MIDLAND, Texas, Feb 11, 2020 (GLOBE NEWSWIRE via COMTEX) -- Viper Energy Partners LP /zigman2/quotes/206725468/composite VNOM -3.25% ("Viper" or the "Company"), a subsidiary of Diamondback Energy, Inc. /zigman2/quotes/201200230/composite FANG +8.74% ("Diamondback"), today announced financial and operating results for the fourth quarter and full year ended December 31, 2019.
FOURTH QUARTER HIGHLIGHTS
FULL YEAR 2019 HIGHLIGHTS
"2019 was an important year for Viper as we successfully leveraged our size and scale to acquire more than 9,000 net royalty acres across 108 separate transactions. Critically, these acquisitions more than doubled Viper's exposure to Diamondback-operated acreage and now provide Viper with concentrated exposure to six of Diamondback's seven core operating areas. Based on Diamondback's current completion schedule, Viper expects to have exposure to roughly 70% of Diamondback's expected 2020 gross completions with an average net revenue interest of greater than 5%, translating to at least 12 Diamondback-operated net 100% royalty interest wells turned to production this year versus less than eight in 2019," stated Travis Stice, Chief Executive Officer of Viper's general partner.
Mr. Stice continued, "Outside of Diamondback-operated acreage, we continue to see strong activity levels across our acreage position, as highlighted by 4.2 net 100% royalty interest wells that are currently in the process of active development and a further 2.7 net wells that have been permitted but not yet spud. In an effort to be conservative, we have contemplated slower than normal timing assumptions for both spud-to-first production and permit-to-first production in our production forecast for 2020. Even on that basis, Viper is initiating full year 2020 oil production guidance that implies 28% growth relative to full year 2019 oil production. In a difficult energy landscape, Diamondback's continued focus on developing Viper's acreage, as well as exposure to other well-capitalized operators in the best parts of the Permian Basin, underscores our confidence in Viper's ability to generate significant organic production growth in 2020 and beyond."
Viper's fourth quarter 2019 average realized prices were $53.90 per barrel of oil, $1.29 per Mcf of natural gas and $14.53 per barrel of natural gas liquids, resulting in a total equivalent realized price of $38.20/boe. Based on current market differentials and estimated in-basin gathering costs, Viper expects to realize between 97% and 100% of WTI in 2020.
During the fourth quarter of 2019, the Company recorded total operating income of $92.7 million and consolidated net income (including non-controlling interest) of $48.5 million.
As of December 31, 2019, the Company had a cash balance of $3.6 million and $678.5 million available under its revolving credit facility.
FOURTH QUARTER 2019 CASH DISTRIBUTION
The Board of Directors of Viper's General Partner declared a cash distribution for the three months ended December 31, 2019 of $0.45 per common unit. The distribution is payable on February 28, 2020 to eligible common unitholders of record at the close of business on February 21, 2020.
On November 15, 2019, Viper made a cash distribution to its unitholders and subsequently has reasonably estimated that such distribution, as well as the distribution payable on February 28, 2020, should not constitute dividends for U.S. federal income tax purposes. Rather, these distributions should generally constitute non-taxable reductions to the tax basis of each distribution recipient's ownership interest in Viper. The Form 8937 containing additional information may be found on www.viperenergy.com under the "Investor Relations" section of the site.
YEAR END RESERVES UPDATE
Ryder Scott Company, L.P. prepared an estimate of Viper's proved reserves as of December 31, 2019. Reference prices of $55.69 per barrel of oil and natural gas liquids and $2.58 per MMbtu of natural gas were used in accordance with applicable rules of the Securities and Exchange Commission. Realized prices with applicable differentials were $52.86 per barrel of oil, $0.51 per Mcf of natural gas and $15.79 per barrel of natural gas liquids.
Proved reserves at year-end 2019 of 88.9 MMboe (54.4 MMbo) represent a 41% increase over year-end 2018 reserves. The year-end 2019 proved reserves have a PV-10 value (as defined and reconciled below) of approximately $1.4 billion.
Proved developed reserves increased by 51% to 69.3 MMboe as of December 31, 2019, reflecting continued horizontal development by the operators of Viper's acreage.
Net proved reserve additions of 33.7 MMboe resulted in a reserve replacement ratio of 428% (defined as the sum of extensions, discoveries, revisions and purchases, divided by annual production). The organic reserve replacement ratio was 150% (defined as the sum of extensions, discoveries and revisions, divided by annual production).
