Viper Energy Partners’ Earnings Call Highlights Growth and Returns

Viper Energy Partners ((VNOM)) has held its Q3 earnings call. Read on for the main highlights of the call.

Viper Energy Partners’ recent earnings call painted a picture of optimism, driven by strong growth in oil production and significant shareholder returns. The company highlighted strategic asset sales and positive third-party activity as key contributors to this positive outlook. However, concerns were raised regarding market valuation and the tax implications of asset sales, which tempered the overall enthusiasm. Despite these challenges, the sentiment remains largely optimistic due to the company’s robust growth strategy and commitment to shareholder returns.

Significant Oil Production Growth

Viper Energy Partners announced an impressive growth trajectory in oil production, with guidance for the fourth quarter of 2025 indicating a roughly 20% increase in oil production per share compared to the same period last year. Looking ahead to 2026, the company expects double-digit year-over-year growth in oil production per share relative to 2025, underscoring its strong operational performance and strategic focus on expanding production capabilities.

Strong Return of Capital

The company demonstrated its commitment to returning capital to shareholders by distributing 85% of cash available for distribution in the third quarter. This resulted in a combined base plus variable dividend that represents an annualized yield of over 6%, marking a 10% increase from the previous quarter. Additionally, Viper Energy completed over $90 million in share repurchases during the quarter, further enhancing shareholder value.

Non-Permian Asset Sale

Proceeds from the sale of non-Permian assets are set to play a crucial role in achieving Viper Energy’s net debt target of $1.5 billion. This financial maneuver will enable the company to return nearly 100% of cash available for distribution to stockholders, reinforcing its commitment to maximizing shareholder returns.

Positive Third-Party Activity

Viper Energy captured nearly half of all third-party activity across the Permian Basin, showcasing its ability to leverage consistent capital deployment by operators outside of Diamondback. This positive third-party activity highlights the company’s strategic positioning and its capacity to benefit from broader industry trends.

Tax Implications of Asset Sale

The asset sale, while beneficial in terms of debt reduction and shareholder returns, will incur a tax hit, reducing net proceeds to approximately $610 million. This tax implication is a critical consideration for the company as it navigates its financial strategy.

Market Dislocation and Valuation Concerns

Amidst market dislocation and perceived undervaluation of shares, Viper Energy has prioritized stock buybacks. This strategic choice reflects the company’s response to challenges in market perception and its efforts to enhance shareholder value through tactical financial maneuvers.

Forward-Looking Guidance

Viper Energy’s forward-looking guidance suggests a robust growth trajectory, with a projected 20% increase in oil production per share for the fourth quarter compared to the previous year. For 2026, the company anticipates mid-single-digit organic growth, translating to double-digit year-over-year growth in oil production per share relative to 2025. The capital return strategy remains a focal point, with an 85% return of cash available for distribution to stockholders in the third quarter, complemented by significant share repurchases and a strong balance sheet position.

In conclusion, Viper Energy Partners’ earnings call highlighted a promising outlook, characterized by strong oil production growth and substantial shareholder returns. While challenges such as market valuation concerns and tax implications of asset sales were noted, the overall sentiment remains optimistic. The company’s strategic initiatives and forward-looking guidance underscore its commitment to growth and shareholder value, positioning it well for future success.