VNOM - Earnings call transcript Q4 2019 | Viper Energy Partners LP

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Viper Energy Partners' Fourth Quarter 2019 Earnings Call.

At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A session . [Operator Instructions]. Please be advised that today's conference is being recorded. instructions] [Operator

to President over you. of ahead, like Adam your Please the sir. Vice Lawlis, Investor hand now to conference speaker, go I'd Relations. Thank

Adam Lawlis

Fourth welcome Justin. Viper morning you, Conference and Thank Energy Good Partners' Quarter XXXX Call. to

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

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

addition, GAAP earnings In the issued with certain will in to our found reference we The afternoon. release non-GAAP reconciliations measures. make measures yesterday be can appropriate

Travis turn Stice. now I'll the over call to

Travis Stice

everyone importantly, for for Viper Thank XXXX our was to acres than year important Adam. X,XXX Partners' acquire your an to operated conference we expose most call. net thank successfully quarter acreage. scale Energy Viper Welcome, and size as leveraged fourth you, doubled more to our XXXX listening and and Diamondback royalty you royalty

to net translates Diamondback Viper the Viper's XX in a Viper offering directly of than exposure average As this exposure less expected be to revenue X%. year gross eight operated to turned an to increased Diamondback net acreage in expects production to have exposure on royalty XXX% interest wells interest roughly XXXX, years. most versus to XXXX greater result, least with XX% of completions Diamondback's This at than

of position Viper overall Viper's in has rig across additional seen Outside as sight premium not yet a well-capitalized the active history. wells strong any near-term been basin. in stronger wells of attract count today at under Diamondback as operators of the short spud inventory the have currently decline activity levels well has our despite process acreage, then line other operated development of to net in Permian continued acreage that time

effort permit three first be production than for first conversion these slower contemplated acreage XXXX have in assumptions to and over owner rights actual out XX% with to been XXXX. to production which pad net both forecast. turned our pushed However, historical by Diamondback by wells conservative, average timing on operated we to we're to compared spud normal months assuming versus slower Even in in more an have assumptions, timing production per XXXX not production

initiating oil XX% is Viper oil production result full a As guidance full production. year to relative XXXX implies year XXXX growth that

Oak Realizations given Midland spreads potential with the the on improvement are Gray should position pricing Diamondback's expected are addition in tailwind growth Separately, December differential off of expected the to in oil Midland as a fixed Diamondback's pipelines. MEH move XXXX the closer also to year last or production versus market local expected rolled in contracts to XXXX. widen and of to the Brent EPIC strong realizations this be current

average than flow XXXX the at greater assuming oil. XXX XXXX, cash current to in of high per annualized Given aggregate cash cost margins, is than sector given free is than that this and a S&P is full unit Viper's even $XX yield the structure and a projecting implying Further, $XX current WTI price. Viper at company yield unit $X still higher expected generate the X% XX% greater distributions

free landscape, Viper's energy flow with peers. cash will relationship yield difficult and from Diamondback resilient its unique a further it In distinguish

to we further the our enhance bit potential come. high-margin years generate asset in that and XXXX zero Diamondback production many acquiring to acreage significant We drill for forward to of operated organic of requires will base continuing to and long-term CapEx continue to be embedded active growth the in ahead growth look

Operator, the for line questions. please open

Operator

from comes And Derrick instructions] question from first our Whitfield Nicolaus. Stifel [Operator

is Your open. line now

Derrick Whitfield

Regarding from a your static. on perspective time times third-party more it time planning nature, that's have more longer is If a to you be view across the one cycle in impact case, conservative production cycle assuming would aggregate fair leading the guys do outlook in to time remains factors the view assumptions, cycle basin?

Travis Stice

on about being we production thirds Derrick, our of of exact two are being Viper's drill thirds, a forecast about operated third two with Diamondback using Diamondback for volumes the and production. non-op schedule

third our and non-op basin six is traditionally piece, to spud Midland is months. months production the production other the the Delaware the on six first average For basin and spud seven in between five average our to in first to

permits early this of guidance months to already, and here production tumultuous certainly all We it's lot going conservative to and spud our that expect conversion XXXX. to February to converted. we're permit it's XXXX first nine guide and a for be a given been In not in of be

permit ratio. very a have conversion We high

year. the this this in the juncture is hardest this guide full year at the for -- for year Viper for guide the hardest Just to is the

first So about assumptions spud to by we're production up pushing those three months.

