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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-35700
 
Diamondback Energy, Inc.
(Exact Name of Registrant As Specified in Its Charter)
DE
45-4502447
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification Number)
500 West Texas Ave.
Suite 100
Midland, TX
79701
(Address of principal executive offices)(Zip code)
(432) 221-7400
(Registrant’s telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockFANGThe Nasdaq Stock Market LLC
(NASDAQ Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  ☒ 

As of April 26, 2024, the registrant had 178,343,733 shares of common stock outstanding.



DIAMONDBACK ENERGY, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS
Page


i

GLOSSARY OF OIL AND NATURAL GAS TERMS
The following is a glossary of certain oil and natural gas industry terms that are used in this Quarterly Report on Form 10-Q (this “report”):
Argus WTI HoustonGrade of oil that serves as a benchmark price for oil at Houston, Texas.
Argus WTI MidlandGrade of oil that serves as a benchmark price for oil at Midland, Texas.
BasinA large depression on the earth’s surface in which sediments accumulate.
Bbl or barrelOne stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons.
BOOne barrel of crude oil.
BO/dOne BO per day.
BOEOne barrel of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil.
BOE/dBOE per day.
BrentA major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.
British Thermal Unit or BtuThe quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
CompletionThe process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
Gross acres or gross wellsThe total acres or wells, as the case may be, in which a working interest is owned.
Henry HubNatural gas gathering point that serves as a benchmark price for natural gas futures on the NYMEX.
Horizontal wellsWells drilled directionally horizontal to allow for development of structures not reachable through traditional vertical drilling mechanisms.
MBblOne thousand barrels of crude oil and other liquid hydrocarbons.
MBOEOne thousand BOE.
MBOE/dOne thousand BOE per day.
McfOne thousand cubic feet of natural gas.
Mineral interestsThe interests in ownership of the resource and mineral rights, giving an owner the right to profit from the extracted resources.
MMBtuOne million British Thermal Units.
MMcfMillion cubic feet of natural gas.
Net acresThe sum of the fractional working interest owned in gross acres.
Oil and natural gas propertiesTracts of land consisting of properties to be developed for oil and natural gas resource extraction.
Proved reservesThe estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.
ReservesThe estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to the market and all permits and financing required to implement the project. Reserves are not assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).
ReservoirA porous and permeable underground formation containing a natural accumulation of producible natural gas and/or crude oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.
Royalty interestAn interest that gives an owner the right to receive a portion of the resources or revenues without having to carry any costs of development, which may be subject to expiration.
Waha HubNatural gas gathering point that serves as a benchmark price for natural gas at western Texas and New Mexico.
Working interestAn operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations.
WTIWest Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil that serves as a benchmark for oil on the NYMEX.
ii

GLOSSARY OF CERTAIN OTHER TERMS
The following is a glossary of certain other terms that are used in this report:
ASUAccounting Standards Update.
Equity PlanThe Company’s 2021 Amended and Restated Equity Incentive Plan.
Exchange ActThe Securities Exchange Act of 1934, as amended.
FASBFinancial Accounting Standards Board.
GAAPAccounting principles generally accepted in the United States.
NasdaqThe Nasdaq Global Select Market.
NYMEXNew York Mercantile Exchange.
OPECOrganization of the Petroleum Exporting Countries.
SECUnited States Securities and Exchange Commission.
Securities ActThe Securities Act of 1933, as amended.
Guaranteed Senior NotesThe outstanding senior notes issued by Diamondback Energy, Inc. under indentures where Diamondback E&P is the sole guarantor, consisting of the 3.250% Senior Notes due 2026, 3.500% Senior Notes due 2029, 3.125% Senior Notes due 2031, 6.250% Senior Notes due 2033, 4.400% Senior Notes due 2051, 4.250% Senior Notes due 2052 and 6.250% Senior Notes due 2053.
SOFRThe secured overnight financing rate.
TSRTotal stockholder return of the Company’s common stock.
Viper
Viper Energy, Inc.
Viper LLCViper Energy Partners LLC, a Delaware limited liability company and a subsidiary of Viper.

iii

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties and assumptions. All statements, other than statements of historical fact, including statements regarding our: future performance; business strategy; future operations (including drilling plans and capital plans); estimates and projections of revenues, losses, costs, expenses, returns, cash flow and financial position; reserve estimates and our ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures); and plans and objectives of management (including plans for future cash flow from operations and for executing environmental strategies) are forward-looking statements. When used in this report, the words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “model,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions (including the negative of such terms) as they relate to the Company are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. In particular, the factors discussed in this report and detailed under Part II, Item 1A. Risk Factors in this report and our Annual Report on Form 10–K for the year ended December 31, 2023 could affect our actual results and cause our actual results to differ materially from expectations, estimates or assumptions expressed, forecasted or implied in such forward-looking statements. Unless the context requires otherwise, references to “we,” “us,” “our” or the “Company” are intended to mean the business and operations of the Company and its consolidated subsidiaries.

Factors that could cause our outcomes to differ materially include (but are not limited to) the following:

changes in supply and demand levels for oil, natural gas and natural gas liquids, and the resulting impact on the price for those commodities;
the impact of public health crises, including epidemic or pandemic diseases and any related company or government policies or actions;
actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments;
changes in general economic, business or industry conditions, including changes in foreign currency exchange rates, interest rates and inflation rates, instability in the financial sector and concerns over a potential economic downturn or recession;
regional supply and demand factors, including delays, curtailment delays or interruptions of production, or governmental orders, rules or regulations that impose production limits;
federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations;
physical and transition risks relating to climate change;
restrictions on the use of water, including limits on the use of produced water and a moratorium on new produced water well permits recently imposed by the Texas Railroad Commission in an effort to control induced seismicity in the Permian Basin;
significant declines in prices for oil, natural gas, or natural gas liquids, which could require recognition of significant impairment charges;
changes in U.S. energy, environmental, monetary and trade policies;
conditions in the capital, financial and credit markets, including the availability and pricing of capital for drilling and development operations and our environmental and social responsibility projects;
challenges with employee retention and an increasingly competitive labor market;
changes in availability or cost of rigs, equipment, raw materials, supplies, oilfield services;
changes in safety, health, environmental, tax and other regulations or requirements (including those addressing air emissions, water management, or the impact of global climate change);
security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, or from breaches of information technology systems of third parties with whom we transact business;
lack of, or disruption in, access to adequate and reliable transportation, processing, storage and other facilities for our oil, natural gas and natural gas liquids;
iv

failures or delays in achieving expected reserve or production levels from existing and future oil and natural gas developments, including due to operating hazards, drilling risks, or the inherent uncertainties in predicting reserve and reservoir performance;
difficulty in obtaining necessary approvals and permits;
severe weather conditions;
acts of war or terrorist acts and the governmental or military response thereto;
changes in the financial strength of counterparties to our credit agreement and hedging contracts;
changes in our credit rating;
risks related to the pending Endeavor Acquisition (as defined below); and
other risks and factors disclosed in this report.

