On June 3, Viper Energy (NASDAQ: VNOM), a subsidiary of Diamondback Energy, announced it will acquire Sitio Royalties (NYSE: STR) in an all-stock transaction valued at approximately $4.1 billion, including the assumption of $1.1 billion in Sitio’s net debt. The combination, unanimously approved by both companies’ boards and supported by major shareholders—including Diamondback and Sitio’s largest investor, Kimmeridge—will create North America’s largest publicly traded oil and gas mineral and royalty company.
Sitio Class A shareholders will receive 0.4855 shares of a new Viper holding company for each Sitio share, valuing Sitio at $19.41 per share based on Viper’s June 2 closing price. The transaction, expected to close in the third quarter of 2024, will increase Viper’s net royalty acreage in the Permian Basin by about 42% to roughly 85,700 net royalty acres. Sitio’s portfolio also brings an additional 9,000 net royalty acres in key U.S. shale regions such as the DJ, Eagle Ford, and Williston basins.
Viper’s acquisition of Sitio Royalties gives Viper a major boost in the Delaware Basin. (Source: Viper Energy)
The deal is set to boost Viper’s fourth-quarter pro-forma oil production by 38% and lower its base dividend breakeven by $2 per barrel to less than $20 WTI. Viper expects to achieve more than $50 million in annual cost synergies, primarily through reductions in general and administrative expenses and lower capital costs. Sitio’s first-quarter 2024 production averaged 42,100 barrels of oil equivalent per day, with the majority coming from the Permian.
Following the merger, Diamondback will own approximately 41% of Viper’s outstanding shares, down from 92% at the time of Viper’s IPO. The transaction underscores the ongoing attractiveness of the Permian Basin for consolidation, even as deal activity in the broader U.S. oil patch slows amid price volatility and market uncertainty.
Viper has also set a near-term net debt target of $1.5 billion, which it aims to achieve through free cash flow and potential non-core asset sales.
Executives from both companies highlighted the strategic significance of the combination. “This creates a leader in size, scale, float, liquidity and access to investment-grade capital in the highly fragmented minerals industry,” said Kaes Van’t Hof, CEO of Viper Energy and Diamondback. Chris Conoscenti, CEO of Sitio Royalties, added, “We are excited to announce the combination of two leading minerals companies with a shared strategic vision to create a truly differentiated investment opportunity for shareholders.”
This deal follows Viper’s earlier $4.45 billion acquisition of Permian mineral interests from Diamondback, reinforcing its leadership position in the minerals and royalties market.
