On Wednesday, Roth/MKM increased its price target for Viper Energy (NASDAQ:VNOM) shares, moving it up to $53.00 from the previous target of $46.00, while maintaining a Buy rating on the stock. The firm anticipates a robust third quarter for the company in 2024, citing oil production figures that slightly surpass consensus estimates.
The firm's analysis suggests that Viper Energy's oil production for the third quarter of 2024 will reach 27,047 barrels of oil per day (Bopd), which is approximately 0.6% higher than the consensus of 26,890 Bopd. This figure also marginally exceeds the company's own guidance range of 26,500-27,000 Bopd.
Total production is also expected to exceed expectations, with an estimate of 48,721 barrels of oil equivalent per day (Boepd), about 1.0% higher than the consensus of 48,230 Boepd and 0.5% higher than the top end of Viper Energy's guidance of 47,500-48,500 Boepd.
The analyst noted that over half of Viper Energy's production is operated by Diamondback Energy (NASDAQ:FANG), which had a very solid quarter. Moreover, the weak gas prices in the Permian during the third quarter likely led to increased ethane extraction, contributing to the anticipated production beat, which is expected to be driven by natural gas liquids (NGLs).
In terms of revenue, the firm expects Viper Energy to see strong oil price realizations in the third quarter of 2024, estimating them to be just over 99% of the West Texas Intermediate (WTI) benchmark. This expectation is based on Diamondback Energy's reported good prices, with Viper Energy's realizations typically being better than those of Diamondback.
Despite the positive production outlook, the firm does not foresee any share buybacks for Viper Energy in the third quarter, attributing this to the stock's strength and the recent $26 billion acquisition of Endeavor by Diamondback Energy. Instead, the company is expected to continue prioritizing cash distributions as the main method of returning capital to shareholders.
The expected cash distribution for the third quarter is projected at $0.60 per share, which represents a 6% decrease from the second quarter's distribution of $0.64, yet 6% higher than the median consensus of $0.565.
In other recent news, Viper Energy, a subsidiary of Diamondback Energy, has seen significant developments. The company has reported a successful second quarter, with a 4% rise in oil production and a 9% increase in cash available for distribution.
Viper Energy also raised its full-year production guidance, forecasting a 1.5% growth in the next quarter. The Board of Directors approved an 11% increase in the annual base dividend, indicating confidence in the company's financial prospects.
Moreover, Viper Energy is set to benefit from a $1 billion acquisition deal with DoubleEagle's minerals segment, expected to boost its earnings and support organic oil growth. Analysts from JPMorgan (NYSE:JPM), Evercore ISI, and Roth/MKM have increased their price targets for the company, citing improved cash flow estimates and the potential impact of the DoubleEagle transaction.
JPMorgan maintains a positive outlook on Viper Energy, emphasizing the company's unique position due to its significant leverage to the Permian Basin and its strategic relationship with Diamondback Energy. Evercore ISI reiterated an Outperform rating, while Roth/MKM maintained a Buy rating on the stock. These developments highlight the recent progression within Viper Energy.
InvestingPro Insights
Viper Energy's (NASDAQ:VNOM) strong performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's revenue growth of 21.87% over the last twelve months and an impressive 28.25% growth in the most recent quarter align with the analyst's positive outlook on production and revenue.
InvestingPro Tips indicate that Viper Energy is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.84. This suggests that the stock may be undervalued considering its growth prospects, which could support Roth/MKM's increased price target.
The company's strong financial health is evident from its liquid assets exceeding short-term obligations and operating with a moderate level of debt. This solid financial position could enable Viper Energy to maintain its focus on cash distributions to shareholders, as mentioned in the article.
Investors should note that Viper Energy has shown a robust return over the last year, with a 71.42% price total return. The stock is also trading near its 52-week high, at 96.12% of that level, which aligns with the firm's bullish stance.
For those interested in dividend stocks, Viper Energy offers a dividend yield of 4.87%, with a remarkable dividend growth of 145% over the last twelve months. This supports the article's mention of prioritizing cash distributions to shareholders.
InvestingPro offers 13 additional tips for Viper Energy, providing investors with a comprehensive analysis to make informed decisions about this energy stock.
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