Viper Energy (VNOM) Q4 FY25 earnings call: guidance and Q&A

How does Viper's ownership translate to Diamondback's Barnett update, specifically regarding deeper zones?

Viper benefits from mineral ownership as operators explore new zones without capital risk. Diamondback has been active in leasing deeper zones in the Midland Basin, particularly Spanish Trail. Only 10-15% of potential deeper zone acreage is currently leased, indicating future tailwinds for lease bonuses and inventory.

“we still only lease about 10% to 15% of the acreage that would potentially be open in the Midland Basin. So that should be a tailwind to come both from a lease bonus perspective, but also new inventory locations that are going to come into play and kind of support the production profile over the years to come.”

asked by Neal Dingmann · answered by Austen Gilfillian

How will the return of capital strategy evolve, particularly the mix between base dividend, variable dividend, buybacks, and debt repayment, given the target of returning up to 100% of cash available for distribution?

The 15% base dividend increase is a meaningful commitment. The company is now at the point of returning almost 100% of cash. The mix depends on market conditions and stock price. While buybacks were more attractive at lower prices, flexibility is key, especially for opportunistic repurchases from non-traditional holders.

“I mean, listen, the Board decided to increase the base dividend by 15%. I think that's a meaningful number. I think it shows that we've done a good amount of accretive deals. Balance sheet is strong. That's always going to be the first call on capital. We've also said, hey, when we get to $1.5 billion or $1.6 billion of net debt, we're going to ramp the shareholder returns to almost 100%. And I think we're there.”

asked by Neal Dingmann · answered by Kaes Van't Hof

Given Permian rig count declines, how resilient has Viper's third-party activity been, and is there any slowdown or enhancement to production growth expected?

No significant slowdown in third-party activity. New disclosures on pages 14-15 of the investor deck show activity dominated by larger players. Viper's acreage consistently captures about 50% of third-party activity in the basin. Current guidance is based on visible DUCs and permits, so sustained activity could lead to higher production.

“We really haven't seen much of a slowdown at all across the third-party activity. We put some new disclosures in this quarter on Pages 14 and 15 of the deck that breaks down kind of some of the key third-party operators by both the Midland and Delaware Basin.”

asked by Wei Jiang · answered by Kaes Van't Hof

What is the current bid-ask environment for royalty assets, and are there any large deals like Sitio still available?

When commodity prices are lower, there's less need for sellers, so fewer large deals have been available. Viper is ready for larger deals but they are harder to execute at current prices. The company's strong balance sheet and debt target of $1.5 billion ($50 oil protection) allows for flexibility. Larger deals are more likely as prices recover.

“When commodity prices are lower, there's not really a need to sell unless there's some other use of proceeds that the seller has. So there hasn't been a ton of large deals for us to look at over the last six months or so.”

asked by Neil Mehta · answered by Kaes Van't Hof

The 2026 oil guide is wide; does this reflect visibility on activity or performance, and is visibility better near-term?

Visibility is better for the first half of the year due to existing DUCs and permits, which typically convert to production within 5-6 months. The second half of the year has less certainty regarding permit conversion timelines. The wide range accounts for this uncertainty, with potential upside if activity accelerates.

“If you look at conversion rates and also the conversion time lines on wells that have been drilled currently, those typically get converted to production within about 5 to 6 months. So we feel very good about the first half of the year and what that growth outlook looks like.”

asked by Kaleinoheaokealaula Akamine · answered by Austen Gilfillian

Is the $1 billion repurchase authorization primarily for liquidity for "unnatural holders" or for open market repurchases, especially given the stock's recent performance?

The authorization provides flexibility. While open market repurchases were more attractive in Q4 at lower prices, the current strategy balances returning capital. The ability to buy back shares from non-traditional holders (like private equity) is important to prevent the stock from being "heavy." The company will remain flexible and lean in if the stock price drops.

“I don't think we need to spend every dollar we make on repurchases at these levels, but it's still a part of the story. I just think the bigger slugs could come from unnatural holders that want to get out. And just having that ability to make sure the stock is not heavy and have the repurchase in place is -- I think is a good thing for Viper shareholders.”

asked by Timothy Rezvan · answered by Kaes Van't Hof