Diamondback Energy, Inc. [FANG] Filings

10-Q 1 fang-20240930.htm 10-Q fang-20240930

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 September 30, 2024


☐			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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

FANG

The 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 Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller 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 November 1, 2024, the registrant had 291,989,194 shares of common stock outstanding.

DIAMONDBACK ENERGY, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS


			Page
Glossary of Oil and Natural Gas Terms			ii
Glossary of Certain Other Terms			iii
Cautionary Statement Regarding Forward-Looking Statements			iv

PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2

Condensed Consolidated Statements of Stockholders’ Equity			3
Condensed Consolidated Statements of Cash Flows			5
Condensed Notes to Consolidated Financial Statements			6
1. Description of the Business and Basis of Presentation			6
2. Summary of Significant Accounting Policies			7
3. Revenue from Contracts with Customers			9
4. Acquisitions and Divestitures			10
5. Endeavor Energy Resources, LP Acquisition			14
6. Property and Equipment			16
7. Asset Retirement Obligations			17
8. Related Party Transactions			17
9. Debt			18
10. Stockholders' Equity and Earnings (Loss) Per Share			20
11. Equity-Based Compensation			22
12. Income Taxes			24
13. Derivatives			24
14. Fair Value Measurements			27
15. Supplemental Information To Statements of Cash Flows			29
16. Commitments and Contingencies			29
17. Subsequent Events			29
18. Segment Information			30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			33

Item 3. Quantitative and Qualitative Disclosures About Market Risk			50

Item 4. Controls and Procedures			51

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			53

Item 1A. Risk Factors			53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			53

Item 5. Other Information			53

Item 6. Exhibits			54

Signatures			55

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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 Houston			Grade of oil that serves as a benchmark price for oil at Houston, Texas.
Argus WTI Midland			Grade of oil that serves as a benchmark price for oil at Midland, Texas.
Basin			A large depression on the earth’s surface in which sediments accumulate.
Bbl or barrel			One stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons.


BO/d			One barrel of crude oil per day.
BOE			One barrel of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil.
BOE/d			BOE per day.
Brent			A major trading classification of light sweet oil that serves as a benchmark price for oil worldwide.

Completion			The 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.















Henry Hub			Natural gas gathering point that serves as a benchmark price for natural gas futures on the NYMEX.
Horizontal wells			Wells drilled directionally horizontal to allow for development of structures not reachable through traditional vertical drilling mechanisms.



MBbl			One thousand barrels of crude oil and other liquid hydrocarbons.

MBOE			One thousand BOE.
MBOE/d			One thousand BOE per day.
Mcf			One thousand cubic feet of natural gas.

Mineral interests			The interests in ownership of the resource and mineral rights, giving an owner the right to profit from the extracted resources.
MMBtu			One million British Thermal Units.
MMcf			Million cubic feet of natural gas.
Net acres			The sum of the fractional working interest owned in gross acres.


Oil and natural gas properties			Tracts of land consisting of properties to be developed for oil and natural gas resource extraction.








Proved reserves			The 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.


Reserves			The 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).
Reservoir			A 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 interest			An 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 Hub			Natural gas gathering point that serves as a benchmark price for natural gas at western Texas and New Mexico.
Working interest			An 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.
WTI			West 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.

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GLOSSARY OF CERTAIN OTHER TERMS

The following is a glossary of certain other terms that are used in this report:





ASU			Accounting Standards Update.



Equity Plan			The Company’s 2021 Amended and Restated Equity Incentive Plan.
Exchange Act			The Securities Exchange Act of 1934, as amended.
FASB			Financial Accounting Standards Board.
GAAP			Accounting principles generally accepted in the United States.







Nasdaq			The Nasdaq Global Select Market.

OPEC			Organization of the Petroleum Exporting Countries.







SEC			United States Securities and Exchange Commission.
Securities Act			The Securities Act of 1933, as amended.

