases such as the COVID-19 pandemic, and any related
company or government policies or actions; actions taken by the
members of OPEC and Russia affecting the production and pricing of
oil, as well as other domestic and global political, economic, or
diplomatic developments, including any impact of the ongoing war in
Ukraine on the global energy markets and geopolitical stability;
rising interest rates and their impact on the cost of capital;
regional supply and demand factors, including delays, curtailment
delays or interruptions of production on Viper’s mineral and
royalty acreage, or governmental orders, rules or regulations that
impose production limits on such acreage; federal and state
legislative and regulatory initiatives relating to hydraulic
fracturing, including the effect of existing and future laws and
governmental regulations; transition risks relating to climate
change and the risks and other factors disclosed 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.
In light of these factors, the events
anticipated by Viper’s forward-looking statements may not occur at
the time anticipated or at all. Moreover, the new risks emerge from
time to time. Viper cannot predict all risks, nor can it assess the
impact of all factors on its business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those anticipated by any forward-looking
statements it may make. Accordingly, you should not place undue
reliance on any forward-looking statements made in this news
release. All forward-looking statements speak only as of the date
of this news release or, if earlier, as of the date they were made.
Viper does not intend to, and disclaim any obligation to, update or
revise any forward-looking statements unless required by applicable
law.
Viper Energy Partners LP |
Condensed Consolidated Balance Sheets |
(unaudited, in thousands, except unit
amounts) |
|
|
|
|
|
June 30, |
|
December 31, |
|
2022 |
|
2021 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
4,312 |
|
|
$ |
39,448 |
|
Royalty income receivable (net of allowance for credit losses) |
|
122,444 |
|
|
|
68,568 |
|
Royalty income receivable—related party |
|
10,589 |
|
|
|
2,144 |
|
Derivative instruments |
|
1,010 |
|
|
|
— |
|
Other current assets |
|
1,502 |
|
|
|
989 |
|
Total current assets |
|
139,857 |
|
|
|
111,149 |
|
Property: |
|
|
|
Oil and natural gas interests, full cost method of accounting
($1,409,092 and $1,640,172 excluded from depletion at June 30,
2022 and December 31, 2021, respectively) |
|
3,482,392 |
|
|
|
3,513,590 |
|
Land |
|
5,688 |
|
|
|
5,688 |
|
Accumulated depletion and impairment |
|
(658,536 |
) |
|
|
(599,163 |
) |
Property, net |
|
2,829,544 |
|
|
|
2,920,115 |
|
Derivative instruments |
|
1,439 |
|
|
|
— |
|
Other assets |
|
1,145 |
|
|
|
2,757 |
|
Total assets |
$ |
2,971,985 |
|
|
$ |
3,034,021 |
|
Liabilities and Unitholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
9 |
|
|
$ |
69 |
|
Accrued liabilities |
|
14,989 |
|
|
|
20,509 |
|
Derivative instruments |
|
9,085 |
|
|
|
3,417 |
|
Income taxes payable |
|
