Viper Energy to expand with acquisition of Diamondback Energy’s mineral and royalty assets

Viper Energy, Inc. (NASDAQ: VNOM), a subsidiary of Diamondback Energy, Inc. (NASDAQ: FANG), has announced a transformative acquisition of mineral and royalty interests from its parent company. This highly anticipated drop down transaction will significantly enhance Viper Energy’s Permian Basin production, strengthening its foothold in the lucrative oil and gas royalty market.

Under the agreement, Viper will acquire Diamondback-operated mineral and royalty assets through a combination of cash and equity, issuing approximately 69.6 million OpCo units and an equal number of Class B common stock shares. The cash component, which will be worth $1bn, will be funded using cash reserves, credit facility borrowings, and potential capital market transactions, subject to market conditions. The transaction is expected to close in Q2 2025, pending customary closing conditions and shareholder approval from non-affiliated investors.

What does the Diamondback Energy deal mean for Viper Energy’s future production?

The Viper Energy acquisition includes approximately 23,100 net royalty acres (NRAs) in the Midland Basin, complemented by additional acreage in the Delaware and Williston Basins. These newly acquired assets will be instrumental in boosting Viper Energy’s mineral royalty interests, with Diamondback Energy operating over 70% of the Midland Basin NRAs at an average 5.0% net revenue interest (NRI).

With the expected completion of the acquisition, Viper Energy’s 2025 production is forecasted to surge, with daily oil output projected at 47,000 to 49,000 barrels per day (bo/d)—a 61% increase from its Q4 2024 levels. Analysts anticipate that Diamondback’s 2026 drilling plans will further accelerate production growth, with estimates suggesting the completion of approximately 300 to 325 wells on the acquired acreage.

In addition to these assets, Viper Energy’s acquisition strategy includes the Quinn Ranch Acquisition, a separate $211 million deal with Morita Ranches Minerals LLC. This transaction, expected to close in Q1 2025, will add approximately 2.4 million OpCo units and Class B shares to Viper’s asset base.

How does the acquisition impact Viper Energy’s financial outlook?

The Viper Energy acquisition of Diamondback’s mineral assets is poised to have an immediate financial impact, with cash available for distribution per Class A share projected to rise by over 10% upon closing.

Viper’s leadership remains confident in the long-term financial benefits of the deal, citing increased revenue from royalty interests, low capital expenditure requirements, and strong production visibility as key drivers. Travis Stice, CEO of Viper Energy, emphasized the strategic importance of the acquisition, stating:

“This transaction enhances Viper’s alignment with Diamondback’s development plan and cements our position as a leading player in the minerals and royalty market. With our expanded asset base and a fortress balance sheet, we are well-positioned to drive sustainable growth while maintaining financial discipline.”

Furthermore, Viper expects to maintain a conservative leverage ratio below 1.0x by the end of 2025, ensuring continued financial stability.

How will this acquisition impact Viper Energy’s long-term growth?

By acquiring high-value mineral and royalty interests, Viper Energy’s acquisition strategy places it at the forefront of Permian Basin production growth. The company will hold a royalty interest in approximately 75% of Diamondback’s planned well development over the next five years, with an estimated 6.0% average NRI in these wells.

Additionally, the total inventory of Diamondback-operated drilling locations with an internal rate of return (IRR) above 10% at $50 WTI crude prices now stands at approximately 334 net locations. This reinforces Viper Energy’s ability to capitalize on long-term revenue streams from oil and gas royalties.

Industry analysts highlight that mineral royalty interests remain an attractive investment due to their low-risk exposure to commodity price fluctuations and passive income structure, making Viper’s expanded portfolio particularly valuable.

What role will financial advisors play in closing the deal?

The Viper Energy acquisition process is supported by leading financial and legal advisors:

• Evercore is advising the Audit Committee of Viper’s Board of Directors.
• Hunton Andrews Kurth LLP is serving as legal counsel for the transaction.
• RBC Capital Markets and Kirkland & Ellis LLP are advising Diamondback Energy.
• Akin Gump Strauss Hauer & Feld LLP and Vinson & Elkins LLP are providing legal counsel for the Quinn Ranch Acquisition.

With the Drop Down deal set to close in Q2 2025 and the Quinn Ranch Acquisition scheduled for Q1 2025, Viper Energy’s expanded asset portfolio will cement its leadership in the Permian Basin mineral royalty market.