Guaranteed Senior Notes			The 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, 5.200% Senior Notes due 2027, 3.500% Senior Notes due 2029, 5.150% Senior Notes due 2030, 3.125% Senior Notes due 2031, 6.250% Senior Notes due 2033, 5.400% Senior Notes due 2034, 4.400% Senior Notes due 2051, 4.250% Senior Notes due 2052, 6.250% Senior Notes due 2053, 5.750% Senior Notes due 2054 and 5.900% Senior Notes due 2064.
SOFR			The secured overnight financing rate.
TSR			Total stockholder return of the Company’s common stock.
Viper			Viper Energy, Inc.

Viper LLC			Viper Energy Partners LLC, a Delaware limited liability company and a subsidiary of Viper.

iii

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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 or other effects of strategic transactions (including the recently completed Endeavor Acquisition (as defined below) discussed in this report and other acquisitions or 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;

•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;

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•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 and natural disasters;

•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 Endeavor Acquisition; and

•other risks and factors disclosed or incorporated by reference 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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
	September 30,		December 31,
	2024		2023
	(In millions, except par values and share data)
Assets
Current assets:
Cash and cash equivalents ($169 million and $26 million related to Viper)	$	370	$	582
Restricted cash	3		3
Accounts receivable:
Joint interest and other, net	233		192
Oil and natural gas sales, net ($109 million and $109 million related to Viper)	1,197		654

Inventories	126		63
Derivative instruments	42		17
Prepaid expenses and other current assets	51		110
Total current assets	2,022		1,621
Property and equipment:
Oil and natural gas properties, full cost method of accounting ($21,971 million and $8,659 million excluded from amortization at September 30, 2024 and December 31, 2023, respectively) ($4,771 million and $4,629 million related to Viper and $1,623 million and $1,769 million excluded from amortization related to Viper)	79,718		42,430
Other property, equipment and land	1,417		673
Accumulated depletion, depreciation, amortization and impairment ($1,016 million and $866 million related to Viper)	(18,082)		(16,429)
Property and equipment, net	63,053		26,674
Funds held in escrow	43		—
Equity method investments	377		529

Derivative instruments	38		1
Deferred income taxes, net	62		45
Investment in real estate, net	81		84
Other assets	71		47
Total assets	$	65,747	$	29,001
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade	$	198	$	261
Accrued capital expenditures	641		493
Current maturities of debt	1,000		—
Other accrued liabilities	857		475
Revenues and royalties payable	1,444		764
Derivative instruments	34		86
Income taxes payable	289		29
Total current liabilities	4,463		2,108
Long-term debt ($822 million and $1,083 million related to Viper)	11,923		6,641
Derivative instruments	79		122
Asset retirement obligations	493		239
Deferred income taxes	9,952		2,449
Other long-term liabilities	18		12
Total liabilities	26,928		11,571
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, $0.01 par value; 800,000,000 shares authorized; 292,742,664 and 178,723,871 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	3		2
Additional paid-in capital	34,007		14,142
Retained earnings (accumulated deficit)	3,427		2,489
Accumulated other comprehensive income (loss)	(8)		(8)
Total Diamondback Energy, Inc. stockholders’ equity	37,429		16,625
Non-controlling interest	1,390		805
Total equity	38,819		17,430
Total liabilities and stockholders' equity	$	65,747	$	29,001

See accompanying condensed notes to consolidated financial statements.

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Diamondback Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions, except per share amounts, shares in thousands)
Revenues:
Oil sales	$	2,160	$	1,997	$	6,025	$	5,359
Natural gas sales	(17)		80		38		197
Natural gas liquid sales	211		188		566		507

Sales of purchased oil	282		59		698		59
Other operating income	9		16		28		62
Total revenues	2,645		2,340		7,355		6,184
Costs and expenses:
Lease operating expenses	316		226		825		618
Production and ad valorem taxes	153		118		413		421
Gathering, processing and transportation	102		73		261		209
Purchased oil expense	280		59		696		59
Depreciation, depletion, amortization and accretion	742		442		1,694		1,277


General and administrative expenses	49		34		141		111

Merger and integration expenses	258		1		273		11
Other operating expenses	35		47		68		113
Total costs and expenses	1,935		1,000		4,371		2,819
Income (loss) from operations	710		1,340		2,984		3,365
Other income (expense):
Interest expense, net	(18)		(37)		(101)		(130)
Other income (expense), net	89		33		87		61

Gain (loss) on derivative instruments, net	131		(76)		101		(358)



Gain (loss) on extinguishment of debt	—		—		2		(4)
Income (loss) from equity investments, net	6		9		23		39
Total other income (expense), net	208		(71)		112		(392)
Income (loss) before income taxes	918		1,269		3,096		2,973
Provision for (benefit from) income taxes	210		276		685		648
Net income (loss)	708		993		2,411		2,325
Net income (loss) attributable to non-controlling interest	49		78		147		142
Net income (loss) attributable to Diamondback Energy, Inc.	$	659	$	915	$	2,264	$	2,183

Earnings (loss) per common share:
Basic	$	3.19	$	5.07	$	12.00	$	12.01
Diluted	$	3.19	$	5.07	$	12.00	$	12.01
Weighted average common shares outstanding:
Basic	204,730		178,872		187,253		180,400
Diluted	204,730		178,872		187,253		180,400

See accompanying condensed notes to consolidated financial statements.

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Diamondback Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
	Shares	Amount
	($ in millions, shares in thousands)
Balance December 31, 2023	178,724	$	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 awards	82	—		—		—		—		—		—
Change in ownership of consolidated subsidiaries, net	—	—		(55)		—		—		70		15

Net income (loss)	—	—		—		768		—		41		809
Balance March 31, 2024	178,340	2		14,251		2,705		(8)		1,069		18,019
Viper equity-based compensation	—	—		—		—		—		1		1
Distribution equivalent rights payments	—	—		—		(3)		—		—		(3)
Stock-based compensation	—	—		25		—		—		—		25
Cash paid for tax withholding on vested equity awards	(16)	—		(3)		—		—		—		(3)



Dividends to non-controlling interest	—	—		—		—		—		(54)		(54)
Dividends paid	—	—		—		(352)		—		—		(352)
Issuance of shares upon vesting of equity awards	70	—		—		—		—		—		—
Change in ownership of consolidated subsidiaries, net	—	—		(6)		—		—		6		—

Net income (loss)	—	—		—		837		—		57		894
Balance June 30, 2024	178,394	2		14,267		3,187		(8)		1,079		18,527
Viper equity-based compensation	—	—		—		—		—		1		1
Distribution equivalent rights payments	—	—		—		(3)		—		—		(3)
Stock-based compensation	—	—		23		—		—		—		23

Repurchased shares under buyback program	(2,920)	—		(515)		—		—		—		(515)

Common shares issued for acquisition	117,267	1		20,109		—		—		—		20,110
Net proceeds from Viper's issuance of common stock	—	—		—		—		—		476		476
Dividends to non-controlling interest	—	—		—		—		—		(59)		(59)
Dividends paid	—	—		—		(416)		—		—		(416)
Issuance of shares upon vesting of equity awards	2	—		—		—		—		—		—
Change in ownership of consolidated subsidiaries, net	—	—		123		—		—		(156)		(33)

Net income (loss)	—	—		—		659		—		49		708
Balance September 30, 2024	292,743	$	3	$	34,007	$	3,427	$	(8)	$	1,390	$	38,819

See accompanying condensed notes to consolidated financial statements.

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Diamondback Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity - (Continued)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
	Shares	Amount
	($ in millions, shares in thousands)
Balance December 31, 2022	179,841	$	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 acquisition	4,330	—		633		—		—		—		633
Distributions to non-controlling interest	—	—		—		—		—		(34)		(34)
Dividend paid	—	—		—		(542)		—		—		(542)
Exercise of stock options and issuance of restricted stock units and awards	84	—		—		—		—		—		—
Change in ownership of consolidated subsidiaries, net	—	—		(9)		—		—		11		2

Net income (loss)	—	—		—		712		—		34		746
Balance March 31, 2023	181,605	2		14,502		967		(7)		659		16,123

Distribution equivalent rights payments	—	—		—		(1)		—		—		(1)
Stock-based compensation	—	—		22		—		—		—		22
Cash paid for tax withholding on vested equity awards	(18)	—		(1)		—		—		—		(1)
Repurchased shares under buyback program	(2,427)	—		(321)		—		—		—		(321)
Repurchased units under buyback programs	—	—		—		—		—		(23)		(23)

Distributions to non-controlling interest	—	—		—		—		—		(25)		(25)
Dividend paid	—	—		—		(150)		—		—		(150)
Exercise of stock options and vesting of restricted stock units and awards	59	—		—		—		—		—		—
Change in ownership of consolidated subsidiaries, net	—	—		(15)		—		—		17		2

Net income (loss)	—	—		—		556		—		30		586
Balance June 30, 2023	179,219	2		14,187		1,372		(7)		658		16,212

Distribution equivalent rights payments	—	—		—		(2)		—		—		(2)
Stock-based compensation	—	—		21		—		—		—		21
Cash paid for tax withholding on vested equity awards	(1)	—		—		—		—		—		—
Repurchased shares under buyback program	(407)	—		(56)		—		—		—		(56)
Repurchased units under buyback programs	—	—		—		—		—		(10)		(10)

Distributions to non-controlling interest	—	—		—		—		—		(25)		(25)
Dividend paid	—	—		—		(149)		—		—		(149)
Exercise of stock options and vesting of restricted stock units and awards	4	—		—		—		—		—		—
Change in ownership of consolidated subsidiaries, net	—	—		(3)		—		—		3		—

Net income (loss)	—	—		—		915		—		78		993
Balance September 30, 2023	178,815	$	2	$	14,149	$	2,136	$	(7)	$	704	$	16,984

See accompanying condensed notes to consolidated financial statements.

Table of Contents

Diamondback Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
	(In millions)
Cash flows from operating activities:
Net income (loss)	$	2,411	$	2,325
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for (benefit from) deferred income taxes	180		185




Depreciation, depletion, amortization and accretion	1,694		1,277

(Gain) loss on extinguishment of debt	(2)		4

(Gain) loss on derivative instruments, net	(101)		358
Cash received (paid) on settlement of derivative instruments	(36)		(62)
(Income) loss from equity investment, net	(23)		(39)

Equity-based compensation expense	49		40



Other	77		(23)
Changes in operating assets and liabilities:
Accounts receivable	61		(218)

Income tax receivable	12		267

Prepaid expenses and other current assets	78		5
Accounts payable and accrued liabilities	(490)		46


Income taxes payable	(51)		4
Revenues and royalties payable	109		139

Other	104		(12)
Net cash provided by (used in) operating activities	4,072		4,296
Cash flows from investing activities:
Drilling, completions, infrastructure and midstream additions to oil and natural gas properties	(1,934)		(2,052)




Property acquisitions	(7,994)		(1,193)


Proceeds from sale of assets	459		1,400







Other	103		(14)
Net cash provided by (used in) investing activities	(9,366)		(1,859)
Cash flows from financing activities:
Proceeds under term loan agreement	1,000		—
Proceeds from borrowings under credit facilities	1,185		4,466
Repayments under credit facilities	(1,333)		(4,368)
Proceeds from senior notes	5,500		—
Repayment of senior notes	(25)		(134)












Repurchased shares under buyback program	(557)		(709)
Repurchased shares/units under Viper's buyback program	—		(67)
Proceeds from partial sale of investment in Viper Energy, Inc.	451		—

Net proceeds from Viper's issuance of common stock	476		—
Dividends paid to stockholders	(1,316)		(841)

Dividends/distributions to non-controlling interest	(157)		(84)



Other	(142)		(34)
Net cash provided by (used in) financing activities	5,082		(1,771)
Net increase (decrease) in cash and cash equivalents	(212)		666
Cash, cash equivalents and restricted cash at beginning of period	585		164
Cash, cash equivalents and restricted cash at end of period	$	373	$	830

See accompanying condensed notes to consolidated financial statements.

Table of Contents

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 September 30, 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 Midstream LP, a Delaware limited partnership, QEP Resources, Inc., a Delaware corporation and Eclipse Merger Sub II, LLC, a Delaware limited liability company.