2,759 |
|
|
|
471 |
|
Total current liabilities |
|
26,842 |
|
|
|
24,466 |
|
Long-term debt, net |
|
674,383 |
|
|
|
776,727 |
|
Total liabilities |
|
701,225 |
|
|
|
801,193 |
|
Unitholders’ equity: |
|
|
|
General Partner |
|
689 |
|
|
|
729 |
|
Common units (75,946,203 units issued and outstanding as of
June 30, 2022 and 78,546,403 units issued and outstanding as
of December 31, 2021) |
|
733,998 |
|
|
|
813,161 |
|
Class B units (90,709,946 units issued and outstanding
June 30, 2022 and December 31, 2021) |
|
881 |
|
|
|
931 |
|
Total Viper Energy Partners LP unitholders’ equity |
|
735,568 |
|
|
|
814,821 |
|
Non-controlling interest |
|
1,535,192 |
|
|
|
1,418,007 |
|
Total equity |
|
2,270,760 |
|
|
|
2,232,828 |
|
Total liabilities and unitholders’ equity |
$ |
2,971,985 |
|
|
$ |
3,034,021 |
|
Viper Energy Partners LP |
Condensed Consolidated Statements of
Operations |
(unaudited, in thousands, except per unit
data) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Operating
income: |
|
|
|
|
|
|
|
Royalty income |
$ |
238,830 |
|
|
$ |
113,458 |
|
|
$ |
431,919 |
|
|
$ |
209,970 |
|
Lease bonus income |
|
329 |
|
|
|
484 |
|
|
|
9,011 |
|
|
|
809 |
|
Other operating income |
|
163 |
|
|
|
208 |
|
|
|
295 |
|
|
|
347 |
|
Total operating income |
|
239,322 |
|
|
|
114,150 |
|
|
|
441,225 |
|
|
|
211,126 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
Production and ad valorem taxes |
|
16,039 |
|
|
|
8,152 |
|
|
|
29,909 |
|
|
|
14,801 |
|
Depletion |
|
31,962 |
|
|
|
23,978 |
|
|
|
59,373 |
|
|
|
48,864 |
|
General and administrative expenses |
|
1,880 |
|
|
|
2,162 |
|
|
|
3,833 |
|
|
|
4,383 |
|
Total costs and expenses |
|
49,881 |
|
|
|
34,292 |
|
|
|
93,115 |
|
|
|
68,048 |
|
Income (loss) from
operations |
|
189,441 |
|
|
|
79,858 |
|
|
|
348,110 |
|
|
|
143,078 |
|
Other income
(expense): |
|
|
|
|
|
|
|
Interest expense, net |
|
(9,782 |
) |
|
|
(7,973 |
) |
|
|
(19,427 |
) |
|
|
(15,833 |
) |
Gain (loss) on derivative instruments, net |
|
(1,889 |
) |
|
|
(29,546 |
) |
|
|
(20,248 |
) |
|
|
(61,050 |
) |
Other income, net |
|
32 |
|
|
|
39 |
|
|
|
38 |
|
|
|
77 |
|
Total other expense, net |
|
(11,639 |
) |
|
|
(37,480 |
) |
|
|
(39,637 |
) |
|
|
(76,806 |
) |
Income (loss) before
income taxes |
|
177,802 |
|
|
|
42,378 |
|
|
|
308,473 |
|
|
|
66,272 |
|
Provision for (benefit from)
income taxes |
|
6,182 |
|
|
|
— |
|
|
|
8,812 |
|
|
|
35 |
|
Net income
(loss) |
|
171,620 |
|
|
|
42,378 |
|
|
|
299,661 |
|
|
|
66,237 |
|
Net income (loss) attributable
to non-controlling interest |
|
137,598 |
|
|
|
37,716 |
|
|
|
249,034 |
|
|
|
64,595 |
|
Net income (loss)
attributable to Viper Energy Partners LP |
$ |
34,022 |
|
|
$ |
4,662 |
|
|
$ |
50,627 |
|
|
$ |
1,642 |
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common limited partner units: |
|
|
|
|
|
|
|
Basic |
$ |
0.44 |
|
|
$ |
0.07 |
|
|
$ |
0.66 |
|
|
$ |
0.03 |
|
Diluted |
$ |
0.44 |
|
|
$ |
0.07 |
|
|
$ |
0.66 |
|
|
$ |
0.03 |
|
Weighted average
number of common limited partner units outstanding: |
|
|
|
|
|
|
|
Basic |
|
