Viper Energy, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto presented in this report as well as our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors. See Part II. Item 1A. Risk Factors and Cautionary Statement Regarding Forward-Looking Statements.

Overview

We are a publicly traded Delaware corporation focused on owning and acquiring mineral and royalty interests in oil and natural gas properties primarily in the Permian Basin. We operate in one reportable segment.

Recent Developments

Pending Divestiture of Non-Permian Assets

On October 30, 2025, we entered into an equity interest purchase agreement to divest all its non-Permian assets, including those acquired from Sitio, for a purchase price of approximately $670 million, subject to customary purchase price adjustments. The properties to be divested consist of approximately 9,400 net royalty acres in the Denver-Julesburg, Eagle Ford and Williston basins with current production of approximately 4,750 BO/d. The Pending Non-Permian Divestiture is subject to customary closing conditions and is expected to close in the first quarter of 2026.

Acquisitions Update

Sitio Acquisition

On August 19, 2025, we completed the Sitio Acquisition in an all-equity transaction valued at approximately $4.0 billion, subject to further adjustments for transaction costs and certain customary post-closing adjustments, including the retirement of Sitio’s net debt of approximately $1.2 billion. The mineral and royalty interests acquired in the Sitio Acquisition represent approximately 25,300 net royalty acres in the Permian Basin and approximately 9,000 net royalty acres in the Denver-Julesburg, Eagle Ford and Williston basins, for total acreage of approximately 34,300 net royalty acres.

Other Acquisitions

During the nine months ended September 30, 2025, we acquired, in individually insignificant transactions from unrelated third-party sellers, mineral and royalty interests representing 270 net royalty acres in the Permian Basin for an aggregate purchase price of approximately $72 million, subject to customary post-closing adjustments.

At September 30, 2025, our footprint of mineral and royalty interests totaled approximately 95,846 net royalty acres, approximately 39% of which are operated by Diamondback.

See Note 4—Acquisitions and Divestitures of the notes to the condensed consolidated financial statements for additional information on these acquisitions.

Debt Transactions

Notes Offering and Redemption of Notes

On July 23, 2025, the Operating Company issued the Guaranteed Senior Notes for an aggregate principal amount of $1.6 billion. We used a portion of the net proceeds from the issuance of the Guaranteed Senior Notes to redeem or satisfy and discharge, as applicable, approximately $780 million in aggregate principal amount of our previously outstanding Notes, including accrued interest paid and redemption premiums. The 2027 Notes were subsequently redeemed in full on November 1, 2025. We used the remaining net proceeds (i) to retire Sitio’s 7.875% senior notes due 2028, (ii) to repay borrowings under Sitio’s revolving credit facility, (iii) to pay fees, costs and expenses related to the redemption or repayment of such debt, and (iv) for general corporate purposes.

Term Loan

In connection with the closing of the Sitio Acquisition, we entered into the $500 million Term Loan, which was fully drawn in a single borrowing to partially fund the retirement of Sitio’s debt.

See Note 6—Debt of the notes to the condensed consolidated financial statements for additional discussions of our debt.

2025 Equity Offering

On February 3, 2025, we completed an underwritten public offering of 28,336,000 shares of our Class A Common Stock, which included 3,696,000 shares issued pursuant to an option to purchase additional shares of Class A Common Stock granted to the underwriters, at a price to the public of $44.50 per share, for total net proceeds of approximately $1.2 billion, after the underwriters’ discount and transaction costs. We used the net proceeds from the 2025 Equity Offering to fund (i) the cash consideration for the Morita Ranches Acquisition, (ii) a portion of the cash consideration for the 2025 Drop Down, and (iii) for general corporate purposes.

Commodity Prices

Prices for oil, natural gas and natural gas liquids are determined primarily by prevailing market conditions. Regional and worldwide economic activity, changes in trade or other government policies or regulations, including with respect to tariffs or other trade barriers and any resulting trade tensions, extreme weather conditions and other substantially variable factors influence market conditions for these products. These factors are beyond our control and are difficult to predict. OPEC and its non-OPEC allies, known collectively as OPEC+, continue to meet regularly to evaluate the state of global oil supply, demand and inventory levels and can heavily influence volatility in oil prices. During the nine months ended September 30, 2025, and 2024, WTI prices averaged $66.65 and $77.61 per Bbl, respectively, and Henry Hub prices averaged $3.48 and $2.22 per MMBtu, respectively.

For additional information around risks related to commodity prices, see Part II. Item 3. Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk.

Guidance

The following table presents our current estimates of certain financial and operating results for the full year 2025, as well as production and cash tax guidance for the fourth quarter of 2025.

(1) Attributable to Viper.

Production and Operational Update

As of September 30, 2025, there are 104 gross rigs operating on our mineral and royalty acreage, nine of which are operated by Diamondback. During the third quarter of 2025, we continued to execute on our growth strategy, bolstered by the closing of the Sitio Acquisition and continued organic growth. Looking ahead to 2026, we anticipate mid-single digit organic oil production growth from the fourth quarter of 2025 estimated production on our Permian assets.

The following table summarizes our gross well information for the third quarter ended September 30, 2025:

(1) Includes the horizontal wells turned to production by Sitio from July 1, 2025 through August 18, 2025.

(2) Average lateral length of 10,947.

(3) The total 1,947 gross wells currently in the process of active development are those wells that have been spud and are expected to be turned to production within approximately the next six to eight months.

(4) The total 1,664 gross line-of-sight wells are those that are not currently in the process of active development, but for which we have reason to believe will be turned to production within approximately the next 15 to 18 months. The expected timing of these line-of-sight wells is based primarily on permitting by third-party operators or Diamondback’s current expected completion schedule. Existing permits or active development of our royalty acreage does not ensure that those wells will be turned to production given the volatility in oil prices.

Results of Operations

Comparison of the Three Months Ended September 30, 2025, and June 30, 2025

The following table summarizes our income and expenses for the periods indicated:

(In millions)

28

The following table summarizes our production data, average sales prices and average costs for the periods indicated:

(1) Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl.

(2) Realized price net of all deducts for gathering, transportation and processing.

(3) Hedged prices reflect the impact of cash settlements of our matured commodity derivative transactions on our average sales prices.

Significant changes in our revenues and expenses between the third quarter of 2025 and the second quarter of 2025 are discussed further below.

Royalty Income. Our royalty income is a function of oil, natural gas and natural gas liquids production volumes sold and average prices received for those volumes.

Royalty income increased by $106 million during the third quarter of 2025 compared to the second quarter of 2025 due to a 39% increase in production. The average realized price for our combined production did not change significantly between quarters due largely to the increase in our average realized oil price being offset by the decrease in our average realized natural gas liquids price for the third quarter of 2025 compared to the second quarter of 2025.

Of the overall 39% increase in production, approximately 58% is attributable to the Sitio Acquisition, 33% is attributable to recording a full quarter of production from the 2025 Drop Down, and 9% is attributable to adjustments recorded in the third quarter of 2025 to estimated volumes accrued in the second quarter of 2025. See Note 4—Acquisitions and Divestitures of the notes to the condensed consolidated financial statements for additional discussion of our acquisitions.

Production and Ad Valorem Taxes. The following table presents production and ad valorem taxes for the periods indicated:

In general, production taxes are directly related to production revenues and are based upon current year commodity prices, and ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Production taxes and ad valorem taxes as a percentage of royalty income for the third quarter of 2025 were relatively consistent with the second quarter of 2025.

Depletion. The increase in depletion expense of $58 million for the third quarter of 2025 compared to the second quarter of 2025 consisted primarily of (i) $48 million from growth in production volumes, and (ii) $10 million due to an increase in the depletion rate to $18.17 per BOE for the third quarter of 2025, resulting primarily from the addition of leasehold costs and reserves from the Sitio Acquisition compared to $17.19 per BOE for the second quarter of 2025.

Impairment. In the third quarter of 2025, we recorded a non-cash ceiling test impairment charge of $360 million due to the carrying value of our proved reserves exceeding their estimated future net cash flows utilizing the SEC’s methodology and pricing at September 30, 2025. The excess value resulted primarily from recording properties acquired in the 2025 Drop Down at Diamondback’s historical carrying value, which exceeded the value calculated in the ceiling test using the SEC Prices at September 30, 2025. No impairment expense was recorded for the second quarter of 2025.

Impairment charges affect our results of operations but do not reduce our cash flow. In addition to commodity prices, our production rates, levels of proved reserves, future development costs, transfers of unevaluated properties, income tax rate assumptions and other factors will determine our actual ceiling test calculation and impairment analysis in future periods. Given the overall decline in SEC Prices through the first three quarters of 2025 and into the fourth quarter of 2025, as compared to 2024, we believe an additional material non-cash impairment of our assets is reasonably likely to occur in the fourth quarter of 2025; however, based on the number of factors that may impact our future estimate of proved reserves, we are currently unable to determine an estimate of the amount or range of amounts of any potential impairment charge in the fourth quarter of 2025.

Transaction Expenses. The $15 million in transaction expenses recorded in the third quarter of 2025 primarily consisted of employee severance costs related to the Sitio Acquisition. The $10 million in transaction expenses recorded in the second quarter of 2025 are costs related to the 2025 Drop Down, which was accounted for as a common control transaction, including $5 million of deal advisory fees and other individually insignificant costs for accounting, legal and filing fees.

Interest Expense, Net. The increase in net interest expense of $17 million for the third quarter of 2025 compared to the second quarter of 2025 consisted primarily of (i) $16 million in additional expense incurred for our Guaranteed Senior Notes, which were issued July 23, 2025, (ii) $3 million in additional expense incurred on the Term Loan, (iii) $2 million in additional amortization of debt issuance costs related to costs incurred on the Guaranteed Senior Notes and the Term Loan, and (iv) other individually insignificant changes. These increases in net interest expense were partially offset by interest cost savings of $6 million due to the early termination of the Notes.

Derivative Instruments. The following table shows the net gain (loss) on derivative instruments and the net cash receipts (payments) on derivatives for the periods presented:

(In millions)

The $47 million change to a gain on derivative instruments, net in the third quarter of 2025 compared to a loss in the second quarter of 2025 consists of (i) a $38 million increase in the value of our open natural gas contracts due primarily to a $43 million increase in the value of our basis swaps from changes in the differential between prices for Waha Hub and Henry Hub, (ii) a $7 million decrease in the estimated fair value of our 2026 WTI Contingent Liability based on fluctuations in the projected WTI 2025 Average price, (iii) a $5 million increase in cash receipts on settled natural gas basis swaps, and (iv) a $3 million cash receipt on our treasury locks, which were terminated upon issuance of the Guaranteed Senior Notes. These increases were offset by a $5 million decrease in the value of our open oil contracts and other insignificant changes.

See Note 10—Derivatives of the notes to the condensed consolidated financial statements for additional discussion of our open contracts at September 30, 2025.

Gain (loss) on Early Extinguishment of Debt. The $32 million loss on early extinguishment of debt in the third quarter of 2025 is due to the retirement of the 2031 Notes. See Note 6—Debt of the notes to the condensed consolidated financial statements for additional discussion of our debt at September 30, 2025.

Provision for (Benefit from) Income Taxes. The $33 million change from income tax expense to benefit from income taxes for the third quarter of 2025 compared to the second quarter of 2025 primarily resulted from a net loss attributable to Viper driven by the $360 million non-cash impairment recorded in the third quarter of 2025. See Note 9—Income Taxes of the notes to the condensed consolidated financial statements for further discussion of income tax expense.

Net Income (Loss) Attributable to Non-controlling Interest. The $167 million decrease in net income attributable to non-controlling interest for the third quarter of 2025 compared to the second quarter of 2025 is primarily due to a net loss resulting from the $360 million non-cash impairment expense recorded in the third quarter of 2025 and changes in the non-controlling interest in the Operating Company resulting from the issuance of OpCo Units to fund the Sitio Acquisition in the third quarter of 2025.

