Sec Form 13D Filing - Diamondback Energy Inc. (FANG) filing for VIPER ENERGY INC (VNOM) - 2024-03-07

(Date of event which requires filing of this statement)

Item 1 of this Schedule 13D is hereby amended and restated as follows:

This Statement is being filed with respect to Class A Common Stock, $0.000001 par value (“Class A Common Stock”), of Viper Energy, Inc. (the “Issuer”).   Prior to the Conversion (as defined below), Viper Energy Partners LP was organized as a limited partnership (such predecessor, “Viper LP”)

Recapitalization, Tax Status Election and Related Transactions

In March 2018, the Issuer announced that the board of directors of the general partner (the “General Partner”) of Viper LP unanimously approved a change of their federal income tax status from that of a pass-through partnership to that of a taxable entity via a “check the box” election. In connection with making this election, on May 10, 2018 the Issuer (i) amended and restated their First Amended and Restated Partnership Agreement, which is incorporated by reference herein as Exhibit 99.1, (ii) amended and restated the First Amended and Restated Limited Liability Company Agreement of Viper Energy Partners LLC (the “Operating Company”), (iii) amended and restated their existing registration rights agreement with Diamondback, which is incorporated by reference herein as Exhibit 99.2, and (iv) entered into an exchange agreement with Diamondback, the General Partner and the Operating Company, which is incorporated by reference herein as Exhibit 99.3. Simultaneously with the effectiveness of these agreements, Diamondback delivered and assigned to Viper LP the 73,150,000 Common Units held by Diamondback owned at the time in exchange for (i) 73,150,000 of the Issuer’s newly-issued Class B units of Viper LP (the “Class B Units”) and (ii) 73,150,000 newly-issued units of the Operating Company (the “Recapitalization”) pursuant to the terms of a Recapitalization Agreement dated March 28, 2018, as amended as of May 10, 2018 (the “Recapitalization Agreement”). Immediately following that exchange, Viper LP continued to be the managing member of the Operating Company, with sole control of its operations, and owned approximately 36% of the outstanding units issued by the Operating Company, and Diamondback owned the remaining approximately 64% of the outstanding units issued by the Operating Company. The Operating Company units (the “OpCo Units” and the Class B units owned by Diamondback were exchangeable from time to time for Viper LP’s common units (that is, one OpCo Unit and one Class B unit, together, would be exchangeable for one Viper LP common unit).

On May 10, 2018, the change in Viper LP’s income tax status became effective. On that date, pursuant to the terms of the Recapitalization Agreement, (i) the General Partner made a cash capital contribution of $1.0 million to the Issuer in respect of its general partner interest and (ii) Diamondback made a cash capital contribution of $1.0 million to Viper LP in respect of the Class B units. Diamondback, as the holder of the Class B units, and the General Partner, as the holder of the general partner interest, were entitled to receive an 8% annual distribution on the outstanding amount of these capital contributions, payable quarterly, as a return on this invested capital. On May 10, 2018, Diamondback also exchanged 731,500 Class B Units and 731,500 OpCo Units for 731,500 of Viper LP’s common units and a cash amount of $10, 000 representing a proportionate return of the $1.0 million invested capital in respect of the Issuer’s Class B Units (the “2018 Exchange”).

2019 Dropdown Acquisition

On October 1, 2019, Viper LP completed the acquisition of certain mineral and royalty interests from subsidiaries of Diamondback in exchange for 10,244,918 OpCo Units and Class B Units newly issued to Diamondback and 8,066,528 OpCo Units and Class B Units newly issued to a subsidiary of Diamondback and $190.2 million in cash, after giving effect to closing adjustments for net title benefits (the “2019 Drop-Down Acquisition”).  The 8,066,528 OpCo Units were subsequently beneficially owned by Diamondback E&P on June 30, 2021, following an internal reorganziation.

Viper Issuance of Common Units to Diamondback

On September 4, 2023, Diamondback granted Viper LP the right to cause Diamondback to purchase from Viper LP up to 7,215,007 Common Units, which right was exercisable by Viper LP until the closing of an acquisition, under the terms and conditions of that certain Common Unit Purchase and Sale Agreement, entered into on September 4, 2023 (the “Common Unit Purchase Agreement”). On October 31, 2023, the Issuer exercised its rights under the Common Unit Purchase Agreement and issued 7,215,007 of their common units (which were converted into the same number of shares of Class A Common Stock in the Conversion discussed below) to Diamondback (the “2023 Issuance”) at a price of $27.72 per unit for total net proceeds of approximately $200.0 million The net proceeds of the 2023 Issuance were used to fund a portion of the cash consideration for an acquisition. The above description does not purport to be complete and is subject to the terms of the Common Unit Purchase Agreement, filed as Exhibit 99.5, which incorporated by reference herein.

