Document
false--12-31Q120190001539838falseLarge Accelerated Filerfalse1.01.04.04.0967000000096460000000.010.012000000002000000001642734471646156421642734471646156420.04750.053750.04750.053750.046250.071250.073200.073500.047500.053750.046250.071250.073200.073500.047500.053752019-10-312020-10-312022-10-312021-10-312020-05-302021-05-302023-05-302022-05-302016-10-282022-11-012019-11-012021-11-012020-11-012016-12-202023-05-312020-05-312022-05-312021-05-3100001000000P3YP5Y 0001539838 2019-01-01 2019-03-31 0001539838 fang:PartnershipCreditFacilityMember 2019-01-01 2019-03-31 0001539838 us-gaap:PhantomShareUnitsPSUsMember fang:ViperEnergyPartnersLPLongTermIncentivePlanMember 2019-01-01 2019-03-31 0001539838 2019-05-03 0001539838 2018-12-31 0001539838 2019-03-31 0001539838 2018-01-01 2018-03-31 0001539838 us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember 2018-01-01 2018-03-31 0001539838 us-gaap:NaturalGasMidstreamMember 2019-01-01 2019-03-31 0001539838 fang:NaturalGasLiquidsProductionMember 2019-01-01 2019-03-31 0001539838 fang:NaturalGasLiquidsProductionMember 2018-01-01 2018-03-31 0001539838 us-gaap:NaturalGasMidstreamMember 2018-01-01 2018-03-31 0001539838 fang:OilExplorationandProductionMember 2018-01-01 2018-03-31 0001539838 us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember 2019-01-01 2019-03-31 0001539838 us-gaap:NaturalGasProductionMember 2018-01-01 2018-03-31 0001539838 fang:OilExplorationandProductionMember 2019-01-01 2019-03-31 0001539838 us-gaap:NaturalGasProductionMember 2019-01-01 2019-03-31 0001539838 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001539838 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001539838 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0001539838 us-gaap:NoncontrollingInterestMember 2018-01-01 2018-03-31 0001539838 us-gaap:CommonStockMember 2019-03-31 0001539838 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001539838 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001539838 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0001539838 us-gaap:NoncontrollingInterestMember 2018-03-31 0001539838 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0001539838 us-gaap:NoncontrollingInterestMember 2018-12-31 0001539838 2018-03-31 0001539838 us-gaap:RetainedEarningsMember 2018-03-31 0001539838 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001539838 us-gaap:NoncontrollingInterestMember 2017-12-31 0001539838 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0001539838 us-gaap:CommonStockMember 2018-12-31 0001539838 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001539838 us-gaap:CommonStockMember 2017-12-31 0001539838 us-gaap:RetainedEarningsMember 2017-12-31 0001539838 us-gaap:CommonStockMember 2018-03-31 0001539838 us-gaap:RetainedEarningsMember 2018-12-31 0001539838 us-gaap:RetainedEarningsMember 2019-03-31 0001539838 2017-12-31 0001539838 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001539838 us-gaap:NoncontrollingInterestMember 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember 2019-03-31 0001539838 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-03-31 0001539838 fang:EnergenCorporationAcquisitionMember 2018-01-01 2018-03-31 0001539838 fang:EnergenCorporationAcquisitionMember 2018-11-29 0001539838 fang:EnergenCorporationAcquisitionMember 2018-10-01 2018-12-31 0001539838 fang:EnergenCorporationAcquisitionMember 2018-12-31 0001539838 fang:EnergenCorporationAcquisitionMember 2019-03-31 0001539838 fang:EnergenCorporationAcquisitionMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember us-gaap:OverAllotmentOptionMember 2019-03-01 2019-03-01 0001539838 2018-05-10 0001539838 srt:NonGuarantorSubsidiariesMember fang:FollowonPublicOfferingMember 2019-03-01 2019-03-01 0001539838 us-gaap:GeneralPartnerMember 2018-05-10 2018-06-30 0001539838 srt:ParentCompanyMember 2018-07-01 2018-07-31 0001539838 us-gaap:GeneralPartnerMember 2018-07-01 2018-07-31 0001539838 2018-05-10 2018-06-30 0001539838 srt:ParentCompanyMember 2018-05-10 0001539838 fang:PartnershipAgreementMember us-gaap:GeneralPartnerMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember 2018-05-10 2018-06-30 0001539838 srt:NonGuarantorSubsidiariesMember fang:FollowonPublicOfferingMember 2019-03-01 0001539838 fang:PartnershipAgreementMember us-gaap:GeneralPartnerMember 2018-01-01 2018-03-31 0001539838 us-gaap:LeaseholdImprovementsMember 2019-01-01 2019-03-31 0001539838 us-gaap:BuildingMember 2019-01-01 2019-03-31 0001539838 us-gaap:LandImprovementsMember 2019-01-01 2019-03-31 0001539838 2018-01-01 2018-12-31 0001539838 us-gaap:AboveMarketLeasesMember 2019-01-01 2019-03-31 0001539838 us-gaap:LeasesAcquiredInPlaceMember 2019-01-01 2019-03-31 0001539838 srt:MinimumMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember 2019-01-01 2019-03-31 0001539838 us-gaap:OilAndGasPropertiesMember 2019-03-31 0001539838 us-gaap:OilAndGasPropertiesMember 2018-12-31 0001539838 us-gaap:PropertyPlantAndEquipmentOtherTypesMember 2019-03-31 0001539838 us-gaap:PropertyPlantAndEquipmentOtherTypesMember 2018-12-31 0001539838 us-gaap:OilAndGasPropertiesMember 2016-01-01 2016-12-31 0001539838 us-gaap:OilAndGasPropertiesMember 2017-01-01 2017-12-31 0001539838 us-gaap:OilAndGasPropertiesMember 2015-01-01 2015-12-31 0001539838 us-gaap:OilAndGasPropertiesMember 2018-01-01 2018-12-31 0001539838 us-gaap:OilAndGasPropertiesMember 2019-01-01 2019-03-31 0001539838 fang:GrayOakPipelineMember 2019-03-29 0001539838 fang:GrayOakPipelineMember 2019-01-01 2019-03-31 0001539838 fang:EpicPipelineMember 2019-03-31 0001539838 fang:HMWFluidManagementLLCMember 2019-01-01 2019-03-31 0001539838 fang:GrayOakPipelineMember 2016-10-28 0001539838 fang:HMWFluidManagementLLCMember 2018-01-01 2018-03-31 0001539838 fang:HMWFluidManagementLLCMember 2014-10-31 0001539838 fang:EpicPipelineMember 2019-02-01 0001539838 fang:GrayOakPipelineMember 2019-02-15 0001539838 fang:GrayOakPipelineMember 2019-03-31 0001539838 fang:SeniorUnsecuredAdditionalNotesdue2025Member 2018-01-29 0001539838 fang:CompanyCreditFacilityMember us-gaap:FederalFundsEffectiveSwapRateMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:PartnershipCreditFacilityMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member 2016-12-20 0001539838 fang:PartnershipCreditFacilityMember 2019-03-31 0001539838 fang:EnergenMember fang:MediumtermNotesSeriesADueJuly282027Member 2018-11-29 0001539838 fang:EnergenMember 2018-11-29 0001539838 srt:MinimumMember fang:CompanyCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0001539838 fang:CompanyCreditFacilityMember 2019-03-31 0001539838 fang:SeniorUnsecuredAdditionalNotesdue2024Member 2018-09-18 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:DebtInstrumentRedemptionPeriodFourMember 2019-01-01 2019-03-31 0001539838 fang:CompanyCreditFacilityMember 2019-03-25 0001539838 fang:SeniorUnsecuredAdditionalNotesdue2025Member 2018-01-29 2018-01-29 0001539838 fang:PartnershipCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:DebtInstrumentRedemptionPeriodOneMember 2019-01-01 2019-03-31 0001539838 srt:MinimumMember fang:PartnershipCreditFacilityMember 2019-01-01 2019-03-31 0001539838 fang:EnergenMember fang:MediumtermNotesSeriesBMember 2018-11-29 0001539838 fang:SeniorUnsecuredNotesdue2024Member 2016-10-28 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:DebtInstrumentRedemptionPeriodThreeMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:DebtInstrumentRedemptionPeriodOneMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:PartnershipCreditFacilityMember us-gaap:BaseRateMember 2019-01-01 2019-03-31 0001539838 fang:EnergenMember fang:MediumtermNotesSeriesADueJuly282022Member 2018-11-29 0001539838 fang:SeniorUnsecuredNotesdue2025Member 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:SeniorUnsecuredNotesdue2024Member us-gaap:DebtInstrumentRedemptionPeriodFiveMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:PartnershipCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0001539838 fang:DrillCoAgreementMember 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:DebtInstrumentRedemptionPeriodFourMember 2019-01-01 2019-03-31 0001539838 srt:MinimumMember fang:CompanyCreditFacilityMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2019-01-01 2019-03-31 0001539838 fang:CompanyCreditFacilityMember 2019-01-01 2019-03-31 0001539838 fang:DrillCoAgreementMember 2019-01-01 2019-03-31 0001539838 fang:PartnershipCreditFacilityMember us-gaap:FederalFundsEffectiveSwapRateMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:CompanyCreditFacilityMember 2019-01-01 2019-03-31 0001539838 srt:MinimumMember fang:PartnershipCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2019-01-01 2019-03-31 0001539838 srt:MinimumMember fang:CompanyCreditFacilityMember us-gaap:BaseRateMember 2019-01-01 2019-03-31 0001539838 fang:EnergenMember us-gaap:SeniorSubordinatedNotesMember 2018-11-29 0001539838 fang:CompanyCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:DebtInstrumentRedemptionPeriodFiveMember 