Viper Energy, Inc. (VNOM) Q1 2026 Earnings Report, Transcript and Summary

Hello, and welcome to the Viper Energy, Inc. 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 *11 on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press *11 again. Please be advised that today’s conference is being recorded. It is now my pleasure to introduce Director of Investor Relations, Chip Seale.

Thank you, Andrew. Good morning, and welcome to Viper Energy, Inc.’s first quarter 2026 conference call. During our call today, we may reference an updated investor presentation which can be found on Viper Energy, Inc.’s website. Representing Viper Energy, Inc. today are Kaes Van't Hof, CEO, and Austen Gilfillian, 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 Kaes.

Thank you, Chip. Welcome everyone, and thank you for listening to Viper Energy, Inc.’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% and expect growth to be driven primarily by Diamondback’s acceleration in near-term activity and continued development of Viper Energy, Inc.’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 Energy, Inc. also continues to execute on our differentiated inorganic growth strategy. Yesterday, we announced the Riverbend acquisition, in which Viper Energy, Inc. 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 $0.68 per share dividend and $0.28 per share of stock repurchases executed in the quarter. As we have 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 is 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 Energy, Inc. offers a differentiated investment 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.

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

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

Hey, Greta. Thanks for the question. I think it is going to be both. This deal with Riverbend is kind of the first deal in this size range that we have executed at Viper Energy, Inc.’s new pro forma size and scale, meaning post drop-down. I think it is a nice tuck-in acquisition, and we can execute on these very seamlessly. When you think about the opportunity set of deals in this size range, it is quite sizable, actually. In addition to that, there is a handful of larger opportunities. We will see how things play out. It is 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. I would say I am cautiously optimistic, but the opportunity set, both medium-sized and larger, is really quite massive for Viper Energy, Inc. We think we have 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 Energy, Inc. three or four years ago, and now we are 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. I think it is pretty clear that any large private equity-backed mineral position that has been built over the last five-plus years is now considering an exit with oil prices where they are. I think we are clearly the buyer of choice, but we 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.

Great. Thank you. That is very helpful. And then for my 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 Energy, Inc.’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 Energy, Inc.’s position.

Yes, so the Midland Basin is going to be a lot of overlap. The Midland Basin is almost three-quarters, call it 70%, operated by Exxon and Diamondback. We are really kind of in the Midland, Glasscock, up in Reagan area, and a lot of undeveloped acreage under Exxon. I would say that looks a lot like Viper Energy, Inc. does today. The Texas Delaware looks pretty similar with some of the Reeves County assets under Permian Resources, for example. What is different is probably some of the New Mexico assets, and that is the exposure that we outlined under Conoco, Oxy, and EOG. So it is really a balanced mix. It gets a lot of what we like in the Midland Basin, and it gets some new, exciting exposure in New Mexico that Viper Energy, Inc. historically has not had a huge presence in.

Thank you. And our next question comes from the line of Analyst with Barclays.

Hello. Good morning again. I want to ask about capital allocation. Given Diamondback is taking a more opportunistic approach on buybacks, can you speak to the capital allocation process and decision-making for Viper Energy, Inc. in terms of both the percentage of free cash flow being returned and the allocation of that cash return in the form of buybacks versus variable dividend? My follow-up is actually something that you mentioned on the Diamondback call, this resource recovery, that we are on the cusp of a technical breakthrough and could see resource recovery increasing in the Permian. Clearly, that is beneficial for Viper Energy, Inc. Maybe just speak to where you are seeing the productivity trends across Midland and Delaware, and how that potentially higher resource recovery could help drive Viper Energy, Inc.’s production growth down the road as well.

Good question. I would say the difference between Viper Energy, Inc. and Diamondback still remains that, because of the low or zero CapEx at Viper Energy, Inc. and the fact that this was taken public as a distribution vehicle, we still want 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 is significantly depressed in terms of valuation. Versus Diamondback, where you have an E&P business with CapEx and different priorities in terms of free cash generation. So we have gone to this number where we are going to distribute at least 75% of our free cash every quarter. This quarter we went with 90% because the balance sheet is in really, really good shape, and we will 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. Viper Energy, Inc. is in a really good spot, but I would say overall we are focused on more cash going out the door than repurchases and have less need for debt reduction given the position of the business. On the resource recovery theme, this is a long-term megatheme. I do not have a ton of concrete examples today. Obviously, we have done some tests at the Diamondback level of surfactants and advanced chemicals, and those have been done in areas where we do have Viper Energy, Inc. interest, so Viper Energy, Inc. does get that benefit. It is immaterial today, but using the crystal ball four, five, six years down the road, could that be a material part of Diamondback’s capital plan and therefore Viper Energy, Inc.’s production profile? I think that is entirely possible. The other key advantage that Viper Energy, Inc. has is being in roughly 50% of the wells in this basin. We have differential knowledge as to what everybody is trying across both sides of the basin. As these tests continue, we will have differential information at Viper Energy, Inc. and hopefully leverage that to improve returns across both companies.

