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Why Is Viper Energy (VNOM) Up 36.4% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Viper Energy Partners (VNOM). Shares have added about 36.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Viper Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Viper Energy Q1 Earnings Beat Estimates, Rise Y/Y

Viper Energyreported first-quarter 2020 earnings per unit of 21 cents, comparing favorably with the Zacks Consensus Estimate of a loss of 6 cents and the year-ago quarter loss of a cent.

The partnership, with mineral interests in North American oil and gas resources, generated operating income of $79 million, which beat the Zacks Consensus Estimate of $75 million. Also, the top line increased from the year-ago level of $62 million.

The strong quarterly results can be attributed to rise in oil equivalent production volumes. This was offset partially by lower commodity price realizations, led by coronavirus-dented energy demand.

Cash Distribution

The partnership was authorized by the board of directors of its general partner to make cash distribution of 10 cents per common unit for the March quarter of 2020. The new distribution reflects a sequential decline of 77.8%.

Production

The resources wherein the partnership has mineral interests produced 2,509 thousand oil equivalent barrels (MBoe) in the March quarter of 2020, up from 1,714 MBoe a year ago. Of the total volumes, oil accounted for 63.3%. Production of crude oil, natural gas and natural gas liquids rose from the year-ago levels in the quarter under review.

Overall Realized Prices

Overall average realized price per barrel of oil equivalent was recorded at $30.62 compared with $35.26 in first-quarter 2019. Notably, average realized oil prices during the quarter were recorded at $45.49 per barrel, up marginally from $45.31 a year ago. However, natural gas prices were recorded at 13 cents per thousand cubic feet, lower than the year-ago quarter’s $2.05. The price of natural gas liquids was $8.94 a barrel, down from the year-ago quarter’s $18.09.

Cost & Expenses

Total expenses in the quarter under review amounted to $33.5 million, significantly higher than $21.6 million in the prior-year quarter. On a per barrel of oil equivalent (BOE) basis, total operating expenses were recorded at $3.36 versus $2.90 in the year-ago quarter.

Balance Sheet

As of Mar 31, 2020, the partnership’s cash and cash equivalents were recorded at $40.3 million. It reported long-term debt of $6.6 billion, representing a debt-to-capitalization ratio of 0.25.

Guidance

The partnership has issued its net daily oil equivalent production guidance at 22-24.5 thousand barrels of oil equivalent per day (MBoE/D) for the second and third quarter of 2020. For 2020, the partnership has reaffirmed the prior-revised production guidance at 22.5-27 MBoE/D.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 26.45% due to these changes.

VGM Scores

Currently, Viper Energy has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Viper Energy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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