2019-01-01 2019-03-31 0001539838 srt:MinimumMember fang:PartnershipCreditFacilityMember us-gaap:BaseRateMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:CompanyCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:DebtInstrumentRedemptionPeriodFiveMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:SeniorUnsecuredNotesdue2025Member us-gaap:DebtInstrumentRedemptionPeriodFiveMember 2019-01-01 2019-03-31 0001539838 srt:MaximumMember fang:CompanyCreditFacilityMember us-gaap:BaseRateMember 2019-01-01 2019-03-31 0001539838 fang:SeniorUnsecuredAdditionalNotesdue2024Member 2018-09-18 2018-09-18 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:DebtInstrumentRedemptionPeriodThreeMember 2019-01-01 2019-03-31 0001539838 fang:A7.32MediumTermSeriesAdue2022Member 2019-03-31 0001539838 fang:PartnershipCreditFacilityMember 2018-12-31 0001539838 fang:A7.35MediumTermNotesSeriesAMember 2019-03-31 0001539838 fang:A7.125MediumTermNotesSeriesBMemberMember 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member 2018-12-31 0001539838 fang:CompanyCreditFacilityMember 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member 2019-03-31 0001539838 fang:A7.32MediumTermSeriesAdue2022Member 2018-12-31 0001539838 fang:A7.125MediumTermNotesSeriesBMemberMember 2018-12-31 0001539838 fang:A4.625Notesdue2021Member 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member 2018-12-31 0001539838 fang:DrillCoAgreementMember 2018-12-31 0001539838 fang:A7.35MediumTermNotesSeriesAMember 2018-12-31 0001539838 fang:A4.625Notesdue2021Member 2019-03-31 0001539838 srt:MinimumMember fang:CompanyCreditFacilityMember 2019-03-31 0001539838 srt:MaximumMember fang:CompanyCreditFacilityMember 2019-03-31 0001539838 srt:MaximumMember fang:PartnershipCreditFacilityMember 2019-03-31 0001539838 srt:MinimumMember fang:PartnershipCreditFacilityMember 2019-03-31 0001539838 us-gaap:PerformanceSharesMember fang:EquityPlanMember 2019-03-31 0001539838 us-gaap:PerformanceSharesMember fang:EquityPlanMember 2019-01-01 2019-03-31 0001539838 us-gaap:RestrictedStockUnitsRSUMember fang:EquityPlanMember 2019-03-31 0001539838 us-gaap:RestrictedStockUnitsRSUMember fang:EquityPlanMember 2018-01-01 2018-03-31 0001539838 srt:MaximumMember us-gaap:PerformanceSharesMember fang:EquityPlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-03-01 2019-03-31 0001539838 us-gaap:RestrictedStockUnitsRSUMember fang:EquityPlanMember 2019-01-01 2019-03-31 0001539838 us-gaap:PerformanceSharesMember fang:EquityPlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-03-01 2019-03-31 0001539838 srt:MinimumMember us-gaap:PerformanceSharesMember fang:EquityPlanMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-03-01 2019-03-31 0001539838 us-gaap:PerformanceSharesMember fang:EquityPlanMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-03-01 2019-03-31 0001539838 srt:MinimumMember us-gaap:PerformanceSharesMember fang:EquityPlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-03-01 2019-03-31 0001539838 srt:MaximumMember us-gaap:PerformanceSharesMember fang:EquityPlanMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-03-01 2019-03-31 0001539838 us-gaap:PhantomShareUnitsPSUsMember fang:ViperEnergyPartnersLPLongTermIncentivePlanMember 2019-03-31 0001539838 us-gaap:PerformanceSharesMember fang:EquityPlanMember 2018-12-31 0001539838 us-gaap:PhantomShareUnitsPSUsMember fang:ViperEnergyPartnersLPLongTermIncentivePlanMember 2018-12-31 0001539838 us-gaap:RestrictedStockUnitsRSUMember fang:EquityPlanMember 2018-12-31 0001539838 us-gaap:PerformanceSharesMember fang:EquityPlanMember 2019-03-01 2019-03-31 0001539838 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-03-31 0001539838 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-03-31 0001539838 us-gaap:StockAppreciationRightsSARSMember fang:EquityPlanMember 2019-01-01 2019-03-31 0001539838 us-gaap:StockAppreciationRightsSARSMember fang:EquityPlanMember 2019-03-31 0001539838 us-gaap:StockAppreciationRightsSARSMember fang:EquityPlanMember 2018-12-31 0001539838 srt:NonGuarantorSubsidiariesMember fang:AdvisoryServicesAgreementMember fang:WexfordMember 2014-06-23 2014-06-23 0001539838 srt:ParentCompanyMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember fang:AdvisoryServicesAgreementMember fang:WexfordMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember fang:AdvisoryServicesAgreementMember fang:WexfordMember 2018-01-01 2018-03-31 0001539838 fang:A2019ThreeWayCollarsWTIMagellanEastHoustonMember 2019-03-31 0001539838 fang:A2020ThreeWayCollarsBRENTMember 2019-03-31 0001539838 fang:A2019ThreeWayCollarsBRENTMember 2019-03-31 0001539838 fang:A2019ThreeWayCollarsWTIMember 2019-03-31 0001539838 fang:A2020ThreeWayCollarsWTIMagellanEastHoustonMember 2019-03-31 0001539838 fang:A2019ThreeWayCollarsWTIMagellanEastHoustonMember 2019-01-01 2019-03-31 0001539838 fang:A2019ThreeWayCollarsWTIMember 2019-01-01 2019-03-31 0001539838 fang:A2020ThreeWayCollarsWTIMagellanEastHoustonMember 2019-01-01 2019-03-31 0001539838 fang:A2020ThreeWayCollarsBRENTMember 2019-01-01 2019-03-31 0001539838 fang:A2019ThreeWayCollarsBRENTMember 2019-01-01 2019-03-31 0001539838 fang:NaturalgasliquidswapsMontBelvieu2019Member 2019-01-01 2019-03-31 0001539838 fang:BRENTOilSwaps2019Member 2019-01-01 2019-03-31 0001539838 fang:NaturalgasbasisswapsWahahub2019Member 2019-03-31 0001539838 fang:NaturalGasSwaps2020Member 2019-03-31 0001539838 fang:NaturalgasliquidswapsMontBelvieu2020Member 2019-01-01 2019-03-31 0001539838 fang:WTIMagellanEastHoustonOilSwaps2020Member 2019-03-31 0001539838 fang:WTIMagellanEastHoustonOilSwaps2019Member 2019-03-31 0001539838 fang:NaturalgasbasisswapsWahahub2019Member 2019-01-01 2019-03-31 0001539838 fang:BRENTOilSwaps2019Member 2019-03-31 0001539838 fang:OilBasisSwaps2019Member 2019-03-31 0001539838 fang:BRENTOilSwaps2020Member 2019-03-31 0001539838 fang:NaturalgasbasisswapsWahahub2020Member 2019-01-01 2019-03-31 0001539838 fang:WTICushingOilSwaps2020Member 2019-01-01 2019-03-31 0001539838 fang:WTICushingOilSwaps2019Member 2019-03-31 0001539838 fang:NaturalgasbasisswapsWahahub2020Member 2019-03-31 0001539838 fang:WTIMagellanEastHoustonOilSwaps2019Member 2019-01-01 2019-03-31 0001539838 fang:OilBasisSwaps2020Member 2019-01-01 2019-03-31 0001539838 fang:BRENTOilSwaps2020Member 2019-01-01 2019-03-31 0001539838 fang:NaturalGasSwaps2019Member 2019-03-31 0001539838 fang:NaturalgasliquidswapsMontBelvieu2020Member 2019-03-31 0001539838 fang:NaturalgasliquidswapsMontBelvieu2019Member 2019-03-31 0001539838 fang:WTIMagellanEastHoustonOilSwaps2020Member 2019-01-01 2019-03-31 0001539838 fang:NaturalGasSwaps2019Member 2019-01-01 2019-03-31 0001539838 fang:NaturalGasSwaps2020Member 2019-01-01 2019-03-31 0001539838 fang:WTICushingOilSwaps2019Member 2019-01-01 2019-03-31 0001539838 fang:OilBasisSwaps2019Member 2019-01-01 2019-03-31 0001539838 fang:WTICushingOilSwaps2020Member 2019-03-31 0001539838 fang:OilBasisSwaps2020Member 2019-03-31 0001539838 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001539838 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001539838 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-03-31 0001539838 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-03-31 0001539838 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-03-31 0001539838 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001539838 fang:DrillCoAgreementMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.35MediumTermNotesSeriesAMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.32MediumTermSeriesAdue2022Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.32MediumTermSeriesAdue2022Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:A4.625Notesdue2021Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:A7.125MediumTermNotesSeriesBMemberMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.35MediumTermNotesSeriesAMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A4.625Notesdue2021Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:CompanyCreditFacilityMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:CompanyCreditFacilityMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:PartnershipCreditFacilityMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:A7.125MediumTermNotesSeriesBMemberMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.32MediumTermSeriesAdue2022Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A4.625Notesdue2021Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:PartnershipCreditFacilityMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:CompanyCreditFacilityMember