Operator: Good day, and thank you for standing by. Welcome to the Viper Energy Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand it over to your first speaker today, Chip Seale, Investor Relations Director. Please go ahead.

Chip Seale: Thank you, Amber. Good morning, and welcome to Viper Energy's Second Quarter 2026 Conference Call. During our call today, we may reference an updated investor presentation, which can be found on Viper's website. Representing Viper today are Kaes Van't Hof, CEO; and Austen Gilfillian, President. During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, future performance and businesses. We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I will now turn the call over to Kaes.

Kaes Van't Hof: Thank you, Chip. Welcome, everyone, and thank you for listening to Viper's Second Quarter 2026 Conference Call. The second quarter continued the trend of strong execution for Viper, highlighted by steady development activity from both Diamondback and our third-party operators across our asset base. During the quarter, operators turned 691 gross horizontal wells to production on our acreage in which Viper owned an average 3% net revenue interest. As a result of this strong activity as well as our continued execution on our acquisition strategy, we have initiated average production guidance for the third quarter that implies roughly 4.5% growth relative to the second quarter. Importantly, the midpoint of our third quarter guidance implies an approximate 15% annualized growth rate in oil production per share relative to the fourth quarter of 2025. Strong underlying organic growth, combined with accretive acquisitions and opportunistic share repurchases is fundamental to Viper's value creation proposition. Turning to return of capital. For the second quarter, we are returning 75% of available cash for distribution to stockholders. This return of capital includes $132 million in share repurchases completing during the quarter as well as a combined base plus variable dividend of $0.67 a share. Looking ahead, yesterday, we announced an important evolution in our return of capital strategy. Going forward, we will be shifting to a framework, which includes a high base dividend and greater flexibility in how we allocate the balance of cash available for distribution. Effective beginning in the third quarter, our Board approved a 32% increase to our base dividend, now up to $2 per Class A share on an annual basis. With this increase to the base dividend, we also announced that beginning in the third quarter, we will be removing our previously -- our previous quarterly commitment to return at least 75% of cash available for distribution. First and foremost, we believe this new outsized base dividend rather than a variable payout that fluctuates with commodity prices best showcases what is truly unique about Viper. At our current share price, the increased base dividend implies an annualized yield of approximately 4.5%. This yield remains meaningfully above the average of our E&P peers and is underpinned by one of the lowest breakevens -- dividend breakevens in the sector. Given our 0 required capital expenditures and long-lived asset base, we believe the durability of this dividend should be compared to the most durable business models in the market, not just our energy peers. The base dividend is sacrosanct, and we are committed to prioritizing steady growth of this base dividend over time. Beyond the increased base dividend, we remain committed to returning a significant amount of capital to our shareholders through the cycle. While we are removing the quarterly commitment to return at least 75% of cash available for distribution, there's a solid floor under our returns given the increased base dividend represents approximately 50% of free cash flow at $70 a barrel WTI. However, the flexibility created by retaining excess cash flow during periods of higher commodity prices will allow us to opportunistically repurchase shares, reduce debt or pursue a disciplined M&A strategy. There are extremely attractive investment opportunities ahead today for Viper, and we believe that allocating incremental capital through a cyclical lens will create long-term stockholder value. In short, we do not believe the market is currently valuing the variable dividend framework and as such, we have put that mechanism aside for now. In its place, we believe our new capital allocation framework will better highlight the attractiveness of Viper's dividend and enable a more compelling growth outlook to be paired with the existing yield. Operator, please open the line for questions.

Operator: [Operator Instructions] Our first question comes from Betty Jiang of Barclays.

Wei Jiang: Clearly, today's big news is the change in the cash return strategy. And I think it really reflects how the royalty model and business has evolved over the last many years. It started as a distribution vehicle, but Viper has shown growth, both organic and inorganic and while distributing strong cash flow through the years. I just want to unpack sort of your -- the rationale to change the cash return strategy today and how that's reflective of the value proposition that you see Viper offering in the long term? And then how do you think about Viper's competitive advantage against an E&P going forward?

