Viper Energy, Inc.

Good day and thank you for standing by. Welcome to the Viper Energy fourth quarter 2025 earnings conference call. At this time, our participants are in the 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 one one on your telephone. You will then hear an automated message advising your hand is raised. So if you draw your 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 Seale, Investor Relations Director. Please go ahead.

Thank you, Brittany. Good morning and welcome to Viper Energy's fourth 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 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's fourth quarter 2025 conference call. The fourth quarter capped the transformational year for VIPER, highlighted by more than $8 billion of mineral acquisitions. and meaningful growth in both absolute and per share metrics. Year-over-year, we grew our Permian Basin acreage by nearly 2.5 times and our oil production per share by 7%. Activity across our Permian acreage remains strong, supported by Diamondback and third-party operators focused on development of long-lateral, high-quality inventory. Looking ahead, we have initiated average daily production guidance for the full year 2026 that implies mid-single-digit organic production growth from our Q4 2025 exit rate. The Diamondback relationship continues to be strategic and meaningful to VIPER's growth, even after two significant acquisitions in 2025 and greater exposure to other leading operators in the Permian Basin. Beyond visible near-term growth, VIPER is better positioned today than we ever have been in terms of the scale, longevity and overall quality of our asset base and future inventory. Another significant achievement was the work we did on our balance sheet. Following our non-Permian divestiture, we fully repaid our $500 million term loan and outstanding revolver balance, resulting in pro forma net debt of roughly $1.6 billion, just over one turn of leverage. Now turning to return of capital, our board approved a 15% increase to our base dividend and a $1 billion increase to our share repurchase authorization, reflecting confidence in our long-term cash generating ability and disciplined capital allocation approach. This base dividend represents approximately 50% of estimated 2026 free cash flow at $50 WTI and is fully covered below $30 WTI. This increased base dividend provides an attractive yield while also allowing us continued financial flexibility to optimize capital allocation through additional returns via a combination of our variable dividend and opportunistic share repurchases. Given the strength of our balance sheet, we returned 90% of available cash during the fourth quarter. And now, following the closing of our non-permian divestiture, we are well positioned to increase our return of capital upwards of 100% of cash available for distribution. Importantly, we expect to execute on this comprehensive return of capital strategy while also continuing to deliver on differentiated growth in per share metrics. I'm pleased with our accomplishments in 2025 and the strong position Viper is in today, but there's still much to achieve. Looking ahead, Viper's well-positioned to generate strong free cash flow deliver attractive shareholder returns, and continue to pursue accretive Permian consolidation opportunities as they arise. Operator, please open the line for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Neil Dingman with William Blair. Your line is now open.

Morning, guys. Thanks for the time. My first question for you, Austin, is just on the Barnett specifically. You know, last night and this morning, Fang's Barnett update really seemed to be positive and certainly, I think, positive for Venom. I'm just wondering, could you give any color on how Venom's ownership translates across Fang's Barnett position?

Yeah, Neil, I'll give you some of the high level. I mean, I think that's, you know, what we continue to try to preach at Viper is, you know, the benefits of mineral ownership and, you know, you own from the surface of the earth to the center of the earth in perpetuity. As operators try new things or try new zones or try new techniques, the benefit of that accrues to the mineral owner without the need to spend capital or take too much risk. Pretty exciting for Viper. We kind of kicked this off a couple of years ago in terms of leasing, but Austin is going to give some color on where we are today and what we're seeing.

Yeah, no, we're still early stages on the actual leasing program. So Diamondback directly and also in some of the JVs that they've done have been very active in taking new leases from Viper to give them the right to develop those deeper zones and then the one they sent Now, the Spanish Trail was a big chunk of that that we leased with Diamondback back in 2023. But as we sit here today, I would say we've still only leased about 10% to 15% of the acreage that would potentially be open in the Midland Basin. So that should be a tell when to come, both from a lease bonus perspective, but also new inventory locations that are going to come into play and kind of support the production profile over the years to come.

