VNOM - Earnings call transcript Q4 2018 | Viper Energy Partners LP

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Operator

Good day, ladies and gentlemen, and welcome to the Viper Energy Partners Fourth Quarter 2018 Earnings Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Mr. Investor of Director Lawlis, Relations. Adam begin. Sir, you may

Adam Lawlis

to Thank fourth Partners welcome you, Good morning. Shenelle. Viper quarter Energy And XXXX call. conference

can call CEO; Stice, our and Investor website. today, will Viper be which Representing reference our found President. are Tracy Van't Dick, During today on Hof, an we Kaes presentation Travis updated CFO;

you could During this company's make the performance condition, Information company's materially filings of results may be businesses. financial can in that objectives, and statements are future found the results of these concerning forward-looking due these conference certain call, that We those from forward-looking in factors caution factors. operations, differ to participants the relating actual plans, indicated to variety with statements SEC.

certain appropriate earnings with Stice. The to to In I'll non-GAAP yesterday measures. GAAP over can our in addition, turn the we release found issued now Travis be afternoon. reconciliations make call measures will the reference

Travis Stice

Welcome Partners Viper Adam. for you, year everyone, at reasons. listening Energy you XXXX for was transformational XXXX quarter Thank call. many fourth Viper a thank Energy Partners and to conference

conversion unique a to relationship First, expanded our to with universe, parent significantly us showcasing leading investment to our due completed taxable opportunity a enabled entity, investor also company Diamondback. while to tax we strategy present a which market our our

employed production capital continue over reserves XX% XX% execute over by of a also return XX% we growing as on annual on of year-over-year. return to our we and generated capital Second, year our while unmatched strategy delivering and and on of XX%, distribution full increased return

asset by acres XX accretive consolidate Tier and over to X,XXX year-over-year. as deals grew or acquisition XX% closed million royalty machine we our continue Lastly, net at $XXX base our Xproperties

XX activity currently we XXXX, see Moving the on position acreage to to as operating our represented by levels across properties. rigs healthy our continue

achieve is this single-digit cash $X common of full production free to growth that As theme, are In providing offers yield. investors annual discipline to the Viper need flow spend now a we cash implies free where capital growth a combination while growth yield. high of a without universal and unmatched implied with guidance flow XX% XXXX both organic result, year an industry capital an providing organic and

in call important to our of catalysts and to relationship to down a drop from commodity for continue undeveloped with Kaes. organic per years accretive are forecast environment many metrics come. price and ability Our strategy multiple Diamondback due acreage our our over even to to largely our and unit growth Diamondback, position acquisition continued the turn distribution now to for years improve flat I'll visibility

Kaes Van't Hof

you, Thank Travis.

X, metrics slide as on our rolling to give guidance. six an month growth on production financial XXXX key Turning several update annual our annual as well show and we

full a on distributions the business we our estimated range based range Importantly, X of model XXXX realized production opportunity show investment and oil by of Viper. X prices. differential presented and showcase Slide guidance year through

of cash which energy As offers of and across some higher industry Viper. base yield yield than shown an multiple combination peers flow traded slide Viper unmatched growth free and versus alternatives, X, significantly multiples on

XX% we'll year. back half not in see levels next is of confidence high in the model. year six activity growth, with of for said, months. in favorably in XXXX. a our significant the compare metals acreage disparity the production And profile Slide the life, success XXXX, yield, first mineral accretive and Slides flow streaming is Viper X acquisition margins nature largely XX to had free X% a of all to remaining rather most and capital. full similar visibility all reserve guidance. provide cash limited year our estimated which our without macro on increased with third commodity vehicles $X versus of undeveloped has of XX return the we mid-teens in business a and Permian beyond Tier level, we operations as XXXX in a growth which the Viper is assessment highlight year-over-year of It owns is that of guidance in XX% that production which metals precious are strategy and typically accounted the machine corporate at flat very expected organic that acquisition a precious party provides expect a given yet peers to half note the Assuming growth organic XX% in cash metrics detailed multiples. its to successful outside continued feel full the currently With Viper very Viper's prices X degree of the spending rights year roughly estimated whole important trading conservative perpetuity which over

