PRESS RELEASES
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Viper Energy Partners LP, A Subsidiary of Diamondback Energy, Inc., Reports Fourth Quarter and Full Year 2020 Financial and Operating Results
FOURTH QUARTER HIGHLIGHTS
- Q4 2020 average production of 17,359 bo/d (27,699 boe/d), an increase of 10% from Q3 2020 average daily oil production and 5% year over year
- Q4 2020 cash distribution of
$0.14 per common unit, representing approximately 50% of cash available for distribution;$0.28 per unit of cash available for distribution implies a 7.0% annualized distributable cash flow yield based on theFebruary 19, 2021 unit closing price of$15.96 - Q4 2020 consolidated net loss (including non-controlling interest) of
$(52.7) million ; adjusted net income (as defined and reconciled below) of$14.2 million - Consolidated adjusted EBITDA (as defined and reconciled below) of
$51.0 million and cash available for distribution to Viper’s common units (as reconciled below) of$18.4 million - Repurchased 2,045,000 common units in Q4 2020 for an aggregate of
$24 .0 million - Generated
$42 .0 million in one-time proceeds from asset sales during the fourth quarter of 2020, including the divestiture of 352 net royalty acres for an aggregate of$36 .3 million - Ended the fourth quarter of 2020 with net debt of
$544.8 million (as defined and reconciled below); total debt down$109.6 million sinceMarch 31, 2020 , or a 16% reduction over the past nine months - 80 total gross (2.1 net 100% royalty interest) horizontal wells turned to production on Viper’s acreage during Q4 2020 with an average lateral length of 10,012 feet
- Q3 2020 and Q4 2020 distributions reasonably estimated to not constitute dividends for
U.S. federal income tax purposes; instead should generally constitute non-taxable reductions to the tax basis
FULL YEAR 2020 HIGHLIGHTS
- Full year 2020 average production of 16,272 bo/d (26,551 boe/d), an increase of 16% from full year 2019 average daily oil production
- Proved reserves as of
December 31, 2020 of 99,392 Mboe (73% PDP, 57,530 Mbo), up 12% year over year with oil up 6% from year end 2019 - 514 total gross (13.8 net 100% royalty interest) horizontal wells turned to production during 2020 with an average lateral length of 9,395 feet
- Generated
$49.4 million in one-time proceeds from asset sales during 2020 - All 2020 quarterly distributions reasonably estimated to not constitute dividends for
U.S. federal income tax purposes; instead should generally constitute non-taxable reductions to the tax basis
2021 OUTLOOK AND FIRST QUARTER UPDATE
Viper expects the production impact from the recent winter storms in the
- As of
February 8, 2021 , there were approximately 529 gross horizontal wells in the process of active development on Viper’s acreage, in which Viper expects to own an average 1.5% net royalty interest (8.2 net 100% royalty interest wells) - Approximately 538 gross (9.0 net 100% royalty interest) line-of-sight wells that are not currently in the process of active development, but for which Viper has visibility to the potential of future development in coming quarters, based on Diamondback’s current completion schedule and third party operators’ permits
- Initiating average daily production guidance for the first half of 2021 of 14,250 to 15,750 bo/d (23,750 to 26,250 boe/d)
- Initiating full year 2021 average production guidance of 14,750 to 16,000 bo/d (24,500 to 26,500 boe/d)
“Viper’s business has rebounded strongly from the unprecedented volatility experienced throughout 2020 as commodity prices have increased and activity has returned to Viper’s acreage. This recovery again highlights both the advantaged nature of the royalty business model, as well as the benefit of Viper’s symbiotic relationship with Diamondback. During the fourth quarter of 2020, we were able to generate more than
FINANCIAL UPDATE
Viper’s fourth quarter 2020 average unhedged realized prices were
During the fourth quarter of 2020, the Company recorded total operating income of
As of
FOURTH QUARTER 2020 CASH DISTRIBUTION & CAPITAL RETURN PROGRAM
The Board of Directors of Viper’s
On
During the fourth quarter of 2020, Viper repurchased 2,045,000 common units for an aggregate of
The repurchase program is authorized to extend through
OPERATIONS AND ACQUISITIONS UPDATE
During the fourth quarter of 2020, Viper estimates that 80 gross (2.1 net 100% royalty interest) horizontal wells with an average royalty interest of 2.6% were turned to production on its existing acreage position with an average lateral length of 10,012 feet. Of these 80 gross wells, Diamondback is the operator of 21 with an average royalty interest of 5.6%, and the remaining 59 gross wells, with an average royalty interest of 1.6%, are operated by third parties.
