Viper Energy Partners LP, Midland, Tex., agreed to a nearly $1-billion deal to acquire Permian basin mineral and royalty interests from affiliates of Warwick Capital Partners and GRP Energy Capital, the company said in a release Sept. 5.
The Diamondback Energy Inc. subsidiary will pay nearly $750 million in cash plus 9.02 million Viper common units to add some 4,600 net royalty acres in the Permian basin (2,800 in Midland basin; 1,800 in Delaware basin), plus an additional 2,700 net royalty acres in other major basins, the company said.
Some 60% of the Midland basin acreage lies in Martin and Midland counties. The Delaware basin acreage is about two-thirds in Reeves and Loving counties.
The Permian basin assets represent over 90% of current production and total deal value, Viper said. Production is expected to increase to about 4,750 b/d of oil (about 8,500 boe/d) for full year 2024 from about 4,000 b/d (7,000 boe/d) currently based on existing production and timing assumptions on current work-in-progress locations, the company said.
Pro forma for the transaction, Viper will own roughly 32,000 net royalty acres in the Permian basin. Preliminary full year 2024 average daily production guidance following the deal close is expected to come in at about 26,500 b/d of oil and 46,250 boe/d at the midpoint, 25% higher than standalone Viper’s second-quarter 2023 average daily oil production, the company said.
“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,” said Travis Stice, chief executive officer of Viper’s general partner. As important, he said, is the quantity and quality of the undeveloped acreage position allowing the company to "capture an increasing amount of activity, particularly within the Northern Midland basin, going forward.”
Meantime, Viper Energy is expected to play a ‘meaningful role’ in consolidating the fragmented mineral market as high value proposition opportunities present themselves, he said.
As part of the deal, Diamondback has granted Viper the right to have Diamondback purchase up to $200 million in shares to help fund the acquisition.
The deal is scheduled to close in the middle of this year’s fourth quarter, subject to closing conditions, with an effective date of Oct. 1, 2023.