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 fourth quarter ended December 31, 2018.
HIGHLIGHTS
- Q4 2018 cash distribution of $0.51 per common unit , up 11%
year over year; implies a 6.4% annualized yield based on the
February 4, 2019 unit closing price of $31.95
- 2018 full year distribution of $2.17, up 52% from full year
2017; implies a 6.8% yield based on the February 4, 2019 unit
closing price of $31.95
- Q4 2018 consolidated net income (including non-controlling
interest) of $40.7 million, consolidated adjusted EBITDA (as
defined and reconciled below) of $68.1 million and cash available
for distribution to Limited Partner units (as defined below) of
$26.5 million
- Q4 2018 production of 20,191 boe/d (69% oil), up 10% over Q3
2018 and 63% year over year
- Proved reserves as of December 31, 2018 of 63.1 MMboe (72% PDP,
66% oil), up 65% year over year
- Full year 2019 production guidance of 20,000 to 23,000
boe/d (67% - 71% oil), up ~24% at the midpoint from full year 2018
production
- Average production guidance for 1H 2019 of 20,500 to 22,000
boe/d, the midpoint of which is up 5% from Q4 2018 production
- Acquired 5,281 net royalty acres across 88 transactions for an
aggregate purchase price of approximately $615 million during the
full year 2018
- Closed 23 acquisitions for an aggregate purchase price of
approximately $104 million in Q4 2018, increasing Viper's mineral
interests to a total of 14,841 net royalty acres, up 55% year over
year
- As of January 23, 2019, there were 40 active rigs on Viper's
mineral acreage and approximately 619 active drilling permits filed
in the past six months
- Q2 2018 and Q3 2018 distributions, which were the initial
distributions after Viper's election to be treated as a taxable
entity for federal income tax purposes, determined to not
constitute dividends for U.S. federal income tax purposes; instead
should generally constitute non-taxable reductions to the tax
basis
“2018 was a transformational year for Viper as
we successfully effected our election to be treated as a taxable
entity which enabled us to present our differentiated investment
opportunity to a significantly expanded investor universe, while
also showcasing a unique tax strategy. We continued to execute on
our strategy of delivering unmatched return on and return of
capital, as we increased our annual distribution by over 50% and
generated a full year return on capital employed in excess of 15%.
Our acquisition machine continued to consolidate Tier 1 properties
as represented by Viper closing 88 deals for an aggregate purchase
price of approximately $615 million and correspondingly growing our
asset base by over 5,000 net royalty acres throughout the year,”
stated Travis Stice, Chief Executive Officer of Viper’s general
partner.
Mr. Stice continued, “Moving to 2019, we
continue to see healthy activity levels across our acreage
represented by the 40 active rigs currently operating on our
properties. As a result, we are providing full year 2019 production
guidance that at the midpoint implies roughly 25% annual organic
growth. Viper does not need to spend one dollar of capital to
achieve this robust organic growth, and we simultaneously provide a
significant, high single digit free cash flow yield, showcasing a
business model that is without peer in our industry. In addition to
our strong anticipated organic growth, we remain excited about the
continued execution of our acquisition strategy, including both the
consolidation of the private minerals market as well as significant
expected drop down opportunities from our parent company.”
FINANCIAL UPDATE
Viper's fourth quarter 2018 average realized
prices were $48.73 per barrel of oil, $2.41 per Mcf of natural gas
and $22.13 per barrel of natural gas liquids, resulting in a total
equivalent realized price of $39.17/boe.
During the fourth quarter of 2018, the Company
recorded total operating income of $73.7 million and consolidated
net income (including non-controlling interest) of $40.7
million. Operating income increased 24% year over year.
As of December 31, 2018, the Company had a
cash balance of $22.7 million and $144.0 million available under
its $555 million revolving credit facility.
FOURTH QUARTER 2018 CASH
DISTRIBUTION
The Board of Directors of Viper's general
partner declared a cash distribution for the three months ended
December 31, 2018 of $0.51 per common unit, up 11% year over year.