During the fourth quarter of 2020, Viper acquired seven net royalty acres for an aggregate purchase price of
The following table summarizes Viper’s gross well information:
Diamondback Operated |
Third Party Operated |
Total | |||
Horizontal wells turned to production (fourth quarter 2020)(1): | |||||
Gross wells | 21 | 59 | 80 | ||
Net 100% royalty interest wells | 1.2 | 0.9 | 2.1 | ||
Average percent net royalty interest | 5.6% | 1.6% | 2.6% | ||
Horizontal wells turned to production (year ended |
|||||
Gross wells | 151 | 363 | 514 | ||
Net 100% royalty interest wells | 9.1 | 4.7 | 13.8 | ||
Average percent net royalty interest | 6.0% | 1.3% | 2.7% | ||
Horizontal producing well count (fourth quarter 2020): | |||||
Gross wells | 1,132 | 3,499 | 4,631 | ||
Net 100% royalty interest wells | 88.8 | 53.1 | 141.9 | ||
Average percent net royalty interest | 7.8% | 1.5% | 3.1% | ||
Horizontal active development well count (as of |
|||||
Gross wells | 91 | 438 | 529 | ||
Net 100% royalty interest wells | 5.5 | 2.6 | 8.2 | ||
Average percent net royalty interest | 6.1% | 0.6% | 1.5% | ||
Line of sight wells (as of |
|||||
Gross wells | 83 | 455 | 538 | ||
Net 100% royalty interest wells | 4.6 | 4.4 | 9.0 | ||
Average percent net royalty interest | 5.6% | 1.0% | 1.7% |
(1) Average lateral length of 10,012.
(2) Average lateral length of 9,395.
There continues to be active development across Viper’s asset base with near-term activity expected to be driven primarily by Diamondback operations. The 529 gross wells currently in the process of active development are those wells that have been spud and are expected to be turned to production within approximately the next six to eight months. The 538 line-of-sight wells are those that are not currently in the process of active development, but for which Viper has reason to believe that they will be turned to production within approximately the next 15 to 18 months. The expected timing of these line-of-sight wells is based primarily on permitting by third party operators or Diamondback’s current expected completion schedule. Existing permits or active development of Viper’s royalty acreage does not ensure that those wells will be turned to production.
YEAR END RESERVES UPDATE
Proved reserves at year-end 2020 of 99,392 Mboe (57,530 Mbo) represent a 12% increase over year-end 2019 reserves. The year-end 2020 proved reserves have a PV-10 value (as defined and reconciled below) of approximately
Proved developed reserves increased by 5% year over year to 72,547 Mboe (40,220 Mbo) as of
Net proved reserve additions of 20,163 Mboe resulted in a reserve replacement ratio of 207% (defined as the sum of extensions, discoveries, revisions, purchases and divestitures, divided by annual production). The organic reserve replacement ratio was 203% (defined as the sum of extensions, discoveries and revisions, divided by annual production).
Extensions and discoveries of 23,836 Mboe are primarily attributable to the drilling of 652 new wells and from 299 new proved undeveloped locations added. The Company’s negative revisions of previous estimated quantities of 4,082 Mboe were primarily due to negative price revisions and PUD downgrades. 114 Mboe of PUDs were downgraded from non-operated properties and 804 Mboe 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 689 Mboe was due to multiple acquisitions of certain mineral and royalty interests.
Oil (MBbls) | Liquids (MBbls) | Gas (MMcf) | MBOE | ||||||||
As of |
54,420 | 18,564 | 95,774 | 88,946 | |||||||
Purchase of reserves in place | 491 | 113 | 507 | 689 | |||||||
Extensions and discoveries | 15,415 | 4,424 | 23,982 | 23,836 | |||||||
Revisions of previous estimates | (6,685) | 763 | 11,043 | (4,082) | |||||||
Divestitures | (155) | (63) | (370) | (280) | |||||||
Production | (5,956) | (1,848) | (11,486) | (9,718) | |||||||
As of |
57,530 | 21,953 | 119,450 | 99,392 | |||||||
As the owner of mineral interests, Viper incurred no exploration and development costs during the year ended
2020 | 2019 | 2018 | |||||||||
(in thousands) | |||||||||||
Acquisition costs: | |||||||||||
Proved properties | $ | 56,169 | $ | 833,221 | $ | 497,766 | |||||
Unproved properties | 9,509 | 318,525 | 115,491 | ||||||||
Total | $ | 65,678 | $ | 1,151,746 | $ | 613,257 | |||||
GUIDANCE UPDATE
Below is Viper’s preliminary guidance for the full year 2021, as well as average production guidance for the first half of 2021.