76,620 |
|
|
|
64,672 |
|
|
|
76,861 |
|
|
|
65,014 |
|
Diluted |
|
76,729 |
|
|
|
64,795 |
|
|
|
76,978 |
|
|
|
65,151 |
|
Viper Energy Partners LP |
Condensed Consolidated Statements of Cash
Flows |
(unaudited, in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Cash flows from operating
activities: |
|
|
|
|
|
|
|
Net income (loss) |
$ |
171,620 |
|
|
$ |
42,378 |
|
|
$ |
299,661 |
|
|
$ |
66,237 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depletion |
|
31,962 |
|
|
|
23,978 |
|
|
|
59,373 |
|
|
|
48,864 |
|
(Gain) loss on derivative instruments, net |
|
1,889 |
|
|
|
29,546 |
|
|
|
20,248 |
|
|
|
61,050 |
|
Net cash receipts (payments) on derivatives |
|
(6,765 |
) |
|
|
(20,940 |
) |
|
|
(17,029 |
) |
|
|
(35,882 |
) |
Other |
|
1,505 |
|
|
|
1,091 |
|
|
|
2,893 |
|
|
|
1,992 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Royalty income receivable |
|
(23,944 |
) |
|
|
(220 |
) |
|
|
(53,876 |
) |
|
|
(9,801 |
) |
Royalty income receivable—related party |
|
(6,397 |
) |
|
|
1,842 |
|
|
|
(8,445 |
) |
|
|
(1,681 |
) |
Accounts payable and accrued liabilities |
|
(5,788 |
) |
|
|
(2,467 |
) |
|
|
(5,580 |
) |
|
|
(1,107 |
) |
Other |
|
(900 |
) |
|
|
(187 |
) |
|
|
1,775 |
|
|
|
8 |
|
Net cash provided by (used in)
operating activities |
|
163,182 |
|
|
|
75,021 |
|
|
|
299,020 |
|
|
|
129,680 |
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
Acquisitions of oil and natural gas interests |
|
(759 |
) |
|
|
(745 |
) |
|
|
1,862 |
|
|
|
(819 |
) |
Proceeds from sale of assets |
|
— |
|
|
|
— |
|
|
|
29,336 |
|
|
|
— |
|
Net cash provided by (used in)
investing activities |
|
(759 |
) |
|
|
(745 |
) |
|
|
31,198 |
|
|
|
(819 |
) |
Cash flows from financing
activities: |
|
|
|
|
|
|
|
Proceeds from borrowings under credit facility |
|
100,000 |
|
|
|
25,000 |
|
|
|
144,000 |
|
|
|
25,000 |
|
Repayment on credit facility |
|
(98,000 |
) |
|
|
(20,000 |
) |
|
|
(198,000 |
) |
|
|
(47,000 |
) |
Repayment of senior notes |
|
(48,963 |
) |
|
|
— |
|
|
|
(48,963 |
) |
|
|
— |
|
Repurchased units as part of unit buyback |
|
(28,949 |
) |
|
|
(6,779 |
) |
|
|
(68,209 |
) |
|
|
(19,822 |
) |
Distributions to public |
|
(51,190 |
) |
|
|
(16,047 |
) |
|
|
(87,084 |
) |
|
|
(25,107 |
) |
Distributions to Diamondback |
|
(64,012 |
) |
|
|
(22,886 |
) |
|
|
(107,015 |
) |
|
|
(35,712 |
) |
Other |
|
(63 |
) |
|
|
(2,869 |
) |
|
|
(83 |
) |
|
|
(2,919 |
) |
Net cash provided by (used in)
financing activities |
|
(191,177 |
) |
|
|
(43,581 |
) |
|
|
(365,354 |
) |
|
|
(105,560 |
) |
Net increase (decrease) in
cash and cash equivalents |
|
(28,754 |
) |
|
|
30,695 |
|
|
|
(35,136 |
) |
|
|
23,301 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
|
33,066 |
|
|
|
11,727 |
|
|
|
39,448 |
|
|
|
19,121 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
4,312 |
|
|
$ |
42,422 |
|
|
$ |
4,312 |
|
|
$ |
42,422 |
|
Viper Energy Partners LP |
Selected Operating Data |
(unaudited) |
|
|
|
|
|
|
|
Three Months Ended June 30, 2022 |
|
Three Months Ended March 31, 2022 |
|
Three Months Ended June 30, 2021 |
