Viper(VNOM) - 2024 Q2 - Quarterly Results

Executive Summary Q2 2024 Highlights Viper Energy reported strong Q2 2024 results, including increased production, significant net income, and a substantial return of capital to shareholders, highlighted by an 11% increase in its annual base dividend | Metric | Q2 2024 Value | | :-------------------------------- | :------------------- | | Average Production (bo/d) | 26,352 (47,473 boe/d) | | Production Growth (QoQ) | 3.7% | | Consolidated Net Income | $122.2 million | | Net Income Attributable to Viper | $56.9 million | | EPS | $0.62 | | Cash Available for Distribution | $78.4 million | | Cash Available for Distribution (per share) | $0.86 | | Annual Base Dividend Increase | 11% (to $1.20/share) | | Q2 2024 Base Cash Dividend | $0.30/share | | Q2 2024 Variable Cash Dividend | $0.34/share | | Total Base-plus-Variable Dividend | $0.64/share | | Total Q2 2024 Return of Capital | $58.8 million ($0.64/share) | | Non-Permian Asset Divestiture Proceeds | ~$90.2 million | | Gross Horizontal Wells Turned to Production | 375 (6.1 net 100% royalty interest) | - Increased full year 2024 average daily production guidance to 26,000 to 26,750 bo/d (46,750 to 48,250 boe/d)[2] - Initiated Q3 2024 average daily production guidance of 26,500 to 27,000 bo/d (47,500 to 48,500 boe/d), representing approximately 1.5% growth relative to Q2 2024 at the midpoint[2] CEO Commentary CEO Travis Stice emphasized the Board's confidence in a sustainable and growing base dividend, supported by a strong balance sheet and durable cash flow, while highlighting production growth and increased 2024 guidance - The 11% increase in the base dividend reflects the Board's belief in a sustainable and growing base dividend, supported by Viper's strong balance sheet and durable cash flow profile[3] - Viper has grown oil production per share by 14% year-over-year while maintaining cash margins and conversion of Adjusted EBITDA into cash available for distribution at around 80%[3] - The increased base dividend is protected down to below $30 WTI at current production levels[3] - Full year 2024 production guidance was increased due to first-half outperformance and increased expectations for the remainder of the year, despite the divestiture of non-Permian assets[3] Financial Performance Q2 2024 Financial Overview Viper Energy reported its second-quarter 2024 financial results, including realized prices for oil, natural gas, and NGLs, and key income figures, while maintaining a healthy cash balance and managing long-term debt effectively | Metric | Q2 2024 Value | | :-------------------------------- | :------------------- | | Average Unhedged Realized Oil Price | $81.04/barrel | | Average Unhedged Realized Natural Gas Price | $0.20/Mcf | | Average Unhedged Realized NGL Price | $20.35/barrel | | Total Equivalent Unhedged Realized Price | $49.88/boe | | Average Hedged Realized Oil Price | $80.24/barrel | | Average Hedged Realized Natural Gas Price | $0.64/Mcf | | Total Equivalent Hedged Realized Price | $50.00/boe | | Total Operating Income | $216.7 million | | Consolidated Net Income | $122.2 million | | Cash Balance (as of June 30, 2024) | $35.2 million | | Total Long-Term Debt Outstanding (as of June 30, 2024) | $1.0 billion | | Net Debt (as of June 30, 2024) | $972.1 million | | Total Liquidity (as of June 30, 2024) | $708.2 million | Condensed Consolidated Balance Sheets (GAAP) As of June 30, 2024, Viper Energy's balance sheet showed an increase in current assets, primarily driven by higher royalty income receivables, while total assets slightly decreased due to a reduction in net oil and natural gas interests | Metric (in thousands) | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :-------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $35,211 | $25,869 | | Total current assets | $205,384 | $143,517 | | Property, net | $3,611,560 | $3,768,319 | | Total assets | $3,900,422 | $3,974,093 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $29,091 | $33,256 | | Long-term debt, net | $998,021 | $1,083,082 | | Total liabilities | $1,027,112 | $1,116,539 | | Total Viper Energy, Inc. stockholders' equity | $1,089,800 | $1,014,292 | | Non-controlling interest | $1,783,510 | $1,843,262 | | Total equity | $2,873,310 | $2,857,554 | | Total liabilities and stockholders' equity | $3,900,422 | $3,974,093 | Condensed Consolidated Statements of Operations (GAAP) Viper Energy's Q2 2024 statements of operations show a significant increase in total operating income and net income compared to Q2 2023, driven by higher oil and NGL income, leading to improved profitability and increased EPS | Metric (in