us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:PartnershipCreditFacilityMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:PartnershipCreditFacilityMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:DrillCoAgreementMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:CompanyCreditFacilityMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:A7.35MediumTermNotesSeriesAMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:DrillCoAgreementMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:DrillCoAgreementMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.125MediumTermNotesSeriesBMemberMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:A4.625Notesdue2021Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.35MediumTermNotesSeriesAMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-03-31 0001539838 fang:A7.32MediumTermSeriesAdue2022Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 fang:A7.125MediumTermNotesSeriesBMemberMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0001539838 us-gaap:OtherNoncurrentAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0001539838 us-gaap:OtherNoncurrentAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-03-31 0001539838 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-01-01 2018-03-31 0001539838 us-gaap:OtherNoncurrentAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-03-31 0001539838 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-01-01 2019-03-31 0001539838 us-gaap:OtherNoncurrentAssetsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member 2017-12-31 0001539838 fang:SeniorUnsecuredNotesdue2024Member 2018-09-30 0001539838 fang:SeniorUnsecuredNotesdue2025Member 2017-12-31 0001539838 fang:SeniorUnsecuredNotesdue2025Member 2018-09-30 0001539838 fang:GrayOakPipelineMember us-gaap:SubsequentEventMember 2019-05-02 0001539838 us-gaap:SubsequentEventMember 2019-05-07 2019-05-07 0001539838 us-gaap:SubsequentEventMember 2019-05-07 0001539838 us-gaap:SubsequentEventMember 2019-04-01 2019-06-30 0001539838 fang:A2020ThreeWayCollarsWTIMember us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:A2020ThreeWayCollarsBRENTMember us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:A2019ThreeWayCollarsBRENTMember us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:A2020ThreeWayCollarsBRENTMember us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:A2019ThreeWayCollarsBRENTMember us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:A2020ThreeWayCollarsWTIMember us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:A2020ThreeWayCollarsWTIMagellanEastHoustonMember us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:A2020ThreeWayCollarsWTIMagellanEastHoustonMember us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:WTICushingOilSwaps2019Member us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:WTIMagellanEastHoustonOilSwaps2019Member us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:WTICushingOilSwaps2020Member us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:WTIMagellanEastHoustonOilSwaps2020Member us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:WTIMagellanEastHoustonOilSwaps2020Member us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:BRENTOilSwaps2020Member us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:BRENTOilSwaps2019Member us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:WTIMagellanEastHoustonOilSwaps2019Member us-gaap:SubsequentEventMember 2019-05-07 0001539838 fang:WTICushingOilSwaps2019Member us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:WTICushingOilSwaps2020Member us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:BRENTOilSwaps2019Member us-gaap:SubsequentEventMember 2019-04-01 2019-05-07 0001539838 fang:BRENTOilSwaps2020Member us-gaap:SubsequentEventMember 2019-05-07 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2019-03-31 0001539838 srt:ConsolidationEliminationsMember 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-12-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember 2018-12-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-12-31 0001539838 srt:ConsolidationEliminationsMember 2018-12-31 0001539838 srt:ConsolidationEliminationsMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:RoyaltyMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember us-gaap:RoyaltyMember 2018-01-01 2018-03-31 0001539838 srt:ConsolidationEliminationsMember us-gaap:NaturalGasMidstreamMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-01-01 2018-03-31 0001539838 srt:ConsolidationEliminationsMember fang:NaturalGasLiquidsProductionMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:GatheringandTransportationMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasMidstreamMember 2018-01-01 2018-03-31 0001539838 srt:ConsolidationEliminationsMember fang:OilExplorationandProductionMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasProductionMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasMidstreamMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasProductionMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasMidstreamMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:NaturalGasLiquidsProductionMember 2018-01-01 2018-03-31 0001539838 us-gaap:RoyaltyMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:OilExplorationandProductionMember 2018-01-01 2018-03-31 0001539838 srt:ConsolidationEliminationsMember us-gaap:RoyaltyMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:GatheringandTransportationMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember fang:GatheringandTransportationMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember fang:OilExplorationandProductionMember 2018-01-01 2018-03-31 0001539838 srt:ConsolidationEliminationsMember us-gaap:NaturalGasProductionMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:RoyaltyMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:NaturalGasLiquidsProductionMember 2018-01-01 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:OilExplorationandProductionMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember fang:NaturalGasLiquidsProductionMember 2018-01-01 2018-03-31 0001539838 srt:ConsolidationEliminationsMember fang:GatheringandTransportationMember 2018-01-01 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasProductionMember 2018-01-01 2018-03-31 0001539838 fang:GatheringandTransportationMember 2018-01-01 2018-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember fang:GatheringandTransportationMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:GatheringandTransportationMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:OilExplorationandProductionMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasMidstreamMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasMidstreamMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember us-gaap:RoyaltyMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember us-gaap:NaturalGasMidstreamMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasProductionMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:NaturalGasLiquidsProductionMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasMidstreamMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:OilExplorationandProductionMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:NaturalGasLiquidsProductionMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember fang:GatheringandTransportationMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasProductionMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:RoyaltyMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:NaturalGasProductionMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember fang:NaturalGasLiquidsProductionMember 2019-01-01 2019-03-31 0001539838 fang:GatheringandTransportationMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember fang:OilExplorationandProductionMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember fang:OilExplorationandProductionMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember fang:NaturalGasLiquidsProductionMember 2019-01-01 2019-03-31 0001539838 srt:ConsolidationEliminationsMember us-gaap:NaturalGasProductionMember 2019-01-01 2019-03-31 0001539838 us-gaap:RoyaltyMember 2019-01-01 2019-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember us-gaap:RoyaltyMember 2019-01-01 2019-03-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember us-gaap:RoyaltyMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember fang:GatheringandTransportationMember 2019-01-01 2019-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2017-12-31 0001539838 srt:ConsolidationEliminationsMember 2018-03-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2017-12-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember 2017-12-31 0001539838 srt:NonGuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-03-31 0001539838 srt:GuarantorSubsidiariesMember srt:ReportableLegalEntitiesMember 2018-03-31 0001539838 srt:ConsolidationEliminationsMember 2017-12-31 0001539838 srt:ParentCompanyMember srt:ReportableLegalEntitiesMember 2018-03-31 xbrli:pure iso4217:USD iso4217:USD xbrli:shares utreg:bbl utreg:MMBTU utreg:acre fang:fraction_per_share fang:redetermindation iso4217:USD utreg:bbl xbrli:shares iso4217:USD utreg:MMBTU