Thank you. And our next question comes from the line of Neal Dingmann with William Blair.

Hey, Kaes. My first question, just on production guidance: besides the boost in Diamondback, could you talk about what other sort of upside third-party activity you are assuming? And secondly, just on the M&A side, after the prior sale earlier this year, are you holding much that you would now consider non-core at this time?

I will give you my high level. We have not booked a ton of third-party acceleration or faster development yet in our guide. I think it is likely to come, but we have seen the leading indicators without seeing them convert into dust and wells turning online. If I was a betting man, at these oil prices, things are going to accelerate throughout the basin.

There are two parts to the DUC equation. One is the absolute amount of DUCs and permits that we have; the second part is how quickly those get converted to production. It is easy to see in real time any increase that happens in the DUC and permit count. It is harder to get a feel for the quicker conversion rates. Right now, we are getting the benefit of any increased permitting activity, but we have not modeled increased rates of conversion. That is going to be the biggest driver as you think about how it impacts the next six months. We are watching and monitoring things as they evolve, and we expect some things to come our way, but we probably have not fully baked in the acceleration benefit from third-party operators across the basin.

Thanks, Austen.

On the M&A side, we cleaned up all the non-Permian assets and used that to put the balance sheet in perfect shape. I think we will see a wave of private equity-backed mineral companies at least try to test the market over the next couple of quarters to a year, and we are primed from a positioning perspective to take advantage of that.

Thank you.

Thank you. And our next question comes from the line of Paul Diamond with Citi.

Thank you all. Good morning, and thanks for taking the call. Just a quick touch on Riverbend and the M&A. You talked about the availability of deals, but how has recent volatility impacted the bid-ask of the deals of different sizes? Are you seeing a bit more convergence on those large deals, of which Riverbend is an example? And just one quick piece of housekeeping: cash taxes had a bit of a run-up with recent pricing. At what point do you see things settle down? Is it still like 27% to 28% where things kind of level out, or how much has current volatility pulled that back?

We only have one good data point with the Riverbend deal. What is interesting about that deal is the strip is so backwardated that we can underwrite a relatively moderate flat oil price scenario for the NAV of that deal, call it $65 to $70 a barrel, and that actually is not too far off from where the strip is. You have the front end that is so high, so yes, we are paying a lower front-year cash flow multiple, but we are not breaking our pick on NAV because the NAV is pretty tied to that long-term mid-cycle price that we are underwriting. Riverbend had owned this position for a while, and they were looking for an exit, and the stars aligned; they were the first to make the move. Credit to them: they now have about 3 million shares of stock that are up 8% to 10% from where we did the deal, and that is a win-win. Beyond that, I have not seen anything else hit the market yet; I just know that supply is likely coming.

On cash taxes, the rate is not changing that much in itself. We still have the 27% to 30% of pretax income, and that is really your 21% statutory rate and the effect of having a higher depletion rate from an income perspective than from a tax perspective. For first quarter taxes, we were higher as an absolute dollar amount than we guided to because income was up, but we expect that 27% to 30% to be a pretty steady rate going forward.

Understood. Appreciate the clarity. I will leave it there.

Thank you.

And our next question comes from the line of Derrick Whitfield with Texas Capital.

Good morning, and thanks for your time again. Kaes, perhaps for you, more broadly as you think about the green-light environment for Diamondback, what degree of flexibility do you have in the development plan at Diamondback to lean more into the areas where Viper Energy, Inc. has higher NRIs for both 2026 and 2027? And 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 barrels per day per quarter to get to the average of 65.5?

I think 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 Energy, Inc. that Diamondback owns. That moves the high-interest area to the front of the development plan. If anything over the next couple of years, given the quality of what we have seen in the Barnett near Spanish Trail, I would bet that area gets accelerated versus expectations over the next 18 to 24 months. One of our best Barnett wells is right off that Spanish Trail, and it is very unique to have an area where you own 100% of the minerals. I think we have a two-well test coming on—it has been a four-well test—coming on in Spanish Trail later this year, and if I was a betting man, I would say that is going to result in accelerated development of the rest of that branch.

On the cadence, I think that is directionally right. We will see how things trend, and if activity gets brought forward, that could move things a little bit, but as we see things today, that seems directionally right.

Thank you.

Thank you. Our next question comes from the line of Leo Mariani with Roth.