thousands, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Oil income | $194,335 | $139,300 | | Natural gas income | $1,143 | $5,090 | | Natural gas liquids income | $20,008 | $13,807 | | Total operating income | $216,708 | $160,787 | | Total costs and expenses | $68,155 | $48,693 | | Income from operations | $148,553 | $112,094 | | Interest expense, net | $(18,667) | $(11,120) | | Gain (loss) on derivative instruments, net | $5,346 | $(12,594) | | Net income (loss) | $122,226 | $79,931 | | Net income (loss) attributable to Viper Energy, Inc. | $56,901 | $30,550 | | Basic EPS | $0.62 | $0.42 | | Diluted EPS | $0.62 | $0.42 | | Weighted average common shares outstanding (Basic) | 91,424 | 71,771 | Condensed Consolidated Statements of Cash Flows (GAAP) Viper Energy's Q2 2024 cash flow statement shows strong cash generation from operating activities, positive investing activities due to asset sales, and a net cash outflow from financing activities primarily for debt repayment and dividends | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $143,284 | $145,426 | | Net cash provided by (used in) investing activities | $81,811 | $(7,874) | | Proceeds from sale of oil and natural gas interests | $90,212 | $(67) | | Net cash provided by (used in) financing activities | $(209,889) | $(133,579) | | Dividends/distributions to stockholders | $(54,057) | $(23,556) | | Dividends/distributions to Diamondback | $(59,823) | $(38,363) | | Net increase (decrease) in cash and cash equivalents | $15,206 | $3,973 | | Cash, cash equivalents at end of period | $35,211 | $13,079 | Operational Performance Q2 2024 Operations Update Viper Energy saw significant development activity on its acreage in Q2 2024, with a substantial number of horizontal wells turned to production, maintaining stable mineral and royalty interests, and a robust pipeline for future growth - 375 gross (6.1 net 100% royalty interest) horizontal wells were turned to production on Viper's acreage during Q2 2024, with an average lateral length of 12,037 feet[8] - Diamondback operated 48 gross wells (5.4% average royalty interest), while third parties operated 327 gross wells (1.1% average royalty interest) turned to production[8] - Viper's footprint of mineral and royalty interests was 31,762 net royalty acres as of June 30, 2024[8] Well Count as of June 30, 2024 | Category | Diamondback Operated | Third Party Operated | Total | | :------------------------------------ | :------------------- | :------------------- | :---- | | Horizontal wells turned to production (Gross) | 48 | 327 | 375 | | Horizontal wells turned to production (Net 100% royalty interest) | 2.6 | 3.5 | 6.1 | | Horizontal producing well count (Gross) | 1,964 | 7,488 | 9,452 | | Horizontal active development well count (Gross) | 132 | 604 | 736 | | Line of sight wells (Gross) | 124 | 608 | 732 | - There are 736 gross wells in active development, expected to be turned to production within 6-8 months, and 732 line-of-sight wells expected within 15-18 months[8] Selected Operating Data Viper Energy's Q2 2024 operating data shows increased oil and NGL production volumes compared to both Q1 2024 and Q2 2023, contributing to higher average daily combined volumes, with improved oil prices and stable cash operating expenses | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :------------------------------------ | :------ | :------ | :------ | | Oil (MBbls) | 2,398 | 2,312 | 1,924 | | Natural gas (MMcf) | 5,631 | 5,589 | 4,685 | | Natural gas liquids (MBbls) | 983 | 954 | 724 | | Combined volumes (MBoe) | 4,320 | 4,198 | 3,429 | | Average daily oil volumes (bo/d) | 26,352 | 25,407 | 21,143 | | Average daily combined volumes (boe/d) | 47,473 | 46,132 | 37,681 | | Average sales prices - Oil ($/Bbl) | $81.04 | $76.61 | $72.40 | | Average sales prices - Natural gas ($/Mcf) | $0.20 | $1.22 | $1.09 | | Average sales prices - NGL ($/Bbl) | $20.35 | $22.17 | $19.07 | | Average sales prices - Combined ($/boe) | $49.88 | $48.85 | $46.14 | | Average Costs ($/boe) - Production and ad valorem taxes | $3.52 | $3.43 | $3.68 | | Average Costs ($/boe) - General and administrative - cash | $0.84 | $1.08 | $0.51 | | Average Costs ($/boe) - Total operating expense - cash | $4.36 | $4.51 | $4.19 | Capital Allocation & Dividends Q2 2024 Cash Dividend & Capital Return Program Viper Energy declared both a base and a variable cash dividend for Q2 2024, reflecting its commitment to returning capital to shareholders, with an 11% increase in the annual base dividend signaling confidence in future cash flows - Declared a Q2 2024 base cash dividend of $0.30 per Class A common share, payable on August 22, 2024[6] - Declared a Q2 2024 variable cash dividend of $0.34 