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Why Is Viper Energy (VNOM) Up 52.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Viper Energy Partners (VNOM - Free Report) . Shares have added about 52.9% in that time frame, outperforming the S&P 500.

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

Viper Energy Beats Q3 Earnings Estimates on Higher Output

Viper Energy reported breakeven third-quarter 2020 adjusted earnings per unit against the Zacks Consensus Estimate of a loss of 9 cents. Notably, the partnership reported a profit of 13 cents in the year-ago quarter.

The partnership — with mineral interests in North American oil and gas resources — generated operating income of $62.9 million, which beat the Zacks Consensus Estimate of $51 million. However, the metric decreased from the year-ago level of $71.8 million.

The better-than-expected quarterly results can be attributed to a rise in oil equivalent production volumes and lower per unit operating costs. This was partially offset by lower oil and gas price realizations due to dented energy demand on account of the coronavirus outbreak.

Distribution

The partnership was authorized by the board of directors of its general partner to make cash distribution of 10 cents per common unit for the September quarter of 2020.

Production

The resources, wherein the partnership has mineral interests, produced 2,430 thousand oil equivalent barrels (MBoe) for the September quarter of 2020, up from 1,956 MBoe a year ago. Of the total volumes, oil accounted for 59.9% of total production. Production of crude oil, natural gas and natural gas liquids rose from the year-ago levels in the quarter under review.

Realized Prices

Overall average realized price per barrel of oil equivalent was recorded at $25.76 compared with $36.33 in third-quarter 2019. Average realized oil prices for the quarter were recorded at $36.80 per barrel, down from $51.53 a year ago. The same for natural gas was recorded at $1.07 per thousand cubic feet, down from $1.28 in the year-ago period. However, the price of natural gas liquids was $12.44 a barrel, up from the year-ago quarter’s $9.84.

Cost & Expenses

Total expenses for the quarter under review amounted to $31.6 million versus $25.2 million in the prior-year quarter. On a per barrel of oil equivalent (BOE) basis, total operating expenses were recorded at $2.71 versus $3.11 in the year-ago quarter.

Cash Flow

Net cash from operating activities were recorded at $27.3 million, down from $62.5 million in the year-ago period. Despite the current market uncertainties, the partnership expects to generate more cash from operations in the coming days, supported by favorable hedges.

Balance Sheet

As of Sep 30, 2020, Viper Energy’s cash and cash equivalents were recorded at $7.4 million. It reported net long-term debt of $597.9 million, representing a debt to capitalization of 23.4%.

Guidance

The partnership issued its daily average oil equivalent production guidance of 25.5-27 thousand barrels of oil equivalent per day (MBoe/d) for fourth-quarter 2020 and first-quarter 2021. For 2020, the partnership increased its average production guidance to 26-26.5 MBoe/d.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Viper Energy has a poor Growth Score of F, a grade with the same score on the momentum front. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. 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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