Viper Energy, Inc.

Good day, and thank you for standing by. Welcome to the FIFER Energy Second 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 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 the question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chip Steele, Investor Relations Director. Chip, please go ahead.

Thank you, Felicia. Good morning, and welcome to Viper Energy's second 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 Kay Spanthoff, CEO, and Austin Gilfillan, 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. The reconciliations with the 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 second quarter 2025 conference call. Despite oil price volatility in the second quarter, Viper delivered strong oil production growth, both on an absolute and per share basis. After closing the transformative drop-down transaction from Diamondback on May 1st, we remain excited and highly confident about the meaningful organic growth that Diamondback can drive on our concentrated royalty assets over both the short and the long term. This symbiotic relationship uniquely positions Viper as one of the few companies in North American energy that is expected to deliver organic growth over the coming quarters and years. As previously announced during the second quarter, we also announced a definitive agreement for VIPER to acquire CTO royalties in an all equity transaction. CTO will be hosting their shareholder meeting to vote on a proposal to approve the merger on August 18th, and if approved, we expect to close the merger shortly following the meeting. As a reminder, this transaction has substantial scale and inventory depth. for Viper that will support our production profile over the next decade while also offering meaningful and immediate financial accretion. Following the expected close of the CITIO acquisition later this month, we remain highly confident in our organic growth trajectory that it will continue into 2026 at current prices, led by over 15% expected year-over-year growth in our Diamondback-operated net oil production. We expect full year 2026 average production to increase by a mid-single-digit percentage from our expected pro forma Q4 2025 production levels, which is the first quarter of VIPER plus CTO consolidated. Importantly, based on this production outlook, we would expect our oil production per share for full year 2026 to be approximately 15% higher than full year 2025, highlighting the unique combination of organic growth, and accretive acquisitions. Moving to return of capital, we are going to return 56 cents a share to stockholders this quarter, primarily in the form of our base plus variable dividend, which represents 75% of our cash available for distribution. As announced with the CTO acquisition, our pro forma net debt target is $1.5 billion, which represents approximately one turn of leverage at $50 WTI based on expected pro forma production levels. We're committed to maintaining a fortress balance sheet, but we see $1.5 billion as the right amount of permanent leverage for Viper as a royalty business, given we have limited operating costs and no capex. Therefore, in the coming quarters and years, should net debt be at or below $1.5 billion, stockholders should expect us to return all excess cash up to 100% of available cash for distribution generated in a quarter. In conclusion, we continue to believe that VIPER presents a differentiated investment opportunity within the broader energy space. Our relationship with Diamondback remains strong and a distinct competitive advantage for VIPER. We believe VIPER's unique ability to deliver sustained per share growth with zero capital and only limited operating costs will result in a differential ability to return increasing amounts of capital to our shareholders over the long term. And the proposed CTO acquisition only enhances our position as we look to compete with mid and large cap E&Ps for investor dollars, attention, and access to capital. Operator, please open the line for questions.