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Comparing Royalty Interest Owner MLPs: VNOM and BSM

PART:
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Part 3
Comparing Royalty Interest Owner MLPs: VNOM and BSM PART 3 OF 11

What’s Driving Viper Energy Partners’ Strong Production Growth?

Production growth

Viper Energy Partners’ (VNOM) average daily production totaled 10.5 Mboepd (thousand barrels of oil equivalent per day) in 2Q17, which represents a 95% YoY (year-over-year) rise and a 23% QoQ (quarter-over-quarter) rise. The massive YoY growth in the partnership’s production is due to increase in its asset base and strong drilling activity on its mineral interest.

Black Stone Minerals (BSM) reported average daily production of 37.3 Mboepd for 2Q17, which represents an 18% YoY rise and a 5% QoQ rise. BSM’s YoY production growth was mainly driven by higher net royalty acres.

What’s Driving Viper Energy Partners’ Strong Production Growth?

Production mix

VNOM’s production mix consists mostly of oil (73% in 2Q17), while BSM’s production mix is mostly natural gas (76% in 2Q17). Notably, 57% of BSM’s 2Q17 production came from mineral and royalty interests, while 100% of VNOM’s 2Q17 production came from mineral and royalty interests. (In the next part, we’ll discuss operating margins.)

Production guidance

VNOM expects its average daily production to lie between 10 MBoepd–11 MBoepd by the end of 2017, which represents a 63% YoY rise at the midpoint and a 17% rise over its prior guidance of 8.5 MBoepd–9.3 MBoepd. This strong growth is expected to come from the acquisition of mineral interests in 2Q17 and 3Q17.

On the other hand, BSM expects its average daily production to be between 37 MBoepd–38 MBoepd, which would be a 4% rise over its previous guidance of 35 MBoepd–37 MBoepd. BSM expects ~60% of its 2017 production to come from royalty interest.

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