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Comparing Royalty Interest Owner MLPs: VNOM and BSM

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Part 5
Comparing Royalty Interest Owner MLPs: VNOM and BSM PART 5 OF 11

Why Viper Energy Is Expected to Benefit from Its Strong Permian Focus

Viper Energy Partners

Viper Energy Partners (VNOM) has acquired 2,446 net royalty acres in the Delaware and Midland Basins, which are parts of the Permian Basin, as of 1Q17. The acquired assets had nine horizontal rigs operating as of July 31, 2017, and 390 horizontal wells.

Why Viper Energy Is Expected to Benefit from Its Strong Permian Focus

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VNOM is expected to benefit from strong drilling activity in this region. According to the recent rig report by Bakers Hughes, the rig count in the Permian Basin has risen to 385 as of September 29, 2017, compared with 370 at the end of 2Q17.

Travis Stice, VNOM’s CEO (chief executive officer) recently stated: “Viper remains active on the acquisition front, primarily focused on Diamondback-operated properties, where we see the greatest cash flow visibility and opportunities to maximize Viper’s present value. We will also continue to buy minerals in tier-1 areas with high visibility to cash flow growth operated by well-capitalized third parties.”

The partnership is also eyeing a dropdown of recently acquired assets net acres by Diamondback Energy (FANG). This would increase “Viper’s pro forma net royalty acres operated by Diamondback to ~45%” as noted in a recent investor presentation.

Black Stone Minerals

Black Stone Minerals (BSM), on the other hand, continues to focus on its expansion in the Haynesville region. BSM acquired $63 million worth of mineral and royalty interests in 2Q17.

The Haynesville region has seen a bounce back in drilling activity since the start of this year. However, drilling activity growth has slowed in 3Q17. The rig count in the region has risen to 42 as of September 29, compared with 40 at the end of 2Q17—a marginal increase of two.

 
 
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