So far this summer, Viper Energy Partners LP’s (NASDAQ: VNOM) A&D team has run riot through the Permian Basin, closing 50 deals since the first quarter.
Viper purchased mineral interests in the Permian and said in July 17 regulatory filings that more deals are pending after a three-month tear that totaled $276.6 million.
With the deals, Viper, a subsidiary of Diamondback Energy Inc. (NASDAQ: FANG), stands to increase its net royalty acreage by 37%. After closing its additional deals, the 3-year-old company will own mineral interests on 8,905 net acres.
Recent deals with third-party sellers also helped diversify its holdings. After closing its remaining deals, Diamondback will operate about 38% of Viper’s net acreage compared with 41% at the end of March. When the company was founded in 2014, about half of its assets were operated by Diamondback.
Viper made the disclosures as part of a prospectus for a public offering. The company plans to sell 14 million common units (upsized from 11 million earlier on July 17) for gross proceeds of $206.5 million. The sale represents nearly 18% of the company’s outstanding units.
Viper acquired the net royalty interests at about $115,000 per acre, excluding any production—a price that suggests the transactions are accretive, Gordon Douthat, a senior analyst for Wells Fargo Securities LLC, said in a July 18 report.
That price “compares favorably to implied-by-trading levels of $210,000/acre backing out production at $35,000 barrels of oil equivalent per day (boe/d),” Douthat said.
Douthat noted that management and board members plan to purchase 114,000 common units at the offer price, which should send a positive signal to investors.
In addition to the public offering, the company will pay for the acquisitions and reduce debt as well as other purposes, including additional deals. As of July 14, the company had used $152.5 million of its $315 million revolving credit. The debt matures in July 2019, according to regulatory filings.
Douthat said that Viper’s second-quarter production was 10,500 boe/d, 18% ahead of Wall Street expectations of 9,000 boe/d.
Viper said that the pending acquisitions are expected to close by the end of July.
Credit Suisse is acting as a sole book-running manager for the offering. Barclays, Citigroup, UBS Investment Bank and Wells Fargo Securities served as senior co-managers for the offering.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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