Viper Energy Partners LP (NASDAQ:VNOM) Q3 2023 Earnings Call Transcript
Viper Energy Partners LP (NASDAQ:VNOM) Q3 2023 Earnings Call Transcript November 7, 2023
Operator: Good day. And thank you for standing by. Welcome to the Viper Energy Partners Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Adam Lawlis, Vice President of Investor Relations. Please go ahead.
Adam Lawlis: Thank you, Anton [Ph]. Good morning, and welcome to Viper Energy Partners’ Third Quarter 2023 Conference call. During our call today, we will reference an updated investor presentation, which can be found on Viper’s website. Representing Viper today are Travis Stice, CEO, Kaes Van’t Hof, President; and Austen Gilfillian, General Manager. During this conference call, the participants may make certain forward-looking statements relating to the company’s financial condition, results of operations, plans, objectives, future performance and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company’s filings with the SEC.
In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I’ll now turn the call over to Travis Stice.
Travis Stice: Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy Partners’ Third Quarter 2023 Conference Call. There were several important updates made yesterday with our earnings announcement, so I will start with our upcoming conversion into a Delaware corporation first. The Board of Directors approved the conversion on November 2 and we expect that it will become effective on November 13. When completed, this conversion will deliver increased corporate governance rights to our limited partners and is intended to position Viper such that the value of our mineral and royalty assets can be fully recognized. Further on that point, we expect the conversion to result in an increase in Viper’s trading liquidity and potential investor universe.
Given Viper’s current status as a partnership, we estimate that approximately 2% of our public float is held by index funds. This compares to a select group of our peers averaging around 30% ownership. Fundamentally, we believe this conversion is the right thing to do for our unitholders and that it will provide numerous benefits, but the foundation of the decision is to fully highlight the advantage nature of mineral ownership and the unique value proposition that Viper presents within the space. As a separate recent event, Viper announced last week the closing of our GRP acquisition. This acquisition was a truly unique opportunity and that it checked all the boxes we look for in an acquisition. A medi-accretion to all relevant financial metrics, substantial undeveloped inventory to support long-term returns and significant scale that results in a pro forma business that is both bigger and better.
What differentiates this acquisition, however, is both the quantity and quality of the undeveloped inventory, particularly in the Northern Midland Basin. Following the closing of this acquisition, Viper now owns roughly 32,000 net royalty acres in the Permian Basin, and our production will be over 25,000 barrels of oil per day. Looking ahead, we have an unparalleled growth runway of high-quality undeveloped acreage and as the largest player in the public minerals market, we expect to play a meaningful role in consolidating the highly fragmented space as high-value proposition opportunities like GRP present themselves. Turning to the results of the business. The third quarter was another strong quarter for Viper as production grew roughly 5% for the second consecutive quarter.
While growth will not always be ratable from quarter-to-quarter, given we own varying interest in what is mostly large-scale development in the Permian Basin. We expect the trend of meaningful growth on an annual basis to continue as evidenced by their preliminary full year 2024 production guidance that we provided. Additionally, during the third quarter, Viper announced an almost $100 million leased bonds which will allow for the future development of deeper zones on certain acreage in the Midland Basin. As mentioned in our rationale for converting into a corporation, there are many structural advantages to mineral ownership beyond just the cost-free royalties, and this significant lease bonus is just one specific example. As owners and lessors of the subsurface property modern lease terms can dictate development requirements of operators.
And when those terms are not met, leases can expire and have the full development rights revert back to us as a mineral owner. As deeper zones are tested throughout the basin, we believe this is an advantage that will only be further highlighted in the years to come. As a final point, Viper remains committed to a sustainable and growing return of capital through cash distributions over the long-term. We have the balance sheet strength, durable cash flow profile and undeveloped inventory base to support many years of significant return of capital through the cycle. Activity on our asset base continues to be strong, and we believe we are positioned to execute on opportunistic M&A to further complement what is already a unique value proposition both in terms of return on and return of capital.
Operator, please open the line for questions.
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