Viper Energy NASDAQ: VNOM opened 2026 with production that exceeded management’s expectations, prompting the company to raise the midpoint of its full-year oil production guidance by roughly 2.5% as strong operator activity continued across its Permian Basin acreage.
First-quarter activity and higher full-year outlook
On the call, CEO Kaes Van’t Hof said the first quarter “marked a strong start to the year,” with more than 650 gross horizontal wells turned to production across Viper’s acreage. He highlighted Diamondback’s 114 gross wells in the Midland Basin and said other “leading third-party operators” also contributed across both the Midland and Delaware basins.
Van’t Hof said the updated outlook is expected to be driven primarily by Diamondback accelerating near-term activity and continued development across Viper’s “high concentration royalty interest throughout the basin.” He added that the higher production outlook represents more than 5% organic growth versus Viper’s pro forma 2025 exit rate.
Asked about potential additional upside from third-party operators, Van’t Hof said the company has not “booked a ton of third-party acceleration” in its guidance yet, though he indicated it could materialize. Management pointed to monitoring drilled-but-uncompleted wells (DUCs) and permits as leading indicators, while noting it is more difficult to forecast the pace at which those indicators convert into production.
Riverbend acquisition expands footprint, adds New Mexico exposure
Viper also emphasized its inorganic growth strategy, centering discussion on the Riverbend acquisition announced the day before the call. Van’t Hof said Viper will acquire more than 3,000 net royalty acres and approximately 2,000 barrels of oil production per day for $337 million in cash and 3.7 million Class A shares.
Management described the assets as highly complementary, with roughly 75% overlap with Viper’s existing acreage and increased exposure to third-party public operators. In response to questions about the remaining 25% of the position, Van’t Hof said much of the overlap is in the Midland Basin, including areas in Midland, Glasscock, Upton, and Reagan counties, and he characterized the Delaware portion as similar to Viper’s existing footprint, including Reeves County assets operated by Permian Resources.
The primary difference, according to Van’t Hof, is added exposure in New Mexico under operators including ConocoPhillips, Occidental, and EOG Resources. “It gets a lot of what we like in the Midland Basin and gets kind of some new exciting exposure in New Mexico that Viper historically hasn’t had a huge presence in,” he said.
On inventory quality, Van’t Hof told analysts that most of the value is expected to come from “core zones being undeveloped,” particularly in New Mexico and the Midland portion. He cited a “big chunk” of legacy Pioneer acreage now held by Exxon Mobil that he described as “completely undeveloped acreage” and said it could support the production profile in coming years. He also referenced emerging zones, including the Barnett in the Midland and the Woodford in the Delaware, as upside “we didn’t have to pay for.”
Looking at the Riverbend production trajectory, Van’t Hof said 2027 “probably grows” and could show “a couple years of slight growth,” while he described the longer-term 5- to 10-year view as “pretty flat.”
Capital returns: dividend-first approach with flexibility
Viper returned $0.94 per share in the first quarter, which Van’t Hof said represented 90% of cash available for distribution. That return included a $0.68 per share dividend and $0.28 per share of stock repurchases executed during the quarter.
Management reiterated its commitment to returning at least 75% of cash available for distribution and described the framework as “disciplined and flexible.” Van’t Hof said that prior to the Riverbend acquisition, the company had also committed to returning 100% of cash available for distribution when net debt was at or below $1.5 billion, while emphasizing that the $1.5 billion figure “is not a static amount” and is intended to evolve with the business.
In response to questions about buybacks versus variable dividends, Van’t Hof said Viper remains “primarily a distribution vehicle” given its low- or zero-capital-expenditure model, with repurchases used opportunistically in certain situations. He said the company could return between 75% and 90% of free cash flow depending on conditions, noting that “the excess free cash flow is gonna pay down the Riverbend deal very quickly.”
Management also suggested the decision-making is more straightforward at Viper than at an upstream operator, with one speaker adding the company’s “90% free cash flow margins” allow it to pursue multiple priorities, including dividends, opportunistic investment (buybacks or acquisitions), and targeted debt reduction.
M&A pipeline and market volatility
Analysts pressed management on the scale of potential mineral and royalty consolidation opportunities in the Permian and whether market volatility is affecting dealmaking. Van’t Hof said he sees opportunity across both “mid-sized to larger deals,” while acknowledging it remains “tough to get deals done in this market.” He said Riverbend is the first deal in that size range for Viper at its current pro forma scale, describing it as a tuck-in acquisition that can be executed “very seamlessly.”
Discussing market conditions, Van’t Hof said Viper’s underwriting on Riverbend used a “moderate” flat oil price scenario of roughly $65 to $70 per barrel for NAV purposes, noting that backwardation in the strip allowed the company to avoid “breaking our pick on NAV.” He characterized the transaction as a “win-win” for both sides, citing the equity component received by the seller.
When asked about deal flow more broadly, management said the phones are active, with more inbound activity on both smaller “ground game” deals and mid-to-larger packages, but they could not yet predict how volatility would impact the ability to close transactions. Van’t Hof also said Viper has already “cleaned up all the non-Permian assets,” adding that he expects private equity-backed mineral companies to test the market over the next several quarters.
Operational themes: development prioritization and recovery technology
Van’t Hof also addressed how development could shift within Diamondback’s inventory to areas where Viper has higher net revenue interests, saying Diamondback evaluates inventory on a consolidated basis and that this can move higher-interest areas forward. He pointed specifically to the Barnett near Spanish Trail, where he said the company has seen strong well results and where Diamondback has tests planned later this year. He suggested those results could lead to accelerated development over the next 18 to 24 months.
On longer-term productivity and recovery improvements, Van’t Hof said Diamondback has tested surfactants and advanced chemicals in areas where Viper has interests. While he called the impact “immaterial today,” he said it could become meaningful “4, 5, 6 years down the road” if adopted more broadly in capital plans.
Viper also provided a brief update on cash taxes, with Van’t Hof saying the company expects a fairly steady 27% to 30% of pre-tax income as a go-forward rate, adding that first-quarter taxes were higher in absolute dollars because income was higher.
In closing remarks, Van’t Hof said Viper’s royalty model, inventory position, and alignment with Diamondback support organic growth and free cash flow generation, and he told listeners the company remains positioned to pursue acquisitions while maintaining its shareholder return framework.
About Viper Energy NASDAQ: VNOM
Viper Energy Partners LP is a publicly traded master limited partnership that owns and intends to acquire mineral and royalty interests in oil and natural gas properties. As a pass-through entity, Viper Energy Partners does not engage in drilling or production operations directly; instead, it generates revenues by holding overriding royalty interests, mineral fee interests and royalty fee interests. These interests entitle the partnership to receive a percentage of the proceeds from hydrocarbons produced and sold by third-party operators.
The partnership's assets are concentrated in the Permian Basin, with a primary focus on the Delaware Basin region of West Texas and southeastern New Mexico.
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