In light of these factors, the events anticipated by our forward-looking statements may not occur at the time anticipated or at all. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. We cannot predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements we may make. Accordingly, you should not place undue reliance on any forward-looking statements made in this report. All forward-looking statements speak only as of the date of this report or, if earlier, as of the date they were made. We do not intend to, and disclaim any obligation to, update or revise any forward-looking statements unless required by applicable law.
v


PART I. FINANCIAL INFORMATION


ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
March 31,December 31,
20242023
(In millions, except par values and share data)
Assets
Current assets:
Cash and cash equivalents$896 $582 
Restricted cash3 3 
Accounts receivable:
Joint interest and other, net208 192 
Oil and natural gas sales, net ($132 million and $109 million related to Viper)
734 654 
Income tax receivable 1 
Inventories57 63 
Derivative instruments7 17 
Prepaid expenses and other current assets43 109 
Total current assets1,948 1,621 
Property and equipment:
Oil and natural gas properties, full cost method of accounting ($8,455 million and $8,659 million excluded from amortization at March 31, 2024 and December 31, 2023, respectively) ($4,649 million and $4,629 million and $1,719 million and $1,769 million excluded from amortization related to Viper)
43,240 42,430 
Other property, equipment and land675 673 
Accumulated depletion, depreciation, amortization and impairment ($913 million and $866 million related to Viper)
(16,891)(16,429)
Property and equipment, net27,024 26,674 
Equity method investments529 529 
Derivative instruments7 1 
Deferred income taxes, net61 45 
Investment in real estate, net83 84 
Other assets38 47 
Total assets$29,690 $29,001 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade$243 $261 
Accrued capital expenditures570 493 
Other accrued liabilities337 475 
Revenues and royalties payable732 764 
Derivative instruments102 86 
Income taxes payable134 29 
Total current liabilities2,118 2,108 
Long-term debt ($1,094 million and $1,083 million related to Viper)
6,629 6,641 
Derivative instruments144 122 
Asset retirement obligations266 239 
Deferred income taxes2,502 2,449 
Other long-term liabilities12 12 
Total liabilities11,671 11,571 
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock, $0.01 par value; 400,000,000 shares authorized; 178,339,978 and 178,723,871 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
2 2 
Additional paid-in capital14,251 14,142 
Retained earnings (accumulated deficit)2,705 2,489 
Accumulated other comprehensive income (loss)(8)(8)
Total Diamondback Energy, Inc. stockholders’ equity16,950 16,625 
Non-controlling interest1,069 805 
Total equity18,019 17,430 
Total liabilities and stockholders' equity$29,690 $29,001 


See accompanying notes to condensed consolidated financial statements.
1

Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31,
20242023
(In millions, except per share amounts, shares in thousands)
Revenues:
Oil sales$1,867 $1,654 
Natural gas sales50 69 
Natural gas liquid sales184 179 
Sales of purchased oil116  
Other operating income10 23 
Total revenues2,227 1,925 
Costs and expenses:
Lease operating expenses255 192 
Production and ad valorem taxes119 155 
Gathering, processing and transportation77 68 
Purchased oil expense117  
Depreciation, depletion, amortization and accretion469 403 
General and administrative expenses46 40 
Merger and integration expenses12 8 
Other operating expenses14 34 
Total costs and expenses1,109 900 
Income (loss) from operations1,118 1,025 
Other income (expense):
Interest expense, net(46)(46)
Other income (expense), net4 53 
Gain (loss) on derivative instruments, net(48)(93)
Gain (loss) on extinguishment of debt2  
Income (loss) from equity investments, net2 14 
Total other income (expense), net(86)(72)
Income (loss) before income taxes1,032 953 
Provision for (benefit from) income taxes223 207 
Net income (loss) 809 746 
Net income (loss) attributable to non-controlling interest41 34 
Net income (loss) attributable to Diamondback Energy, Inc.$768 $712 
Earnings (loss) per common share:
Basic$4.28 $3.88 
Diluted$4.28 $3.88 
Weighted average common shares outstanding:
Basic178,477 181,988 
Diluted178,477 181,988 






See accompanying notes to condensed consolidated financial statements.
2

Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss)
Non-Controlling InterestTotal
SharesAmount
($ in millions, shares in thousands)
Balance December 31, 2023178,724 $2 $14,142 $2,489 $(8)$805 $17,430 
Distribution equivalent rights payments— — — (4)— — (4)
Stock-based compensation— — 21 — — — 21 
Cash paid for tax withholding on vested equity awards(187)— (34)— — — (34)
Repurchased shares under buyback program(279)— (42)— — — (42)
Proceeds from partial sale of investment in Viper Energy, Inc.— — 219 — — 197 416 
Dividends to non-controlling interest— — — — — (44)(44)
Dividends paid— — — (548)— — (548)
Issuance of shares upon vesting of equity awards82 — — — — — — 
Change in ownership of consolidated subsidiaries, net— — (55)— — 70 15 
Net income (loss)— — — 768 — 41 809 
Balance March 31, 2024178,340 $2 $14,251 $2,705 $(8)$1,069 $18,019 

Common StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss)
Non-Controlling InterestTotal
SharesAmount
($ in millions, shares in thousands)
Balance December 31, 2022179,841 $2 $14,213 $801 $(7)$681 $15,690 
Unit-based compensation— — — — — 1 1 
Distribution equivalent rights payments— — — (4)—  (4)
Stock-based compensation— — 15 — — — 15 
Cash paid for tax withholding on vested equity awards(119)— (18)— — — (18)
Repurchased shares under buyback program(2,531)— (332)— — — (332)
Repurchased units under buyback programs— — — — — (34)(34)
Common shares issued for acquisition4,330 — 633 — — — 633 
Distributions to non-controlling interest— — — — — (34)(34)
Dividend paid— — — (542)— — (542)
Exercise of stock options and issuance of restricted stock units and awards84 — — — — — — 
Change in ownership of consolidated subsidiaries, net— — (9)— — 11 2 
Net income (loss)— — — 712 — 34 746 
Balance March 31, 2023181,605 $2 $14,502 $967 $(7)$659 $16,123 













