Viper Energy Partners LP, a Subsidiary of Diamondback Energy, Inc., Announces Acquisition
September 05 2023 - 6:00AM
Viper Energy Partners LP (NASDAQ:VNOM) (“Viper” or the “Company”),
a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG)
(“Diamondback”), today announced it has entered into a definitive
purchase and sale agreement to acquire certain mineral and royalty
interests from affiliates of Warwick Capital Partners and GRP
Energy Capital (collectively, the “Seller”) in exchange for
approximately 9.02 million Viper common units and $750 million of
cash, subject to customary adjustments. The cash portion of this
transaction is expected to be funded through a combination of cash
on hand, borrowings under the Company’s credit facility, and up to
$200 million of committed equity from Diamondback, as well as
proceeds from one or more capital markets transactions, including a
potential bond offering, subject to market conditions and other
factors.
ACQUISITION HIGHLIGHTS
- Approximately 4,600 net royalty
acres in the Permian Basin, plus an additional ~2,700 net royalty
acres in other major basins; total acreage of roughly 7,300 net
royalty acres
- Permian Basin assets represent over
90% of current production and total deal value
- Valuation implies a greater than
15% 2024 unlevered free cash flow yield at current strip prices
giving credit to only existing PDP, DUCs and permits
- High confidence visibility to
near-term production growth results in meaningful and immediate
accretion to all relevant financial metrics; accretion expected to
grow in subsequent years due to the highly undeveloped nature of
the asset
- Current production of approximately
4,000 bo/d (~7,000 boe/d); expected to increase to ~4,750 bo/d
(~8,500 boe/d) for full year 2024 based on existing production and
timing assumptions on current work-in-progress locations that are
more conservative than Viper’s typical base assumptions
- Increases expected pro forma 2024
per unit return of capital to unitholders by an estimated 7-8%
- Viper will issue approximately 9.02
million common units to the Seller at closing, subject to certain
closing adjustments
- Diamondback has granted Viper the
right to cause Diamondback to purchase up to 7.22 million common
units for up to an aggregate of $200 million to partially finance
the transaction; this right is exercisable by Viper until the
closing date of the acquisition
- Viper intends to finance the
remaining cash portion of the purchase price through a combination
of cash on hand, existing borrowing capacity under its revolving
credit facility, and/or proceeds from one or more capital markets
transactions, including a potential bond offering, subject to
market conditions and other factors
- Effective date of October 1, 2023,
with closing anticipated by the middle of Q4 2023, subject to
customary closing conditions
- Leverage expected to be around 1.3x
at year end of 2023 based on estimated pro forma Q4 2023 annualized
EBITDA; expected to decrease thereafter at current strip prices
while still maintaining commitment to return 75% of cash available
for distribution to unitholders
PERMIAN ACREAGE DETAILS
- Approximately 2,800 net royalty
acres in the Midland Basin and 1,800 net royalty acres in the
Delaware Basin with an average 0.7% NRI
- Combined 21 gross rigs currently
operating on acreage position
- Midland Basin:
- Roughly 60% of acreage is in Martin
and Midland counties; primary operators are Pioneer, Endeavor, and
Diamondback
- Largely undeveloped acreage that
provides an average ~0.8% NRI across an estimated 135 completely
undeveloped horizontal units; represents ~1,000 net royalty acres
and an expected ~12.6 net locations
- 5.1 net DUCs and permits; expected
to be turned to production over the next 12-15 months
- Delaware Basin:
- Approximately two-thirds of acreage
is in Reeves and Loving counties
- The top four operators, who operate
roughly half of the total acreage, are running a combined 50 rigs
in the Delaware Basin
- 0.8 net DUCs and permits; expected
to be turned to production over the next 12-15 months
- Diamondback is the operator of
approximately 290 net royalty acres combined between the Midland
and Delaware Basins
PRO FORMA VIPER HIGHLIGHTS
- Preliminary full year 2024 average
daily production guidance of 25,500 to 27,500 bo/d (44,500 to
48,000 boe/d), the midpoint of which is 25% higher than standalone
Viper’s Q2 2023 average daily oil production
- Approximately 32,000 net royalty
acres in the Permian Basin
- 60 active rigs currently operating
on combined acreage position in the Permian Basin, with an average
1.7% NRI expected in those wells
“This acquisition of high quality mineral and
royalty assets is a truly differentiated opportunity that
represents a significant value proposition for Viper and its
unitholders. The high confidence near-term production outlook
results in meaningful and immediate accretion to all relevant
financial metrics, including an estimated increase of 7-8% to our
expected 2024 return of capital program. Equally as important, and
what truly differentiates this opportunity, however, is both the
quantity and quality of the undeveloped acreage position. Credit is
due to the GRP Energy Capital team for building an asset of this
size, scale and overall quality that cannot be replicated in the
private minerals market today,” stated Travis Stice, Chief
Executive Officer of Viper’s General Partner.