type transactions growth Viper and acreage since Delaware in for acreage we capital. Viper $X.X be total, the As extremely million XXX scale across XXX organic believe estimate nature across The XX one Basins acreage of IPO using the closed to accumulate net to believe robust our shown our $X on resource XXXX, X need of undeveloped of assumptions. many continue In alone. detail more without billion through unmatched with barrels in expertise. spacing XXXX million our Slide position and $XXX or opportunities acquisitions XX% Basin we and acquisition both XX over XX, slide completed almost we undeveloped roughly deliver undeveloped robust. in And spend contain and Tier is position over has worth of complete accretive Permian a immediately can and curve conservative a in production the Permian for illustrates to set years to acquisitions highly why now size, unique and Midland Viper's remains given Viper over transactions

Over of position. Southern acreage net operated XX% acres acreage Basin of slide Basin line Diamondback inventory this is Diamondback growth. currently net the the the Delaware production of years still or XX% dropdown Viper over to in acres by at sight X,XXX XX, an in held organic giving XXX of a provide Midland update Moving our to almost current on we remaining Diamondback. almost and owns royalty loyalty

acquisition has minerals. acreage Diamondback's production and Resources of cash that of Additionally, for of a net XXX more royalty associated amount qualifies And to a flow provided Energen significant importantly, Viper. dropdown another

towards We some expect dropdown if transaction to at assets all of these working XXXX. the some in of point not

turn the over now Tracy. With these call comments complete, I'll to

Teresa Dick

net you, Thank $XX.X consolidated income million. quarter fourth Viper's was Kaes. XXXX

operating the Our up was XX% million, in of $XX.X XXXX. million $XX.X for from quarter the fourth quarter income

Viper Also we on million $XXX and the cost unit on provided our of million. slide a shown ended updated liquidity guidance. slide quarter cash details with XX, fourth XX, the of $XX As on and production balance

XX,XXX Importantly, election Viper's distributions federal the production be XX% distributions treated BOE day, the Viper after of The for tax reductions quarter distribution which taxable not should is instead which federal purposes. tax were non-taxable of implies initial to dividends XX,XXX second constitute purposes entity for generally per guidance as XXXX year-over-year income initiating to U.S. tax to income a the constitute midpoint were third determined growth. basis. XXXX Separately, to organic full year and Viper's

I'll it back With turn over these complete, Travis. comments to

Travis Stice

truly throughout years acreage and this flow substantial yield. margin when free will asset support X growth Tier of with our asset growth organic with of lead to Permian and business the Basin required continued many no capital growth. generate can directly spending stands high distribution Viper a versus Tracy. of largely consisting base to offering both both growth comes classes Viper's undeveloped energy it cash alone other you, combination In Thank in closing, the industry and to

of our In please addition from significant company. to the the remain robust the the Operator, consolidation strategy, continued acquisition as including for both growth open questions. of line private potential, market the well we as our organic excited minerals dropdown opportunities parent execution expected about

Operator

[Operator you. Thank Instructions].

Our of of comes question from first Neal line the SunTrust. Dingmann

is now line open. Your

Travis Stice

Good morning, Neal.

Jordan Levy

Jordan Levy. is This actually

the one how guys in or of just it's Just thoughts Eagle you another the are deal, Eagle that fact outside your thinking of that? curious, question set Thanks. kind or Ford Travis a any for Permian the back, looking quick opportunity basin, the after Kaes on the or wondering you whether Post on Ford deal about and guys.

