. Welcome to the Viper Energy Partners third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Adam Lawlis, Vice President of Investor Relations. Please go ahead. Thank you, Antoine. Good morning, and welcome to Viper Energy Partners' third quarter 2023 conference call. During our call today, we'll reference an updated investor presentation, which can be found on Viper's website. Representing Viper today are Travis Stice, CEO,Kaes Van't Hof, President, and Austen Gilfillian, General Manager. During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance, and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I'll now turn the call over to Travis Stice. Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy Partners' third quarter 2023 conference call. There were several important updates made yesterday with our earnings announcement, so I will start with our upcoming conversion into a Delaware corporation first. The board of directors approved the conversion on November 2, and we expect that it will become effective on November 13. When completed, this conversion will deliver increased corporate governance rights to our limited partners and is intended to position Viper such that the value of our mineral and royalty assets can be fully recognized. Further on that point, we expect the conversion to result in an increase in Viper's trading liquidity and potential investor universe. Given Viper's current status as a partnership, we estimate that approximately 2% of our public float is held by index funds. This compares to a select group of our peers averaging around 30% ownership. Fundamentally, we believe this conversion is the right thing to do for our unit holders and that it will provide numerous benefits, but the foundation of the decision is to fully highlight the advantaged nature of mineral ownership and the unique value proposition that Viper presents within the space. As a separate recent event, Viper announced last week the closing of our GRP acquisition. This acquisition was a truly unique opportunity in that it checked all the boxes we look for in an acquisition: immediate accretion to all relevant financial metrics, substantial undeveloped inventory to support long-term returns, and significant scale that results in a pro forma business that is both bigger and better. What differentiates this acquisition, however, is both the quantity and quality of the undeveloped inventory, particularly in the Northern Midland Basin. Following the closing of this acquisition, Viper now owns roughly 32,000 net royalty acres in the Permian Basin, and our production will be over 25,000 barrels of oil per day. Looking ahead, we have an unparalleled growth runway of high-quality, undeveloped acreage, and as the largest player in the public minerals market, we expect to play a meaningful role in consolidating the highly fragmented space as high-value proposition opportunities like GRP present themselves. Turning to the results of the business, the third quarter was another strong quarter for Viper as production grew roughly 5% for the second consecutive quarter. While growth will not always be ratable from quarter- to- quarter, given we own varying interests in what is mostly large-scale development in the Permian Basin, we expect the trend of meaningful growth on an annual basis to continue, as evidenced by the preliminary full-year 2024 production guidance that we provided. Additionally, during the third quarter, Viper announced an almost $100 million lease bonus, which will allow for the future development of deeper zones on certain acreage in the Midland Basin. As mentioned in our rationale for converting into a corporation, there are many structural advantages to mineral ownership beyond just the cost-free royalties, and this significant lease bonus is just one specific example. As owners and lessors of the subsurface property, modern lease terms can dictate development requirements of operators, and when those terms are not met, leases can expire and have the full development rights revert back to us as the mineral owner. As deeper zones are tested throughout the basin, we believe this is an advantage that will only be further highlighted in the years to come. As a final point, Viper remains committed to a sustainable and growing return of capital through cash distributions over the long term. We have the balance sheet strength- durable cash flow profile and undeveloped inventory base to support many years of significant return of capital through the cycle. Activity on our asset base continues to be strong, and we believe we are positioned to execute on opportunistic M&A to further complement, complement what is already a unique value proposition, both in terms of return on and return of capital. Operator, please open the line for questions. Thank you. We will now conduct a question-and-answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while I compile the question-and-answer roster. Our first question comes from Neal Dingmann from Truist Securities. Please go ahead. Morning, guys. Nice quarter. My first question, guys, is just on the lease bonuses, that's the impressive one you all recently received. I'm just wondering, could you speak to if all that bonus was tied likely to the deeper zones? And wondering, do you all believe you have many of your other assets have potential for similar type bonuses, maybe in those type of areas? Yeah, Neal, good question. You know, I'll, I'll answer part of it and give it to Austen to talk about the rest of the asset base. I think high level, you know, we kind of added a slide in the deck to kind of show that, you know, even in an area like Spanish Trail, highly developed on, you know, the traditional Wolfberry play that we all know, but now, you know, moving back in and developing, you know, Barnett, Woodford and some of the Wolfcamp D across the position, you know, the mineral owner gets the benefit there, right? They get a lease bonus, and they get a royalty on, you know, all of the all the new zones. So I think we're going to be slow to test it. I think it was a convenient time to get that lease done between Diamondback and Viper, as it provided a lot of cash to Viper to help close the GRP deal. But I think just generally, we're trying to highlight that we own a lot of minerals in the Midland Basin, and there's a lot left to do in terms of other zones, deeper zones, shallower zones, and all of that benefits the mineral owner, whether you can model it today or not. And Austin, you want to talk about the asset base? Yeah, no, the monitoring and enforcing these type of lease terms is a really important part of what we do now, especially kind of where we are in the industry and these modern leases and some of the terms that they could have. So this specific lease with Spanish Trail represented about 10% of our total net acres. When we kind of go through and look at the lease specific lease provisions that are included across the acres that we own, you know, we estimate about 50% of our acres had a similar lease language that where if the deeper rights hadn't been developed, that acreage would kind of fall out and would become available. So, you know, I don't think that's a story for tomorrow, but certainly as things play out over time and the zone becomes more developed and it kind of expands across the basin, I think it's something that you'll see more of going forward. Yeah, I like that upside. Thanks, Austen. And then just quick second one on capital allocation. Just wondering, given the current leverage, you know, post the deal and, you know, obviously the great production guide for next year, I'm just wondering, any thoughts on, if capital allocation would change or will the payout type continue? No, that's a good question, too. I mean, I think our payout philosophy is the same. 75% of free cash flow goes to equity, 25% goes to the balance sheet. You know, we put a good amount of cash in this GRP deal, but we have the balance sheet capacity to do it. We also have kind of a small balance on our revolver after closing the deal, so that'll be, you know, easy debt paydown. And, you know, at kind of strip prices, we're still gonna be likely below 1x leverage at the end of 2024, even if we, you know, do pay out 75% to equity. You know, I think Viper has kind of gone back and forth on, you know, how we're returning capital to shareholders. I think we'd probably prefer to distribute more cash via the fixed plus variable distribution than buybacks, but, you know, there, there might be opportunities to buy back stock in, in unique situations over the coming year. But I think, you know, our, our preference on that 75% that gets returned to shareholders or unit holders is through the, the, the base plus variable dividend. Appreciate the details. Thanks, guys. Thanks, Neal. Thank you. One moment for our next question. Our next question comes from Derrick Whitfield, from Stifel. Please go ahead. Good morning, all, and thanks again for your time. Hey, Derrick. With respect to the recent GRP acquisition, this was one of the first we've seen you pursue where there wasn't a Diamondback angle. Thinking about your prepared remarks and consolidation opportunities you're seeing, could you speak to what you're seeing in deal flow and the bid-ask spreads for minerals, which could lead to incremental opportunities? Yeah, I'll talk about the GRP deal, and Austin can talk about the market right now. I mean, you know, the, this deal was kind of the one we've been waiting for. You know, this team built, built this asset base over, you know, eight or 10 years, and, and, you know, I, I think it can be best summed up as, you know, very unique in that it'd be impossible to build that position today, and so we needed to buy that position. And the reason why we liked it is, you know, it's, it's a lot of, the Midland Basin is the, is the core asset. It's a lot of undeveloped units in the Midland Basin, and, you know, it's all in acreage that, that we would covet. So while there isn't a huge Diamondback operated component to it, you know, we put our operator hat on and said, you know, "Would we like to own exposure to the core of the basin under competent operators like Pioneer, Endeavor, now Exxon, et cetera?" And you know, that is second to none, and in our mind, can't be built, you know, through the ground game. And so we used our size and scale to be able to put a good amount of cash in the deal and get it across the finish line. Yeah, Derrick, you know, there's been quite a few deals that have come to market and have transacted this year. We, we've really been pretty selective the last couple of years with the primary focus on Diamondback operated, like you mentioned, or secondarily, as Kaes kind of highlighted, if it doesn't have the high Diamondback operated percentage, then it's just really high-quality acreage with clear undeveloped inventory, where we can have that confidence in what the long-term development's gonna look like. I think going forward, you know, it's gonna be a similar viewpoint for us, and we see an opportunity for quite a few more deals to come to market. But for us, it's always a pretty high hurdle, given the quality of acres that we have today, the development that we see going forward, and it kind of has to compete for that, right? Just being accretive day one is not enough for us. We kind of have to have confidence in that development outlook over year 2, year 3, year 4, et cetera. And that's always the hardest hurdle to clear. Yeah, one last comment on the Diamondback operated piece. You know, it certainly has been beneficial to have that Diamondback Viper relationship, you know, for a significant amount of our production. You know, as the business has gotten bigger and, you know, we chase these same decline rates that the E&Ps do, you know, it's harder to find sizable packages under Diamondback that will move the needle for the next five, six, seven years. So I think generally, you know, we have a great position operated by Diamondback, but the next leg of the stool is going to be, you know, undeveloped units, particularly in the Midland Basin, like what we found with GRP, that drive growth into, you know, the next decade. Perhaps actually picking up with where you ended there, Case, because I think the opportunity that you guys have with the deep rights under Spanish Trail could be quite remarkable. But, I would love to, again, if you guys could share what the opportunity you see with the Woodford and Barnett intervals at present, and how soon you could see meaningful activity, and that would clearly benefit Viper, given the elevated NRIs you have in that area. Yeah, you know, there's certainly a lot of industry activity in the Barnett and Woodford, and traditionally, our mentality has been to be a fast follower. But, you know, I think there will be some tests, particularly, you know, operated by Diamondback in the next 12-24 months. I don't think it'll move to full-scale development until, you know, kind of 2025, 2026. But, you know, all indications are pointing to those zones being very productive, covering a lot of the basin. And it works at a price, right? It's gonna be a little more expensive to the operator. Wearing my Viper hat, we don't really care, as long as there's a lot of resource. I think, you know, all indications are pointing towards significant resource in those deeper zones. That's great. Thanks for your time. Thanks, Jared. Thank you. One moment for our next question. Our next question comes from Paul Diamond from Citi. Please go ahead. Thank you. Good morning, all. Thanks for taking my call. Just a quick one on the Delaware Corp conversion. You talked about a, you know, currently, about 2% of the public float is held by index funds versus about 30% by peers. Just wanted to get, dig a bit deeper on that to see kind of how you guys are envisioning the, you know, any trend towards that higher rate, you know, post-conversion? Yeah, great, great question. You know, we've done a little bit of work on it. You know, the deals, the conversion's supposed to close next Monday, and then we'll be a corporation. There's some details in there for shareholders, so they know what's going on. But, you know, well, from what we can tell, there's a couple indices that we could be eligible for, you know, even before the end of the year. And, you know, those are pretty significant indices. I think, you know, the Vanguard-related indices, as well as then eventually some of the S&P related indices. And, as the market knows, that's a lot of, that's a lot of buying for a company that has a lower public float. So we're gonna start working with them right away after getting this thing closed and get in as many indices as possible and kind of follow the path of, you know, hopefully, what Diamondback followed, you know, years ago as that business grew and got more exposure to large index funds. And you want to add anything there, Austin? Yeah, Paul, the main three benchmarks are kind of your S&P, CRSP, and Russell. S&P and CRSP do quarterly rebalances, so they'll both do one middle of December. So the conversion will be done by then. So we'll, you know, we'll be in communication with them and see if that's something that can happen this year. And then Russell does the rebalance annually in June. And then additionally, you know, you'll have something that's more criteria-based or subjective, like the S&P 600, where we'll have to have some communication with them. But all signs are pointing to being eligible right away and hopefully getting included pretty soon. But certainly, we meet the criteria now as being a corporation as opposed to being a partnership. ... Yeah, and the strategy there is also exposure, right? There's a lot of other investors that, you know, I think are limited in their exposure to minerals, and we've already had some success converting some, you know, shareholders on, potential shareholders