See accompanying notes to condensed consolidated financial statements.
3

Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
20242023
(In millions)
Cash flows from operating activities:
Net income (loss) $809 $746 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for (benefit from) deferred income taxes52 97 
Depreciation, depletion, amortization and accretion469 403 
(Gain) loss on extinguishment of debt(2) 
(Gain) loss on derivative instruments, net48 93 
Cash received (paid) on settlement of derivative instruments(4)1 
(Income) loss from equity investment, net(2)(14)
Equity-based compensation expense14 11 
Other16 (34)
Changes in operating assets and liabilities:
Accounts receivable(95)(36)
Income tax receivable12 95 
Prepaid expenses and other current assets89  
Accounts payable and accrued liabilities(110)(26)
Income taxes payable70 17 
Revenues and royalties payable(35)60 
Other3 12 
Net cash provided by (used in) operating activities1,334 1,425 
Cash flows from investing activities:
Drilling, completions and infrastructure additions to oil and natural gas properties(605)(622)
Additions to midstream assets(4)(35)
Property acquisitions(153)(880)
Proceeds from sale of assets12 264 
Other(1)(6)
Net cash provided by (used in) investing activities(751)(1,279)
Cash flows from financing activities:
Proceeds from borrowings under credit facilities90 1,696 
Repayments under credit facilities(80)(989)
Repayment of senior notes(25) 
Repurchased shares under buyback program(42)(332)
Repurchased shares/units under Viper's buyback program (34)
Proceeds from partial sale of investment in Viper Energy, Inc.451  
Dividends paid to stockholders(548)(542)
Dividends/distributions to non-controlling interest(44)(34)
Other(71)(22)
Net cash provided by (used in) financing activities(269)(257)
Net increase (decrease) in cash and cash equivalents314 (111)
Cash, cash equivalents and restricted cash at beginning of period585 164 
Cash, cash equivalents and restricted cash at end of period$899 $53 



See accompanying notes to condensed consolidated financial statements.
4

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)


1.    DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Organization and Description of the Business

Diamondback Energy, Inc., together with its subsidiaries (collectively referred to as “Diamondback” or the “Company” unless the context otherwise requires), is an independent oil and natural gas company currently focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas.

As of March 31, 2024, the wholly owned subsidiaries of Diamondback include Diamondback E&P LLC (“Diamondback E&P”), a Delaware limited liability company, Rattler Midstream GP LLC, a Delaware limited liability company (“Rattler’s GP”), Rattler Midstream LP, a Delaware limited partnership (“Rattler”) and QEP Resources, Inc. (“QEP”), a Delaware corporation.

Viper Conversion to Corporate Structure

On November 13, 2023, the Company’s publicly traded subsidiary, Viper Energy Partners LP, completed its conversion from a Delaware limited partnership into a Delaware corporation, Viper Energy, Inc. (“Viper”) (the “Viper Conversion”). At the time of the Viper Conversion, each of the Company’s common units representing limited partnership interest in Viper Energy Partners, LP was converted, on a unit-for-unit basis, into one issued and outstanding, fully paid and nonassessable share of Class A common stock of Viper Energy, Inc., and each of the Company’s Class B units representing a limited partnership interest in Viper Energy Partners, LP was converted, on a unit-for-unit basis, into one issued and outstanding, fully paid and nonassessable share of Class B common stock of Viper. At the time of the Conversion, Viper was a “controlled company” under the Nasdaq rules as the Company owned more than 50% of the voting power of Viper’s common stock.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries after all significant intercompany balances and transactions have been eliminated upon consolidation. The Company has one reportable segment, the upstream segment.

On October 31, 2023, pursuant to a common unit purchase and sale agreement entered into on September 4, 2023, Viper issued approximately 7.22 million of its common units, which were converted to shares of Viper Class A common stock at the time of the Viper Conversion, to the Company at a price of $27.72 per unit for total consideration to Viper of approximately $200 million. On March 5, 2024, the Company exercised certain of its demand rights, pursuant to a registration rights agreement initially entered into on June 23, 2014, as amended and restated on May 9, 2018 and November 10, 2023, and on March 8, 2024, completed a public offering of approximately 13.23 million of Viper’s Class A common stock at a price of $35.00 per share for proceeds, net of underwriters’ discount, of approximately $451 million. After this offering and through March 31, 2024, the Company owned approximately 48% of Viper’s combined outstanding Class A common stock and Class B common stock, resulting in Viper no longer being a controlled company under the Nasdaq rules. However, the Company determined that it still controls the activities of Viper in accordance with the guidance for variable interest entities in Accounting Standards Codification Topic 810— “Consolidation” (“ASC 810”) and therefore continues to consolidate Viper in the Company’s financial statements at March 31, 2024. See further discussion of the Company’s determination that Viper is a variable interest entity (“VIE”) in Note 2—Summary of Significant Accounting Policies. The results of operations attributable to the non-controlling interest in Viper are presented within equity and net income and are shown separately from the equity and net income attributable to the Company.

These condensed consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the SEC. They reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to SEC rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10–Q should be read in conjunction with the Company’s most recent Annual Report on Form 10–K for the fiscal year ended December 31, 2023, which contains a summary of the Company’s significant accounting policies and other disclosures.
5

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Certain amounts included in or affecting the Company’s condensed consolidated financial statements and related disclosures must be estimated by management, requiring certain assumptions to be made with respect to values or conditions that cannot be known with certainty at the time the condensed consolidated financial statements are prepared. These estimates and assumptions affect the amounts the Company reports for assets and liabilities and the Company’s disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements. Actual results could differ from those estimates.

Making accurate estimates and assumptions is particularly difficult in the oil and natural gas industry given the challenges resulting from volatility in oil and natural gas prices. For instance, the war in Ukraine and the Israel-Hamas war, rising interest rates, global supply chain disruptions, recent measures to combat persistent inflation and instability in the financial sector have contributed to recent economic and pricing volatility. The financial results of companies in the oil and natural gas industry have been impacted materially as a result of these events and changing market conditions. Such circumstances generally increase uncertainty in the Company’s accounting estimates, particularly those involving financial forecasts.

The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, fair value estimates of derivative instruments, the fair value determination of acquired assets and liabilities assumed and estimates of income taxes, including deferred tax valuation allowances.

Variable Interest Entity

Viper is a publicly traded corporation formed by the Company in 2014 to provide an attractive return to its shareholders (the largest of which is Diamondback) by focusing on business results, maximizing dividends through organic growth and pursuing accretive growth opportunities through acquisitions of mineral, royalty, overriding royalty, net profits and similar interests from the Company and from third parties. Viper has no employees and the Company provides management, operating and administrative services to Viper under a services and secondment agreement, including the services of the executive officers and other employees.

