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Viper Energy, Inc. (VNOM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was operationally strong with oil and total production above the high end of guidance; net income attributable to Viper was $75 million and diluted EPS was $0.62, with cash available for distribution of $100 million ($0.76/share) and base-plus-variable dividend of $0.57/share .
  • The transformative Drop Down from Diamondback closed May 1, 2025; management expects leverage to remain below 1.0x even at sustained $50 WTI, and Fitch upgraded Viper to BBB- (second investment-grade rating) .
  • Guidance: Q2 2025 production 40–43 Mbo/d (72.5–78.0 Mboe/d); maintained oil production guidance for the balance of 2025 (47–49 Mbo/d) with full-year average 41–43.5 Mbo/d (74.5–79.0 Mboe/d) .
  • Capital returns: declared base dividend $0.30 and variable $0.27; opportunistic buybacks and 2027 notes repurchases underway amid volatility; dividend was ~$0.07 lower due to timing of share issuance, with ~$$25 million retained for flexibility .

What Went Well and What Went Wrong

What Went Well

  • Production outperformed: “both oil and total production above the high end of their respective guidance ranges,” supporting cash generation despite price volatility .
  • Balance sheet resilience: “we expect leverage to remain below 1.0x even in a sustained $50 per barrel WTI environment,” enhanced by the Drop Down financing and IG upgrade by Fitch .
  • Capital returns and liquidity discipline: $0.57/share total dividend; continued buybacks ($9 million in Q2 to date) and 2027 notes repurchases (~$36 million) show proactive capital allocation in volatile markets .

What Went Wrong

  • Macro headwinds: management flagged “lower commodity prices and significant market volatility,” with risk to activity if sub-$50 persists; smaller private operators may push completions .
  • Dividend optics: Q1 dividend “roughly $0.07 lower” due to share issuance and timing; ~$25 million retained rather than true-up given volatility .
  • Taxes down with oil: Q2 cash tax guidance lowered to $10–$15 million vs Q1 cash taxes of $23 million, reflecting commodity weakness rather than fundamental performance .

Financial Results

Income Statement Snapshot vs Prior Periods

MetricQ1 2024Q4 2024Q1 2025
Royalty income ($USD Millions)$205 $224.9 $244
Total operating income ($USD Millions)$205 $228.7 $245
Net income attributable to Viper ($USD Millions)$43 $210.1 $75
Diluted EPS ($USD)$0.49 $2.04 $0.62

Commodity Revenue Breakdown

MetricQ1 2024Q4 2024Q1 2025
Oil income ($USD Millions)$177 $192.0 $201
Natural gas income ($USD Millions)$7 $6.1 $15
NGL income ($USD Millions)$21 $26.8 $28
Lease bonus income ($USD Millions)$— $3.7 $1

KPIs and Unit Costs

KPI / CostsQ1 2024Q4 2024Q1 2025
Avg daily oil (bo/d)25,407 29,859 31,311
Avg daily total (boe/d)46,132 56,109 57,378
Combined realized price ($/boe, unhedged)$48.85 $43.56 $47.25
Production & ad valorem taxes ($/boe)$3.43 $3.13 $3.29
Depletion ($/boe)$11.18 $12.51 $12.97

Consensus vs Reported (S&P Global definitions)

Metric (Q1 2025)ConsensusActual (S&P)Result
EPS ($USD)0.4747*0.54*Bold beat
Revenue ($USD Millions)243.7*232.0*Bold miss
EBITDA ($USD Millions)230.9*254.0*Bold beat

Values retrieved from S&P Global.*

Note: Company-reported diluted EPS was $0.62; S&P “Primary EPS” methodology may differ (two-class method and normalization), driving the variance . Company-reported total operating income was $245 million and royalty income was $244 million .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net production (Mbo/d)Q2 2025N/A40.0–43.0 Initiated
Net production (Mboe/d)Q2 2025N/A72.5–78.0 Initiated
Net production (Mbo/d)FY 2025N/A41.0–43.5 Initiated
Net production (Mboe/d)FY 2025N/A74.5–79.0 Initiated
Depletion ($/boe)Q2 2025N/A$15.50–$16.50 Initiated
Cash G&A ($/boe)Q2 2025N/A$0.80–$1.00 Initiated
Non-cash SBC ($/boe)Q2 2025N/A$0.10–$0.20 Initiated
Net interest expense ($/boe)Q2 2025N/A$2.00–$2.50 Initiated
Production & ad valorem (% revenue)Q2 2025N/A~7% Maintained vs Q4 framework
Cash tax rate (% pre-tax)Q2 2025N/A21%–23% Lower vs Q1 actual $23mm taxes
Cash taxes ($mm)Q2 2025N/A$10–$15 Lower
Dividend declaredQ1 2025N/ABase $0.30, Variable $0.27 Announced

