Diamondback’s Viper Energy will purchase Sitio royalty for $4.1 billion.
Viper Energy will acquire Sitio royalties for $4.1 billion in an all-stock transaction that combines two largest minerals and royalty players in the oil and gas sector.
Industry Shake Up on June 3rd It further integrates both the boom, but matures and the Permian Basin in western Texas and the niche minerals and royalty spaces where businesses own fossil fuel rights underneath the surface but do not drill or manipulate wells.
Viper is a listed subsidiary of Minerals based in Midland, Texas Diamondback Energy (383rd place on the Fortune 500). It continues to expand rapidly as the largest 2-tier oil and gas producer focused solely on the West Texas region.
“The combination of Viper and Sitio means a key moment of mineral and loyalty interest,” said Kaes Van’t Hof, CEO of Diamondback and Viper, in a prepared statement. “This combination creates leaders in size, scale, float, liquidity and access to investment grade capital in the highly fragmented mineral industry.”
The deal will allow expanded Viper to scale and compete for capital with large exploration players and production players who own and operate their own oil and gas wells, Van’t Hof added.
The deal is the largest in the mineral sector as Sitio first appeared as a power player in 2022, with a $4.8 billion combination with Brigham Minerals.
The $4.1 billion share trade, including the $1.1 billion debt assumption, represents a nearly 15% premium on Sitio’s stock price, which rose 12% in early trading on June 3. The transaction is expected to close in the third quarter.
Viper’s stock remained pretty flat in early trading at a market capitalization of around $11.5 billion, but Diamondback rose 1% to over $40 billion.
Rapid growth of diamondback
Diamondback’s rise is Diamondback’s popular acquisition price after it acquired Double Eagle assets for almost $4.1 billion on April 1, and continues after a much more $26 billion deal on Endeavor energy resources last year.
Earlier this year, Sitio CEO Chris Conosenti told the reporter that he saw 2025 as an opportunity for growth through the acquisition. However, in public energy spaces, if the offer is correct, the company is always on sale.
In the Permian Permian booming, which also produces about 40% of the country’s crude oil and most of the natural gas, propane, butane and ethane, Vipers are placed stronger in the Permian eastern Midland basin, while Sitio grows larger in the Western Delaware Basin, spreading southeastern New Mexico.
“This transaction is the next logical step in Sitio’s evolution,” Sitio Chairman Noam Lockshin said in a statement. “By adding coverage of Citio’s Delaware Basin to Viper’s location in the Midland Basin, the total company will be well positioned in the Permian for years to come.”
According to Viper, the deal will expand the Permian Viper’s mineral footprint to approximately 25,300 acres of royal acres to a total of 85,700 acres, with about 43% of which being run by parent Diamondback.
The merger also expanded the Permian slightly with 9,000 acres of royal acres in southern Texas, Colorado and North Dakota, with 9,000 acres of royal acres.
“We’re still focused on the Permian and we’re holding other basins for now, but we might eventually sell them if prices improve,” Van’t Hof told Fortune about the non-core assets it’s acquiring.
Diamondback is expected to own approximately 41% of Viper’s outstanding shares after the transaction, from today’s majority ownership.
“This transaction reduces Diamondback ownership in Pro Forma Viper, but does not reduce the importance of the Diamondback-Viper relationship. DiamondbackDrill Bit remains the most visible source of Viper’s biggest competitive advantage and long-term production growth in Viper.
“Mineral benefits provide the highest form of security and advantages in the oil fields, and all benefits have been managed by operators to unlock directly to mineral holders without capital risk,” he added.
This story was originally introduced Fortune.com