Viper Energy (NASDAQ:VNOM) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Viper Energy reported strong Q1 2026 performance with production exceeding expectations, leading to an increased oil production guidance for the year by 2.5%.

The company announced the Riverbend acquisition, acquiring over 3,000 net royalty acres and 2,000 barrels of oil per day for $337 million and 3.7 million Class A shares, enhancing their portfolio.

Viper Energy returned 90% of cash available for distribution in Q1, with a 68 cent per share dividend and 28 cents per share in stock repurchases, maintaining a commitment to return at least 75% of available cash.

The company remains focused on organic growth and executing a differentiated inorganic growth strategy, while also prioritizing disciplined capital allocation.

Management noted the potential for significant M&A activity due to favorable market conditions and emphasized their position as a preferred buyer for mid-sized to larger deals.

Full Transcript

OPERATOR

Hello and welcome to Viper Energy first quarter 2026 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand has been raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Director of Investor Relations Chip Seal.

Chip Seal (Director of Investor Relations)

Thank you Andrew Good morning and welcome to Viper Energy's first 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 Case Vantoff, CEO and Austin Gilfillen, 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 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 the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I will now turn the call over to case.

Case Vantoff (CEO)

Thank you Chip. Welcome everyone and thank you for listening to Viper Energy's first quarter 2026 conference call. The first quarter marked a strong start to the year as production exceeded our expectations and that momentum is carrying into an increased growth outlook for the remainder of 2026. During the quarter, operators in our acreage turned more than 650 gross horizontal wells to production led by Diamondback's 114 gross wells in the Midland Basin with meaningful contributions from leading third party operators across both the Midland and Delaware basins. Based on first quarter results and continued strong activity across our acreage, we are increasing the midpoint of our full year oil production guidance by roughly 2.5%. We expect growth to be driven primarily by Diamondback's acceleration of near term activity and continued development of Viper's high concentration royalty interest throughout the basin. Importantly, this increased production outlook represents over 5% organic growth relative to our pro forma 2025 exit rate.... In addition to this organic growth, Viper also continues to execute on our differentiated inorganic growth strategy. Yesterday we announced the Riverbend Acquisition in which Viper will acquire over 3,000 net royalty acres and approximately 2,000 barrels of oil production per day for 337 million in cash and 3.7 million Class A shares. These assets are highly complementary to our portfolio with roughly 75% overlap on our existing acreage and further increase our exposure to high quality third party public operators. Turning to capital allocation, our first quarter return of capital of $0.94 represents 90% of our cash available for distribution and this is comprised of a 68 cent per share dividend and 28 cents per share of stock repurchases executed in the quarter. As we've outlined, we are committed to returning at least 75% of cash available for distribution and our return of capital framework is designed to be both disciplined and flexible to fit the needs of our business. Prior to the Riverbend Acquisition, we had a further commitment to return 100% of cash available for distribution if we were at or below 1.5 billion of net debt. On that point it's important to note that 1.5 billion net debt is not a static amount, but instead represents a capitalization mix designed to evolve with the continued growth of the business. Within our broader capital allocation strategy, we will continue to invest in growing our business when the right opportunities present themselves. However, in periods where we are closer to our minimum debt mix, we will provide all that cash back to our stockholders. In closing, Viper offers a differentiated investment opportunity within the energy sector. Our mineral and royalty model, deep inventory position and alignment with Diamondback support, durable organic growth and strong free cash flow generation. Combined with disciplined capital allocation, we are well positioned to deliver sustainable per share growth and attractive long term stockholder returns. Operator, Please open the line for questions.

OPERATOR

Certainly. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment please. Our first question comes from the line of Greta Drefke with Goldman Sachs.

Greta Drefke (Equity Analyst)

Good morning team and thank you for taking my questions. First off, I was just wondering if you could speak to the number of and scale of remaining Permian Pure Play packages available that Viper could potentially consolidate over time. Do you expect ViperE's consolidation strategy to be the roll up of smaller positions or are there positions with meaningful scale that Viper could evaluate over time?

