Viper Energy, a subsidiary of Diamondback Energy, and Sitio Royalties Corp. have announced that they have entered into a definitive agreement under which Viper will acquire Sitio in an all-equity transaction valued at approx. $4.1 billion, including Sitio’s net debt of approx. $1.1 billion as of March 31, 2025. The consideration will consist of 0.4855 shares of Class A common stock of a new holding company (“pro forma Viper”) for each share of Sitio Class A common stock, and 0.4855 units of Viper’s operating subsidiary, Viper Energy Partners LLC, for each unit of Sitio’s operating subsidiary (along with a corresponding amount of Class B common stock of pro forma Viper for each share of Sitio Class C common stock), representing an implied value to each Sitio stockholder of $19.41 per share based on the closing price of Viper common stock on June 2, 2025. The transaction was unanimously approved by the Board of Directors of each company and has been approved by the written consent of Diamondback as Viper’s majority stockholder. Stockholders holding an aggregate of approximately 48% of Sitio’s outstanding voting power, including Kimmeridge, its largest stockholder, have agreed to vote in favor of the transaction. The transaction is subject to customary regulatory approvals and is expected to close in the third quarter of 2025.
The Company today also announced that the Board of Directors of Viper approved a 10% increase to its base dividend to $1.32 per share annually ($0.33 per share quarterly).
STRATEGIC RATIONALE
- Size and Scale: Adds substantial scale and inventory depth that will support pro forma Viper’s durable production profile and free cash flow growth over the next decade
- Meaningful Financial Accretion and Higher Cash Returns: Expected to be approximately 8 - 10% accretive to cash available for distribution per Class A share immediately upon closing
- Lower Breakeven: Lowers pro forma Viper’s base dividend breakeven by approximately $2 per barrel to <$20 WTI; increased base dividend of $1.32/share represents approximately 45% of cash available for distribution at $50 WTI
- Significant Synergies: Estimated to be in excess of $50 million annually, primarily attributable to general and administrative and cost of capital savings
- Access to Capital: Pro forma Viper is expected to maintain its Investment Grade status; pro forma leverage expected to be approximately 1.2x at closing at strip pricing and decreasing thereafter; near-term net debt target of $1.5 billion which equates to less than 1.0x leverage at $60 WTI
- Diamondback Relationship: Diamondback is expected to own approximately 41% of pro forma Viper’s outstanding common stock after closing and will continue to drive meaningful long-term oil production growth from the Company’s acreage
SITIO HIGHLIGHTS
- Approximately 25,300 net royalty acres in the Permian Basin, plus an additional ~9,000 net royalty acres in other major basins (DJ, Eagle Ford, Williston); total acreage of approximately 34,300 net royalty acres
- Roughly 50% overlap with existing Viper gross producing horizontal wells in the Permian Basin
- Q1 2025 average production of 18.9 mbo/d (42.1 mboe/d); Q1 2025 average Permian production of 14.5 mbo/d (31.9 mboe/d)
- Approximately 16.1 existing net DUCs and permits with an average lateral length of ~9,500 feet
PRO FORMA HIGHLIGHTS
- Approximately 85,700 net royalty acres in the Permian Basin; ~43% operated by Diamondback
- Pro forma Viper owns an average 1.8% NRI in approximately 33,300 gross producing horizontal wells (~608 net wells)
- Approximately 75.4 existing net DUCs and permits with an average lateral length of ~10,800 feet; Diamondback is the largest operator of these net locations with 41.1 DUCs and permits with an average lateral length of ~12,400 feet
- Estimated Q4 2025 average production of 64 – 68 mbo/d (122 – 130 mboe/d); expect full year 2026 average production to increase by a mid-single digit percentage from these levels assuming current commodity prices, line of sight trajectory, and industry activity levels
'The combination of Viper and Sitio signifies an important moment for mineral and royalty interests,' stated Kaes Van’t Hof, Chief Executive Officer of Viper. 'This combination creates a leader in size, scale, float, liquidity and access to investment grade capital in the highly fragmented minerals industry. Pro forma Viper is now clearly a must-own public mineral and royalty company in North America, with attractive size and scale in the Permian Basin. This transaction positions Viper to compete for capital with mid and large cap North American E&Ps; except with higher margins, minimal operating costs, and the lowest dividend breakeven in the space.'
Mr. Van’t Hof continued, 'While this transaction will reduce Diamondback’s ownership in pro forma Viper to 41%, it does not reduce the significance of the relationship between Diamondback and Viper. The Diamondback drillbit remains Viper’s biggest competitive advantage and the most visible source of long-term production growth at Viper. Mineral interests offer the highest form of security and upside in the oil field, and any and all benefits an operator manages to unlock accrues directly to the mineral holder without any capital risk, forever.'
'We are excited to announce the combination of two leading minerals companies with a shared strategic vision of integrating the highest quality assets to create a truly differentiated investment opportunity for shareholders,' said Sitio CEO Chris Conoscenti. 'This transaction provides Sitio’s shareholders with exposure to an entity with significantly greater size, future development visibility, and all of the benefits of the economies of scale unique to the minerals business – higher margins, lower cost of capital, strong positioning for future M&A opportunities, and the ability to return more capital to shareholders. I want to thank all of the Sitio team members, whose innovation and relentless pursuit of continuous improvement made building Sitio such an amazing and rewarding experience.'
'This transaction is the next logical step in Sitio’s evolution,' stated Noam Lockshin, Chairman of the Sitio Board of Directors. 'By adding Sitio’s coverage of the Delaware Basin to Viper’s position in the Midland Basin, the combined company will be well positioned in the Permian for years to come.'
Advisors
Moelis & Company LLC is serving as financial advisor to Viper and Wachtell, Lipton, Rosen & Katz is serving as its legal advisor.
J.P. Morgan Securities LLC is serving as exclusive financial advisor to Sitio and Vinson & Elkins LLP is serving as its legal advisor.
Source: Viper Energy
