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VNOM

Viper Energy Partners NasdaqGS:VNOM Stock Report

Last Price

US$29.39

Market Cap

US$4.9b

7D

-0.8%

1Y

68.1%

Updated

16 Aug, 2022

Data

Company Financials +
VNOM fundamental analysis
Snowflake Score
Valuation3/6
Future Growth1/6
Past Performance3/6
Financial Health4/6
Dividends2/6

VNOM Stock Overview

Viper Energy Partners LP owns, acquires, and exploits oil and natural gas properties in North America.

Viper Energy Partners LP Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Viper Energy Partners
Historical stock prices
Current Share PriceUS$29.39
52 Week HighUS$35.85
52 Week LowUS$16.49
Beta2.07
1 Month Change15.66%
3 Month Change-0.37%
1 Year Change68.14%
3 Year Change3.34%
5 Year Change84.84%
Change since IPO-11.85%

Recent News & Updates

Aug 01

Viper Energy Emphasizes Buybacks Over Dividends (Not A Fan)

Viper Energy Partners is an MLP of Permian producer Diamondback Energy. However, since May of 2018 the company has been a dividend-paying corporation (no K-1 form at tax-time). VNOM has ~26,700 net working acres (operated and non-operated) primarily across the Midland and Delaware Basins of the Permian. Strong O&G prices in Q2 led to record operating income and distributions of $0.81/unit. That's an annualized yield of 10.9% based on Monday's closing price of $29.61/unit. The outlook for distributions was excellent going forward. That is, until today's announcement that the company was allocating over half-a-billion dollars to unit repurchases. Viper Energy Partners (VNOM) is one of two MLPs that General Partner Diamondback Energy (FANG) controls and the one that produces oil and gas (the other MLP is Rattler Midstream LP (RTLR) - a midstream infrastructure LP). The current relatively strong O&G price environment appeared to be bullish for VNOM in the short to mid term considering its ability to throw off strong distributions to unitholders. Indeed, in the Q2 report issued today (Monday, Aug. 1), VNOM announced a $0.81/unit distribution - up 21% sequentially from Q1. However, the company also significantly increased its unit repurchase plan - by a whopping half-a-billion dollars. That represents what otherwise would have been a potential $6.52/unit of potential income for unitholders. I'm not a fan of energy companies that greatly over-emphasize share buybacks during up-cycles. I would take advantage of any price strength to SELL the units. Investment Thesis An overview of VNOM is shown below and illustrates the tight-link and adjacency of VNOM's royalty leasehold with that of Diamondback Energy: Viper Energy Partners Source: May Presentation As can be seen below, Viper Energy Partners' primary asset is its large leasehold in the Permian Basin which has proven reserves of 127.9 million boe: 54% oil and an estimated 1.67 boe/unit with ~76.7 million units outstanding: Viper Energy Partners Source: May Presentation As can be seen in the above graphic, Viper owns 26,700 net royalty acres (operated and non-operated) primarily across the Midland and Delaware Basins of the Permian. That being the case, Viper Energy Partners is focused on efficiently producing O&G from its Permian leasehold (with a dash of the Eagle Ford) in order to generate robust free cash flow to reward its unitholders with excellent income. Of its operated acreage, VNOM reports it has 3,900 gross (213 net) horizontal wells economic at $50/Bbl WTI, 190 net locations of which are economic at $40/bbl WTI. Proved reserves at YE 2021 were 127.9 million boe (69.2 million bbls oil) and represented a 29% increase over YE 2020 reserves. Net proved reserve additions of 38.8 million boe equated to a reserve replacement ratio of 378% and an organic RRR of 293%. My point being that VNOM's asset base still has considerable upside reserve potential as the partnership exploits its resource base. As mentioned in the bullets, and although VNOM is an MLP, since May of 2018 the partnership has been treated as a corporation for U.S. federal income tax purposes. However, VNOM units are still tax-advantaged because ~60% of the distributions paid in 2022 are expected to be "reasonably determined to not constitute dividends for U.S. federal income tax purposes; rather constitute non-taxable reductions to tax basis" (see page 4 of the above reference May Presentation). Q2 Earnings The Q2 FY2022 EPS report was released after the market closed today (Monday, August 1) and it was a very bullish report (at least from a financial and operational perspective). Highlights included: Q2 average production was 19,758 bo/d (33,560 boe/d), +9% from Q1 2022 and 20% yoy. Q2 consolidated net income (including non-controlling interest) was a record $171.6 million; net income attributable to VNOM was $34.0 million, or $0.44/unit. Adjusted net income was $167.0 million, or $2.18/unit The Q2 cash distribution of $0.81/unit represented ~70% of total DCF of $1.16/unit and was up 21% qoq and implies a 10.9% annualized yield based on today's close. The increase in production was primarily driven primarily a record 4.8 net wells being turned onto production by Diamondback. Travis Stice, CEO of Diamondback, said: 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. That increases VNOM's guidance for full-year 2022 average daily production guidance to 19,000 to 19,750 bbls of oil per day (32,500 to 33,750 boe/d). More production obviously means more distribution potential for unitholders. Management also adjusted its guidance on distributions' taxation: As of end of Q2, ~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." Share Repurchases During Q2, VNOM repurchased 1.0 million common units for an aggregate $28.9 million (an average of $28.38/unit). The stock closed Monday at $29.61/unit. That comes on the heels of repurchasing 1.6 million common units in Q1 2022 for an aggregate of $39.3 million (or an average of $24.56/unit) and, in the Q1 report, lifting the authorization for its common unit repurchase program by $100 million to $250 million. Today, the repurchase authorization was further increased by $500 million to $750.0 million. Viper also reported it already expended ~21% of the increased authorized amount, leaving ~$591.6 million remaining on the increased authorization as of July 29, 2022. Risks Being an O&G producer (and commodity price taker), Viper Energy Partners is exposed to the typical risks and volatility associated with the commodity price cycle. Increased domestic and/or international oil production and/or reduced global demand for O&G due to a slowing global economy could negatively affect the company's realized pricing and therefore reduce distributions to unit holders.