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
 
FORM 10-Q

 
ý
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2019
OR
o
TRANSITION REPORT UNDER 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)
 
 
Delaware
 
45-4502447
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification Number)
 
 
500 West Texas, Suite 1200
Midland, Texas
 
79701
(Address of Principal Executive Offices)
 
(Zip Code)
(432) 221-7400
(Registrant 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 outstanding as of May 3, 2019
Common Stock
FANG
Nasdaq Global Select Market
164,672,205

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 past 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  ý    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  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
 
ý
 
Accelerated Filer
 
o
 
 
 
 
Non-Accelerated Filer
 
o
 
Smaller Reporting Company
 
o
 
 
 
 
 
 
 
 
 
 
 
Emerging Growth Company
 
o

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.    o

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




DIAMONDBACK ENERGY, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2019
TABLE OF CONTENTS
 
 
Page
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
 








GLOSSARY OF OIL AND NATURAL GAS TERMS
The following is a glossary of certain oil and gas terms that are used in this Quarterly Report on Form 10-Q (this “report”):
Basin
A large depression on the earth’s surface in which sediments accumulate.
Bbl
Stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons.
BOE
Barrels of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil.
BOE/d
BOE per day.
British Thermal Unit or Btu
The quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
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.
Crude oil
Liquid hydrocarbons retrieved from geological structures underground to be refined into fuel sources.
Finding and development costs
Capital costs incurred in the acquisition, exploitation and exploration of proved oil and natural gas reserves divided by proved reserve additions and revisions to proved reserves.
Gross acres or gross wells
The total acres or wells, as the case may be, in which a working interest is owned.
Horizontal drilling
A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle with a specified interval.
Horizontal wells
Wells drilled directionally horizontal to allow for development of structures not reachable through traditional vertical drilling mechanisms.
Mb/d
Thousand barrels per day.
Mcf
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
Million British Thermal Units.
Net acres or net wells
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.
Operator
The individual or company responsible for the exploration and/or production of an oil or natural gas well or lease.
Plugging and abandonment
Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another or to the surface. Regulations of all states require plugging of abandoned wells.
Prospect
A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.
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 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.

ii



Spacing
The distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres (e.g., 40-acre spacing) and is often established by regulatory agencies.
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.

iii



GLOSSARY OF CERTAIN OTHER TERMS
The following is a glossary of certain other terms that are used in this report.
Company
Diamondback Energy, Inc., a Delaware corporation.
Equity Plan
The Company’s Equity Incentive Plan.
Exchange Act
The Securities Exchange Act of 1934, as amended.
GAAP
Accounting principles generally accepted in the United States.
General Partner
Viper Energy Partners GP LLC, a Delaware limited liability company and the General Partner of the Partnership.
2024 Indenture
The indenture relating to the 2024 Senior Notes, dated as of October 28, 2016, among the Company, the subsidiary guarantors party thereto and Wells Fargo, as the trustee, as supplemented.
2025 Indenture
The indenture relating to the 2025 Senior Notes, dated as of December 20, 2016, among the Company, the subsidiary guarantors party thereto and Wells Fargo, as the trustee, as supplemented.
NYMEX
New York Mercantile Exchange.
Partnership
Viper Energy Partners LP, a Delaware limited partnership.
Partnership Agreement
The second amended and restated agreement of limited partnership, dated May 9, 2018, as amended as of May 10, 2018.
Operating Company
Viper Energy Partners LLC, a Delaware limited liability company and a subsidiary of the Partnership.
SEC
United States Securities and Exchange Commission.
Securities Act
The Securities Act of 1933, as amended.
2024 Senior Notes
The Company’s 4.750% senior unsecured notes due 2024 in the aggregate principal amount of $1,250 million.
2025 Senior Notes
The Company’s 5.375% senior unsecured notes due 2025 in the aggregate principal amount of $800 million.
Senior Notes
The 2024 Senior Notes and the 2025 Senior Notes.
Viper LTIP
Viper Energy Partners LP Long Term Incentive Plan.
Viper Offering
The Partnerships’ initial public offering.
Wells Fargo
Wells Fargo Bank, National Association.


iv



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this report that express a belief, expectation, or intention, or that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions 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, 2018 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.

Forward-looking statements may include statements about our:

business strategy;

exploration and development drilling prospects, inventories, projects and programs;

oil and natural gas reserves;

acquisitions, including our recent acquisition of certain leasehold acres and other assets from Ajax Resources, LLC and our recent acquisition of Energen Corporation, or Energen, discussed elsewhere in this report;

identified drilling locations;

ability to obtain permits and governmental approvals;

technology;

financial strategy;

realized oil and natural gas prices;

production;

lease operating expenses, general and administrative costs and finding and development costs;

future operating results; and

plans, objectives, expectations and intentions.

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 securities laws. You should not place undue reliance on these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to 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 contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.


v

Table of Contents
Diamondback Energy, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)



 
March 31,
December 31,
 
2019
2018
 
(In millions, except par values and share data)
Assets
 
 
Current assets:
 
 
Cash and cash equivalents
$
126

$
215

Accounts receivable:
 
 
Joint interest and other, net
107

96

Oil and natural gas sales
356

296

Inventories
39

37

Derivative instruments
5

231

Prepaid expenses and other
60

50

Total current assets
693

925

Property and equipment:
 
 
Oil and natural gas properties, full cost method of accounting ($9,646 million and $9,670 million excluded from amortization at March 31, 2019 and December 31, 2018, respectively)
23,229

22,299

Midstream assets
762

700

Other property, equipment and land
151

147

Accumulated depletion, depreciation, amortization and impairment
(3,095
)
(2,774
)
Net property and equipment
21,047

20,372

Equity method investments
150

1

Deferred tax asset
150

97

Investment in real estate, net
114

116

Other assets
114

85

Total assets
$
22,268

$
21,596

Liabilities and Stockholders’ Equity
 
 
Current liabilities:
 
 
Accounts payable-trade
$
180

$
128

Accrued capital expenditures
485

495

Other accrued liabilities
238

253

Revenues and royalties payable
151

143

Derivative instruments
58


Total current liabilities
1,112

1,019

Long-term debt
4,670

4,464

Derivative instruments
16

15

Asset retirement obligations
140

136

Deferred income taxes
1,802

1,785

Other long-term liabilities
14

10

Total liabilities
7,754

7,429

Commitments and contingencies (Note 18)
 
 
Stockholders’ equity:
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 164,615,642 issued and outstanding at March 31, 2019; 200,000,000 shares authorized, 164,273,447 issued and outstanding at December 31, 2018
2

2

Additional paid-in capital
13,019

12,936

Retained earnings
752

762

Total Diamondback Energy, Inc. stockholders’ equity
13,773

13,700

Non-controlling interest
741

467

Total equity
14,514

14,167

Total liabilities and equity
$
22,268

$
21,596

See accompanying notes to consolidated financial statements.

1

Table of Contents
Diamondback Energy, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)



 
Three Months Ended March 31,
 
2019
2018
 
(In millions, except per share amounts, shares in thousands)
Revenues:
 
 
Oil sales
$
743

$
419

Natural gas sales
29

14

Natural gas liquid sales
70

33

Lease bonus
1


Midstream services
19

11

Other operating income
2

2

Total revenues
864

479

Costs and expenses:
 
 
Lease operating expenses
109

37

Production and ad valorem taxes
55

27

Gathering and transportation
12

4

Midstream services
17

11

Depreciation, depletion and amortization
322

115

General and administrative expenses
27

16

Asset retirement obligation accretion
2

1

Other operating expense
1

1

Total costs and expenses
545

212

Income from operations
319

267

Other income (expense):
 
 
Interest expense, net
(46
)
(14
)
Other income, net
1

3

Loss on derivative instruments, net
(268
)
(32
)
Gain on revaluation of investment
4

1

Total other expense, net
(309
)
(42
)
Income before income taxes
10

225

Provision for (benefit from) income taxes
(33
)
47

Net income
43

178

Net income attributable to non-controlling interest
33

15

Net income attributable to Diamondback Energy, Inc.
$
10

$
163

Earnings per common share:


Basic
$
0.06

$
1.65

Diluted
$
0.06

$
1.65

Weighted average common shares outstanding:
 
 
Basic
164,852

98,555

Diluted
165,061

98,769

Dividends declared per share
$
0.1875

$
0.125






See accompanying notes to consolidated financial statements.

2

Table of Contents
Diamondback Energy, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(Unaudited)


 
Common Stock
Additional Paid-in Capital
Retained Earnings (Accumulated Deficit)
Non-Controlling Interest
Total
 
Shares
Amount
 
($ in millions, shares in thousands)
Balance December 31, 2017
98,167

$
1

$
5,291

$
(37
)
$
327

$
5,582

Impact of adoption of ASU 2016-01, net of tax
 


(9
)
(7
)
(16
)
Unit-based compensation





1

1

Stock-based compensation



9



9

Distribution to non-controlling interest





(19
)
(19
)
Exercise of stock options and vesting of restricted stock units
443






Net income




163

15

178

Balance March 31, 2018
98,610

$
1

$
5,300

$
117

$
317

$
5,735

 
 
 
 
 
 
 
Balance December 31, 2018
164,273

$
2

$
12,936

$
762

$
467

$
14,167

Net proceeds from issuance of common units - Viper Energy Partners LP





341

341

Stock-based compensation



19



19

Repurchased shares for tax withholding
(125
)

(13
)


(13
)
Distribution to non-controlling interest





(26
)
(26
)
Dividend paid
 


(20
)

(20
)
Exercise of stock and unit options and awards of restricted stock
468






Change in ownership of consolidated subsidiaries, net
 

77


(74
)
3

Net income




10

33

43

Balance March 31, 2019
164,616

$
2

$
13,019

$
752

$
741

$
14,514



















See accompanying notes to consolidated financial statements.

3

Table of Contents
Diamondback Energy, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

 
Three Months Ended March 31,
 
2019
2018
 
 
 
 
(In millions)
Cash flows from operating activities:
 
 
Net income
$
43

$
178

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Provision for (benefit from) deferred income taxes
(33
)
47

Asset retirement obligation accretion
2

1

Depreciation, depletion and amortization
322

115

Amortization of debt issuance costs
1

1

Change in fair value of derivative instruments
285


Income from equity investment

(2
)
Gain on revaluation of investment
(4
)
(1
)
Equity-based compensation expense
14

7

Changes in operating assets and liabilities:
 
 
Accounts receivable
(63
)
6

Inventories
(4
)
(13
)
Prepaid expenses and other
(9
)
(7
)
Accounts payable and accrued liabilities
(190
)
(17
)
Accrued interest
5

11

Revenues and royalties payable
8

13

Net cash provided by operating activities
377

339

Cash flows from investing activities:
 
 
Additions to oil and natural gas properties
(569
)
(280
)
Additions to midstream assets
(58
)
(38
)
Purchase of other property, equipment and land
(4
)
(2
)
Acquisition of leasehold interests
(75
)
(16
)
Acquisition of mineral interests
(82
)
(150
)
Investment in real estate

(110
)
Funds held in escrow

11

Equity investments
(149
)

Net cash used in investing activities
(937
)
(585
)
Cash flows from financing activities:
 
 
Proceeds from borrowings under credit facility
484

224

Repayment under credit facility
(314
)
(308
)
Proceeds from senior notes

312

Proceeds from joint venture
23


Debt issuance costs
(3
)
(3
)
Proceeds from public offerings
341


Repurchased shares for tax withholdings
(13
)

Dividends to stockholders
(21
)

Distributions to non-controlling interest
(26
)
(19
)
Net cash provided by financing activities
471

206

Net decrease in cash and cash equivalents
(89
)
(40
)
Cash and cash equivalents at beginning of period
215

112

Cash and cash equivalents at end of period
$
126

$
72

 
 
 
Supplemental disclosure of cash flow information:
 
 
Interest paid, net of capitalized interest
$
17

$
4


4

Table of Contents
Diamondback Energy, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Continued
(Unaudited)

 
Three Months Ended March 31,
 
2019
2018
 
 
 
Supplemental disclosure of non-cash transactions:
 
 
Change in accrued capital expenditures
$
(10
)
$
41

Capitalized stock-based compensation
$
6

$
3

Asset retirement obligations acquired
$
3

$
















































See accompanying notes to consolidated financial statements.

5

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. (“Diamondback” or the “Company”), together with its subsidiaries, is an independent oil and gas company currently focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. Diamondback was incorporated in Delaware on December 30, 2011.

The wholly-owned subsidiaries of Diamondback, as of March 31, 2019, include Diamondback E&P LLC, a Delaware limited liability company, Diamondback O&G LLC, a Delaware limited liability company, Viper Energy Partners GP LLC, a Delaware limited liability company, Rattler Midstream GP LLC, a Delaware limited liability company, and Energen Corporation, an Alabama corporation. The consolidated subsidiaries include these wholly-owned subsidiaries as well as Viper Energy Partners LP, a Delaware limited partnership (the “Partnership”), the Partnership’s wholly-owned subsidiary Viper Energy Partners LLC, a Delaware limited liability company (the “Operating Company”), Rattler Midstream LP (formerly known as Rattler Midstream Partners LP), a Delaware limited liability company, Rattler Midstream Operating LLC (formerly known as Rattler Midstream LLC), a Delaware limited liability company, and Rattler Midstream Operating LLC’s wholly-owned subsidiary Tall City Towers LLC, a Delaware limited liability company (“Tall City”).