The distribution is payable on February 25, 2019 to common
unitholders of record at the close of business on February 19,
2019.
On August 20, 2018 and November 19, 2018, Viper
made cash distributions to its unitholders and subsequently has
made the reasonable determination that such distributions should
not constitute dividends for U.S. federal income tax purposes but
rather should generally constitute non-taxable reductions to the
tax basis of each distribution recipient's ownership interest in
Viper. The form 8937 containing the full information related
to this determination can be found on www.viperenergy.com under the
“Investor Relations” section of the site.
RESERVES
Ryder Scott Company, L.P. prepared an estimate
of Viper's proved reserves as of December 31, 2018. Reference
prices of $65.56 per barrel of oil and $3.10 per MMbtu of natural
gas were used in accordance with applicable rules of the Securities
and Exchange Commission. Realized prices with applicable
differentials were $61.46 per barrel of oil, $1.84 per Mcf of
natural gas and $25.04 per barrel of natural gas liquids.
Proved reserves at year-end 2018 of 63.1 MMboe
(66% oil) represent a 65% increase over year-end 2017 reserves. The
year-end 2018 proved reserves have a PV-10 value (as defined and
reconciled below) of approximately $1.3 billion.
Proved developed reserves increased by 62% to
45.8 MMboe as of December 31, 2018, reflecting continued horizontal
development by the operators of Viper’s acreage.
Net proved reserve additions of 31.2 MMboe
resulted in a reserve replacement ratio of 495% (defined as the sum
of extensions, discoveries, revisions and purchases, divided by
annual production). The organic reserve replacement ratio was 347%
(defined as the sum of extensions, discoveries and revisions,
divided by annual production).
Extensions and discoveries of 19.5 MMboe are
primarily attributable to the drilling of 133 new wells and from
138 new proved undeveloped locations added. The Company’s positive
revisions of previous estimated quantities of 2.3 MMboe were
primarily due to changes in type curves and realized prices. The
purchase of reserves in place of 9.3 MMboe were due to multiple
acquisitions primarily located in Pecos, Reeves and Howard
counties.
|
Oil (MBbls) |
|
Liquids (MBbls) |
|
Gas (MMcf) |
|
MBOE |
Proved reserves as of
December 31, 2017 |
25,885 |
|
|
6,295 |
|
|
36,395 |
|
|
38,246 |
|
Purchase
of reserves in place |
5,394 |
|
|
1,163 |
|
|
16,486 |
|
|
9,305 |
|
Extensions and discoveries |
13,858 |
|
|
3,359 |
|
|
13,992 |
|
|
19,549 |
|
Revisions
of previous estimates |
1,140 |
|
|
1,108 |
|
|
564 |
|
|
2,342 |
|
Production |
(4,399 |
) |
|
(933 |
) |
|
(5,840 |
) |
|
(6,306 |
) |
Proved reserves as of
December 31, 2018 |
41,878 |
|
|
10,992 |
|
|
61,597 |
|
|
63,136 |
|
As the owner of mineral interests, Viper
incurred no exploration and development costs during the year ended
December 31, 2018.
|
December 31, |
|
2018 |
|
2017 |
|
2016 |
|
(in thousands) |
Acquisition costs |
|
|
|
|
|
Proved
properties |
$ |
256,055 |
|
|
$ |
55,948 |
|
|
$ |
31,441 |
|
Unproved
properties |
356,761 |
|
|
287,131 |
|
|
174,385 |
|
Total |
$ |
612,816 |
|
|
$ |
343,079 |
|
|
$ |
205,826 |
|
ACQUISITION UPDATE
During the fourth quarter of 2018, Viper
acquired 933 net royalty acres for an aggregate purchase price of
approximately $104 million. These transactions brought Viper's
footprint of mineral interests to a total of 14,841 net royalty
acres. Viper funded these acquisitions with cash on hand and
borrowings under its revolving credit facility.
