Viper(US:VNOM)2025-11-04 18:02Financial Data and Key Metrics Changes - Viper Energy's fourth quarter 2025 oil production guidance indicates a roughly 20% increase in oil production per share compared to the same quarter last year [4] - The combined base plus variable dividend represents a greater than 6% annualized yield, with an increase of almost 10% relative to the previous quarter's dividend [5] - The return of capital per Class A share in the third quarter represents a 48% increase versus the second quarter [5] Business Line Data and Key Metrics Changes - The company anticipates mid-single-digit organic oil production growth from fourth quarter 2025 estimated production, implying double-digit year-over-year growth in oil production per share relative to 2025 [4] - Viper's asset base has captured almost half of all third-party activity in the Permian Basin, indicating strong operational performance [7][16] Market Data and Key Metrics Changes - The company has seen strong activity levels across its asset base, expecting mid-single-digit organic growth in 2026 despite commodity price volatility [7] - The non-Permian asset sale is expected to enhance the company's balance sheet and return of capital strategy [6][11] Company Strategy and Development Direction - Viper Energy is focused on returning nearly 100% of cash available for distribution to stockholders, with a commitment to buy back shares in the current market environment [6][11] - The company aims to leverage its differentiated return of capital profile and maintain a strong balance sheet while pursuing growth opportunities [5][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver sustained per share growth with zero capital and limited operating costs, even during market volatility [8] - The relationship with Diamondback is expected to drive growth for at least the next couple of years, with a projected interest of 5% to 7% in all of Diamondback's wells [34] Other Important Information - The company is integrating AI and automation to enhance operational efficiency and data management, which is expected to provide a competitive advantage [22][40] - The net proceeds from the recent asset sale are projected to be about $610 million, which will be used to pay down debt and enhance financial flexibility [26] Q&A Session Summary Question: Near-term and 2026 capital allocation following the asset sale - Management indicated that they plan to return nearly 100% of free cash to shareholders and will be aggressive with buybacks due to market dislocation [11][12] Question: Activity trends outside of Diamondback - Management confirmed strong activity levels across the asset base, with Viper capturing almost half of all activity in the Permian Basin [15][16] Question: Contribution of CTO to third-party activity - Management stated that the increase in third-party activity is evenly mixed between the CTO contribution and legacy assets outperforming expectations [21] Question: Impact of AI on operations and M&A - Management highlighted the potential for AI to improve operational efficiency and data utilization, with a focus on automation [22][40] Question: Considerations regarding cash inflows from asset sales - Management noted a slight tax hit on proceeds, but overall, the cash will be used to strengthen the balance sheet and return capital to shareholders [26] Question: A&D market outlook - Management indicated that while larger strategic acquisitions may be challenging in the current environment, smaller acquisitions are still possible [28] Question: Guidance for 2026 and price sensitivity - Management clarified that the guidance reflects a maintenance level of activity and is insulated from gross reductions in Diamondback's activity [39] Question: Clarification on growth guidance and asset sale impact - Management explained that the growth guidance for 2026 is based on retained assets post-asset sale, with a couple thousand barrels of growth expected [45] Question: Future of variable dividend growth - Management stated that the growth of the variable dividend will depend on market conditions, but they aim to balance buybacks and cash distributions [48]