Conversion into Corporation

Secondary Offering of Class A Common Stock by Diamondback

Pursuant to Diamondback’s rights under the Second Amended and Restated Registration Rights Agreement, Diamondback and the Issuer have announced a public deal to sell in a secondary underwritten public offering (i) 7,946,507 Class A Common Stock currently held by Diamondback and (ii) 3,553,493 shares of Class A Common Stock (which amount will by increased by up to 1,725,000 shares of Class A Common Stock in the event the underwriters exercise their 30-day option to purchase additional shares of Class A Common Stock) to be received by Diamondback upon exchange, pursuant to the terms of the Amended and Restated Exchange Agreement, of an equal number of shares of Class B Common Stock and an equal number of OpCo Units prior to the closing of such offering (the “March 2024 Offering”). The sale is pursuant to an effective registration statement on Form S-3ASR (File No. 333-277668) filed by the Issuer on March 5, 2024. The managing underwriter is J.P. Morgan Securities LLC. Diamondback, the Issuer, and the underwriters have entered into an underwriting agreement in connection with the March 2024 Offering, pursuant to which (among other things) Diamondback has agreed to a 45-day lock-up with respect to its shares of common stock of the Issuer. The above description does not purport to be complete and is subject to the terms of the Underwriting Agreement, included as Exhibit 99.8, which is incorporated by reference herein.

The purpose of Diamondback’s previous acquisitions of Class A Common Stock was for investment. The Reporting Persons at any time and from time to time may acquire additional Class A Common Stock or other securities of the Issuer, either in the open market or in private transactions, or dispose of any or all of the securities they own, in each case depending upon an ongoing evaluation of the investment in the securities, the applicable Reporting Person’s business, prospects and financial condition, the market for the Class A Common Stock, general economic and prevailing market conditions, future developments and/or other factors.

The Reporting Person has no plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (a) through (j) inclusive of the instructions to Item 4 of the Schedule 13D other than as stated herein. The Reporting Person may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto.

* Less than 1%.

Item 6 of this Schedule 13D is supplemented and superseded, as the case may be, as follows:

The information contained in Item 4 is incorporated herein by reference.

Services and Secondment Agreement and Certificate of Incorporation Provisions

In connection with the Conversion, Viper Energy Partners LP and the General Partner, entered into a Services and Secondment Agreement with Diamondback E&P and Viper Energy Partners LLC, Viper Energy Partners LP’s operating subsidiary (“OpCo”), on November 2, 2023, effective as of the effective time (the “Services Agreement”). Pursuant to the Services Agreement, the Reporting Person continues to provide personnel and general and administrative services to the Issuer, including the services of the executive officers and other employees, in substantially the same manner as the Reporting Person previously provided to the General Partner. In addition, under the Issuer’s certificate of incorporation, for so long as the Reporting Person and any of its subsidiaries collectively beneficially own at least 25% of the outstanding common stock of the Issuer, (i) the Reporting Person has the right to designate up to three persons to serve as directors of the Issuer and (ii) the board of directors of the Issuer may not appoint any person other than a Reporting Person seconded employee as an executive officer of the Issuer unless such appointment is approved, in advance, by either (x) the Reporting Person (which approval may not be unreasonably withheld or conditioned) or (y) the affirmative vote of the holders of at least 80% of the voting power of the capital stock of the Issuer. There are currently two Reporting Person designees to the board of directors of the Issuer—Travis Stice and Kaes Van’t Hof.

In addition, in connection with the Conversion, Viper Energy Partners LP amended and restated certain agreements between it and the Reporting Person to reflect the effects of the Conversion. On November 10, 2023, effective at the Effective Time, Viper Energy Partners LP and the Reporting Person entered into an Amended and Restated Tax Sharing Agreement, Amended and Restated Registration Rights Agreement, which is incorporated by reference herein as Exhibit 99.6, and an Amended and Restated Exchange Agreement, which is incorporated by reference herein as Exhibit 99.7.

Item 7.

Material to be Filed as Exhibits

Executive Officers and Directors of Diamondback Energy, Inc.

	Diamondback Energy, Inc.
	By:	/s/ P. Matt Zmigrosky
	Name:	P. Matt Zmigrosky
	Title:	Executive Vice President, Chief Legal and Administrative Officer and Secretary

	Diamondback E&P LLC

	By:	/s/ P. Matt Zmigrosky
	Name:	P. Matt Zmigrosky
	Title:	Executive Vice President, Chief Legal and Administrative Officer and Secretary