Viper Energy, Inc. [VNOM] Filings

10-Q 1 vnom-20240630.htm 10-Q vnom-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36505

Viper Energy, Inc.

(Exact Name of Registrant As Specified in Its Charter)

46-5001985

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification Number)

500 West Texas Ave.

Suite 100

Midland, TX

79701

(Address of principal executive offices)

(Zip code)

(432) 221-7400

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock
$0.000001 par value

VNOM

The Nasdaq Stock Market LLC

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 1, 2024, 91,447,008 shares of Class A Common Stock and 85,431,453 shares of Class B Common Stock of the registrant were outstanding.

VIPER ENERGY, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2024

TABLE OF CONTENTS


			Page
Glossary of Oil and Natural Gas Terms			ii
Glossary of Certain Other Terms			iv
Cautionary Statement Regarding Forward-Looking Statements			v

PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Changes to Stockholders’ Equity			3
Condensed Consolidated Statements of Cash Flows			5
Condensed Notes to Consolidated Financial Statements			6
1. Organization and Basis of Presentation			6
2. Summary of Significant Accounting Policies			7
3. Revenue from Contracts with Customers			8
4. Acquisitions and Divestitures			9
5. Oil and Natural Gas Interests			10
6. Debt			11
7. Stockholders' Equity			11
8. Earnings Per Common Share			13
9. Income Taxes			14
10. Derivatives			15
11. Fair Value Measurements			16
12. Commitments and Contingencies			18
13. Subsequent Events			18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19

Item 3. Quantitative and Qualitative Disclosures about Market Risk			30

Item 4. Controls and Procedures			31

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			32

Item 1A. Risk Factors			32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32

Item 5. Other Information			33

Item 6. Exhibits			34

Signatures			35

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GLOSSARY OF OIL AND NATURAL GAS TERMS

The following is a glossary of certain oil and natural gas terms that are used in this Quarterly Report on Form 10-Q (this “report”):



Argus WTI Midland			Grade of oil that serves as a benchmark price for oil at Midland, Texas.
Basin			A large depression on the earth’s surface in which sediments accumulate.
Bbl or barrel			One stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons.


BO/d			One barrel of crude oil per day.
BOE			One barrel of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil.
BOE/d			BOE per day.

Completion			The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

Crude oil			Liquid hydrocarbons retrieved from geological structures underground to be refined into fuel sources.




Development well			A well drilled within the proved area of a natural gas or oil reservoir to the depth of a stratigraphic horizon known to be productive.
Differential			An adjustment to the price of oil or natural gas from an established spot market price to reflect differences in the quality and/or location of oil or natural gas.






Fracturing			The process of creating and preserving a fracture or system of fractures in a reservoir rock typically by injecting a fluid under pressure through a wellbore and into the targeted formation.
Gross wells			The total wells, as the case may be, in which a working interest is owned.

Henry Hub			Natural gas gathering point that serves as a benchmark price for natural gas futures on the NYMEX.
Horizontal wells			Wells drilled directionally horizontal to allow for development of structures not reachable through traditional vertical drilling mechanisms.
MBbl			One thousand barrels of crude oil and other liquid hydrocarbons.
MBOE			One thousand barrels of crude oil equivalent, determined using a ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
MBOE/d			One thousand BOE per day.
Mcf			One thousand cubic feet of natural gas.

Mineral interests			The interests in ownership of the resource and mineral rights, giving an owner the right to profit from the extracted resources.
MMBtu			One million British Thermal Units.
MMcf			Million cubic feet of natural gas.



Net royalty acres			Net mineral acres multiplied by the average lease royalty interest and other burdens.
Oil and natural gas properties			Tracts of land consisting of properties to be developed for oil and natural gas resource extraction.
Operator			The individual or company responsible for the exploration and/or production of an oil or natural gas well or lease.







Proved reserves			The estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.

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Reserves			The estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to the market and all permits and financing required to implement the project. Reserves are not assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).


Royalty interest			An interest that gives an owner the right to receive a portion of the resources or revenues without having to carry any costs of development, which may be subject to expiration.
Spud			Commencement of actual drilling operations.
Waha Hub			Natural gas gathering point that serves as a benchmark price for natural gas at western Texas and New Mexico.






WTI			West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil that serves as a benchmark for oil on the NYMEX.
WTI Cushing			Grade of oil that serves as a benchmark price for oil at Cushing, Oklahoma.

iii

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GLOSSARY OF CERTAIN OTHER TERMS

The following is a glossary of certain other terms that are used in this report:



Adjusted EBITDA			Consolidated Adjusted EBITDA, a non-GAAP measure, generally equals net income (loss) attributable to Viper Energy, Inc. plus net income (loss) attributable to non-controlling interest before interest expense, net, non-cash share-based compensation expense, depletion expense, non-cash (gain) loss on derivative instruments, other non-cash operating expenses, other non-recurring expenses and provision for (benefit from) income taxes, which measure is used by management to more effectively evaluate the operating performance and determine dividend amounts for purposes of the dividend policy.
ASU			Accounting Standards Update.
Class A Common Stock			Class A Common Stock, $0.000001 par value per share of Viper Energy, Inc.
Class B Common Stock			Class B Common Stock, $0.000001 par value per share of Viper Energy, Inc.
Common Stock			Collectively, Class A Common Stock and Class B Common Stock.
Diamondback			Diamondback Energy, Inc., a Delaware corporation.

Exchange Act			The Securities Exchange Act of 1934, as amended.
GAAP			Accounting principles generally accepted in the United States.
General Partner			Viper Energy Partners GP LLC, a Delaware limited liability company, and the General Partner of the Partnership.


LTIP			Viper Energy, Inc. Amended and Restated 2014 Long Term Incentive Plan, as amended and restated by Viper Energy, Inc. 2024 Amended and Restated Long Term Incentive Plan, and as may be further amended or restated from time to time.
Nasdaq			The Nasdaq Global Select Market.
Notes			The outstanding senior notes of Viper Energy, Inc. issued under indentures where Viper Energy Partners LLC is the sole guarantor, consisting of the 5.375% Senior Notes due 2027 and the 7.375% Senior Notes due 2031.

OPEC			Organization of the Petroleum Exporting Countries.
Operating Company			Viper Energy Partners LLC, a Delaware limited liability company and a consolidated subsidiary of Viper Energy, Inc.
Partnership			Viper Energy Partners LP, the predecessor of the Company, which converted into the Company in the Conversion.
SEC			United States Securities and Exchange Commission.
Securities Act			The Securities Act of 1933, as amended.
SOFR			The secured overnight financing rate.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties, and assumptions. All statements, other than statements of historical fact, including statements regarding our: future performance; business strategy; future operations; estimates and projections of operating income, losses, costs and expenses, returns, cash flow, and financial position; production levels on properties in which we have mineral and royalty interests, developmental activity by other operators; reserve estimates and our ability to replace or increase reserves; anticipated benefits other of strategic transactions (including acquisitions and divestitures); and plans and objectives of management (including Diamondback’s plans for developing our acreage and our cash dividend policy and repurchases of our common shares and/or senior notes) are forward-looking statements. When used in this report, the words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “model,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions (including the negative of such terms) as they relate to us are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. In particular, the factors discussed in this report and detailed under Part II. Item 1A. Risk Factors, and our Annual Report on Form 10-K for the year ended December 31, 2023, could affect our actual results and cause our actual results to differ materially from expectations, estimates or assumptions expressed, forecasted or implied in such forward-looking statements. Unless the context requires otherwise, references to “we,” “us,” “our” or the “Company” are intended to mean the business and operations of the Company and the Operating Company.

Factors that could cause the outcomes to differ materially include (but are not limited to) the following:

•changes in supply and demand levels for oil, natural gas, and natural gas liquids and the resulting impact on the price for those commodities;

•the impact of public health crises, including epidemic or pandemic diseases and any related company or government policies or actions;

•actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments;

•changes in general economic, business or industry conditions, including changes in foreign currency exchange rates, interest rates, inflation rates, instability in the financial sector;

•regional supply and demand factors, including delays, curtailment delays or interruptions of production on our mineral and royalty acreage, or governmental orders, rules or regulations that impose production limits on such acreage;

•federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations;

•physical and transition risks relating to climate change;

•restrictions on the use of water, including limits on the use of produced water by our operators and a moratorium on new produced water well permits recently imposed by the Texas Railroad Commission in an effort to control induced seismicity in the Permian Basin;

•significant declines in prices for oil, natural gas, or natural gas liquids, which could require recognition of significant impairment charges;

•changes in U.S. energy, environmental, monetary and trade policies;

•conditions in the capital, financial and credit markets, including the availability and pricing of capital for drilling and development by our operators and environmental and social responsibility projects undertaken by Diamondback and our other operators;

•changes in availability or cost of rigs, equipment, raw materials, supplies and oilfield services impacting our operators;

•changes in safety, health, environmental, tax, and other regulations or requirements impacting us or our operators (including those addressing air emissions, water management, or the impact of global climate change);

•security threats, including cybersecurity threats and disruptions to our business from breaches of Diamondback’s information technology systems, or from breaches of information technology systems of our operators or third parties with whom we transact business;

•lack of, or disruption in, access to adequate and reliable transportation, processing, storage and other facilities impacting our operators;

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•severe weather conditions;

•acts of war or terrorist acts and the governmental or military response thereto;

•changes in the financial strength of counterparties to the credit facility and hedging contracts of our operating subsidiary;

•changes in our credit rating; and

•other risks and factors disclosed in this report.

In light of these factors, the events anticipated by our forward-looking statements may not occur at the time anticipated or at all. Moreover, new risks emerge from time to time. We cannot predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements we may make. Accordingly, you should not place undue reliance on any forward-looking statements made in this report. All forward-looking statements speak only as of the date of this report or, if earlier, as of the date they were made. We do not intend to, and disclaim any obligation to, update or revise any forward-looking statements unless required by applicable law.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Viper Energy, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	June 30,		December 31,
	2024		2023
	(In thousands, except share amounts)
Assets
Current assets:
Cash and cash equivalents	$	35,211	$	25,869

Royalty income receivable (net of allowance for credit losses)	131,724		108,681
Royalty income receivable—related party	34,981		3,329
Income tax receivable	—		813
Derivative instruments	—		358
Prepaid expenses and other current assets	3,468		4,467
Total current assets	205,384		143,517
Property:
Oil and natural gas interests, full cost method of accounting ($1,581,227 and $1,769,341 excluded from depletion at June 30, 2024 and December 31, 2023, respectively)	4,567,518		4,628,983
Land	5,688		5,688
Accumulated depletion and impairment	(961,646)		(866,352)
Property, net	3,611,560		3,768,319

Derivative instruments	2,134		92
Deferred income taxes (net of allowances)	76,393		56,656
Other assets	4,951		5,509
Total assets	$	3,900,422	$	3,974,093
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	19	$	19
Accounts payable—related party	—		1,330
Accrued liabilities	22,106		27,021
Derivative instruments	4,766		2,961
Income taxes payable	2,200		1,925
Total current liabilities	29,091		33,256
Long-term debt, net	998,021		1,083,082

Derivative instruments	—		201
Total liabilities	1,027,112		1,116,539
Commitments and contingencies (Note 12)

Stockholders’ equity:



Class A Common Stock, $0.000001 par value: 1,000,000,000 shares authorized; 91,423,830 shares issued and outstanding as of June 30, 2024 and 86,144,273 shares issued and outstanding as of December 31, 2023	—		—
Class B Common Stock, $0.000001 par value: 1,000,000,000 shares authorized; 85,431,453 shares issued and outstanding as of June 30, 2024 and 90,709,946 shares issued and outstanding as of December 31, 2023	—		—
Additional paid-in capital	1,108,739		1,031,078
Retained earnings (accumulated deficit)	(18,939)		(16,786)
Total Viper Energy, Inc. stockholders’ equity	1,089,800		1,014,292
Non-controlling interest	1,783,510		1,843,262
Total equity	2,873,310		2,857,554
Total liabilities and stockholders’ equity	$	3,900,422	$	3,974,093

See accompanying notes to condensed consolidated financial statements.