In connection with the reduction of the Company’s ownership percentage in Viper to below 50% in March 2024, the Company re-evaluated whether Viper should continue to be consolidated in the Company’s financial statements. Viper meets the definition of a VIE under ASC 810 and the Company continues to be the primary beneficiary of the VIE through its ability, via existing contractual agreements, to direct the activities that most significantly affect the economic performance of Viper. The Company also has the obligation to absorb losses and the right to receive benefits that could be significant to Viper. As such, the Company will continue to consolidate the activity of Viper.

Viper maintains its own capital structure that is separate from the Company. The Company is not under any obligation to provide additional financial support or investment to Viper. Viper’s assets cannot be used by the Company for general corporate purposes, and the creditors of Viper’s liabilities do not have recourse to the Company’s assets. The assets and liabilities of Viper are included in the Company’s condensed consolidated balance sheets and disclosed parenthetically, if material.

Recent Accounting Pronouncements

Recently Adopted Pronouncements

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842) – Common Control Arrangements.” This update (i) requires all lessees that are a party to a lease between entities under common control in which there are leasehold improvements to record amortization over the useful life of the leasehold improvements to the common control group, regardless of the lease term, and (ii) requires leasehold improvements to be accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. The
6

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Company adopted this update effective January 1, 2024 by electing to apply the guidance in ASU 2023-01 prospectively to all new leasehold improvements recognized on or after January 1, 2024. As such, the adoption of this update did not have a material impact on the Company’s financial position, results of operations or liquidity.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures,” which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments are effective for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. Adoption of the update will not impact the Company’s financial position, results of operations or liquidity.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures,” which requires that certain information in a reporting entity’s tax rate reconciliation be disaggregated and provides additional requirements regarding income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. Adoption of the update will not impact the Company’s financial position, results of operations or liquidity.

The Company considers the applicability and impact of all ASUs. ASUs not listed above were assessed and determined to be either not applicable, previously disclosed, or not material upon adoption.

3.    REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from Contracts with Customers

The following tables present the Company’s revenue from contracts with customers:

Three Months Ended March 31,
20242023
(In millions)
Oil sales$1,867 $1,654 
Natural gas sales50 69 
Natural gas liquid sales184 179 
Total oil, natural gas and natural gas liquid revenues2,101 1,902 
Sales of purchased oil116  
Midstream and marketing services8 21 
Total revenue from contracts with customers$2,225 $1,923 

The following tables present the Company’s revenue from oil, natural gas, and natural gas liquids disaggregated by basin:

Three Months Ended March 31, 2024Three Months Ended March 31, 2023
Midland BasinDelaware BasinOtherTotalMidland BasinDelaware BasinOtherTotal
(In millions)
Oil sales$1,503 $360 $4 $1,867 $1,295 $358 $1 $1,654 
Natural gas sales34 15 1 50 48 21  69 
Natural gas liquid sales137 47  184 132 47  179 
Total$1,674 $422 $5 $2,101 $1,475 $426 $1 $1,902 

7

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
4.    ACQUISITIONS AND DIVESTITURES

2024 Activity

See Note 16—Endeavor Energy Resources, LP Acquisition for details on the previously announced plan of merger. The Company had no other material acquisition or divestiture activity during the three months ended March 31, 2024.

2023 Activity

Acquisitions

GRP Acquisition

On November 1, 2023, Viper and Viper LLC acquired certain mineral and royalty interests from Royalty Asset Holdings, LP, Royalty Asset Holdings II, LP and Saxum Asset Holdings, LP and affiliates of Warwick Capital Partners and GRP Energy Capital (collectively, “GRP”), pursuant to a definitive purchase and sale agreement for approximately 9.02 million Viper common units and $750 million in cash, including transactions costs and subject to customary post-closing adjustments (the “GRP Acquisition”). The mineral and royalty interests acquired in the GRP Acquisition represent 4,600 net royalty acres in the Permian Basin, plus an additional 2,700 net royalty acres in other major basins. The cash consideration for the GRP Acquisition was funded through a combination of cash on hand and held in escrow, borrowings under the Viper credit agreement, proceeds from Viper’s offering of $400 million in aggregate principal amount of its 7.375% Senior Notes due in 2031 and proceeds from the $200 million common unit issuance to the Company.

Lario Acquisition

On January 31, 2023, the Company closed on its acquisition of all leasehold interests and related assets of Lario Permian, LLC, a wholly owned subsidiary of Lario Oil and Gas Company, and certain associated sellers (collectively “Lario”). The acquisition included approximately 25,000 gross (16,000 net) acres in the Midland Basin and certain related oil and gas assets (the “Lario Acquisition”), in exchange for 4.33 million shares of the Company’s common stock and $814 million in cash, including certain customary post-closing adjustments. Approximately $113 million of the cash consideration was deposited in an indemnity holdback escrow account at closing to be distributed upon satisfactory settlement of any potential title defects on the acquired properties. As of March 31, 2024, the Company has released the full amount of the indemnity holdback to Lario. The cash portion of the consideration for the Lario Acquisition was funded through a combination of cash on hand, a portion of the net proceeds from the Company’s offering of 6.250% Senior Notes due 2053 and borrowings under the Company’s revolving credit facility.

The following table presents the acquisition consideration paid in the Lario Acquisition (in millions, except per share data, shares in thousands):

Consideration:
Shares of Diamondback common stock issued at closing4,330
Closing price per share of Diamondback common stock on the closing date$146.12 
Fair value of Diamondback common stock issued$633 
Cash consideration814 
Total consideration (including fair value of Diamondback common stock issued)$1,447 

8

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Purchase Price Allocation

The Lario Acquisition has been accounted for as a business combination using the acquisition method. The following table represents the allocation of the total purchase price paid in the Lario Acquisition to the identifiable assets acquired and the liabilities assumed based on the fair values at the acquisition date. The purchase price allocation was completed in December 2023.

The following table sets forth the Company’s purchase price allocation (in millions):

Total consideration$1,447 
Fair value of liabilities assumed:
Other long-term liabilities37 
Fair value of assets acquired:
Oil and natural gas properties1,460 
Inventories2 
Other property, equipment and land22 
Amount attributable to assets acquired1,484 
Net assets acquired and liabilities assumed$1,447 

Oil and natural gas properties were valued using an income approach utilizing the discounted cash flow method, which takes into account production forecasts, projected commodity prices and pricing differentials, and estimates of future capital and operating costs which were then discounted utilizing an estimated weighted-average cost of capital for industry market participants. The fair value of acquired midstream assets, vehicles and a field office were based on the cost approach, which utilized asset listings and cost records with consideration for the reported age, condition, utilization and economic support of the assets and were included in the Company’s condensed consolidated balance sheets under the caption “Other property, equipment and land.” The majority of the measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and are therefore considered Level 3 inputs in the fair value hierarchy.