Derrick Whitfield

over and That years operated comment your program. follow could last on a that to on question, how permit couple pop pop your of times have to you cycle as makes to the and for trended spud sense

Travis Stice

permit we once of minerals team in Diamondback consistent the buying five operated because at filed. We'll timeframe. filed or minerals of that price the poker filing get so month -- before price can the say levels that permit The permits on ahead is our is wait minerals up for that program is of six that pretty dramatically Viper goes

Derrick Whitfield

helpful. commentary. sense. for That's Makes your Thanks

Operator

next And Goldman Brian Singer Sachs. from from comes Thank our question you.

open. now is line Your

Brian Singer

that third-party and may well with XXXX what see you to trend to you operator? expectations look XXXX built relative Wanted how and the when performance operators in FANG or versus differ not for year-on-year at

Travis Stice

general, water our guidance. we're different type also field to We Yeah Brian exact Diamondback that traditionally been view but year in see those Diamondback. and the guided We we're curves throughout at throughout curves the risked the various I'll level. type the going curves. using in speak the for we that's We've type new reflected fact Viper

possible third IP assume I'll best percent that's the the on this particularly side. our on type but curve type but not rate we looking curves below more third-party double-digit about a environment, average our in parties lower expectations, to see on traditionally say that than really Certainly, probably are in model what non-op

Brian Singer

at would or curve. you anything suggest degradation beyond reason type well is for this material that Are year-on-year seeing conservatism there that improvement performance in either

Travis Stice

I a No, change. foresee significant don’t

think certainly in here. what production single but just profile more I well we're more a zones and different that are down that's developing has reflected think projecting larger than parent wells, more I and operators pads on the

Brian Singer

have seen my then on interest? acquisitions character your think have front, market in incremental And production the the you when is you and follow-up acquisition any you guidance trajectory and about contemplated

Travis Stice

Yes so for assets guide we that always have the we today.

be So cash opportunities, being projected continue there the certainly machine to say or third-party stopped haven’t lot but acquisition from mean side. a we're incremental we We Diamondback that on contribution flow acquisitions. more I is will no acquisition doesn't continuing acquisitive, would production on selective the

on in the pretty We to gets we expectations sometimes Diamondback amount some I also side. environment market of think careful from this there's a opportunities remaining price set the but heated. be just gets have for that significant -- us

drill going XXXX, buying we but aggressively saying Diamondback can't no the that So in more is keep be exception to for doesn’t the under bit. norm deals the mean us to than

Operator

next And Jeff question you. Capital Thank Grampp from Markets. our Northland comes from

Your open. is line now

Jeff Grampp

hearing Diamondback that in Wanted comment third to guidance that the on and done here, altering is first I make in of of are to decent the baked I into you third lately? is was a right, acquisition on or beginning is that two sure think guess first a at dramatically for XXXX think I circle production saying split front Is I the the you’ve want that that the on -- production was back given side side. I Kaes, the made third-party the drop completions some that that in

Kaes Van’t Hof

to and total where but to the we're the Diamondback's percentage is I think On have increasing quarter. in fair net the a non-op going net thirds a [indiscernible] fourth increasing wells, Jeff. fair be are of production I No with the that's of for low throughout the number we production two in it about our right XX% year, is the fourth basis, pretty in first where now, kind XX% quarter. today in Diamondback inventory a given of but well quarter well net model

in are XX% the general operated thirds to So two generate assets of by production. are of going FANG the

Jeff Grampp

of look at one, the what we of XQ and my kind And base PDP have 'XX? do an estimate 'XX hopefully rate decline the you to if to follow-up XQ were of asset a guys quicker

Kaes Van’t Hof

high on should XXs on oil. about mid-XXs It and be BOEs

Operator

from Thank Thompson you. comes Barclays. next And William our question from

open. now is line Your

William Thompson

production translate guidance, the oil throughout growth pickup the in you completions on Should to think models consensus at 'XX XQ? but your about the of help quote in midpoint the half XQ net street into us the cadence simply year? the So how modest first the a we and flattish maybe maybe XQ of that can XX visibility growth understand can