Kaes Van't Hof: Yes, Betty, a lot in that question. I'll start with the base dividend move. Certainly not something we take lightly, and the Board looked at this and the data surrounding this decision in great detail. And we kind of all came to the conclusion that the cash distribution yield was not being rewarded by the market. And instead, we figured that a very high base dividend yield that is higher than majors, higher than our E&P competitors, higher than mid-cap E&Ps, higher than utilities, but with a utility level of protection should be something that gets rewarded by the market. And for us to have a 4.5% base dividend yield today at today's stock price, that's protected to $30 a barrel, that's about as secure a dividend as you could possibly find in the market and certainly the most secure you can find in oil and gas. And I think what's interesting is that Viper is a business here that if you look at Slide 4, has had a 17% CAGR in per share growth. And that excludes price impacts, right? This is just production per million shares. And Viper's valuation today absolutely does not reflect that reality. And I think the other interesting thing is in a year where people are questioning shale growth and how much longer can the Permian grow, you got Viper growing 15% in 2026 with 0 reward from the market on that growth. So what we decided is, okay, let's have a big base dividend, and let's be able to repurchase a lot of shares at these levels or if the multiple goes up and the stock performs well, we pull back and use cash for deals or to fortify the balance sheet. But at the end of the day, this is about freely allocating capital to a business that I think is severely mispriced, particularly relative to its growth profile.

Wei Jiang: Yes. No, that makes a lot of sense and I do agree that a lot of the value is not getting recognized by the market and having more share buyback would be good. My follow-up will be sort of on the M&A strategy and funding of M&A. I think given the shift, there's also a move towards potentially self-funding deals going forward. And that's a difference from -- in the past where you guys have tapped into the public market. So how do you think about M&A financing have changed under this new framework?

Kaes Van't Hof: Yes. So let me add a couple of things to the rest of the original comments I made. I think the other point of this evolution is this is -- Viper is growing up into a real company and a real business that should be valued relative to S&P 500 comps. And that's our stated goal. And I think it's just a natural evolution from -- and this ties to your other question, but the evolution from the distribution model where we distributed all of our cash every quarter and needed to rely on equity financing to grow the business. Well, now as an investor, you can say, my 4.5% base dividend is set and growing and safe. But these guys -- the company now has flexibility to allocate the rest of the free cash to either deals or repurchase shares or balance sheet, depending on which is the best value creation opportunity for the business. And that kind of ties to the market we're in today. I've never seen an A&D market, certainly on the larger side of deals, that's been more available and the opportunity set is so large. So we obviously did the Riverbend deal. There's a lot of deals in the market. We don't need to buy all these deals. But naturally, if we have an advantage in our modeling or what we see in the asset base, I think those deals should naturally come to us. And I think this flexibility in terms of base dividend going up, but less -- more cash to play around with gives us an opportunity to put more cash in deals or not have to tap the equity markets for every deal.

Operator: Our next question comes from Neal Dingmann of William Blair.

Neal Dingmann: Maybe I'll just hit you with both since my first is pretty quick. My first quick one is just on the payout that you talked about, specifically, what percent do you believe is the most appropriate cash available for distribution kind of on a go forward? I mean I know that's been a little bit flexible, but what we think is most appropriate. And maybe just secondly, it's a little bit like Betty's second question, just on future strategy and more specifically, how do you all believe you can continue to take advantage of Viper's dominant size and strong balance sheet for opportunities going forward?

Kaes Van't Hof: Yes. I mean, listen, I think there's going to be quarters where we distribute all of our free cash in the form of buying back shares plus a big base dividend when the market isn't rewarding Viper for the growth prospects we put out there. I think this is a market today where we've been in the market almost every day since over the last 2 or 3 months buying back shares. And if the stock doesn't respond, we're going to keep buying back and shrink the share count. So tying to the other side of the equation, it's been frustrating to watch Viper's valuation versus other royalty-like models in the basin, right? This is a pure free cash flow stream. It's a bet on Permian Basin technology, productivity, activity and growth. And to see Viper trade where it trades relative to some of the non-commodity exposed royalty streams in this basin is flummoxing to me. So our mindset was basically let's put a big base dividend in place and let's buy back shares. If the market doesn't realize the value, we're just going to keep buying them back. And that also applies to Diamondback. Diamondback is a large shareholder of Viper and Diamondback has a lot of free cash to do things with, too. And that could be buying more Viper because I just think we're pounding the table that relative to what else is out there, this is the best value proposition in E&P land or in the Permian in general.