per Class A common share, also payable on August 22, 2024[6] - The annual base dividend was increased by 11% to $1.20 per share, implying a 3.0% annualized yield based on the August 2, 2024 closing price[2] - The total base-plus-variable dividend of $0.64 per Class A common share implies a 6.4% annualized yield based on the August 2, 2024 closing price[2] Guidance Q3 2024 and Full Year 2024 Guidance Viper Energy updated its production and cost guidance for Q3 and the full year 2024, reflecting increased production expectations and providing detailed estimates for various per-boe costs and tax rates | Metric | Q3 2024 Guidance | Full Year 2024 Guidance | | :------------------------------------------ | :----------------- | :---------------------- | | Net Production - MBo/d | 26.50 - 27.00 | 26.00 - 26.75 | | Net Production - MBoe/d | 47.50 - 48.50 | 46.75 - 48.25 | | Share costs ($/boe) - Depletion | $11.00 - $11.50 | | | Share costs ($/boe) - Cash G&A | $1.00 - $1.20 | | | Share costs ($/boe) - Non-Cash Share-Based Compensation | $0.10 - $0.20 | | | Share costs ($/boe) - Interest Expense | $4.00 - $4.25 | | | Production and Ad Valorem Taxes (% of Revenue) | ~7% | | | Cash Tax Rate (% of Pre-Tax Income Attributable to Viper Energy, Inc.) | 20% - 22% | | | Q3 2024 Cash Taxes ($ - million) | $13.0 - $18.0 | | Non-GAAP Financial Measures & Reconciliations Adjusted EBITDA and Cash Available for Distribution Viper Energy provides Adjusted EBITDA and Cash Available for Distribution as non-GAAP measures to evaluate operating performance, excluding non-cash items and short-term working capital changes, which are crucial for assessing cash generation for shareholders and debt service - Adjusted EBITDA is defined as net income (loss) attributable to Viper Energy, Inc. plus net income (loss) attributable to non-controlling interest, adjusted for interest expense, non-cash share-based compensation, depletion, non-cash derivative gains/losses, and income taxes[21] - Cash available for distribution to Viper Energy, Inc. shareholders is defined as Adjusted EBITDA less cash needed for income taxes, debt service, contractual obligations, fixed charges, reserves, lease bonus income (net of tax), distribution equivalent rights payments, and preferred distributions[22] Reconciliation to Adjusted EBITDA and Cash Available for Distribution (Q2 2024) | Metric (in thousands) | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | | Net income (loss) attributable to Viper Energy, Inc. | $56,901 | | Net income (loss) attributable to non-controlling interest | $65,325 | | Net income (loss) | $122,226 | | Consolidated Adjusted EBITDA | $199,400 | | Adjusted EBITDA attributable to Viper Energy, Inc. | $103,078 | | Cash available for distribution to Viper Energy, Inc. shareholders | $78,422 | | 75% Committed Return of Capital | $58,817 ($0.64/share) | | Base dividend | $27,427 ($0.30/share) | | Cash available for variable dividends | $31,390 ($0.34/share) | Pre-tax Income Attributable to Viper Energy, Inc. This non-GAAP measure provides insight into the basis for income taxes payable by Viper Energy, Inc., which is a key adjustment in calculating cash available for distribution Pre-tax Income Attributable to Viper Energy, Inc. (Q2 2024) | Metric (in thousands) | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | | Income (loss) before income taxes | $135,232 | | Less: Net income (loss) attributable to non-controlling interest | $65,325 | | Pre-tax income attributable to Viper Energy, Inc. | $69,907 | | Income taxes payable for the current period | $14,648 | | Effective cash tax rate attributable to Viper Energy, Inc. | 21.0% | Adjusted Net Income (Loss) Adjusted net income (loss) is a non-GAAP measure used to compare Viper's performance with other oil and natural gas companies by excluding non-cash and non-operational factors that can vary significantly - Adjusted net income (loss) is defined as net income (loss) attributable to Viper Energy, Inc. plus net income (loss) attributable to non-controlling interest, adjusted for non-cash derivative gains/losses, other non-cash operating expenses, other non-recurring expenses, and related income tax adjustments[25] Adjusted Net Income (Loss) Reconciliation (Q2 2024) | Metric (in thousands, except per share) | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | | Net income (loss) attributable to Viper Energy, Inc. | $56,901 ($0.62/share) | | Net income (loss) attributable to non-controlling interest | $65,325 ($0.72/share) | | Net income (loss) | $122,226 ($1.34/share) | | Adjusted net income (loss) attributable to Viper Energy, Inc. | $55,349 ($0.61/share) | Net Debt Reconciliation Net debt, a