Q1 2021 / Q2 2021 Net Production - MBo/d | 14.25 - 15.75 |
Q1 2021 / Q2 2021 Net Production - MBoe/d | 23.75 - 26.25 |
Full Year 2021 Net Production - MBo/d | 14.75 - 16.00 |
Full Year 2020 Net Production - MBoe/d | 24.50 - 26.50 |
Unit costs ($/boe) | |
Depletion | |
Cash G&A | |
Non-Cash Unit-Based Compensation | |
Interest Expense(1) | |
Production and Ad Valorem Taxes (% of Revenue) (2) | 7% |
(1) Assumes expected interest on
(2) Includes production taxes of 4.6% for crude oil and 7.5% for natural gas and NGLs and ad valorem taxes.
CONFERENCE CALL
Viper will host a conference call and webcast for investors and analysts to discuss its results for the fourth quarter of 2020 on
About
Viper is a limited partnership formed by Diamondback to own, acquire and exploit oil and natural gas properties in
About
Diamondback is an independent oil and natural gas company headquartered in
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than historical facts, that address activities that Viper assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, including specifically the statements regarding the current adverse industry and macroeconomic conditions, volatile commodity prices, production levels on properties in which Viper has mineral and royalty interests, the effect of the recent presidential and congressional elections on environmental policies and regulations impacting Viper and its operators, any potential regulatory action that may impose production limits on Viper’s mineral and royalty acreage, severe weather conditions (including the impact of the recent severe winter storms on production volumes on Viper’s mineral and royalty acreage), any acquisitions or dispositions, Diamondback’s plans for developing Viper’s acreage discussed above, development activity by other operators, Viper’s cash distribution policy and the impact of the ongoing COVID-19 pandemic. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Viper. Information concerning these risks and other factors can be found in Viper’s filings with the
Consolidated Balance Sheets | |||||||
(unaudited, in thousands, except unit amounts) | |||||||
2020 | 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 19,121 | $ | 3,602 | |||
Royalty income receivable (net of allowance for credit losses) | 32,210 | 58,089 | |||||
Royalty income receivable—related party | 1,998 | 10,576 | |||||
Other current assets | 665 | 397 | |||||
Total current assets | 53,994 | 72,664 | |||||
Property: | |||||||
Oil and natural gas interests, full cost method of accounting ( |
2,895,542 | 2,868,459 | |||||
Land | 5,688 | 5,688 | |||||
Accumulated depletion and impairment | (496,176 | ) | (326,474 | ) | |||
Property, net | 2,405,054 | 2,547,673 | |||||
Deferred tax asset (net of allowance) | — | 142,466 | |||||
Other assets | 2,327 | 22,823 | |||||
Total assets | $ | 2,461,375 | $ | 2,785,626 | |||
Liabilities and Unitholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 43 | $ | — | |||
Accounts payable—related party | — | 150 | |||||
Accrued liabilities | 18,262 | 13,282 | |||||
Derivative instruments | 26,593 | — | |||||
Total current liabilities | 44,898 | 13,432 | |||||
Long-term debt, net | 555,644 | 586,774 | |||||
Total liabilities | 600,542 | 600,206 | |||||
Commitments and contingencies | |||||||
Unitholders’ equity: | |||||||
General partner | 809 | 889 | |||||
Common units (65,817,281 units issued and outstanding as of |
633,415 | 929,116 | |||||
Class B units (90,709,946 units issued and outstanding |
1,031 | 1,130 | |||||
635,255 | 931,135 | ||||||
Non-controlling interest | 1,225,578 | 1,254,285 | |||||
Total equity | 1,860,833 | 2,185,420 | |||||
Total liabilities and unitholders’ equity | $ | 2,461,375 | $ | 2,785,626 | |||