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, the Company owned less than 50% 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. As of September 30, 2024, following the completion of the Viper 2024 Equity Offering (as defined and discussed in Note 10—Stockholders' Equity and Earnings (Loss) Per Share) the Company’s ownership of Viper’s voting securities was further reduced to approximately 45%. However, the Company determined, in each case, 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 September 30, 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

Table of Contents

Diamondback Energy, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements - (Continued)

(Unaudited)

fiscal year ended December 31, 2023, which contains a summary of the Company’s significant accounting policies and other disclosures.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These reclassifications had an immaterial effect on the previously reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.

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, the Israel-Hamas war and other conflicts in the Middle East, 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 stockholders (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. The Viper 2024 Equity Offering (as defined and discussed in Note 10—Stockholders' Equity and Earnings (Loss) Per Share) was not determined to be an event that would cause the Company to change its conclusion regarding Viper’s status as a VIE.

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.

Table of Contents

Diamondback Energy, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements - (Continued)

(Unaudited)

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 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.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses,” which requires additional disclosure about specified categories of expenses included in relevant expense captions presented on the income statement. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may 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.

Table of Contents

Diamondback Energy, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements - (Continued)

(Unaudited)

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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Oil sales	$	2,160	$	1,997	$	6,025	$	5,359
Natural gas sales	(17)		80		38		197
Natural gas liquid sales	211		188		566		507
Total oil, natural gas and natural gas liquid revenues	2,354		2,265		6,629		6,063
Sales of purchased oil	282		59		698		59
Other service revenues	6		13		21		56
Total revenue from contracts with customers	$	2,642	$	2,337	$	7,348	$	6,178

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


	Three Months Ended September 30, 2024								Three Months Ended September 30, 2023
	Midland Basin		Delaware Basin		Other		Total		Midland Basin		Delaware Basin		Other		Total
	(In millions)
Oil sales	$	1,823	$	336	$	1	$	2,160	$	1,588	$	407	$	2	$	1,997
Natural gas sales	(8)		(9)		—		(17)		52		28		—		80
Natural gas liquid sales	179		33		(1)		211		138		50		—		188
Total	$	1,994	$	360	$	—	$	2,354	$	1,778	$	485	$	2	$	2,265

	Nine Months Ended September 30, 2024								Nine Months Ended September 30, 2023
	Midland Basin		Delaware Basin		Other		Total		Midland Basin		Delaware Basin		Other		Total
	(In millions)
Oil sales	$	4,985	$	1,034	$	6	$	6,025	$	4,205	$	1,149	$	5	$	5,359
Natural gas sales	28		9		1		38		131		66		—		197
Natural gas liquid sales	444		122		—		566		363		144		—		507
Total	$

Diamondback Energy, Inc. [FANG] Filings
10-Q	[2024-11]
10-Q	[2024-08]
10-Q	[2024-05-02]
10-K	[2024-02-22]
10-Q	[2023-11-08]
10-Q	[2023-08-03]
10-Q	[2023-05-03]
10-K	[2023-02-23]
10-Q	[2022-11-08]
10-Q	[2022-08-03]
10-Q	[2022-05-05]
10-K	[2022-02-24]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-07]
10-K	[2021-02-25]
10-Q	[2020-11-05]
10-Q	[2020-08-10]
10-Q	[2020-05-08]
10-K	[2020-02-27]
10-Q	[2019-11-06]
10-Q	[2019-08-09]
10-Q	[2019-05-10]
10-K	[2019-02-25]
10-Q	[2018-11-07]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-02-15]
10-Q	[2017-11-07]
10-Q	[2017-08-02]
10-Q	[2017-05-04]
10-K	[2017-02-15]
10-Q	[2016-11-08]
10-Q	[2016-08-09]
10-Q	[2016-05-05]
10-K	[2016-02-19]
10-Q	[2015-11-06]
10-Q	[2015-08-10]
10-Q	[2015-05-07]
10-K	[2015-02-20]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-09]
10-K	[2014-02-19]
10-Q	[2013-11-05]
10-Q	[2013-08-08]
S-1	[2013-08-08]
S-1	[2013-06-07]
10-Q	[2013-05-09]
S-1	[2013-04-11]
10-K	[2013-03-01]
10-Q	[2012-11-16]
S-1	[2012-02-14]