Viper Energy, Inc.

Good day and thank you for standing by. Welcome to the Viper Energy fourth quarter 2023 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. 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. I would like to hand the conference over to your first speaker today, Adam Manolis, Vice President of Investor Relations. Please go ahead.

Thank you, Victor. Good morning, and welcome to Viper Energy's fourth 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 Stice, CEO, Kate Stantoff, President, and Austin Gilson, Vice 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 filing with SEC. In addition, we will make reference to certain on-gap measures. The reconciliations with the appropriate gap measures can be found in the earnings release issued yesterday afternoon.

I'll now turn the call over to Travis Day. Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy's fourth quarter 2023 conference call. The fourth quarter wrapped up a milestone year for Viper. For the full year, average oil production increased 13% compared to previous year, while our average share count was reduced by 1% over the same period. As a result of continued strong organic production growth, creative acquisitions, and an opportunistic share repurchase program, the fourth quarter represented the eighth consecutive quarter of increased production per share for Viper. For our return of capital for the fourth quarter, we've declared a 29-cent variable dividend to Class A shareholders to go along with our 27-cent-based dividend. This variable dividend is the same that we would have paid with a 75% payout ratio assuming we did not repurchase any shares during the quarter. However, inclusive of the $28.7 million in shares that we repurchased during the quarter, our effective payout ratio for Q4 is 97%. Our rationale for excluding the share repurchases done during the quarter and calculating our variable dividend is that we view this buyback which was done during the secondary offering related to our GRP acquisition, as an extension of the financing of the deal. Additionally, we've already received $10 million in post-effective cash flow that is applied as a reduction to the purchase price and does not show up in our reported financials for the quarter. Looking back on the year as a whole, there were several strategic initiatives completed during 2023 that marked important steps in the growth and evolution of Viper. Our GRP acquisition, which closed in the fourth quarter, clearly laid out the framework that we look for in large-scale M&A. First, it must be accretive on all relevant financial measures. Second, there must be high-quality, undeveloped inventory that supports our long-term growth profile and provides clear visibility to future development. The acquisition must provide significant scale that results in a pro forma business that is both bigger and better. Separately, Viper also completed its conversion into a Delaware corporation during the fourth quarter. We believe this conversion has delivered increased governance rights for our shareholders and positions Viper to grow our business and fully highlight the advantage nature of mineral and royalty ownership. Looking ahead to 2024, we've initiated production guidance for both Q1 and the full year. While Q1 is expected to be the weakest quarter of the year, primarily as a result of the timing of large fads, we continue to see strong activity levels across our acreage position and expect significant growth to occur throughout the year with Q4 2024 production expected to be at or above the high end of our guidance range. This continued production growth, along with our best-in-class cost structure, should enable VIPER to continue to return a substantial amount of capital to our shareholders, primarily through our base plus variable dividend. Operator, please open the line for questions.