Travis Stice

We Jordon. with. we pleased Ford, extremely Sure, and back made into look entry acquisition the the we're at Eagle the

the deck look significantly one to looking is outside we In that And like Basin, of currently now. see while the an fact, That But opportunistic right the was look. Viper's in at Basin. we you we're focus not in what continue and yield you, Permian trade do feel current mineral of to its here Permian an position the tell obligation slides is the time. we can growing did I'll at got

Jordan Levy

Got Thanks second quick then And Great. for a the question. color. just you.

about it's given acreage undeveloped it Midland Looking does the the some higher been at that going of Viper's where you that equate How it's and of developed tandem growth we've terms seen that? towards forward think or assets. before, slide in shows optimistic ever and How about XX than XX in the with in do lowest that and Delaware. outstanding are amount probably you does growth

Kaes Van't Hof

running a of of without have we say Plus to take is still thing profile optimistic to growth XX we next this years, another the organic ahead about has XX if think you over very as Yeah. deal. are growth mean next the know the XX our we're model I us I long-term, room business runway for slides decade. and away locations important these needing decades do drilled huge Viper from

that's Viper's I think part the a kind of story. So of misunderstood

now So our Spanish asset huge public, when around but a and we some developed. these how is X% wanted production XX% that's Spanish we we very only assets of undeveloped Trail are. for have position to Trail a Viper was clarity Delaware just important went add

excited the about and ahead inventory of pretty we're So runway us. the

Travis Stice

we resource future without that just with stands pointed in to capital don't dollar Partners. unique these in being just is Energy a this space again just is it, of out, this organic I resources, this of decades and alone. But have XXX investment as all once to you it one in Jordon, growth, development where of this prepared yield challenge to I anyone stands all to just front it's couple there occurs as required. of And And remarks that unique of find of any million a get of of single -- this money all barrels this Viper I'll vehicle total add development, our there growth times, as that commentary spend emphasized challenge, Kaes

Jordan Levy

Thanks color. for agreed. the Absolutely

Operator

Thank you.

of question line of next the comes Tim Our from Rezvan Oppenheimer.

is now open. Your line

Tim Rezvan

a Thanks rig of was in hoping support XXXX many for questions. pipeline is that Viper taking the delays sort Diamondback would for run I to folks. kind how maybe out? count royalty morning, Good production of deteriorates, start, you put to guide on worst case rigs and scenario need to my there acreage if that

Travis Stice

our of of midpoint know guidance actual plus You the at see production for third baseline guidance Tim, what the our production acreage. schedule Diamondback's months midpoint from next drill is over the the guidance party can the or Diamondback six we

So operates of the but has production. XX% the of XX% acreage, Diamondback

We have visibility that a good pretty growth. into

Now which supports position program takeaway our has and execute on of the midpoint guidance ability confident to taken here. capital Diamondback in care this we're Diamondback's its very of

Tim Rezvan

I'm if rig a trying inclination is kind or there that Okay. of to Diamondback's subsequent just guidance? to understand, backstop drops, ability growth

Kaes Van't Hof

combined of the acreage on certainly Diamondback first. some mineral the mean economics incentivizes I the of on this to minerals acreage owning drill Yeah.

feel up for that we last rigs certainly midpoint of year we confident So very holds the year. December a Diamondback's that XX production Viper's released

Tim Rezvan

that NOLs positive happen of sort news. Okay, throughout the NOLs that related And seems a will tax won't is item in the How three Diamondback to place? put stay status certainly and Is on then years? that forever of up moving theory or really by in every work those it the four to okay. like or does if just long distribution

Travis Stice

Diamondback's produce of not Well entity expected Yeah. conversion from million cash and cash taxable know MLP public so you the board to the future. support that wasn't taxes for foreseeable Viper stock to $XXX produce a approved our unitholders for taxes did

pending can't we that a Now reassess But and something acquisitions, the later at expect speak oil five over can that's what be date. the happens Viper the down will dividend large you a or significant foreseeable non-taxable. increase know for from price we in years certainly line that I income future four or

Tim Rezvan

Okay, okay.

all That's I you. Okay. had. Thank

Kaes Van't Hof

Thank you, Tim.

Operator

Thank you.