on the road to look at the story. I mean, I envision, and Travis envisions a world where, you know, this mineral space and this business is competing with, you know, the likes of some of the SMID and midcaps on the E&P side. And, you know, this business certainly shows as a safer way to play, you know, the Permian Basin or oil exposure, you know, with no capital requirements and just upside. Understood. I appreciate the clarity there. Just one more quick follow-up, just more on the lease bonus payments. How are you guys envisioning that going forward? Is it more tend to be chunky, or do you see it as just a consistent growth over time? Well, the Spanish Trail one's unique, right? I mean, this was a unique asset that a generational asset that doesn't come around very often. So this was certainly the big one. You know, I think it's logical that a lot of the deep rights throughout the basin are going to get leased up, you know, over the coming 12-24 months. But for us, they'll all be smaller than this large payment, you know, which was a pretty significant amount of acreage. Understood. Thanks for the clarity. Thanks, Paul. Thank you. One moment more. Our next question comes from Leo Mariani, from Roth MKM. Please go ahead. Hi, guys. Wanted to ask whether or not you see any kind of material change in the tax rates for VNOM following this kind of corporate, you know, conversion. I did see you had this kind of soft, sort of, not really guidance, but just kind of, you know, numbers that you kind of rolled out for 2024 outside of production, where you talk about kind of an effective tax rate. But I know you've got kind of multiple classes of units historically. I know you're gonna have maybe more than one class of shares, but just trying to get a sense, are we gonna see any material difference in kind of cash taxes in 2024 versus 2023? No, Leo, nothing should change at all for the public unitholders that will become public stockholders. So tax position didn't change, and, you know, I think it'll just provide them more, more flow and more liquidity. Yeah, Leo, that's, that's why the conversion made so much sense, is that we, we became a taxable partnership back in 2018. And in there for a couple of years, Diamondback was effectively shielding us from corporate taxes, and that, and that agreement ran out end of last year. So here, here in 2023, we're a partnership of paying full corporate income taxes, and getting all the, the downsides, effectively, of being a corporation, but, but you don't have any of the upsides. So it, it just made a lot of sense to do that today, given in large part the, the kind of tax situation that we're in. Okay, that's helpful. And then just wanted to kind of ask on a couple other sort of numbers here. So I think you guys are kind of expecting production to come down a little bit in the first quarter. I'm assuming that's all just kind of timing related, but just wanted to maybe get a little color around that. And then also just noticing that your cash G&A per barrel guidance also came down, you know, nicely as well. Is that a function of spending kind of less than you expected there? Or maybe just perhaps production results have been better, and then with the acquisition, you're seeing the BOEs go up, and you're just able to spread the costs out over more barrels? On the production side first, you know, reported production will actually go up from Q4 to Q1. Q4, you're gonna have two-thirds of contributions from the GRP assets. So we have the midpoint there of 24.5. And then going into the first quarter, you know, actual reported production will go up, given you have a full quarter of those assets contributions. But, you know, we're trying to be intellectually honest there and look at it on a pro forma basis. And that's kind of what we're pointing to there with a slight sequential decline. And really, that follows, you know, back-to-back quarters of 5% growth that we've had here. And it's mainly a result of just kind of the timing of some of these really large Diamondback pads where we have really high interest. And we put in slide nine of the deck, where we kind of show the visibility to the Diamondback schedule. You know, the way that we kind of see 2024 right now with the Diamondback side is having and owning an interest in about 60% of Diamondback's completions next year, with about a 6.5% interest within those wells. But that'll be split roughly 40/ 60 between first half of the year and the second half of the year. So still significant growth coming, especially on the Diamondback operated side. It's just most significant second half weighted, given some of the bigger pads. And then on the cost items, you know, I mean, those are all very minimal. We've kind of been spending $6, $7, maybe $8 million a year in cash GNA. As production growth goes up, it's we grow the business. We're not really having to add any people. So on a per unit basis, those should continue to trend down even further over time. Okay, thank you. Thank you. At this time, the Q&A session has now ended. I will now turn the call over to Travis Stice for closing remarks. Thank you again to everyone who participated in today's call. If you have any questions, please contact us using the information provided. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.