Operator: Our next question comes from Paul Diamond of Citi.

Paul Diamond: Just wanted to touch base on -- so the new base dividend, does that over time -- is there any level of volatility over time that, that would really shift your hedging framework at all? Is there a level you would ramp up given concrete nature of the distribution now versus a relative one previously?

Kaes Van't Hof: I think generally, we like having -- buying these $50 puts just to protect the extreme downside. Obviously, there's a huge gap between $50 and $30 oil where the base dividend is protected today. But we set the base dividend to grow and to grow meaningfully on a percentage basis. And I think as production grows, as share count shrinks, as debt gets reduced or as we do deals that are accretive, that provides more capacity for the base dividend to grow. So I think two different sides of the equation, but generally, the base dividend needs to grow, and we still like the puts in place to protect that extreme downside.

Paul Diamond: Got it. Makes perfect sense. And just one more, I guess, high-level strategic question. I talked in previous calls a bit about the opportunity set in your acreage from new and emerging benches. Is there any update there? Is there any more work done either at FANG level or some of the third-party stuff that would shift your view there? Or is that more just an emerging opportunity set?

Austen Gilfillian: Yes, Paul, I think the big emergence over the last couple of quarters has been, at least from a leasing perspective, on the Woodford and the Delaware. So we've had five or six quarters now where we've been extremely active leasing the Barnett and the Midland Basin. But the Woodford on the Delaware side has really picked up over the last couple of quarters. And I think if you look from probably the early part of 2025 to what we've done in the first half of 2026, it's pretty evenly split. I think everything in the door now, we're probably $25 million to $30 million of lease bonuses just on deep rights there, which is about 1/3 of our total leasing effort over that time period. And that money upfront is good, but that also typically means a 3-year clock for operators to go start developing those minerals. So I think it's going to equate to more production growth over that time period as well.

Operator: Our next question comes from Derrick Whitfield of Texas Capital.

Derrick Whitfield: I wanted to start first with your production outlook. When you think about the growth in your net or in your near-term inventory in your line of sight wells and compare that to the amount of wells required to hold your production flat, what does that suggest about the underlying growth rate of the business on a consolidated basis as you look out to 2027?

Austen Gilfillian: Yes, Derrick, it's certainly strong. So if you just look at Q2 and then compare that to the guide for Q3, we incorporate the 2,000 barrels a day of production contribution from the Riverbend assets. But that still implies 1,000 barrels a day of quarter-over-quarter growth on purely an organic basis. I mean you can kind of do the math as well on what might be implied in Q4. And I think the takeaway there will be continued organic growth. So I think it sets us up for a really strong second half of the year. And I think Slide 5 of the investor presentation for the first time lays out explicitly what Permian production was for Viper going back to the fourth quarter of last year as well as the first quarter of this year, stripping out the noise associated with the non-Permian divestiture, all in, you're looking at about high single-digit organic growth in 2026. I don't know if we'll maintain that level on a percentage basis going into next year. But certainly, the line of sight we have in terms of activity is going to support some modest growth off the exit rate this year.

Derrick Whitfield: Great. Certainly makes sense. And then maybe referencing an earlier call, the Diamondback call, you guys noted a four-well pad targeting the Barnett and Spanish Trail, which, again, exceptionally high NRI area for you. As you look further on the development curve, how much activity does Diamondback have planned there or other areas with very high NRIs?

