Viper(VNOM) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Viper Energy Partners LP's unaudited Q1 2022 condensed consolidated financial statements highlight increased revenue and net income from higher commodity prices Condensed Consolidated Balance Sheets Total assets slightly decreased to $3.001 billion as of March 31, 2022, with liabilities decreasing and equity modestly increasing Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $136,702 | $111,149 | | Property, net | $2,860,747 | $2,920,115 | | Total Assets | $3,001,085 | $3,034,021 | | Total Current Liabilities | $37,104 | $24,466 | | Long-term debt, net | $721,005 | $776,727 | | Total Liabilities | $758,109 | $801,193 | | Total Equity | $2,242,976 | $2,232,828 | Condensed Consolidated Statements of Operations Net income surged to $128.0 million in Q1 2022, primarily due to royalty income more than doubling to $193.1 million amid strong commodity prices Condensed Consolidated Statements of Operations (in thousands, except per unit amounts) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Royalty income | $193,089 | $96,512 | | Total operating income | $201,903 | $96,976 | | Income from operations | $158,669 | $63,220 | | Net income (loss) | $128,041 | $23,859 | | Net income (loss) attributable to Viper Energy Partners LP | $16,605 | $(3,020) | | Diluted EPS | $0.22 | $(0.05) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities surged to $135.8 million in Q1 2022, while financing activities used $174.2 million for debt repayment and distributions Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $135,838 | $54,659 | | Net cash provided by (used in) investing activities | $31,957 | $(74) | | Net cash provided by (used in) financing activities | $(174,177) | $(61,979) | | Net decrease in cash and cash equivalents | $(6,382) | $(7,394) | Condensed Notes to Consolidated Financial Statements Detailed notes cover accounting policies, revenue, acquisitions, debt, and equity, highlighting a $29.3 million divestiture and $39.3 million unit repurchase Royalty Income by Product (in thousands) | Product | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Oil income | $155,051 | $78,344 | | Natural gas income | $15,190 | $9,044 | | Natural gas liquids income | $22,848 | $9,124 | | Total royalty income | $193,089 | $96,512 | - In Q1 2022, the Partnership divested 325 net royalty acres in the Midland Basin for an aggregate sales price of $29.3 million[43] - During Q1 2022, the Partnership repurchased approximately $39.3 million of common units, with $40.7 million remaining available under the program, which was subsequently increased to $250.0 million on April 27, 2022[54][97] - Subsequent to quarter end, on April 27, 2022, the board approved a cash distribution of $0.67 per common unit for Q1 2022[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022's improved financial results, driven by strong commodity prices and record operational activity, detailing liquidity and capital allocation Recent Developments and Operational Update Q1 2022 performance was significantly influenced by high commodity prices, with record third-party well activity and a $29.3 million divestiture of royalty acres - Commodity prices were highly volatile in Q1 2022, with NYMEX WTI ranging from $47.62 to $123.70 per Bbl, influenced by the Russian-Ukrainian military conflict and the COVID-19 pandemic[102] Operational Well Information (Q1 2022) | Metric | Diamondback Operated | Third Party Operated | Total | | :--- | :--- | :--- | :--- | | Horizontal wells turned to production (Q1 2022) | | | | | Gross wells | 45 | 230 | 275 | | Net 100% royalty interest wells | 2.0 | 1.9 | 3.9 | | Horizontal producing well count (as of Apr 13, 2022) | | | | | Gross wells | 1,384 | 4,357 | 5,741 | | Horizontal active development well count (as of Apr 13, 2022) | | | | | Gross wells | 91 | 382 | 473 | Results of Operations Royalty income increased significantly year-over-year and quarter-over-quarter, driven by a 65% rise in average combined sales price and a 21% increase in production volumes Production and Pricing Comparison (Q1 2022 vs. Q1 2021) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Production | | | | | Average daily combined volumes (BOE/d) | 31,567 | 26,066 | +21.1% | | Average Sales Prices | | | | | Oil ($/Bbl) | $94.95 | $56.16 | +69.1% | | Combined ($/BOE) | $67.97 | $41.14 | +65.2% | Production and Pricing Comparison (Q1 2022 vs. Q4 2021) | Metric | Q1 2022 | Q4 2021 | % Change | | :--- | :--- | :--- | :--- | | Production | | | | | Average daily combined volumes (BOE/d) | 31,567 | 31,359 | +0.7% | | Average Sales Prices | | | | | Oil ($/Bbl) | $94.95 | $74.00 | +28.3% | | Combined ($/BOE) | $67.97 | $56.82 | +19.6% | Liquidity and Capital Resources As of March 31, 2022, total liquidity was $285.1 million, with primary cash uses including distributions, debt repayment, and common unit repurchases - Total liquidity at March 31, 2022, was approximately $285.1 million, comprising $33.1 million in cash and $252.0 million available under the credit agreement[133] - Primary uses of cash included distributions to unitholders, debt repayment, acquisitions, and repurchases of common units and senior notes[133] - During Q1 2022, the company made net repayments of $56.0 million on its revolving credit facility, paid $78.9 million in distributions, and repurchased $39.3 million of common units[141] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks include commodity price volatility, credit risk, and interest rate risk, mitigated by derivative contracts for price fluctuations - The company's major market risk exposure is oil and natural gas pricing, mitigated using derivative instruments like fixed price swaps and costless collars to reduce volatility[151][152] - As of March 31, 2022, the company had a net derivative liability of $11.5 million, which would increase by $4.8 million with a hypothetical 10% increase in forward commodity prices[153] - The company is subject to interest rate risk on its revolving credit facility, which bears interest at a floating rate based on LIBOR or an alternative base rate[155] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures are effective[158] - No material changes occurred during Q1 2022 that affected internal controls over financial reporting[159] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine litigation, but management does not expect any pending matters to materially affect its financial condition or operations - The company is involved in routine litigation, but management does not expect any pending proceedings to have a material adverse effect on its financial condition or results of operations[162] Item 1A. Risk Factors A new risk factor addresses the unpredictable impact of the Russia-Ukraine conflict on the global economy and energy markets, potentially affecting the company's business - A new risk factor was added regarding the unpredictable impact of the military conflict between Russia and Ukraine on the global economy, energy markets, and the company's business[165] - No other material changes have been made to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2021[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2022, the company repurchased 1,580,200 common units for $39.3 million, with the repurchase program authorization subsequently increased to $250.0 million Issuer Repurchases of Equity Securities (Q1 2022) | Period | Total Number of Units Purchased | Average Price Paid Per Unit | Approximate Dollar Value of Units that May Yet Be Purchased Under the Plan (as of 3/31/22) | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2022 | 1,580,200 | $24.85 | $40,715,000 | | Feb 1 - Feb 28, 2022 | — | $— | $40,715,000 | | Mar 1 - Mar 31, 2022 | — | $— | $40,715,000 | | Total | 1,580,200 | $24.85 | | - On April 27, 2022, the board of directors increased the authorization of the common unit repurchase program from $150.0 million to $250.0 million[169] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including required CEO and CFO certifications and Inline XBRL financial data - The report includes a list of filed exhibits, such as various agreements and required CEO and CFO certifications pursuant to the Securities Exchange Act of 1934[170]