Viper Energy, Inc.

Good day and thank you for standing by. Welcome to the Viper Energy first quarter 2025 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you 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 now like to hand the conference over to your speaker today, Chip Seale, Investor Relations Director. Please go ahead.

Thank you, Michelle. Good morning, and welcome to Viper Energy's first quarter 2025 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 Case Vantoff, CEO, and Austin Gil-Billen, President. During this conference call, the participants may make certain forward-looking statements condition, results of operations, plans, objectives, future performance in 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 these appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I will now turn the call over to Case. Thank you, Chip.

Welcome, everyone, and thank you for listening to Viper Energy's first quarter 2025 conference call. The first quarter was a strong quarter for Viper with both oil and total production above the high end of their respective guidance ranges. Unfortunately, since the end of the first quarter, we've entered a period of lower commodity prices and significant market volatility. With that said, Viper is very well positioned to endure this period of volatility given our high free cash flow margins and high quality assets. As previously announced, we are excited the transformative drop down transaction between Viper and Diamondback closed on May 1st. As a result of the conservative financing of this transaction, as well as Viper's continued strong financial and operating results, we expect leverage to remain below one times, even in a sustained $50 per barrel WTI environment. Given the strength of our balance sheet, we will look to use this period of volatility to our advantage where we can, as highlighted by the opportunistic share repurchases we have been able to make so far this quarter. As a reminder, we issued approximately 28 million shares in a primary equity offering in January to fund the cash consideration of the drop-down. While the net proceeds of roughly $1.3 billion from the offering resulted in a meaningfully deleveraging transaction for Viper, We didn't receive any of the production or cash flow from the acquired assets during the quarter given the timing of the closing of the drop-down this quarter. So as a result, our Q1 dividend of 57 cents was roughly 7 cents lower than it would have been otherwise in our prior share count. While in previous situations, similar situations, we have decided to true up the dividend for the share issuance, this quarter, given the current market volatility, we have decided to retain the roughly $25 million of incremental capital to keep on the balance sheet and apply to future capital allocation decisions. Looking ahead, despite the potential for sustained weakness in commodity prices and reduced activity levels, we expect Viper's production to remain durable. And as such, we are maintaining our previous guidance for oil production for the back half of 2025. The symbiotic relationship between Diamondback and Viper is highlighted during times like these where Diamondback continues to focus on its development focus its development on wells where VIPER owns high royalty interests and therefore enhances Diamondbacks consolidated capital efficiency. Further, the roughly 45% of VIPER's current production that is operated by third parties is predominantly exposed to well-capitalized operators in the best parts of the Permian Basin, led by ExxonMobil operating almost half of our third party production. In conclusion, we continue to believe that VIPER presents a differentiated investment opportunity with zero capital and operating costs, alignment with a parent company that has helped Viper deliver consistent organic growth, and a current size and scale that positions us as a consolidator of choice in what remains a highly fragmented minerals and royalty space. Following the recent closing of the dropdown, Viper now ranks amongst the largest U.S. independent E&Ps, and we believe the unique attributes of the business model will continue to be recognized by the market Over time, as our uniquely durable cash flow profile becomes increasingly differentiated. Operator, now open the line for questions.