Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Viper Energy Inc (VNOM, Financial) reported a strong start to the year with increased cash available for distribution per share quarter over quarter.
- The company declared a combined base plus variable dividend for the first quarter of $0.59 a share, reflecting strong financial and operational results.
- Viper Energy Inc (VNOM) initiated production guidance for the second quarter that implies over 3% growth relative to the first quarter.
- The successful test of the Wolfcamp D in Spanish Trail by Diamondback, which derisks a substantial amount of net inventory for Viper Energy Inc (VNOM), boosting confidence in extended outlook for potential organic production growth.
- Viper Energy Inc (VNOM) continues to maintain best in class cash margins and free cash flow generation, enabling substantial capital return to shareholders.
Negative Points
- Despite positive production guidance, the midpoint of the full year 2024 production guidance was reduced by 250 barrels of oil per day due to the divestiture of non-Permian assets.
- The company increased its guidance for cash G&A slightly due to increased costs associated with conversion to a corporation.
- There are ongoing challenges with the volatility in commodity prices which impacted the sector during the quarter.
- The divestiture of non-Permian assets resulted in the loss of production contribution for significant parts of the year.
- Operational risks remain with reliance on third-party operators for a portion of production, which can introduce variability in production outcomes.
Q & A Highlights
Q: Could you discuss the capital allocation strategy, particularly regarding the payout ratio and the balance between dividends and buybacks?
A: Kaes Van't Hof, President, Director - The focus remains on cash distribution, with a preference for dividends over buybacks currently. The company aims to grow the base distribution consistently and manage debt effectively to maintain a conservative funding structure.
Q: What are the plans for the mineral position in Martin County following the acquisition of Endeavour acreage?
A: Kaes Van't Hof, President, Director - The area will be a key focus for future growth, with plans to drill using longer laterals and high mineral interest, making it one of the best places for oil drilling in the U.S.
Q: Can you provide more details on the early results and future plans for the Wolfcamp D tests in Spanish Trail?
A: Al Barkmann, Executive VP & Chief Engineer - The initial tests are promising, showing good performance and no significant degradation from existing wells. This supports the potential for effective development of Wolfcamp D under existing Wolfcamp B wells.
Q: How does Viper view the M&A environment, especially regarding smaller deals and the competitive landscape?
A: Austen Gilfillian, Vice President - The market remains competitive, particularly for deals under $50 million. Viper's strategic advantage lies in pursuing larger deals where it can leverage its cost of capital.
Q: What is the anticipated impact of the Endeavour acquisition on Viper's operations and M&A strategy?
A: Kaes Van't Hof, President, Director - The acquisition is expected to significantly enhance Viper's mineral business, creating a substantial entity in the mineral space. The company plans to manage this integration responsibly without leveraging up excessively.
Q: Could you elaborate on the increased cash G&A guidance and its implications?
A: Kaes Van't Hof, President, Director - The increase is minimal in the context of the company's overall cash flow and is part of adjusting to a new organizational structure as Viper transitions to a C-Corp.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
