Core Thesis - Viper Energy, Inc. (VNOM) is positioned as a unique energy royalty business focused on the Permian Basin, generating high cash flow with limited operational risk [2][3] Financial Performance - VNOM's trailing and forward P/E ratios are 15.49 and 55.25 respectively, indicating a valuation that may not fully reflect its potential [1] - The company achieves EBITDA margins above 90% and free cash flow margins exceeding 70%, even in lower commodity price environments [3] - At a commodity price of approximately $60 per barrel, VNOM offers over 10% cash-on-cash free cash flow yield, with an estimated payback period of 10 to 11 years [3] Operational Structure - VNOM owns subsurface mineral rights across about 86,000 net royalty acres, functioning more like an upstream capital provider rather than a traditional producer [2] - The company maintains low leverage with a net debt to EBITDA ratio of roughly 1x, allowing for flexibility in value compounding through mineral acquisitions and share buybacks [4] Shareholder Returns - VNOM is committed to returning at least 75% of cash available for distribution to shareholders through dividends and repurchases, resulting in an approximate 8% current cash yield [5] - The relationship with Diamondback Energy provides a steady pipeline of potential mineral dropdowns, enhancing VNOM's role as a consolidator in the Permian [5] Market Position - Despite strong performance and scale achieved through the Sitio merger, VNOM trades at a valuation discount compared to similar royalty businesses, presenting a long-term compounding opportunity [7] - The combination of strong free cash flow generation and a declining share count over time offers attractive downside protection and significant upside potential [7]