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Viper Energy (VNOM) Down 2.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Viper Energy Partners (VNOM - Free Report) . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Viper Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Viper Tops Q2 Earnings Estimates, Cuts Distribution

Viper Energyreported second-quarter 2020 loss per unit of 4 cents, narrower than the Zacks Consensus Estimate of a loss of 14 cents. Notably, the partnership reported a profit of 4 cents in the year-ago quarter.

The partnership, with mineral interests in North American oil and gas resources, generated operating income of $33 million, which marginally beat the Zacks Consensus Estimate of $32 million. However, the top line decreased from the year-ago level of $72 million.

The better-than-expected quarterly results can be attributed to a rise in oil equivalent production volumes. This was offset partially by lower commodity price realizations, led by coronavirus-dented energy demand.

Distribution Cut

The partnership was authorized by the board of directors of its general partner to make cash distribution of 3 cents per common unit for the June quarter of 2020. The new distribution reflects a sequential decline of roughly 70%.

Production

The resources, wherein the partnership has mineral interests, produced 2,230 thousand oil equivalent barrels (MBoe) in the June quarter of 2020, up from 1,783 MBoe a year ago. Of the total volumes, oil accounted for almost 59%. Production of crude oil, natural gas and natural gas liquids rose from the year-ago levels in the quarter under review.

Overall Realized Prices

Overall average realized price per barrel of oil equivalent was recorded at $14.55 compared with $39.50 in second-quarter 2019. Notably, average realized oil prices during the quarter were recorded at $21 per barrel, down from $54.81 a year ago. The price of natural gas liquids was $7.69 a barrel, down from the year-ago quarter’s $18.33.

Cost & Expenses

Total expenses in the quarter under review amounted to $27.6 million versus $22.6 million in the prior-year quarter. On a per barrel of oil equivalent (BOE) basis, total operating expenses were recorded at $2.02 versus $3.16 in the year-ago quarter.

Balance Sheet

As of Jun 30, 2020, the partnership’s cash and cash equivalents were recorded at $9.7 million. It reported net long-term debt of $630.5 million, representing a debt-to-capitalization ratio of 0.24.

Guidance

The partnership has issued its daily average oil equivalent production guidance at 24.5-26.5 thousand barrels of oil equivalent per day (MBoE/D) for the third and fourth quarter of 2020. For 2020, the partnership has narrowed the average production guidance to 25.3-26.3 MBoE/D.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 14.91% due to these changes.

VGM Scores

At this time, Viper Energy has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Viper Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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