Production
Data: |
|
|
|
|
|
Oil (MBbls) |
|
1,798 |
|
|
1,633 |
|
|
1,503 |
Natural gas (MMcf) |
|
3,898 |
|
|
3,729 |
|
|
3,219 |
Natural gas liquids (MBbls) |
|
607 |
|
|
586 |
|
|
449 |
Combined volumes (MBOE)(1) |
|
3,054 |
|
|
2,841 |
|
|
2,489 |
|
|
|
|
|
|
Average daily oil volumes (BO/d) |
|
19,758 |
|
|
18,144 |
|
|
16,516 |
Average daily combined volumes (BOE/d) |
|
33,560 |
|
|
31,567 |
|
|
27,352 |
|
|
|
|
|
|
Average sales
prices: |
|
|
|
|
|
Oil ($/Bbl) |
$ |
106.34 |
|
$ |
94.95 |
|
$ |
62.51 |
Natural gas ($/Mcf) |
$ |
6.10 |
|
$ |
4.07 |
|
$ |
2.96 |
Natural gas liquids ($/Bbl) |
$ |
39.28 |
|
$ |
38.99 |
|
$ |
22.21 |
Combined ($/BOE)(2) |
$ |
78.20 |
|
$ |
67.97 |
|
$ |
45.58 |
|
|
|
|
|
|
Oil, hedged ($/Bbl)(3) |
$ |
105.59 |
|
$ |
92.05 |
|
$ |
48.58 |
Natural gas, hedged ($/Mcf)(3) |
$ |
4.72 |
|
$ |
3.71 |
|
$ |
2.96 |
Natural gas liquids ($/Bbl)(3) |
$ |
39.28 |
|
$ |
38.99 |
|
$ |
22.21 |
Combined price, hedged ($/BOE)(3) |
$ |
75.99 |
|
$ |
65.82 |
|
$ |
37.18 |
|
|
|
|
|
|
Average Costs
($/BOE): |
|
|
|
|
|
Production and ad valorem taxes |
$ |
5.25 |
|
$ |
4.88 |
|
$ |
3.28 |
General and administrative - cash component(4) |
|
0.51 |
|
|
0.59 |
|
|
0.73 |
Total operating expense - cash |
$ |
5.76 |
|
$ |
5.47 |
|
$ |
4.01 |
|
|
|
|
|
|
General and administrative - non-cash unit compensation
expense |
$ |
0.11 |
|
$ |
0.10 |
|
$ |
0.14 |
Interest expense, net |
$ |
3.20 |
|
$ |
3.39 |
|
$ |
3.20 |
Depletion |
$ |
10.47 |
|
$ |
9.65 |
|
$ |
9.63 |
(1) |
Bbl equivalents are calculated using a conversion rate of six Mcf
per one Bbl. |
(2) |
Realized price net of all deducts for gathering, transportation and
processing. |
(3) |
Hedged prices reflect the impact of cash settlements of our matured
commodity derivative transactions on our average sales prices. |
(4) |
Excludes non-cash unit-based compensation expense for the
respective periods presented. |
|
|
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) attributable to Viper Energy Partners LP plus net
income (loss) attributable to non-controlling interest (“net income
(loss)”) before interest expense, net, non-cash unit-based
compensation expense, depletion expense, non-cash (gain) loss on
derivative instruments, (gain) loss on extinguishment of debt and
provision for (benefit from) income taxes. Adjusted EBITDA is not a
measure of net income as determined by United States’ generally
accepted accounting principles (“GAAP”). Management believes
Adjusted EBITDA is useful because it allows them 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, royalty income, cash flow from operating activities or
any other measure of financial performance or liquidity presented
as determined in accordance with GAAP. 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 income taxes payable, debt
service, contractual obligations, fixed charges and reserves for
future operating or capital needs that the Board may deem
appropriate, cash paid for tax withholding on vested common units,
distribution equivalent rights and preferred distributions, if any.
