Viper Energy Partners LP’s (VNOM - Free Report) shares have declined 11.6% in the past year. Currently, there are several factors affecting the stock. The partnership’s share price is expected to further decline in the near future. As such, it currently has a Zacks Rank #4 (Sell).
Let’s delve into the factors that have taken a toll on the firm.
The partnership has mineral interest in oil-rich shale plays like Eagle Ford and Permian Basin. A constraint in transportation activities in the Permian Basin is limiting operations therein. Notably, the pipeline bottleneck problem is likely to persist until fresh networks come online by late 2019. Since Viper Energy has interests in 14,161 net royalty acres in the Permian, it is still losing opportunities for considerable royalty income.
Total cost and expenses in 2018 increased nearly 50%, which dented the partnership’s bottom line. Meanwhile, the partnership expects 2019 gathering & transportation cost per BoE in the range of 30-60 cents versus no such expense in 2018. Thus, hike in total cost is likely to hurt its bottom line in 2019.
The partnership received authorization from the board of directors of its general partner to report cash distributions for the last reported quarter at 38 cents per common unit. The new distribution reflects a sequential decline of 25.5%.
With the downward revision in crude demand estimates by the International Energy Agency, worries concerning further decline in crude prices remain rife. Since Viper Energy Partners has mineral interests in oil-rich shale resources, the partnership is bearing the brunt of volatile oil prices.
The above-mentioned factors are reflected in the partnership’s downward earnings estimate revisions.
Earnings Estimate Revisions
The Zacks Consensus Estimate for Viper Energy’s 2019 earnings is pegged at 95 cents, which has witnessed one upside but four downward estimate revisions in the past 60 days. This suggests a fall of more than 12% from the year-ago reported figure. Notably, the partnership missed earnings estimates in the trailing four quarters, with average negative surprise of 67.3%.
Given these headwinds, Viper Energy seems a risky bet that investors should avoid right now.
Stocks to Consider
Some better-ranked players in the energy space are TOTAL S.A. (TOT - Free Report) , Murphy USA Inc. (MUSA - Free Report) and Par Pacific Holdings, Inc. (PARR - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TOTAL’s 2019 earnings per share are expected to rise 7.3% year over year.
Murphy USA beat earnings estimates thrice in the trailing four quarters, with a positive surprise of 21.7%.
Par Pacific’s 2019 earnings per share are expected to rise 46.2% year over year.
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