Q1 2023 Viper Energy Partners LP Earnings Call
Speaker 1: You
Speaker 2: Phone.
Speaker 3: Good day and thank you for standing by. Welcome to the Viper Energy Partners first quarter of 2023 earnings conference call. At this time, all participants are now listen only mode. After the speakers presentation, there will be a question and answer session to ask a question during that session. You'll need to press.
Speaker 3: To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded and I would now like to hand the conference over to your speaker today, Mr. Adam Wallace, Vice President of Investor Relations. Sir, please go ahead.
Speaker 4: Thank you, Chris. Good morning and welcome to Viper Energy Partners first quarter 2023 conference call. During our call today, we will reference an updated investor presentation, which can be found on Vipers website. Representing Viper today are Travis Stice, CEO , Kate Van Tom's president, and Austin Gilfillan, general manager.
Speaker 4: During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, and future performance in businesses.
Speaker 4: We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors.
Speaker 4: Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures.
Speaker 4: earnings released issued yesterday afternoon. I'm now sending the call over to Travis Fies. Thank you, Adam. Welcome, everyone, and thank you for listening to Viper Energy Partners' first quarter 2023 conference call.
Speaker 4: The first quarter was a strong start for the year as Viper oil production set a company record for a fourth consecutive quarter.
Speaker 4: The advantaged nature of this royalty business model was highlighted during the quarter as we maintained our strong free cash flow conversion despite the volatility in commodity prices.
Speaker 4: Further, on that point, wipers, low operating costs, and zero capital requirements allow us to convert over 80% of our operating cash flow into free cash flow during the quarter.
Speaker 4: This metric compares favorably to many operators at around a 40% free cash flow conversion and insulates Vypr's free cash flow profile and return of capital during times of commodity price volatility.
Speaker 4: Additionally, BIPER announced it completed a drop-down transaction of certain royalty interests from Diamondback on operated properties located in Ward County. This transaction was a $75 million acquisition of an overriding royalty interest representing 660 net royalty acres that will provide high MRI exposure to Diamondback's expected development plan in the southern Delaware basin.
Speaker 4: Production on the acquired asset was roughly 300 barrels of oil per day during the first quarter.
Speaker 4: and is expected to increase through the remainder of the year to average over 500 barrels of wool per day for the full year 2023.
Speaker 4: Looking ahead, we have initiated average production guidance for Q2 and Q3 2023.
Speaker 4: That implies over 8% growth relative to the first quarter.
Speaker 4: importantly, on an organic basis.
Speaker 4: So excluding the impact of the drop-down acquisition
Speaker 4: Production is growing at over 5% this period, primarily as a result of large down-and-back operated pads with high VIPER NRIs being turned to production. On the capital return front, VIPER took advantage of the volatility experienced during the quarter of the year.
Speaker 4: aggregate of roughly $250 million, reflecting an average price of under $23 per unit.
Speaker 4: In addition to these unit repurchases,
Speaker 4: return of capital program during the quarter.
Speaker 4: is going to also deliver a distribution that represents a roughly 5% annualized yield at today's price.
Speaker 4: In conclusion, the first quarter was an outstanding quarter for Viper and the forward outlook continues to improve as our high quality asset base continues to attract outsized activity levels.
Speaker 4: Viper remains differentially positioned to grow production without having to spend a single dollar of capital and with only limited operating costs. And as a result, we look forward to continuing to efficiently return substantial amounts of capital back to our unitovers.
Speaker 4: Operator, please open the line for questions.
Speaker 3: Thank you.
Speaker 3: As a reminder, to ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by as we compile the Q&A roster.
Speaker 3: As a reminder, to ask a question, please press star 1 1 on your phone and wait for your name to be announced. With all your questions, please press star 1 1 again. Please stand by as we compile the Q and a roster. 1 moment please for our 1st question.
Speaker 3: Our first question will come from Neil Dingman of Truist Securities. Your line is open. Morning, gentlemen. Thanks for the time. My first question is on future activities specifically. Can you remind me maybe just in really broad terms how much of your acreage has what I would call maybe more relatively virgin units where we can see continued large pads boosting the already record volumes?
Speaker 3: versus a lot of the other acreage out there I know is more on what I would call developed assets where we're seeing more child type wells. Yeah, good question Neil. I mean, I would say
Speaker 4: almost all of the Diamondback operated position that we bought from Swallowtail is still, the vast majority of it is still completely undeveloped. We haven't even brought on our first pad yet in the Robertson Ranch area where we own essentially half the minerals at Viper. Thanks for watching and have a great day.
Speaker 4: I think what's fundamentally misunderstood on Vyper's growth profile is that this growth profile is not going to be a flash in the pan over the next couple of quarters. I think this business...
Speaker 4: can grow significantly over the next few years, even with the EMP business growing slower or in some cases in maintenance mode. So that's the benefit of this mineral business. There's a lot of growth to be had because when we allocate capital on the drilling side of gonna back Ellen May mugging with withered
Speaker 4: We take into account the 58% ownership of Vyper into those economics.
Speaker 3: Great point. Okay. And then second question just on capital allocation of the shareholder return. Just wondering while I know an alien asked earlier, I know it saying the allocation decision. Is largely driven by how you view your share price versus assume value based on mid cycle prices. And I'm just wondering, do you think about that the same way the diaper and obviously with oil down today now approaching 70.
Speaker 4: Is there any change to your thinking? Yeah, let me say a couple things about mineral valuations because this is important in why we changed our capital allocation philosophy at Biper to not just distribute every dollar we make. We wanted to retain some flexibility between a buyback of units and
Speaker 4: and variable dividends. Now we have a higher base dividend by birth, so that was put in place.
Speaker 4: for a reason, but I think generally the public markets are fundamentally mispricing mineral interests relative to upstream assets. Therefore, we've allocated a lot more capital to own more of the mineral business. And if the market continues to misprice mineral values and not understand the benefit of a mineral versus an upstream asset, we'll just simply own more and more of this business like we did in Q1. So that, we do look at our NAV at Viper. They're significantly undervalued relative to our NAV at a mid-cycle deck. And mid-cycle at Viper is $60 a barrel, just like it is at Diamondback.
Speaker 4: And the other validation we have in the mineral market, while I'm not going to hang our hat on 100% of this, but we are getting blown out in the private market, absolutely blown out on deals in the private market. We're losing deals by 50%, 60%, 70%. And these deals, Neil, are of much lower quality than the acreage position that Viper has today. So while that's an anecdote, and we don't base our business on, you should be cautious about it. Stay tuned.
Speaker 4: where third-party deals are trading. If third-party deals are gonna continue trading at 50 to 70% above where we're trading, we're gonna buy back a lot of units.
Speaker 3: Yeah, I agree with you. Glad to see you all leaning into the Unity Purchase.
Speaker 3: I'm glad to see you all leaning into the unit repurchase. Thank you.
Speaker 5: Thank you.
Speaker 5: One moment please for our next question. Our next question will come from Paul Diamond of Citi. Your line is open.
Speaker 6: Hi, good morning guys. Thanks for taking my call. Just a quick one for you talking about, how's it going? Just a quick one for you talking about, you just noted that some of the private deals are going for 50, 60, 70% above.
Speaker 4: Because right now in the middle market deals, the numbers being paid are astronomical. Okay, no, understood. It makes perfect sense. And yeah, I'll leave it there. Thanks for your time. Thanks, Paul. Thank you. One moment, please, for our next question. Again, one moment, please.
Speaker 5: Our next question will come from Derek Whitman of STIFL. Your line is open. Your line is open.
Speaker 3: With regard to the drop down and I'm thinking about some of your comments on the mispricing of mineral assets, this drop down was extremely impactful from the perspective of line of sight activity that elevated NRIs. As this was sourced from a ward acquisition at Diamondback over a year ago, I wanted to ask if there are other potential carve outs from the Firebird or Lario acquisitions that could make sense in the future. Is there an impact on the There are none today that came with the Lario or Firebird packages. Now, this is just as basic as we do now.
Speaker 4: when we do get a new playground to buy minerals in, that does allow some opportunities to try to buy minerals in those new areas. But no drop-down opportunities. To comment on the drop-down specifically, this deal, we have the benefit of figuring out the right timing of when to drop something down between the two companies.
Speaker 4: And this deal wouldn't have made sense to do a year ago, but now that development's happening and there's that forward visibility, it made a lot of sense to be able to get that done ahead of the first large pads coming on in March.