I just wanted to revisit the question of variable dividend versus buyback. On the Diamondback call, you were pretty clear that you wanted to take more of a countercyclical approach and, when well above mid-cycle oil prices, lean more on paying down debt. Obviously, you do not really need to do that at Viper Energy, Inc. Should we be thinking similarly where at a higher-than–mid-cycle oil price, you are more likely to push money to the variable dividends and the buyback could be a bit more muted in the near term? Also, jumping back to the Riverbend deal: you did a good job talking about where the acreage was in terms of key operators. You made a high-level comment that some of the stuff under Exxon was a little more underdeveloped. Can you give a sense of the overall flavor of the inventory there? Is it geared more toward emerging zones, or is there still substantial core legacy zones like Wolfcamp A and Wolfcamp B? And based on what you are describing, if oil prices hang out here, would you expect that production grows a bit over time from that individual piece?

Generally, you are correct. We are going to lean more towards cash returns at Viper Energy, Inc. It is how the business was set up. We have not used a ton of leverage in deals—particularly the drop-down—and we paid off most of that CTO debt with the non-core asset sale. In the uses of free cash flow, Viper Energy, Inc. has a base dividend that is going to continue to grow. I would put the variable dividend probably a little bit above repurchases, just because that is how the business was set up. I do not think we are going to sit on a bunch of cash at Viper Energy, Inc., given the strength of the balance sheet. The decision tree becomes easier when you are a distribution vehicle versus an overall NAV growth vehicle at Diamondback. We are going to keep distributing cash, we are going to grow these per-share metrics, and that should result in a higher stock price but also higher distributions.

It really highlights the advantage of the business model when you have roughly 90% free cash flow margins. It allows you to do all of the above. You can pay a big dividend with a base plus variable, you can opportunistically invest in the business—whether that is buybacks or acquisitions—and you can have targeted debt reductions, especially in times of higher commodity prices. You do not have to sit around and wonder which of those options to choose, because your investment as a percentage of operating cash flow is pretty low given the margin. On Riverbend inventory, most of the value will come from your core zones being undeveloped, especially in New Mexico and in the Midland piece. If you look at the Midland–Glasscock line, kind of in what we call the four-corners area there, there is a big chunk of legacy Pioneer—now Exxon—completely underdeveloped acreage that I think will be the primary acreage that supports the production profile over the coming years. As you dig in and think about some of the unquantified zones that we did have to pay for, you are 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. We are pretty excited about that. So I think it is a good mix of existing production and also core undeveloped zones, and you get the unquantified upside to go along with it. That is the beauty of the mineral business model.

On the trajectory, I think 2027 probably grows, and it has got a couple of years of slight growth. Generally, if you zoom out and look over a five- to ten-year period, it looks pretty flat, but 2027 certainly looks higher than the next-twelve-month production number that we put out.

And our next question comes from the line of Tim Rezvan with KeyBanc Capital Markets.

Good morning, folks. Some of mine have been answered, so just one for you. We were a little surprised that the Viper Energy, Inc. secondary earlier this year was mostly Diamondback selling and not as many unnatural holders. That overhang is still out there a bit. Is there a price at which you potentially would not participate if some of these unnatural holders come to market? How do you think about dampening volatility should they look to sell because shares are back up to about $50? And as a follow-up, we have heard from some minerals peers that, all else equal, a higher strip is bringing sellers to market. Are you seeing that dynamic as well, or are you facing a different dynamic because you are sort of elephant hunting with a couple of the very large packages out there?

It kind of depends on the size of the deal and the nature of the trade. If it is a sizable deal and we need to make sure it goes smoothly with public shareholders, then we want the long-term holders of the stock to win long term, and that is probably a good use of capital. If it is smaller one-offs, we probably do not need to support it, given the higher float and liquidity of the business. Flexibility is key, and size of the prize is also key. We are well on our way at Viper Energy, Inc. toward that goal of S&P 500 inclusion as the business gets bigger. That is only going to help float, liquidity, ability to exit, and ability to get deals done.

We have seen it on both levels. We are still actively engaged in our ground game, and calls have picked up on that front, surely as a result of where oil prices have moved. We have seen it on the smaller deals, and we have also seen it on the mid to larger packages—the phones are definitely ringing. I just cannot predict yet what the higher strip or volatility means in terms of ability to get deals done. I think the supply is going to be there. It is key for us to stay disciplined, and when the right deals can generate good returns, we will act. If we do that, things will come our way over time.

I will now hand the call back over to CEO, Kaes Van't Hof, for closing remarks.

Thanks, everybody, for your time. Busy week, and thanks for your support of Viper Energy, Inc. The future is bright.

Ladies and gentlemen, thank you for participating. This does conclude today’s program, and you may now disconnect.