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Viper Energy, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(In thousands, except per share amounts)
Operating income:
Oil income	$	194,335	$	139,300	$	371,453	$	275,919
Natural gas income	1,143		5,090		7,940		14,081
Natural gas liquids income	20,008		13,807		41,160		29,282
Royalty income	215,486		158,197		420,553		319,282
Lease bonus income—related party	—		1,277		120		8,348
Lease bonus income	1,096		1,134		1,146		1,534

Other operating income	126		179		281		581
Total operating income	216,708		160,787		422,100		329,745
Costs and expenses:
Production and ad valorem taxes	15,201		12,621		29,607		25,508

Depletion	48,360		34,064		95,293		65,051

General and administrative expenses—related party	2,436		924		4,822		1,848
General and administrative expenses	2,019		1,084		4,666		2,924
Other operating expense	139		—		233		—
Total costs and expenses	68,155		48,693		134,621		95,331
Income (loss) from operations	148,553		112,094		287,479		234,414
Other income (expense):
Interest expense, net	(18,667)		(11,120)		(37,997)		(20,666)


Gain (loss) on derivative instruments, net	5,346		(12,594)		(2,146)		(27,697)

Other income, net	—		1		—		2
Total other expense, net	(13,321)		(23,713)		(40,143)		(48,361)
Income (loss) before income taxes	135,232		88,381		247,336		186,053
Provision for (benefit from) income taxes	13,006		8,450		25,535		17,856
Net income (loss)	122,226		79,931		221,801		168,197
Net income (loss) attributable to non-controlling interest	65,325		49,381		121,540		103,680
Net income (loss) attributable to Viper Energy, Inc.	$	56,901	$	30,550	$	100,261	$	64,517

Net income (loss) attributable to common shares:
Basic	$	0.62	$	0.42	$	1.12	$	0.89
Diluted	$	0.62	$	0.42	$	1.12	$	0.89
Weighted average number of common shares outstanding:
Basic	91,424		71,771		89,480		72,249
Diluted	91,424		71,771		89,570		72,249

See accompanying notes to condensed consolidated financial statements.

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Viper Energy, Inc.

Condensed Consolidated Statements of Changes to Stockholders' Equity

(Unaudited)


	Common Stock(1)
		Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Non-Controlling Interest		Total
					Class A Shares			Class B Shares

			(In thousands)
Balance at December 31, 2023			86,144	90,710		$	1,031,078	$	(16,786)	$	1,843,262	$	2,857,554

Common shares issued to related party			5,279	(5,279)		—		—		—		—
Equity-based compensation			—	—		485		—		—		485
Issuance of shares upon vesting of equity awards			1	—		—		—		—		—
Distribution equivalent rights payments			—	—		—		(56)		—		(56)
Dividends to stockholders			—	—		—		(43,791)		—		(43,791)
Dividends to Diamondback			—	—		20		(4,490)		(62,590)		(67,060)
Change in ownership of consolidated subsidiaries, net			—	—		69,753		—		(52,298)		17,455
Cash paid for tax withholding on vested equity awards			—	—		(28)		—		—		(28)

Net income (loss)			—	—		—		43,360		56,215		99,575
Balance at March 31, 2024			91,424	85,431		1,101,308		(21,763)		1,784,589		2,864,134


Equity-based compensation			—	—		830		—		—		830

Distribution equivalent rights payments			—	—		—		(116)		—		(116)
Dividends to stockholders			—	—		—		(53,941)		—		(53,941)
Dividends to Diamondback			—	—		—		(20)		(59,803)		(59,823)
Change in ownership of consolidated subsidiaries, net			—	—		6,601		—		(6,601)		—


Net income (loss)			—	—		—		56,901		65,325		122,226
Balance at June 30, 2024			91,424	85,431		$	1,108,739	$	(18,939)	$	1,783,510	$	2,873,310

(1) The par values of the outstanding shares of Class A Common Stock and Class B Common Stock each round to zero during the periods presented.

See accompanying notes to condensed consolidated financial statements.

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Viper Energy, Inc.

Condensed Consolidated Statements of Changes to Stockholders' Equity - (Continued)

(Unaudited)


							General Partner			Non-Controlling Interest		Total
	Limited Partners
	Common Units	Amount		Class B Units	Amount		Amount		Amount

	(In thousands)
Balance at December 31, 2022	73,230	$	689,178	90,710	$	832	$	649		$	1,630,866	$	2,321,525

Unit-based compensation	—	370		—	—		—			—		370
Issuance of shares upon vesting of equity awards	4	—		—	—		—			—		—
Distribution equivalent rights payments	—	(72)		—	—		—			—		(72)
Distributions to public	—	(35,253)		—	—		—			—		(35,253)
Distributions to Diamondback	—	(358)		—	(25)		—			(48,983)		(49,366)
Distributions to General Partner	—	—		—	—		(20)			—		(20)
Change in ownership of consolidated subsidiaries, net	—	11,449		—	—		—			(11,449)		—

Repurchased units as part of unit buyback	(1,115)	(33,022)		—	—		—			—		(33,022)
Net income (loss)	—	33,967		—	—		—			54,299		88,266
Balance at March 31, 2023	72,119	666,259		90,710	807		629			1,624,733		2,292,428

Unit-based compensation	—	259		—	—		—			—		259

Distribution equivalent rights payments	—	(43)		—	—		—			—		(43)
Distributions to public	—	(23,513)		—	—		—			—		(23,513)
Distributions to Diamondback	—	(241)		—	(25)		—			(38,097)		(38,363)
Distributions to General Partner	—	—		—	—		(20)			—		(20)
Change in ownership of consolidated subsidiaries, net	—	16,749		—	—		—			(16,749)		—

Repurchased units as part of unit buyback	(912)	(24,509)		—	—		—			—		(24,509)
Net income (loss)	—	30,550		—	—		—			49,381		79,931
Balance at June 30, 2023	71,207	$	665,511	90,710	$	782	$	609		$	1,619,268	$	2,286,170

See accompanying notes to condensed consolidated financial statements.

