MIDLAND, Texas - Viper Energy Partners LP (NASDAQ:VNOM) ('Viper' or the 'Company'), a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG) ('Diamondback'), announced financial and operating results for the second quarter ended June 30, 2022.
Additionally, the Company announced today that beginning in the third quarter of 2022, the Board of Directors of Viper's General Partner (the 'Board') has approved a base annual distribution of $1.00 per common unit as well as a return of capital commitment of at least 75% of cash available for distribution. Viper's base distribution is expected to be supplemented by additional return of capital in the form of variable distributions and opportunistic unit repurchases. As part of this enhanced capital return program, the Board also increased the authorization of its common unit repurchase program to $750.0 million, up from $250.0 million previously.
SECOND QUARTER HIGHLIGHTS
Q2 2022 average production of 19,758 bo/d (33,560 boe/d), an increase of 9% from Q1 2022 and 20% year over year
Q2 2022 consolidated net income (including non-controlling interest) of $171.6 million; net income attributable to Viper Energy Partners LP of $34.0 million, or $0.44 per common unit
Adjusted net income (as defined and reconciled below) of $167.0 million, or $2.18 per common unit
Q2 2022 cash distribution of $0.81 per common unit, representing approximately 70% of total cash available for distribution (as defined and reconciled below) of $1.16 per common unit; $0.81 distribution is up 21% quarter over quarter and implies a 10.5% annualized yield based on the July 29, 2022 unit closing price of $30.74
Repurchased 1.0 million common units in Q2 2022 for an aggregate of $28.9 million (average price of $28.38 per unit); repurchased 0.8 million common units to date in Q3 2022 for $20.1 million (average price of $26.51 per unit)
Q2 2022 Consolidated Adjusted EBITDA (as defined and reconciled below) of $215.1 million and cash available for distribution to Viper's common units (as defined and reconciled below) of $88.0 million
Ended the second quarter of 2022 with total long-term debt of $680.4 million and net debt (as defined and reconciled below) of $676.0 million
180 total gross (5.7 net 100% royalty interest) horizontal wells turned to production on Viper's acreage during Q2 2022 with an average lateral length of 9,785 feet
Initiating average daily production guidance for Q3 2022 and Q4 2022 of 19,250 to 20,250 bo/d (32,750 to 34,500 boe/d)
Increasing full year 2022 average daily production guidance to 19,000 to 19,750 bo/d (32,500 to 33,750 boe/d), an increase of 4.0% at the midpoint
As of July 13, 2022, there were approximately 550 gross horizontal wells in the process of active development on Viper's acreage in which Viper expects to own an average 1.6% net royalty interest (9.0 net 100% royalty interest wells)
Approximately 558 gross (12.5 net 100% royalty interest) line-of-sight wells on Viper's acreage 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
Approximately 55% of distributions paid in 2022 are expected to be reasonably estimated to constitute non-taxable reductions to the tax basis, and not dividends, for U.S. federal income tax purposes
ENHANCED CAPITAL RETURN PROGRAM
Implementing base annual distribution of $1.00 per unit; implies a 3.3% annualized yield based on the July 29, 2022 unit closing price of $30.74
Increasing return of capital commitment to at least 75% of cash available for distribution, inclusive of the base distribution, variable distributions and opportunistic unit repurchases
Increasing authorization for common unit repurchase program to $750.0 million, up from $250.0 million previously
'The second quarter was an outstanding quarter for Viper as oil production grew nine percent quarter over quarter, which, combined with the benefit of increasing commodity prices and no inflationary cost pressures, resulted in a 20% increase in cash available for distribution. Importantly, the significant increase in production was driven primarily by a record 4.8 net wells being turned to production by Diamondback during the quarter. As a result of Diamondback's consistent focus on developing Viper's high concentration royalty acreage, primarily in the Northern Midland Basin, as well as continued strong activity levels by third party operators, Viper is increasing our guidance for oil production for the full year 2022 by 4% at the midpoint,' stated Travis Stice, Chief Executive Officer of Viper's General Partner.