Great point, Austin. Thanks. And then second question, just on return to capital. Specifically, now you've mentioned your position to return upwards to 100% of cash available from distribution in addition to the share growth. And I'm just wondering, it looks like last quarter, about 41% of the cash available for distribution went to base dividend and then followed by, what was it, 27 buyback, 23 variable, and 9% debt repayment. How, you know, will this stay in this range? Or, you know, Oscar the case, is this just largely share price dependent or You know, I mean, I'm just thinking more on sort of broad terms and rankings should be, you know, will we see the base dividends still probably be the highest or, you know, how should we think about it?

Yeah, I mean, listen, as the board decided to increase the base dividend by 15%, I think that's, you know, a meaningful number. I think it shows that we've done, you know, a good amount of accretive deals. Balance sheet's strong. You know, that's always going to be the first call on capital. We've also said, hey, when we get to $1.5 billion or $1.6 billion of net debt, we're going to ramp the shareholder returns to almost 100%, and I think we're there. I think it all depends on the market and the stock price and where things are headed. Obviously, the decision to buy back shares is less obvious today than it was at $37 a share, but You know, we think we recognize that, you know, we have done a lot of accretive buybacks at Viper. You know, we'll probably be ready should any of our, you know, non-traditional holders like the private equity owners want to sell, we'll help them get out like we did in Q4. We bought back a million shares directly from one of the private equity holders. So I just think having that flexibility is key, but, you know, in general – I think shareholders still want a lot of cash back, and at these prices with commodity improving and the stock price improving, we probably lean more towards cash return outside of unique situations.

That makes sense. Thanks, guys.

Thank you so much. One moment for our next question. Our next question comes from the line of Betty John with Barclays. Your line is now open. Thank you.

Good morning. My question is on the third-party activity outlook that you're seeing there. I think given the recount declines in the Permian, it's notable how resilient Diamondbacks or Vipers third party activity has been holding up fairly well in the last few quarters. Where are you seeing today in terms of your activity backlog? Are you seeing any slowdown at all? Or could this be another area that perhaps it's enhancing the production growth that you might see this year?

Yeah, good question, Betty. We really haven't seen much of a slowdown at all across the third party activity. You know, we put some new disclosures in this quarter on pages 14 and 15 of the deck that break down kind of some of the key third party operators by both the Midland and Delaware Basin. And kind of as you look through that list, right, it's dominated by some of the larger players in industry. So I think that's really helped. I think also it's just kind of supportive of the view that we've had of trying to acquire high quality royalty interest. And as you look at the amount of activity that our acreage position has captured over the years, it's really been consistent in capturing pretty much 50% of everything that happens by third parties across the entire basin. And then you get the kicker of the concentrated development by Diamondback as well. We'll see what happens over the course of the year. Right now, the guidance only takes into account what we can see, meaning existing doves and permits. If activity holds like it can today, that might help a bit on the production outlook. Overall, I would say that the key takeaway is that third-party activity continues to be very strong.

We always put our operator hat on when we're buying minerals. We always buy under well-capitalized operators. from the third party side in acreage that we covet. And that usually means that acreage that we covet gets developed first, which is why we've had such strong activity levels on the third party side.

Yeah, no, that makes sense. And I can really see how resilient that activity broadly is despite the basin overall levels. A follow up on the lease bonus. and it's related to the Barnett for the deeper zones as well. Lease bonus have been coming in fairly strong in 2025 and got another decent quarter in 4Q. As the basin continue to chase deeper zones, how does that benefit you guys from the lease bonus income perspective?