Comparison of the Nine Months Ended September 30, 2025, and 2024

The following table summarizes our income and expenses for the periods indicated:

(In millions)

32

The following table summarizes our production data, average sales prices and average costs for the periods indicated:

(1) Bbl equivalents are calculated using a conversion rate of six Mcf per one Bbl.

(2) Realized price net of all deducts for gathering, transportation and processing.

(3) Hedged prices reflect the impact of cash settlements of our matured commodity derivative transactions on our average sales prices.

Significant changes in our revenues and expenses for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, are discussed further below.

Royalty Income. Our royalty income is a function of oil, natural gas and natural gas liquids production volumes sold and average prices received for those volumes.

Royalty income increased $295 million during the nine months ended September 30, 2025, compared to the same period in 2024. This net increase consisted of an additional $410 million in royalty income from the 71% growth in production, partially offset by a decrease of $115 million due primarily to lower average prices received for our oil production during 2025 compared to the same period in 2024.

Of the 71% growth in production, approximately 52% is attributable to the 2025 Drop Down, 17% is attributable to the Sitio Acquisition, 9% is attributable to the Tumbleweed Acquisitions, and 2% is attributable to the Morita Ranches Acquisition. The remainder of the growth is primarily from new wells added between periods. See Note 4—Acquisitions and Divestitures of the notes to the condensed consolidated financial statements for additional discussion of our acquisitions.

Production and Ad Valorem Taxes. The following table presents production and ad valorem taxes for the periods indicated:

In general, production taxes are directly related to production revenues and are based upon current year commodity prices. Ad valorem taxes are based, among other factors, on property values driven by prior year commodity prices. Production taxes and ad valorem taxes as a percentage of royalty income for the nine months ended September 30, 2025, were relatively consistent with the same period in 2024.

Depletion. The increase in depletion expense of $223 million for the nine months ended September 30, 2025, compared to the same period in 2024 consisted primarily of (i) $116 million due to an increase in the depletion rate to $16.66 per BOE for the nine months ended September 30, 2025, resulting primarily from the addition of leasehold costs and reserves from the TWR Acquisition, the Morita Ranches Acquisition, the 2025 Drop Down and the Sitio Acquisition compared to $11.47 per BOE for the same period in 2024, and (ii) $107 million from growth in production volumes.

Impairment. See discussion in “—Results of Operations—Comparison of the Three Months Ended September 30, 2025, and June 30, 2025” above.

Transaction expenses. The $25 million in transaction expenses recorded in the nine months ended September 30, 2025, are (i) $15 million in employee severance costs related to the Sitio Acquisition, and (ii) costs related to the 2025 Drop Down, which was accounted for as a common control transaction, including $5 million of deal advisory fees and other individually insignificant costs for accounting, legal and filing fees.

Interest Expense, Net. The increase in net interest expense of $6 million for the nine months ended September 30, 2025, compared to the same period in 2024 consisted primarily of (i) approximately $16 million in additional expense incurred for our Guaranteed Senior Notes, which were issued July 23, 2025, (ii) approximately $3 million in additional interest expense incurred on the Term Loan, and (iii) other individually insignificant changes. These increases in net interest expense were partially offset by (i) the receipt of approximately $7 million in additional interest income, and (ii) interest cost savings of approximately $7 million due to the early termination of the Notes.

Derivative Instruments. The following table shows the net gain (loss) on derivative instruments and the net cash receipts (payments) on derivatives for the periods presented:

(In millions)

The $16 million increase in the gain on derivative instruments, net for the nine months ended September 30, 2025, compared to the same period in 2024 consists primarily of (i) a $25 million increase in cash receipts on our settled natural gas basis swaps, (ii) a $3 million decrease in the estimated fair value of our 2026 WTI Contingent Liability based on fluctuations in the projected WTI 2025 Average price, (iii) a $3 million increase in the value of our open oil contracts, (iv) a $3 million cash receipt on our treasury locks, which were terminated upon issuance of the Guaranteed Senior Notes, and (v) other insignificant changes. These increases were primarily offset by a $15 million decrease in the value of our open natural gas contracts primarily due to changes in the differential between prices for Waha Hub and Henry Hub on our basis swaps and other insignificant changes.

