Viper Energy, Inc.VNOM
Viper Energy, Inc. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The Company uses appropriate valuation techniques based on available inputs to measure the fair values of its assets and liabilities.
Level 1 - Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date.
Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 - Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Certain assets and liabilities are reported at fair value on a recurring basis on the Company’s consolidated balance sheets, including the Company’s commodity derivative instruments and the 2026 WTI Contingent Liability.
The fair values of the Company’s commodity derivative contracts are measured internally using established commodity futures price strips for the underlying commodity provided by a reputable third-party, the contracted notional volumes and time to maturity. The net amounts are classified as current or noncurrent based on their anticipated settlement dates. The fair value of the 2026 WTI Contingent Liability was estimated using observable market data and a Monte Carlo pricing model, which are considered Level 2 inputs in the fair value hierarchy.
The following tables provide (i) the consolidated balance sheet classification where the Company’s commodity derivative instrument assets and liabilities and 2026 WTI Contingent Liability are recorded, (ii) fair value measurement information, (iii) the gross amounts of recognized assets and liabilities, (iv) the amounts offset under master netting arrangements with counterparties, and (v) the resulting net amounts presented in the Company’s consolidated balance sheets as of December 31, 2025, and December 31, 2024:
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Balance Sheet Classification | Level 1 | Level 2 | Level 3 | Total Gross Fair Value | Gross Amounts Offset in Balance Sheet | Net Fair Value Presented in Balance Sheet | ||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | $ | — | $ | 37 | $ | — | $ | 37 | $ | (9) | $ | 28 | ||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Other current liabilities | $ | — | $ | 9 | $ | — | $ | 9 | $ | (9) | $ | — | ||||||||||||||||||||||||||
Accrued liabilities (2026 WTI Contingent Liability) | $ | — | $ | 20 | $ | — | $ | 20 | $ | — | $ | 20 | ||||||||||||||||||||||||||
| Other long-term liabilities | $ | — | $ | 7 | $ | — | $ | 7 | $ | — | $ | 7 | ||||||||||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Balance Sheet Classification | Level 1 | Level 2 | Level 3 | Total Gross Fair Value | Gross Amounts Offset in Balance Sheet | Net Fair Value Presented in Balance Sheet | ||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | $ | — | $ | 24 | $ | — | $ | 24 | $ | (6) | $ | 18 | ||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Other current liabilities | $ | — | $ | 8 | $ | — | $ | 8 | $ | (6) | $ | 2 | ||||||||||||||||||||||||||
Accrued liabilities (2026 WTI Contingent Liability) | $ | — | $ | 30 | $ | — | $ | 30 | $ | — | $ | 30 | ||||||||||||||||||||||||||
Assets and Liabilities Not Recorded at Fair Value
The following table provides the fair value of financial instruments that are not recorded at fair value in the consolidated balance sheets:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
Debt | $ | 2,186 | $ | 2,233 | $ | 1,083 | $ | 1,105 | |||||||||||||||
The fair values of our current or previous revolving credit facility, as applicable, and the Term Loan approximate their carrying values based on borrowing rates available to the Company for bank loans with similar terms and maturities and are classified as Level 2 in the fair value hierarchy. The fair values of the Notes and Guaranteed Senior Notes were determined using the quoted market price at each period end, a Level 1 classification in the fair value hierarchy.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis in certain circumstances. These assets and liabilities can include mineral and royalty interests acquired in asset acquisitions and subsequent write-downs of the Company’s proved oil and natural gas interests to fair value when they are impaired or held for sale.
See Note 2—Summary of Significant Accounting Policies and Note 5—Oil and Natural Gas Interests for further discussion of non-recurring fair value adjustments.
Fair Value of Financial Assets
The Company has other financial instruments consisting of cash and cash equivalents, royalty income receivable, income tax receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and income taxes payable. The carrying value of these instruments approximate their fair value because of the short-term nature of the instruments.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.