Viper Energy, Inc.

Good day, and thank you for standing by, and welcome to the Viper Energy Partners third quarter 2021 earnings. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to our speaker today, Adam Lawless. Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to Viper Energy Partners' third quarter 2021 conference call. During our call today, we will reference an updated investor presentation, which can be found on Viper's website. Representing Viper today are Travis Dye, CEO, and Kate Fantoff, President. During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance, and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures. Reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I'll now turn the call over to Travis Stiles.

Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy Partners' third quarter 2021 conference call. During the third quarter, Vipers saw third-party operated net wells turn to production on our acreage, rebound to their highest level since the first quarter of 2020. As a result of our continued strong production and further enhanced by our high margin exposure to increase in commodity prices, Vipers cash available for distribution increased 15% quarter over quarter to 54 cents per common unit. With this strong cash flow, Viper will pay a $0.38 per unit distribution on top of the $14 million we deployed through our unit repurchase program last quarter. In total, the combined return of capital between the distribution and buyback represents $0.47 per unit, or an 8% yield, based off yesterday's closing stock price. Following the recent closing of the Swallowtail acquisition, Viper has unprecedented high-confidence visibility into Diamondback's forward development plan that is expected to bolster oil production for Viper, not only for the next several quarters, but also for years to come. More specifically, Diamondback plans to complete over 400 wells on the acquired Swallowtail acreage over the next five years, or an amount that represents over 17 net wells for Viper over this period. Looking at near-term production, VIPER initiated average production guidance for Q4 2021 and Q1 2022 that implies over 17,000 barrels per day of production at the midpoint. Additionally, we increased our full-year 2021 oil production guide by over 2% at the midpoint. Based on the average Q4 2021 and Q1 2022 production guidance, assuming production is held flat at the stated midpoint of the range, Vipers expected to generate roughly $375 million of annualized free cash flow in the fourth quarter of 2021, assuming $75 WTI. Importantly, given these same assumptions, we're expected to generate over $475 million of annualized free cash flow in the first quarter of 2022 as our defensive hedges placed in 2020 roll off. This 2022 free cash flow amount equates to greater than 11% free cash flow yield as a percentage of our enterprise value, or almost 13% based on our current market cap. In conclusion, the third quarter of 2021 was another strong quarter for Viper that once again highlighted our high-quality asset base, best-in-class cost structure, and overall differentiated business model. As our balance sheet has continued to strengthen, we have evolved our hedging strategy so that we can maximize upside exposure to commodity prices while also protecting against extreme downside. With our strong inventory of work in progress and line of site wells, we look forward to continuing to generate robust amounts of free cash flow and subsequently using that cash to both reduce debt and increase returns to our unit holders. Operator, Please open the line for questions.