See Note 10—Derivatives of the notes to the condensed consolidated financial statements for additional discussion of our open contracts at September 30, 2025.

Gain (loss) on Early Extinguishment of Debt. See discussion in “—Results of Operations—Comparison of the Three Months Ended September 30, 2025, and June 30, 2025” above.

Provision for (Benefit from) Income Taxes. The $41 million decrease in income tax expense for the nine months ended September 30, 2025, compared to the same period in 2024 primarily resulted from a decrease in pre-tax income attributable to Viper driven by the $360 million non-cash impairment recorded in the third quarter of 2025. See Note 9—Income Taxes of the notes to the condensed consolidated financial statements for further discussion of income tax expense.

Net Income (Loss) Attributable to Non-controlling Interest. The $177 million decrease in net income attributable to non-controlling interest for the nine months ended September 30, 2025, compared to the same period in 2024 is primarily due to a decrease in net income and changes in the non-controlling interest in the Operating Company resulting from (i) the Drop Down Equity Issuance, (ii) the issuance of OpCo Units to fund the Sitio Acquisition in the third quarter of 2025, (iii) the issuance of OpCo Units to the Morita Ranches Equity Recipients, and (iv) the issuance of OpCo Units to TWR IV in the fourth quarter of 2024, which were partially offset by a dilution of the non-controlling interest following the 2024 Equity Offering and the 2025 Equity Offering.

Liquidity and Capital Resources

Overview of Sources and Uses of Cash

As we pursue our business and financial strategy, we regularly consider which capital resources, including cash flow, equity and debt financings, are available to meet our future financial obligations and liquidity requirements. Our future ability to grow proved reserves will be highly dependent on the capital resources available to us. Our primary sources of liquidity have been cash flows from operations, equity and debt offerings, borrowings under the 2025 Revolving Credit Facility and proceeds from sales of non-core assets. Our primary uses of cash have been dividends to our stockholders, Operating Company distributions to the holders of OpCo Units, repayments of debt, capital expenditures for the acquisition of our mineral and royalty interests in oil and natural gas properties, including the recently completed Sitio Acquisition, the 2025 Drop Down and the Morita Ranches Acquisition and repurchases of our Class A Common Stock.

At September 30, 2025, we had approximately $1.4 billion of liquidity consisting of $53 million in cash and cash equivalents and $1.3 billion in available borrowings under the 2025 Revolving Credit Facility. At September 30, 2025, our $380 million 2027 Notes were recorded as a current liability in the condensed consolidated balance sheet and were subsequently redeemed on November 1, 2025, with funds held in restricted cash as discussed in Note 6—Debt of the notes to the condensed consolidated financial statements. See “—Capital Resources” below for additional discussions of changes in our sources of cash.

Our working capital requirements are supported by our cash and cash equivalents and the 2025 Revolving Credit Facility. We may draw on the 2025 Revolving Credit Facility to meet short-term cash requirements, or issue debt or equity securities as part of our longer-term liquidity and capital management program. Because of the alternatives available to us as discussed above, we believe our short-term and long-term liquidity are adequate to fund not only our current operations, but also our near-term and long-term funding requirements including future acquisitions of mineral and royalty interests, dividends, debt service obligations, repayment of debt maturities, any repurchases of our Class A Common Stock, Notes or Guaranteed Senior Notes and any amounts that may ultimately be paid in connection with contingencies.

In order to mitigate volatility in oil and natural gas prices, we have entered into commodity derivative contracts as discussed further in Part II. Item 3. Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Risk.