Basis of Presentation

The 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 Partnership is consolidated in the financial statements of the Company. As of March 31, 2019, the Company owned approximately 54% of the Partnership’s total units outstanding. The Company’s wholly-owned subsidiary, Viper Energy Partners GP LLC, is the General Partner of the Partnership.

These 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 such 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, 2018, which contains a summary of the Company’s significant accounting policies and other disclosures.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Certain amounts included in or affecting the Company’s 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 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 at the date of the consolidated financial statements. Actual results could differ from those estimates.

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

6


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


value of oil and natural gas properties, asset retirement obligations, the fair value determination of acquired assets and liabilities assumed, equity-based compensation, fair value estimates of commodity derivatives and estimates of income taxes.

Investments

Equity investments in which the Company exercises significant influence but does not control are accounted for using the equity method. Under the equity method, generally the Company’s share of investees’ earnings or loss is recognized in the statement of operations. The Company reviews its investments to determine if a loss in value which is other than a temporary decline has occurred. If such loss has occurred, the Company would recognize an impairment provision.

The Partnership has an equity interest in a limited partnership that is so minor that the Partnership has no influence over the limited partnership’s operating and financial policies. This interest was acquired during the year ended December 31, 2014 and was accounted for under the cost method. Effective January 1, 2018, the Partnership adopted Accounting Standards Update 2016-01 which requires the Partnership to measure its investment at fair value which resulted in a downward adjustment of $19 million to record the impact of this adoption. See Note 16Fair Value Measurements.

New Accounting Pronouncements

Recently Adopted Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-02, “Leases”. This update applies to any entity that enters into a lease, with some specified scope exemptions. Under this update, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. While there were no major changes to the lessor accounting, changes were made to align key aspects with the revenue recognition guidance. Entities will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company enters into lease agreements to support its operations. These agreements are for leases on assets such as office space, vehicles and compressors. The Company has completed the process of reviewing and determining the agreements to which this new guidance applies. Upon adoption effective January 1, 2019, the Company recognized approximately $13 million of right-of-use assets, of which the total amount relates to the Company’s operating leases.

In January 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-01, “Leases - Land Easement Practical Expedient for Transition to Topic 842”. This update applies to any entity that holds land easements. The update allows entities to adopt a practical expedient to not evaluate existing or expired land easements under Topic 842 that were not previously accounted for as leases under the current leases guidance. An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date that the entity adopts Topic 842. The Company adopted this standard effective January 1, 2019. The adoption of this update did not have an impact on its financial position, results of operations or liquidity.

In July 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-10, “Codification Improvements to Topic 842, Leases”. This update provides clarification and corrects unintended application of certain sections in the new lease guidance. The Company adopted this standard effective January 1, 2019. The adoption of this update did not have an impact on its financial position, results of operations or liquidity.

In July 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-11, “Lease (Topic 842): Targeted Improvements”. This update provides another transition method of allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted this standard effective January 1, 2019. The adoption of this update did not have an impact on its financial position, results of operations or liquidity.

In December 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors”. This update provides a practical expedient for lessors to elect not to evaluate whether sales taxes and other similar taxes are lessor costs. The update also requires a lessor to

7


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


exclude from variable payments those costs paid directly by the lessee to third parties and include lessor costs paid by the lessor and reimbursed by the lessee. The Company adopted this standard effective January 1, 2019. The adoption of this update did not have an impact on its financial position, results of operations or liquidity.

See Note 17Leases for more information on the adoption of these standards.

In June 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-07, “Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting”. This update applies the existing employee guidance to nonemployee share-based transactions, with the exception of specific guidance related to the attribution of compensation cost. The Company adopted this standard effective January 1, 2019. The adoption of this update did not have an impact on its financial position, results of operations or liquidity because the Company currently accounts for nonemployee share-based transactions in the same manner as employee share-based transactions.

In July 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-09, “Codification Improvements”. This update provides clarification and corrects unintended application of the guidance in various sections. The Company adopted this standard effective January 1, 2019. The adoption of this update did not have a material impact on its financial position, results of operations or liquidity.

Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses”. This update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements since it does not have a history of credit losses.

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the fair value measurement disclosure requirements specifically related to Level 3 fair value measurements and transfers between levels. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update will be applied prospectively. The Company is currently evaluating the impact of the adoption of this update, but does not believe it will have a material impact on its financial position, results of operations or liquidity.

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”. This update requires the capitalization of implementation costs incurred in a hosting arrangement that is a service contract for internal-use software. Training and certain data conversion costs cannot be capitalized. The entity is required to expense the capitalized implementation costs over the term of the hosting agreement. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company believes the adoption of this update will not have an impact on its financial position, results of operations or liquidity.

In November 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. This update clarifies that receivables arising from operating leases are not within the scope of this topic, but rather Topic 842, Leases. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company does not believe the adoption of this standard will have an impact on its financial statements since it does not have a history of credit losses.

8


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


3.    REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from Contracts with Customers

Sales of oil, natural gas and natural gas liquids are recognized at the point control of the product is transferred to the customer. Virtually all of the pricing provisions in the Company’s contracts are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil or natural gas and the prevailing supply and demand conditions. As a result, the price of the oil, natural gas and natural gas liquids fluctuates to remain competitive with other available oil, natural gas and natural gas liquids supplies.

Oil sales

The Company’s oil sales contracts are generally structured where it delivers oil to the purchaser at a contractually agreed-upon delivery point at which the purchaser takes custody, title and risk of loss of the product. Under this arrangement, the Company or a third party transports the product to the delivery point and receives a specified index price from the purchaser with no deduction. In this scenario, the Company recognizes revenue when control transfers to the purchaser at the delivery point based on the price received from the purchaser. Oil revenues are recorded net of any third-party transportation fees and other applicable differentials in the Company’s consolidated statements of operations.

Natural gas and natural gas liquids sales

Under the Company’s natural gas processing contracts, it delivers natural gas to a midstream processing entity at the wellhead, battery facilities or the inlet of the midstream processing entity’s system. The midstream processing entity gathers and processes the natural gas and remits proceeds to the Company for the resulting sales of natural gas liquids and residue gas. In these scenarios, the Company evaluates whether it is the principal or the agent in the transaction. For those contracts where the Company has concluded it is the principal and the ultimate third party is its customer, the Company recognizes revenue on a gross basis, with transportation, gathering, processing, treating and compression fees presented as an expense in its consolidated statements of operations.

In certain natural gas processing agreements, the Company may elect to take its residue gas and/or natural gas liquids in-kind at the tailgate of the midstream entity’s processing plant and subsequently market the product. Through the marketing process, the Company delivers product to the ultimate third-party purchaser at a contractually agreed-upon delivery point and receives a specified index price from the purchaser. In this scenario, the Company recognizes revenue when control transfers to the purchaser at the delivery point based on the index price received from the purchaser. The gathering, processing, treating and compression fees attributable to the gas processing contract, as well as any transportation fees incurred to deliver the product to the purchaser, are presented as transportation, gathering, processing, treating and compression expense in its consolidated statements of operations.

Midstream Revenue

Substantially all revenues from gathering, compression, water handling, disposal and treatment operations are derived from intersegment transactions for services Rattler Midstream Operating LLC (“Rattler”) provides to exploration and production operations. The portion of such fees shown in the Company’s consolidated financial statements represent amounts charged to interest owners in the Company’s operated wells, as well as fees charged to other third parties for water handling and treatment services provided by Rattler or usage of Rattler’s gathering and compression systems. For gathering and compression revenue, Rattler satisfies its performance obligations and recognizes revenue when low pressure volumes are delivered to a specified delivery point. Revenue is recognized based on the per MMbtu gathering fee or a per barrel gathering fee charged by Rattler in accordance with the gathering and compression agreement. For water handling and treatment revenue, Rattler satisfies its performance obligations and recognizes revenue when the fresh water volumes have been delivered to the fracwater meter for a specified well pad and the wastewater volumes have been metered downstream of the Company’s facilities. For services contracted through third party providers, Rattler’s performance obligation is satisfied when the service performed by the third party provider has been completed. Revenue is recognized based on the per barrel fresh water delivery or a wastewater gathering and disposal fee charged by Rattler in accordance with the water services agreement.


