SCHEDULE 13D/A: Diamondback Energy Affiliates Greenlight Viper Energy's All-Equity Acquisition of Sitio Royalties

Major shareholders Diamondback Energy, Diamondback E&P, and Endeavor Energy Resources have irrevocably approved Viper Energy's all-equity merger with Sitio Royalties Corp., committing to support the transaction and restrict share transfers.

Summary

• Diamondback Energy, Inc., Diamondback E&P LLC, and Endeavor Energy Resources, L.P. (collectively, "Reporting Persons") have filed Amendment No. 5 to their Schedule 13D regarding Viper Energy, Inc. ("Issuer").
• The amendment discloses the execution of an Agreement and Plan of Merger on June 2, 2025, between the Issuer, Viper Energy Partners LLC ("Opco"), Sitio Royalties Corp. ("Sitio"), and other entities, for the all-equity acquisition of Sitio by Viper (the "Sitio Acquisition").
• The Reporting Persons, who collectively hold significant beneficial ownership in Viper Energy, delivered a written consent on June 2, 2025, irrevocably approving the Merger Agreement and the contemplated transactions, fulfilling the requisite stockholder approval.
• Concurrently, the Reporting Persons entered into a Parent Support Agreement, agreeing not to transfer or dispose of any common stock of the Issuer or New Parent, or OpCo Units, nor engage in short sales, during a "Restricted Period" from the Merger Agreement date until 90 days following the closing of the merger.
• As of May 30, 2025, Diamondback beneficially owned 54.2% of Viper's outstanding Class A Common Stock, Diamondback E&P owned 5.8%, and Endeavor owned 34.7%, based on 131,067,235 Class A Common Stock shares outstanding.
• The beneficial ownership figures for Diamondback include 77,364,925 shares of Class B Common Stock and OpCo Units held by Diamondback, 8,066,528 shares/units by Diamondback E&P, and 69,626,640 shares/units by Endeavor, all exchangeable for Class A Common Stock on a one-for-one basis.

Sentiment

Score: 8

Explanation: The document indicates a significant strategic acquisition is moving forward with strong, irrevocable support from major shareholders, suggesting a high likelihood of successful completion. This is a positive development for the company's strategic growth.

Positives

• The acquisition of Sitio Royalties Corp. by Viper Energy, Inc. is a strategic move to expand Viper's asset base.
• The irrevocable approval and support from major shareholders (Diamondback Energy and its subsidiaries) ensure the merger has strong internal backing and is likely to proceed.
• The Support Agreement's restrictions on share transfers and short sales by major shareholders demonstrate commitment and stability for the transaction.

Risks

• The Support Agreement mentions the possibility of "takeover law" becoming applicable to the Viper Pubco Merger, requiring the Reporting Persons to take actions to eliminate or minimize its effects, implying a potential regulatory or legal hurdle.

Future Outlook

The document outlines the definitive agreement for Viper Energy to acquire Sitio Royalties in an all-equity transaction, which is expected to proceed given the irrevocable approval and support from major shareholders. The transaction involves a complex merger structure leading to New Cobra Pubco, Inc. becoming the new parent company.

Industry Context

This acquisition signifies further consolidation within the Permian Basin's oil and natural gas royalty and mineral interest sector. Diamondback Energy, a major player in the Permian, is leveraging its subsidiary Viper Energy to expand its footprint in the mineral and royalty space by acquiring Sitio Royalties, another significant entity in this niche. This trend reflects a strategy to enhance scale, optimize portfolios, and potentially achieve synergies in a mature, but still highly productive, basin.

Comparison to Industry Standards

• The all-equity nature of the Sitio acquisition by Viper Energy is a common transaction structure in the oil and gas industry, particularly for royalty and mineral companies, as it allows for tax-efficient combinations and defers capital outlays.
• The consolidation of mineral and royalty interests, as seen with this merger, aligns with broader industry trends where larger, more diversified portfolios are sought to enhance stability and attract institutional investment.
• While specific comparable companies or projects are not detailed in this filing, similar consolidation efforts have been observed with entities like Black Stone Minerals, Kimbell Royalty Partners, and other private equity-backed royalty companies seeking scale in key basins like the Permian.
• The strategic rationale typically revolves around increasing net royalty acres, diversifying asset exposure, and improving cash flow stability, which are standard objectives for such transactions in the sector.

Corporate Governance

Related Party Transactions

• The Merger Agreement and Support Agreement involve Viper Energy, Inc. and its parent company, Diamondback Energy, Inc., along with Diamondback's wholly-owned subsidiaries, Diamondback E&P LLC and Endeavor Energy Resources, L.P., as major shareholders. This constitutes a related party transaction as Diamondback is effectively facilitating the acquisition through its subsidiary and committing its significant ownership stake.

Stakeholder Impact

• Shareholders (Viper Energy): The acquisition of Sitio Royalties is expected to expand Viper's asset base, potentially leading to increased scale and future value. The strong shareholder support from Diamondback and its affiliates reduces uncertainty regarding the merger's completion.
• Shareholders (Sitio Royalties): Sitio shareholders will receive all-equity consideration in the transaction, becoming shareholders of the new parent company, New Cobra Pubco, Inc.
• Management/Employees: The merger will likely lead to integration efforts, potentially impacting roles and organizational structure, though the document does not provide specifics.
• Creditors: The all-equity nature of the transaction suggests no immediate new debt, but the combined entity's financial profile will change, which could affect future credit assessments.

Next Steps

• Completion of the Sitio Acquisition, involving the mergers of Sitio Merger Sub into Sitio, Viper Merger Sub into Viper, and Sitio Opco into Viper Opco.
• The "Restricted Period" for major shareholders' share transfers and short sales will continue until 90 days following the closing of the merger.

Key Dates

Recommendation

Keywords

Viper Energy, Diamondback Energy, Sitio Royalties, Merger Agreement, SEC Filing, Schedule 13D, Beneficial Ownership, Oil and Gas, Permian Basin, Corporate Acquisition, Shareholder Approval, Support Agreement, Class A Common Stock, Class B Common Stock, OpCo Units