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VNOM and BSM: Comparing Their Distribution Growth

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Jul. 24 2018, Updated 10:32 a.m. ET

Historical distribution

Viper Energy Partners (VNOM) declared a distribution of $0.48 per unit for the first quarter, which represents a 58.9% YoY (year-over-year) increase compared to the first quarter of 2017 and a 4.3% increase compared to the fourth quarter of 2017.

In comparison, Black Stone Minerals (BSM) declared a flat distribution of $0.3125 per unit for its common units. The partnership has kept its distribution unchanged for the past three quarters. Based on their recent distributions, VNOM and BSEM are trading at attractive distribution yields of 6.3% and 7.0%, respectively.

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Distribution outlook

Viper Energy Partners (VNOM) expects a distribution of $2.37–$2.23 per unit in 2018, which assumes an average crude oil price of $65.00 per barrel. At the midpoint, this would represent a 61.0% YoY increase.

VNOM’s distribution per unit is expected to increase to $2.40–$2.56 and $2.58–$2.74, assuming that crude oil ends at $70.00 per barrel and $75.00 per barrel this year, respectively. Crude oil averaged $67.90 per barrel in the second quarter, and it’s currently trading at $68.10 per barrel.

Considering its strong coverage ratio, investors can expect distribution growth resumption from BSM in the coming quarters. The partnership’s distribution coverage was 1.6x for all units and 2.5x for common units by the end of the first quarter.

In the next article, we’ll look into the financial metrics for VNOM and BSM.

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