Speaker 4: Austin, you want to add anything to that? No, that's right. I mean, we got it done right around the ramp up in production and then still quite a bit of visibility to some high interest pads over the next couple of years. So it made a lot of sense for Viper and I think Diamondback to do a deal on here this fast quarter. Ok,
Speaker 3: With my follow-up, I wanted to focus on a bigger picture question for Permian activity, which I think placed your benefit relative to your peers. That question is, if we were to assume strip pricing, do you think we've seen peak activity in the Permian for at least the immediate term, given that privates generally have less quality inventory depth and are likely to have less activity?
Speaker 3: likely more exposed to weaker gas pricing. Again, the benefit part would just be what percent operating you guys carry today and the visibility you have with that.
Speaker 4: Yeah, I think that's a good, a fair statement. I think we've probably seen peak.
Speaker 4: activity in the Permian. Now, you know, we did make a lot of comments on service cost reductions on the Diamondback side. I would say part of that is attributable to other basins equipment opening up, but we've kind of said that this is the year where publics kind of stay flat and Diamondback and Viper benefit from that.
Speaker 4: Activity-wise, majors increase and we don't own a lot of minerals under majors. And privates in general are slowing down to either preserve inventory or sell their company. So this does put us at an advantage with the Diamondback piece, particularly with us allocating so much.
Speaker 4: Upstream capital to areas where we have mineral interests, particularly, you know, central Martin County.
Speaker 3: Thanks, that's all for me. Thank you, Derek.
Speaker 3: Thanks, that's all for me. Thank you, Derek. Thank you.
Speaker 5: One moment, please, for our next question. Our next question will come from Leo Mariani of ROC-MKM. Your line is open.
Speaker 7: Hey, I was hoping you'd provide a little bit more color around this kind of additional $41 million of acquisitions that you guys did, you know, kind of apart from the $75 million dropdown. Was that just kind of a bunch of, you know, little stuff? You know, the aggregate obviously you commented that it's...
Speaker 7: Kind of hard to get deals these days given the you know the overpricing in the markets Maybe just some color around their recent 41 million of activity Yeah, that was mainly a result of what we call kind of call our ground game acquisitions So we're constantly out there. You know talking to smaller mineral owners We've seen a lot of competition on more than marketing deals like case mentioned on the middle market size
Speaker 7: but on the smaller deals, kind of the nuts and bolts, picking up little pieces here and there. We've had a couple more deals shake free here, so we've been focused on areas where we like to rock, whether it's Diamond-Bexby operator or it's an active operator in the area. These deals are mainly pioneering Exxon in Martin County.
Speaker 7: Still rock that we feel really good about and have a lot of confidence in what that Ford outlook looks like, but certainly differentiated subset of deals than the marketing deals where we've seen so much competition.
Speaker 7: All right, that's helpful. And then obviously in your prepared comments you talked about how you guys are comfortable sort of de-emphasizing the variable dividend for the foreseeable future it sounds like and doing kind of more buyback just based on where you see the disconnect sort of on the value here. I guess just curious if you guys kind of look at this.
Speaker 7: Do you guys kind of take into consideration kind of relative yield of your securities say versus alternatives in the market? I know a lot of people look at either the 10 year treasury yield or even the two year these days with the inversion. Do you guys kind of pay any sort of attention to kind of where you're trading kind of relative to that on a yield basis when you make these decisions?
Speaker 4: I would say it impacts us on a yield basis, certainly from a cost of capital perspective. We do a lot of work on looking at where rates are and where our debt is and what our cost of our debt is, cost of equity. At the end of the day, the value of the equity is the present value in the future cash flows of the business and we think that is fundamentally.
Speaker 4: undervalued for security that is, as we said, the highest form of security in the oil field, right? Mineral interests, if an operator loses a lease for whatever reason, they have to release from the mineral owner. If other zones become economic, like some of the deeper zones in the Midland Basin are being discussed today, operators have to come to someone like Viper to take control or, by the way,
Speaker 4: pay a bonus and release those mineral interests. So I would say it's part of the calculus. It doesn't drive the final decision. Really the final decision is net present value based at a reasonable discount rate.
Speaker 4: and release those mineral interests. So I would say it's part of the calculus. It doesn't drive the final decision. Really the final decision is net present value based at a reasonable discount rate. All right, thank you.
Speaker 5: Thank you, Leo. Thank you. And one more, please, for our next question. Our next question will come from Tim Redson of KeyBank Capital Markets. Your line is open.