Yeah, I mean, it's

Any time a lease comes available, whether it be because of a vertical well doesn't hold down to these new emerging beef rights or an operator fails to fulfill some of the requirements in the lease, meaning drilling a well by a certain day or producing a certain amount of production, that lease would terminate and those rights revert back to us as the mineral owner and then we can go take a new lease and get that lease bonus and kind of set the clock again on the development requirements. We've spent a lot of time and effort building teams and systems and processes here to manage all those tens of thousands of leases and the production data associated with that so we can really proactively manage that and have an active leasing program. I think you're seeing that benefit play out with the lease bonus that we achieved last year and really over the last couple years. I think that's going to be a continuing theme both from a deep rights perspective as well as just operators needing to meet continuous drilling requirements, and overall the rig count being lower, so that being harder for certain operators to fill.

Got it. No, that makes sense. Thank you. Thank you so much.

One moment for our next question. Our next question comes from the line of Neil Mehta with Goldman Sachs and Company. Your line is now open. Thanks.

Case, what's the environment out there right now in terms of the bid-ask for other royalty assets? Is there another city awaiting out there, or has a lot of the big prize has already been taken?

Yeah, I mean, it's a good question. You know, minerals are interesting. You know, when commodity prices are lower, there's not really a need to sell unless there's some, you know, some other use of proceeds that the seller has. So there hasn't been a ton of large deals for us to look at, you know, over the last six months or so. And I think, you know, I think generally investors wanted a little bit of a break from deals at Viper, big deals in particular, and prove that we could integrate, you know, Cidio and the drop-down, and we've done that. But I'd say we're ready to look at larger deals. They're just kind of hard to get done at these prices. And, you know, that kind of ties to the thesis around, the Viper balance sheet and return of capital, we kind of said, hey listen, debt to EBITDA, Viper is very close to debt to free cash flow and at a billion and five in debt, we're well protected at $50 oil, but also at $50 oil, we don't need a ton of cash for deals because it's harder to get them done. That's kind of why we set that debt target, and as you think about going above that, as prices recover, I think the psyche for sellers changes, and we might be able to get some deals done. But from a size perspective, it's been hard to get really big deals done over the last few quarters. We've done a couple small things that add up over time, but that's kind of how I see the market.

Austin, you want to add anything? No, I agree. The ground game, as we call it, is tough out here, but we have a team dedicated to that, and I think we have the relationships in the basement to get some good value adds that help on the margin. I think, to Casey's point, there are bigger strategic deals to be done when the time is right. We just haven't seen those over the last couple quarters, more so because of the commodity price environment.

Yeah, that's great, guys. And then the follow-up is just geography. I mean, it seems like the position is certainly more concentrated on the Midland side, and that's where you have the asset overlap with the parent. How does Delaware fit into the portfolio? Where specifically could you see yourselves leaning in from an activity perspective? And then I think I know the answer to this, but this is a permanent pure play story, right? We wouldn't be surprised if you try to diversify outside of that.

Yes, it's definitely a Permian first place story. I think the unique attributes of the Permian with the SPAC pay and the emerging zones and kind of also some of the modern lease clauses really benefits you more as a mineral owner, even more so than some of the obvious things that you would appreciate from the operating perspective. It's who we know, it's what we know, and I think most of the sizable deals here exist in the Permian given the still very highly fragmented royalty ownership across Texas and New Mexico. For us on the royalty side, I think we still see a lot of value in the Delaware Basin. It's a little bit of a different story given that you're not going to be able to rely on the Diamondback drill bit to drive that visible growth. But as we dig in, there's still some really high quality undeveloped locations there that exist under well capitalized operators. And that's kind of how we view it, right? It's just like what is the likelihood of that next inventory location getting developed? And for us, we get that confidence either via knowing Dynabank's development plan or by just looking at what the operator economics are. And I think a lot of that exists today, especially in the northern Delaware. So we'll focus there where we can. For us, rock is rock and value is value, so it'll just kind of be depending on the assets that are available.

Yep. Very clear, guys. Thank you.

Thanks, Neal.

Thank you so much. Our next question comes from the line of Kalei Akamai with Bank of America. Your line is now open.