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Viper Energy, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
	2024		2023
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	221,801	$	168,197
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for (benefit from) deferred income taxes	(2,282)		532
Depletion	95,293		65,051

(Gain) loss on derivative instruments, net	2,146		27,697
Net cash receipts (payments) on derivatives	(2,225)		(6,212)






Other	3,080		1,222
Changes in operating assets and liabilities:

Royalty income receivable	(23,277)		892
Royalty income receivable—related party	(31,652)		1,876


Accounts payable and accrued liabilities	(4,915)		(2,583)

Accounts payable—related party	(1,330)		(306)
Income taxes payable	276		673

Other	1,811		(4,370)
Net cash provided by (used in) operating activities	258,726		252,669
Cash flows from investing activities:

Acquisitions of oil and natural gas interests—related party	—		(75,073)
Acquisitions of oil and natural gas interests	(29,175)		(47,409)



Proceeds from sale of oil and natural gas interests	90,641		(1,975)


Net cash provided by (used in) investing activities	61,466		(124,457)
Cash flows from financing activities:
Proceeds from borrowings under credit facility	95,000		191,000
Repayment on credit facility	(181,000)		(119,000)










Repurchased shares/units under buyback program	—		(57,531)
Dividends/distributions to stockholders	(97,904)		(58,881)
Dividends/distributions to Diamondback	(126,883)		(87,729)
Other	(63)		(1,171)
Net cash provided by (used in) financing activities	(310,850)		(133,312)
Net increase (decrease) in cash and cash equivalents	9,342		(5,100)
Cash, cash equivalents and restricted cash at beginning of period	25,869		18,179
Cash, cash equivalents and restricted cash at end of period	$	35,211	$	13,079

Supplemental disclosure of cash flow information:
Interest paid	$	(38,868)	$	(19,922)
Cash (paid) received for income taxes	$	(26,515)	$	(20,150)

See accompanying notes to condensed consolidated financial statements.

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Viper Energy, Inc.

Condensed Notes to Consolidated Financial Statements

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Effective November 13, 2023 (the “Effective Time”), Viper Energy Partners LP (the “Partnership”) converted from a publicly traded Delaware limited partnership to a Delaware corporation pursuant to a plan of conversion (the “Conversion”) and changed names from Viper Energy Partners LP to Viper Energy, Inc. This report includes the results for the Partnership prior to the Conversion and Viper Energy, Inc. (the “Company”) following the Conversion. References to the “Company” refer to (i) Viper Energy, Inc. and its consolidated subsidiaries following the Conversion, and (ii) the Partnership and its consolidated subsidiaries prior to the Conversion. References to shares or per share amounts prior to the Conversion refer to units or per unit amounts. Unless otherwise noted, all references to shares or per share amounts following the Conversion refer to shares or per share amounts of the Company’s Common Stock. References to dividends prior to the Conversion refer to distributions. There are no tax impacts resulting from the Conversion as Viper Energy Partners LP was treated as a corporation for tax purposes.

The Company is a publicly traded Delaware corporation focused on owning and acquiring mineral interests and royalty interests in oil and natural gas properties primarily in the Permian Basin.

Prior to March 8, 2024, the Company was a “controlled company” under the rules of the Nasdaq Stock Market LLC (the “Nasdaq Rules”). On March 8, 2024, the Company’s parent, Diamondback, completed an underwritten public offering in which it sold approximately 13.2 million shares of the Company’s Class A Common Stock (the “Diamondback Offering”). Following the Offering, Diamondback owned no shares of the Company’s Class A Common Stock and owned 85,431,453 shares of the Company’s Class B Common Stock, reducing its beneficial ownership to less than 50% of the Company’s total Common Stock outstanding. As such, the Company ceased to be a “controlled company” under the Nasdaq Rules. Prior to the Diamondback Offering, the Company’s board of directors had a majority of independent directors and a standing audit committee comprised of all independent directors but had elected to take advantage of certain exemptions from corporate governance requirements applicable to controlled companies under the Nasdaq Rules and, until March 8, 2024, did not have a compensation committee or a committee of independent directors that selects director nominees.

Effective as of March 8, 2024, the Company’s board of directors formed (i) the compensation committee for purposes of making certain executive and other compensation decisions, and (ii) the nominating and corporate governance committee for purposes of making certain nominating and corporate governance decisions, with each such committee’s rights and obligations being subject to the terms and conditions of (x) the Company’s certificate of incorporation, (y) such committee’s charter as adopted by the board, and (z) the services and secondment agreement, dated as of November 2, 2023, pursuant to which Diamondback provides personnel and general and administrative services to us, including the services of the executive officers and other employees, substantially in the same manner as those provided to the Company by the former General Partner prior to the Conversion (the “Services and Secondment Agreement”).

As of June 30, 2024, Diamondback beneficially owned approximately 48% of the Company’s total Common Stock outstanding.

Basis of Presentation

The accompanying condensed consolidated financial statements and related notes thereto were prepared in accordance with GAAP. All material intercompany balances and transactions have been eliminated upon consolidation. The Company reports its operations in one reportable segment.

These condensed consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the SEC. They reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to SEC rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s most recent Annual Report on Form 10–K for the fiscal year ended December 31, 2023, which contains a summary of the Company’s significant accounting policies and other disclosures.

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Condensed Notes to Consolidated Financial Statements - (Continued)

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Reclassifications

Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These reclassifications had no effect on the previously reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Certain amounts included in or affecting the Company’s financial statements and related disclosures must be estimated by management, requiring certain assumptions to be made with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the amounts the Company reports for assets and liabilities and the Company’s disclosure of contingent assets and liabilities as of the date of the financial statements.

Making accurate estimates and assumptions is particularly difficult in the oil and natural gas industry given the challenges resulting from volatility in oil and natural gas prices. For instance, the war in Ukraine and the Israel-Hamas war, higher interest rates, global supply chain disruptions and recent measures to combat persistent inflation and instability in the financial sector have contributed to recent pricing and economic volatility. The financial results of companies in the oil and natural gas industry have been and may continue to be impacted materially as a result of changing market conditions. Such circumstances generally increase uncertainty in the Company’s accounting estimates, particularly those involving financial forecasts.

The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in each particular circumstance. Nevertheless, actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas interests, estimates of third party operated royalty income related to expected sales volumes and prices, the recoverability of costs of unevaluated properties, the fair value determination of assets and liabilities, including those acquired by the Company, fair value estimates of commodity derivatives and estimates of income taxes, including deferred tax valuation allowances.

Related Party Transactions

Royalty Income Receivable

As of June 30, 2024 and December 31, 2023, Diamondback, either directly or through its consolidated subsidiaries, owed the Company $35.0 million and $3.3 million, respectively, for royalty income received from third parties for the Company’s production, which had not yet been remitted to the Company.

Lease Bonus Income

During the six months ended June 30, 2024 and the three and six months ended 2023, Diamondback paid the Company $0.1 million, $1.3 million and $8.3 million, respectively, of lease bonus income primarily related to new leases in the Midland Basin.