For the full year 2018, Viper closed 88 deals to
acquire 5,281 net royalty acres for an aggregate purchase price of
$615 million. These transactions included the first drop down of
Pecos County assets from Diamondback, as well as a strategic
entrance into the Eagle Ford Shale.
GUIDANCE UPDATE
Below is Viper's preliminary guidance for the full year 2019, as
well as production guidance for the first half of 2019.
|
|
|
Viper Energy Partners |
|
|
1H 2019 Net Production
– MBoe/d |
20.50 - 22.00 |
Total 2019 Net
Production – MBoe/d |
20.00 - 23.00 |
Oil Production - % of
Net Production |
67% - 71% |
|
|
Unit costs ($/boe) |
|
Gathering &
Transportation (to be netted from realized price going
forward) |
$0.30 - $0.60 |
Depletion |
$9.00 - $10.50 |
G&A |
|
Cash
G&A |
Under $1.00 |
Non-Cash
Unit-Based Compensation |
$0.40 - $0.65 |
|
|
Production and Ad
Valorem Taxes (% of Revenue) (a) |
7% |
(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 their results for the fourth
quarter of 2018 on Wednesday, February 6, 2019 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 1265649. A telephonic replay will be
available from 12:00 p.m. CT on Wednesday, February 6, 2019 through
Wednesday, February 13, 2019 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 1265649.
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. 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 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 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 Ended December 31, |
|
Year Ended December 31, |
|
2018 |
2017 |
|
2018 |
2017 |
|
(In thousands) |
Operating
income: |
|
|
|
|
|
Royalty
income |
$ |
72,759 |
|
$ |
49,969 |
|
|
$ |
282,661 |
|
$ |
160,163 |
|
Lease
bonus income |
671 |
|
9,257 |
|
|
2,920 |
|
11,764 |
|
Lease
bonus income - related party |
225 |
|
— |
|
|
3,109 |
|
106 |
|
Other
operating income |
10 |
|
— |
|
|
130 |
|
— |
|
Total
operating income |
73,665 |
|
59,226 |
|
|
288,820 |
|
172,033 |
|
Costs and
expenses: |
|
|
|
|
|
Production and ad valorem taxes |
4,915 |
|
2,940 |
|
|
19,048 |
|
10,608 |
|
Gathering
and transportation |
— |
|
297 |
|
|
— |
|
789 |
|
Depletion |
17,513 |
|
11,932 |
|
|
58,830 |
|
40,519 |
|
General
and administrative expenses |
1,725 |
|
1,232 |
|
|
7,955 |
|
6,296 |
|
Total
costs and expenses |
24,153 |
|
16,401 |
|
|
85,833 |
|
58,212 |
|
Income (loss)
from operations |
49,512 |
|
42,825 |
|
|
202,987 |
|
113,821 |
|
Other income
(expense): |
|
|
|
|
|
Interest
expense, net |
(4,788 |
) |
(1,050 |
) |
|
(13,849 |
) |
(3,164 |
) |
Loss on
revaluation of investment |
(5,715 |
) |
— |
|
|
(550 |
) |
— |
|
Other
income, net |
445 |
|
295 |
|
|
1,924 |
|
821 |
|
Total
other income (expense), net |
(10,058 |
) |
(755 |
) |
|
(12,475 |
) |
(2,343 |
) |
Income before
income taxes |
39,454 |
|
42,070 |
|
|
190,512 |
|
111,478 |
|
Benefit from income
taxes |
(1,251 |
) |
— |
|
|
(72,365 |
) |
— |
|