Case Vantoff (CEO)

Hey Greta, thanks for the question. I think it's going to be both. This deal with Riverbend is kind of the first deal in this size range that we've executed in Viper's new pro forma size and scale meaning post video and post drop down. I think it's a nice tuck in acquisition and we can execute on these very seamlessly when you think about the opportunity size or opportunity set of deals in this size range, it's quite sizable actually. And then in addition to that, there's a handful of larger opportunities. So we'll see how things play out. It's still tough to get deals done in this market, I would say, but as we showed yesterday, there are ways for buyers and sellers to come together with the volatility to still get deals done. So I would say I'm cautiously optimistic, but the opportunity set, both medium size and larger, is really quite massive for Viper.

Austin Gilfillen (President)

Yeah, I'd say we think we positioned ourselves to be the buyer of choice for those mid sized to larger deals. A deal like Riverbend would have been a very large deal for Viper three or four years ago and now we're able to do it, able to finance it without going to the market, able to pay down that financing very, very quickly and not have a huge overhang on our stock. So very excited with the position that we're in. I think it's pretty clear that any large private equity backed mineral position that had been built over the last kind of five plus years is now considering an exit with oil prices where they are. I think we're clearly the buyer of choice but need to be disciplined in terms of our valuation framework. And getting this deal done with Riverbend is a good example of that and hopefully more to come.

Greta Drefke (Equity Analyst)

Great, thank you, that's very helpful. And then for our second question, I just wanted to follow up a bit more on Riverbend. Specifically you outlined that about 75% of the asset base overlaps with Viper's existing assets. But I was wondering if you could provide any more detail on the quality and or geological differences of the other 25% relative to Viper's position.

Case Vantoff (CEO)

Yeah. So the Midland Basin is going to be a lot of overlap. The Midland basin is almost 3/4 70% operated by Exxon and Diamondback, really kind of in the Midland Glascock, up 10 Reagan area and a lot of undeveloped acreage, particularly under Exxon. So I would say that looks a lot like Viper does,,,,, today. The Delaware, the Texas Delaware looks pretty similar with some of the Reiss county assets under Permian Resources, for example. I would say what's different is probably some of the New Mexico assets and that's the exposure that we outlined under Conoco, Oxy and EOG. So it's really a balanced mix. It gets a lot of what we like in the Midland Basin and gets kind of some new exciting exposure in New Mexico. That vibrant historically hasn't had a huge presence in.

Greta Drefke (Equity Analyst)

Great, thank you.

OPERATOR

Thank you. Our next question comes from the line of Betty Jang with Barclays.

Betty Jang (Equity Analyst)

Hello, Good morning again. So I want to ask about capital allocation given Diamondback is taking a more opportunistic approach on buyback. So can you speak to the capital allocation process, decision making for VIPR in terms of both percentage of free cash flow being returned and the allocation of that cash return in the form of buyback versus variable dividend?

Austin Gilfillen (President)

Yeah, Betty, good question. You know, I would say the difference between Viper and Diamondback still remains that, you know, because of the low cap or zero capex at Viper and the fact that this was taken public as a distribution vehicle, we still want it to be primarily a distribution vehicle where share repurchases are brought into the equation when we have a unique situation with an unorthodox seller or a non long term holder of the stock or the stock's significantly depressed in terms of valuation versus Diamondback, where you have an EMP business with CapEx and, and I think different priorities in terms of free cash generation. So we kind of went to this number where we're going to distribute at least 75% of our free cash every quarter. This quarter we went with 90% because the balance sheet's in really, really good shape. And we'll see what happens in Q2 if we have significantly higher prices throughout the quarter. I think we have flexibility to return anywhere between 75 and 90% of free cash because we know that the excess free cash flow is going to pay down the Riverbend deal very, very quickly. So Viper's in a really good spot. But I would say overall focused on more cash going out the door than repurchases and less need for debt reduction given the position of the business.

Betty Jang (Equity Analyst)

Right, that makes sense. My follow up is actually something that you mentioned on the Diamondback call on this resource recovery that we are on the cusp of a technical breakthrough that we could see resource recovery increasing in the Permian. Clearly that's beneficial for vipr. Yeah, beneficial for vipr. Maybe just speak to. Are you seeing any. Where are you seeing the productivity trends across Midland and Delaware and whether how that potentially higher resource recovery could help to drive Viper production growth in the future down the road as well.

