Viper(US:VNOM)2025-08-06 20:05PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The company presents its unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2025 Condensed Consolidated Balance Sheets The balance sheet shows a significant increase in total assets to $9.79 billion, driven by acquisitions and equity offerings Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $443 | $238 | | Property, net | $9,294 | $4,638 | | Total Assets | $9,788 | $5,069 | | Total Current Liabilities | $72 | $49 | | Long-term debt, net | $1,098 | $1,083 | | Total Liabilities | $1,177 | $1,162 | | Total Equity | $8,611 | $3,907 | | Total Liabilities and Stockholders' Equity | $9,788 | $5,069 | Condensed Consolidated Statements of Operations The company reported total operating income of $297 million and net income of $84 million for Q2 2025 Condensed Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total operating income | $297 | $216 | | Depletion | $124 | $48 | | Income from operations | $135 | $148 | | Net income | $84 | $123 | | Net income attributable to Viper Energy, Inc | $37 | $57 | | Diluted EPS | $0.28 | $0.62 | Condensed Consolidated Statements of Cash Flows Net cash from operations was $373 million for the first half of 2025, with significant cash used for acquisitions Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $373 | $259 | | Net cash provided by (used in) investing activities | $(1,260) | $61 | | Net cash provided by (used in) financing activities | $888 | $(311) | | Net increase (decrease) in cash | $1 | $9 | Notes to the Condensed Consolidated Financial Statements The notes detail significant transactions including the pending $4.1 billion Sitio acquisition and a $1.2 billion equity offering - On June 2, 2025, the Company entered into an agreement to acquire Sitio Royalties Corp in an all-equity transaction valued at approximately $4.1 billion555662 - On May 1, 2025, the Company completed the '2025 Drop Down' acquisition from its parent, Diamondback, for $1.0 billion in cash and 69.6 million OpCo Units and Class B shares6568 - In February 2025, the Company completed a public offering of 28.3 million shares of Class A Common Stock, raising net proceeds of approximately $1.2 billion to fund acquisitions9697 - Subsequent to the quarter end, in July 2025, the company issued $1.6 billion in new senior notes and used proceeds to redeem or discharge $780 million of existing notes139141144 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant production growth from acquisitions, the pending Sitio merger, and recent financing activities Recent Developments and Acquisitions The company details its pending ~$4.1 billion acquisition of Sitio Royalties and other completed transactions expanding its Permian Basin footprint - Announced the pending acquisition of Sitio Royalties in an all-equity deal valued at ~$4.1 billion, expected to close in Q3 2025152 - Completed the '2025 Drop Down' from Diamondback, acquiring 24,446 net royalty acres in the Permian Basin for $1.0 billion cash and equity159 - Completed the Morita Ranches Acquisition, adding 1,691 net royalty acres in the Permian Basin for ~$207 million cash and equity160 - As of June 30, 2025, the company's total mineral and royalty interests reached approximately 61,275 net royalty acres162 Guidance and Production The company provides updated 2025 production guidance and reports strong Q2 2025 well activity Full Year 2025 Guidance | Metric | Guidance | | :--- | :--- | | Net production (MBO/d) | 41.0 - 43.5 | | Net production (MBOE/d) | 76.5 - 81.5 | | Depletion ($/BOE) | $16.50 - $17.50 | | Cash G&A ($/BOE) | $0.80 - $1.00 | | Cash tax rate (% of pre-tax income) | 21% - 23% | - In Q2 2025, 302 gross horizontal wells were turned to production on the company's acreage, with an average net royalty interest of 2.2%169 - As of June 30, 2025, there are 69 gross rigs operating on the company's mineral and royalty acreage, with 11 operated by Diamondback168 Results of Operations Royalty income increased sequentially due to a 40% production growth, though partially offset by lower commodity prices Production and Pricing Comparison (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Avg. daily combined volumes (BOE/d) | 79,286 | 57,378 | | Avg. oil sales price ($/Bbl) | $63.64 | $71.33 | | Avg. combined sales price ($/BOE) | $39.78 | $47.25 | - Royalty income increased by $43 million sequentially in Q2 2025, driven by a $90 million increase from 40% production growth, partially offset by a $47 million decrease from lower commodity prices176 - Depletion expense increased by $57 million sequentially in Q2 2025, with $30 million from a higher depletion rate ($17.19/BOE vs $12.97/BOE) and $27 million from higher production volumes180 - For the first six months of 2025, royalty income increased by $111 million year-over-year, as a 45% production growth more than offset a $63 million negative impact from lower oil prices190 Liquidity and Capital Resources The company maintained $1.2 billion in liquidity and executed significant debt refinancing subsequent to the quarter - As of June 30, 2025, the company had approximately $1.2 billion of liquidity, consisting of $28 million in cash and $1.2 billion available under its revolving credit facility198 - In July 2025, the company issued $1.6 billion in new senior notes and entered into a new $500 million term loan facility, using part of the proceeds to redeem or discharge $780 million of existing notes198 - The company's board authorized a $750 million common stock repurchase program, with approximately $424 million remaining available as of June 30, 2025213 - The company received an investment-grade credit rating from Fitch in May 2025, its second such rating, which enhances liquidity and lowers borrowing costs211 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are volatile commodity prices, managed with derivatives, and interest rate risk on its debt - The company's primary market risk is the pricing of oil and natural gas, which is volatile and influenced by factors beyond its control226 - To reduce price volatility, the company uses derivative contracts, including fixed price swaps and costless collars227 - The company is exposed to interest rate risk on its revolving credit facility, which had $325 million in outstanding borrowings at a weighted average interest rate of 6.33% for Q2 2025230 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the quarter-end - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures are effective232 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls233 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine litigation that is not expected to have a material adverse effect on its financial condition - The company is involved in routine litigation from time to time, but management does not expect any pending cases to have a material adverse effect on its financial condition, cash flows, or operations236 Item 1A. Risk Factors This section updates risk factors, focusing on potential challenges related to the pending acquisition of Sitio Royalties Corp - The completion of the Pending Sitio Acquisition is subject to various closing conditions, including Sitio stockholder approval, and there is no assurance these conditions will be met238239 - The merger agreement with Sitio contains termination rights for both parties, and if the deal is not consummated, it could negatively impact the company's business and stock price240243 - Integrating Sitio's business may be more difficult, costly, or time-consuming than expected, and the company may fail to realize the anticipated benefits of the acquisition245 - The company may be subject to litigation challenging the acquisition, which could prevent or delay its consummation and result in substantial costs244 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 255,843 shares during Q2 2025, with $424.4 million remaining under its repurchase program Issuer Repurchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 239,374 | $37.85 | | May 2025 | 16,469 | $39.93 | | June 2025 | 0 | $0.00 | | Total | 255,843 | $37.99 | - As of June 30, 2025, approximately $424 million remained available for share repurchases under the company's $750 million program252253 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025254 Item 6. Exhibits This section lists key agreements filed with the Form 10-Q, including those for the Sitio merger and recent debt facilities - Key exhibits filed include the Equity Purchase Agreement with Endeavor Energy (Exhibit 2.1), the Agreement and Plan of Merger with Sitio Royalties (Exhibit 2.2), and the new Credit Agreement dated June 12, 2025 (Exhibit 10.1)255