In a drop-down transaction valued at $4.45 billion, Viper Energy has agreed to acquire mineral and royalty interests from its Midland-based parent, Diamondback Energy Inc., for units of Viper’s operating subsidiary and $1 billion in cash.
Viper says it plans to fund the transaction with cash on hand, borrowings from its existing credit facility and proceeds from one or more capital market transactions.
Tom Stice, chairman and CEO of Diamondback, said the transaction was related to the company’s acquisition last year of Endeavor Energy Resources for $26 billion.
“This drop own transaction with Viper is a major milestone in the continued synergy capture and execution of corporate development objectives related to the Endeavor transaction,” Stice said.
“Additionally, the drop down will accelerate debt reduction and increase Diamondback’s exposure to Viper’s differentiated growth profile and market-leading minerals position.”
Kirkland & Ellis is advising Diamondback; Hunton AK is counsel to Viper’s audit committee.
RBC Capital Markets is serving as Diamondback’s financial advisor. Evercore is advising the audit committee at Viper.
Matt Zmigrosky is Diamondback’s chief legal officer and is based in Midland.
The Kirkland team was led by Houston partners Sean Wheeler, Debbie Yee and Camille Meissner; real asset transactions lawyers Chris Heasley, Jarrod Gamble, Rizwan Popatia and Tom Harrigan; tax lawyers David Wheat and Joe Tobias; and capital markets lawyer Michael Rigdon.
The Hunton AK team was also led from Houston by Mike O’Leary and O&G partner Carl von Merz and included Cheryl Phillips, Sami Kahn, Allison Mantor, Lexi Williams and Field Daniel.
In addition to the $1 billion cash payment, Diamondback will gain 69.6 million tax-advantaged units of Viper’s operating subsidiary. The OpCo units, to be issued together with equal shares of Class B common shares of Viper, will be exchangeable for Class A common shares of Viper. The $44.95 per share pricing is based on the volume-weighted 30-day price of Viper’s common stock for the period ending Jan. 24.