Viper Energy, Inc. (VNOM)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered higher production and operating income with strong cash generation; EPS spiked on a one-time $155.9m deferred tax valuation allowance reversal, lifting diluted EPS to $2.04 versus $0.70 YoY and $0.52 QoQ; adjusted diluted EPS was $1.93, better reflecting run-rate performance .
• Cash available for distribution rose to $89.0m ($0.86/share), with total base+variable dividend of $0.65/share (base $0.30, variable $0.35) and 75% return of capital; variable dividend increased versus Q3’s $0.31/share .
• Management initiated Q1 2025 production guidance of 30–31 Mbo/d (54–56 Mboe/d) and, assuming a Q2 close of the Diamondback “Drop Down,” expects 47–49 Mbo/d run-rate for the balance of 2025; net interest expense guidance was lowered materially, reflecting balance sheet strength .
• Strategic catalysts: pending Drop Down and Quinn Ranch acquisition support scale, alignment with Diamondback, and production visibility; leadership transition to CEO Kaes Van’t Hof underscores continuity; management emphasized 75% payout, base dividend growth, and flexible buybacks as potential volatility response .

What Went Well and What Went Wrong

• What Went Well
  • Organic production growth and operating income increased: oil volumes averaged 29,859 bo/d (up QoQ and YoY), combined volumes 56,109 boe/d; total operating income reached $228.7m in Q4 .
  • Capital return strengthened: cash available for distribution of $89.0m ($0.86/share); variable dividend lifted to $0.35/share, total $0.65/share; return of capital was 75% of cash available .
  • Strategic visibility: initiated Q1 2025 guidance and provided post-Drop Down 2025 run-rate outlook (47–49 Mbo/d) with substantial WIP and line-of-sight wells (867 active dev wells; 1,191 LOS wells) .
  • Quote: “The fourth quarter concluded a landmark year… we continue to be excited about the transformative Drop Down… and the unmatched forward outlook Viper will be provided upon that closing” – Kaes Van’t Hof .
• What Went Wrong
  • Commodity price headwinds: combined realized price fell to $43.56/boe (vs $50.20 YoY and $45.83 QoQ); natural gas price declined to $0.84/Mcf YoY/QoQ .
  • Higher depletion and interest burden QoQ: depletion rose to $12.51/boe (QoQ +$0.50/boe); net interest expense guidance is lowered for Q1 2025 but Q4’s interest per boe remained elevated at $3.70 .
  • EPS inflated by non-recurring tax benefit ($155.9m), complicating comparability; adjusted diluted EPS of $1.93 provides a cleaner signal for operating trends .

Financial Results

Notes: EBITDA margin approximates ~90.9% for Q4 2024 (Calculated: $207.874m ÷ $228.699m) based on reported figures .

Consensus vs Actual (S&P Global)

Segment/Commodity Breakdown

KPIs and Capital Return

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “On a pro forma basis, Viper expects to own an interest in approximately 75% of Diamondback's expected completions over the next 5 years with an average 6% NRI… we expect run rate daily average oil production of 48,000 barrels of oil a day [post Drop Down].” – Kaes Van’t Hof .
• “We really like 75% for Viper… base dividend needs to grow… prioritizing the variable dividend over repurchases… repurchases [remain] an ability to lean in above 75% if there was extreme volatility.” – Kaes Van’t Hof .
• “At least $50 million of upside to Viper from a cash flow perspective at, call it, $70 oil in 2026 [from Double Eagle acceleration].” – Kaes Van’t Hof .

Q&A Highlights

• Payout discipline and capital allocation: Management reiterated 75–100% payout range flexibility, preference for base+variable dividends, and opportunistic buybacks in volatility; base dividend growth remains a priority .
• Leverage posture: Target low leverage, with comment that minerals could support more leverage but market/rating agencies prefer conservative profile; cost of capital improving with scale .
• Consolidation strategy: Viper aims to be consolidator of choice, with tools to combine cash and OpCo units for tax efficiency; significant basin-wide fragmentation remains, creating large pipeline opportunity .
• Scope clarity: Surface/data center assets to remain at Diamondback to avoid intercompany complexity; Viper remains pure-play royalty; water/surface acknowledged as ancillary basin opportunities .
• Operational upside: Reagan County acceleration tied to Double Eagle carry provides ~$50m upside in 2026 at ~$70 oil; active pursuit of minerals in under-traded areas .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to access limits at the time of this analysis; therefore, no beat/miss determination can be made for headline EPS and revenue. Analysts are likely to focus on adjusted diluted EPS of $1.93 (removes certain non-cash items) and the one-time deferred tax valuation allowance reversal of $155.9m that boosted GAAP EPS, recalibrating normalized estimates accordingly .

Key Takeaways for Investors

• Underlying operations are strong: higher volumes and operating income with robust adjusted EBITDA and cash conversion; combined realized price softness was offset by volume growth .
• Dividend trajectory constructive: base maintained and variable increased; payout policy reiteration (75%) plus potential buyback flexibility provides balanced capital return optionality .
• Guidance improves visibility: initiated Q1 2025 production and unit cost guidance; material net interest expense reduction underscores improved financial footing; post-Drop Down run-rate offers a clear growth bridge for 2025 .
• Strategic alignment with Diamondback is a differentiator: expected interest in ~75% of Diamondback completions over five years enhances line-of-sight; consolidation opportunities remain sizable and accretive via cash+OpCo structures .
• Watch the non-recurring tax benefit: GAAP EPS includes a large one-time item; use adjusted diluted EPS ($1.93) for run-rate comparison and valuation discussions .
• Near-term trading lens: Dividend strength and Q1 guidance can support shares; potential Drop Down closing in Q2 2025 and Reagan County acceleration in 2026 are tangible catalysts; commodity price sensitivity remains the primary macro risk .

Supporting data and disclosures sourced from Viper’s Q4 2024 8-K press release and exhibits, Q4 earnings call transcript, prior quarter materials, and press releases as cited throughout.