Extensions and discoveries of 17.1 MMboe are primarily attributable to the drilling of 829 new wells and from 97 new proved undeveloped locations added. The Company's negative revisions of previous estimated quantities of 5.3 MMboe were primarily due to 2.1 MMboe of negative price revisions and 3.2 MMboe of PUD downgrades. 1.1 MMboe of PUDs were downgraded from non-operated properties and 2.1 MMboe of PUDs were downgraded from Diamondback-operated properties, with the Diamondback-operated downgrades due to changes in the development plan and optimization of the inventory. The purchase of reserves in place of 21.9 MMboe was due to multiple acquisitions, primarily the drop down transaction from Diamondback and the acquisition of certain mineral and royalty interests from Santa Elena Minerals, LP.
Oil (MBbls) Liquids (MBbls) Gas (MMcf) MBOE Proved reserves as of December 31, 2018 41,878 10,992 61,597 63,136 Purchase of reserves in place 12,949 4,895 24,423 21,914 Extensions and discoveries 11,526 3,095 14,822 17,091 Revisions of previous estimates (6,810 ) 1,041 2,589 (5,337 ) Production (5,123 ) (1,459 ) (7,657 ) (7,858 ) Proved reserves as of December 31, 2019 54,420 18,564 95,774 88,946
As the owner of mineral interests, Viper incurred no exploration and development costs during the year ended December 31, 2019.
December 31, 2019 2018 2017 (in thousands) Acquisition costs Proved properties $ 471,464 $ 256,055 $ 55,948 Unproved properties 758,624 356,761 287,131 Total $ 1,230,088 $ 612,816 $ 343,079
OPERATIONS AND ACQUISITIONS UPDATE
During the fourth quarter 2019, Viper estimates that 123 gross (3.4 net 100% royalty interest) horizontal wells with an average royalty interest of 2.7% had been turned to production on its existing acreage position with an average lateral length of 8,895 feet. Of these 123 gross wells, Diamondback is the operator of 41 with an average royalty interest of 5.1%, and the remaining 82 gross wells, which had an average royalty interest of 1.6%, are operated by third parties.
Additionally, during the fourth quarter 2019, Viper acquired 7,218 net royalty acres for an aggregate purchase price of approximately $912.9 million. These transactions brought Viper's footprint of mineral interests to a total of 24,304 net royalty acres. Viper funded these acquisitions with proceeds from cash on hand, borrowings under its revolving credit facility and equity provided to the sellers. These acquisitions added an additional 738 producing gross horizontal wells with an average royalty interest of 3.9%.
For the full year ended of 2019, Viper acquired 9,462 net royalty acres for an aggregate purchase price of approximately $1.2 billion across 108 separate transactions. These acquisitions contributed a total of 1,051 gross horizontal producing wells with an average royalty interest of 3.1%.
In total, as of December 31, 2019, Viper estimates there were 2,452 vertical wells and 4,024 horizontal wells producing on its acreage with a combined average net royalty interest of 3.8%. There continues to be active development on Viper's mineral acreage as represented by approximately 497 gross horizontal wells currently in the process of active development, in which Viper expects to own an average 2.0% net royalty interest (9.9 net 100% royalty interest wells). These wells currently in the process of active development include wells currently being drilled by the 53 active rigs that were on the Company's mineral acreage as of January 15, 2020, in addition to other wells currently waiting to be completed, actively in the process of being completed or waiting to be turned to production. Additionally, based on Diamondback's current completion schedule and third party operators' permits, there is line-of-sight to a further 420 gross (10.4 net 100% royalty interest) wells which Viper expects to be turned to production within the next 12 to 15 months, but which have not yet begun the process of active development. The acquisitions closed during the fourth quarter of 2019 contributed 62 gross (1.4 net 100% royalty interest) horizontal wells in the process of active development out of the total 497 currently in Viper's portfolio. Further, the acquisitions also contributed 47 gross (2.1 net 100% royalty interest) permits out of the total 420 total gross wells for which the process of active development has not yet begun, but which are expected to be turned to production within the next 12 to 15 months.
Below is Viper's preliminary guidance for the full year 2020, as well as average production guidance for the first half of 2020.