Viper Energy Partners LP (VNOM): Business Model Canvas [11-2024 Updated]

Viper Energy Partners LP (VNOM) operates at the intersection of innovation and opportunity in the oil and gas sector. With a robust business model that emphasizes strategic partnerships and operational efficiency, VNOM is well-positioned to capitalize on the growing demand for energy resources. This blog post delves into the key components of VNOM's Business Model Canvas, exploring how the company creates value for its investors and stakeholders while navigating the complexities of the energy market. Discover the intricacies of their approach, from mineral rights acquisition to revenue generation, and learn what makes this company a compelling player in the industry.

Viper Energy Partners LP (VNOM) - Business Model: Key Partnerships

Collaboration with Diamondback Energy

Viper Energy Partners LP maintains a significant partnership with Diamondback Energy, which holds approximately 45% of Viper's total common stock outstanding as of September 30, 2024. This collaboration allows Viper to leverage Diamondback's operational expertise and resources in the Permian Basin, enhancing its capabilities in mineral and royalty interest management.

In 2024, Viper Energy reported dividends to Diamondback amounting to $191.83 million.

Partnerships with Oil and Gas Service Providers

Viper relies on various oil and gas service providers to support its operations. These partnerships are essential for drilling, completion, and production activities. The company has entered into contracts with service providers to ensure efficient operational processes. Production and ad valorem taxes for Q3 2024 were reported at $15.11 million, indicative of the operational scale and the service engagement required to manage these costs.

In addition, the company reported a total operating income of $631.69 million for the nine months ending September 30, 2024.

Relationships with Landowners for Mineral Rights

Viper Energy has established relationships with landowners to secure mineral rights. As of September 30, 2024, Viper owned approximately 35,634 net royalty acres in the Permian Basin, with around 54% of these acres operated by Diamondback.

The company has also completed significant acquisitions, including the Q Acquisition, which consisted of 406 net royalty acres for a purchase price of $113.6 million, and the M Acquisition with 267 net royalty acres for $75.8 million.

Joint Ventures for Resource Extraction

Viper Energy engages in joint ventures to optimize resource extraction. These ventures allow for shared risks and costs associated with exploration and production. The company continues to assess opportunities for further joint ventures to enhance its operational footprint in the oil and gas sector. As of Q3 2024, the cumulative net income attributable to Viper Energy was reported at $149.18 million.

The financial structure also reflects the strategic importance of these joint ventures, with total assets standing at $4.206 billion as of September 30, 2024.

Viper Energy Partners LP (VNOM) - Business Model: Key Activities

Acquiring and managing mineral interests

Viper Energy Partners LP focuses on acquiring and managing mineral and royalty interests primarily in the Permian Basin. As of September 30, 2024, Viper owned approximately 35,634 net royalty acres, with about 54% operated by Diamondback Energy, Inc. The company completed significant acquisitions in 2024, including:

Acquisition	Net Royalty Acres	Purchase Price (Million $)
Q Acquisition	406	113.6
M Acquisition	267	75.8
TWR Acquisition	N/A	458.9

Conducting geological and engineering evaluations

Viper employs geological and engineering evaluations to assess the potential of its mineral interests. These evaluations guide the company's strategy for exploration and production, ensuring that investments are directed towards areas with the highest potential returns. The company’s operational efficiency is supported by its partnership with Diamondback, leveraging advanced technology and expertise in the field.

Drilling and production operations oversight

The company oversees drilling and production operations to maximize output from its mineral interests. For the three months ended September 30, 2024, Viper reported:

Production Data	Oil (MBbls)	Natural Gas (MMcf)	Natural Gas Liquids (MBbls)
Q3 2024	2,482	6,150	1,035
Q2 2024	2,398	5,631	983

The average daily oil production for Q3 2024 was 26,978 BO/d, with a combined average daily production of 49,370 BOE/d.

Marketing and selling oil and natural gas

Viper Energy Partners LP actively markets and sells its oil and natural gas production. The average sales prices for Q3 2024 were:

Product	Average Sales Price
Oil ($/Bbl)	75.24
Natural Gas ($/Mcf)	0.13
Natural Gas Liquids ($/Bbl)	19.89
Combined ($/BOE)	45.83

The company's royalty income is closely tied to its production volumes and market prices, with total royalty income for the nine months ended September 30, 2024, reaching $628.7 million, compared to $514.9 million for the same period in 2023, reflecting a 27% growth in production volumes.

Viper Energy Partners LP (VNOM) - Business Model: Key Resources

Extensive portfolio of mineral rights

As of September 30, 2024, Viper Energy Partners LP holds approximately 35,634 net royalty acres, with about 54% of these acres operated by Diamondback Energy. This represents a substantial increase from the 32,567 net royalty acres reported previously.