Other Related Party Transactions

See Note 4—Acquisitions and Divestitures for significant related party acquisitions of oil and natural gas interests.

See Note 7—Stockholder's Equity for further details regarding equity transactions with related parties.

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Condensed Notes to Consolidated Financial Statements - (Continued)

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All other significant related party transactions with Diamondback or its affiliates have been stated on the face of the condensed consolidated financial statements as of June 30, 2024, and for the three and six months ended June 30, 2024 and 2023.

Accrued Liabilities

Accrued liabilities consist of the following as of the dates indicated:


	June 30,		December 31,
	2024		2023
	(In thousands)
Interest payable	$	9,270	$	11,036
Ad valorem taxes payable	10,064		13,299
Derivatives instruments payable	633		1,279
Other	2,139		1,407
Total accrued liabilities	$	22,106	$	27,021

Recent Accounting Pronouncements

Recently Adopted Pronouncements

There are no recently adopted pronouncements.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures,” which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments are effective for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. Management is currently evaluating this ASU to determine its impact on the Company's disclosures. Adoption of the update will not impact the Company’s financial position, results of operations or liquidity.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures,” which requires that certain information in a reporting entity’s tax rate reconciliation be disaggregated, and provides additional requirements regarding income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. Adoption of the update will not impact the Company’s financial position, results of operations or liquidity.

The Company considers the applicability and impact of all ASUs. ASUs not discussed above were assessed and determined to be either not applicable, previously disclosed, or not material upon adoption.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Royalty income represents the right to receive revenues from oil, natural gas and natural gas liquids sales obtained from third party purchasers by the operator of the wells in which the Company owns a royalty interest. Royalty income is recognized at the point control of the product is transferred to the purchaser at the wellhead or at the gas processing facility based on the Company’s percentage ownership share of the revenue, net of any deductions for gathering and transportation. Virtually all of the pricing provisions in the Company’s contracts are tied to a market index.

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Condensed Notes to Consolidated Financial Statements - (Continued)

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The following table disaggregates the Company’s revenue from oil, natural gas and natural gas liquids by revenue generated from production on properties operated by Diamondback and revenue generated from production on properties operated by third parties:


	Three Months Ended June 30,
	2024						2023
	Revenue Generated from Diamondback Operated Properties		Revenue Generated from Third Party Operated Properties		Total		Revenue Generated from Diamondback Operated Properties		Revenue Generated from Third Party Operated Properties		Total
	(In thousands)
Oil income	$	99,879	$	94,456	$	194,335	$	86,565	$	52,735	$	139,300
Natural gas income	1,130		13		1,143		2,799		2,291		5,090
Natural gas liquids income	11,241		8,767		20,008		9,130		4,677		13,807
Total royalty income	$	112,250	$	103,236	$	215,486	$	98,494	$	59,703	$	158,197

	Six Months Ended June 30,
	2024						2023
	Revenue Generated from Diamondback Operated Properties		Revenue Generated from Third Party Operated Properties		Total		Revenue Generated from Diamondback Operated Properties		Revenue Generated from Third Party Operated Properties		Total
	(In thousands)
Oil income	$	194,495	$	176,958	$	371,453	$	164,532	$	111,387	$	275,919
Natural gas income	4,568		3,372		7,940		6,660		7,421		14,081
Natural gas liquids income	22,277		18,883		41,160		18,833		10,449		29,282
Total royalty income	$	221,340	$	199,213	$	420,553	$	190,025	$	129,257	$	319,282

4. ACQUISITIONS AND DIVESTITURES

2024 Activity

Acquisitions

In the first half of 2024, the Company acquired, in individually insignificant transactions from unrelated third-party sellers, mineral and royalty interests representing 203 net royalty acres in the Midland Basin for an aggregate purchase price of approximately $41.2 million, subject to customary post-closing adjustments.

Divestitures

In the second quarter of 2024, the Company divested all of its non-Permian assets for a purchase price of approximately $90.2 million, subject to customary post-closing adjustments. The divested properties consisted of approximately 2,713 net royalty acres with current production of approximately 450 BO/d. The Company recorded the proceeds as a reduction of its full cost pool with no gain or loss recognized on the sale.

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Condensed Notes to Consolidated Financial Statements - (Continued)

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2023 Activity

Acquisitions

GRP Acquisition

On November 1, 2023, the Company and the Operating Company acquired certain mineral and royalty interests from Royalty Asset Holdings, LP, Royalty Asset Holdings II, LP and Saxum Asset Holdings, LP, affiliates of Warwick Capital Partners and GRP Energy Capital (collectively, “GRP,”) pursuant to a definitive purchase and sale agreement for approximately 9.02 million common units and $749.5 million in cash, including transactions costs and subject to customary post-closing adjustments (the “GRP Acquisition”). The mineral and royalty interests acquired in the GRP Acquisition represent approximately 4,600 net royalty acres in the Permian Basin, plus approximately 2,700 additional net royalty acres in other major basins. The cash consideration for the GRP Acquisition was funded through a combination of cash on hand and held in escrow, borrowings under the Operating Company’s revolving credit facility, proceeds from the 7.375% Senior unsecured notes due 2031 and proceeds from the $200.0 million common unit issuance to Diamondback.

Drop Down Transaction

On March 8, 2023, the Company acquired certain mineral and royalty interests from subsidiaries of Diamondback for approximately $74.5 million in cash, including customary closing adjustments for net title benefits (the ‘‘Drop Down’’). The mineral and royalty interests acquired in the Drop Down represent approximately 660 net royalty acres in Ward County in the Southern Delaware Basin, 100% of which are operated by Diamondback, and have an average net royalty interest of approximately 7.2% and production of approximately 300 BO/d. The Company funded the Drop Down through a combination of cash on hand and borrowings under the Operating Company’s revolving credit facility. The Drop Down was accounted for as a transaction between entities under common control with the properties acquired recorded at Diamondback’s historical carrying value in the Company’s condensed consolidated balance sheet. The historical carrying value of the properties approximated the Drop Down purchase price.

Other Acquisitions

Additionally, during the year ended December 31, 2023, the Company acquired, in individually insignificant transactions from unrelated third-party sellers, mineral and royalty interests representing 286 net royalty acres in the Permian Basin for an aggregate purchase price of approximately $70.4 million, including customary closing adjustments. The Company funded these acquisitions with cash on hand and borrowings under the Operating Company’s revolving credit facility.

