Diamondback Energy subsidiary Viper Energy acquires mineral, royalty interests

Viper Energy (VNOM), a subsidiary of Diamondback Energy (FANG) has entered into a definitive purchase and sale agreement to acquire certain mineral and royalty interests from affiliates of Warwick Capital Partners and GRP Energy Capital in exchange for approximately 9.02 million Viper common units and $750M of cash. The cash portion of this transaction is expected to be funded through a combination of cash on hand, borrowings under the company’s credit facility, and up to $200M of committed equity from Diamondback, as well as proceeds from one or more capital markets transactions. Highlights of the acquisition include: approximately 4,600 net royalty acres in the Permian Basin, plus an additional ~2,700 net royalty acres in other major basins; total acreage of roughly 7,300 net royalty acres; Permian Basin assets representing over 90% of current production and total deal value; valuation implies a greater than 15% 2024 unlevered free cash flow yield at current strip prices giving credit to only existing PDP, DUCs and permits; high confidence visibility to near-term production growth results in immediate accretion to all relevant financial metrics; accretion expected to grow in subsequent years due to the highly undeveloped nature of the asset; current production of approximately 4,000 bo/d or ~7,000 boe/d; expected to increase to ~4,750 bo/d or ~8,500 boe/d for full year 2024; increases expected pro forma 2024 per unit return of capital to unitholders by an estimated 7-8%. Viper will issue approximately 9.02 million common units to the seller at closing. Effective date is October 1, with closing anticipated by the middle of Q4 2023. Leverage is expected to be around 1.3x at year end of 2023 based on estimated pro forma Q4 2023 annualized EBITDA, expected to decrease thereafter at current strip prices while still maintaining commitment to return 75% of cash available for distribution to unitholders. Pro forma Viper highlights include preliminary full year 2024 average daily production guidance of 25,500-27,500 bo/d or 44,500 to 48,000 boe/d, the midpoint of which is 25% higher than standalone Viper’s Q2 2023 average daily oil production; approximately 32,000 net royalty acres in the Permian Basin; 60 active rigs currently operating on combined acreage position in the Permian Basin, with an average 1.7% NRI expected in those wells.