9


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


Transaction price allocated to remaining performance obligations

The Company’s upstream product sales contracts do not originate until production occurs and, therefore, are not considered to exist beyond each days’ production. Therefore, there are no remaining performance obligations under any of our product sales contracts.
The majority of the Company’s midstream revenue agreements have a term greater than one year, and as such the Company has utilized the practical expedient in ASC 606, which states that the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under its revenue agreements, each delivery generally represents a separate performance obligation; therefore, future volumes delivered are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.
The remainder of the Company’s midstream revenue agreements, which relate to agreements with third parties, are short-term in nature with a term of one year or less. The Company has utilized an additional practical expedient in ASC 606 which exempts it from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of an agreement that has an original expected duration of one year or less.

Contract balances

Under the Company’s product sales contracts, it has the right to invoice its customers once the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s product sales contracts do not give rise to contract assets or liabilities under Accounting Standards Codification 606.

Prior-period performance obligations

The Company records revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas and natural gas liquids sales may not be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. The Company records the differences between its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. The Company has existing internal controls for its revenue estimation process and related accruals, and any identified differences between its revenue estimates and actual revenue received historically have not been significant. For the three months ended March 31, 2019, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. The Company believes that the pricing provisions of its oil, natural gas and natural gas liquids contracts are customary in the industry. To the extent actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the revenue related to expected sales volumes and prices for those properties are estimated and recorded.

4.    ACQUISITIONS

Tall City Towers LLC

On January 31, 2018, Tall City, a subsidiary of the Company, completed its acquisition of the Fasken Center office buildings in Midland, TX where the Company’s corporate offices are located for a net purchase price of $110 million.

Energen Corporation Merger

On November 29, 2018, the Company completed its acquisition of Energen Corporation (“Energen”) in an all-stock transaction (the “Merger”), which was accounted for as a business combination. Upon completion of this acquisition, the addition of Energen’s assets increased the Company’s assets to: (i) over 273,000 net Tier One acres in the Permian Basin, (ii) approximately 7,200 estimated total net horizontal Permian locations, and (iii) approximately 394,000 net acres across the Midland and Delaware Basins. Under the terms of the Merger, each share of Energen common stock was converted into 0.6442 of a share of the Company’s common stock. The Company issued approximately 62.8 million shares of its common stock valued at a price of $112.00 per share on the closing date, resulting in total consideration paid by the Company to the former Energen shareholders of approximately $7 billion.

10


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



In connection with the closing of the Merger, the Company repaid outstanding principal under Energen’s revolving credit facility and assumed all of Energen’s other long-term debt. See Note 10Debt for additional information.

Purchase Price Allocation

The Merger has been accounted for as a business combination, using the acquisition method. The following table represents the preliminary allocation of the total purchase price of Energen to the identifiable assets acquired and the liabilities assumed based on the fair values on the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, valuation of pre-acquisition contingencies, final tax returns that provide the underlying tax basis of Energen’s assets and liabilities and final appraisals of assets acquired and liabilities assumed. The Company expects to complete the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate.

The following table sets forth the Company’s preliminary purchase price allocation as of March 31, 2019:
 
(In millions)
Consideration:
 
Fair value of the Company's common stock issued
$
7,136

Total consideration
$
7,136

 
 
Fair value of liabilities assumed:
 
Current liabilities
$
349

Asset retirement obligation
105

Long-term debt
1,099

Noncurrent derivative instruments
17

Deferred income taxes
1,403

Other long-term liabilities
7

Amount attributable to liabilities assumed
$
2,980

 
 
Fair value of assets acquired:
 
Total current assets
$
305

Oil and natural gas properties
9,283

Midstream assets
263

Investment in real estate
11

Other property, equipment and land
58

Asset retirement obligation
105

Other postretirement assets
3

Noncurrent income tax receivable, net
76

Other long term assets
12

Amount attributable to assets acquired
$
10,116



Pro Forma Financial Information

The following unaudited summary pro forma consolidated statement of operations data of Diamondback for the three months ended March 31, 2018 have been prepared to give effect to the Merger as if it had occurred on January 1, 2018. The below information reflects pro forma adjustments for the issuance of the Company’s common stock in exchange for Energen’s outstanding shares of common stock, as well as pro forma adjustments based on available information and certain assumptions that the Company believes are reasonable, including (i) the Company’s common

11


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


stock issued to convert Energen’s outstanding shares of common stock and equity awards as of the closing date of the Merger, (ii) the depletion of Energen’s fair-valued proved oil and natural gas properties and (iii) the estimated tax impacts of the pro forma adjustments.

The pro forma results of operations do not include any cost savings or other synergies that may result from the Merger or any estimated costs that have been or will be incurred by the Company to integrate the Energen assets. The pro forma financial data does not include the results of operations for any other acquisitions made during the periods presented, as they were primarily acreage acquisitions and their results were not deemed material.

The pro forma consolidated statement of operations data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the Merger taken place on January 1, 2018 and is not intended to be a projection of future results.
 
Three Months Ended March 31, 2018
 
(in millions, except per share amounts)
Revenues
$
838

Income from operations
$
418

Net income
$
268

Basic earnings per common share
$
1.66

Diluted earnings per common share
$
1.65



5.    VIPER ENERGY PARTNERS LP

The Partnership is a publicly traded Delaware limited partnership, the common units of which are listed on the Nasdaq Global Select Market under the symbol “VNOM”. The Partnership was formed by Diamondback on February 27, 2014, to, among other things, own, acquire and exploit oil and natural gas properties in North America. The Partnership is currently focused on oil and natural gas properties in the Permian Basin and the Eagle Ford Shale. Viper Energy Partners GP LLC, a fully-consolidated subsidiary of Diamondback, serves as the general partner of the Partnership. As of March 31, 2019, the Company owned approximately 54% of the Partnership’s total units outstanding.

Equity Offerings

On March 1, 2019, the Partnership completed an underwritten public offering of 10,925,000 common units, which included 1,425,000 common units issued pursuant to an option to purchase additional common units granted to the underwriters. Following this offering, the Company owned approximately 54% of the total Partnership units then outstanding. The Partnership received net proceeds from this offering of approximately $341 million, after deducting underwriting discounts and commissions and estimated offering expenses. The Partnership used the net proceeds to purchase units of the Operating Company. The Operating Company in turn used the net proceeds to repay a portion of the outstanding borrowings under the revolving credit facility and finance acquisitions during the period.

As a result of this public offering and the Partnership’s issuance of unit-based compensation, the Company’s ownership percentage in the Partnership was reduced. During the three months ended March 31, 2019, the Company recorded a $74 million decrease to non-controlling interest in the Partnership with an increase to additional paid-in capital, which represents the difference between the Company’s share of the underlying net book value in the Partnership before and after the respective Partnership common unit transactions, on the Company’s consolidated balance sheet.

