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Viper Energy Outperformed Its Peers and the Sector

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Nov. 20 2020, Updated 1:26 p.m. ET

Recent market performance

Mineral interest MLPs such as Viper Energy Partners (VNOM) and Black Stone Minerals (BSM) have been weak over the recent trading sessions. VNOM and BSM have lost 8.9% and 2.2%, respectively, from their month’s peak. This recent weakness could be attributed to the sharp decline in crude oil prices, as US crude oil has lost 8.2% from the month’s peak. 

For a recent update and an outlook of crude oil prices, please read Are Crude Oil Bears Overshadowing Oil Bulls?

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YTD market performance

Mineral interest MLPs comprised the best-performing MLP subsector in the first half of 2018, which could be attributed to their strong earnings growth and gains in crude oil prices. VNOM was among the top MLP gainers in the first half of 2018. 

Despite the recent weakness, VNOM is up 35.5% YTD (year-to-date), and it’s outperforming the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). XOP has gained 13.5%. VNOM’s YTD outperformance relative to XOP could be attributed to its strong earnings growth, industry-leading distribution growth, low leverage, and strong Permian exposure.

On the other hand, BSM is down 1.0% YTD. It’s underperforming both VNOM and the sector. This could be attributed to the partnership’s high natural gas and low crude oil exposure, flat distributions, and an insignificant presence in the Permian region. Crude oil is up 12.7% YTD while natural gas is down 7.2%. We’ll look into VNOM’s and BSM’s commodity price exposure in the next article.

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