With the completion of the Lario Acquisition, the Company acquired proved properties of $924 million and unproved properties of $536 million.

Divestitures

Divestiture of Deep Blue Water Assets and Deep Blue Formation

On September 1, 2023, the Company closed on a joint venture agreement with Five Point Energy LLC (“Five Point”) to form Deep Blue Midland Basin LLC (“Deep Blue”). At closing, the Company contributed certain treated water, fresh water and saltwater disposal assets (the “Deep Blue Water Assets”) with a net carrying value of $692 million and Five Point contributed $251 million in cash, subject to certain customary post-closing adjustments, to Deep Blue. In exchange for these contributions, Deep Blue issued the Company a one-time cash distribution of approximately $516 million and issued to the Company a 30% equity ownership and voting interest, and issued to Five Point a 70% equity ownership and voting interest.

Under a separate agreement with Deep Blue, the Company is continuing to operate the Deep Blue Water Assets on a short-term basis before transferring operations to Deep Blue, which is anticipated to happen in the second quarter of 2024. Contingent upon the successful transfer of operations, the Company will receive approximately $47 million in cash to be contributed by Five Point in 2024. This contingent consideration does not meet the criteria to be accounted for as a derivative. As such, at March 31, 2024, approximately $43 million has been recorded as a receivable in the condensed consolidated balance sheet for the fair value of the additional consideration to be received when operation of the Deep Blue Water Assets transfers to Deep Blue.

9

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
The Company recorded its 30% equity interest in Deep Blue at fair value based on the cash consideration contributed by Five Point to Deep Blue in exchange for its 70% equity ownership and the estimated fair value of contingent consideration to be contributed by Five Point in future years. The Company’s equity method investment in Deep Blue had an initial fair value of $126 million. The Company’s proportionate share of the income or loss from Deep Blue will be recognized on a two-month lag. The Company has recognized an aggregate $13 million loss on the sale of its Deep Blue Water Assets, of which approximately $1 million was recognized during the three months ended March 31, 2024. The loss on the sale of Deep Blue Water Assets is included in the caption “Other operating expenses” in the condensed consolidated statement of operations. The majority of measurements utilized to determine the fair value amounts reported above relating to this transaction are based on inputs that are not observable in the market and are therefore considered Level 3 inputs in the fair value hierarchy.

The Company and Five Point currently anticipate collectively contributing $500 million in follow-on capital to fund future growth projects and acquisitions.

As part of the transaction, the Company also entered into a 15-year dedication with Deep Blue for its produced water and supply water within a 12-county area of mutual interest in the Midland Basin. See Note 7— Related Party Transactions for further discussion of transactions with Deep Blue.

OMOG Divestiture

On July 28, 2023, the Company divested its 43% limited liability company interest in OMOG JV LLC (“OMOG”) for $225 million in cash received at closing. This divestiture resulted in a gain on the sale of equity method investments of approximately $35 million. The Company used its net proceeds from this transaction for debt reduction and other general corporate purposes.

Non-Core Assets Divestiture

On April 28, 2023, the Company divested non-core assets to an unrelated third-party buyer consisting of approximately 19,000 net acres in Glasscock County, TX for net cash proceeds at closing of $269 million, including customary post-closing adjustments. The Company used its net proceeds from this transaction for debt reduction and other general corporate purposes.

On March 31, 2023, the Company divested non-core assets consisting of approximately 4,900 net acres in Ward and Winkler counties to unrelated third-party buyers for $72 million in net cash proceeds, including customary post-closing adjustments.

The divestitures of non-core oil and gas assets did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the Company recorded the proceeds as a reduction of its full cost pool with no gain or loss recognized on the sale.

Gray Oak Divestiture

On January 9, 2023, the Company divested its 10% non-operating equity investment in Gray Oak Pipeline, LLC (“Gray Oak”) for $172 million in net cash proceeds and recorded a gain on the sale of equity method investments of approximately $53 million, which is included in the caption “Other income (expense), net” on the condensed consolidated statement of operations for the three months ended March 31, 2023.

10

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
5.    PROPERTY AND EQUIPMENT

Property and equipment includes the following as of the dates indicated:

March 31,December 31,
20242023
(In millions)
Oil and natural gas properties:
Subject to depletion$34,785 $33,771 
Not subject to depletion8,455 8,659 
Gross oil and natural gas properties43,240 42,430 
Accumulated depletion(8,785)(8,333)
Accumulated impairment(7,954)(7,954)
Oil and natural gas properties, net26,501 26,143 
Other property, equipment and land675 673 
Accumulated depreciation, amortization, accretion and impairment(152)(142)
Total property and equipment, net $27,024 $26,674 

Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter which determines a limit, or ceiling, on the book value of proved oil and natural gas properties. No impairment expense was recorded for the three months ended March 31, 2024 or 2023 based on the results of the respective quarterly ceiling tests.

In addition to commodity prices, the Company’s production rates, levels of proved reserves, future development costs, transfers of unevaluated properties and other factors will determine its actual ceiling test calculation and impairment analysis in future periods. If the future trailing 12-month commodity prices decline as compared to the commodity prices used in prior quarters, the Company may have material write downs in subsequent quarters. It is possible that circumstances requiring additional impairment testing will occur in future interim periods, which could result in potentially material impairment charges being recorded.

6.    ASSET RETIREMENT OBLIGATIONS

The following table describes the changes to the Company’s asset retirement obligations liability for the following periods:
Three Months Ended March 31,
20242023
(In millions)
Asset retirement obligations, beginning of period$245 $347 
Additional liabilities incurred1 7 
Liabilities acquired1 4 
Liabilities settled and divested(7)(18)
Accretion expense3 4 
Revisions in estimated liabilities31 (32)
Asset retirement obligations, end of period274 312 
Less current portion(1)
8 6 
Asset retirement obligations - long-term$266 $306 
(1) The current portion of the asset retirement obligation is included in the caption “Other accrued liabilities” in the Company’s condensed consolidated balance sheets.