Year	Net Royalty Acres	Operated by Diamondback (%)
2023	32,567	54%
2024	35,634	54%

Experienced management team

The management team at Viper Energy is equipped with extensive industry experience and expertise. This includes strategic leadership from key executives who have backgrounds in operations, finance, and geology, contributing to effective decision-making and operational success. The team is pivotal in navigating the complexities of the energy sector and optimizing asset management.

Advanced drilling and production technology

Viper Energy utilizes cutting-edge drilling and production technologies to enhance efficiency and reduce costs. As of September 30, 2024, the company has a total of 60 rigs operating across its mineral and royalty acreage, with seven rigs operated by Diamondback. This operational scale supports high production levels and efficient resource extraction.

Metric	Value
Total Rigs Operating	60
Rigs Operated by Diamondback	7

Financial resources for acquisitions and operations

Viper Energy has demonstrated strong financial performance, reporting a net income of $330.846 million for the nine months ended September 30, 2024, compared to $375.410 million for the same period in 2023. The company also completed a public offering in September 2024, raising approximately $475.9 million, which will be used to fund acquisitions and operational activities.

Financial Metric	Value (2024)
Net Income (Nine Months)	$330.846 million
Public Offering Proceeds	$475.9 million

Viper Energy Partners LP (VNOM) - Business Model: Value Propositions

High-quality, low-risk oil and gas production

Viper Energy Partners LP focuses on acquiring mineral and royalty interests primarily in the Permian Basin, which is known for its high-quality oil and natural gas production. As of September 30, 2024, the company reported an average daily oil production of 26,248 barrels and combined daily production of 47,661 BOE (barrels of oil equivalent).

Attractive dividend yield for investors

Viper Energy has implemented a dividend policy that reflects its commitment to returning capital to shareholders. The board approved an increase in the annual base dividend to $1.20 per share, beginning with the second quarter of 2024. A combined cash dividend of $0.61 per share was declared for the fourth quarter of 2024.

Strong growth potential through strategic acquisitions

In 2024, Viper Energy completed significant acquisitions, enhancing its mineral and royalty interests. Notably, the TWR Acquisition on October 1, 2024, involved approximately $458.9 million in cash and 10.09 million Operating Company units, adding 3,067 net royalty acres. The company’s footprint of mineral and royalty interests totals approximately 35,634 net royalty acres.

Operational efficiency leading to cost advantages

Viper Energy maintains operational efficiency, which translates into cost advantages. For the third quarter of 2024, total operating expenses were reported at $74.02 million, while the depletion expense was $54.53 per BOE. The company also benefits from low cash general and administrative expenses, which ranged from $0.80 to $1.00 per BOE.

Metric	Q3 2024	Q2 2024	2024 Guidance (Full Year)
Average Daily Oil Production (BO/d)	26,248	21,139	27,000 - 27,250
Average Daily Combined Production (BOE/d)	47,661	37,718	48,750 - 49,250
Annual Base Dividend	$1.20 per share	N/A	N/A
Cash General and Administrative Expenses ($/BOE)	$0.80 - $1.00	N/A	N/A
Depletion Expense ($/BOE)	$12.01	$11.19	$11.50 - $12.00

Viper Energy Partners LP (VNOM) - Business Model: Customer Relationships

Focus on investor engagement and communication

Viper Energy Partners LP actively engages with its investors through regular communication channels. The company holds quarterly earnings calls and publishes detailed financial reports to keep stakeholders informed. For instance, in Q3 2024, Viper reported a net income of $109.045 million, and earnings per share (EPS) of $0.52. This transparency in financial performance is crucial for maintaining investor confidence.

Building trust through transparency in operations

Viper emphasizes transparency by providing comprehensive updates on operational activities and financial results. In the nine months ended September 30, 2024, the company reported total operating income of $631.688 million, with oil income contributing $558.203 million. Such disclosures help foster trust among investors and stakeholders.

Providing timely updates on production and earnings

Viper's commitment to timely updates is reflected in its production data. For the nine months ended September 30, 2024, Viper produced 7,192 MBbls of oil, 17,370 MMcf of natural gas, and 2,972 MBbls of natural gas liquids. The average daily oil volumes reached 26,248 BO/d, highlighting the company's operational efficiency and responsiveness to market conditions.

Engaging with local communities for support

Viper Energy Partners LP engages with local communities, recognizing the importance of social responsibility. The company’s operational footprint in the Permian Basin spans approximately 35,634 net royalty acres, with around 54% operated by Diamondback Energy. This engagement not only helps in building local support but also contributes to its overall business sustainability.

