Viper Energy, Inc., a Subsidiary of Diamondback Energy, Inc., Announces Closing of Acquisition

Rhea-AI Summary

Viper Energy, Inc. (NASDAQ:VNOM), a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG), has completed the acquisition of certain mineral and royalty interest-owning subsidiaries of Tumbleweed Royalty IV, (TWR IV). The total consideration for the acquisition included:

1. $459.0 million in cash
2. Issuance of approximately 10.1 million OpCo units to TWR IV
3. An option for TWR IV to acquire an equal number of Viper's Class B common stock

The cash portion was funded through cash on hand, borrowings, and proceeds from a public offering of Viper's Class A common stock. The deal also includes a potential additional payment of up to $41.0 million in Q1 2026, contingent on the average 2025 WTI price.

Positive

• Acquisition of mineral and royalty interest-owning subsidiaries, potentially expanding Viper's asset portfolio
• Successful completion of a public offering of Class A common stock to partially fund the acquisition
• Potential for additional value through contingent payment of up to $41.0 million based on 2025 WTI prices

Negative

• Significant cash outlay of $459.0 million for the acquisition
• Issuance of approximately 10.1 million OpCo units, potentially diluting existing shareholders
• Increased debt through borrowings under OpCo's revolving credit facility

Insights

Financial Analyst

The acquisition of mineral and royalty interest-owning subsidiaries from Tumbleweed Royalty IV by Viper Energy is a significant move that expands their portfolio in the oil-rich Permian Basin. The $459 million cash component, combined with 10.1 million OpCo units, represents a substantial investment. This deal strengthens Viper's position in the royalty space and potentially increases its future cash flows.

The financing structure, utilizing cash, credit facility and a public offering, demonstrates financial flexibility. The additional $41 million contingent payment tied to 2025 WTI prices adds an interesting upside potential, aligning the deal's value with market conditions.

For investors, this acquisition could lead to increased distributions and long-term value creation, especially if oil prices remain strong. However, it's important to monitor how this impacts Viper's debt levels and the dilution effect from the new units issued.

Oil Industry Expert

This acquisition significantly bolsters Viper Energy's footprint in the Permian Basin, which is known for its high-quality, oil-weighted assets. By focusing on mineral and royalty interests, Viper is positioning itself to benefit from production without the capital expenditure burden of operators.

The deal's structure, including the contingent payment based on 2025 WTI prices, shows a savvy approach to risk management. It allows Viper to potentially capture upside in a rising oil price environment while limiting downside risk.

For the broader industry, this move signals continued consolidation in the Permian Basin and the attractiveness of royalty models. Investors should watch for potential shifts in Viper's production mix and how this acquisition impacts their overall cost structure and margins compared to traditional E&P companies.

MIDLAND, Texas, Oct. 01, 2024 (GLOBE NEWSWIRE) -- Viper Energy, Inc. (NASDAQ:VNOM) (“Viper” or the “Company”), a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG) (“Diamondback”), today announced it and its operating subsidiary Viper Energy Partners LLC (“OpCo”) completed the previously announced acquisition of certain mineral and royalty interest- owning subsidiaries of Tumbleweed Royalty IV, LLC (“TWR IV”) under the previously reported purchase agreement, dated as of September 11, 2024. The total consideration for the acquisition consisted of approximately $459.0 million in cash, the issuance of approximately 10.1 million OpCo units to TWR IV and an option granted for TWR IV to acquire the same number of shares of Viper’s Class B common stock as the OpCo units. The cash consideration for the acquisition was funded through a combination of cash on hand, borrowings under OpCo’s revolving credit facility and proceeds from the previously reported underwritten public offering of Viper’s Class A common stock. The purchase agreement for the acquisition also provides for a potential additional payment in Q1 2026 of contingent cash consideration of up to $41.0 million, based on the average 2025 West Texas Intermediate (WTI) price.

Advisors

Intrepid Partners, LLC has served as financial advisor to Viper. Akin Gump Strauss Hauer & Feld LLP and Wachtell, Lipton, Rosen & Katz have served as its legal advisors.

Vinson & Elkins LLP has served as the sellers’ legal advisor.

About Viper Energy, Inc.

Viper is a corporation formed by Diamondback to own, acquire and exploit oil and natural gas properties in North America, with a focus on owning and acquiring mineral and royalty interests in oil-weighted basins, primarily the Permian Basin. For more information, please visit www.viperenergy.com.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. For more information, please visit www.diamondbackenergy.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than historical facts, that address activities that Viper assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward- looking statements. The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, including specifically the statements regarding the acquisition. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Viper. Information concerning these risks and other factors can be found in Viper’s filings with the Securities and Exchange Commission, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the Securities and Exchange Commission’s web site at http://www.sec.gov. Viper undertakes no obligation to update or revise any forward-looking statement.

Investor Contacts:
Adam Lawlis
+1 432.221.7467
alawlis@diamondbackenergy.com

Austen Gilfillian
+1 432.221.7420
agilfillian@diamondbackenergy.com

Source: Viper Energy, Inc.; Diamondback Energy, Inc.

FAQ

What was the total consideration for Viper Energy's (VNOM) acquisition of Tumbleweed Royalty IV subsidiaries?

The total consideration consisted of $459.0 million in cash, approximately 10.1 million OpCo units issued to TWR IV, and an option for TWR IV to acquire an equal number of Viper's Class B common stock.

How did Viper Energy (VNOM) finance the cash portion of the acquisition?

Viper Energy financed the cash portion through a combination of cash on hand, borrowings under OpCo's revolving credit facility, and proceeds from a public offering of Viper's Class A common stock.

Is there any contingent consideration in Viper Energy's (VNOM) acquisition deal?

Yes, the deal includes a potential additional payment of up to $41.0 million in Q1 2026, contingent on the average 2025 West Texas Intermediate (WTI) oil price.

When did Viper Energy (VNOM) complete the acquisition of Tumbleweed Royalty IV subsidiaries?

Viper Energy completed the acquisition on October 1, 2024, as announced in their press release.