Day and thank you for standing by. Welcome to the Viper Energy Q2 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw the 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 your first speaker today, Chip Seale, Investor Relations Director. Chip, please go ahead. Thank you, Felicia. Good morning and welcome to Viper Energy's Q2 2025 Conference Call. During our call today, we will reference an updated investor presentation, which can be found on Viper's website. Representing Viper today are Kaes Van't Hof, CEO, and Austen Gilfillian, President. 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 will now turn the call over to Kaes. Thank you, Chip. Welcome, everyone, and thank you for listening to Viper Energy's Q2 2025 Conference Call. Despite oil price volatility in the second quarter, Viper delivered strong oil production growth, both on an absolute and per share basis. After closing the transformative dropdown transaction from Diamondback on May 1st, we remain excited and highly confident about the meaningful organic growth that Diamondback can drive on our concentrated royalty assets over both the short and the long term. This symbiotic relationship uniquely positions Viper as one of the few companies in North American energy that is expected to deliver organic growth over the coming quarters and years. As previously announced during the second quarter, we also announced a definitive agreement for Viper to acquire Sitio royalties in an all-equity transaction. Sitio will be hosting their shareholder meeting to vote on a proposal to approve the merger on August 18th, and if approved, we expect to close the merger shortly following the meeting. As a reminder, this transaction adds substantial scale and inventory depth for Viper that will support our production profile over the next decade while also offering meaningful and immediate financial accretion. Following the expected close of the Sitio acquisition later this month, we remain highly confident in our organic growth trajectory that it will continue into 2026 at current prices, led by over 15% expected year-over-year growth in our Diamondback-operated net oil production. We expect full-year 2026 average production to increase by a mid-single-digit percentage from our expected pro forma Q4 2025 production levels, which is the first quarter of Viper plus Sitio consolidated. Importantly, based on this production outlook, we would expect our oil production per share for full-year 2026 to be approximately 15% higher than full-year 2025, highlighting the unique combination of organic growth and accretive acquisitions. Moving to return of capital, we are going to return $0.56 a share to stockholders this quarter, primarily in the form of our base plus variable dividend, which represents 75% of our cash available for distribution. As announced with the Sitio acquisition, our pro forma net debt target is $1.5 billion, which represents approximately one turn of leverage at $50 WTI based on expected pro forma production levels. We're committed to maintaining a fortress balance sheet, but we see $1.5 billion as the right amount of permanent leverage for Viper as a royalty business, given we have limited operating costs and no CapEx. Therefore, in the coming quarters and years, should net debt be at or below $1.5 billion, stockholders should expect us to return all excess cash, up to 100% of available cash for distribution generated in a quarter. In conclusion, we continue to believe that Viper presents a differentiated investment opportunity within the broader energy space. Our relationship with Diamondback remains strong and a distinct competitive advantage for Viper. 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 to our shareholders over the long term. The proposed Sitio acquisition only enhances our position as we look to compete with mid and large-cap E&Ps for investor dollars, attention, and access to capital. Operator, please open the line for questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to 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 we compile the Q&A roster. The first question comes from the line of Chris Baker of Evercore. Chris, please go ahead. Yeah, thanks. Kaes, great to see the commitment to returning 100% of cash flow once you get to that $1.5 billion target. Maybe just help frame up the flexibility in terms of the path toward that target, whether it be organically or with perhaps non-core asset sales? Yeah, good question, Chris. I think there are a couple of ways to go about that. The base case is the business can be generating a lot of free cash if we split that return 75/25 between equity and the balance sheet. We naturally get down to that $1.5 billion fairly quickly post Sitio close. I think we mentioned some of the non-Permian assets could be considered non-core to us, and there's been a lot of inbound interest that we haven't been able to do anything about because the deal hasn't closed yet. I think it would be logical for us to look at an asset or two outside of the basin to kind of accelerate that. I think we feel really good about the balance sheet where it is today. I think we're also very cognizant of where the stock's trading, and I think it's extremely undervalued versus what we expect the growth profile to look like over the coming years. I think we're going to balance a mix of probably a couple non-core asset sales combined with free cash generation, but also a heavy dose of buybacks here when we're permitted to post close. Yeah, that's great. I guess just hitting on that last point, you know, how are you thinking about the mix of buyback versus variable on top of the base dividend? Is it fair to think that, you know, we could see most of that variable cut in favor of buyback, just given where the stock is today? Yeah, I mean, I think we're going to have to look at how many days we're allowed to buy back before a buyback window closes and when the Sitio deal actually does close, which we expect in the coming weeks. Yeah, I mean, I think generally we prefer that Viper be a distribution vehicle, but when there are these dislocations, I think it's great to have a pure free cash flow vehicle to be able to allocate more cash to other forms of return of capital without worrying about capex commitments. Great. Thanks, guys. One moment for your next question. The next question comes from the line of Betty Jiang of Barclays. Betty, please go ahead. Thank you. Good morning again. I want to ask about the third-party operator activity. It's quite impressive considering the broader industry slowdown that you're seeing, more activity running on the third-party assets and increased backlog. Just want to see what you, any color on that dynamic, and do you think that level of activity is sustainable? Yeah, good question, Betty. I think it's a couple of things. One, going back to the last quarter when we were in the midst of some of the heightened volatility, we highlighted for standalone Viper what our exposure is to third-party operators. Really, the bulk of the existing production and activity is just a handful of really large caps, namely being Exxon, OXY, EOG, and Conoco. I think those operators are folks that you would expect to stay pretty consistent with their development plan through periods of volatility. That's benefited us. Secondly, you're seeing some of these concentrated assets that we've acquired in some of the recent acquisitions getting some activity on them. It's really been more of a drive in net activity while gross activity has been relatively flat. The third thing that I would flag, and you can see it showing up in one of the pie charts on slide 12, is we're starting to see some of the benefit in those numbers from the double-legal development on the Reagan County asset that has that development agreement in place with Diamondback to drive some growth on what was a very concentrated asset in the dropdown transaction. Great color, thanks. A follow-up to that is, if I look at your 2026 production growth outlook, the mid-single-digit growth, I believe that's really underpinned by Diamondback operated activities. Based on what you currently see with third-party activity, do you think there could be upside to that growth trajectory in 2026? Yeah, I think so. That mid-single digit is really three or four thousand barrels a day of growth if you're thinking about it on an absolute basis, which is, you know, entirely driven by the growth that we see coming from the Diamondback operated side. As we look at it today, if you maintain like historical permit conversions and timing and such, I think current activity on the third-party side would be a little bit of growth, actually, relative to the baseline of being flat. A lot of things can change and there's certainly a lot of volatility in the market. We're still kind of guiding to third-party volume staying flat. We are really encouraged by the activity levels that we've seen over the past couple of months. That's great. Thank you. One moment for your next question. The next question comes from the line of Neil Mehta of Goldman Sachs. Neil, please go ahead. Yeah, good morning, team. Just want your perspective on some of the non-core, or I should say non-Permian stuff in the Sitio portfolio, your perspective on how are you evaluating how much of that ultimately stays versus gets monetized? This has historically been a Permian pure play asset. How important is that for you as you think about the long term of the business? Yeah, Neil, I mean, I think we still see our combined business as a long-term Permian-only business. I think we've done a lot of deals over the past years, and in some instances, we've sold assets immediately post-close to pay down debt or just to clean up the asset base. I think in this situation, given that it's minerals and it's really heavily PDP-weighted, we're probably going to be pretty patient on some of the larger positions, particularly knowing that the buyer universe is strong. The buyer universe is going to underwrite STRIP, and with the STRIP weak, we don't have to sell assets here. We might be patient waiting to sell some of the larger positions over the next few years. On the flip side, Kaes, you've been very clear about using this asset to consolidate. You have an advantage cost of capital, even if it's undervalued, and you are the logical acquirer of a lot of royalty acreage. Is the opportunity set available and interesting, and how do you weigh that against the intensity of integration around the Sitio asset that you'll need for the next couple of months? Yeah, I think the integration is going to go pretty quickly. I think Sitio had a very clean business and some of the key employees are hopefully going to join us at some point at Viper. I think the integration won't necessarily be the problem, but I do think as you think about uses of capital, we want to be patient at the Viper level, given that we've done two large deals in six months, and we expect those deals to be accretive, and we expect the market to reward those deals for being accretive. That hasn't happened yet. I think we need to hit numbers and be aggressive on our buyback and let things settle out for a little bit before doing anything large or strategic right away. There certainly are packages we're very interested in. Most of those are held in private hands, so they're pretty patient. I think we need to show a clean quarter or two pro forma for the Sitio and show that we're hitting our synergies and hitting our production targets and reducing our share count, all while paying a very large dividend. Awesome. All right. Thanks, Kaes. Thanks, Neil. Sorry. One moment for your next question. The next question comes from the line of Paul Diamond of Citi. Paul, please go ahead. Thank you. Good morning, Al. Thanks for taking my call. I just wanted to quickly touch base on the $1.5 million net debt target. Once hit, even without any asset disposition, does that shift your hedge strategy at all? Do you feel the need to maintain current levels, or could we see that moderate a little bit? How do you think about that post hitting that target? Yeah, Paul, we've always kind of thought about our hedging strategy as locking in a certain amount of downside protected cash flow that even if things really go south, you have some level of protection and leverage isn't going to blow out on you. I think we'll continue to hedge probably in this consistent form of the deferred premium puts. Really, just as debt goes down or net debt goes down, you just need to hedge less barrels to lock in the required amount of downside protected cash flow to solve for a cap on leverage. Got it. Makes sense. Okay. Just shifting a little bit, I know you talked about this a touch, but just in the back half of the year post Sitio close, how should we think about that 75% of distributable cash to be split between the variable versus buybacks? This seems to be a pretty big dislocation in the equity right now. Is there one, are you thinking about weighing in more in that direction, or how do you think about that for between now and year end? Yeah, I mean, I think it's all going to be flexible, but there is a lot of cash and capacity to buy back shares here, you know, once we close the deal. I think we're just going to have to see how things unfold over the back half of the year. That's the beauty of a pure free cash flow business that's