Key Financial Metrics	Q3 2024	Q3 2023	Change (%)
Net Income	$109.045 million	$207.213 million	-47.4%
Earnings Per Share (EPS)	$0.52	$1.11	-53.2%
Oil Production (MBbls)	7,192	5,771	24.6%
Natural Gas Production (MMcf)	17,370	13,809	25.3%
Natural Gas Liquids Production (MBbls)	2,972	2,224	33.6%

Viper Energy Partners LP (VNOM) - Business Model: Channels

Financial markets for equity and debt financing

Viper Energy Partners LP has actively engaged in the financial markets to secure equity and debt financing. In September 2024, the company completed a public offering of approximately 11.50 million shares of its Class A Common Stock at a price of $42.50 per share, yielding total net proceeds of approximately $475.9 million after transaction costs. As of September 30, 2024, Viper's long-term debt totaled $821.5 million, comprised of:

Debt Instrument	Amount (in thousands)
5.375% Senior unsecured notes due 2027	$430,350
7.375% Senior unsecured notes due 2031	$400,000
Revolving credit facility	$0
Total long-term debt	$821,505

Direct sales to refineries and energy companies

Viper Energy primarily generates revenue through direct sales of oil, natural gas, and natural gas liquids to refineries and energy companies. For the nine months ended September 30, 2024, the company reported:

Product	Income (in thousands)
Oil	$558,203
Natural gas	$8,763
Natural gas liquids	$61,745
Total Operating Income	$631,688

Investor relations through corporate websites and reports

Investor relations play a crucial role in Viper Energy's strategy to communicate with stakeholders. The company maintains a corporate website where it publishes detailed financial reports, press releases, and updates on operational performance. For the third quarter of 2024, Viper Energy declared a cash dividend of $0.61 per share of Class A Common Stock, consisting of a base dividend of $0.30 and a variable dividend of $0.31.

Industry conferences for networking and exposure

Viper Energy actively participates in industry conferences to enhance its visibility and foster relationships with potential partners and investors. This engagement is pivotal for networking and exploring new business opportunities within the oil and gas sector.

Viper Energy Partners LP (VNOM) - Business Model: Customer Segments

Institutional investors seeking income and growth

Viper Energy Partners LP attracts institutional investors who prioritize income generation and growth potential. As of September 30, 2024, Viper reported a net income attributable to Viper Energy, Inc. of $149.178 million, an increase from $143.116 million in the same period of the previous year. This financial performance is supported by a robust dividend policy, with an annual base dividend set at $1.20 per share, alongside variable dividends reflecting capital returns. The company’s strategy of acquiring mineral and royalty interests further enhances its appeal to institutional investors, aiming for sustainable growth through strategic acquisitions, such as the recent TWR Acquisition.

Retail investors interested in energy sector investments

Retail investors are drawn to Viper Energy due to its position within the energy sector, particularly in the Permian Basin. The company has approximately 35,634 net royalty acres, with 54% operated by Diamondback. For the nine months ended September 30, 2024, Viper reported oil income of $558.203 million, indicating strong demand and revenue generation potential. This income is complemented by a consistent dividend policy, which provides retail investors with attractive returns. As of September 30, 2024, the average daily oil production was reported at 26,248 barrels, which further solidifies its appeal to retail investors seeking exposure to the energy market.

Energy companies needing reliable oil and gas supply

Energy companies seeking reliable sources of oil and gas supply form a critical customer segment for Viper Energy. The company operates in a strategic partnership with Diamondback Energy, which manages a significant portion of its production operations. As of October 1, 2024, there were 60 rigs active on Viper’s mineral and royalty acreage, reinforcing the company’s capability to provide consistent supply. The average sales price for oil was $77.61 per barrel for the nine months ended September 30, 2024, indicating a stable pricing environment that benefits both Viper and its energy partners. Additionally, Viper's royalty income structure allows energy companies to operate with reduced financial risk, making it an attractive partner in the oil and gas sector.

Local communities impacted by operations

Local communities play a significant role in Viper Energy's operational framework. The company’s activities, including its mineral and royalty interests, impact local economies, providing jobs and economic opportunities. As of September 30, 2024, Viper’s operations generated significant revenue, with total operating income reported at $631.688 million. This economic activity is crucial for local communities, as it supports local businesses and infrastructure development. Viper is committed to maintaining positive relationships with these communities, ensuring that its operations contribute to local economic growth while adhering to environmental and regulatory standards.

