Viper Energy anticipates double-digit oil production per share growth in 2026 following asset sale and Sitio integration

Earnings Call Insights: Viper Energy, Inc. (VNOM) Q3 2025

MANAGEMENT VIEW

* CEO Kaes Van't Hof stated that "During the third quarter, Viper continued to execute on our growth strategy, bolstered by the closing of the Sitio acquisition and continued organic growth." He highlighted, "Our fourth quarter 2025 oil production guidance implies a roughly 20% increase in oil production per share compared to the same quarter last year." Van't Hof also indicated expectations for "mid-single-digit organic oil production growth from fourth quarter 2025 estimated production," projecting "double-digit year-over-year growth in oil production per share relative to 2025."
* Van't Hof emphasized the company's capital return strategy, noting, "we felt it appropriate to lean into our return of capital commitment and returned 85% of cash available for distribution in the third quarter to stockholders." He further stated, "Our combined base plus variable dividend represents a greater than 6% annualized yield and an increase of almost 10% relative to our dividend from last quarter." The CEO detailed that this was "combined with over $90 million of share repurchases completed during the quarter and an incremental $60 million being retained to the balance sheet," resulting in "a 48% increase versus the second quarter" in return of capital per Class A share.
* Van't Hof added, "as we move to close our non-Permian asset sale, and as a result, move closer to our long-term net debt target of $1.5 billion, we will have line of sight to return nearly 100% of cash available for distribution to stockholders." He reiterated the company's intent to prioritize dividends but also pursue share repurchases "given the current market dislocation and unique opportunity to invest countercyclically."
* The CEO reported strong operational activity and confidence in organic growth, stating, "we continue to see strong activity levels across our asset base, and as a result, continue to expect mid-single-digit organic growth in 2026 despite the commodity price volatility."
* Commenting on the impact of the Sitio acquisition, Van't Hof said, "Viper continues to own concentrated interests under Diamondback's core Midland Basin development, which is expected to drive meaningful long-term oil production growth."
* The CEO concluded, "Viper's unmatched ability to deliver sustained per share growth with 0 capital and limited operating costs should result in a differential ability to return increasing amounts of capital to stockholders over the long term."

OUTLOOK

* Management guided for "mid-single-digit organic oil production growth from fourth quarter 2025 estimated production," which "implies double-digit year-over-year growth in oil production per share relative to 2025."
* The company expects to "return nearly 100% of cash available for distribution to stockholders" as it approaches its $1.5 billion net debt target.
* No explicit changes in formal guidance language compared to the previous quarter, but an increased emphasis on share repurchases and a more aggressive capital return profile was noted.

FINANCIAL RESULTS

* The company reported returning 85% of cash available for distribution to stockholders in the third quarter.
* The combined base plus variable dividend represents a greater than 6% annualized yield, an increase of almost 10% relative to the prior quarter's dividend.
* Over $90 million in share repurchases were completed during the quarter, with $60 million retained on the balance sheet.
* Third quarter return of capital per Class A share represents a 48% increase versus the second quarter.

Q&A

* Neal Dingmann, William Blair & Company: Asked about capital allocation and the impact of the $700 million asset sale. CEO Van't Hof responded that the asset sale helps the company move swiftly toward the $1.5 billion net debt target, stating, "by the beginning of the year next year, we'll be ready to consistently return almost 100% of free cash to shareholders."
* Wei Jiang, Barclays: Inquired about third-party activity and the contribution from Sitio. President Austen Gilfillian explained that both new and legacy assets have outperformed, noting, "we've just captured almost half of all activity across the basin over this time period."
* Neil Mehta, Goldman Sachs: Asked about net proceeds and balance sheet impact from divestitures. Van't Hof noted, "our net proceeds will be about $610 million...the proceeds are going to pay down essentially the revolver to 0 as well as almost pay our term loan down to essentially 0."
* Kaleinoheaokealaula Akamine, BofA Securities: Questioned sustainability of Permian volume growth. Van't Hof said, "the advantaged nature of the Diamondback-Viper relationship probably drives that growth for at least the next couple of years, if not longer."
* Derrick Whitfield, Texas Capital: Asked about guidance sensitivity to commodity prices. Gilfillian stated, "the beauty of the relationship...to the extent that it flexes down, Diamondback will really be prioritizing the highest returning projects."
* Tim Rezvan, KeyBanc: Focused on share repurchases and potential for further buybacks. Van't Hof said, "if the market dislocates further, we can just -- we can lean in further without compromising free cash flow generation or the balance sheet."

SENTIMENT ANALYSIS

* Analysts displayed a positive to slightly positive tone, with repeated interest in capital returns, asset allocation, and the company's ability to sustain growth despite challenging market conditions. Questions frequently focused on capital allocation, asset sales, and dividend sustainability.
* Management's tone during prepared remarks was confident and assertive, with strong emphasis on capital returns and growth. During Q&A, management maintained a positive and occasionally defensive tone, particularly when discussing share repurchases and market perception, as seen in Van't Hof's comment: "we're going to try to take advantage of it as a complex."
* Compared to the previous quarter, management's confidence increased, and the language around buybacks and capital return became more proactive. Analysts' sentiment shifted from curiosity about the Sitio integration and asset sales to a more direct interest in execution and capital allocation.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2026 remains for mid-single-digit organic oil production growth, with a continued emphasis on double-digit per share growth. This is consistent with the previous quarter but is now backed by the completed Sitio acquisition and significant asset sales.
* Strategic focus shifted from integrating Sitio and planning for organic growth to executing asset sales, accelerating share repurchases, and maximizing capital returns.
* Analysts in the current quarter pressed more on capital allocation, sustainability of dividends, and share buybacks, reflecting heightened focus on shareholder returns.
* Management's tone was more aggressive and confident in capital allocation, compared to a more measured approach in the previous quarter when integration and debt reduction were primary concerns.

RISKS AND CONCERNS

* Management highlighted commodity price volatility as a risk but emphasized the company's low breakeven and flexible capital return model.
* Analysts raised concerns about the sustainability of third-party activity, the potential impact of large asset sales, and market dislocation affecting stock valuation. Van't Hof and Gilfillian addressed these by stressing operational efficiency, balance sheet strength, and the ability to scale capital returns up or down as needed.

FINAL TAKEAWAY

Viper Energy management underscored the company's strategic execution following the Sitio acquisition and significant non-Permian asset sales, emphasizing a path toward double-digit oil production per share growth in 2026 and an aggressive capital returns program. With net proceeds from divestitures strengthening the balance sheet and a clear focus on maximizing shareholder value through dividends and buybacks, the management team presented a confident outlook, signaling readiness to respond dynamically to market conditions and prioritize shareholder returns as Viper advances toward its net debt target and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vnom/earnings/transcripts]

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