Speaker 8: Good morning and thank you for taking my question. My first question, just following up on a prior one on the acquisitions.
Speaker 8: You've been, you know, absent from a lot of the larger acquisitions that have happened. You seem to have in a $41 million deal got some third party minerals. How actively do you look at third party kind of minerals? Because it seems like you, um,
Speaker 8: You're sort of posturing that you were really focused on just dying it back Is it is it just if the price is right you'll do it But as we think about kind of your willingness to go third party You're right, your right, it's tough to any event that you're looking at, but it's a very forward language that you are aiding your power over.
Speaker 4: Good question. We've kind of shied away from significant amount of third-party acquisitions. You know, I think we're certainly still looking at them today. They're just harder to get across the finish line because we don't have what I would say differential knowledge as to the development pace of those positions. And so, you know, you've seen a few deals trade.
Speaker 4: where, you know, there are concentrated positions that you could probably, you know, underwrite some sort of pace of development, but we still just kind of got blown out in terms of value. So I think, you know, it's good discipline to not have your name on every trade, but we still think we have, you know, the differential knowledge on the operated side. Okay, thanks for that.
Speaker 8: And then if I could circle back to the.
Speaker 8: cash return framework. In the DynaVac call this morning case, I think he said, when the stock is down, the variable dividend doesn't matter.
Speaker 8: And that seems to be what you've indicated with your capital allocation in the first quarter. And I believe there is different opinions in the marketplace about the role of a minerals company and the role of yield to investors. So you've also talked about the discount to NAV, which is –
Speaker 8: is probably apparent in any public equity across the energy landscape. So how do you think about the competitiveness of the Vypr equity when you have a distribution now that's half of public peers? And what is the role of holistically the role of Vypr to investors that are looking for yields?
Speaker 4: Yeah, I mean, I think the role of Vypr is to create value. And the best value we can create right now at these prices is to spend more money buying back units. I think the public markets don't see what's going on in the private markets. And the public markets maybe misunderstand what the value of a mineral is relative to the upstream. I mean, I think what's happened over the last couple of years is that we've been seeing
Speaker 4: to distribute more cash at Viper and repurchase more shares at Diamondback, but when there are extreme dislocations like we've seen over the last six months or so in pockets, we'll lean into the buyback. And Tim, at the end of the day, we think creating value over creating a story makes more sense.
Speaker 8: Okay, I appreciate that. I just, yeah, I think I just have a different view on that, you know, from our conversations with shareholders that, you know, might prefer that yield. So, but I appreciate your insights on that. Thank you. Yeah, listen, those are discussions we're happy to have. At the end of the day, we're also the largest shareholder, right? At 58%. We all agree, too, that you guys should be being listed in the
Speaker 4: are taking money away from ourselves by not distributing it and buying back open interest in the market. But we still think that is the best long-term value ever for both us, Diamondback, and the public shareholders that remain.
Speaker 4: ourselves by not distributing it and buying back open interest in the market. But we think that is the best long-term value ever for both us, Diamondback, and the public shareholders that remain. OK.
Speaker 9: Thank you. Thank you.
Speaker 5: Thank you.
Speaker 5: And I'm seeing no further questions in the queue. I would now like to turn the call.
Speaker 5: I'll turn the conference back over to the CEO , Travis Deiss, for closing remarks.
Speaker 4: Thanks again for everyone participating in today's call. If you got any questions, don't hesitate to reach out using the numbers we provided. Thank you again. Have a great day.
Speaker 5: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a wonderful day.
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After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you'll need to press star 1 1 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Please be advised that today's conference is being recorded and I would now like to hand the conference over to your speaker today Mr. Adam Wallace, Vice President of Investor Relations. Sir, please go ahead.
Thank you, Chris. Good morning and welcome to Viper Energy Partners' first quarter 2023 conference call.
During our call today, we will reference an updated investor presentation which can be found on Bikers website.
Representing Biker today are Travis Stye, CEO , Kate Svantos, President, and Austin Gilfillan, General Manager.
During this conference call, the participants may make certain forward-looking statements relating to the company's financial condition, results of operations, plans, objectives, and future performance in businesses.
We caution you that actual results could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we will make reference to certain non-GAAP measures. The reconciliations with the appropriate GAAP measures can be found in our earnings released issued yesterday afternoon. I'm now turning the call over to Travis Fess.