Consolidated Statements of Operations | |||||||||||||||
(unaudited, in thousands, except per unit data) | |||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Operating income: | |||||||||||||||
Royalty income | $ | 75,124 | $ | 91,861 | $ | 246,981 | $ | 293,811 | |||||||
Lease bonus income | 900 | 510 | 2,585 | 4,117 | |||||||||||
Other operating income | 299 | 340 | 1,060 | 355 | |||||||||||
Total operating income | 76,323 | 92,711 | 250,626 | 298,283 | |||||||||||
Costs and expenses: | |||||||||||||||
Production and ad valorem taxes | 5,538 | 6,264 | 19,844 | 19,076 | |||||||||||
Depletion | 28,297 | 26,770 | 100,501 | 78,178 | |||||||||||
Impairment | 69,202 | — | 69,202 | — | |||||||||||
General and administrative expenses | 2,005 | 2,266 | 8,165 | 7,489 | |||||||||||
Total costs and expenses | 105,042 | 35,300 | 197,712 | 104,743 | |||||||||||
Income (loss) from operations | (28,719 | ) | 57,411 | 52,914 | 193,540 | ||||||||||
Other income (expense): | |||||||||||||||
Interest expense, net | (8,130 | ) | (9,987 | ) | (33,000 | ) | (21,076 | ) | |||||||
Gain (loss) on derivative instruments, net | (16,122 | ) | — | (63,591 | ) | — | |||||||||
Gain (loss) on revaluation of investment | 105 | 854 | (8,556 | ) | 4,832 | ||||||||||
Other income, net | 175 | 576 | 1,286 | 2,332 | |||||||||||
Total other expense, net | (23,972 | ) | (8,557 | ) | (103,861 | ) | (13,912 | ) | |||||||
Income (loss) before income taxes | (52,691 | ) | 48,854 | (50,947 | ) | 179,628 | |||||||||
Provision for (benefit from) income taxes | — | 326 | 142,466 | (41,582 | ) | ||||||||||
Net income (loss) | (52,691 | ) | 48,528 | (193,413 | ) | 221,210 | |||||||||
Net income (loss) attributable to non-controlling interest | (25,072 | ) | 46,237 | (1,109 | ) | 174,929 | |||||||||
Net income (loss) attributable to |
$ | (27,619 | ) | $ | 2,291 | $ | (192,304 | ) | $ | 46,281 | |||||
Net income (loss) attributable to common limited partner units: | |||||||||||||||
Basic | $ | (0.41 | ) | $ | 0.03 | $ | (2.84 | ) | $ | 0.75 | |||||
Diluted | $ | (0.41 | ) | $ | 0.03 | $ | (2.84 | ) | $ | 0.75 | |||||
Weighted average number of common limited partner units outstanding: | |||||||||||||||
Basic | 67,253 | 66,126 | 67,686 | 61,744 | |||||||||||
Diluted | 67,253 | 66,159 | 67,686 | 61,787 |
Consolidated Statements of Cash Flows | |||||||||||||||
(unaudited, in thousands) | |||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income (loss) | $ | (52,691 | ) | $ | 48,528 | $ | (193,413 | ) | $ | 221,210 | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
Provision for (benefit from) income taxes | — | 495 | 142,466 | (41,582 | ) | ||||||||||
Depletion | 28,297 | 26,770 | 100,501 | 78,178 | |||||||||||
Impairment | 69,202 | — | 69,202 | — | |||||||||||
(Gain) loss on derivative instruments, net | 16,122 | — | 63,591 | — | |||||||||||
Net cash payments on derivatives | (18,280 | ) | — | (36,998 | ) | — | |||||||||
(Gain) loss on revaluation of investment | (105 | ) | (854 | ) | 8,556 | (4,832 | ) | ||||||||
Other | 908 | 798 | 3,589 | 2,800 | |||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Royalty income receivable | (102 | ) | (14,801 | ) | 25,879 | (19,266 | ) | ||||||||
Royalty income receivable—related party | 12,913 | 3,457 | 8,578 | (7,087 | ) | ||||||||||
Accounts payable and accrued liabilities | (2,621 | ) | 7,912 | 5,023 | 7,091 | ||||||||||
Other | (293 | ) | 158 | (418 | ) | 179 | |||||||||
Net cash provided by (used in) operating activities | 53,350 | 72,463 | 196,556 | 236,691 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisitions of oil and natural gas interests | (1,170 | ) | (210,876 | ) | (65,678 | ) | (530,572 | ) | |||||||
Funds held in escrow | — | 7,500 | — | — | |||||||||||
Proceeds from sale of assets | 36,496 | — | 38,594 | — | |||||||||||