Reference: Q4 2024 provided Q1 unit cost framework; full-year guidance was deferred until Drop Down closing .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Macro & commodity volatilityBest-in-class cost structure; durable profile despite volatility Deferred full-year guidance pending Drop Down Lower prices; volatility; maintain oil guidance for back half 2025 Elevated uncertainty; cautious stance
M&A/consolidationTumbleweed acquisitions; continued strategy Quinn Ranch acquisition; pending Drop Down Will “sit through volatility,” still consolidator of choice; agnostic Midland/Delaware Pipeline intact; timing prudence
Hedging philosophyUtilized deferred premium structures Collar and deferred puts added “Fortress balance sheet”; continue deferred premium puts; protect downside Consistent strategy
Third-party operatorsRobust activity led by major operators ~54 rigs on acreage Exxon ~half of third-party production; anecdotes of private operators delaying Quality operator mix offsets small-operator delays
Capital returnsBase+variable framework (~75% of cash) $0.65/share total; continued buybacks $0.57 total; opportunistic buybacks; could flex >75% in volatility Flexible, opportunistic
Balance sheet & ratingsNet debt trajectory improving Net debt $1.064B YE; liquidity strong Leverage <1x at $50 WTI; Fitch IG upgrade Stronger, lower cost of capital
2026 growth outlookActivity and WIP strong Drop Down expected to unlock accretion 2026 still expected strong; focus on high NRI projects (Quinn Ranch, Tumbleweed, Drop Down) Positive, contingent on oil stabilization

Management Commentary

  • “We expect leverage to remain below 1.0x even in a sustained $50 per barrel WTI environment” — Kaes Van’t Hof, CEO .
  • “We are maintaining our previous guidance for oil production for the balance of 2025” .
  • “Distributions are going to grow [post Drop Down]… even in this kind of $60-ish oil world” .
  • “We still generate a lot of free cash at lower oil prices… we wouldn’t be afraid to go above 75% of free cash distributed… to lean into buybacks” .
  • “We will… sit through this volatility… [and] see who’s willing to transact on the other side” (M&A pacing) .

Q&A Highlights

  • M&A appetite intact but timing prudent: willing to consolidate minerals, agnostic across Midland/Delaware; expect to reassess after volatility subsides .
  • Reagan County (Double Eagle) and 2026 modeling: completions modeled starting 2026; could slip if sub-$50 persists; otherwise expect development in normalized $60+ .
  • Hedging strategy unchanged: deferred premium puts to protect downside with unlimited upside; priority is fortress balance sheet .
  • Operator activity: majors (Exxon, EOG, Occidental) leading third-party activity; anecdotal delays among smaller private operators .
  • Capital allocation: dividend down ~$0.07 due to issuance timing; ~$25 million retained for flexibility; potential to exceed 75% cash return in heightened volatility; longer-dated debt issuance possible post IG upgrade .

Estimates Context

  • Q1 2025 results vs S&P Global consensus: EPS beat (0.54 vs 0.47); revenue miss ($232mm vs $244mm); EBITDA beat ($254mm vs $231mm). Company-reported diluted EPS was $0.62, reflecting methodology differences vs S&P “Primary EPS” . Values retrieved from S&P Global.*
  • Near-term consensus (Q2 2025) suggests moderation: EPS 0.388* and revenue $286.9mm*, consistent with management’s lower Q2 cash taxes and volatility commentary . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Operational durability: production outpaced guidance; commodity mix and operator quality (Exxon, Diamondback) underpin resilience through volatility .
  • Balance sheet and ratings provide flexibility: leverage <1x at $50 WTI and Fitch IG upgrade enable opportunistic buybacks and potential longer-dated debt at improved terms .
  • Cash returns remain attractive and flexible: $0.57/share Q1 dividend; ability to flex buybacks above 75% of free cash in downturns .
  • 2026 growth setup intact: high-NRI Diamondback-operated and third-party projects (Quinn Ranch, Tumbleweed, Drop Down assets) support medium-term volume growth if prices stabilize .
  • Watch macro and activity signals: if sub-$50 oil persists, expect broader basin activity cuts to impact back-half 2025; smaller private operators may delay completions .
  • Near-term guideposts: Q2 production 40–43 Mbo/d; unit costs and cash taxes lower with commodity prices; hedge book provides floor (WTI $55 puts, Henry Hub collars) .
  • Valuation/estimates: Q1 beat on EPS and EBITDA vs S&P consensus but missed on revenue under S&P definitions; monitor consensus revisions as Drop Down volumes and price trajectory flow through models. Values retrieved from S&P Global.*
S&P Global estimates disclaimer: Values marked with * are retrieved from S&P Global.

Additional Data and Operational Details

  • Q1 realized prices (unhedged/hedged): $71.33/$70.26 oil; $2.08/$3.74 gas; $24.52/$24.52 NGL; combined $47.25/$48.99 per boe .
  • Liquidity and debt: $560mm cash and $830mm total long-term debt at 3/31; ~$255mm revolver draw after Drop Down; ~$1.9bn total liquidity pre-close; buybacks of 239,374 shares ($9mm) and ~$36mm notes repurchased in Q2 .
  • Well activity: 442 gross wells TTP in Q1 (8.0 net 100% royalty interest); 921 gross wells in active development; 1,094 LOS wells post Drop Down; average lateral 11,946 feet .
All document-sourced figures and statements are cited inline.