Kaes Van’t Hof

by and that's similar we're net look about two QX Diamondback net a in up almost in very then year. QX the We fair. net think wells perspective, of I a four wells back XX% that's in the from perspective, Yeah quarter operated a the of operated Diamondback half wells, from number to will about averaging QX

on single 'XX off to digits BOE right exit on of help with The to the BOE which modeled an QX growth I way and side. the have it from have strong a half meaningful and from up a number from to oil mid-to-high digits think 'XX the in QX exit production into the of released QX grow we there back are QX step year, coming exit I So perspective large in teens some to expect very in oil a perspective, the the QX pads now mid-single the pretty numbers the QX. year modestly and should we

William Thompson

represents the to WTI, of clarify just You'd regarding then indicated thirds Venom's of of XXX% moving updated be volumes. two can there Diamondback guidance may the parts oil XX% that you realization about And

net you're with that was MEH realization Trail just parts So that linked I to a maybe now assuming the us in that understand to reduction guidance? updated had the agreement, moving You differentials legacy around? Spanish back have WTI Diamondback think MEH the been sales moving help

Kaes Van’t Hof

our WTI a Yeah, barrels of so to hard are really to when get to on It's not lot priced going spreads WTI. guide for move. us

about is think you if WTI Spanish greater the MEH Trail than So $X.XX. versus

for operated piece. about that You should WTI XXX% of that on equal number

up The or benefit off rest Gray EPIC WTI, particularly $X is Brent XX% so just about are and we'll last looking a I've seen where today, of of some start conservative be priced be the wide, and is and $X.XX to the when more to to as it Cushing than couple higher WTI noise lot the going think but was XXX%, of over position Brent, morning. it a Oak I can our today months spreads think they has Midland also you this at been of

having up these X% X% a just the XXXX. we're had through move around to time where So to excited tough going that be going and realizations in we're spreads we after XXXX am we in I go or from through

Travis Stice

add XX that And of on viability it the I deck, just of Page to on because think [indiscernible] to point adding that hedges. indicates

pertaining to of maybe space differentials? some that's locking So those in

Kaes Van’t Hof

is of program. Waha Yeah, for XXXX. the both these we some side given add to spread even the dire gas approval gases be sort but received outlook on prices hedging spread hedging the to aren’t oil permitting side We so here going certainly in our to or pretty if have protection

the I story. take think to of risk Viper looking out that we're

So the to approval have at and a hedge we'll now protection spread be and downside market perspective. looking from

Operator

next Gail comes our from And question Nicholson from you. Thank Stephens.

line Your open. now is

Gail Nicholson

have can so some with value questions asked, taking it the you price would accruing. creates guess Do I yield you in much that cost think or look at of oil S&P environment really been entire and even sector? Viper and deliver my market energy 'XX not step overall of a yield is of the but Lots morning. 'XX? that missing of ability about level top [ph] play really still versus be tier talk a planning just the like overall to kind but Can at a variant forward I kind Good confidence back, the creates going

Travis Stice

because Gail, confidence of wells, confident the we we but forecast really to some included is operated that exposure a feel shows increased in Again really the well, put XXXX about slide Yeah that Diamondback place. think X.X%. that in of new even that have slide going I is shows, an yield it's deck annualized to X of this we $XX at over number vehicle

how understand to merits our of look is return as choice vehicle be. this future pristinely And vehicle capital so I sure going or and expense, because requires market think how operating it's the should be like a we've think I that modeled still just of it investment a it robust no the

Operator

Simmons from next our comes question And Pearce Energy. Hammond from

Your line is open. now

Pearce Hammond

Do rig count outperforming basin basin your Permian is think percentage acreage whole the the declined meaning a large? on middle as and acreage you lower versus has at at level rig looking the Viper's a Permian activity on

Travis Stice

year, were areas operator acreage we quality. I we as if want out. buying to to what in. our minerals do the I projecting conservative that non-op non-op think this at so acreage can't interest out that than increased be XXXX in year, last are we more that say tough there point even would figure that's while about operating will Pearce XX% net put the to the and say XXX% wells XXXX assumptions we we're

capital our first the we going to with knowledge of are minerals allocation we in hopefully than last. that Permian, be developed our and areas buying think So are rather

