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Viper Energy, Inc. (VNOM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong operational growth and cash returns despite a GAAP loss from a non-cash impairment; adjusted EPS was $0.40 with consolidated Adjusted EBITDA of $393M, and total capital returned equaled $0.83 per Class A share (85% of pro forma cash available for distribution) .
  • Viper declared a base dividend of $0.33 and variable dividend of $0.25; repurchased 2.4M shares for ~$90M, and guided Q4 net oil production to 65–67 Mbo/d (up ~20% per-share YoY) .
  • Announced definitive agreement to sell non‑Permian assets for $670M (expected close Q1 2026), supporting deleveraging toward the $1.5B net debt target and enabling nearly 100% cash return to shareholders post-close .
  • Management emphasized leaning into buybacks given “market dislocation” and maintaining a robust base-plus-variable dividend, with visibility to mid-single-digit organic oil growth in 2026 from Diamondback-operated development .

What Went Well and What Went Wrong

What Went Well

  • Record activity on royalty acreage: 739 gross (15.2 net) wells turned to production in Q3; average daily oil volumes rose to 56,087 bo/d (108,859 boe/d) .
  • Capital returns and discipline: 85% of pro forma cash available for distribution returned, $0.58 base+variable dividend, and $90M buybacks; CFO-level guidance indicated line of sight to returning nearly 100% post-divestiture .
  • Clear growth outlook: Q4 oil guidance implies ~20% per-share YoY increase; management reiterated mid-single-digit organic oil growth in 2026 on Diamondback’s drillbit exposure (5–7% NRI on average) .

Quotation examples:

  • “Our Q4 2025 oil production guidance implies a ~20% increase in oil production per share compared to Q4 2024.” — CEO Kaes Van’t Hof .
  • “We felt it appropriate to lean into our return of capital commitment and return 85% of pro forma cash available for distribution in the third quarter to stockholders.” — CEO .
  • “We will have line of sight to return nearly 100% of cash available for distribution to stockholders.” — CEO .

What Went Wrong

  • GAAP net loss from impairment: Consolidated net loss of $197M, with a $360M non-cash impairment tied to properties recorded at Diamondback’s historical carrying value from the May 1 drop-down .
  • Price/mix headwinds: Combined realized price fell to $39.24/boe, down from $45.83/boe YoY; natural gas price remained weak ($1.02/Mcf) while depletion per boe increased .
  • Higher interest expense run-rate and transaction costs: Net interest expense per boe rose to $3.20 and transaction expenses were $15M; GAAP diluted EPS was -$0.52 due to non-cash items .

Financial Results

Quarterly Financials (GAAP and Adjusted)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$232.0*$283.0*$399.0*
Total Operating Income ($USD Millions)$245 $297 $418
Net Income - (IS) ($USD Millions, attributable to Viper)$75 $37 -$77
Diluted EPS - Continuing Operations ($USD, GAAP)$0.62 $0.28 -$0.52
Adjusted EPS ($USD, attributable to Viper)$0.54 $0.41 $0.40
Adjusted EBITDA ($USD Millions, consolidated)$232 $274 $393

Note: Values marked with * retrieved from S&P Global.

Operating Income Components (YoY and QoQ context)

MetricQ3 2024Q2 2025Q3 2025
Royalty Income ($USD Millions)$209 $287 $393
Lease Bonus Income ($USD Millions)$1 $10 $25 (17 related party, 8 other)
Total Operating Income ($USD Millions)$211 $297 $418

KPIs and Unit Economics

KPIQ1 2025Q2 2025Q3 2025
Average Daily Oil (bo/d)31,311 41,615 56,087
Average Daily Total (boe/d)57,378 79,286 108,859
Combined Realized Price ($/boe, unhedged)$47.25 $39.78 $39.24
Production + Ad Valorem Taxes ($/boe)$3.29 $2.91 $2.70
Cash G&A ($/boe)$0.97 $0.69 $0.80
Interest Expense, net ($/boe)$2.52 $2.08 $3.20
Depletion ($/boe)$12.97 $17.19 $18.17
Wells Turned to Production (gross / net)442 / 8.0 302 / 6.5 739 / 15.2

Q3 2025 Actuals vs Wall Street Consensus (S&P Global)

MetricActualConsensusSurprise
Primary EPS ($USD)$0.40*$0.3907*Beat (2%)
Revenue ($USD Millions)$399.0*$400.3*Slight miss (~0.3%)
Consolidated Adjusted EBITDA ($USD Millions)$393 $361.5*Beat (~9%)

