Viper Energy, Inc.

Good day and thank you for standing by. Welcome to the VIPER Energy second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during your session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand it over to your first speaker today, Chip Seale, Investor Relations Director. Please go ahead.

Thank you, Amber. Good morning and welcome to Viper Energy's second quarter 2026 conference call. During our call today, we may reference an updated investor presentation which can be found on Viper's website. Representing Viper today are Kaes Van't Hof, CEO, and 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 gap measures can be found in our earnings release issued yesterday afternoon. I will now turn the call over to Kaes. Thank you, Chip.

Welcome, everyone, and thank you for listening to VIPER's second quarter 2026 conference call. The second quarter continued the trend of strong execution for VIPER, highlighted by steady development activity from both Diamondback and our third-party operators across our asset base. During the quarter, Operators turned 691 gross horizontal wells to production on our acreage, in which BIPER owned an average 3% net revenue interest. As a result of this strong activity, as well as our continued execution on our acquisition strategy, we have initiated average production guidance for the third quarter that implies roughly 4.5% growth relative to the second quarter. Importantly, the midpoint of our third quarter guidance implies an approximate 15% annualized growth rate in oil production per share relative to the fourth quarter of 2025. Strong underlying organic growth combined with accretive acquisitions and opportunistic share repurchases is fundamental to VIPER's value creation proposition. Turning to return of capital, for the second quarter we are returning 75% of available cash for distribution to stockholders. This return of capital includes $132 million in share repurchases completing during the quarter as well as a combined base plus variable dividend of 67 cents a share. Looking ahead, yesterday we announced an important evolution in our return of capital strategy. Going forward, we will be shifting to a framework which includes a high base dividend and greater flexibility in how we allocate the balance of cash available for distribution. Effective beginning in the third quarter, our board approved a 32% increase to our base dividend, now up to $2 per Class A share on an annual basis. With this increase to the base dividend, we also announced that beginning in the third quarter, we will be removing our previous quarterly commitment to return at least 75% of cash available for distribution. First and foremost, We believe this new outsized base dividend, rather than a variable payout that fluctuates with commodity prices, best showcases what is truly unique about Viper. At our current share price, the increased base dividend implies an annualized yield of approximately 4.5%. This yield remains meaningfully above the average of our E&P peers and is underpinned by one of the lowest dividend break-evens in the sector. Given our zero required capital expenditures and long-lived asset base, we believe the durability of this dividend should be compared to the most durable business models in the market, not just our energy peers. The base dividend is sacrosanct, and we are committed to prioritizing steady growth of this base dividend over time. Beyond the increased base dividend, we remain committed to returning a significant amount of capital to our shareholders through the cycle. While we are removing the quarterly commitment to return at least 75% of cash available for distribution, there is a solid floor on our returns given the increased base dividend represents approximately 50% of free cash flow at $70 a barrel WTI. However, the flexibility created by retaining excess cash flow during periods of higher commodity prices will allow us to opportunistically repurchase shares, reduce debt, or pursue a disciplined M&A strategy. There are extremely attractive investment opportunities ahead today for Viper, and we believe that allocating incremental capital through a cyclical lens will create long-term stockholder value. In short, we do not believe the market is currently valuing the variable dividend framework, and as such, I've put that mechanism aside for now. In its place, we believe our new capital allocation framework will better highlight the attractiveness of Viper's dividend and enable a more compelling growth outlook to be paired with the existing yield. Operator, please open the line for questions.