Pearce Hammond

And the look to then XXXX and at declined be the percentage my guidance. during mix follow-up, XXXX flat oil as levels we QX looks 'XX with roughly

drove it more Was and XXXX? just the your what the is mix the indicative change years? do over current oil of mix completions see basin you production few in next So percentage oil Delaware

Travis Stice

we to higher of gas the the Delaware Midland. Pearce, certainly our and Yeah added mix content Delaware more significantly particularly Northern is the than so have

is to oil production we go separately, been of Delaware outperforming but tried plus at we I forecasted oil a think have Viper will as which to we rather a overall guide particularly expectations different areas. oil a the should in help than higher so gas in production have different curves through percentage and basin XXXX, mix, barrels therefore trail decided from a switch of being asset we now only. oil guide lot decided just a to to of percentage guide We've because lot diverse Spanish total particularly type the

Operator

And our from question SunTrust. next Welles comes Fitzpatrick from

now is Your open. line

Welles Fitzpatrick

much in a last February came give sight new you saw uptick How but as us development that in the quarter's accelerate should in you to as and nice can Obviously out? wells an January idea release, budgets cadence. versus

Travis Stice

areas. We pick interest of of our up on high saw towards end some December activity some the

said going is up I QX little think to from little but think a non-op perspective last to a but QX, little net now assuming a contribution non-op is side, non-op we're versus the on a I non-op wells we QX I perspective even the well in last overall right have than at from got QX we question the I assumptions, that think XXXX flat net think this in more bit modeling today's we're year. more XX% than or

Welles Fitzpatrick

to as there all? X, your of And anything you why on have think a are recovery lock on sticking to that that's disclosure the obviously to to change review you that sensitivity wanting those was of on in you hedge guidance I illustration look that Page need if a don't the or but at is an Would data?

Travis Stice

focused on particularly side. hedging differential only we're think on the I exposure gas Yeah today

downside remove gas risk can that'll oil the leave and severe on from upside Viper exposure both and the we side to full [ph]. story hopefully investors So

Operator

question from next our Scotia Bank. Phil from comes Stuart And

Your now line is open.

Phil Stuart

of I previous net volumes Viper. all more dovetailing on obviously guess questions, focusing to a are on some the the you lot oil

you units be evenly oil accretion? million is kind that, three forward the volumes I most going or for has split about going of of So million production job metrics deal it think historic still and important -- at across looking Viper quarters units is for accretion factor forward, pretty deal you per to acquisitions your maybe going outstanding done per good a growing last the guess oil all and financing over as

Travis Stice

think million that this the Overall I driver production broadly there. of deals with Viper units go on our is focus by over here equity today about oil year and the story, or deal. machine the of this where growth Viper doing per funded next And acquisition story key oil down think distribution we So changed. up doubled hasn't that's the we're for payer our what

running pricing commodity and on zero. to becomes will I but conservative almost more essentially it our assumptions NGL gas say changed have at

or that portion point eastern Midland program. more under us Diamondback So Delaware the basin where the the deals development in the of particularly we're confident very does to basin in Northern

Operator

next from question our Leo KeyBanc. from comes And Mariani

line Your open. is

Leo Mariani

appetite acquisitions, expect for on a out to add here is little better sense up you chunkier get wanted deals commentary Just the FANG of the to time? had Elena there the in around should fall just wanted stream deals obviously off fourth there couple of we maybe an short just much quarter of tiny chunky were a over to of with in and try term up-down, kind the the Santa a anything that closed kind or and

Travis Stice

last I think especially particularly on think it's asset Viper did uncertain we're is we relatively to important to there and organic large going in these really deals the investors us growth the production units I of prove -- some very focused that for size year, up. times, million on our per and for is

the I not not we're it, deals I as at these in on is to next come small some think asked on today here not and going to we're as some interested there couple years. deals and there [ph] a the going me am kind say Diamondback, larger huge of very we just see but I bit packages to in go look of particularly through

Leo Mariani

the that out in low I at XXs that per your the of you flattish, a implies runs you at That's from here, would first equation, the saying I into big 'XX guide, bit quarter XQ get bump XXXX. maybe BOE think your little guys in mid acquisitions sure helpful just unit side the guess for you're BOE per for a under G&A and expected came looking the somewhere it that XXXX, of XXXX guess -- with per to I looking the think G&A that I GOE production XX bit in drop little would in have