Note: Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Oil Production (Mbo/d)Q4 2025—65.00 – 67.00 New
Net Total Production (Mboe/d)Q4 2025—124.00 – 128.00 New
Net Oil Production (Mbo/d)FY 202541.00 – 43.50 48.75 – 49.00 Raised (pro forma Sitio)
Net Total Production (Mboe/d)FY 202576.50 – 81.50 92.75 – 93.50 Raised (pro forma Sitio)
Depletion ($/boe)FY 2025$16.50 – $17.50 $16.75 – $17.25 Maintained/Narrowed
Cash G&A ($/boe)FY 2025$0.80 – $1.00 $0.80 – $1.00 Maintained
Non‑cash SBC ($/boe)FY 2025$0.10 – $0.20 $0.10 – $0.20 Maintained
Net Interest Expense ($/boe)FY 2025$2.00 – $2.50 $2.50 – $3.00 Raised
Production & Ad Valorem Taxes (% of Revenue)FY 2025~7% ~7% Maintained
Cash Tax Rate (%)FY 202521% – 23% 21% – 23% Maintained
Cash Taxes ($MM)Q4 2025—$13 – $18 New
Base Dividend ($/share)Q3 2025—$0.33 Declared
Variable Dividend ($/share)Q3 2025—$0.25 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Return of Capital & Buybacks75% payout in Q1/Q2; willingness to tilt variable toward buybacks amid dislocation 85% payout in Q3; $90M buybacks; intent to approach ~100% post-divestiture Increasing emphasis
Deleveraging TargetNet debt target $1.5B; plan to return up to 100% when at/under target Non‑Permian sale proceeds to pay down revolver/term loan; “line of sight” to near-100% returns Accelerating progress
Diamondback AlignmentVisibility to Diamondback-operated growth; 25 net wells/year avg through 2029 5–7% average interest in Diamondback wells; key driver of 2026 growth Sustained
Third‑Party ActivityResilient activity led by majors; exposure supports flat-to-upside “Captured almost half” of third‑party activity since 2023; backlog rising Constructive
AI/AutomationBack-office automation and data leverage in minerals CTO synergies in big data; automation to improve efficiency and potential monetization Building capability
Hedging StrategyDeferred premium puts to cap downside, retain upside Hedge summary reaffirmed; puts, gas collars, Waha basis swaps Consistent
M&A/PortfolioSitio pending in Q2; focus on accretive scale and patience Sitio closed; $670M non‑Permian divestiture signed to core Permian focus Portfolio curation

Management Commentary

  • Capital allocation: “We felt it appropriate to… return 85% of pro forma cash available for distribution… As we move to close this divestiture… we will have line of sight to return nearly 100% of cash available for distribution.” — CEO .
  • Non‑Permian divestiture use of proceeds: “Net proceeds would be about $610 million… pay down the revolver to zero… and almost pay our term loan down…” — CEO .
  • Growth visibility: “Our Q4 2025 oil production guidance implies a ~20% increase in oil production per share compared to Q4 2024… anticipate mid‑single digit organic oil production growth in 2026.” — CEO .
  • AI/automation synergy: “Tracking 35,000 wells every month should not be a manual process… biggest thing from the CTO team has been big data and automation.” — CEO .

Q&A Highlights

  • Deleveraging and higher cash returns: Proceeds from the $670M asset sale expected to reduce revolver/term loan balances, positioning for sustained near-100% return of cash available for distribution when net debt target is met .
  • Buybacks vs dividends: Management will remain a distribution vehicle but is “compelled to buy back shares” given valuation and market dislocation, with flexibility to lean further without compromising the balance sheet .
  • Third‑party activity/backlog: Backlog growth is mixed between CTO contribution and legacy Viper assets; broad exposure to Permian operators supports confidence in 2026 .
  • 2026 production framework: Mid-single-digit growth off Q4 pro forma base; asset sale volumes (~5 Mbo/d oil) to be stripped out with remaining assets growing by “a couple thousand barrels per day” .
  • Hedge philosophy: Continue downside protection via deferred premium puts while retaining upside; hedge levels flex with leverage needs .

Estimates Context

  • Q3 2025 EPS beat and EBITDA beat: Primary EPS $0.40 vs $0.3907 consensus (beat), consolidated Adjusted EBITDA $393M vs ~$361.5M consensus (beat). Revenue was essentially in-line/slightly below at $399.0M vs $400.3M consensus. Values retrieved from S&P Global.
  • Implications: Street likely to adjust models for higher Q4 production (guidance 65–67 Mbo/d) and stronger EBITDA run-rate post-Sitio/notes refinancing, while incorporating higher interest expense per boe and removal of non‑Permian volumes post close .

Key Takeaways for Investors

  • Production momentum: Q3 oil volumes up sharply; Q4 guidance implies ~20% per-share YoY growth; mid-single-digit organic oil growth expected in 2026 (ex non‑Permian) .
  • Robust cash returns: 85% payout in Q3; base+variable dividends of $0.58 and $90M buybacks; visibility to near-100% returns as net debt approaches $1.5B target .
  • Portfolio optimization: $670M non‑Permian sale re‑cores business to Permian royalties; proceeds to deleverage and increase capital return flexibility .
  • Diamondback alignment: 5–7% average interest in Diamondback wells and broad third‑party exposure underpin durable growth and cash flow .
  • Non‑cash impairment obscures GAAP optics: $360M impairment drove GAAP loss; adjusted metrics (EPS $0.40, Adj. EBITDA $393M) better reflect operating performance .
  • Cost/price dynamics: Combined realized price per boe softened; depletion and interest per boe increased, but cash margins remain strong due to low operating costs .
  • Tactical buybacks: Management prioritizes buybacks amid perceived dislocation while preserving base-plus-variable dividend, offering multiple levers for capital return .
Note: S&P Global consensus and actuals marked with * are sourced via S&P Global. All other figures and quotes are from company filings and the Q3 2025 earnings call.