Net
income |
40,705 |
|
42,070 |
|
|
262,877 |
|
111,478 |
|
Net income attributable
to non-controlling interest |
41,393 |
|
— |
|
|
118,919 |
|
— |
|
Net income
(loss) attributable to Viper Energy Partners LP |
$ |
(688 |
) |
$ |
42,070 |
|
|
$ |
143,958 |
|
$ |
111,478 |
|
|
|
|
|
|
|
Net income
(loss) attributable to common limited partners per
unit: |
|
|
|
|
|
Basic |
$ |
(0.01 |
) |
$ |
0.37 |
|
|
$ |
2.01 |
|
$ |
1.07 |
|
Diluted |
$ |
(0.01 |
) |
$ |
0.37 |
|
|
$ |
2.01 |
|
$ |
1.07 |
|
Weighted
average number of common limited partner units
outstanding: |
|
|
|
|
|
Basic |
51,654 |
|
113,882 |
|
|
71,546 |
|
104,318 |
|
Diluted |
51,724 |
|
113,923 |
|
|
71,626 |
|
104,383 |
|
Viper Energy Partners LP |
Selected Operating Data |
(unaudited) |
|
|
|
|
|
Three Months EndedDecember 31, |
|
Year Ended December 31, |
|
2018 |
2017 |
|
2018 |
2017 |
Production
Data: |
|
|
|
|
|
Oil (MBbls) |
1,275 |
|
821 |
|
|
4,399 |
|
2,899 |
|
Natural gas (MMcf) |
1,773 |
|
1,088 |
|
|
5,840 |
|
3,549 |
|
Natural gas liquids
(MBbls) |
287 |
|
139 |
|
|
933 |
|
533 |
|
Combined volumes
(MBOE)(1) |
1,858 |
|
1,142 |
|
|
6,305 |
|
4,024 |
|
Daily combined volumes
(BOE/d) |
20,191 |
|
12,413 |
|
|
17,275 |
|
11,023 |
|
% Oil |
69 |
% |
72 |
% |
|
70 |
% |
72 |
% |
|
|
|
|
|
|
Average sales
prices: |
|
|
|
|
|
Oil (per
Bbl) |
$ |
48.73 |
|
$ |
53.03 |
|
|
$ |
56.13 |
|
$ |
48.36 |
|
Natural
gas (per Mcf) |
2.41 |
|
2.63 |
|
|
2.22 |
|
2.62 |
|
Natural
gas liquids (per Bbl) |
22.13 |
|
25.53 |
|
|
24.41 |
|
20.02 |
|
Combined
(per BOE)(2) |
39.17 |
|
43.76 |
|
|
44.83 |
|
39.81 |
|
|
|
|
|
|
|
Average Costs
(per BOE): |
|
|
|
|
|
Production and ad valorem taxes |
$ |
2.65 |
|
$ |
2.57 |
|
|
$ |
3.02 |
|
$ |
2.64 |
|
Gathering
and transportation expense |
— |
|
0.26 |
|
|
— |
|
0.20 |
|
General
and administrative - cash component |
0.61 |
|
0.77 |
|
|
0.82 |
|
0.97 |
|
Total
operating expense - cash |
$ |
3.26 |
|
$ |
3.60 |
|
|
$ |
3.84 |
|
$ |
3.81 |
|
|
|
|
|
|
|
General
and administrative - non-cash component |
$ |
0.32 |
|
$ |
0.31 |
|
|
$ |
0.44 |
|
$ |
0.59 |
|
Interest
expense |
2.58 |
|
0.92 |
|
|
2.20 |
|
0.79 |
|
Depletion |
9.43 |
|
10.45 |
|
|
9.33 |
|
10.07 |
|
(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.
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 plus interest expense, net, non-cash unit-based
compensation expense, depletion, loss on revaluation of investments
and benefit from income taxes. Adjusted EBITDA is not a
measure of net income 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 (loss), 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
debt service, other contractual obligations, fixed charges and
reserves for future operating or capital needs that the board of
directors of Viper’s general partner may deem appropriate, dividend
equivalent rights and preferred distributions. 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.