Proceeds from the sale of investments | 5,539 | — | 10,801 | — | |||||||||||
Net cash provided by (used in) investing activities | 40,865 | (203,376 | ) | (16,283 | ) | (530,572 | ) | ||||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from borrowings under credit facility | 9,000 | 222,500 | 104,000 | 590,500 | |||||||||||
Repayment on credit facility | (51,500 | ) | (535,500 | ) | (116,500 | ) | (905,000 | ) | |||||||
Proceeds from senior notes | — | 500,000 | — | 500,000 | |||||||||||
Repayment of senior notes | — | — | (19,697 | ) | — | ||||||||||
Debt issuance costs | (21 | ) | (10,514 | ) | (111 | ) | (10,863 | ) | |||||||
Proceeds from public offerings | — | — | — | 340,860 | |||||||||||
Repurchased units as part of unit buyback | (24,026 | ) | — | (24,026 | ) | — | |||||||||
Distributions to public | (6,731 | ) | (28,484 | ) | (45,674 | ) | (107,074 | ) | |||||||
Distributions to Diamondback | (9,170 | ) | (33,668 | ) | (62,282 | ) | (133,211 | ) | |||||||
Other | (20 | ) | 229 | (464 | ) | (405 | ) | ||||||||
Net cash provided by (used in) financing activities | (82,468 | ) | 114,563 | (164,754 | ) | 274,807 | |||||||||
Net increase (decrease) in cash | 11,747 | (16,350 | ) | 15,519 | (19,074 | ) | |||||||||
Cash and cash equivalents at beginning of period | 7,374 | 19,952 | 3,602 | 22,676 | |||||||||||
Cash and cash equivalents at end of period | $ | 19,121 | $ | 3,602 | $ | 19,121 | $ | 3,602 | |||||||
Supplemental disclosure of cash flow information: | |||||||||||||||
Interest paid | $ | 13,925 | $ | 2,921 | $ | 33,121 | $ | 13,803 | |||||||
Supplemental disclosure of non—cash transactions: | |||||||||||||||
OpCo units issued for the Drop-Down transaction | $ | — | $ | 497,162 | $ | — | $ | 497,162 | |||||||
Common units issued for acquisition | $ | — | $ | 124,012 | $ | — | $ | 124,012 |
Selected Operating Data | |||||||||||||
(unaudited) | |||||||||||||
Three Months Ended |
Year Ended |
||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||
Production Data: | |||||||||||||
Oil (MBbls) | 1,597 | 1,516 | 5,956 | 5,123 | |||||||||
Natural gas (MMcf) | 3,032 | 2,435 | 11,486 | 7,657 | |||||||||
Natural gas liquids (MBbls) | 446 | 483 | 1,848 | 1,459 | |||||||||
Combined volumes (MBOE)(1) | 2,549 | 2,405 | 9,718 | 7,858 | |||||||||
Average daily oil volumes (BO/d)(2) | 17,359 | 16,476 | 16,272 | 14,035 | |||||||||
Average daily combined volumes (BOE/d)(2) | 27,699 | 26,137 | 26,551 | 21,529 | |||||||||
Average sales prices(2): | |||||||||||||
Oil ($/Bbl) | $ | 40.36 | $ | 53.90 | $ | 36.58 | $ | 51.61 | |||||
Natural gas ($/Mcf) | $ | 1.36 | $ | 1.29 | $ | 0.79 | $ | 1.06 | |||||
Natural gas liquids ($/Bbl) | $ | 14.71 | $ | 14.53 | $ | 10.88 | $ | 14.63 | |||||
Combined ($/BOE)(3) | $ | 29.48 | $ | 38.20 | $ | 25.41 | $ | 37.39 | |||||
Oil, hedged ($/Bbl)(4) | $ | 30.48 | $ | 53.90 | $ | 32.00 | $ | 51.61 | |||||
Natural gas, hedged ($/Mcf)(4) | $ | 0.84 | $ | 1.29 | $ | 0.02 | $ | 1.06 | |||||
Natural gas liquids ($/Bbl)(4) | $ | 14.71 | $ | 14.53 | $ | 10.88 | $ | 14.63 | |||||
Combined price, hedged ($/BOE)(4) | $ | 22.68 | $ | 38.20 | $ | 21.71 | $ | 37.39 | |||||
Average Costs ($/BOE): | |||||||||||||
Production and ad valorem taxes | $ | 2.17 | $ | 2.60 | $ | 2.04 | $ | 2.43 | |||||
General and administrative - cash component(5) | 0.66 | 0.74 | 0.71 | 0.72 | |||||||||
Total operating expense - cash | $ | 2.83 | $ | 3.34 | $ | 2.75 | $ | 3.15 | |||||
General and administrative - non-cash unit compensation expense | $ | 0.13 | $ | 0.21 | $ | 0.13 | $ | 0.23 | |||||
Interest expense, net | $ | 3.19 | $ | 4.15 | $ | 3.40 | $ | 2.68 | |||||
Depletion | $ | 11.10 | $ | 11.13 | $ | 10.34 | $ | 9.95 |
(1) Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl.