Thank you, Adam. Welcome everyone and thank you for listening to Viper Energy Partners first quarter 2023 conference call. The first quarter was a strong start for the year as Viper oil production set a company record for a fourth consecutive quarter.
The advantaged nature of this royalty business model was highlighted during the quarter as we maintained our strong free cash flow conversion despite the volatility in commodity prices.
Further, on that point, wipers, low operating costs, and zero capital requirements allow us to convert over 80% of our operating cash flow into free cash flow during the quarter.
This metric compares favorably to many operators at around a 40% free cash flow conversion and insulates Vypr's free cash flow profile and return of capital during times of commodity price volatility.
Additionally, BIPER announced it completed a drop-down transaction of certain royalty interests from Dynavac on operated properties located in Ward County. This transaction was a $75 million acquisition of an overriding royalty interest.
representing 660 net royalty acres that will provide high NRI exposure to Diamondbacks expected development plan in the southern Delaware Basin.
Production on the acquired asset was roughly 300 barrels of oil per day during the first quarter.
and is expected to increase through the remainder of the year to average over 500 barrels of wool per day for the full year 2023.
Looking ahead, we have initiated average production guidance for Q2 and Q3 2023.
That implies over 8% growth relative to the first quarter.
importantly, on an organic basis, so excluding the impact of the drop-down acquisition.
Production is growing at over 5% this period, primarily as a result of large diamondback-operated pads with high biker inner eyes being turned to production.
On the capital return front, Vyper took advantage of the volatility experience during the quarter through our flexible return of capital program.
by opportunistically repurchasing over 1 million units.
Since the inception of our unit repurchase program, we have now repurchased over 11 million units for an aggregate of roughly $250 million.
reflecting an average price of under $23 per unit.
reflecting an average price of under $23 per unit. In addition to these unit repurchases,
Our return of capital program during the quarter is going to also deliver a distribution that represents a roughly 5% annualized yield at today's price.
In conclusion, the first quarter was an outstanding quarter for Vyper and the forward outlook continues to improve as our high quality asset base continues to attract outsized activity levels.
Viper remains differentially positioned to grow production without having to spend a single dollar of capital and with only limited operating costs.
And as a result, we look forward to continuing to efficiently return substantial amounts of capital back to our unitovers.
Thank you.
Operator, please open the line for questions.
Thank you. As a reminder, to ask a question, please press star 11 on your phone and wait for your name to be announced.
To withdraw your question, please press star 11 again. We compiled the Q&A roster.
One moment please for our first question.
Our first question will come from Neil Dingman of Truist Securities. Your line is open. Morning, gentlemen. Thanks for the time. My first question is on future activities specifically. Can you remind me maybe just in really broad terms how much of your acreage has!
Has what I would call maybe more relatively virgin units where we can see continued large pad boosting the already record volumes. Versus a lot of the other acreage out there I know is more on what I would call developed assets where we're seeing more child type wells.
Yeah, good question Neil. I mean, I would say, you know, almost all of the Diamondback operated position that we bought from Swallowtail is still, you know, the vast majority of it is still completely undeveloped. I mean, we haven't even brought on our first pad yet.
in the Robertson Ranch area where we own essentially half the minerals at Vipers. So I think what's fundamentally misunderstood on Vipers...
growth profile is that this growth profile is not going to be a flash in the pan over the next couple quarters. You know, I think this business can grow significantly over the next few years even with the EMP business, you know, growing slower or you know in some cases in maintenance mode. So you know, that's the benefit of this mineral business. There's a lot of growth to be had.
because when we allocate capital on the drilling side of Diamondback, we take into account the 58% ownership of Viper into those economics.
Great point. Okay. And then second question just on capital allocation of the shareholder return. Just wondering, while I know, and Aiden asked earlier, I know at FANG the allocation decision is largely driven by how you view your share price versus the assumed value, you know, based on mid-cycle prices. And I'm just wondering, do you think about that the same way the diaper and, you know, obviously with oil down today now approaching 70?
of units and And a variable dividend now. We have a higher base dividend by birth so that you know that was put in place For a reason, but I think generally the public markets are fundamentally mispricing mineral interests relative to upstream assets.