11

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
7.    RELATED PARTY TRANSACTIONS

Deep Blue

In addition to the Deep Blue transaction discussed in Note 4— Acquisitions and Divestitures, the Company has other significant related party transactions with Deep Blue which include (i) contingent consideration and other post-close adjustments receivable from Deep Blue, (ii) accrued capital expenditures and other accrued payables related to a commitment to fund certain capital expenditures on projects that were in process at the time of the Deep Blue transaction, and (iii) lease operating expenses and capitalized expenses related to fees paid to Deep Blue under a 15-year dedication for its produced water and supply water within a 12-county area of mutual interest in the Midland Basin.

The following table presents the significant related party balances included in the condensed consolidated balance sheet at March 31, 2024 and December 31, 2023:
March 31,December 31,
20242023
(In millions)
Current assets - Accounts receivable$65 $61 
Current liabilities - Accrued capital expenditures$(32)$(21)
Current liabilities - Other accrued liabilities$(15)$(18)

During the three months ended March 31, 2024, the Company recorded approximately $31 million for water services provided by Deep Blue during the completion phase of wells. These costs were capitalized and are included in the caption “Oil and natural gas properties” on the condensed consolidated balance sheet.

The following table presents the significant related party transactions included in the condensed consolidated statement of operations for the three months ended March 31, 2024 and 2023:
Three Months Ended
20242023
(In millions)
Lease operating expenses$26 $ 

12

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
8.    DEBT

Long-term debt consisted of the following as of the dates indicated:

March 31,December 31,
20242023
(In millions)
3.250% Senior Notes due 2026
$750 $750 
5.625% Senior Notes due 2026
14 14 
7.125% Medium-term Notes, Series B, due 2028
73 73 
3.500% Senior Notes due 2029
915 921 
3.125% Senior Notes due 2031
767 789 
6.250% Senior Notes due 2033
1,100 1,100 
4.400% Senior Notes due 2051
650 650 
4.250% Senior Notes due 2052
750 750 
6.250% Senior Notes due 2053
650 650 
Unamortized debt issuance costs(45)(46)
Unamortized discount costs(21)(23)
Unamortized premium costs4 4 
Unamortized basis adjustment of dedesignated interest rate swap agreements(1)
(81)(84)
Viper revolving credit facility273 263 
Viper 5.375% Senior Notes due 2027
430 430 
Viper 7.375% Senior Notes due 2031
400 400 
Total debt, net6,629 6,641 
Less: current maturities of long-term debt  
Total long-term debt$6,629 $6,641 
(1) Represents the unamortized basis adjustment related to two receive-fixed, pay variable interest rate swap agreements which were previously designated as fair value hedges of the Company’s $1.2 billion 3.500% fixed rate senior notes due 2029. This basis adjustment is being amortized to interest expense over the remaining term of the 2029 Notes utilizing the effective interest method.

References in this section to the Company shall mean Diamondback Energy, Inc. and Diamondback E&P, collectively, unless otherwise specified.

Credit Agreement

On March 6, 2024, Diamondback E&P, as borrower, and Diamondback Energy, Inc., as parent guarantor, entered into a fourteenth amendment to the existing credit agreement, which upon consummation of the pending Endeavor Acquisition (as defined in Note 16—Endeavor Energy Resources, LP Acquisition) will among other things, (i) increase the maximum credit amount from $1.6 billion to $2.5 billion, (ii) decrease the swingline commitments amount from $100 million to $50 million and (iii) make certain amendments to the representations and warranties, affirmative and negative covenants, and events of default. As of March 31, 2024, the Company had no outstanding borrowings under the credit agreement and $1.6 billion available for future borrowings. During the three months ended March 31, 2023, the weighted average interest rate on borrowings under the credit agreement was 6.02%. The credit agreement matures on June 2, 2028.

As of March 31, 2024, the Company was in compliance with all financial maintenance covenants under the credit agreement.

13

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Term Loan Agreement

In connection with the pending Endeavor Acquisition (as defined in Note 16—Endeavor Energy Resources, LP Acquisition), Diamondback Energy, Inc., as guarantor, entered into a Term Loan Credit Agreement with Diamondback E&P LLC, as borrower, and Citibank, N.A., as administrative agent (the “Term Loan Agreement”) on February 29, 2024.

The Term Loan Agreement provides the Company with the ability to borrow up to $1.5 billion, which is comprised of $1 billion of Tranche A Loans and $500 million of Tranche B Loans (collectively, the “Term Loans”) on an unsecured basis to pay a portion of the cash consideration for the Endeavor Acquisition (as defined in Note 16—Endeavor Energy Resources, LP Acquisition), repay certain debt of Endeavor or pay fees, costs and expenses related to the acquisition. As of March 31, 2024, the Company had no outstanding borrowings under the Term Loan Agreement and $1.5 billion available for future borrowings.

The availability of the Term Loans, which have not yet been funded, is subject to the satisfaction of certain limited customary acquisition-financing conditions under the Term Loan Agreement. The Term Loans will be made in a single borrowing on the date of closing of the Endeavor Acquisition (as defined in Note 16—Endeavor Energy Resources, LP Acquisition) (the “Closing Date”) and will mature and be payable in full, in the case of the Tranche A Loans, on the first anniversary of the Closing Date and, in the case of the Tranche B Loans, on the second anniversary of the Closing Date.

Outstanding borrowings under the Term Loan Agreement bear interest at a per annum rate elected by the Company that is equal to (i) term SOFR plus 0.10% (“Adjusted Term SOFR”) or (ii) an alternate base rate (which is equal to the greatest of the prime rate, the federal funds effective rate plus 0.50%, and 1-month Adjusted Term SOFR plus 1.0%), in each case plus the applicable margin. After giving effect to the amendment, (i) the applicable margin ranges from 0.125% to 1.000% and 0.250% to 1.125% for Tranche A and Tranche B, respectively, per annum in the case of the alternate base rate, and from 1.125% to 2.000% and 1.250% to 2.125% for Tranche A and Tranche B, respectively, per annum in the case of Adjusted Term SOFR, in each case based on the pricing level, and (ii) the commitment fee is equal to 0.125% per annum on the aggregate principal amount of the commitments. The pricing level depends on the Company’s long-term senior unsecured debt ratings.

Bridge Facility

On February 11, 2024, in connection with the pending Endeavor Acquisition (as defined in Note 16—Endeavor Energy Resources, LP Acquisition), Diamondback Energy, Inc., as guarantor, obtained commitments of $8.0 billion to a 364-day senior unsecured term loan facility with Diamondback E&P LLC, as borrower, and Citigroup Global Markets Inc., as administrative agent (the “Bridge Facility”). The Bridge Facility was reduced on a dollar-for-dollar basis by the amount of the Term Loan Agreement to $6.5 billion on February 29, 2024. The Bridge Facility will be further reduced on a dollar-for-dollar basis by the April 2024 Notes as defined and discussed further in Note 17— Subsequent Events. The proceeds from the Bridge Facility may be used to repay certain debt of Endeavor and pay fees, costs and expenses related to the pending Endeavor Acquisition. As of March 31, 2024, the Company had no outstanding borrowings under the Bridge Facility.