Customer Segment	Key Metrics	Financial Performance	Operational Insights
Institutional Investors	Net Income: $149.178 million (2024)	Annual Dividend: $1.20 per share	Strategic Acquisitions: TWR Acquisition
Retail Investors	Oil Income: $558.203 million (2024)	Average Daily Production: 26,248 barrels	Net Royalty Acres: 35,634
Energy Companies	Active Rigs: 60 on mineral acreage	Average Oil Price: $77.61 per barrel	Royalty Income Structure
Local Communities	Total Operating Income: $631.688 million (2024)	Economic Contributions: Jobs and local business support	Commitment to Community Relations

Viper Energy Partners LP (VNOM) - Business Model: Cost Structure

Operational costs related to drilling and production

The operational costs for Viper Energy Partners LP primarily consist of production and ad valorem taxes, depletion, and general administrative expenses. For the nine months ended September 30, 2024, the total production and ad valorem taxes amounted to $44.72 million, while depletion costs were $149.82 million.

Cost Type	Amount (in millions)
Production and Ad Valorem Taxes	$44.72
Depletion	$149.82
Total Operating Costs	$208.64

Land acquisition and lease expenses

Land acquisition costs are significant for Viper Energy, especially with the recent acquisitions of net royalty acres. In September 2024, Viper completed two acquisitions totaling approximately $189.4 million for net royalty acres in the Permian Basin.

Acquisition	Net Royalty Acres	Cost (in millions)
Q Acquisition	406	$113.60
M Acquisition	267	$75.80
Total	673	$189.40

Administrative and corporate overhead

Administrative expenses for Viper Energy include general and administrative costs, which were $6.71 million for the nine months ended September 30, 2024. This figure reflects a significant increase from $3.88 million during the same period in 2023.

Expense Type	Amount (in millions)
General and Administrative Expenses	$6.71
Related Party Expenses	$7.39
Total Administrative Costs	$14.10

Maintenance and capital expenditures on equipment

Maintenance costs and capital expenditures are essential for ensuring the operational efficiency of Viper Energy’s drilling and production activities. As of September 30, 2024, the company reported a capital expenditure of $271.05 million for acquisitions of oil and natural gas interests.

Expenditure Type	Amount (in millions)
Capital Expenditures	$271.05
Maintenance Costs	Included in Operating Costs

Viper Energy Partners LP (VNOM) - Business Model: Revenue Streams

Sale of oil and gas production

As of September 30, 2024, Viper Energy Partners LP reported the following revenue from oil and gas production:

Type	Q3 2024 Revenue (in thousands)	Q2 2024 Revenue (in thousands)	Q3 2023 Revenue (in thousands)
Oil Income	$186,750	$194,335	$168,008
Natural Gas Income	$823	$1,143	$8,893
Natural Gas Liquids Income	$20,585	$20,008	$18,713
Total Operating Income	$209,588	$216,708	$293,240

The total oil income for the nine months ended September 30, 2024, was $558,203 thousand, compared to $443,927 thousand for the same period in 2023.

Royalty income from mineral interests

Royalty income is a significant revenue stream for Viper Energy. The company reported royalty income as follows:

Period	Royalty Income (in thousands)
Q3 2024	$208,158
Q2 2024	$215,486
Q3 2023	$195,614
Total Royalty Income (Nine Months Ended September 30, 2024)	$628,711
Total Royalty Income (Nine Months Ended September 30, 2023)	$514,896

This reflects an increase in royalty income driven by a 27% growth in production.

Dividend distributions from investments

In 2024, Viper Energy Partners LP distributed dividends to stockholders as follows:

Quarter	Dividend per Share	Total Dividends Paid (in thousands)
Q1 2024	$0.70	$59,803
Q2 2024	$0.76	$64,927
Total Dividends (Nine Months Ended September 30, 2024)		$156,553

The dividend amounts indicate a strong commitment to returning capital to shareholders while maintaining operational cash flow.

Potential revenues from joint ventures and partnerships

Viper Energy's joint ventures and partnerships primarily involve collaborations with Diamondback Energy. These ventures can generate additional revenue through shared operations and resource extraction. The company has access to approximately 35,634 net royalty acres, with about 54% operated by Diamondback.

Additional revenues from joint ventures are anticipated, particularly from the newly acquired properties, which include:

• Q Acquisition: 406 net royalty acres for $113.6 million
• M Acquisition: 267 net royalty acres for $75.8 million

These acquisitions are expected to enhance production capabilities and revenue streams in the future.

Updated on 16 Nov 2024

Resources:

1. Viper Energy Partners LP (VNOM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Viper Energy Partners LP (VNOM)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Viper Energy Partners LP (VNOM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.