Continued prolonged volatility in the capital, financial and/or credit markets due to changing or adverse macroeconomic conditions, including tariffs, higher interest rates, global supply chain disruptions and actions taken by OPEC members and other exporting nations, conflicts in the Middle East and globally may limit our access to, or increase our cost of, capital or make capital unavailable on terms acceptable to us or at all. Although we expect that our sources of funding will be adequate to fund our short-term and long-term liquidity requirements, we cannot assure you that the needed capital will be available on acceptable terms or at all.

Cash Flows

The following table presents our cash flows for the periods indicated:

(In millions)

Operating Activities

Our operating cash flow is sensitive to many variables, the most significant of which are the volatility of prices for oil and natural gas and the volumes of oil and natural gas sold by our producers. The increase in net cash provided by operating activities during the nine months ended September 30, 2025, compared to the same period in 2024 was primarily driven by an increase in royalty and lease bonus income and receiving cash payments on our derivatives in 2025 compared to making cash payments to counterparties in 2024. These increases in cash flow were partially offset by an increase in certain cash costs for transaction expenses and production taxes and other changes in our working capital accounts including the timing of when accounts receivable are collected. See “—Results of Operations” for discussion of significant changes in our revenues and expenses.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2025, was primarily related to acquisitions of oil and natural gas interests, including the approximately $1.2 billion repayment made for Sitio’s outstanding debt as part of the consideration for the Sitio Acquisition, the 2025 Drop Down, the Morita Ranches Acquisition and from other third parties. See Note 4—Acquisitions and Divestitures of the notes to the condensed consolidated financial statements for additional information on these acquisitions.

Net cash used in investing activities during the nine months ended September 30, 2024, was primarily related to the Q Acquisition, the M Acquisition and acquisitions of oil and natural gas interests from third parties, partially offset by proceeds from the divestiture of our non-Permian assets.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2025, was primarily attributable to (i) net proceeds from the issuance of the Guaranteed Senior Notes of $1.6 billion, (ii) proceeds of $1.2 billion from the 2025 Equity Offering, and (iii) net proceeds from the Term Loan of $500 million. These cash inflows were partially offset by (i) net repayments of $101 million on the 2025 Revolving Credit Facility, (ii) a payment of $427 million for the retirement of the outstanding 2031 Notes principal and redemption premium and $50 million paid for the redemption of a portion of principal outstanding on the 2027 prior to their satisfaction and discharge, (iii) $512 million of dividends paid to holders of the OpCo Units and our Class A Common Stock, and (iv) $100 million of repurchases as part of the share repurchase programs.

Net cash used in financing activities during the nine months ended September 30, 2024, was primarily attributable to $349 million of dividends paid to holders of the OpCo Units and our Class A Common Stock and net repayments of $263 million on the Operating Company’s previous revolving credit facility, offset by proceeds of $476 million from the 2024 Equity Offering.

Capital Resources

The 2025 Revolving Credit Facility and Other Debt Instruments

At September 30, 2025, the Operating Company’s credit facility, which matures on June 12, 2030, had a commitment amount of $1.5 billion, with $160 million in outstanding borrowings and $1.3 billion of availability. Additionally, at September 30, 2025, we had $500 million in outstanding borrowings under the Term Loan.

See Note 6—Debt of the notes to the condensed consolidated financial statements for additional discussions of our debt.

Debt Ratings

We receive debt ratings from the major ratings agencies in the U.S., which impact the interest rates we receive on our variable rate debt and interest rate swaps. In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels, cost structure, planned asset sales and production growth opportunities. In May 2025, Fitch Investor Services upgraded our credit rating to investment grade, the second such investment grade credit rating for us. This upgrade granted us access to a broader investor base, lower interest rates and reduced collateral requirements; therefore, enhancing our liquidity. Currently, our credit ratings from the three main credit rating agencies are as follows:

• Standard and Poor’s Global Ratings Services (BBB-);
• Fitch Investor Services (BBB-); and
• Moody’s Investor Services (Ba1).

Any rating downgrades may result in additional letters of credit or cash collateral being posted under certain contractual arrangements.

