Viper Energy Partners ((VNOM)) has held its Q4 earnings call. Read on for the main highlights of the call.
Viper Energy Partners’ recent earnings call conveyed a generally positive sentiment, underscored by the company’s impressive production growth, strategic acquisitions, and a solid dividend strategy. These elements suggest a promising trajectory for Viper Energy’s future performance. Nonetheless, the call also highlighted concerns regarding market volatility and limited immediate drop-down opportunities, which slightly dampen the otherwise optimistic outlook.
Strong Organic Production Growth
Viper Energy showcased robust organic production growth on its legacy assets, complemented by successful execution of its acquisition strategy. For the first quarter of 2025, the company set an average daily production guidance of 30,000 to 31,000 barrels of oil per day. Following an anticipated drop-down in the second quarter of 2025, Viper expects a run rate daily average oil production of 48,000 barrels, marking a significant increase.
Strategic Transactions and Acquisitions
The company completed transformative transactions, including a drop-down transaction with Diamondback and the acquisition of Quinn Ranch. These strategic moves align Viper Energy with Diamondback’s development plans, fostering expected organic growth driven by Diamondback’s operations.
Dividend and Cash Flow Strategy
Viper Energy maintained its dividend payout guidance of 75% to 100% of free cash flow, reflecting a commitment to growing its base dividend. The company prioritizes variable dividends over repurchases, indicating a focus on returning value to shareholders.
Market Volatility and Stock Price Concerns
Amid macroeconomic pressures, concerns about Viper’s stock price were discussed. The company is considering repurchase plans to mitigate the impact of continued market weakness, showcasing a proactive approach to managing stock price volatility.
Limited Drop-Down Opportunities
While recent transactions present potential drop-down opportunities, they are expected to be smaller compared to previous deals. This limitation could impact the scale of future growth opportunities.
Forward-Looking Guidance
During the earnings call, Viper Energy provided forward-looking guidance, projecting an average daily production of 30,000 to 31,000 barrels of oil per day for Q1 2025. Upon closing a drop-down transaction expected in Q2 2025, the run rate daily average oil production could rise to 48,000 barrels. Additionally, Viper anticipates Diamondback-operated production to increase to approximately 31,000 barrels a day in 2026, up from 27,000 barrels in 2025. The company aims to align with Diamondback, owning an interest in about 75% of Diamondback’s completions over the next five years, with an average 6% net revenue interest in those wells.
In conclusion, Viper Energy Partners’ earnings call painted a picture of a company poised for growth, driven by strategic acquisitions and a strong dividend strategy. While market volatility and limited drop-down opportunities present challenges, the overall sentiment remains optimistic, with forward-looking guidance indicating significant production growth and alignment with Diamondback’s operations.