Viper Energy to Expand in Permian: How Will the Stock Benefit?
Since the announcement of an acquisition agreement on Sept. 11, Viper Energy Inc.’s VNOM stock has experienced a slight decline of 0.6%. While concerns about a potential U.S. economic slowdown caused by the high-interest rate environment are weighing on the broader stock market, VNOM’s anticipated benefits from the acquisition have helped to support its stock price.
Overview of VNOM’s Acquisition Agreement
VNOM and its operating affiliate Viper Energy Partners LLC (OpCo) have recently signed a definitive purchase and sale agreement to acquire the subsidiaries of Tumbleweed Royalty IV LLC. These affiliates own mineral and royalty interests in the Permian, which are rights to earn income from the extraction of natural resources.
The transaction, likely to be consummated by the early fourth quarter, will comprise $461 million in cash and around 10.1 million OpCo units. Viper Energy, carrying a Zacks Rank #3 (Hold), stated that a combination of cash on hand, borrowings under its credit facility, and proceeds from one or more capital markets transactions will likely be utilized to finance the cash portion of the acquisition. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The acquisition also involves a possible additional payment of up to $41 million in the first quarter of 2026, contingent on the average West Texas Intermediate crude price in 2025.
Viper Energy also disclosed the completion of two earlier related acquisitions which would substantially increase its portfolio in the Permian Basin. On Sept. 3, OpCo acquired entities holding mineral and royalty interests from Tumbleweed-Q Royalty Partners LLC and MC Tumbleweed Royalty LLC for a total cash consideration of $189 million.
VNOM’s Combined Acquisition Highlights
VNOM, an affiliate of Diamondback Energy Inc FANG, estimated that the acquisitions added approximately 3,727 net royalty acres in the Permian Basin, comprising the Midland and Delaware Basins. Although the assets are largely undeveloped, they are expected to experience significant production growth. Current production from these assets is around 2,500 barrels of oil per day (Bbls/D), with VNOM projecting volumes to jump to 4,500 Bbls/D for 2025. On these properties, Diamondback is expected to complete between 120 and 140 gross drilling locations by 2026, according to Viper's projections.
According to Viper Energy, the acquisitions align with its ongoing strategy to consolidate high-quality mineral and royalty assets, aim to deliver financial accretion. Overall, the company’s long-term production outlook seems bright, with the acquisitions adding significant undeveloped inventory to its portfolio.
These transactions also boost Diamondback Energy’s production as a major operator in the Permian Basin, with Exxon Mobil Corporation XOM and ConocoPhillips COP as the other key players in the area.
In the low-cost Permian, ExxonMobil has a pipeline of profitable projects, while ConocoPhillips derives a significant production volume from the most prolific basin of the United States.
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