Mr. Stice continued, “In addition to the
immediate financial accretion, this deal sets Viper up with an
unparalleled growth runway as highly concentrated undeveloped units
are turned to production over the coming years. Pro forma for this
transaction, Viper will own roughly 32,000 net royalty acres in the
Permian Basin, and we believe the high quality nature of our assets
will position us to capture an increasing amount of activity,
particularly within the Northern Midland Basin, going forward. As
we look ahead, the mineral market remains highly fragmented and
Viper plans to play a meaningful role in consolidating this market
as high value proposition opportunities present themselves.”
Ken Willey, Chief Executive Officer of GRP
Energy Capital, stated, “Building and managing a mineral asset of
this scale is a monumental task. It requires a thoughtful strategy
and disciplined process. We are happy with the outcome for the
company and our partners, and we look forward to working with Viper
on the transition and closing.”
“This transaction underpins Warwick’s
partnership-led approach to sourcing compelling investment
opportunities alongside best-in-class sector specialists such as
GRP Energy Capital. The high-quality portfolio GRP has built means
that the transaction has not only provided a positive outcome for
our investors, but a fantastic asset for Viper to take on into the
years to come,” added Alfredo Mattera, Co-Founder & Managing
Partner at Warwick Capital Partners.
Advisors
Evercore is serving as financial advisor to
Viper and Akin Gump Strauss Hauer & Feld LLP is serving as its
legal advisor.
Barclays is serving as financial advisor to the
Seller and Kirkland & Ellis LLP is serving as its legal
advisor.
About Viper Energy Partners LP
Viper is a limited partnership formed by
Diamondback to own, acquire and exploit oil and natural gas
properties in North America, with a focus on owning and acquiring
mineral and royalty interests in oil-weighted basins, primarily the
Permian Basin. For more information, please visit
www.viperenergy.com.
About Diamondback Energy, Inc.
Diamondback is an independent oil and natural
gas company headquartered in Midland, Texas focused on the
acquisition, development, exploration and exploitation of
unconventional, onshore oil and natural gas reserves primarily in
the Permian Basin in West Texas. For more information, please visit
www.diamondbackenergy.com.
Forward-Looking Statements
This news release contains forward-looking
statements within the meaning of the federal securities laws. All
statements, other than historical facts, that address activities
that Viper assumes, plans, expects, believes, intends or
anticipates (and other similar expressions) will, should or may
occur in the future are forward-looking statements. The
forward-looking statements are based on management’s current
beliefs, based on currently available information, as to the
outcome and timing of future events, including specifically the
statements regarding the pending acquisition and any potential
capital markets transactions and other funding sources for the
pending acquisition. These forward-looking statements involve
certain risks and uncertainties that could cause the results to
differ materially from those expected by the management of Viper.
Information concerning these risks and other factors can be found
in Viper’s filings with the Securities and Exchange Commission,
including its Forms 10-K, 10-Q and 8-K, which can be obtained free
of charge on the Securities and Exchange Commission’s web site at
http://www.sec.gov. Viper undertakes no obligation to update or
revise any forward-looking statement.
Investor Contacts:Adam Lawlis+1
432.221.7467alawlis@viperenergy.com
Austen Gilfillian+1 432.221.7420agilfillian@viperenergy.com
Source: Viper Energy Partners LP; Diamondback Energy, Inc.
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