# Viper Energy (VNOM) No longer a pick since 2026-10-11. The price is at the analysts' value and the AI estimate, and Viper does not control where its wells get drilled. Sector: Oil & gas royalties | Field | Value | |---|---| | Price | $42.99 | | Fair value (Analysts) | $44.83 | | Discount to fair value | 4.1% | | Fair value uncertainty (Analysts) | Medium | | Economic moat (Analysts) | Narrow | | LSEG analyst rating (1 strong buy to 5 strong sell) | 1.81 | | Data as of | 2026-10-11 | | Next earnings | 2026-11-02 (confirmed) | ## In short Viper earns royalties but Diamondback decides the drilling, so the gap closes slowly and only if production and the higher dividend hold through an oil-price cycle. ## Themes and gap - Themes: Power and energy (power-energy) - Gap type: Slow (slow) - Why: Viper must show its dividend holds through a full oil-price cycle, and Diamondback, not Viper, decides the drilling pace. ## About Viper Energy owns mineral and royalty interests in the Permian Basin, in Texas. It does not drill or operate wells. Other companies, mainly its parent Diamondback Energy, drill and produce oil and gas on Viper's land. Viper collects a share of that revenue as a royalty, with no drilling cost of its own. ## Thesis Viper Energy owns oil and gas royalties, but it does not choose where or when wells get drilled. The market prices royalty companies at a discount to companies that operate their own wells. That is because Viper's growth depends fully on parent Diamondback Energy's drilling plans, not on decisions Viper makes itself. Viper also just finished a large reorganization. It bought Sitio Royalties in 2025, then sold the non-Permian assets in 2026. Investors often treat a buy-then-sell sequence like this as a sign of integration risk and extra share dilution. For the gap to close, Diamondback needs to keep drilling at a steady pace on Viper's land. Viper also needs to show its new, higher base dividend holds up through a full oil-price cycle, not just one strong quarter. Diamondback raised its own stake in Viper to 42.9% in September 2026, a sign it expects steady royalty income ahead. The next test comes at Viper's next quarterly report, due on November 2, 2026, after the market closes. Investors will watch production growth and the dividend policy after Viper dropped its old 75%-of-cash-flow payout rule in August 2026. If Diamondback keeps growing production on Viper's acreage and the dividend holds, the gap can narrow over the next two to four quarters. But because Viper depends on another company's drilling pace, part of this discount may not fully close. ## Checkpoints - Nov 2, 2026: Q3 2026 results: production and new base dividend. Status: Pending. Watch: Production at or above Q2 levels and a $0.50 quarterly base dividend paid from cash flow passes; lower production or a dividend cut fails. - Feb 2027 (estimate): Q4 2026 results and Diamondback's 2027 drilling plan. Status: Pending. Watch: A 2027 plan with steady or higher Diamondback activity on Viper's land passes; a cut in Diamondback's drilling on Viper acreage fails. ## Balance sheet - Cash: $77M - Debt: $1.7B - Net debt: $1.6B - Net debt / EBITDA: 0.6× (low) - Ratings: S&P BBB-, Fitch BBB- Viper owns royalties and pays no drilling costs, so it needs little capital. Its debt is modest for its cash flow, and Diamondback does not guarantee it. At June 30, 2026, the debt was $500 million of 4.900% senior notes due 2030, $1.1 billion of 5.700% senior notes due 2035 and $95 million drawn on the revolving credit facility. The notes and the revolver sit at the operating subsidiary, Viper Energy Partners LLC, and Viper Energy, Inc. guarantees them. In February 2026, Viper repaid a $500 million term loan in full with cash from the sale of its non-Permian assets. Thus debt fell from $2.19 billion at December 31, 2025. In June 2026, Viper raised the revolver to $2.0 billion and extended it to June 2031, which left about $2.0 billion of liquidity. Leverage uses annualized Q2 2026 adjusted EBITDA (Q2 adjusted EBITDA was $339 million). Interest expense was $51 million in the first half of 2026. Both ratings are investment grade. This low debt gives room to keep the new $2.00 base dividend and to buy back shares through a period of lower oil prices. As of 2026-06-30. Sources: - https://www.globenewswire.com/news-release/2026/08/03/3337856/0/en/viper-energy-inc-a-subsidiary-of-diamondback-energy-inc-reports-second-quarter-2026-financial-and-operating-results-increases-base-dividend.html - https://www.sec.gov/Archives/edgar/data/0002074176/000207417626000053/vnom-20260630.htm - https://www.sec.gov/Archives/edgar/data/2074176/000207417626000010/vnom-20251231.htm ## Recent events - 2026-09-01: Diamondback Energy raised its beneficial stake in Viper Energy to 42.9%, after a purchase agreement for 3,815,459 OpCo units and matching Class B shares. - 2026-08-03: Viper Energy reported Q2 2026 results. Production averaged 134,363 barrels of oil equivalent per day, up 69.5% from a year earlier. The board raised the base dividend 32%, to $2.00 per share per year, and dropped its prior policy of paying out at least 75% of distributable cash flow each quarter as a variable dividend. - 2026-02-09: Viper Energy closed the sale of its non-Permian mineral and royalty assets, for about $617 million in cash, making the company a pure Permian Basin business. - 2025-08-19: Viper Energy closed its acquisition of Sitio Royalties Corp, an all-equity deal valued at about $4.0 billion. ## Risks - High: Viper earns royalties as a share of oil and gas revenue. Its cash flow moves directly with oil and gas prices. A sustained drop in the oil price would strain the dividend the board just raised. - Medium: Viper does not drill its own wells. Its production growth depends on the drilling pace of Diamondback Energy and other operators on its land. If Diamondback slows its drilling or moves capital elsewhere, Viper's growth slows too. - Low: Viper grew quickly through large, debt- and equity-funded deals, including the $4.0 billion Sitio acquisition. Another large deal, or a deal that does not integrate well, could add debt or dilute existing shareholders. - Low: Viper dropped its policy of paying out at least 75% of distributable cash flow as a variable dividend each quarter, in favor of a larger fixed base dividend. This gives income investors a bigger guaranteed payment but less of the upside when cash flow is strong. ## Links - Page: https://picks.kamadorueda.com/company/VNOM/ - History of changes: https://picks.kamadorueda.com/company/VNOM/history/ - JSON with full history: https://picks.kamadorueda.com/data/company/VNOM.json > Picks is a personal record of stock picks. It gives information only, not financial, investment, tax or legal advice. 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