SCHEDULE: Diamondback Energy Solidifies Control in Viper Post-Merger

Diamondback Energy, Inc. and its subsidiaries significantly increased their beneficial ownership in Viper Energy, Inc. to 47.8% following the all-equity Sitio Acquisition.

Summary

• Diamondback Energy, Inc., Diamondback E&P LLC, and Endeavor Energy Resources, L.P. (collectively, "Reporting Persons") filed a Schedule 13D regarding their beneficial ownership in Viper Energy, Inc. (formerly New Cobra Pubco, Inc.).
• The filing follows the August 19, 2025, closing of the Sitio Acquisition, an all-equity transaction where Viper Energy, Inc. acquired Sitio Royalties Corp. and Old Viper (formerly Viper Energy, Inc.).
• In connection with the acquisition, Reporting Persons received 155,058,093 shares of Class B Common Stock and retained 155,058,093 OpCo Units, which are exchangeable for Class A Common Stock on a one-for-one basis.
• As of August 19, 2025, Diamondback Energy, Inc. beneficially owns 47.8% of Viper Energy's outstanding common stock, Diamondback E&P LLC owns 4.5%, and Endeavor Energy Resources, L.P. owns 29.1%.
• The total outstanding Class A Common Stock of Viper Energy, Inc. as of August 19, 2025, is 169,518,801 shares.
• Diamondback Energy, Inc. is the parent company of Viper Energy, Inc., and Diamondback E&P and Endeavor are wholly owned subsidiaries of Diamondback.

Sentiment

Score: 7

Explanation: The filing reflects a strategic consolidation by Diamondback Energy, increasing its control over Viper Energy. This is generally positive for Diamondback as it enhances operational and strategic alignment. For Viper Energy, it solidifies its relationship with a major parent, but also implies less independent decision-making. The all-equity nature of the acquisition and the clear governance structure are well-defined.

Positives

• Diamondback Energy, Inc. has solidified its significant ownership stake in Viper Energy, Inc., holding 47.8% of the outstanding common stock, indicating strong control and alignment of interests.
• The corporate governance structure grants Diamondback substantial influence, including the right to designate up to three directors and approve executive officer appointments, ensuring strategic alignment.
• The Registration Rights Agreement provides Diamondback with the ability to facilitate the resale of its Class A Common Stock, offering liquidity options for its substantial holdings.

Negatives

• The significant control by Diamondback Energy, Inc. (47.8% beneficial ownership, plus subsidiary holdings) could limit the independent decision-making capacity of Viper Energy's board and management, potentially disadvantaging minority shareholders.
• The requirement for Reporting Persons' approval or an 80% affirmative vote for executive officer appointments (other than seconded employees) could create operational hurdles or delays in management changes.

Risks

• Potential for conflicts of interest between Diamondback Energy, Inc. and Viper Energy, Inc. due to Diamondback's substantial ownership and governance rights.
• The 90-day restricted period on transfers by Reporting Persons under the Support Agreement, while temporary, could impact market liquidity or perception if not managed effectively.
• The complexity of the exchange mechanism for Class B Common Stock and OpCo Units into Class A Common Stock, as detailed in the Opco LLCA, could lead to administrative challenges or misunderstandings for some investors.

Future Outlook

Reporting Persons state their shares were acquired for investment purposes and they retain the right to change their investment intent, acquire additional shares, or sell existing holdings based on ongoing evaluations of the investment, market conditions, and other factors. They may also consider and formulate plans regarding matters described in Schedule 13D Item 4(a)-(j) and engage in discussions with management or the board.

Management Comments

• "All of the shares of Class A common stock... were acquired for investment purposes."
• "The Reporting Persons retain the right to change their investment intent, from time to time, to acquire additional shares... or to sell or otherwise dispose of all or part of the Class A Common Stock..."

Industry Context

This filing highlights the ongoing consolidation and strategic positioning within the Permian Basin oil and natural gas sector. Diamondback Energy, a major player in the Permian, is solidifying its control over Viper Energy, a mineral and royalty interest company, through an all-equity acquisition. This move suggests a strategy to integrate and optimize royalty assets within a larger E&P framework, a common trend among larger operators seeking to enhance capital efficiency and scale in core basins.

Comparison to Industry Standards

• Diamondback's beneficial ownership of 47.8% in Viper Energy, Inc. (with total control exceeding 80% through subsidiaries) is a substantial stake, indicating a strategic move towards consolidation rather than a passive investment. This level of control is comparable to situations where a parent company maintains a significant, but not 100%, ownership in a publicly traded subsidiary (e.g., ExxonMobil's historical stake in XTO Energy or other large E&P companies holding significant interests in their midstream or royalty spin-offs).
• The governance provisions, allowing Diamondback to designate directors and influence executive appointments, are standard for companies with such a dominant shareholder, ensuring alignment between the parent and subsidiary.
• The use of Class B Common Stock and OpCo Units exchangeable for Class A Common Stock is a common structure in master limited partnership (MLP) conversions or roll-ups, similar to structures seen in other royalty and mineral companies like Sitio Royalties (prior to this merger) or Black Stone Minerals.

Corporate Governance

Related Party Transactions

• Services and Secondment Agreement: Diamondback and Diamondback E&P provide personnel and general and administrative services to the Issuer.
• Exchange Agreement: Governs the exchange of Class B Common Stock and OpCo Units held by Reporting Persons for Class A Common Stock.
• Registration Rights Agreement: Grants Diamondback certain rights to register its shares for resale.
• Opco LLCA: Governs the operations of Opco, in which Diamondback and its subsidiaries are significant members.
• Support Agreement: An agreement between Reporting Persons, Old Viper, Sitio, and the Issuer regarding transfer restrictions post-merger.

Stakeholder Impact

• Shareholders (Viper Energy): Minority shareholders may experience reduced influence due to Diamondback's significant control and governance rights.
• Shareholders (Diamondback Energy): Increased control over Viper Energy's assets and operations, potentially leading to greater strategic alignment and value creation within the Diamondback portfolio.
• Employees (Viper Energy): Diamondback and Diamondback E&P provide personnel and G&A services, suggesting integration of operations and potential for shared resources.
• Management (Viper Energy): Executive officer appointments are subject to Diamondback's approval, indicating a more centralized control structure.

Next Steps

• The Issuer is obligated to file a shelf registration statement for the resale of Class A Common Stock issuable upon exchange of Diamondback's Class B Common Stock and OpCo Units, within 90 days of a demand notice from Diamondback.
• The Issuer must cause such shelf registration statement to be declared effective promptly and cause the securities to be listed on Nasdaq.
• The 90-day Restricted Period under the Support Agreement will expire, after which Reporting Persons may transfer or dispose of their holdings.

Key Dates

Recommendation

The filing details a significant increase in Diamondback Energy's beneficial ownership and control over Viper Energy following the Sitio Acquisition. This consolidation provides strategic alignment and operational efficiencies for Diamondback, which is a positive. However, for Viper Energy's minority shareholders, the increased control by a single entity could limit independent growth prospects and decision-making, potentially leading to a less dynamic investment profile. Given the strategic nature of the transaction and the established control, a "hold" recommendation is appropriate as the market digests the implications of this solidified relationship and the long-term strategic benefits or drawbacks unfold. The filing itself is a disclosure of a completed transaction and ownership structure, not a performance update, so a strong buy/sell signal is not directly warranted from this document alone.

Keywords

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