Jeff of Grampp Our comes line next Capital. from Northland of question

is line now open. Your

Jeffrey Grampp

say dropdowns dropdown talk Good acquisitions they Wanted in that to amount to guys type you such Kaes XX% maintain to Diamondback morning, then success timeframe? your dollar on can the that within any to can extent the comfortable bit the a how equity third a giving you which party ownership? feel guys or and also guys. you interest kind to in talk touch XX% on scenarios manage on And doing that dropdown on strategy more to little your of certain of predicated maybe strategy maybe maybe acquisition maybe many

Kaes Van't Hof

Yeah. transaction, how Diamondback think you cash the should if a significant over to like Diamondback on ownership really logically know necessarily get going for need and and but boards speak Jeff, at and they're flow certainly you I cash the growing dividend, the growing of we I within in can't Diamondback Viper about having negotiate the time that we don't Viper think our level larger. XX% this

speaking the done the overrides want get to understand quickly the Energen in to certainly the off possible. assets we be and vehicle Now carve especially we these that dropdowns, Viper We that that the as should minerals from as acquisition.

ago. -- the that continued synergies at on execute So months Diamondback presented we it's the six level a

is so mean right, back to stream the working and work about dropdown to quarter that one think to get over quarters two other The at on we're done we but your XX done, question discussions continue that is so I it, last acquisitions, something we dropdown other we're size certainly and are So And particular working but of business want or we're certainly the expect it's acquisitions sizable it's actively the a it very working exclusive. million get mutually a want $XXX other on. actively those to I we've forward. carry to on

Jeffrey Grampp

disclosed touch the there That's of assets levels to to assume cash sense has those I of million excess can I'm Diamondback's -- not. where of what $XX on $XX guys activity for for flow at of a up that? million or but that. those NRIs, I lower that question been any overall NRI. guess Do and it's of higher similar get give maybe areas perhaps the helpful. follow disclosed like guys or know higher really guys I think Energen well. this that my in trying Alright, average what all Diamondback guided you maybe to you faster appreciate great. that's of I XX%, But may flavor slower kind XXXX And be to growing you to as about is a production is has way where more a us you and or

Travis Stice

Diamondback's the growth -- to It's is. I would it's assume tough. would We're I sorting through assume equal it's details. what

this over key areas the NRI will works Diamondback that's a as to than actively one sure and have make but next and to sections Some dropdown better others being where done key -- it's size five years. developing Viper, right the the accretive an to is

Jeffrey Grampp

guys. Alright, great. the I appreciate time Thanks.

Kaes Van't Hof

Thank you, Jeff

Operator

Thank you.

Our comes IFS Securities. of the question line Eli from Kantor of next

is now line Your open.

Eli Kantor

guys. Hey, good morning

Kaes Van't Hof

Eli. Hey

Travis Stice

Good morning, Eli.

Eli Kantor

the we're from some you a the how inning minerals to companies? relative public year color market changed of private terms the Can in size think owners And you to of give on in, what hands shake ago? has minerals seeing private

Kaes Van't Hof

that going vehicle the there ranches change to those. good million to make acres Permian the availability good X we're But that million public we to look their of that not going X.XX I Viper space. assuming in a acre those are available are the are and XX,XXX hands; you hands. Viper all in the opportunity that's that as set Well, minerals owns it acres they're minerals set, define largest families million Certainly change only the some And forever. wake of to at hold opportunity if to question. Permian X.XX there like in would

we're inning. So space I'd certainly the I've like evolve. the purchase to say in seen mineral second

are mineral regular buyers deals a a lot operating owners have small that basis. now and We on of

increased us past So over of has the couple opportunity for years. the only set

Eli Kantor

guys activity most it far you you that the are areas or the those quarter, stratigraphically to like relative that any talk operated Can disclosed looks there are third as rigs. in uptick from specific rig private geographically of was operated as rigs increase -- -- then And where focused? privately either about

Travis Stice

Yeah.