Capital Requirements

Repurchases of Securities

Under our current common stock repurchase program, the board of directors has authorized us to acquire up to $750 million of our Class A Common Stock, excluding excise tax. Since the inception of our common stock repurchase program, we have repurchased an aggregate of 16,918,291 shares of our Class A Common Stock for a total cost of $448 million, excluding excise tax, as of October 31, 2025, leaving approximately $302 million for future repurchases under such stock repurchase program, excluding excise tax. See Note 7—Stockholders’ Equity of the notes to the condensed consolidated financial statements for further discussion of our stock repurchase program.

Retirement of Notes

On July 23, 2025, we redeemed all of our 2031 Notes and subsequently redeemed our 2027 Notes on November 1, 2025, for an aggregate cash purchase price of approximately $780 million. On August 19, 2025, we used the remaining proceeds from the issuance of the Guaranteed Senior Notes and borrowings under the Term Loan to retire approximately $1.2 billion of Sitio’s outstanding debt.

During the second quarter of 2025, we opportunistically repurchased principal amounts of $50 million of our 2027 Notes in open market transactions for total cash consideration of $50 million, at an average of 99.7% of par value. We may continue from time to time to opportunistically repurchase some of the outstanding Notes in open market purchases or in privately negotiated transactions.

Interest on the Guaranteed Senior Notes

In 2025 we do not expect to incur any cash interest costs on the Guaranteed Senior Notes. We expect to incur future cash interest costs on the Guaranteed Senior Notes of approximately $174 million cumulatively in the years from 2026 through 2027, $174 million cumulatively in the years from 2028 through 2029 and $402 million between 2030 and 2035.

See Note 6—Debt of the notes to the condensed consolidated financial statements for additional discussions of our debt.

Third Quarter 2025 Cash Dividends and Return of Capital Update

The Operating Company will pay a cash distribution for the third quarter of 2025 in accordance with its distribution policy of $0.66 per OpCo Unit on November 20, 2025, to eligible holders of record at the close of business on November 13, 2025.

Because of our high operating and free cash flow margin, strong balance sheet, and the announced Pending Non-Permian Divestiture, we felt it appropriate to lean into our return of capital commitment and return 85% of cash available for distribution in the third quarter of 2025 to stockholders. We will pay a cash dividend for the third quarter of 2025 of $0.58 per share of Class A Common Stock on November 20, 2025, to eligible holders of record at the close of business on November 13, 2025. The dividend to stockholders consists of a base quarterly dividend of $0.33 per share of Class A Common Stock and a variable quarterly dividend of $0.25 per share of Class A Common Stock. Future base and variable dividends are at the discretion of the board of directors.

As we move to close the Pending Non-Permian Divestiture, and as a result move closer to our net debt target of $1.5 billion, we will have line of sight to return nearly 100% of cash available for distribution to stockholders. We expect to continue to allocate the majority of our cash available for distribution to our base plus variable dividend but feel compelled to repurchase of shares of our Class A Common Stock in today’s market given the current market dislocation. See Note 7—Stockholders’ Equity of the notes to the condensed consolidated financial statements for further discussion of the repurchase program and dividends.

Supplemental Guarantor Disclosure

On July 9, 2025, we and the Operating Company filed a registration statement on Form S-3 with the SEC registering debt securities of the Operating Company. On July 23, 2025, the Operating Company issued the Guaranteed Senior Notes for an aggregate principal amount of $1.6 billion, which are fully and unconditionally guaranteed by us.

In accordance with Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the disclosures specified in Rule 13-01 are provided, which include narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Company have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for the Operating Company because the assets, liabilities and results of operations of the Operating Company are not materially different than the corresponding amounts in our consolidated financial statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

Critical Accounting Estimates

There have been no changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

See Note 2—Summary of Significant Accounting Policies of the notes to the condensed consolidated financial statements for recent accounting pronouncements not yet adopted, if any.

We are exposed to market risk, including the effects of adverse changes in commodity prices and interest rates as described below. The primary objective of the following information is to provide quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in oil and natural gas prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses.