5. OIL AND NATURAL GAS INTERESTS

Oil and natural gas interests include the following for the periods presented:


	June 30,		December 31,
	2024		2023
	(In thousands)
Oil and natural gas interests:
Subject to depletion	$	2,986,291	$	2,859,642
Not subject to depletion	1,581,227		1,769,341
Gross oil and natural gas interests	4,567,518		4,628,983
Accumulated depletion and impairment	(961,646)		(866,352)
Oil and natural gas interests, net	3,605,872		3,762,631
Land	5,688		5,688
Property, net of accumulated depletion and impairment	$	3,611,560	$	3,768,319

As of June 30, 2024 and December 31, 2023, the Company had mineral and royalty interests representing approximately 31,762 and 34,217 net royalty acres, respectively.

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Condensed Notes to Consolidated Financial Statements - (Continued)

(Unaudited)

No impairment expense was recorded on the Company’s oil and natural gas interests for the three and six months ended June 30, 2024 and 2023 based on the results of the respective quarterly ceiling tests. In addition to commodity prices, the Company’s production rates, levels of proved reserves, transfers of unevaluated properties and other factors will determine its actual ceiling test limitations and impairment analysis in future periods. If the trailing 12-month commodity prices decline as compared to the commodity prices used in prior quarters, the Company could have material write-downs in subsequent quarters.

6. DEBT

Long-term debt consisted of the following as of the dates indicated:


	June 30,		December 31,
	2024		2023
	(In thousands)
5.375% Senior unsecured notes due 2027	$	430,350	$	430,350
7.375% Senior unsecured notes due 2031	400,000		400,000
Revolving credit facility	177,000		263,000
Unamortized debt issuance costs	(6,373)		(6,903)
Unamortized discount	(2,956)		(3,365)
Total long-term debt	$	998,021	$	1,083,082

The Operating Company’s Revolving Credit Facility

The Operating Company’s credit facility, as amended to date, provides for a revolving credit facility in the maximum credit amount of $2.0 billion and a borrowing base of $1.3 billion. The borrowing base is scheduled to be redetermined semi-annually in May and November. As of June 30, 2024, the Operating Company had elected a commitment amount of $850.0 million, with $177.0 million of outstanding borrowings and $673.0 million available for future borrowings. During the three and six months ended June 30, 2024 and 2023, the weighted average interest rates on the Operating Company’s revolving credit facility were 7.63%, 7.52%, 7.53% and 7.24%, respectively. The revolving credit facility will mature on September 22, 2028.

As of June 30, 2024, the Operating Company was in compliance with the financial maintenance covenants under its credit facility.

7. STOCKHOLDERS’ EQUITY

At June 30, 2024, the Company had a total of 91,423,830 shares of Class A Common Stock issued and outstanding and 85,431,453 shares of Class B Common Stock issued and outstanding. All of the shares of Class B Common Stock were beneficially owned by Diamondback, representing approximately 48% of the Company’s total shares outstanding. Diamondback also beneficially owned 85,431,453 Operating Company units, representing a 48% non-controlling ownership interest in the Operating Company, and the Company owned the remaining 91,423,830 Operating Company units. The Operating Company units and the Company’s Class B Common Stock beneficially owned by Diamondback are exchangeable from time to time for the Company’s Class A Common Stock (that is, one Operating Company unit and one share of the Company’s Class B Common Stock, together, are exchangeable for one share of the Company’s Class A Common Stock).

2023 Viper Issuance of Common Units to Diamondback

In October 2023, the Company issued approximately 7.22 million of its common units to Diamondback at a price of $27.72 per unit for total net proceeds of approximately $200.0 million. The net proceeds were used to fund a portion of the cash consideration for the GRP Acquisition.

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Condensed Notes to Consolidated Financial Statements - (Continued)

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Common Stock Repurchase Program

The Company’s board of directors has authorized a $750.0 million common stock repurchase program, with respect to the repurchase of the Company’s Class A Common Stock, excluding excise tax, over an indefinite period of time. The Company has and intends to continue to purchase shares of Class A Common Stock under the repurchase program opportunistically with funds from cash on hand, free cash flow from operations and potential liquidity events such as the sale of assets. This repurchase program may be suspended from time to time, modified, extended or discontinued by the Company’s board of directors at any time.

There were no repurchases of Class A Common Stock during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023 the Company repurchased, excluding excise tax, approximately $24.3 million and $57.0 million common units under the repurchase program, respectively. As of June 30, 2024, approximately $434.2 million remains available under the repurchase program, excluding excise tax.

Cash Dividends

The board of directors of the Company has established a dividend policy, whereby the Operating Company distributes all or a portion of its available cash on a quarterly basis to its stockholders (including Diamondback and the Company). The Company in turn distributes all or a portion of the available cash it receives from the Operating Company to stockholders of its Class A Common Stock through base and variable dividends that take into account capital returned to stockholders via its stock repurchase program. The Company’s available cash and the available cash of the Operating Company for each quarter is determined by the board of directors following the end of such quarter.

The cash available for distribution by the Operating Company, a non-GAAP measure, generally equals the Company’s consolidated Adjusted EBITDA for the applicable quarter, less cash needed for income taxes payable, debt service, contractual obligations, fixed charges and reserves for future operating or capital needs that the board of directors of the Company deems necessary or appropriate, lease bonus income (net of applicable taxes), distribution equivalent rights payments and preferred dividends, if any. For a detailed description of the Company’s and the Operating Company’s dividend policy, see Note 7—Stockholders’ Equity—Cash Dividends in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The percentage of cash available for distribution by the Operating Company pursuant to its distribution policy may change quarterly to enable the Operating Company to retain cash flow to help strengthen the Company’s balance sheet while also expanding the return of capital program through the Company’s stock repurchase program. The Company is not required to pay dividends to its Class A Common stockholders on a quarterly or other basis.