on deck, were If the the can you you of on our XX see side where Page right operating. look rigs

to the buying of and usually Basin to we on the that's Diamondback our like portion in minerals Midland Eastern operate us really focus Delaware operator Basin. would the where and Northern So like with

Eli Kantor

The along Mexico portion there been areas last Viper haven't same where the for opportunities you lines. New been some one and platform, future? Delaware where think see could anywhere in and me historically either active. for Basin Basin Central So in and the the Mexico shelf New the of Diamondback Are of areas those have you Viper growth

Kaes Van't Hof

lot Diamondback operate buying to just have Diamondback at that would sure to been plan. G&A focus acreage in the we platform clear Central I'm mean at not that forward I a dedicated No, of we've that opportunities to is level don't pretty want on we go there acreage. are really minerals our part Basin We of and like

So it's either. of not Viper's really part

Eli Kantor

Great. Thanks color. for the

Kaes Van't Hof

Eli. you, Thank

Operator

Our [Operator you. Instructions] Wangler Capital. line of of question the Thank Jason comes next from Imperial

is now line Your open.

Jason Wangler

Hey, maybe good know kind rigs. bigger about many a continue I have the talk those visibility Do active Kaes pads flavor the drilling curious, how you increased you there. just of these of of morning everyone. I are XX on drilling kind for was the to guys days?

So how breaking just curious that count kind this of at rig point? down see you

Kaes Van't Hof

those and majority I large vast Yeah. those pads clarity is deck what of wells those acquisitions. we multi-well And our are an at some Viper rigs are. looking for said drilling on showing the we large where interest pads XX page gave XX with exactly those are of the are

larger smaller run a maybe percentage gives So it smaller peers only us visibility I a other of high some that percentage us to that of think and a because rather area, forecast. from area a that mineral run separates ability we'd

Jason Wangler

acquisitions obviously think you liquidity. still obviously Would of about But the look or because very fourth repay liquidity, made have in the out at look that there just levels the you to a good some quarter, you a and do table? about think going how a debt you liquidity Okay. have some some And is low you're debt options terming of then portion? you you forward plan or on as again still you bunch of the at how lot

Travis Stice

Certainly, couple revolver. continue our past up $XXX reserves revolvers to it's production over as to in now the of million years, increase increased have

or at point balance I company its light grade turnout it's that Viper try assume think permanent data strength out given leverage some turn parent at of to and level. investment some its to to the sheet the Viper logical

Jason Wangler

turn you. Thank I'll it Perfect. back.

Travis Stice

Thank you.

Operator

you. Thank

from Scotia Howard Philip Our next Weil. of Stuart question line of the comes

Your now open. line is

Philip Stuart

guys. morning, Good

Just the minerals one I Ranch opportunities quick And of one if legal Quinn see just acreage be for me. the Quinn in level, but level At any successful kind Quinn Ranch? under that if material mineral the on should you in you Do Ranch the own winning guys Diamondback not, is know at uncertainty, acreage? Viper still lease. curious Diamondback

Kaes Van't Hof

any that We Yeah. that a I'll out ranch deal, the at comes into time. very gets anything the own do say Diamondback larger whether team and of much or acreage anytime active sandbox it's it. Ajax they the Viper Energen not requires this acreage deal, deal, get on our Excel

that to Viper becomes acreage team into So it's our Diamondback assume we any one logical level for buy minerals. or buy the number to priority trade

Philip Stuart

color I Okay. the there appreciate guys.

Travis Stice

you. Thank

Operator

now And I call like at you. to showing Travis this no questions closing turn I'm to remarks. would Mr. for over the CEO Thank Stice, further time.

Travis Stice

call. to Thanks in today's everyone participating again

please information questions, If provided. contact us any using contact the you have

Operator

in thank conference. you participating gentlemen, today's today's conclude and This Ladies for program.

day. all disconnect. have a great Everyone may You

Viper Energy Partners (VNOM) 6 Feb 192018 Q4 Earnings call transcript