Management believes cash available for distribution is useful
because it allows them to more effectively evaluate Viper’s
operating performance excluding the impact of non-cash financial
items and short-term changes in working capital. 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 GAAP financial measure of net income (loss) to the non-GAAP
financial measures of Adjusted EBITDA and cash available for
distribution:
Viper Energy Partners LP |
(unaudited, in thousands, except per unit
data) |
|
|
|
Three Months Ended |
|
June 30, 2022 |
Net income (loss) attributable to Viper Energy Partners
LP |
$ |
34,022 |
|
Net income (loss) attributable to non-controlling interest |
|
137,598 |
|
Net income
(loss) |
|
171,620 |
|
Interest expense, net |
|
9,782 |
|
Non-cash unit-based compensation expense |
|
335 |
|
Depletion |
|
31,962 |
|
Non-cash (gain) loss on derivative instruments |
|
(4,876 |
) |
(Gain) loss on extinguishment of debt |
|
73 |
|
Provision for (benefit from) income taxes |
|
6,182 |
|
Consolidated Adjusted
EBITDA |
|
215,078 |
|
Less: Adjusted EBITDA attributable to non-controlling
interest(1) |
|
116,763 |
|
Adjusted EBITDA
attributable to Viper Energy Partners LP |
$ |
98,315 |
|
|
|
Adjustments to
reconcile Adjusted EBITDA to cash available for
distribution: |
|
Income taxes payable |
$ |
(6,182 |
) |
Debt service, contractual obligations, fixed charges and
reserves |
|
(3,993 |
) |
Distribution equivalent rights payments |
|
(113 |
) |
Preferred distributions |
|
(45 |
) |
Cash available for
distribution to Viper Energy Partners LP unitholders |
$ |
87,982 |
|
|
|
Common limited partner units
outstanding |
|
75,946 |
|
|
|
Cash available for
distribution per limited partner unit |
$ |
1.16 |
|
Cash per unit approved for
distribution |
$ |
0.81 |
|
(1) |
Does not take into account special income allocation
consideration. |
|
|
The following tables present a reconciliation of
the GAAP financial measure of income (loss) before income taxes to
the non-GAAP financial measure of pre-tax income attributable to
Viper Energy Partners LP. Management believes this measure is
useful to investors given it provides the basis for income taxes
payable by Viper Energy Partners LP, which is an adjustment to
reconcile Adjusted EBITDA to cash available for distribution to
Viper Energy Partners LP unitholders.
Viper Energy Partners LP |
Pre-tax income attributable to Viper Energy Partners
LP |
(unaudited, in thousands) |
|
|
|
Three Months Ended |
|
June 30, 2022 |
Income (loss) before income taxes |
$ |
177,802 |
|
Less: Net income (loss) attributable to non-controlling
interest |
|
137,598 |
|
Pre-tax income attributable to Viper Energy Partners
LP |
$ |
40,204 |
|
|
|
Provision for (benefit from)
income taxes |
$ |
6,182 |
|
Effective tax rate attributable to Viper Energy Partners
LP |
|
15.4 |
% |
Adjusted net income (loss) is a non-GAAP
financial measure equal to net income (loss) attributable to Viper
Energy Partners, LP plus net income (loss) attributable to
non-controlling interest adjusted for non-cash (gain) loss on
derivative instruments, (gain) loss on extinguishment of debt and
related income tax adjustments. The Company’s computation of
adjusted net income may not be comparable to other similarly titled
measures of other companies or to such measure in our credit
facility or any of our other contracts. Management believes
adjusted net income helps investors in the oil and natural gas
industry to measure and compare the Company’s performance to other
oil and natural gas companies by excluding from the calculation
items that can vary significantly from company to company depending
upon accounting methods, the book value of assets and other
non-operational factors.
The following table presents a reconciliation of net income
(loss) attributable to Viper Energy Partners LP to adjusted net
income (loss):
Viper Energy Partners LP |
Adjusted Net Income (Loss) |
(unaudited, in thousands, except per unit
data) |
|
|
|
Three Months Ended June 30, 2022 |
|
Amounts |
|
Amounts Per Diluted Unit |
Net income (loss) attributable to Viper Energy Partners
LP |
$ |
34,022 |
|
|
$ |
0.44 |
|
Net income (loss) attributable to non-controlling interest |
|
137,598 |
|
|
|
1.79 |
|
Net income
(loss) |
|
171,620 |
|
|
|
2.23 |
|
Non-cash (gain) loss on derivative instruments, net |
|
(4,876 |
) |
|
|
(0.06 |
) |
(Gain) loss on extinguishment of debt |
|
73 |
|
|
|
— |
|
Adjusted income excluding above items |
|
166,817 |
|
|
|
2.17 |
|
Income tax adjustment for above items |
|
167 |
|
|
|
0.01 |
|
Adjusted net income
(loss) |
|
166,984 |
|
|
|
2.18 |
|
Less: Adjusted net income (loss) attributed to non-controlling
interests |
|
133,880 |
|
|
|
1.75 |
|
Adjusted net income
(loss) attributable to Viper Energy Partners LP |
$ |
33,104 |
|
|
$ |
0.43 |
|
|
|
|
|
Weighted average
common units outstanding: |
|
|
|
Basic |
|
76,620 |
|
Diluted |
|
76,729 |
|
RECONCILIATION OF LONG-TERM DEBT TO NET
DEBT
The Company defines net debt as debt (excluding
debt issuance costs, discounts and premiums) less cash and cash
equivalents. Net debt should not be considered an alternative to,
or more meaningful than, total debt, the most directly comparable
GAAP measure. Management uses net debt to determine the Company's
outstanding debt obligations that would not be readily satisfied by
its cash and cash equivalents on hand. The Company believes this
metric is useful to analysts and investors in determining the
Company's leverage position because the Company has the ability to,
and may decide to, use a portion of its cash and cash equivalents
to reduce debt.
