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  • Roger S. Conrad

Viper Energy Partners LP: Mineral Rights Gain Momentum

By Elliott H. Gue on Jul. 18, 2014

Viper Energy Partners LP (NSDQ: VNOM) went public on June 17, 2014, pricing its initial offering of 5 million units at $26.00 apiece–well above the $19.00 to $20.00 range that the partnership had anticipated. Over the subsequent month, the stock has rallied by 27 percent. 

Like Dorchester Minerals LP (NSDQ: DMLP), this fledgling partnership owns mineral interests in oil and gas fields and pays a quarterly distribution that will vary with commodity prices and production volumes.

The publicly traded partnership is a spin-off of Diamondback Energy (NSDQ: FANG), an oil and gas producer that owns 72,000 net acres in the Permian Basin and expects to grow its hydrocarbon production by 125 percent this year.

This prolific region already tops the charts in terms of monthly crude-oil production from liquids-rich, unconventional basins. Operators in the Permian Basin continue to transition from rigs that sink tradition vertical wells to units that drill laterally off the vertical shaft.

This technique exposes more of the field’s productive horizon to the well and, when combined with hydraulic fracturing, substantially boosts initial and ultimate recovery rates.

Production per rig in the Permian Basin to trend higher in coming quarters as Diamondback Energy and other operators transition to pad drilling, an innovation that enables to drill multiple wells on a single site.

Diamondback Energy has drilled more than 60 horizontal wells in this red-hot basin since its own IPO in October 2012. Over this period, the stock has rewarded investors with capital gains of 384 percent.

Viper Energy Partners owns mineral rights that entitle the MLP to an average 21.4 percent royalty interest in 14,804 gross acres in the northwest portion of Midland County, an area that’s prospective for multiple oil-bearing payzones that occur at various depths. The stacked nature of these plays effectively increases the subsurface opportunity set relative to the surface acreage.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor