Sign in
VE

Viper Energy, Inc. (VNOM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered strong volume growth (41,615 bo/d; 79,286 boe/d) but weaker pricing, driving mixed headline results: adjusted EPS of $0.41 beat consensus by ~5.6% while revenue (-1.4%) and EBITDA (-12.4%) came in below S&P Global estimates; GAAP diluted EPS was $0.28 due to higher depletion, non‑cash derivative losses and transaction costs .*
  • Cash available for distribution was $97 million ($0.74/share); total base+variable dividend of $0.53, plus $10 million buybacks, returned 75% of CAD to shareholders .
  • Guidance: initiated Q3 2025 net production of 46–49 Mbo/d (86–92 Mboe/d) and maintained FY25 production; unit depletion guidance raised, cash taxes modestly higher; management reiterated a $1.5B net debt target and intention to return up to 100% of CAD once at or below that level .
  • Strategic catalysts: Sitio shareholder approval of the merger (anticipated close Aug 19) and $1.6B notes offering with proceeds used to refinance debt and fund Sitio-related redemptions—supports balance sheet strategy and future capital returns .

What Went Well and What Went Wrong

What Went Well

  • Record activity and organic growth visibility: 302 gross wells turned to production (6.5 net), 69 rigs on acreage; CEO: “Our symbiotic relationship with Diamondback provides unmatched growth visibility… accretive acquisitions… only accelerate per share growth” .
  • Capital return discipline: Returned $73 million (75% of CAD) via base + variable dividends and repurchases; CEO emphasized flexibility to “return all excess cash up to 100% of cash available for distribution” at or below the $1.5B net debt target .
  • Strategic financing and liability management: Priced $1.6B senior notes and redeemed $780M of 2027/2031 notes, reducing near-term refinancing risk and preparing to retire Sitio notes post-close .

What Went Wrong

  • Pricing headwinds pressured revenue: combined realized price fell to $39.78/boe from $47.25/boe in Q1, with oil price down to $63.64/bbl, driving a slight revenue miss vs consensus .*
  • GAAP profitability diluted by non‑cash items: non‑cash derivative loss (~$32M add-back) and transaction expenses ($10M) plus higher depletion ($124M; $17.19/boe) weighed on GAAP EPS ($0.28), though adjusted EPS was $0.41 .
  • Leverage rose sequentially due to dropdown and revolver borrowings: net debt increased to ~$1.077B at quarter end from $270M in Q1 before subsequent refinancings .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Royalty income ($USD Millions)$224.865 $244 $287
Total operating income ($USD Millions)$228.699 $245 $297
Net income attributable to Viper ($USD Millions)$210.067 $75 $37
Diluted EPS ($USD)$2.04 $0.62 $0.28
Adjusted EBITDA (Consolidated, $USD Millions)$207.874 $232 $274
Adjusted EBITDA attributable to Viper ($USD Millions)$107.839 $133 $120
Cash available for distribution ($USD Millions)$88.962 $100 $97
Cash available per share ($USD)$0.86 $0.76 $0.74
Volumes, Realized Prices & CostsQ4 2024Q1 2025Q2 2025
Avg daily oil (bo/d)29,859 31,311 41,615
Avg daily boe (boe/d)56,109 57,378 79,286
Combined price ($/boe)$43.56 $47.25 $39.78
Oil price ($/bbl)$69.91 $71.33 $63.64
Gas price ($/Mcf)$0.84 $2.08 $0.99
NGL price ($/bbl)$22.15 $24.52 $20.70
Production & ad valorem taxes ($/boe)$3.13 $3.29 $2.91
Cash G&A ($/boe)$0.72 $0.97 $0.69
Interest expense ($/boe)$3.70 $2.52 $2.08
Depletion ($/boe)$12.51 $12.97 $17.19
Capital ReturnsQ4 2024Q1 2025Q2 2025
Base dividend/share ($)$0.30 $0.30 $0.33
Variable dividend/share ($)$0.35 $0.27 $0.20
Total dividend/share ($)$0.65 $0.57 $0.53
Return of capital ($USD Millions)$66.722 $75 $73
Share repurchases ($USD Millions)—$9 $10
Q2 2025 vs S&P Global ConsensusConsensusActualSurprise (%)
Primary EPS ($)0.38831*0.41*+5.6%
Revenue ($USD Millions)286.94*283.00*-1.4%
EBITDA ($USD Millions)262.70*230.00*-12.4%

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net production (Mbo/d)Q3 2025—46.0–49.0 Initiated
Net production (Mboe/d)Q3 2025—86.0–92.0 Initiated
Net production (Mbo/d)FY 202541.0–43.5 41.0–43.5 Maintained
Net production (Mboe/d)FY 202574.5–79.0 76.5–81.5 Raised (boe/d)
Depletion ($/boe)FY 2025$15.50–$16.50 $16.50–$17.50 Raised
Cash G&A ($/boe)FY 2025$0.80–$1.00 $0.80–$1.00 Maintained
Non-cash SBC ($/boe)FY 2025$0.10–$0.20 $0.10–$0.20 Maintained
Net interest ($/boe)FY 2025$2.00–$2.50 $2.00–$2.50 Maintained
Prod & ad valorem taxes (% rev)FY 2025~7% ~7% Maintained
Cash tax rate (%)FY 202521%–23% 21%–23% Maintained
Cash taxes ($mm)Q2/Q3 2025$10–$15 (Q2) $13–$18 (Q3) Raised (quarterly)