Just under of looking at that a just XX little little it? way a is down come potential maybe bit, a conservative to for

Travis Stice

XXX I think for need we've a We're when $X.X save G&A, the on run with cash of we're back-office been adding not get XXX, but have guys good you a the of a million on. wells a $X to we're sure have always conservative we you that guide. and make ton certainly paid pretty company and this we going to be quarter to G&A we some adding, company, people your year, but do million

So not overall help we're on increase saving a guys. a that little going to I much basis we're G&A bit, that always think good but for the gross will

Operator

Thank from you. question And our Imperial comes from next Wangler Capital. Jason

open. Your is now line

Jason Wangler

in Kaes, just was detail Diamondback you the third talk the appreciate terms booking parties but as the the wondering what's on makeup of reserve side all the pretty of about -- conservatively, reserves? versus

Kaes Van’t Hof

on booked are of operated dust parties those the are that a like the so Yes rest are going we [indiscernible]. either and PUDs Diamondback to that side, PUDs or that now in majority completed third-party third PUDs. wells really are Trail operated, don’t The really PUD are or our we XX% Spanish we XX% get by

XXXX aggressively XXXX to of continue given for us PUDs either Diamondback -- XX% has the the operated. up overall big push So and in operated go in seen to PDP book company or sorry it's third you’ve from party liquidity Viper percentage the to a not XX% XXXX

Operator

Schultz from Markets. question next comes instructions] Capital from [Operator RBC our TJ And

Your now line open. is

TJ Schultz

or couple soon, With pace over potentially planning your the with all? Permian years next gas for flaring flaring the in at impact of out outlook if need of limit report does a the Railroad Commission gas to the coming development just how

Travis Stice

eliminate here we the our we control it lot mitigating we're weekly the flaring and certainly in steps in very, has appropriately but into that at studied a level monitor translated and out gotten Permian has the any something flaring forecast that's of. closely the across of basin, actually attention board as Yeah to very Diamondback take

how to of regulation. the not forecast third-party as How We're the Permian of our report undefined. so each across impacts shortly or is it here come out see forecasting to into going in through flaring the reads individual operator production but of interested that's third-party basin, Commissioner all any -- far looks flaring yet increased [indiscernible] we're TJ still taken

TJ Schultz

a just lastly when any to you cash acquisitions Just potentially, payer? on do tax guidance would slow you give if down can expect be

Travis Stice

massive at for at okay I where low where ramp dependent XXs moment change today, price a think XX commodity but today think would to and we're we're accelerate years, months. okay very I strip well price the we couple the we should It's upon for a at XX that we're in are see

Operator

we a And Thompson from from have follow-up William question Berkeley.

now line open. Your is

William Thompson

You we net sustainable on inventory mineral pushback sometimes the with inventory backfill location growth show at isn’t is organic this here FANG XX is space, to Slide year the well that required based XXX get probably or M&A on So to that locations on if net operated. XX an location? net of XX%

say would I on wasn't but in you see XXXX to this growth not curious trying obviously organic on XXXX? double-digit am let's guidance organic sense we in and what M&A just do XXXX, in Viper a just get give growth a like could us am look still like to is I can sense

Travis Stice

thing, you're here. section tell second not you completed. most for into of going in am we We'll get well buy one seeing assets XXXX talked I be first or our to guidance a the

don't don't down. reserve blow in We a you buy that's a to ton of inventory just got be got category to full the Most us. the So see going are report. long our of that of we way We a XP section a PDP ahead in reserves go.

years. for We've Spanish rigs doing in and Trail keep the been to going next last that the five we're two years few still

undeveloped time. inventory a around expect for grow organically and to we to both undeveloped long basins that and be backfill with resource we throughout So very

Operator

no questions. Stice, like showing over turn Travis to now I I call the And back you. further to would Thank CEO remarks. for am closing

Travis Stice

today's in call. to you everyone Thank participating again

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

Operator

conference call. Thank this participating. you concludes today's Thank you. and And ladies gentlemen, for

now disconnect. You may

Viper Energy Partners (VNOM) 12 Feb 202019 Q4 Earnings call transcript