Case Vantoff (CEO)

Yeah. Well, listen, this is I think a long term mega theme. Right. I don't have a ton of concrete examples today. Obviously we've done some tests at the Diamondback level of surfactants and advanced chemicals, you know, and those have been done on Areas where we do have Viper interest. So, you know, Viper does,, get that benefit. It's immaterial today, but you know, just using the crystal ball four to six years down the road here, could that be a material part of Diamondback's capital plan and therefore Viper's production profile? I think that's entirely possible. The other thing that is, the key advantage that Viper has is being in 50% of the wells in this basin. We have a differential knowledge as to what everybody's trying across both sides of the basin. So as these tests continue, we will have differential information at Viper and hopefully leverage that to improve returns across both, you know, both Snake companies.

Betty Jang (Equity Analyst)

Great, helpful. Thank you.

Austin Gilfillen (President)

Thanks Betty.

OPERATOR

Thank you. And our next question comes from the line of Neil Dingman with William Blair.

Neil Dingman (Equity Analyst)

Hey Case, my first question just on production guide besides the boost in Diamondback, could you just talk about what other sort of upside and third party activity you're assuming?

Case Vantoff (CEO)

Yeah, I mean I'll give you my high level. We haven't booked a ton of third party acceleration or faster development yet in our guide. I think it's likely to come, but we haven't seen, we've seen the leading indicators, but we haven't seen them kind of convert into ducs and wells turning online. But I think if I was a betting man today at these oil prices, things are going to accelerate throughout the basin. I would say it's two parts to the equation. One is the absolute amount of ducts and permits that we have and then the second part is how quickly those get converted to production. So it's easy to see in real time any increase that happens in the DUC and permit count. It's harder to get a feel for the quicker conversion rates. So right now I would say we're getting the benefit of any increased permitting activity, but we haven't modeled increased rates of conversion. And really that's going to be the biggest driver as you think how it impacts the next six months. So we're watching and monitoring things as they evolve and we expect some things to come our way, but probably haven't fully baked in the acceleration benefit from third party operators across the basin.

Neil Dingman (Equity Analyst)

Thanks, Austin. And then just secondly, just on the M and A side taze I'm wondering is after that, I forget earlier this year, the prior sale, are you holding much that your Austin now would consider non core at this time?

Case Vantoff (CEO)

No, we cleaned up all the non Permian assets and used that to put the balance sheet in perfect shape. And I think we kind of see a wave of private equity backed mineral companies going to at least try to test the market here over the next couple quarters to a year and I think we're pretty primed from a positioning perspective to take advantage of that.

Neil Dingman (Equity Analyst)

Perfect. Thank you all.

Case Vantoff (CEO)

Thanks Dale.

OPERATOR

Thank you. Our next question comes from the line of Paul diamond with Citi.

Paul Diamond (Equity Analyst)

Thank you all. Good morning. Thanks for taking the call. Just a quick touch on post River Bend and the M and A outlook. I think you guys talked about the availability of deals but I guess how has recent volatility really impacted the bid? Asks at the deals of different sizes. Are you seeing a bit more convergence of those large deals which Riverview is an example of or as what are you seeing on the volatility of the bid? Ask there.

Austin Gilfillen (President)

Yeah, we only have really one good data point with the Riverbend deal and I think what's interesting about that deal is the strip is so backwardated that we can actually underwrite a relatively moderate flat oil price scenario for the nab of that deal called 65 $70 a barrel and that actually isn't too far off from where the strip is. So you have the front end that's so high. So yeah we're paying a lower front year cash flow multiple but we're not breaking our pick on nav because the navigation is pretty tied to that long term mid cycle price that we're underwriting. So that's kind of a unique situation. I think Riverbend had owned this position for a while and they were looking for an exit and the stars aligned and they were the first to make the move and credit to them they've now got 3 million shares of stock that's up 8 to 10% from where we did the deal and that's called a win win. But you know the rest. I haven't seen anything else hit the market yet. I just know that it seems like the bankers phones are ringing off the hook to try to learn about what the market looks like versus hitting the market actively.

Paul Diamond (Equity Analyst)

Got it. Makes perfect sense. There's one quick piece on cleanup for housekeeping I guess cash taxes, bit of run up with recent pricing I guess. At what point do you guys see is it still like a 2728 where things kind of settle down like run rate out or is there how much of that's current volatility pulled that date forward?