The following table presents information regarding cash dividends paid during the periods presented (in thousands, except for per share amounts):


	Distributions
	(In thousands, except share amounts)
Period	Amount per Operating Company Unit		Operating Company Distributions to Diamondback		Amount per Common Share		Common Stockholders(1)(2)		Declaration Date	Stockholder Record Date	Payment Date
2024
Q4 2023	$	0.69	$	62,590	$	0.56	$	48,337	February 15, 2024	March 5, 2024	March 12, 2024
Q1 2024	$	0.70	$	59,803	$	0.59	$	54,077	April 25, 2024	May 15, 2024	May 22, 2024



2023
Q4 2022	$	0.54	$	48,983	$	0.49	$	35,683	February 15, 2023	March 3, 2023	March 10, 2023
Q1 2023	$	0.42	$	38,097	$	0.33	$	23,797	April 26, 2023	May 11, 2023	May 18, 2023

(1)Dividends paid in the first quarter of 2024 include amounts paid to Diamondback for the 7,946,507 shares of Class A Common Stock then beneficially owned by Diamondback and distribution equivalent rights payments. As of March 31, 2024, Diamondback did not beneficially own any shares of Class A Common Stock. See Note 1—Organization and Basis of Presentation for further details.

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(2)For distributions paid in 2023, includes amounts paid to Diamondback for the 731,500 common units then beneficially owned by Diamondback.

Cash dividends will be made to the common stockholders of record on the applicable record date, generally within 60 days after the end of each quarter.

Change in Ownership of Consolidated Subsidiaries

Non-controlling interest in the accompanying condensed consolidated financial statements represents Diamondback’s ownership in the net assets of the Operating Company. Diamondback’s relative ownership interest in the Operating Company can change due to its purchase or sale of the Company’s Common Stock, the Company’s public offerings of shares of Class A Common Stock, issuance of shares of Class A Common Stock for acquisitions, share-based compensation, repurchases of shares of Class A Common Stock and distribution equivalent rights paid on the Company’s Class A Common Stock. These changes in ownership percentage result in adjustments to non-controlling interest and stockholders’ equity, tax effected, but do not impact earnings.

The following table summarizes the changes in stockholders’ equity due to changes in ownership interest during the period:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(In thousands)
Net income (loss) attributable to the Company	$	56,901	$	30,550	$	100,261	$	64,517

Change in ownership of consolidated subsidiaries	6,601		16,749		76,354		28,198




Change from net income (loss) attributable to the Company's stockholders and transfers with non-controlling interest	$	63,502	$	47,299	$	176,615	$	92,715

8. EARNINGS PER COMMON SHARE

The net income (loss) per common share on the condensed consolidated statements of operations is based on the net income (loss) attributable to the Company’s Class A Common Stock or common units for the three and six months ended June 30, 2024 and 2023, respectively.

Basic and diluted earnings per common share are calculated using the two-class method. The two-class method is an earnings allocation proportional to the respective ownership among holders of Class A Common Stock and participating securities. Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average shares of Class A Common Stock or common units outstanding during the period. Diluted net income (loss) per common share gives effect, when applicable, to unvested shares of Class A Common Stock granted under the LTIP.

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Condensed Notes to Consolidated Financial Statements - (Continued)

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A reconciliation of the components of basic and diluted earnings per common share is presented in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(In thousands, except per share amounts)
Net income (loss) attributable to the period	$	56,901	$	30,550	$	100,261	$	64,517
Less: distributed and undistributed earnings allocated to participating securities(1)	122		56		172		123
Net income (loss) attributable to common stockholders	$	56,779	$	30,494	$	100,089	$	64,394
Weighted average common shares outstanding:
Basic weighted average common shares outstanding	91,424		71,771		89,480		72,249
Effect of dilutive securities:
Potential common shares issuable(2)	—		—		90		—
Diluted weighted average common shares outstanding	91,424		71,771		89,570		72,249
Net income (loss) per common share, basic	$	0.62	$	0.42	$	1.12	$	0.89
Net income (loss) per common share, diluted	$	0.62	$	0.42	$	1.12	$	0.89

(1) Unvested restricted stock units and performance restricted stock units that contain non-forfeitable distribution equivalent rights granted are considered participating securities and are therefore included in the earnings per share calculation pursuant to the two-class method.

(2) For the three and six months ended June 30, 2024 and 2023, there were no other significant potential common shares excluded from the computation of diluted earnings per common share.

9. INCOME TAXES

The following table provides the Company’s provision for (benefit from) income taxes and the effective income tax rate for the dates indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(In thousands, except for tax rate)
Provision for (benefit from) income taxes	$	13,006		$	8,450		$	25,535		$	17,856
Effective tax rate	9.6		%	9.6		%	10.3		%	9.6		%

The Company’s effective income tax rate for the three and six months ended June 30, 2024 and June 30, 2023 differed from the amount computed by applying the United States federal statutory tax rate to pre-tax income for the period primarily due to net income attributable to the non-controlling interest.

As of June 30, 2024 and 2023, the Company maintained a partial valuation allowance against its deferred tax assets considered not more likely than not to be realized, based on its assessment of all available evidence, both positive and negative as required by applicable accounting standards. In March 2024, Diamondback converted approximately 5.28 million shares of the Company’s Class B Common Stock along with 5.28 million Operating Company units into an equivalent number of shares of Class A Common Stock. In connection with this transaction, the Company recognized a $28.2 million increase in its deferred tax asset and a $10.8 million increase in its valuation allowance through additional paid-in capital.

The Company incurred no excise tax on repurchases of Class A Common Stock during the three and six months ended June 30, 2024 and an immaterial amount of excise tax for the three and six months ended June 30, 2023.

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10. DERIVATIVES

All derivative financial instruments are recorded at fair value. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the cash and non-cash changes in fair value in the condensed consolidated statements of operations under the caption “Gain (loss) on derivative instruments, net.”

Commodity Contracts

The Company historically has used fixed price swap contracts, fixed price basis swap contracts and costless collars with corresponding put and call options to reduce price volatility associated with certain of its royalty income. At June 30, 2024, the Company has put options, costless collars and fixed price basis swaps outstanding.

The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with put contracts for oil based on WTI Cushing and fixed price basis swaps for oil based on the spread between the WTI Cushing crude oil price and the Argus WTI Midland crude oil price. The Company’s fixed price basis swaps for natural gas are for the spread between the Waha Hub natural gas price and the Henry Hub natural gas price. The weighted average differential represents the amount of reduction to the WTI Cushing oil price and the Waha Hub natural gas price for the notional volumes covered by the basis swap contracts. Under the Company’s costless collar contracts, each collar has an established floor price and ceiling price. When the settlement price is below the floor price, the counterparty is required to make a payment to the Company, and when the settlement price is above the ceiling price, the Company is required to make a payment to the counterparty. When the settlement price is between the floor and the ceiling, there is no payment required.