Therefore, we've allocated a lot more capital to own more of the mineral business. And if the market continues to miss price.
mineral values and not understand the benefit of a mineral versus an upstream asset. We'll just simply own more and more of this business like we did in Q1. Second to that, we do look at our NAV at Viper. They're significantly undervalued relative to our NAV.
at a mid-cycle deck and mid-cycle at Viper is $60 a barrel just like it is at Diamondback. The other validation we have in the mineral market, while it's not going to hang our hat on 100% of this, but we are getting blown out in the private market. Absolutely blown out on deals in the private market.
We're losing deals by 50, 60, 70%. And these deals, Neil, are much lower quality than the acreage position that Viper has today. So while that's an anecdote and we don't base our business on where third-party deals are trading, if third-party deals are going to continue trading at 50 to 70% above where we're trading, we're going to buy back a lot of units. Yeah, I agree with you. I'll let you all lean into the unit we purchased.
50, 60, 70 percent. And these deals, Neil, are much lower quality than the acreage position that Viper has today. So, well, that's an anecdote, and we don't base our business on where third-party deals are trading. If third-party deals are going to continue trading at 50 to 70 percent above where we're trading, we're going to buy back a lot of units. Yeah, I agree with you. Glad to see you all leaning into the unit we purchased. Thank you.
Thank you. One moment please for our next question.
Our next question will come from Paul Diamond of Citi. Your line is open. Hi, good morning guys. Thanks for taking my call. Just a quick one for you talking about, how's it going? Just a quick one for you talking about, you just noted that some of the private deals are going for 50, 60, 70% above.
You know what you guys think is a good value, but did you still got a few things done last quarter? Is that kind of trend you're seeing it's going to be a lot more like nuance and specific areas Do you guys see the market opening up a bit more and just kind of coming back to its rationality on that front?
Yeah, I was also referring to where Viper's trading on a mineral acre basis, but I think your point is valid. I think we're getting beat pretty handily on a lot of the...
You know, I would say mid-market deals, you know, 20 to 80 million dollar deals or 20 to 100. I think Viper has a unique advantage with our size and scale to compete in the 500 plus million dollar mineral deals. I think those are, you know, fewer and further between.
But I do think eventually, like a deal like Swallowtail, we had a unique advantage to get that deal done. So that's kind of our playground, because right now in the middle-market deals, you know, the numbers being paid are astronomical. Okay. No. Understood. Makes perfect sense.
like Swallowtail, we had a unique advantage to get that deal done. That's kind of our playground, because right now in the middle market deals, the numbers being paid are astronomical. Okay, no, understood, makes perfect sense. And yeah, I'll leave it there, thanks for...
Thanks, Paul. Thank you. One moment, please, for our next question.
Thanks, Paul. Thank you. One moment, please, for our next question. Again, one moment, please.
Our next question will come from Derek Whitman of TIFL. Your line is open.
Good morning, Owen, and congrats again on a solid quarter and drop down transaction. Thank you.
With regard to the drop down and I was thinking about some of your comments on the mispricing of mineral assets.
I mean, this drop down was extremely impactful from the perspective of line of sight activity that elevated NRIs. This was sourced from a ward acquisition at Diamondback over a year ago. I wanted to ask if there are other potential carve-outs from the Firebird or Lario acquisitions that could make sense in the future.
There are none today that came with the Lario or Farber packages. Now when we do get a new playground to buy minerals in, that does allow some opportunities to try to buy minerals in those new areas. But no drop down opportunities. To comment on the drop down specifically.
You know, this deal, we have the benefit of figuring out the right timing of when to drop something down between the two companies. And you know, this deal wouldn't have made sense to do a year ago, but now that development's happening and there's that forward visibility, you know, it made a lot of sense to be able to get that done ahead of the first large pads coming on in March.
Austin, you want to add anything to that? No, that's right. I mean, we got it done right around the ramp up in production and then still quite a bit of visibility to some high interest pads over the next couple of years. So it made a lot of sense for Viper and I think Diamondback to do a deal on here this past quarter. And I think it's ranges to now distribution in some parts of the system and a lot of driving
Terrific. With my follow-up, I wanted to focus on a bigger picture question for Permian activity, which I think plays to your benefit relative to your peers. That question is, if we were to assume strip pricing, do you think we've seen peak activity in the Permian for at least the immediate term, given that privates generally have less quality inventory depth and are likely to have less activity?