Viper Energy Partners LP |
(unaudited, in thousands, except per unit
data) |
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2018 |
2017 |
|
2018 |
2017 |
Net
income |
$ |
40,705 |
|
$ |
42,070 |
|
|
$ |
262,877 |
|
$ |
111,478 |
|
Interest
expense, net |
4,788 |
|
1,050 |
|
|
13,849 |
|
3,164 |
|
Non-cash
unit-based compensation expense |
596 |
|
356 |
|
|
2,763 |
|
2,395 |
|
Depletion |
17,513 |
|
11,932 |
|
|
58,830 |
|
40,519 |
|
Loss on
revaluation of investment |
5,715 |
|
— |
|
|
550 |
|
— |
|
Benefit
from income taxes |
(1,251 |
) |
— |
|
|
(72,365 |
) |
— |
|
Consolidated Adjusted
EBITDA |
$ |
68,066 |
|
$ |
55,408 |
|
|
$ |
266,504 |
|
$ |
157,556 |
|
EBITDA attributable to
non-controlling interest |
(39,718 |
) |
— |
|
|
(125,616 |
) |
— |
|
Adjusted EBITDA
attributable to Viper Energy Partners LP |
$ |
28,348 |
|
$ |
55,408 |
|
|
$ |
140,888 |
|
$ |
157,556 |
|
|
|
|
|
|
|
Adjustments to
reconcile Adjusted EBITDA to cash available for
distribution: |
|
|
|
|
|
Debt service,
contractual obligations, fixed charges and reserves |
(1,775 |
) |
(2,975 |
) |
|
(4,348 |
) |
(4,848 |
) |
Units - dividend
equivalent rights |
(42 |
) |
— |
|
|
(115 |
) |
— |
|
Preferred
distributions |
(40 |
) |
— |
|
|
(103 |
) |
— |
|
Cash available
for distribution |
$ |
26,491 |
|
$ |
52,433 |
|
|
$ |
136,322 |
|
$ |
152,708 |
|
|
|
|
|
|
|
Limited Partner units
outstanding |
51,654 |
|
113,882 |
|
|
51,654 |
|
113,882 |
|
|
|
|
|
|
|
Cash available
for distribution per common limited partner unit |
$ |
0.51 |
|
$ |
0.46 |
|
|
$ |
2.17 |
|
$ |
1.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PV-10
PV-10 is the Company’s estimate of the present
value of the future net revenues from proved oil and gas reserves
after deducting estimated production and ad valorem taxes, future
capital costs and operating expenses, but before deducting any
estimates of future income taxes. The estimated future net
revenues are discounted at an annual rate of 10% to determine their
“present value.” The Company believes PV-10 to be an
important measure for evaluating the relative significance of its
oil and gas properties and that the presentation of the non-GAAP
financial measure of PV-10 provides useful information to investors
because it is widely used by professional analysts and investors in
evaluating oil and gas companies. Because there are many
unique factors that can impact an individual company when
estimating the amount of future income taxes to be paid, the
Company believes the use of a pre-tax measure is valuable for
evaluating the Company. The Company believes that PV-10 is a
financial measure routinely used and calculated similarly by other
companies in the oil and gas industry.
The following table reconciles PV-10 to the
Company’s standardized measure of discounted future net cash flows,
the most directly comparable measure calculated and presented in
accordance with GAAP. PV-10 should not be considered as an
alternative to the standardized measure as computed under GAAP.
(in
thousands) |
December 31, 2018 |
PV-10 |
$ |
1,266,504 |
|
Less income taxes: |
|
Undiscounted future income taxes |
(273,643 |
) |
10%
discount factor |
(146,521 |
) |
Future discounted
income taxes |
$ |
(127,122 |
) |
|
|
Standardized measure of
discounted future net cash flows |
$ |
1,139,382 |
|
Investor Contact:Adam Lawlis+1
432.221.7467alawlis@viperenergy.com
Viper Energy (NASDAQ:VNOM)
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Viper Energy (NASDAQ:VNOM)
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