Viper Energy, Inc. Acquires Mineral and Royalty Interests in $650 Million Deal with Tumbleweed Royalty IV, LLC
Viper Energy, Inc., a subsidiary of Diamondback Energy, Inc., has recently announced a definitive agreement to acquire mineral and royalty interest-owning subsidiaries of Tumbleweed Royalty IV, LLC. This transaction, valued at $650 million, includes a cash portion of $461 million and approximately 10.1 million units of Viper Energy Partners LLC (OpCo), with an additional contingent cash consideration of up to $41 million based on 2025 oil prices.
The cash portion of the purchase will be financed through various means, including cash on hand, borrowings, and potential capital markets transactions. The deal also includes an option to purchase an equal number of shares of Class B common stock of Viper Energy. The acquisition is expected to close early in the fourth quarter of 2024, subject to customary closing conditions.
The assets involved in this deal span approximately 3,727 net royalty acres in the Permian Basin, with a focus on the Midland Basin's core. Current production stands at around 2,500 barrels of oil per day, projected to increase to about 4,500 barrels per day by 2025. The development plan includes completing 120-140 gross locations by the end of 2026, which is expected to significantly enhance Diamondback-operated production.
This acquisition aligns with Viper's strategy to consolidate mineral and royalty assets, aiming to boost financial performance and long-term production growth. The acquired assets are anticipated to increase Viper's per share return of capital to Class A shareholders by an estimated 4-5% by 2025.
In other news, Viper Energy Inc. has announced a public offering of 8.5 million shares of its Class A common stock to fund the acquisition of subsidiaries from Tumbleweed Royalty IV, LLC. This move is intended to expand Viper's asset portfolio in the Permian Basin.
Diamondback Energy, on the other hand, recently completed a merger with Endeavor Energy Resources, further enhancing its operational footprint in the Permian Basin and positioning itself strongly in the North American oil market.
Analyzing the situation, it is crucial to note that Diamondback Energy has a market capitalization of $30.14 billion and a P/E ratio of 8.72. These figures indicate the company's strong presence in the market and reasonable valuation relative to its earnings. Additionally, Diamondback Energy has maintained dividend payments for seven consecutive years, showcasing stability and potential for investors seeking steady income streams.
Overall, these developments highlight the growth potential and strategic moves of Viper Energy and Diamondback Energy in the Permian Basin, presenting investment opportunities for those looking to capitalize on the companies' financial strength and operational prowess in the oil market.