Commodity Price Risk

Our major market risk exposure is in the pricing applicable to the oil and natural gas production of our operators. Realized prices are driven primarily by the prevailing worldwide price for crude oil and prices for natural gas in the United States. Both crude oil and natural gas realized prices are also impacted by the quality of the product, supply and demand balances in local physical markets and the availability of transportation to demand centers. Pricing for oil and natural gas production has been historically volatile and unpredictable and the prices that our operators receive for production depend on many factors outside of our or their control, as discussed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Overview of Sources and Uses of Cash. We cannot predict events that may lead to future price volatility and the near term energy outlook remains subject to heightened levels of uncertainty.

We historically have used fixed price swap contracts, fixed price basis swap contracts and costless collars with corresponding put and call options to reduce price volatility associated with certain of our royalty income as discussed in Note 10—Derivatives of the notes to the condensed consolidated financial statements.

At September 30, 2025, we had a net asset derivative position of $11 million related to our commodity price derivatives. Utilizing actual derivative contractual volumes under our contracts as of September 30, 2025, both a 10% increase and a 10% decrease in forward curves associated with the underlying commodity would have increased the net asset position by $3 million to approximately $14 million, respectively. However, any cash derivative gain or loss may be substantially offset by a decrease or increase, respectively, in the actual sales value of production covered by the derivative instrument.

Credit Risk

We are subject to risk resulting from the concentration of royalty income in producing oil and natural gas interests and receivables with a limited number of significant purchasers and producers. We do not require collateral and the failure or inability of our significant purchasers to meet their obligations to us due to their liquidity issues, bankruptcy, insolvency or liquidation may adversely affect our financial results. Volatility in the commodity pricing environment and macroeconomic conditions may enhance our purchaser credit risk.

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates on our indebtedness under the 2025 Revolving Credit Facility. The terms of the credit facility provide for interest on borrowings at a floating rate equal to term SOFR, or an alternate base rate (which is equal to the greatest of the prime rate, the federal funds effective rate plus 0.50% and 1-month term SOFR plus 1.0%, subject to a 1.0% floor), in each case plus the applicable margin. The applicable margin ranges from 0.125% to 1.000% per annum in the case of the alternate base rate loans and from 1.125% to 2.000% per annum in the case of term SOFR loans, in each case based on the pricing level. Further, the commitment fee ranges from 0.125% to 0.325% per annum on the average daily unused portion of the commitment, based on the pricing level. The pricing level depends on the rating of our long-term senior unsecured debt by certain ratings agencies.

Borrowings under the Term Loan bear interest at a per annum rate elected by the Operating Company that is equal to SOFR or an alternate base rate (which is equal to the greatest of the prime rate, the federal funds effective rate plus 0.50% and 1-month term SOFR plus 1.0%, subject to a 1.0% floor), in each case plus the applicable margin. The applicable margin ranges from 0.250% to 1.125% per annum in the case of the alternate base rate loans and from 1.250% to 2.125% per annum in the case of term SOFR loans, in each case based on the pricing level. The pricing level depends on the rating of the Company’s long-term senior unsecured debt by certain ratings agencies. In addition, the fee on undrawn commitments is equal to 0.20% per annum on the aggregate principal amount of such commitments.

Evaluation of Disclosure Controls and Procedures. Under the direction of our Chief Executive Officer and Chief Financial Officer, we have established disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

As of September 30, 2025, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under our Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2025, our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting. Management’s assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of the entities acquired in the Sitio Acquisition on August 19, 2025. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. The Company is in the process of integrating Sitio’s and our internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Except as noted above, there were no changes in our internal control over financial reporting that occurred during the third quarter of 2025 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

Our business faces many risks. Any of the risks discussed in this report and our other SEC filings could have a material impact on our business, financial position or results of operations. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also materially impair our business operations, financial condition or future results.

As of the date of this filing, we continue to be subject to the risk factors previously disclosed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 26, 2025. There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K for the year ended December 31, 2024.