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Viper Energy Sees Q2 Production Rise, Resumes Paused Output

Viper Energy Partners LP VNOM recently announced second-quarter 2020 production and realized price of commodities. This preliminary data will give an insight into the partnership’s second-quarter earnings, scheduled to release on Aug 3. Moreover, the partnership is resuming paused production, which was hit by low oil prices.

Second-Quarter Production

Overall production averaged 24,508 barrels of oil equivalent per day (Boe/d). The figure was significantly higher than the year-ago period’s 19,597 Boe/d but lower than the first-quarter 2020 level of 27,575 Boe/d. Oil production for the second quarter was recorded at 14,453 barrels per day (bpd), higher than 13,130 bpd a year ago. However, the figure was down from the prior quarter’s 17,441 bpd.

Realized Prices

Hedged realized price for oil was $22.39 per barrel in the second quarter. The same for natural gas liquids (NGLs) and natural gas was recorded at $7.69 per barrel and $1.01 per thousand cubic feet (Mcf), respectively. Overall hedged realized oil equivalent price was $13.60 per barrel. It recorded realized hedging losses of $2.1 million.

During the second quarter, unhedged realized price for oil was $21 per barrel. The same for NGLs and natural gas was recorded at $7.69 per barrel and 46 cents per Mcf, respectively. Overall hedged realized oil equivalent price was $14.55 per barrel.

In comparison, the partnership recorded average realized oil prices of $54.81 per barrel in second-quarter 2019. During that period, realized NGLs price was $18.33 per barrel. Combined oil equivalent price was recorded at $39.50 per barrel.

What to Expect?

While higher production level than the year-ago period is expected to have boosted the partnership’s profit levels, offset by lower realized commodity prices. As such, the Zacks Consensus Estimate for Viper Energy’s second-quarter loss is 13 cents per share. Earnings of 4 cents per share were recorded in the year-ago period. In the past 60 days, the partnership has witnessed three upward estimate revisions and one downward movement.

Current Environment & Looking Ahead

The partnership responded to lower oil price with reduced capital expenditure budget, which lowered completion activity in the second quarter. The oil price has significantly recovered in the past two months, which enabled the partnership to bring back most of the curtailed production online.

Diamondback Energy, Inc. FANG, the parent company of Viper Energy, has brought back three completion crews back to operations. Viper Energy’s production in second-half 2020 is expected to rise as Diamondback is likely to focus its completion operations at sites wherein the subsidiary has massive mineral ownership. This will likely lead to strong December quarter exit rate output, which will continue throughout the next year.

Price Performance

Stocks of the partnership have popped 47.5% in the past three months compared with 25.7% rise of the industry it belongs to.

Zacks Rank & Other Stocks to Consider

The partnership currently has a Zacks Rank #1 (Strong Buy). Other top-ranked players in the energy space include NGL Energy Partners LP NGL and Cheniere Energy, Inc. LNG, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.

Cheniere Energy’s bottom line for second-quarter 2020 is expected to rise 200% year over year.

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