Viper Energy (VNOM 2.46%), a mineral and royalty interest owner focused on the Permian Basin, released its results on August 4, 2025. The key news: revenue (GAAP) outperformed analyst expectations at $297 million compared to a $288.8 million consensus, while earnings per share (GAAP) missed, posting $0.28 versus $0.37 forecasted. The company reported a large jump in oil production but saw earnings pressured by higher non-cash charges and deal expenses. The quarter underscored significant expansion through acquisitions and continued capital returns to shareholders, even as profit margins narrowed compared to last year.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP, Diluted) | $0.28 | $0.37 | $0.62 | (54.8%) |
| Revenue (GAAP) | $297 million | $288.8 million | $216 million | 37.5% |
| Adjusted EBITDA | $274 million | N/A | ||
| Cash Available for Distribution | $97 million | N/A | ||
| Average Daily Oil Production (bo/d) | 41,615 | 26,352 | 57.9% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Understanding Viper Energy's Business
Viper Energy is a company that owns mineral and royalty interests, mainly in Texas' Permian Basin. This model lets it collect a share of oil and gas production revenue without paying to drill wells or operate equipment. The firm's business depends on acquiring new acreage and earning royalties from operators like Diamondback Energy.
Recent years have seen Viper focus on growing its asset base through acquisitions, deepening its ties with Diamondback, and increasing production volumes. Success depends on finding quality deals, effective management of its capital structure, and maximizing royalty cash flow. Stable partnerships and the ability to respond to market swings also play key roles in its business model.
Quarter Highlights: Expansion, Production, and Capital Management
The quarter featured major acquisitions and production growth. On May 1, 2025, Viper closed a $1.0 billion acquisition from Diamondback Energy, adding 22,847 net royalty acres in the Permian Basin as part of the Pending 2025 Drop Down transaction expected to close this quarter. In June 2025, it announced plans to acquire Sitio Royalties Corp in a $4.1 billion all-equity deal.
These acquisitions boosted production. Oil volumes averaged 41,615 barrels per day, up nearly 58% from Q2 2024. Total production rose to 79,286 barrels of oil equivalent per day. The company benefited from 302 new wells turned to production, with most growth coming from assets operated by Diamondback or major third-party producers like ExxonMobil and EOG Resources.
Despite strong top-line growth, earnings per share (GAAP) declined to $0.28, falling short of analyst estimates by $0.09 (GAAP). Factors limiting profits included higher non-cash depletion expense of $124 million, reflecting the larger asset base, and $10 million in transaction expenses related to acquisitions. Share count increased to 131.1 million as of June 30, 2025, up by 43.5% from 102.98 million as of December 31, 2024, due to new shares issued for deals. While these deals expand future potential, they bring near-term dilution and higher costs.
Realized prices for oil, the amount received before hedges, averaged $63.64 per barrel, down sharply from $81.04 per barrel in Q2 2024. As a result, cash flow margins felt some compression despite the scale-up in production. Hedging helped soften volatility, but lower commodity prices remain a risk. Viper returned 75% of its cash available for distribution (a non-GAAP metric) to shareholders. It paid a base dividend of $0.33 and a variable dividend of $0.20, for a total of $0.53 per share. Buybacks totaled $10 million, showing continued commitment to shareholder returns even with increased debt for acquisitions.
Looking Ahead: Guidance and Key Issues for Investors
For Q3 2025, management guided for oil production between 46,000 and 49,000 barrels per day, not including the impact of the planned Sitio merger. Total production guidance stands at 86,000 to 92,000 barrels of oil equivalent per day for Q3 2025. If the Sitio deal closes, full-year 2025 production could reach as high as 68,000 barrels of oil per day, based on pro forma guidance provided by management, with an additional mid-single digit percentage increase in average production targeted for full year 2026.
The company did not change its approach to returning capital to shareholders or its hedging strategy. No formal forward guidance was provided on earnings or cash flows beyond production forecasts, but management continued to highlight conservative leverage targets (aiming for approximately 1.0x net debt at $50 WTI based on expected pro forma production levels) and readiness for further acquisitions. The quarterly dividend was declared at $0.53 per share, reflecting both a base and variable component, and buybacks are expected to continue as market conditions allow.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