Austin Gilfillen (President)

Yeah, so the rate's not changing that much in itself. We still have the 27 to 30% of pre tax income and that's really your kind of 21% statutory rate and you're just getting gained higher on an income basis given you have a higher depletion rate from an income perspective than you do from a tax perspective. So first quarter taxes were higher as an absolute dollar amount than we guided to just because income was up. But we kind of expect that 27 to 30% to be a pretty steady rate going forward.

Paul Diamond (Equity Analyst)

Understood. Appreciate the clarity. I'll leave it there.

OPERATOR

Thank you. Our next question comes from the line of Derek Whitfield with Texas Capital.

Derek Whitfield (Equity Analyst)

Good morning guys and thanks for your time again. Hey, Derek, Case, perhaps for you, just I guess more broadly, as you think about the green line environment for Diamondback, what degree of flexibility do you have in the development plan at Diamondback to lean more into the areas where Venom has higher NRIs for both 26 and 27?

Case Vantoff (CEO)

Yeah, I mean, I think the, the way we look at it remains the same. We do look at all of our inventory on a consolidated basis for the portion of Viper that Diamondback owns. That moves the high interest area to the front of the development plan. I think if anything over the next couple years, given the quality of what we've seen in the Barnett near Spanish Trail, I probably bet that that area gets accelerated versus expectations over the next kind of 18 to 24 months. One of our best Barnett Wells is right offset Spanish Trail. And it's very unique to have an area where you own 100% of the minerals. So I think we have a two well test coming on, a four well test coming on in Spanish Trail later this year. But if I was a betting man, I would say that that's going to result in accelerated development of the rest of that ranch.

Derek Whitfield (Equity Analyst)

Great, that makes sense.

Case Vantoff (CEO)

And then maybe just More specific on 2026 guidance, is it fair to think about the cadence of growth beyond 2Q as a steady build of maybe 1,000 per quarter to get to the average of 65,500?

Derek Whitfield (Equity Analyst)

Yeah, I think that's directionally right. I mean, we'll see how things trend and if activity gets brought forward, that can move things a little bit. But as we see things today, that seems directionally right. Great update, guys. Thanks for your time.

OPERATOR

Thank you.

Leo Mariani (Equity Analyst)

Thank you. Our next question comes from the line of Leo Mariani with Roth. I just wanted to revisit the question of sort of variable dividend versus buybacks on the fang call. You guys were pretty clear that you wanted to take more of a countercyclical approach. And when we're well above mid cycle oil prices, which we certainly, probably likely are here today, that you would certainly Lean more on paying down debt. Obviously you don't really need to do that here at Venom. Should be thinking about that. Similarly, where at a higher mid cycle oil price, you're much more likely to just push money to the variable dividend and the buyback could be a little bit more muted in the near term. Just any color on that would be great.

Austin Gilfillen (President)

Yes, Leo, I think generally you're correct. We're going to lean more towards cash returns at Viper. It's kind of how the business was set up. We haven't used a ton of leverage in deals, particularly at the dropdown then Citio, we paid off most of that sitio debt with the non core asset sale. So the uses of free cash flow, you know, Viper, obviously base dividend, that's going to continue to grow. I put the variable dividend probably a little bit above repurchases just because that's how the business was set up. And I don't think we're going to sit on a bunch of cash at Viper given the strength of the balance sheet. So the decision tree becomes easier when you're a distribution vehicle versus kind of a overall nav growth vehicle at Diamondback, where we're going to keep distributing cash, we're going to grow these per share metrics and that should result in a higher stock price but also higher distributions. Yeah, Lee, and I think it really shines the advantage of the business model too. When you have 90% free cash flow margins, it really allows you to do all of the above. Right. You can pay a big dividend with the base variable. You can opportunistically invest in the business, whether that's buybacks or acquisitions. And then you can have targeted debt reductions, especially in times of higher commodity prices and you don't have to sit around as much and wonder which of those options you choose. You can do all of them because when you look at your investment as a percentage of your operating cash flow, it's pretty low just given your margins.

