Viper Energy Partners LP (NASDAQ:VNOM) Q1 2024 Earnings Call Transcript May 1, 2024
Viper Energy Partners LP isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Viper Energy First Quarter 2024 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Adam Lawlis, Vice President of Investor Relations. Sir, please begin.
Adam Lawlis: Thank you, Howard. Good morning and welcome to Viper Energy’s first quarter 2024 conference call. During our call today, we will reference an updated investor presentation, which can be found on Viper’s website. Representing Viper today are Travis Stice, CEO; Kaes Van’t Hof, President; and Austen Gilfillian, Vice President. During this conference call, the participants may make certain forward-looking statements relating to the company’s financial condition, results of operations, plans, objectives, future performance and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company’s filings with the SEC.
In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I’ll now turn the call over to Travis Stice.
Travis Stice: Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy’s first quarter 2024 conference call. The first quarter was a strong start to the year for Viper in the period, which uniquely highlighted the benefits of Viper’s business model and high-quality assets. Despite commodity prices declining during the quarter, Viper’s continued production growth, along with our best-in-class cost structure, allowed for us to increase our cash available for distribution per share quarter-over-quarter. Importantly, as a result of our strong financial and operational results, our Board has declared a combined base plus variable dividend for the first quarter of $0.59 a share. Looking specifically at operations.
Both activity and well productivity trends across our acreage position continue to be encouraging. As a result, we have initiated production guidance for the second quarter that implies over 3% growth relative to the first quarter. It is important to note that this guidance takes into account the divestiture of our non-Permian assets in losing their production contribution for two months of the quarter. On a pro forma basis, so including the loss of roughly 450 barrels of oil per day from the divestiture, our true organic growth quarter-over-quarter is expected to be almost 5%. Additionally, we have also provided updated production guidance for the full year 2024. While the midpoint of this guidance range has been reduced by 250 barrels of oil per day versus our previous guidance range, that loss is entirely attributable to the loss of the production contribution from the non-Permian assets for the remaining seven months of 2024.
As a further point on the continued strong activity levels across our acreage position, the implied average production for the second half of 2024 represents a roughly 2% increase relative to the midpoint of our second quarter production guidance range. Looking more long term at potential inventory expansion. During the first quarter, Diamondback completed its first test of the Wolfcamp D and Spanish Trail with two wells being turned to production. Of these two wells, only one was developed under an existing Wolfcamp B well as to test the vertical communication between the two zones. To date, we have seen similar performance between the two wells and therefore believe that there’s enough vertical separation between the two zones to limit the parent-child effect.
The initial takeaway is that the Wolfcamp D and Spanish Trail can be effectively developed below existing Wolfcamp B wells. And while they are not the highest-returning projects in Diamondback’s portfolio, they can’t compete for capital over the next several years, especially inclusive of Viper’s high NRI and the existing infrastructure that’s in place. This test derisks a substantial amount of net inventory for Viper, and as a result, gives confidence to an extended outlook for potential organic production growth. Separately, we have increased our guidance for cash G&A slightly as the result of increased costs associated with our conversion to a corporation, but we continue to run our business extremely efficiently and with peer-leading per unit costs.
Our continued best-in-class cash margins and free cash flow generation, along with the previously detailed organic production growth, should enable Viper to continue to return a substantial amount of capital to our shareholders primarily through our base plus variable dividend. Operator, please open the line for questions.
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