• Average Daily Production Guidance for Q1 2025: 30,000 to 31,000 barrels of oil per day.
• Expected Run Rate Daily Average Oil Production Post-Dropdown (Q2 2025): 48,000 barrels of oil per day.
• Expected Diamondback Operated Production Increase in 2026: Approximately 31,000 barrels a day, up from 27,000 barrels a day in 2025.
• Interest in Diamondback's Expected Completions Over Next Five Years: Approximately 75% with an average 6% NRI.

• Warning! GuruFocus has detected 6 Warning Sign with VNOM.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Viper Energy Inc (NASDAQ:VNOM) reported strong organic production growth on legacy assets and successfully executed a differentiated acquisition strategy.
• The company expects significant production growth, with daily oil production projected to increase from 30,000-31,000 barrels in Q1 2025 to 48,000 barrels post-dropdown in Q2 2025.
• Viper Energy Inc (NASDAQ:VNOM) has a unique alignment with Diamondback's development plans, owning an interest in approximately 75% of Diamondback's expected completions over the next five years.
• The company has a strong balance sheet and is positioned as a consolidator in the fragmented minerals market, particularly in the Permian Basin.
• Viper Energy Inc (NASDAQ:VNOM) offers a differentiated investment opportunity with zero capital and operating costs, and a durable cash flow profile.

Negative Points

• The company's forward-looking statements are subject to risks and uncertainties, which could result in actual results differing materially.
• Viper Energy Inc (NASDAQ:VNOM) relies on the capital markets for acquisitions, which can be challenging during market volatility.
• The company faces potential challenges in executing its acquisition strategy due to the fragmented nature of the minerals market.
• There is uncertainty regarding the timing and details of the potential upside from the Double Eagle transaction.
• Viper Energy Inc (NASDAQ:VNOM) may face difficulties in leveraging its balance sheet due to market and rating agency perceptions.

Q & A Highlights

Q: Can you discuss the potential upside from the Double Eagle transaction for Viper Energy? A: Kaes Van't Hof, President of Viper Energy Partners LLC, explained that they expect at least $50 million of upside from a capital perspective at $70 oil in 2026. The timing is dependent on rig movements in the southern portion of their acreage. They are also exploring opportunities to buy minerals in Reagan County, an emerging part of the basin.

Q: How do you view the payout range of 75% to 100% given the strength of the balance sheet? A: Kaes Van't Hof stated that they have moved from a 100% pass-through to a 75% payout of free cash flow, which allows them to fund deals without relying heavily on capital markets. The remaining 25% of free cash flow is used for acquisitions. They prioritize the variable dividend over repurchases but are flexible to adjust based on market conditions.

Q: What are your thoughts on the opportunity for surface ownership in the Midland Basin? A: Kaes Van't Hof mentioned that while surface ownership can be beneficial, they see more value in keeping surface rights with the operator, Diamondback, to facilitate development without intercompany complications. They plan to keep Viper as a pure-play royalty company.

Q: How do you view the current M&A landscape in the minerals space? A: Kaes Van't Hof highlighted that the minerals market remains highly fragmented, with significant consolidation opportunities. Viper is well-positioned to capitalize on these opportunities, leveraging their strong balance sheet and innovative deal structures, such as offering OpCo units to defer tax liabilities.

Q: What is your outlook on dividend growth following the Endeavor deal? A: Kaes Van't Hof indicated that they expect the Endeavor deal to be accretive to dividends. They aim to achieve $1 per share of distributable cash flow each quarter, with 75% of that being returned to shareholders, providing a strong yield.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.