Quarterly / Earnings Reports | Fourth Quarter (4Q) Update | Financial Results | Capital Markets | Capital Expenditure | Capital Expenditure - 2021

Viper Energy Partners Fourth Quarter, Full Year 2020 Results

Share Print Bookmark    |    Tuesday,February 23,2021

Viper Energy Partners LP announced financial and operating results for the Q4 and full year 2020.

Q4 Highlights:

• Q4 2020 average production of 17,359 bo/d (27,699 boe/d), an increase of 10% from Q3 2020 average daily oil production and 5% year over year
• Q4 2020 cash distribution of $0.14 per common unit, representing approximately 50% of cash available for distribution; $0.28 per unit of cash available for distribution implies a 7.0% annualized distributable cash flow yield based on the February 19, 2021 unit closing price of $15.96
• Q4 2020 consolidated net loss (including non-controlling interest) of $(52.7) million; adjusted net income (as defined and reconciled below) of $14.2 million
• Consolidated adjusted EBITDA (as defined and reconciled below) of $51.0 million and cash available for distribution to Viper’s common units (as reconciled below) of $18.4 million
• Repurchased 2,045,000 common units in Q4 2020 for an aggregate of $24.0 million
• Generated $42.0 million in one-time proceeds from asset sales during the fourth quarter of 2020, including the divestiture of 352 net royalty acres for an aggregate of $36.3 million
• Ended the fourth quarter of 2020 with net debt of $544.8 million (as defined and reconciled below); total debt down $109.6 million since March 31, 2020, or a 16% reduction over the past nine months
• 80 total gross (2.1 net 100% royalty interest) horizontal wells turned to production on Viper’s acreage during Q4 2020 with an average lateral length of 10,012 feet
• Q3 2020 and Q4 2020 distributions reasonably estimated to not constitute dividends for U.S. federal income tax purposes; instead should generally constitute non-taxable reductions to the tax basis

Full Year Highlights:

• Full year 2020 average production of 16,272 bo/d (26,551 boe/d), an increase of 16% from full year 2019 average daily oil production
• Proved reserves as of December 31, 2020 of 99,392 Mboe (73% PDP, 57,530 Mbo), up 12% year over year with oil up 6% from year end 2019
• 514 total gross (13.8 net 100% royalty interest) horizontal wells turned to production during 2020 with an average lateral length of 9,395 feet
• Generated $49.4 million in one-time proceeds from asset sales during 2020
• All 2020 quarterly distributions reasonably estimated to not constitute dividends for U.S. federal income tax purposes; instead should generally constitute non-taxable reductions to the tax basis

2021 Outlook

Viper expects the production impact from the recent winter storms in the Permian Basin will be in the range of four to five days of total net production lost during February for Diamondback operated properties, with a slightly greater negative impact expected for third party operated properties. As a result, Viper has adjusted its guidance accordingly.

• As of February 8, 2021, there were approximately 529 gross horizontal wells in the process of active development on Viper’s acreage, in which Viper expects to own an average 1.5% net royalty interest (8.2 net 100% royalty interest wells)
• Approximately 538 gross (9.0 net 100% royalty interest) line-of-sight wells 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
• Initiating average daily production guidance for the first half of 2021 of 14,250 to 15,750 bo/d (23,750 to 26,250 boe/d)
• Initiating full year 2021 average production guidance of 14,750 to 16,000 bo/d (24,500 to 26,500 boe/d)

CEO Travis Stice commented: “Viper’s business has rebounded strongly from the unprecedented volatility experienced throughout 2020 as commodity prices have increased and activity has returned to Viper’s acreage. This recovery again highlights both the advantaged nature of the royalty business model, as well as the benefit of Viper’s symbiotic relationship with Diamondback. During the fourth quarter of 2020, we were able to generate more than $40 million in one-time proceeds from asset sales, which, in addition to the roughly $50 million in net cash provided by operating activities that the business delivered, helped accelerate our debt reduction and kick start our common unit repurchase program. We have now reduced total debt by 16% over the past nine months and have repurchased more than 2.5 million common units in the last three months, or a repurchase of 1.6% of our previous total units outstanding.

Mr. Stice continued, “Viper’s 10% quarter over quarter increase in oil production was driven primarily by Viper having an interest in 21 of Diamondback’s 35 completions in the fourth quarter of 2020, with well performance exceeding internal expectations. Viper also benefited from third party well performance and timing of wells being turned to production that exceeded our prior conservative expectations that were lowered due to the uncertainty presented by the volatile oil prices experienced in 2020. Looking ahead to 2021, Diamondback’s continued focus on developing Viper’s acreage, as well as exposure to other well-capitalized operators in the Permian Basin, underscores our confidence in Viper’s forward production and free cash flow outlook, even considering the impact of the recent winter storms in the Permian Basin.”

Financial Update

Viper’s fourth quarter 2020 average unhedged realized prices were $40.36 per barrel of oil, $1.36 per Mcf of natural gas and $14.71 per barrel of natural gas liquids, resulting in a total equivalent realized price of $29.48/boe.

During the fourth quarter of 2020, the Company recorded total operating income of $76.3 million and a consolidated net loss (including non-controlling interest) of $(52.7) million. The fourth quarter net loss includes a non-cash impairment charge of $69.2 million as a result of lower SEC pricing because of the sharp decline in commodity prices.

As of December 31, 2020, the Company had a cash balance of $19.1 million. During the fourth quarter of 2020, Viper repaid $42.5 million of outstanding borrowings under its revolving credit facility and, as of December 31, 2020, had $496.0 million available for borrowing under this facility. Since the end of the first quarter of 2020, Viper reduced total debt by $109.6 million, or a 16% reduction over this time period.

Ops / Acquisition Update

During the fourth quarter of 2020, Viper estimates that 80 gross (2.1 net 100% royalty interest) horizontal wells with an average royalty interest of 2.6% were turned to production on its existing acreage position with an average lateral length of 10,012 feet. Of these 80 gross wells, Diamondback is the operator of 21 with an average royalty interest of 5.6%, and the remaining 59 gross wells, with an average royalty interest of 1.6%, are operated by third parties.

During the fourth quarter of 2020, Viper acquired seven net royalty acres for an aggregate purchase price of $0.8 million. Additionally during the fourth quarter, the Company sold 352 net royalty acres in the Permian Basin for an aggregate of approximately $36.3 million, subject to post-closing adjustments. As a result of these acquisitions and divestitures, Viper’s footprint of mineral and royalty interests as of December 31, 2020 was 24,350 net royalty acres.