Note: Management also maintained pro forma production expectations post Sitio close for the balance of 2025 at 64–68 Mbo/d (122–130 Mboe/d) and mid‑single‑digit growth in 2026 from those levels .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 & Q1’25)Current Period (Q2’25)Trend
Capital returns mixPrior 75% CAD return; steady base+variable cadence Leaning toward buybacks given valuation dislocation; still distribution vehicle; flexible split Tilt toward buybacks near term
Leverage target & cash returnInvestment-grade rating; conservative financing; leverage <1.0x at $50 WTI post dropdown Formal $1.5B net debt target; return up to 100% of CAD when ≤$1.5B Clearer framework; more aggressive returns once target met
M&A consolidation (Sitio)Dropdown announced/closed; pipeline of accretive deals Sitio shareholder vote Aug 18; expected close shortly; emphasizes accretion and scale Closing catalyst; integration readiness
Operator activity (third‑party)Concentrated exposure to well‑capitalized operators; durable activity Activity/backlog strong; upside possible but guiding third‑party volumes flat; Diamondback drives growth Stable to modestly positive
Hedging strategyDeferred premium puts and gas collars in place Post‑target, hedge fewer barrels; maintain downside protection via deferred premium puts Hedging calibrated to leverage
Technology/AI back office—“AI and machine learning… important pieces to review 35,000 wells a month” and enhance royalty accuracy New initiative; efficiency lever

Management Commentary

  • “Despite oil price volatility in the second quarter, Viper delivered strong oil production growth, both on an absolute and per share basis.”
  • “As announced with the Sitio Acquisition, our pro forma net and long-term debt target is $1.5 billion… we are committed to maintaining a fortress balance sheet… stockholders should expect us to return all excess cash up to 100% of cash available for distribution.”
  • “We expect full year 2026 average production to increase by a mid-single digit percentage from our expected pro forma Q4 2025 production levels… oil production per share for full year 2026 to be approximately 15% higher than full year 2025.”
  • “We believe Viper’s unique ability to deliver sustained per share growth with zero capital and only limited operating costs will result in a differential ability to return increasing amounts of capital… the proposed Sitio acquisition only enhances our position.”

Q&A Highlights

  • Buybacks vs variable dividend: Management likely to lean toward buybacks in the near term given equity dislocation, while maintaining flexibility within the 75% CAD framework .
  • Path to $1.5B net debt: Mix of organic free cash flow, potential non‑core asset sales, and strong buyback program post Sitio close .
  • Third‑party operator activity: Backlog and activity robust across major operators (Exxon, Oxy, EOG, Conoco); guiding third‑party volumes flat but sees potential upside .
  • Non‑Permian assets post Sitio: Long‑term Permian focus; patient on larger positions given strip; buyer universe strong but disciplined timing .
  • Hedging policy post target: Maintain downside protection via deferred premium puts; as net debt declines, fewer barrels need hedging to cap leverage risk .
  • Dividend outlook: Board may consider increasing base dividend in coming quarters given accretion and free cash flow growth .

Estimates Context

  • Q2 2025: Adjusted EPS of $0.41 beat the S&P Global consensus $0.388, while revenue ($283M) and EBITDA ($230M) were below consensus ($287M and $263M), reflecting pricing headwinds and higher depletion; GAAP diluted EPS was $0.28 due to non‑cash derivative losses and transaction costs .*
  • Forward consensus (S&P Global): Q3 2025 EPS $0.391, revenue ~$400.3M, EBITDA ~$361.5M; Q4 2025 EPS $0.368, revenue ~$449.0M, EBITDA ~$404.2M—tracking higher volumes post Sitio close and Diamondback-operated growth [GetEstimates]*.
  • Potential estimate revisions: Higher unit depletion guidance and Q3 cash taxes may temper EPS estimates, while raised FY25 boe/d guidance and Q3 volume initiation support revenue/EBITDA trajectories .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Volume growth intact; pricing was the primary drag—monitor commodity realizations as a key swing factor for near‑term prints .
  • Adjusted EPS strength vs consensus underlines underlying cash generation; GAAP dilution driven by non‑cash and transaction items should fade post integration .
  • Capital returns likely shift toward buybacks near term; watch for a potential base dividend increase as integration benefits and free cash flow scale materialize .
  • Balance sheet strategy is clear: reach/maintain ~$1.5B net debt, then return up to 100% of CAD—buybacks may accelerate share count reduction post Sitio close .
  • Catalysts: Sitio merger closing (Aug 19 target), integration updates, pro forma production ramp, debt redemption progress, and Q3 guidance execution .
  • Operational upside from third‑party activity/backlog could add to Diamondback-operated growth; watch permit conversions and Reagan County development .
  • Hedge discipline aligns with leverage cap; expect reduced hedge volumes as net debt falls while preserving downside protection .

Notes:

  • Segment breakdown: Not applicable; Viper is a mineral/royalty owner with no operating segments.
  • Non‑GAAP: Adjusted EBITDA and adjusted EPS reconciliations provided in the release; key add‑backs include non‑cash derivative loss (~$32M) and transaction expenses ($10M) .