Viper Energy is acquiring Sitio Royalties for $4.1 billion in stock. (Source: Shutterstock.com)
Viper Energy is growing its minerals and royalties empire in the Permian and beyond with the acquisition of Sitio Royalties.
Viper will acquire Sitio for $4.1 billion in stock, including the assumption of $1.1 billion of Sitio’s net debt, the companies announced June 3.
Sitio Class A common shareholders will receive 0.4855 shares of Class A common stock of a new holding company as consideration. Sitio operating-unit holders will receive 0.4855 units of Viper Energy Partners LLC with corresponding Class B stock for Sitio Class C shares.
Based on Viper’s June 2 closing price, the deal values Sitio at $19.41 per share.
The deal is expected to close in the third quarter and has been unanimously approved by both boards. Diamondback Energy, Viper’s largest shareholder, has approved the deal by written consent.
Shareholders owning 48% of Sitio’s outstanding voting power have agreed to the deal, including Kimmeridge, Sitio’s largest stockholder. Diamondback is expected to own around 41% of Viper’s outstanding shares after the deal.
“The combination of Viper and Sitio signifies an important moment for mineral and royalty interests,” said Kaes Van’t Hof, CEO of Viper Energy and Diamondback Energy. “This combination creates a leader in size, scale, float, liquidity and access to investment grade capital in the highly fragmented minerals industry.”
The deal creates a powerhouse in the Permian Basin, where the company will own approximately 85,700 net royalty acres after combining.
Sitio’s portfolio includes 25,300 net Permian acres and an additional 9,000 net royalty acres in the Denver-Julesburg (D-J), Eagle Ford and Williston plays.
The transaction lowers the company’s pro forma breakeven by $2/bbl to less than $20/bbl WTI. Viper expects to save over $50 million in synergy costs, primarily G&A and reduced cost of capital.
Sitio’s first-quarter production averaged 18,900 bbl/d (42,100 boe/d), with 14,500 bbl/d (31,900 boe/d) coming from the Permian.
“We are excited to announce the combination of two leading minerals companies with a shared strategic vision of integrating the highest quality assets to create a truly differentiated investment opportunity for shareholders,” said Chris Conoscenti, CEO of Sitio Royalties.
Earlier this year, Viper closed a $4.45 billion acquisition of Permian mineral interests from Diamondback, the largest minerals and royalties-focused transaction ever signed.
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Moelis & Co. LLC is serving as financial adviser to Viper and Wachtell, Lipton, Rosen & Katz is serving as its legal adviser. J.P. Morgan Securities LLC is serving as exclusive financial adviser to Sitio and Vinson & Elkins LLP is serving as its legal adviser.
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