Chris Baker

Chris Baker from Evercore ISI asked about the impact of the Bedrock acquisition on the company's maintenance capital expenditures and requested more details on the recently reserved manufacturing slots for power turbines, such as delivery windows and scale.

Answer

Eric Jacobsen, President of Upstream, stated that Bedrock's low-decline assets would add approximately $20-25 million to the current maintenance CapEx of $170-180 million. CEO Chris Kalnin added that the turbine slots provide crucial optionality in discussions with hyperscalers, enabling BKV to link new power generation capacity directly to long-term Power Purchase Agreements (PPAs) to de-risk the investment.

Chris Baker of Evercore ISI asked about the strategy for reaching the $1.5 billion net debt target, questioning the mix between organic cash flow and non-core asset sales. He also inquired about the allocation between share buybacks and variable dividends.

Answer

Kaes Van’t Hof, CEO & Director of Viper Energy Partners, explained that the path to the debt target will involve a combination of free cash flow, potential non-core asset sales to accelerate the process, and a significant focus on share repurchases. He emphasized that given the current stock valuation, the company would lean heavily into buybacks over variable dividends.

Chris Baker of Evercore ISI inquired about Viper Energy's strategy for reaching its $1.5 billion net debt target, questioning the balance between organic cash flow and non-core asset sales. He also asked about the future mix of shareholder returns, specifically buybacks versus variable dividends.

Answer

CEO Kaes Van’t Hof explained that the debt target will be achieved through a combination of strong free cash flow, potential sales of non-Permian assets, and a significant share buyback program. He emphasized that given the current stock valuation, the company would favor buybacks over variable dividends to return capital to shareholders once permitted post-merger.

Christopher Baker of Evercore ISI inquired about the long-term strategy for the operated partnership model, particularly regarding the anticipated free cash flow inflection and how the company might address the market's current lack of valuation credit for it.

Answer

Executive Luke Brandenberg acknowledged the cash flow outspend inherent in ramping up rig activity but confirmed a positive free cash flow inflection is coming as partnerships mature, likely within the next year for the first one. He noted that despite the market's focus on growth, the company remains conservative on leverage. The strategy is to continue adding partners and rigs, accepting the near-term cash outspend to build a self-sustaining program that will eventually generate significant free cash flow.

Chris Baker from Evercore ISI asked if there is any additional conservatism baked into the 2025 guidance beyond typical Gulf of Mexico weather assumptions, given the unexpected issues in 2024. He also inquired about the potential to exceed the minimum 50% cash return to shareholders again in 2025, following the nearly 80% return in 2024.

Answer

President and CEO Eric Hambly stated their storm guidance methodology aims for a mean expectation and that the recent high level of mechanical workovers is not common and thus not forecasted to be an ongoing issue. CFO Tom Mireles addressed cash returns, explaining that they leaned heavily into buybacks in 2024 due to the share price. He confirmed they will maintain flexibility to exceed the 50% minimum again in 2025 if they see a dislocation in share price, noting that such actions would likely occur in the second half of the year due to front-loaded CapEx.