By using derivative instruments to economically hedge exposure to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are all participants in the amended and restated credit facility, which is secured by substantially all of the assets of the Operating Company; therefore, the Company is not required to post any collateral. The Company’s counterparties have been determined to have an acceptable credit risk; therefore, the Company does not require collateral from its counterparties.

As of June 30, 2024, the Company had the following outstanding derivative contracts. When aggregating multiple contracts, the weighted average contract price is disclosed.


					Swaps	Collars		Puts
Settlement Month	Settlement Year	Type of Contract	Bbls/MMBtu Per Day	Index	Weighted Average Differential	Weighted Average Floor Price	Weighted Average Ceiling Price	Strike Price	Deferred Premium
OIL
Jul. - Sep.	2024	Puts	16,000	WTI Cushing	$—	$—	$—	$55.00	$(1.65)
Oct. - Dec.	2024	Puts	16,000	WTI Cushing	$—	$—	$—	$55.00	$(1.70)
Jul. - Dec.	2024	Costless Collar	4,000	WTI Cushing	$—	$55.00	$93.66	$—	$—
Jan. - Mar.	2025	Puts	20,000	WTI Cushing	$—	$—	$—	$55.00	$(1.62)
Apr. - Jun.	2025	Puts	16,000	WTI Cushing	$—	$—	$—	$55.00	$(1.61)
NATURAL GAS
Jul. - Dec.	2024	Basis Swaps	30,000	Waha Hub	$(1.20)	$—	$—	$—	$—
Jan. - Dec.	2025	Basis Swaps	40,000	Waha Hub	$(0.68)	$—	$—	$—	$—

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Viper Energy, Inc.

Condensed Notes to Consolidated Financial Statements - (Continued)

(Unaudited)

Balance Sheet Offsetting of Derivative Assets and Liabilities

The fair value of derivative instruments is generally determined using established index prices and other sources which are based upon, among other things, futures prices and time to maturity. These fair values are recorded by netting asset and liability positions, including any deferred premiums, that are with the same counterparty and are subject to contractual terms which provide for net settlement. See Note 11—Fair Value Measurements for further details.

Gains and Losses on Derivative Instruments

The following table summarizes the gains and losses on derivative instruments included in the condensed consolidated statements of operations and the net cash receipts (payments) on derivatives for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(In thousands)
Gain (loss) on derivative instruments	$	5,346	$	(12,594)	$	(2,146)	$	(27,697)
Net cash receipts (payments) on derivatives	$	529	$	(3,997)	$	(2,225)	$	(6,212)

11. FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As discussed in Note 11—Fair Value Measurements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, certain assets and liabilities are reported at fair value on a recurring basis on the Company’s condensed consolidated balance sheets, including the Company’s derivative instruments. The fair values of the Company’s derivative contracts are measured internally using established commodity futures price strips for the underlying commodity provided by a reputable third party, the contracted notional volumes, and time to maturity. These valuations are Level 2 inputs in the fair value hierarchy. The net amounts are classified as current or noncurrent based on their anticipated settlement dates.

The following table provides (i) fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis, (ii) the gross amounts of recognized derivative assets and liabilities, (iii) the amounts offset under master netting arrangements with counterparties, and (iv) the resulting net amounts presented in the Company’s condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023:


	As of June 30, 2024
	Level 1		Level 2		Level 3		Total Gross Fair Value		Gross Amounts Offset in Balance Sheet		Net Fair Value Presented in Balance Sheet
	(In thousands)
Assets:
Current:
Derivative instruments	$	—	$	6,619	$	—	$	6,619	$	(6,619)	$	—
Non-current:

Derivative instruments	$	—	$	2,869	$	—	$	2,869	$	(735)	$	2,134
Liabilities:
Current:
Derivative instruments	$	—	$	11,385	$	—	$	11,385	$	(6,619)	$	4,766
Non-current:
Derivative instruments	$	—	$	735	$	—	$	735	$	(735)	$	—

Table of Contents

Viper Energy, Inc.

Condensed Notes to Consolidated Financial Statements - (Continued)

(Unaudited)


	As of December 31, 2023
	Level 1		Level 2		Level 3		Total Gross Fair Value		Gross Amounts Offset in Balance Sheet		Net Fair Value Presented in Balance Sheet
	(In thousands)
Assets:
Current:
Derivative instruments	$	—	$	7,040	$	—	$	7,040	$	(6,682)	$	358
Non-current:

Derivative instruments	$	—	$	1,269	$	—	$	1,269	$	(1,177)	$	92
Liabilities:
Current:
Derivative instruments	$	—	$	9,643	$	—	$	9,643	$	(6,682)	$	2,961
Non-current:
Derivative instruments	$	—	$	1,378	$	—	$	1,378	$	(1,177)

Viper Energy, Inc. [VNOM] Filings
10-Q	[2024-08-05]
10-Q	[2024-05-02]
10-K	[2024-02-22]
10-Q	[2023-11-08]
10-Q	[2023-08-03]
10-Q	[2023-05-03]
10-K	[2023-02-23]
10-Q	[2022-11-08]
10-Q	[2022-08-03]
10-Q	[2022-05-05]
10-K	[2022-02-24]
10-Q	[2021-11-04]
10-Q	[2021-08-03]
10-Q	[2021-05-05]
10-K	[2021-02-25]
10-Q	[2020-11-05]
10-Q	[2020-08-05]
10-Q	[2020-05-08]
10-K	[2020-02-18]
10-Q	[2019-10-30]
10-Q	[2019-08-01]
10-Q	[2019-05-01]
10-K	[2019-02-15]
10-Q	[2018-10-30]
10-Q	[2018-08-09]
10-Q	[2018-05-02]
10-K	[2018-02-07]
10-Q	[2017-10-25]
10-Q	[2017-08-02]
10-Q	[2017-05-04]
10-K	[2017-02-15]
10-Q	[2016-11-08]
10-Q	[2016-08-09]
10-Q	[2016-05-05]
10-K	[2016-02-19]
10-Q	[2015-11-06]
10-Q	[2015-08-10]
10-Q	[2015-05-07]
10-K	[2015-02-20]
10-Q	[2014-11-06]
S-1	[2014-08-14]
10-Q	[2014-08-07]
S-1	[2014-05-07]