|
June 30, 2022 |
|
Net Q2 Principal Borrowings/ (Repayments) |
|
March 31, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
June 30, 2021 |
|
(in thousands) |
Total long-term debt(1) |
$ |
680,350 |
|
|
$ |
(47,588 |
) |
|
$ |
727,938 |
|
|
$ |
783,938 |
|
|
$ |
571,938 |
|
|
$ |
541,938 |
|
Cash and cash equivalents |
|
(4,312 |
) |
|
|
|
|
(33,066 |
) |
|
|
(39,448 |
) |
|
|
(41,515 |
) |
|
|
(42,422 |
) |
Net debt |
$ |
676,038 |
|
|
|
|
$ |
694,872 |
|
|
$ |
744,490 |
|
|
$ |
530,423 |
|
|
$ |
499,516 |
|
(1) Excludes debt issuance costs, discounts
& premiums.
Derivatives
As of the filing date, the Company had the
following outstanding derivative contracts. The Company’s
derivative contracts are based upon reported settlement prices on
commodity exchanges, with crude oil derivative settlements based on
New York Mercantile Exchange West Texas Intermediate pricing and
Crude Oil Brent. When aggregating multiple contracts, the weighted
average contract price is disclosed.
|
Crude Oil (Bbls/day, $/Bbl) |
|
Q3 2022(1) |
|
Q4 2022 |
|
Q1 2023 |
Collars - WTI (Cushing) |
|
— |
|
|
|
4,000 |
|
|
|
— |
|
Floor Price |
$ |
— |
|
|
$ |
50.00 |
|
|
$ |
— |
|
Ceiling Price |
$ |
— |
|
|
$ |
128.01 |
|
|
$ |
— |
|
Deferred Premium Puts - WTI (Cushing) |
|
10,000 |
|
|
|
8,000 |
|
|
|
6,000 |
|
Strike |
$ |
47.00 |
|
|
$ |
55.00 |
|
|
$ |
55.00 |
|
Premium |
$ |
(1.22 |
) |
|
$ |
(1.54 |
) |
|
$ |
(1.87 |
) |
|
Natural Gas (Mmbtu/day, $/Mmbtu) |
|
Q3 2022 |
|
Q4 2022 |
|
Q1 2023 |
Costless Collars - Henry Hub |
|
20,000 |
|
|
20,000 |
|
|
— |
Floor Price |
$ |
2.50 |
|
$ |
2.50 |
|
$ |
— |
Ceiling Price |
$ |
4.62 |
|
$ |
4.62 |
|
$ |
— |
|
Natural Gas (Mmbtu/day, $/Mmbtu) |
|
Q1 2023 |
|
Q2 2023 |
|
Q3 2023 |
|
Q4 2023 |
Natural Gas Basis Swaps - Waha Hub |
|
30,000 |
|
|
|
30,000 |
|
|
|
30,000 |
|
|
|
30,000 |
|
Swap Price |
$ |
(1.33 |
) |
|
$ |
(1.33 |
) |
|
$ |
(1.33 |
) |
|
$ |
(1.33 |
) |
(1) |
During the third quarter of 2022, Viper paid $2.4 million related
to the termination or restructuring of certain commodity derivative
positions prior to their contractual maturities. |
|
|
Investor Contact:
Austen Gilfillian+1 432.221.7420agilfillian@viperenergy.com
Source: Viper Energy Partners LP; Diamondback Energy, Inc.
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