Viper Energy, Inc. Q3 FY2026 earnings call

• Production Growth: Oil production averaged over 69,000 barrels per day in Q3, exceeding the high end of guidance and representing a >6% quarter-over-quarter increase driven by acquisitions and operator development.
• Acquisition Activity: Closed the Riverbend acquisition (July), Diamondback drop-down (Sept), McElroy Ranch ($529M cash, adding ~7,400 net royalty acres in Upton/Crane counties), and announced the Buckhorn Minerals acquisition (~1,600 net acres for $280M cash + shares).
• Capital Allocation Strategy: Shifted to funding accretive M&A primarily with cash rather than equity, maintaining sub-1x leverage while delivering a base dividend of $0.50/share and executing $90M in share repurchases.
• Strategic Positioning: Emphasized a 'grow or die' philosophy, leveraging strong free cash flow conversion to pursue high-quality, undeveloped inventory assets that are expected to outperform basin averages over the long term.

The provided transcript does not contain a detailed breakdown of financial performance by specific product segments (e.g., mineral vs. surface rights) in absolute terms or revenue contribution percentages. The company reports consolidated financial results, highlighting $520 million in free cash flow with an approximate 80% free cash flow margin.

• Full Year 2026 Oil Production: Raised to a new midpoint of 67,500 barrels per day.
• Fourth Quarter 2026 Oil Production: Initiated guidance of 70,000 to 71,000 barrels per day, an increase of nearly 1,500 barrels per day from Q3 actuals, inclusive of partial contributions from the Buckhorn acquisition.

• Operational Execution Risk: Reliance on third-party operators (e.g., Chevron in the Barnett) introduces uncertainty regarding development cadence and timing, as Viper has limited visibility into specific operator plans.
• Market Timing and Valuation: The ability to execute accretive deals depends on counterparty willingness to sell; in low-price environments, upstream operators may be forced to sell due to CapEx pressures, whereas mineral owners may hold, potentially limiting deal flow at lower oil prices.
• Integration and Debt Management: While funding acquisitions with cash reduces equity dilution, the company must manage the rapid paydown of incremental debt associated with these large transactions to maintain balance sheet health.

Q: Betty Zhang (Barclays) asked about the M&A landscape, specifically why deals are closing now, future opportunities, and balance sheet capacity. / A: Kaes Van't Hof explained that packages like Buckhorn and Riverbend were ripe for years but required speed and cash capability. He noted that Viper’s scale allows it to act as a preferred counterparty for complex deals like McElroy Ranch. Austen Gilfillan added that Viper can be picky, focusing on assets with significant undeveloped inventory to generate differential returns through unique asset quality views.

Q: Neil Dingmann (William Blair) asked about further drop-downs of minerals/surface and how the revised capital framework improves investor returns. / A: Kaes stated all known minerals at Diamondback have been dropped down, though surface revenues are being evaluated for potential future transactions. He emphasized that retaining cash for growth rather than distributing it all prevents limiting opportunities, allowing Viper to complete over $1B in deals this year while maintaining sub-1x leverage and growing the base dividend sustainably.

Q: Jack Cavanaugh (Goldman Sachs) inquired if Venom's stock performance influences the FANG-Venom relationship and future support. / A: Kaes admitted selling Venom shares in March was a mistake that sent the wrong message, but clarified that the strategic relationship remains strong. He highlighted increased ownership via the drop-down and noted that both companies have flexible capital allocation options—such as buybacks, debt paydown, or deals—to maximize value for their respective shareholder bases without conflict.

Q: Leo Mariani (Roth Capital) asked if Barnett activity benefits Viper more on margins/NRI and if McElroy is a medium-term bet. / A: Austen Gilfillan clarified that near-term NRI metrics remain similar regardless of zone, as returns depend on total completions and Viper's interest percentage. However, he noted excitement around targeted acquisitions in the Barnett. Kaes confirmed McElroy Ranch is a long-term play on the Barnett's emergence as a core fairway, citing existing productivity in adjacent zones and testing eastward.