Viper intends to fund the cash portion of the transaction through a combination of cash on hand, borrowings under its credit facility, up to $200m equity commitment from Diamondback and proceeds from one or more capital markets transactions
Viper Energy Partners, a subsidiary of Diamondback Energy, has agreed to acquire certain mineral and royalty interests from Warwick Capital Partners and GRP Energy Capital for a total consideration of $1bn.
Under the terms of the agreement, Viper will acquire the mineral and royalty interests, in exchange for around 9.02 million common shares and a $750m cash payment to the seller.
Viper intends to fund the cash portion of the transaction through a combination of cash on hand, borrowings under its credit facility, and up to $200m of equity commitment from Diamondback.
In addition, it will use the proceeds from one or more capital markets transactions, including a potential bond offering, subject to market conditions and other factors.
The acquisition is expected to be completed by the middle of the fourth quarter of this year, subject to customary closing conditions, with an effective date of 1 October 2023.
Upon closing, Viper will integrate the new assets into its portfolio and use the enhanced cash flow profile to return the increasing amounts of capital to shareholders.
Viper General Partner CEO Travis Stice said: “This acquisition of high-quality mineral and royalty assets is a truly differentiated opportunity that represents a significant value proposition for Viper and its unitholders.
“The high confidence near-term production outlook results in meaningful and immediate accretion to all relevant financial metrics, including an estimated increase of 7-8% to our expected 2024 return of the capital program.
“Equally as important, and what truly differentiates this opportunity, however, is both the quantity and quality of the undeveloped acreage position. Credit is due to the GRP Energy Capital team for building an asset of this size, scale and overall quality that cannot be replicated in the private minerals market today.”
The acquisition comprises a total acreage of around 7,300 net royalty acres, including 4,600 net royalty acres in the Permian Basin, and 2,700 net royalty acres in other major basins.
It includes around 2,800 net royalty acres in the Midland Basin and 1,800 net royalty acres in the Delaware Basin, with a total of 21 rigs currently operating on the acreage.
Around 60% of Midland Basin acreage is located in Martin and Midland counties, and two-thirds of Delaware Basin acreage is in Reeves and Loving counties.
Evercore served as financial advisor and Akin Gump Strauss Hauer & Feld as legal advisor to Viper, while Barclays served as financial advisor and Kirkland & Ellis as legal advisor to Seller.
GRP Energy Capital CEO Ken Willey said: “Building and managing a mineral asset of this scale is a monumental task. It requires a thoughtful strategy and disciplined process.
“We are happy with the outcome for the company and our partners, and we look forward to working with Viper on the transition and closing.”
Warwick Capital Partners co-founder and managing partner Alfredo Mattera said: “This transaction underpins Warwick’s partnership-led approach to sourcing compelling investment opportunities alongside best-in-class sector specialists such as GRP Energy Capital.”