Outstanding borrowings under the Bridge Facility bear interest at a per annum rate elected by the Company that is equal to (i) term SOFR plus 0.10% (“Adjusted Term SOFR”) or (ii) an alternate base rate (which is equal to the greatest of the prime rate, the federal funds effective rate plus 0.50%, and 1-month Adjusted Term SOFR plus 1.0%), in each case plus the applicable margin. The applicable margin ranges from (i) 1.125% to 2.000% from the Closing Date through 89 days following the Closing Date, (ii) 1.375% to 2.250% from the 90th day following the Closing Date through the 179th day following the Closing Date, (iii) 1.625% to 2.500% from the 180th day following the Closing Date through the 269th day following the Closing Date, and (iv) 1.875% to 2.750% for the 270th day following the Closing Date through the expiration of the Bridge Facility, in each case based on the pricing level, and (ii) the commitment fee is equal to 0.125% per annum on the aggregate principal amount of the commitments. The pricing level depends on the Company’s long-term senior unsecured debt ratings.

Retirement of Notes

In the first quarter of 2024, the Company opportunistically repurchased principal amounts of $22 million of its 3.125% Senior Notes due 2031 and $6 million of its 3.500% Senior Notes due 2029 for total cash consideration, including accrued interest paid of $25 million. These repurchases resulted in an immaterial gain on extinguishment of debt during the three months ended March 31, 2024.

14

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Viper’s Credit Agreement

Viper LLC’s credit agreement, as amended to date, provides for a revolving credit facility in the maximum credit amount of $2.0 billion with a borrowing base of $1.3 billion based on Viper LLC’s oil and natural gas reserves and other factors. As of March 31, 2024, the elected commitment amount was $850 million, with $273 million of outstanding borrowings and $577 million available for future borrowings. During the three months ended March 31, 2024 and 2023, the weighted average interest rates on borrowings under the Viper credit agreement were 7.65% and 6.10%, respectively. As of March 31, 2024, Viper LLC was in compliance with all financial maintenance covenants under the Viper credit agreement. The revolving credit facility will mature on September 22, 2028.

9.    STOCKHOLDERS’ EQUITY AND EARNINGS (LOSS) PER SHARE

Stock Repurchase Program

The Company’s board of directors has approved a common stock repurchase program to acquire up to $4.0 billion of the Company’s outstanding common stock, excluding excise tax. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, contractual obligations and other factors. The repurchase program does not require the Company to acquire any specific number of shares. This repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. During the three months ended March 31, 2024 and 2023, the Company repurchased, excluding excise tax, approximately $42 million and $332 million of common stock under this repurchase program, respectively. As of March 31, 2024, approximately $1.6 billion remained available for use to repurchase shares under the Company’s common stock repurchase program, excluding excise tax.

Change in Ownership of Consolidated Subsidiaries

Non-controlling interests in the accompanying condensed consolidated financial statements represent minority interest ownership in Viper and are presented as a component of equity. When the Company’s relative ownership interests in Viper change, adjustments to non-controlling interest and additional paid-in-capital, tax effected, will occur. The following table summarizes changes in the ownership interest in consolidated subsidiaries during the periods presented:

Three Months Ended March 31,
20242023
(In millions)
Net income (loss) attributable to the Company$768 $712 
Change in ownership of consolidated subsidiaries(55)(9)
Change from net income (loss) attributable to the Company's stockholders and transfers with non-controlling interest$713 $703 

Dividends

The following table presents dividends and distribution equivalent rights paid on the Company’s common stock during the respective periods:

BaseVariableTotalTotal
($ per share)
(In millions)
2024
First quarter$0.90 $2.18 $3.08 $552 
2023
First quarter$0.80 $2.15 $2.95 $546 

15

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Earnings (Loss) Per Share

The Company’s earnings (loss) per share amounts have been computed using the two-class method. The two-class method is an earnings allocation proportional to the respective ownership among holders of common stock and participating securities. Basic earnings (loss) per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share include the effect of potentially dilutive non-participating securities outstanding for the period. Additionally, the per share earnings of Viper are included in the consolidated earnings per share computation based on the consolidated group’s holdings of the subsidiaries.

A reconciliation of the components of basic and diluted earnings per common share is presented in the table below:

Three Months Ended March 31,
20242023
($ in millions, except per share amounts, shares in thousands)
Net income (loss) attributable to common shares$768 $712 
Less: distributed and undistributed earnings allocated to participating securities(1)
5 5 
Net income (loss) attributable to common stockholders$763 $707 
Weighted average common shares outstanding:
Basic weighted average common shares outstanding178,477 181,988 
Effect of dilutive securities:
Weighted-average potential common shares issuable  
Diluted weighted average common shares outstanding178,477 181,988 
Basic net income (loss) attributable to common shares$4.28 $3.88 
Diluted net income (loss) attributable to common shares$4.28 $3.88 
(1)    Unvested restricted stock awards and performance stock awards that contain non-forfeitable distribution equivalent rights are considered participating securities and therefore are included in the earnings per share calculation pursuant to the two-class method.

10.    EQUITY-BASED COMPENSATION

Under the Equity Plan approved by the board of directors, the Company is authorized to issue up to 11.8 million shares of incentive and non-statutory stock options, restricted stock awards and restricted stock units, performance awards and stock appreciation rights to eligible employees. The Company currently has outstanding restricted stock units and performance-based restricted stock units under the Equity Plan. At March 31, 2024, approximately 4.7 million shares of common stock remain available for future grants under the Equity Plan. The Company classifies its restricted stock units and performance-based restricted stock units as equity-based awards and estimates the fair values of restricted stock awards and units as the closing price of the Company’s common stock on the grant date of the award, which is expensed over the applicable vesting period.

In addition to the Equity Plan, Viper maintains its own long-term incentive plan, which is not significant to the Company.

