Analyst Skeptical About Viability Of Cash Return Framework In Uncertain Market, Downgrades VNOM - Viper Energy (NASDAQ:VNOM)

KeyBanc Capital Markets analyst Tim Rezvan downgraded the rating on Viper Energy Partners LP VNOM to Sector Weight from Overweight.
The analyst disagrees with VNOM's fundamental value proposition of prioritizing repurchases over generating distributable cash flow and removed the price target of $37.
Rezvan is bearish on the intensity of repurchases of VNOM, as witnessed in Q3 and Q4 2022. Amid economic uncertainty and weak oil prices, VNOM's unit is down 11% year-to-date, and the analyst is skeptical about the viability of the cash return framework.
Given shorter commodity price cycles, uncertain shale inventory life and ESG headwinds, Rezvan doesn't expect public markets to rerate public minerals valuations higher.
Rezvan raised its expectations for 2023 EBITDA to $555.1 million (from $536.7 million, vs. Cons. EBITDA $641.8 million) and EPS to $1.34 from $1.10.
He now expects 2024 EBITDA of $603.0 million ($616.9 million earlier, vs. Cons. EBITDA $687.7 million) and EPS of $1.36 vs. $1.34 earlier.
Price Action: VNOM shares are trading lower by 2.92% at $27.26 on the last check Wednesday.