non-GAAP measure, is used by management and investors to assess the company's leverage position by considering outstanding debt obligations net of readily available cash and cash equivalents - Net debt is defined as total debt (excluding debt issuance costs, discounts, and premiums) less cash and cash equivalents[27] Net Debt Reconciliation (in thousands) | Metric | June 30, 2024 | March 31, 2024 | December 31, 2023 | | :------------------------ | :-------------- | :------------- | :---------------- | | Total long-term debt | $1,007,350 | $1,103,350 | $1,093,350 | | Cash and cash equivalents | $(35,211) | $(20,005) | $(25,869) | | Net debt | $972,139 | $1,083,345 | $1,067,481 | Derivative Contracts Outstanding Derivative Contracts Viper Energy utilizes various derivative contracts, including deferred premium puts, costless collars for crude oil, and natural gas basis swaps, to manage commodity price risk, with contracts extending through Q4 2025 for natural gas and Q2 2025 for crude oil Crude Oil Derivative Contracts (Bbls/day, $/Bbl) | Contract Type | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | | :-------------------------- | :------ | :------ | :------ | :------ | | Deferred Premium Puts - WTI (Cushing) | 16,000 | 16,000 | 20,000 | 20,000 | | Strike | $55.00 | $55.00 | $55.00 | $55.00 | | Premium | $(1.65) | $(1.70) | $(1.62) | $(1.61) | | Costless Collars - WTI (Cushing) | 4,000 | 4,000 | — | — | | Floor | $55.00 | $55.00 | — | — | | Ceiling | $93.66 | $93.66 | — | — | Natural Gas Basis Swaps - Waha Hub (Mmbtu/day, $/Mmbtu) | Contract Type | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | | :-------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | | Natural Gas Basis Swaps - Waha Hub | 30,000 | 30,000 | 40,000 | 40,000 | 40,000 | 40,000 | | Swap Price | $(1.20) | $(1.20) | $(0.68) | $(0.68) | $(0.68) | $(0.68) | Company Information About Viper Energy, Inc. Viper Energy, a subsidiary of Diamondback Energy, focuses on acquiring and exploiting oil and natural gas mineral and royalty interests, primarily in the oil-weighted Permian Basin - Viper Energy is a corporation formed by Diamondback to own, acquire, and exploit oil and natural gas properties in North America[11] - The company's primary focus is on owning and acquiring mineral and royalty interests in oil-weighted basins, predominantly the Permian Basin[11] About Diamondback Energy, Inc. Diamondback Energy is an independent oil and natural gas company based in Midland, Texas, primarily focused on the Permian Basin in West Texas for the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves - Diamondback Energy is an independent oil and natural gas company headquartered in Midland, Texas[12] - Its focus is on the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas[12] Forward-Looking Statements Risks and Uncertainties This section outlines the inherent risks and uncertainties associated with forward-looking statements, emphasizing that actual outcomes may differ materially from expectations due to various factors, including commodity price fluctuations, geopolitical events, financial sector instability, regulatory changes, and climate-related risks - Forward-looking statements involve risks, uncertainties, and assumptions, and actual outcomes could differ materially from expectations[13] - Key factors that could cause differences include changes in supply and demand for oil, natural gas, and NGLs, impacts of public health crises, actions by OPEC and Russia, geopolitical developments (e.g., Ukraine, Israel-Hamas wars), financial sector instability, higher interest rates, and regional supply/demand factors[14] - Other risks include federal and state legislative/regulatory initiatives on hydraulic fracturing, physical and transition risks related to climate change, and other factors disclosed in SEC filings[14] - Viper disclaims any obligation to update or revise forward-looking statements unless required by applicable law[15] Conference Call & Investor Contact Conference Call Details Viper Energy will host a conference call and webcast on August 6, 2024, to discuss its Q2 2024 results, with access available via live audio-only webcast and replay on the company's investor relations website - Viper will host a conference call and webcast on Tuesday, August 6, 2024, at 10:00 a.m. CT to discuss Q2 2024 results[11] - Access to the live audio-only webcast and replay is available via Viper's website at www.viperenergy.com under the 'Investor Relations' section[11] Investor Contact Information For investor inquiries, Austen Gilfillian can be contacted directly - Investor Contact: Austen Gilfillian, +1 432.221.7420, agilfillian@viperenergy.com[32]