The following table presents the financial statement impacts of equity compensation plans and related costs on the Company’s financial statements:
Three Months Ended March 31,
20242023
(In millions)
General and administrative expenses$14 $11 
Equity-based compensation capitalized pursuant to full cost method of accounting for oil and natural gas properties$7 $5 

16

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Restricted Stock Units

The following table presents the Company’s restricted stock unit activity during the three months ended March 31, 2024 under the Equity Plan:
Restricted Stock
 Units
Weighted Average Grant-Date
Fair Value
Unvested at December 31, 2023
751,196 $132.29 
Granted308,923 $180.39 
Vested(82,003)$152.41 
Forfeited(7,506)$139.36 
Unvested at March 31, 2024
970,610 $145.85 

The aggregate grant date fair value of restricted stock units that vested during the three months ended March 31, 2024 was $12 million. As of March 31, 2024, the Company’s unrecognized compensation cost related to unvested restricted stock units was $115 million, which is expected to be recognized over a weighted-average period of 2.2 years.

Performance Based Restricted Stock Units

The following table presents the Company’s performance restricted stock units activity under the Equity Plan for the three months ended March 31, 2024:

Performance Restricted Stock UnitsWeighted Average Grant-Date Fair Value
Unvested at December 31, 2023
278,056 $234.80 
Granted110,989 $214.14 
Unvested at March 31, 2024(1)
389,045 $228.91 
(1)A maximum of 923,176 units could be awarded based upon the Company’s final TSR ranking.

As of March 31, 2024, the Company’s unrecognized compensation cost related to unvested performance based restricted stock awards and units was $52 million, which is expected to be recognized over a weighted-average period of 2.0 years.

In March 2024, eligible employees received performance restricted stock unit awards totaling 110,989 units from which a minimum of 0% and a maximum of 200% of the units could be awarded based upon the measurement of total stockholder return of the Company’s common stock as compared to a designated peer group during the three-year performance period of January 1, 2024 to December 31, 2026 and cliff vest at December 31, 2026 subject to continued employment. The initial payout of the March 2024 awards will be further adjusted by a TSR modifier that may reduce the payout or increase the payout up to a maximum of 250%.

The fair value of each performance restricted stock unit issuance is estimated at the date of grant using a Monte Carlo simulation, which results in an expected percentage of units to be earned during the performance period.

The following table presents a summary of the grant-date fair values of performance restricted stock units granted and the related assumptions for the awards granted during the periods presented:

March 2024
Grant-date fair value$341.81 
Risk-free rate4.38 %
Company volatility41.40 %

17

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
11.    INCOME TAXES

The following table provides the Company’s provision for (benefit from) income taxes and the effective income tax rate for the periods indicated:

Three Months Ended March 31,
20242023
(In millions, except for tax rate)
Provision for (benefit from) income taxes$223 $207 
Effective income tax rate21.6 %21.7 %

Total income tax expense from continuing operations for the three months ended March 31, 2024 and 2023 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to (i) state income taxes, net of federal benefit, and (ii) the impact of permanent differences between book and taxable income.

As of March 31, 2024, Viper maintained a partial valuation allowance against its deferred tax assets, based on its assessment of all available evidence, both positive and negative, supporting realizability of Viper’s deferred tax assets.

In connection with the public offering of Viper’s Class A common stock and resulting change of ownership in Viper during the three months ended March 31, 2024, the Company recorded a $36 million increase in tax payable and a $3 million increase in deferred tax liability through paid in capital and an $18 million increase in the deferred tax asset, net of valuation allowance, through non-controlling interest on the Company’s condensed consolidated balance sheet.

Based on application of the Inflation Reduction Act of 2022 guidance, the Company’s income tax expense for the three months ended March 31, 2024 was not impacted by the corporate alternative minimum tax. The Company’s excise tax during the three months ended March 31, 2024 was immaterial and was recognized as part of the cost basis of the units repurchased.

12.    DERIVATIVES

At March 31, 2024, the Company has commodity derivative contracts and interest rate swaps outstanding. All derivative financial instruments are recorded at fair value.

Commodity Contracts

The Company has entered into multiple crude oil and natural gas derivatives, indexed to the respective indices as noted in the table below, to reduce price volatility associated with certain of its oil and natural gas sales. The Company has not designated its commodity derivative instruments as hedges for accounting purposes and, as a result, marks its commodity derivative instruments to fair value and recognizes the cash and non-cash changes in fair value in the condensed consolidated statements of operations under the caption “Gain (loss) on derivative instruments, net.”

By using derivative instruments to economically hedge exposure to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company has entered into commodity derivative instruments only with counterparties that are also lenders under its credit facility and have been deemed an acceptable credit risk. As such, collateral is not required from either the counterparties or the Company on its outstanding commodity derivative contracts.

18

Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
As of March 31, 2024, the Company had the following outstanding commodity derivative contracts. When aggregating multiple contracts, the weighted average contract price is disclosed.

SwapsCollars
Settlement MonthSettlement YearType of ContractBbls/MMBtu Per DayIndexWeighted Average DifferentialWeighted Average Floor PriceWeighted Average Ceiling Price
OIL
Apr. - Jun.
2024
Costless Collar
6,000
WTI Cushing
$$65.00$95.55
Apr. - Dec.
2024
Basis Swap(1)
12,000Argus WTI Midland$1.19$$
Apr. - Dec.
2024Roll Swap40,000WTI Cushing$0.82$$
Jul. - Dec.2024Costless Collar4,000WTI Cushing$$55.00$93.66
NATURAL GAS
Apr. - Dec.
2024Costless Collar290,000Henry Hub$$2.83$7.52
Apr. - Dec.
2024
Basis Swap(1)
380,000Waha Hub$(1.18)$$
Jan. - Dec.
2025
Basis Swap(1)
310,000Waha Hub$(0.69)$$
Jan. - Dec.
2025
Costless Collar150,000Henry Hub$$2.50$5.31
(1)    The Company has fixed price basis swaps for the spread between the Cushing crude oil price and the Midland WTI crude oil price as well as the spread between the Henry Hub natural gas price and the Waha Hub natural gas price. The weighted average differential represents the amount of reduction to the Cushing, Oklahoma oil price and the Waha Hub natural gas price for the notional volumes covered by the basis swap contracts.

Settlement MonthSettlement YearType of ContractBbls Per DayIndexStrike PriceDeferred Premium
OIL
Apr. - Jun.2024Put110,000Brent$55.45$1.49
Apr. - Jun.2024Put32,000Argus WTI Houston$55.63$1.56
Apr. - Jun.2024Put39,000
WTI Cushing
$59.23$1.49
Jul. - Sep.
2024Put80,000Brent$55.25$1.55
Jul. - Sep.
2024Put28,000Argus WTI Houston$56.07$1.58
Jul. - Sep.
2024Put51,000
WTI Cushing
$57.65$1.54
Oct. - Dec.2024Put44,000Brent$55.23$1.61
Oct. - Dec.2024Put14,000Argus WTI Houston$57.14$1.66
Oct. - Dec.2024Put40,000
WTI Cushing