Austen Gilfillian: I think generally, it's pretty consistent. There's really three parts of the equation. One is what is Diamondback gross activity levels; two, what is Viper's exposure to that gross activity levels; and three, what is our average NRI within those wells. So we've been extremely consistent going back over 5 years now of capturing about 75% to 80% of Diamondback's gross activity with around a 6% average NRI. I mean that gets skewed and you benefit from certain wells where you own the full royalty and get a 25% NRI. So I think we still feel confident in maintaining that alignment with Diamondback here for the next couple of years. And hopefully, we'll have some encouraging results, which we expect to on that first Spanish Trail-Barnett development. And as you get more gross wells there with those high NRIs, that helps the net exposure quite significantly.

Kaes Van't Hof: And here's what I'll add, we're wearing kind of two hats here, Derrick, is that if that pad produces how we expect and the costs come in how we expect, particularly since Diamondback not only has a high working interest in Spanish Trail, but Viper has the high NRI full section development in the Barnett will probably move to the top decile of our combined inventory in terms of rate of return plus NPV. So should the results be what we expect, we're going to mow down Spanish Trail very, very quickly in the Barnett.

Operator: Our next question comes from Jack Cavanagh of Goldman Sachs.

John Cavanagh: I appreciate your comments on the market not maybe rewarding Viper's value proposition at this point. And so I was just wondering if you could kind of overlay those comments with how you're viewing maybe the near-term outlook for opportunistic repurchases maybe relative to what we've seen this quarter and what we've seen historically from you guys and kind of what those levels could look like in the second half of this year?

Kaes Van't Hof: Yes. I mean I think we did a little under $150 million in Q2. We've kind of continued at a similar daily pace. Obviously, it's hard during the blackout window to alter your pace much. But after the window opens, we'll see where the stock is in the next couple of days and be back in the market aggressively. I just -- I think we just fundamentally disagree that this should be a double-digit type yield, low double-digit type yield. And I recognize that oil prices were well above mid-cycle in Q2. But even if you look at a normalized price environment, which is how we look at everything, both Diamondback and Viper, the value proposition is pretty obvious. So I think generally, we'll be ready to step in here in a couple of days.

John Cavanagh: Got it. Appreciate that. And then maybe for my follow-up, just looking at 2027, obviously, really strong on the organic growth side. And then you've obviously mentioned there's maybe potential for inorganic opportunities as well. Beyond that, I'm wondering if there -- like beyond 2027, if you see the potential for continued organic growth or if you think the structure could shift more to a higher returns, higher yield scenario or kind of what you're kind of seeing as the organic volume growth outlook beyond 2027?

Kaes Van't Hof: I think for what we can see, there's certainly organic growth potential beyond 2027, particularly led by Diamondback development of kind of the Barnett, right? That's going to drive the stuff we can see. I guess the bet on the rest of the basin is that the basin continues to grow and that we grow relatively higher to the rest of the basin. I think as we do our underwriting process for third-party acquisitions, that third party's inventory and the quality of their inventory goes into our calculus for what we want to buy and what we don't buy. And generally, we've outperformed the growth in the basin by buying minerals in the places that get developed first.

Operator: Our next question comes from Scott Hanold of RBC.

Scott Hanold: It looks like your development wells and line of sight wells stepped up pretty nicely this quarter, and a lot of it looks like third-party operated stuff. Can you give us some sense and color on what you're seeing there? Is it just the uptick in rig activity is aligning with the Viper acreage? Or is there some other dynamic there?

Austen Gilfillian: No, that's it, Scott. I mean, I would say, generally, third-party activity has been pretty consistent from a gross perspective. It kind of moves around from quarter-to-quarter on a net basis. But as Kaes just mentioned, we spend a lot of time and effort thinking about it from an operator's perspective of what is the highest returning projects they have ahead of them and how do we get exposure to that. So I think it's certainly not a coincidence in how you've seen our third-party activity trend over the last couple of years, and it's just representative of us targeting the highest quality undeveloped acreage that we can in the Permian Basin regardless of the operator.