Mr. Stice continued, 'Additionally, Viper today announced the next step in the evolution of our capital return program. The Board has approved, beginning in the third quarter, an annual base distribution of $1.00 per unit, which provides a competitive yield of 3.3% at today's unit price, and which would represent an annual distribution roughly equal to 50% of our estimated cash available for distribution assuming $50 WTI. The Board also approved an increase to our return of capital commitment to at least 75% of cash available for distribution. To meet this commitment, our base distribution is expected to be supplemented by additional return of capital in the form of variable distributions and opportunistic unit repurchases.'
Mr. Stice continued, 'The enhanced return of capital framework announced today, along with the increase in the unit repurchase authorization, displays the confidence we have in our forward outlook. The optionality provided by the variable return of capital beyond our base distribution will allow greater flexibility in taking advantage of extreme market volatility and the current dislocation from the long-term intrinsic value of our asset base. Going forward, we remain committed to generating the highest value proposition for our unitholders, whether that be allocating capital to a growing base distribution, variable distribution or opportunistic unit repurchases.'
FINANCIAL UPDATE
Viper's second quarter 2022 average unhedged realized prices were $106.34 per barrel of oil, $6.10 per Mcf of natural gas and $39.28 per barrel of natural gas liquids, resulting in a total equivalent realized price of $78.20/boe.
Viper's second quarter 2022 average hedged realized prices were $105.59 per barrel of oil, $4.72 per Mcf of natural gas and $39.28 per barrel of natural gas liquids, resulting in a total equivalent realized price of $75.99/boe.
During the second quarter of 2022, the Company recorded total operating income of $239.3 million and consolidated net income (including non-controlling interest) of $171.6 million. Through the first half of 2022, Viper generated $441.2 million in operating income and $299.7 million in consolidated net income.
During the second quarter of 2022, the Company repurchased $49.6 million of the outstanding principal of its 5.375% Senior Notes due 2027 at an average cost of 98.7% of par, or $49.0 million in aggregate.
As of June 30, 2022, the Company had a cash balance of $4.3 million and total long-term debt outstanding (excluding debt issuance, discounts and premiums) of $680.4 million, resulting in net debt (as defined and reconciled below) of $676.0 million. Viper's outstanding long-term debt as of June 30, 2022 consisted of $430.4 million in aggregate principal amount of its 5.375% Senior Notes due 2027 and $250.0 million in borrowings on its revolving credit facility, leaving $250.0 million available for future borrowings and $254.3 million of total liquidity.
SECOND QUARTER 2022 CASH DISTRIBUTION & CAPITAL RETURN PROGRAM
The Board declared a cash distribution for the three months ended June 30, 2022 of $0.81 per common unit. The distribution is payable on August 23, 2022 to eligible common unitholders of record at the close of business on August 16, 2022. This distribution represents approximately 70% of total cash available for distribution.
On May 19, 2022, Viper made a cash distribution to its common unitholders and subsequently has reasonably estimated that a portion of that distribution, as well as a portion of the distribution payable on August 23, 2022, should not constitute dividends for U.S. federal income tax purposes. Rather, approximately 55% of distributions that have been paid, or which are expected to be paid, in 2022 are estimated to constitute non-taxable reductions to the tax basis of each distribution recipient's ownership interest in Viper. The Form 8937 containing additional information may be found on www.viperenergy.com under the 'Investor Relations' section of the site.
During the second quarter of 2022, Viper repurchased 1.0 million common units for an aggregate purchase price of $28.9 million (average price of $28.38 per unit). From the end of the second quarter through July 29, 2022, the Company repurchased an additional 0.8 million common units for an aggregate purchase price of $20.1 million (average price of $26.51 per unit). In total through July 29, 2022, the Company repurchased 8.0 million common units for an aggregate of $158.4 million, reflecting an average price of $19.75 per unit.
Additionally, the Company announced today that the Board increased the authorization of its common unit repurchase program to $750.0 million, up from $250.0 million previously. Viper has expended approximately 21% of the increased authorized amount, leaving approximately $591.6 million remaining on the increased authorization as of July 29, 2022.
