Viper Energy, Inc.

Good day and thank you for standing by. Welcome to the Viper Energy Partners first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you'll need to press star 1 1 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded, and I would now like to hand the conference over to your speaker today, Mr. Adam Lawless, Vice President of Investor Relations. Sir, please go ahead.

Thank you, Chris. Good morning, and welcome to Viper Energy Partners' first quarter 2023 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 Skye, CEO, Kate Vantoff, President, and Austin Gilfillan, General Manager. 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. The reconciliations with the appropriate gap measures can be found in our earnings release issued yesterday afternoon. I'll now turn the call over to Travis Spice.

Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy Partners' first quarter 2023 conference call. The first quarter was a strong start for the year as Viper Oil Production set a company record for a fourth consecutive quarter. The advantage nature of this royalty business model was highlighted during the quarter as we maintained our strong free cash flow conversion despite the volatility in commodity prices. Further on that point, Vipers' low operating costs and zero capital requirements allow us to convert over 80% of our operating cash flow into free cash flow during the quarter. This metric compares favorably to many operators at around a 40% free cash flow conversion and insulates BIPER's free cash flow profile and return of capital during times of commodity price volatility. Additionally, BIPER announced it completed a drop-down transaction of certain royalty interests from Dynavac on operated properties located in Ward County. This transaction was a $75 million acquisition of an overriding royalty interest representing 660 net royalty acres that will provide high NRI exposure to Diamondbacks' expected development plant in the southern Delaware Basin. Production on the acquired asset was roughly 300 barrels of oil per day during the first quarter and is expected to increase through the remainder of the year to average over 500 barrels of wool per day for the full year 2023. Looking ahead, we have initiated average production guidance for Q2 and Q3 2023 that implies over 8% growth relative to the first quarter. Importantly, on an organic basis, so excluding the impact of the drop-down acquisition, Production is growing at over 5% this period, primarily as a result of large down-and-back operated pads with high Viper NRIs being turned to production. On the capital return front, Viper took advantage of the volatility experienced during the quarter through our flexible return of capital program by opportunistically repurchasing over 1 million units. Since the inception of our unit repurchase program, we have now repurchased over 11 million units for an aggregate of roughly $250 million, reflecting an average price of under $23 per unit. In addition to these unit repurchases, our return of capital program during the quarter is going to also deliver a distribution that represents a roughly 5% annualized yield at today's price. In conclusion, the first quarter was an outstanding quarter for Viper and the forward outlook continues to improve as our high quality asset base continues to attract outsized activity levels. Viper remains differentially positioned to grow production without having to spend a single dollar of capital and with only limited operating costs. And as a result, We look forward to continuing to efficiently return substantial amounts of capital back to our unit holders. Operator, please open the line for questions.