Scott Hanold: Got it. Okay. And then I guess this one is for you, Kaes. Obviously, you're pivoting more to stock buybacks and you -- it feels like you all have some frustration on the Viper valuation -- if you step back and look at stock buybacks, whether it's in E&P or even with Viper, it doesn't seem that it quite move the needle. I mean I get the fact that there's more production or EPS per share for existing shareholders. But what would be the next step if buybacks don't do the trick in pushing Viper stock higher? Are there other alternatives you're evaluating?

Kaes Van't Hof: Well, I mean, clearly, the move to more index inclusion was a big benefit to Viper a couple of years ago. We have our sights set and we -- obviously, you got to dream big. We'd like to get into the S&P 500 as a goal at some point. I think that opens us up to a broader investor universe. People start to pay more attention to the dividend yield and the size of the company. I understand the concept that stock buybacks, while a tool may not be a silver bullet. But I think if you firmly believe you're buying back shares below NAV at a mid-cycle price and a reasonable rate of return, then whether someone buys the stock or not should result in value accretion to the rest of the shareholder base, of which Diamondback is a significant shareholder. So there's obviously other tools in the toolkit, but I think being a pure-play mineral company today is still the best position for Viper. I just think it's interesting to see people or investors pay 20-plus times for surface right royalties in the basin when the biggest mineral owner in the public space that's growing 15% a year trades at half that. And I just don't think that, that makes sense.

Operator: Our next question comes from Leo Mariani of ROTH.

Leo Mariani: I was hoping you could talk a bit more about what you're seeing with third-party operator activity trends. I think you mentioned on the call that you think the rig count in the Permian Basin is going to continue to sort of grow as we get kind of later in the year. So maybe you can provide a little bit more color around what you're seeing there.

Austen Gilfillian: Yes. We've seen rig count trend up. We've seen that in the basin, and we've seen that specific to Viper as well. And really, that gets reflected in the work in progress in line of sight wells. I talked about this pretty consistently, but really what's most impactful for Viper is the conversion rates of those, what percentage of the permits or the DUCs get converted to production and then also how quickly they do that. I think as rig count trends up, those existing permits get converted to production more quickly than potentially we underwrite, and that just brings forward some volume. So I think we've positioned this business really well where we benefit from the growth of Diamondback and their focus on Viper's concentrated mineral interest and then also kind of a broad basin exposure to other third-party operators and whatever their activity levels may be and also whatever learnings they might have across the entire Permian Basin. So yes, we feel good about the third-party asset base and how it's performing, especially here recently with kind of where commodity prices have been.

Leo Mariani: Okay. I wanted to expand a bit more on the M&A side. It looks like you guys did about $103 million in M&A in the quarter, then you announced kind of $160-ish million drop-down from FANG. You talked about a pretty robust kind of M&A opportunity set. Can you provide a little bit more color about what you're seeing? Is it kind of a lot of smaller bite-sized deals? Are there bigger deals kind of starting to get floated? Just any more color on that would be helpful.

Austen Gilfillian: I think it's a combination of both. We really have gained a lot of traction over the last quarter or 2 on the ground game. Those are conversations we've always had. I think we've just had a little bit higher success rate on converting those into deals we're closing. So that's exciting, and it's a pretty core part of our business of bulking up and netting up and adding value around the edges. On the bigger packages, there were certainly a lot of calls over the last couple of months with sellers seeing where oil prices were or at least potential sellers. I think Riverbend is reflective of a good type of deal that Viper can do pretty easily now. The volatility has not been helpful. That's for sure. But I think there's still a really constructive A&D market out there and Viper expects to play a very significant role within that. But as part of allocating capital today, if you think about all of the different uses, the investment opportunity in buying back shares looks pretty attractive relative to even what M&A might look like.

Operator: This concludes the question-and-answer session. I would now like to turn it back over to the CEO, Kaes Van't Hof, for closing remarks.

Kaes Van't Hof: Thanks, everybody, for your interest in Viper Energy. I think we laid out a very clear future value proposition for our shareholders, and we look forward to delivering on it. So thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.