Hey, good morning, guys. My first question is on the 2026 oil guide. It's quite wide. Wondering what that reflects. Is it visibility that you have on the activity or is it performance related as players in the basin are trying out new stuff? And if it's visibility related, is it fair to say that visibility is better near term and less so in the second half of the year?

That's right, Clay, mainly on the second point. So, on the third-party operated side, we have the same visibility that you do, really, being that it's limited to the existing ducts and permits. If you look at conversion rates and also conversion timelines on wells that have been drilled currently, those typically get converted to production within about five to six months. So, we feel very good about the first half of the year and what that growth outlook looks like. As you move to the second half of the year, it becomes a little bit more tricky, calculus, having conversion rates and timelines on permits. So we've modeled the permits that we can see today, but as we progress through the year and potentially activity gets brought forward or new wells get permitted that are already included in the guide, that could help move you up to the higher end of the range. And really the wide guide right now is just that we can only guide to what we see today. And a lot will happen that we don't know about today in the back half of the year.

Thank you, Chip. My second question is on is on the gas contracts that were announced at Diamondback that are starting up later this year. To the extent that secures higher gas realizations, wondering if that also benefits Viper on the revenue side?

Yeah, we do everything essentially heads up between Viper and Diamondback. So any marketing contract benefit rolls through. It won't be for all of Viper's production, but for a good majority, you know, the gas realization thesis works pretty well for Viper, too. You know, particularly now, you know, on the third-party side, you know, de-bottleneck Permian, you know, given the Viper Delaware exposure, you know, could be a good positive rate of change story as well.

I hope you guys don't mind me trying the third question, but I imagine that there's a portfolio of lower-zoned rights at Viper. Maybe not all that is viewed as being competitive today, given where the activity on the Midland side of the basin has been. But the proportion that is competitive, should we assume that's already been transferred to Diamondback?

Yeah, not all of it has been leased yet. There's still a lot of unleased deep rights at Viper. And, you know, as we get closer to development, you know, at Diamondback, you know, it's logical that Viper will be a first call. You know, we've got to – do things on a market basis and a heads-up basis, but this relationship between parent and sub, mineral owner and operator, I think is going to pay some long-term dividends with deeper zone development. I think the great example was we leased Spanish Trail, which is 100% of the minerals are owned by Viper. That's what started this business 15 or 11 years ago going public. And, you know, a 10,000-acre block at 100% NRI is as good as it gets in the Permian Basin.

I appreciate that, guys. Thank you.

Thank you so much. One moment for our next question. Our next question comes from the line of Derek Whitfield with Texas Capital. Your line is now open.

Thanks, guys. Good morning. Hey, Derek. I wanted to start on the Barnett. Regarding the interval and the 200,000 net acres you referenced for Diamondback earlier today, how much coverage do you specifically have with VIPER? And does Diamondback have any activity planned at Spanish Trail, the area you were just mentioning, which you guys have a very high NRI for?

Yeah, so, you know, without getting into the specifics, I would say a lot of the work that Diamondback has done has kind of been with third parties. You know, we had the big chunk, kind of that 10,000 to 15,000 acre block in Spanish Trail, which is going to provide the great alignment between Diamondback and Viper. You know, I think Diamondback's had a little bit more flexibility to handle the leases with Viper as they come up and fit more term on the development plan, whereas a lot of what they've done has kind of been more bigger strategic options. I think you'll see the alignment continue to improve as we progress through the year. And then on Spanish Trail, I think if you listen to the Dynabec call, there's been some references to some offset tests, but the first two wells that are going to be tested on Spanish Trail proper, those wells have been permitted and should have production kind of in the mid part of this year. So very excited to see those results and see what that might mean for Dynabec to apply more of a full-scale development approach where Viper owns 100% of the minerals.

Yeah, no question, great development for Viper. And maybe just going back to some of your M&A comments earlier on the ground game, with the inclusion of the CIDIO guys who had really focused on the ground game, I guess how would you characterize the growth you're seeing in organic additions throughout 2025 and kind of what you see ahead for you in 2026?

