Viper Energy Partners LP has entered a deal to substantially expand its Lower 48 mineral and royalty interest footprint through an acquisition from two private equity firms.
The Diamondback Energy Inc. subsidiary agreed to acquire about 7,300 net royalty acres from Warwick Capital Partners and GRP Energy Capital for roughly 9.02 million Viper common units and $750 million in cash, Viper management said.
The assets include some 4,600 net royalty acres in the Permian Basin and 2,700 net royalty acres in other major basins.
The acreage currently is producing about 7,000 boe/d (4,000 b/d oil), with output expected to increase to roughly 8,500 boe/d for full-year 2024.
The Permian assets include 2,800 net royalty acres in the Midland sub-basin and 1,800 net royalty acres in the Delaware sub-basin.
The acquisition “sets Viper up with an unparalleled growth runway as highly concentrated undeveloped units are turned to production over the coming years,” said Diamondback CEO Travis Stice. Midland, TX-based Diamondback is Viper’s general partner.
“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,” Stice added. “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.”
Following the acquisition, which is expected to close by the middle of the fourth quarter, Viper expects its full-year 2024 production to average between 44,500 and 48,000 boe/d (25,500-27,500 b/d oil). The midpoint of this range would be 25% higher than Viper’s standalone 2Q2023 average daily oil output.
Currently there are 60 active rigs operating on the combined acreage.
“Building and managing a mineral asset of this scale is a monumental task,” said GRP Energy Capital’s CEO Ken Willey. “It requires a thoughtful strategy and disciplined process.”
Warwick Capital Partners’ Alfredo Mattera, managing partner, added, ““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.”
To finance the transaction, Diamondback has granted Viper the right to cause Diamondback to purchase up to 7.22 million common units for up to $200 million. Viper plans 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,” management said.