OPERATIONS UPDATE
During the second quarter of 2022, Viper estimates that 180 gross (5.7 net 100% royalty interest) horizontal wells with an average royalty interest of 3.2% were turned to production on its acreage position with an average lateral length of 9,785 feet. Of these 180 gross wells, Diamondback is the operator of 54 gross wells, with an average royalty interest of 8.9%, and the remaining 126 gross wells, with an average royalty interest of 0.7%, are operated by third parties.
CONFERENCE CALL
Viper will host a conference call and webcast for investors and analysts to discuss its results for the second quarter of 2022 on Tuesday, August 2, 2022 at 11:00 a.m. CT. Access to the live audio-only webcast, and replay which will be available following the call, may be found here. The live webcast of the earnings conference call will also be available via Viper's website at www.viperenergy.com under the 'Investor Relations' section of the site.
About Viper Energy Partners LP
Viper is a limited partnership formed by Diamondback to own, acquire and exploit oil and natural gas properties in North America, with a focus on owning and acquiring mineral and royalty interests in oil-weighted basins, primarily the Permian Basin. For more information, please visit www.viperenergy.com.
About Diamondback Energy, Inc.
Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.
Forward-Looking Statements
This news release contains 'forward-looking statements' within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties, and assumptions. All statements, other than statements of historical fact, including statements regarding Viper's: future performance; business strategy; future operations; estimates and projections of operating income, losses, costs and expenses, returns, cash flow, and financial position; production levels on properties in which Viper has mineral and royalty interests, developmental activity by other operators; reserve estimates and Viper's ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures); and plans and objectives of (including Diamondback's plans for developing Viper's acreage and Viper's cash distribution policy and common unit repurchase program) are forward-looking statements. When used in this news release, the words 'aim,' 'anticipate,' 'believe,' 'continue,' 'could,' 'estimate,' 'expect,' 'forecast,' 'future,' 'guidance,' 'intend,' 'may,' 'model,' 'outlook,' 'plan,' 'positioned,' 'potential,' 'predict,' 'project,' 'seek,' 'should,' 'target,' 'will,' 'would,' and similar expressions (including the negative of such terms) as they relate to Viper are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Although Viper believes that the expectations and assumptions reflected in its forward-looking statements are reasonable as and when made, they involve risks and uncertainties that are difficult to predict and, in many cases, beyond its control. Accordingly, forward-looking statements are not guarantees of Viper's future performance and the actual outcomes could differ materially from what Viper expressed in its forward-looking statements.
Factors that could cause the outcomes to differ materially include (but are not limited to) the following: changes in supply and demand levels for oil, natural gas, and natural gas liquids, and the resulting impact on the price for those commodities; the impact of public health crises, including epidemic or pandemic diseases such as the COVID-19 pandemic, and any related company or government policies or actions; actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments, including any impact of the ongoing war in Ukraine on the global energy markets and geopolitical stability; rising interest rates and their impact on the cost of capital; regional supply and demand factors, including delays, curtailment delays or interruptions of production on Viper's mineral and royalty acreage, or governmental orders, rules or regulations that impose production limits on such acreage; federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations; transition risks relating to climate change and the risks and other factors disclosed in Viper's filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the Securities and Exchange Commission's web site at http://www.sec.gov.
In light of these factors, the events anticipated by Viper's forward-looking statements may not occur at the time anticipated or at all. Moreover, the new risks emerge from time to time. Viper cannot predict all risks, nor can it assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements it may make. Accordingly, you should not place undue reliance on any forward-looking statements made in this news release. All forward-looking statements speak only as of the date of this news release or, if earlier, as of the date they were made. Viper does not intend to, and disclaim any obligation to, update or revise any forward-looking statements unless required by applicable law.
Contact:
Investor
Austen Gilfillian
T: +1 432.221.7420
E: agilfillian@viperenergy.com
VIPER ENERGY, INC. 