Yeah, I mean, listen, we're continuing to look at every deal that crosses our desk. We're in the flow. We know everybody. They're bringing us deals. It's not that we're not getting anything done. It's just that from a materiality perspective, it takes a lot more effort on the ground game to equal something of the scale that we did last year. Don't count out the ground game. I think that's still going to be an important part of the story. It's just going to have to add up over time. And then you have the big deals, you know, really moving the needle from a size scale and, you know, flow of liquidity perspective.

Got it. Great. Very helpful. Thanks for your time. Thanks, Jared.

Thank you so much. Our next question comes from the line of Paul Diamond with Citi. Your line is now open.

Thank you. Good morning, all those who are taking the call. So people in sticking on M&A, you guys have been kind of progressing towards that, you know, billion and a half net debt number, you know, one turn leverage. I guess in the presence of a potentially larger deal, how much are you, with increased scale, how much are you willing to flex that out?

Yeah, I mean, you know, I think we probably feel like, you know, a little bit of a turn and a half, a little bit above that. as a stretch and then you pay it down, you know, wouldn't hurt. You know, I think we're very cognizant of maintaining and improving our ratings profile. Getting to investment grade was a big deal for us last year. Pretty unique access to capital at Viper versus peers in the space. So I wouldn't want to stretch the balance sheet and I think, you know, I think our currency offers a very unique opportunity for sellers as well. You know, we've done a few of these deals with OPCO units where taxes can be deferred and a lot of large mineral owners have very little basis in their minerals and like that tax deferred status. We stretched a little bit. I think half internal leverage is a big number now, which is a good thing. Any deal that we do is going to come with significant cash flow. That's how I would frame it.

Got it. Understood. And then just a housekeeping question on the hedge plan. 2026 looks pretty well locked in. Is there any volatility level that would really move you off these marks, or are you guys comfortable with the current levels?

We're comfortable with it. We've had this approach for a while now where we just try to protect against the extreme downside through deferred premium puts. So we've been able to take advantage of some volatility over the last couple quarters and have a good position built through Q3, which especially given where the debt level is, don't feel like we need to do much more there. As we continue to progress through time and if you see debt levels stay low like they are now, you probably just need less protection, meaning either a lower percentage of our volumes heads or potentially a lower strike price on the puts, and you can get them for a little bit cheaper. But in general, we just want to protect against the extreme downside, ensure that we can continue to pay out a lot of our capital, and not have to panic if things go south quickly again and try to start hoarding cash. So I think it's just a prudent approach that we've had that's worked well for us the last couple of years.

Understood. Appreciate your clarity. I'll leave it there. Thank you so much. One moment for our next question.

Our next question comes from the line of Leo Mariani with Roth. Your line is now open.

Hey, guys. Wanted to follow up on lease bonus income. Obviously, that popped a bit in 2025. I know it's difficult to kind of, you know, have any precision guide, but, you know, would it be fair to assume that maybe 26 is not dramatically different in terms of lease bonus income? Are we kind of in a bit of an upcycle versus kind of a handful of years ago? Obviously, there's some new zones that are coming to bear, as you guys have described on both this and the FAN call.

We'll see. I mean, it's a little bit out of our control, given it's, you know, dependent on operators typically failing to meet certain requirements lease provisions or lease requirements for alternatively having deep rights being open. I think we are seeing the deep rights story play out on both the Midland and Delaware side for VIPER in terms of the ground route leasing that's happening. I think something also that's going to be interesting to happen, especially post video, is as you move into 2027 and gas takeaway gets better, you know, we'll be able to explore what new development areas might look a little bit better with higher gas realizations and that could help as well. you know, maybe it's being optimistic, but I think we can have 2026 look similar to 2025 and really if it's going to be the benefit of having a much larger asset base today and a team fully dedicated to proactively managing the position.