Shareholder Returns

VNOMUS Oil and GasUS Market
7D-0.8%4.8%3.6%
1Y68.1%58.5%-9.6%

Return vs Industry: VNOM exceeded the US Oil and Gas industry which returned 58.5% over the past year.

Return vs Market: VNOM exceeded the US Market which returned -9.6% over the past year.

Price Volatility

Is VNOM's price volatile compared to industry and market?
VNOM volatility
VNOM Average Weekly Movement8.1%
Oil and Gas Industry Average Movement8.8%
Market Average Movement7.7%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: VNOM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 8% a week.

Volatility Over Time: VNOM's weekly volatility (8%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
2013n/aTravis Sticehttps://www.viperenergy.com

Viper Energy Partners LP owns, acquires, and exploits oil and natural gas properties in North America. As of December 31, 2021, it had mineral interests in 27,027 net royalty acres in the Permian Basin and Eagle Ford Shale; and estimated proved oil and natural gas reserves of 127,888 thousand barrels of crude oil equivalent. Viper Energy Partners GP LLC operates as the general partner of the company.

Viper Energy Partners LP Fundamentals Summary

How do Viper Energy Partners's earnings and revenue compare to its market cap?
VNOM fundamental statistics
Market CapUS$4.92b
Earnings (TTM)US$107.02m
Revenue (TTM)US$697.10m

20.7x

P/E Ratio

3.2x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
VNOM income statement (TTM)
RevenueUS$697.10m
Cost of RevenueUS$0
Gross ProfitUS$697.10m
Other ExpensesUS$590.08m
EarningsUS$107.02m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.42
Gross Margin100.00%
Net Profit Margin15.35%
Debt/Equity Ratio29.7%

How did VNOM perform over the long term?

See historical performance and comparison

Dividends

4.9%

Current Dividend Yield

162%

Payout Ratio