actually, you know, growing is that, you know, there's capacity to do both. I think today, I think you're hearing a strong message from us that we would lean into buybacks over a variable today. Understood. Thanks for the clarity on that today. Thanks, Paul. One moment for your next question. The next question comes from the line of Derrick Whitfield of Texas Capital. Derrick, please go ahead. Good morning, all, and thanks again for your time. Thanks, Derek. My first question, I wanted to focus on the Sitio acquisition. While it's hard to fully attribute stock performance to any specific development, Viper has underperformed several of its peers since the announcement. Are there any aspects of the acquisition that you feel are underappreciated by investors? Yeah, I mean, listen, I think the size and scale of the combined business is misunderstood, right? It's hard to model mineral businesses because you have a small interest in a significant number of wells. You know, I think if you combine the visibility we have with the Diamondback drill bid and the financial accretion associated with the trade, you start to see numbers go up. You know, listen, our job is to make the business look cheap by executing on either growth or reduction in share count. Over time, the market's a weighing machine versus a voting machine. These higher per-share metrics tend to prove out to be the right way to run a business long term. I think, while we often get stuck in the malaise of the short term, the long-term path is very bright. Great. In past calls, Sitio management has highlighted the substantial investment it has made in back-office efforts to identify underpayment of royalties. Kind of in thinking about the levers that you guys have to pull for accretion, how much of that exists within Viper? They've done some pretty interesting things on the automation side that we're really excited to bring into our business. I think they've had to do it out of necessity given the number of wells they have interest in, and that's why we have a lot of confidence that we'll be able to integrate that very quickly. I think, in general, a lot of the administrative functions throughout our business in E&P and in minerals, the AI revolution and machine learning are going to be two very important pieces to review 35,000 wells a month to make sure you're getting paid right. I think it'll accrue to our shareholders' benefit long term as well. That's great. I'll leave it there. One moment for your next question. The next question comes from the line of Aaron Bilkoski of TD Cowen. Aaron, please go ahead. Thanks. Good morning, guys. Your presentation outlines an expected 5.9% NRI in Diamondback operated wells through 2029. I guess my question is, do you expect that NRI to be fairly consistent across those years, or do you anticipate a higher NRI in 2026 and see that taper off in the later years? Yeah, Aaron, I think really the important metric is the net well count. You know, as we think about that on the Diamondback operated side, it's really a function of two things. It's one, your exposure to total Diamondback gross activity levels, and then secondly, your NRI within those wells. We kind of laid this detail out with the dropdown, given we have such increased alignment with the Diamondback development plan over an extended period of time, given the overlap of that dropdown acreage. You'll kind of see on slide 11, thinking about around 25 net wells per year over this time period. I would say that that certainly will be a touch front-weighted. If you think about 2026 and 2027, that'll be biased a touch higher than that. That's really going to drive the couple thousand barrels a day of growth that we're talking about on an absolute basis. Really, over a five-year period, it's going to be pretty consistent exposure to whatever Diamondback's development plan is going to be. That really underscores the confidence we have in the long-term production growth outlook. Perfect. Thank you very much. One moment for our last question. The next question comes from the line of Leo Mariani of ROTH. Leo, please go ahead. Yeah, I wanted to touch base on the debt target here. Do you guys anticipate hitting that? It sounds like in the relatively near future. Do you think that's going to happen here in the first half of 2026? Could you also just talk about the strategy of sort of dividends, you know, versus buybacks? Obviously, it sounds like you want to step up the buyback here, given the weakness in the shares on a relative basis. Do you also see room for dividend increases in the back half of the year, given the accretion from the mergers? Yeah, Leo, I mean, I think it's reasonable to expect that the board will look at the base dividend and increasing that sometime in the next quarter or two. On top of that, just free cash flow growth overall from production growth and the accretion of the deals starts to roll through as well. I think importantly, this $1.5 billion net debt target and just saying, "Hey, we're not going to hold on to a bunch of cash on top of that number." If we're at that net debt number, we're giving the cash back to shareholders. I think that once that starts flowing through numbers, people are going to realize how much cash they're going to get back from Viper over the next couple of years is going to be significant. Okay. On the M&A side, obviously, it sounds like you know you got a lot to still digest here. You haven't closed Sitio yet. You kind of made a comment here that perhaps you take it a little bit slower as you want to get maybe the stock price up a bit to kind of fully reflect the benefits of the acquisition. I understand maybe you don't have as much desire in the very near term, but can you talk about availability of deals out there? Are you seeing packages that are transacting? Obviously, while prices have settled down a little bit after a pretty tumultuous second quarter. Yeah, it's been pretty quiet for us, but that's probably because we've been doing this large deal. Most importantly, as I said earlier in the call, we did two transformative deals in six months. We expect our investors to make money on those deals, and that's why we're kind of signaling that we'd like to be patient on M&A and make sure our investors are made whole on the accretion that we all expect to come. Okay, thanks. Thanks, Leo. This concludes the question and answer session. I would now like to turn it back over to management for closing remarks. Thank you, everybody, for participating in today's call, our second call without air conditioning. I appreciate you making it shorter than the Diamondback call. Have a good day. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.