Yeah, I mean, that's the key. We're getting a lot better at proactively managing our position despite its size, and that's where, you know, some of the CITIO team members that are, you know, focused on automation, reviewing title, reviewing leases. This is where I think AI is going to be important for Viper. We don't have a ton of manpower to study 50,000 wellbores and 40,000 leases, but a machine can do it, and I think that's going to make our shareholders more money.

All right. That's good color there. I just wanted to ask on kind of oil cut. Your oil cut here was kind of mid-50s several quarters ago. It's kind of trending a little bit more towards low 50s. What do you attribute this to? Is this just more secondary zone development? And of course, just wells get older, GOR sort of increases.

Yeah, I mean, I think if you think about Viper as a bond for the Permian Basin, it actually kind of gives you a good look into where GORs are headed throughout the basin. Last year we added a lot of Delaware exposure through CITIO, so that's part of the equation, but I think outside of that we've seen these gas systems and gas plants operate a lot more efficiently in both basins. You've seen just the gas and the NGL beats be pretty dramatic across the board. I think I think that's telling you something about the basin. It's not necessarily just secondary zones. I think it's all of the above.

Got it. Okay. Thanks.

Thanks, Leo.

One moment for our next question. Our next question comes from the line of Tim Resnick with KeyBank Capital Markets. Your line is now open.

Okay, thanks, folks. I appreciate you letting me on here. I want to kind of circle back on the repurchase comments. You know, it sounds like, Kate, from your comments, that that $1 billion authorization may be as much focused on liquidity for the unnatural holders as it is to open market repurchases today. So I'm just trying to kind of – I know you can't show your cards too much, but, you know, shares are up 17% year-to-date. You're still well below where shares traded in 24 and 25 at a higher oil price. So just trying to kind of get your arms around the attractiveness of open market repurchases today.

Yeah, I mean, it's a good question, Tim. I mean, it's a relative question too, right? Obviously, open market repurchases were more obvious in Q4 than they are today. So we're trying to walk this balancing act of how to return capital to shareholders. And with the balance sheet where it is, we do have more cash that can go to shareholders in the form of the distribution or repurchases. So I think you should expect us to continue to be flexible. I don't think we need to spend every dollar we make on repurchases at these levels, but it's still a part of the story. I just think... you know, the bigger slugs could come from, you know, unnatural holders that want to get out. And just having that ability to make sure, you know, the stock's not heavy and have them repurchase in place is, you know, I think it's a good thing for Viper shareholders. You know, I'm talking down the buyback a little bit relative to Q4 because Q4 was a much different environment than where we are today. But who knows? I mean, you know, we could drop from here, and that's why the authorization is there to lean in.

Okay. That's good context. I appreciate that. And, Cade, if I could quickly ask a macro question. We saw pretty strong third-party turn in lines in the fourth quarter relative to the full-year run rate. I know some of that is probably due to the CDO acquisitions. But, you know, it seems like industry-wide concerns on Permian oil, you know, rolling over, those concerns seem to be fading. So, you know, given the lens into aggregate activity that you have through Viper, do you expect Permian oil to grow this year?

Yeah, I mean, you know, we've been very vocal on the Diamondback side about production and U.S. production. I think, you know, the Permian's always kind of been an outlier. I would say at these... Oil prices, you know, I haven't heard about operators dropping a rig since kind of the first week of the year, you know, when we had the Venezuela noise. So, I mean, since then that's gone very quiet. I think overall Permian probably grows here and, you know, some of the larger operators, the majors are continuing to grow. You know, some of the privates, you know, still have deals to do here and there. So, in general, I think the Permian looks strong relative to the rest of North America. And, you know, the conversations about reductions in activity have gone very quiet.

Okay. I appreciate the context. Thank you.

Thanks, Tim.

Thank you so much. I am showing no further questions at this time. I would now like to turn it back to Case Van Holt, CEO, for closing remarks.

Thanks, everybody, for taking the time to listen in today. If you have any questions, please reach out, and we'll talk soon. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.