(2) Average daily volumes and average sales prices presented are based on actual production volumes and not calculated utilizing the rounded production volumes presented in the table above.
(3) Realized price net of all deducts for gathering, transportation and processing.
(4) Hedged prices reflect the effect of our matured commodity derivative transactions on our average sales prices. Our calculation of such effects includes realized gains and losses on cash settlements for commodity derivatives, which we do not designate for hedge accounting. We did not have any derivative contracts prior to February of 2020.
(5) Excludes non-cash stock compensation for the respective periods presented.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. Viper defines Adjusted EBITDA as net income (loss) plus interest expense, net, non-cash unit-based compensation expense, depletion expense, impairment expense, (gain) loss on revaluation of investments, non-cash (gain) loss on derivative instruments, (gain) loss on extinguishment of debt and provision for (benefit from) income taxes, if any. Adjusted EBITDA is not a measure of net income as determined by United States’ generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA is useful because it allows them to more effectively evaluate Viper’s operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income, royalty income, cash flow from operating activities or any other measure of financial performance or liquidity presented as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Viper defines cash available for distribution generally as an amount equal to its Adjusted EBITDA for the applicable quarter less cash needed for income taxes payable, debt service, contractual obligations, fixed charges and reserves for future operating or capital needs that the board of directors of Viper’s general partner may deem appropriate, common units repurchased for tax withholding, dividend equivalent rights and preferred distributions. Viper’s computations of Adjusted EBITDA and cash available for distribution may not be comparable to other similarly titled measures of other companies or to such measure in its credit facility or any of its other contracts.
The following tables present a reconciliation of the non-GAAP financial measures of Adjusted EBITDA and cash available for distribution to the GAAP financial measure of net loss.
(unaudited, in thousands, except per unit data) | |||||||
Three Months Ended |
Year Ended |
||||||
Net income (loss) | $ | (52,691) | $ | (193,413) | |||
Interest expense, net | 8,130 | 33,000 | |||||
Non-cash unit-based compensation expense | 327 | 1,272 | |||||
Depletion | 28,297 | 100,501 | |||||
Impairment | 69,202 | 69,202 | |||||
(Gain) loss on revaluation of investment | (105) | 8,556 | |||||
Non-cash (gain) loss on derivative instruments | (2,158) | 26,593 | |||||
(Gain) loss on extinguishment of debt | — | 6 | |||||
Provision for (benefit from) income taxes | — | 142,466 | |||||
Consolidated Adjusted EBITDA | 51,002 | 188,183 | |||||
Less: Adjusted EBITDA attributable to non-controlling interest(1) | 29,367 | 107,859 | |||||
Adjusted EBITDA attributable to |
$ | 21,635 | $ | 80,324 | |||
Adjustments to reconcile Adjusted EBITDA to cash available for distribution: | |||||||
Debt service, contractual obligations, fixed charges and reserves | $ | (3,214) | $ | (13,155) | |||
Units repurchased for tax withholding | — | (384) | |||||
Units - dividend equivalent rights | (18) | (44) | |||||
Preferred distributions | (44) | (179) | |||||
Cash available for distribution to |
$ | 18,359 | $ | 66,562 | |||
Common limited partner units outstanding | 65,817 | 65,817 | |||||
Cash available for distribution per limited partner unit | $ | 0.28 | $ | 1.01 | |||
Cash per unit approved for distribution | $ | 0.14 | $ | 0.37 |
(1) Does not take into account special income allocation consideration.