Leo Mariani (Equity Analyst)

Yep, certainly makes sense. Wanted to jump back over to the Riverbend deal here. So you kind of did a good job kind of talking about where the acreage was in terms of the key operators remaining there. You kind of made a bit of a high level comment that some of the stuff under Exxon was a little bit more underdeveloped. I just wanted to get maybe a little sense of just kind of the overall flavor of the inventory there. Is it going to be a little bit more geared towards the emerging zones or is there still substantial. Let's call it core kind of legacy zones. Wolfcamp A, Wolf Camp B and whatever on the acreage. So just any color there would be great.

Austin Gilfillen (President)

Yeah, most of the value will come from your core zones being undeveloped, especially in New Mexico and in the Midland piece. If you kind of look at a map and you look at the Midland glasscock line kind of in what we call the Four Corners area there, there's a big chunk of legacy Pioneer now Exxon, completely undeveloped acreage that I think will be the primary acreage that supports the production profile over the coming years. But you know, as you dig in and you think about some of the unquantified zones that we didn't have to pay for, certainly you're getting the emergence of the Barnett in the Midland and also the Woodford in the Delaware, kind of on the eastern edge of the Delaware basin. Getting pretty excited about that now. So I think it's a good mix of existing production and also core undeveloped zones that you get the kind of unquantified upside to go along with it. And that's kind of the beauty of the mineral business model.

Leo Mariani (Equity Analyst)

Yup, that makes sense. And then just a follow up there. So I know you gave some production numbers over the next 12 months, but just based on what you're describing, would you expect that if we kind of hang out at these oil prices that perhaps that production grows a bit over time? It sounds like there's enough inventory there to probably grow that individual piece. Is that fair?

Austin Gilfillen (President)

Yeah, I think 27 probably grows and it's got a couple years of slight growth. And then you know, generally if you zoom out and look over a five to ten year period, it looks pretty flat. But 27 certainly looks probably higher than what the MTM production number that we put out.

Leo Mariani (Equity Analyst)

Okay, thanks.

OPERATOR

Thank you. Our next question comes from the line of Tim Resvan with Keybanc Capital Markets.

Tim Resvan (Equity Analyst)

Good morning folks. Some of mine have been answered. So I just had one for you. We were a little surprised that the Viper's sale earlier this year was mostly diamondback selling and not as many unorthodox. So that overhang is still out there a bit. I'm just curious, is there a price at which you potentially wouldn't participate if some of these unnatural holders come to market? Or how do you think about kind of dampening volatility? Should they look to sell? Because shares are back up to about $50.

Austin Gilfillen (President)

Thanks. Yeah, Tim, I mean it's a good question. I think it kind of depends on the size of the deal and the nature of the trade. I think if it's a sizable deal and we need to participate to make sure it goes smoothly with public shareholders, then we want the long term holders of the stock to win long term. So we know that that's probably a good use of capital. If it's smaller one offs, we probably don't need to support it given the higher float and liquidity of the business. So I think flexibility is key. Size of the prize is also key and we're well on our way to at VIPR, to continuing towards that goal. The S&P 500 as the business gets bigger, that's going to only help float liquidity, ability to exit and ability to get deals done.

Tim Resvan (Equity Analyst)

Okay, appreciate the comment. If I could take a quick follow up. You gave some comments, Austin, on sort of the M and A outlook. We've heard from some minerals peers that all else equal, a higher strip is bringing sellers to market. So are you seeing that dynamic as well or are you facing a different dynamic because you're sort of elephant hunting with a couple of the very large packages out there?

Austin Gilfillen (President)

No, I mean we've seen it on both levels. So we're still actively engaged in our ground game and I think calls have picked up on that front. You would think surely as a result of where oil prices have moved. So we've seen it there on the smaller deals and then we've also seen it. Case was mentioning before that the phones are definitely ringing on some of these mid to larger packages. I just can't predict yet today what the higher strip or what the volatility means in terms of ability to get deals done. But I think the supply is going to be there. So it's just key for us to stay disciplined and under the right deals where we can generate good returns. And I think if we do that, things will come our way over time.

Tim Resvan (Equity Analyst)

Thank you.

OPERATOR

Thank you. I will now hand the call back over to CEO Case Vant Hoff for closing remarks.

Case Vantoff (CEO)

Well, thanks everybody for your time on a busy week and thanks for your support of Viper Energy. And the future is bright.

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