Adjusted net income (loss) is a non-GAAP financial measure equal to net income (loss) attributable to Viper adjusted for impairment expenses, non-cash (gain) loss on derivative instruments, (gain) loss on revaluation of investments, (gain) loss on extinguishment of debt, provisions for (benefit from) income taxes, if any. The Company’s computation of adjusted net income may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts.
The following table presents a reconciliation of adjusted net income (loss) to net income (loss):
Adjusted Net Income (Loss) | |||
(unaudited, in thousands, except per unit data) | |||
Three Months Ended |
|||
Net income (loss) | $ | (52,691) | |
Non-cash (gain) loss on derivative instruments, net | (2,158) | ||
(Gain) loss on revaluation of investments | (105) | ||
Impairment | 69,202 | ||
Adjusted net income (loss) | 14,248 | ||
Less: Adjusted net income (loss) attributed to non-controlling interests | 6,316 | ||
Adjusted net income (loss) attributable to |
$ | 7,932 | |
Adjusted net income (loss) attributable to limited partners per common unit | $ | 0.12 |
RECONCILIATION OF LONG-TERM DEBT TO NET DEBT
The Company defines net debt as debt less cash equivalents. Net debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. The Company believes this metric is useful to analysts and investors in determining the Company's leverage position because the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt.
December 31, 2020 |
Net Q4 Principal Borrowings/(Repayments) |
September 30, 2020 |
2020 |
2020 |
December 31, 2019 |
||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Total long-term debt(1) | $ | 563,938 | $ | (42,500 | ) | $ | 606,438 | $ | 639,438 | $ | 673,500 | $ | 596,500 | ||||||||||
Cash and cash equivalents | (19,121 | ) | (7,374 | ) | (9,663 | ) | (40,271 | ) | (3,602 | ) | |||||||||||||
Net debt | $ | 544,817 | $ | 599,064 | $ | 629,775 | $ | 633,229 | $ | 592,898 | |||||||||||||
(1) Excludes debt issuance, discounts & premiums.
PV-10
PV-10 is the Company’s estimate of the present value of the future net revenues from proved oil and natural gas reserves after deducting estimated production and ad valorem taxes, future capital costs and operating expenses, but before deducting any estimates of future income taxes. The estimated future net revenues are discounted at an annual rate of 10% to determine their “present value.” The Company believes PV-10 to be an important measure for evaluating the relative significance of its oil and natural gas properties and that the presentation of the non-GAAP financial measure of PV-10 provides useful information to investors because it is widely used by professional analysts and investors in evaluating oil and natural gas companies. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, the Company believes the use of a pre-tax measure is valuable for evaluating the Company. The Company believes that PV-10 is a financial measure routinely used and calculated similarly by other companies in the oil and natural gas industry.
The following table reconciles PV-10 to the Company’s standardized measure of discounted future net cash flows, the most directly comparable measure calculated and presented in accordance with GAAP. PV-10 should not be considered as an alternative to the standardized measure as computed under GAAP.
(in thousands) | |||
PV-10 | $ | 1,034,460 | |
Less income taxes: | |||
Undiscounted future income taxes | (22,993 | ) | |
10% discount factor | (12,127 | ) | |
Future discounted income taxes | $ | (10,866 | ) |
Standardized measure of discounted future net cash flows | $ | 1,023,594 | |
Derivatives
As of the filing date, the Company had the following outstanding derivative contracts. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate pricing and Crude Oil Brent. When aggregating multiple contracts, the weighted average contract price is disclosed.
Crude Oil (Bbls/day, $/Bbl) | |||||||
Q1 2021 | Q2 - Q4 2021 | ||||||
Collars - WTI ( |
12,000 | 10,000 | |||||
Floor Price | $ | 30.83 | $ | 30.00 | |||
Ceiling Price | $ | 43.96 | $ | 43.05 |
Investor Contacts:
+1 432.221.7467
alawlis@viperenergy.com
+1 432.221.7420
agilfillian@viperenergy.com
Source:
Source: Viper Energy Partners LP