Recapitalization, Tax Status Election and Related Transactions by Viper

In March 2018, the Partnership announced that the Board of Directors of the General Partner had unanimously approved a change of the Partnership’s federal income tax status from that of a pass-through partnership to that of a taxable entity via a “check the box” election. In connection with making this election, on May 9, 2018 the Partnership (i) amended and restated its First Amended and Restated Partnership Agreement, (ii) amended and restated the First Amended and Restated Limited Liability Company Agreement of the Operating Company, (iii) amended and restated its existing registration rights agreement with the Company and (iv) entered into an exchange agreement with the

12


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


Company, the General Partner and the Operating Company. Simultaneously with the effectiveness of these agreements, the Company delivered and assigned to the Partnership the 73,150,000 common units the Company owned in exchange for (i) 73,150,000 of the Partnership’s newly-issued Class B units and (ii) 73,150,000 newly-issued units of the Operating Company pursuant to the terms of a Recapitalization Agreement dated March 28, 2018, as amended as of May 9, 2018 (the “Recapitalization Agreement”). Immediately following that exchange, the Partnership continued to be the managing member of the Operating Company, with sole control of its operations, and owned approximately 36% of the outstanding units issued by the Operating Company, and the Company owned the remaining approximately 64% of the outstanding units issued by the Operating Company. Upon completion of the Partnership’s July 2018 offering of units, it owned approximately 41% of the outstanding units issued by the Operating Company and the Company owned the remaining approximately 59%. The Operating Company units and the Partnership’s Class B units owned by the Company are exchangeable from time to time for the Partnership’s common units (that is, one Operating Company unit and one Partnership Class B unit, together, will be exchangeable for one Partnership common unit).

On May 10, 2018, the change in the Partnership’s income tax status became effective. On that date, pursuant to the terms of the Recapitalization Agreement, (i) the General Partner made a cash capital contribution of $1 million to the Partnership in respect of its general partner interest and (ii) the Company made a cash capital contribution of $1 million to the Partnership in respect of the Class B units. The Company, as the holder of the Class B units, and the General Partner, as the holder of the general partner interest, are entitled to receive an 8% annual distribution on the outstanding amount of these capital contributions, payable quarterly, as a return on this invested capital. On May 10, 2018, the Company also exchanged 731,500 Class B units and 731,500 units in the Operating Company for 731,500 common units of the Partnership and a cash amount of $10,000 representing a proportionate return of the $1 million invested capital in respect of the Class B units. The General Partner continues to serve as the Partnership’s general partner and the Company continues to control the Partnership. After the effectiveness of the tax status election and the completion of related transactions, the Partnership’s minerals business continues to be conducted through the Operating Company, which continues to be taxed as a partnership for federal and state income tax purposes. This structure is anticipated to provide significant benefits to the Partnership’s business, including operational effectiveness, acquisition and disposition transactional planning flexibility and income tax efficiency. For additional information regarding the tax status election and related transactions, please refer to the Partnership’s Definitive Information Statement on Schedule 14C filed with the SEC on April 17, 2018 and the Partnership’s Current Report on Form 8-K filed with the SEC on May 15, 2018.

Partnership Agreement

The second amended and restated agreement of limited partnership, dated as of May 9, 2018, as amended as of May 10, 2018 (the “Partnership Agreement”), requires the Partnership to reimburse the General Partner for all direct and indirect expenses incurred or paid on the Partnership’s behalf and all other expenses allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership’s business. The Partnership Agreement does not set a limit on the amount of expenses for which the General Partner and its affiliates may be reimbursed. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for the Partnership or on its behalf and expenses allocated to the General Partner by its affiliates. The General Partner is entitled to determine the expenses that are allocable to the Partnership. For each of the three months ended March 31, 2019 and 2018, the General Partner allocated $1 million to the Partnership.

Tax Sharing

In connection with the closing of the Viper Offering, the Partnership entered into a tax sharing agreement with Diamondback, dated June 23, 2014, pursuant to which the Partnership agreed to reimburse Diamondback for its share of state and local income and other taxes for which the Partnership’s results are included in a combined or consolidated tax return filed by Diamondback with respect to taxable periods including or beginning on June 23, 2014. The amount of any such reimbursement is limited to the tax the Partnership would have paid had it not been included in a combined group with Diamondback. Diamondback may use its tax attributes to cause its combined or consolidated group, of which the Partnership may be a member for this purpose, to owe less or no tax. In such a situation, the Partnership agreed to reimburse Diamondback for the tax the Partnership would have owed had the tax attributes not been available or used for the Partnership’s benefit, even though Diamondback had no cash tax expense for that period. For the three months ended March 31, 2019, the Partnership accrued a minimal amount of state income tax expense for its share of Texas margin tax for which the Partnership’s results are included in a combined tax return filed by Diamondback.


13


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


Other Agreements

The Partnership has entered into a secured revolving credit facility with Wells Fargo, as administrative agent sole book runner and lead arranger. See Note 10Debt for a description of this credit facility.

6.    REAL ESTATE ASSETS    

The following schedules present the cost and related accumulated depreciation or amortization (as applicable) of the Company’s real estate assets including intangible lease assets:
 
Estimated Useful Lives
 
March 31, 2019
 
December 31, 2018
 
(Years)
 
(in millions)
Buildings
30
 
$
103

 
$
103

Tenant improvements
15
 
4

 
4

Land
N/A
 
1

 
1

Land improvements
15
 
1

 
1

Total real estate assets
 
 
109

 
109

Less: accumulated depreciation
 
 
(5
)
 
(4
)
Total investment in land and buildings, net
 
 
$
104

 
$
105


 
Weighted Average Useful Lives
 
March 31, 2019
 
December 31, 2018
 
(Months)
 
(in millions)
In-place lease intangibles
45
 
$
11

 
$
11

Less: accumulated amortization
 
 
(4
)
 
(3
)
In-place lease intangibles, net
 
 
7

 
8

 
 
 
 
 
 
Above-market lease intangibles
45
 
4

 
4

Less: accumulated amortization
 
 
(1
)
 
(1
)
Above-market lease intangibles, net
 
 
3

 
3

Total intangible lease assets, net
 
 
$
10

 
$
11




14


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


7.    PROPERTY AND EQUIPMENT

Property and equipment includes the following:
 
March 31,
December 31,
 
2019
2018
 
 
 
 
(in millions)
Oil and natural gas properties:
 
 
Subject to depletion
$
13,583

$
12,629

Not subject to depletion
9,646

9,670

Gross oil and natural gas properties
23,229

22,299

Accumulated depletion
(1,907
)
(1,599
)
Accumulated impairment
(1,144
)
(1,144
)
Oil and natural gas properties, net
20,178

19,556

Midstream assets
762

700

Other property, equipment and land
151

147

Accumulated depreciation
(44
)
(31
)
Property and equipment, net of accumulated depreciation, depletion, amortization and impairment
$
21,047

$
20,372

 
 
 
Balance of costs not subject to depletion:
 
 
Incurred in 2019
$
186

 
Incurred in 2018
6,142

 
Incurred in 2017
2,473

 
Incurred in 2016
687

 
Incurred in 2015
158

 
Total not subject to depletion
$
9,646

 


The Company uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain internal costs, are capitalized and amortized on a composite unit of production method based on proved oil, natural gas liquids and natural gas reserves. Internal costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other administrative costs associated with overseeing the exploration and development activities. Costs, including related employee costs, associated with production and operation of the properties are charged to expense as incurred. All other internal costs not directly associated with exploration and development activities are charged to expense as they are incurred. Capitalized internal costs were approximately $13 million and $7 million for the three months ended March 31, 2019 and 2018, respectively. Costs associated with unevaluated properties are excluded from the full cost pool until the Company has made a determination as to the existence of proved reserves. The inclusion of the Company’s unevaluated costs into the amortization base is expected to be completed within three years to five years. Acquisition costs not currently being amortized are primarily related to unproved acreage that the Company plans to prove up through drilling. The Company has no plans to let any acreage expire. Sales of oil and natural gas properties, whether or not being amortized currently, are accounted for as adjustments of capitalized costs, with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil, natural gas liquids and natural gas.

Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the proved oil and natural gas properties. Net capitalized costs are limited to the lower of unamortized cost net of deferred income taxes, or the cost center ceiling. The cost center ceiling is defined as the sum of (a) estimated future net revenue including estimated expenditures (based on current costs) to be incurred in developing and producing the proved reserves, discounted at 10% per annum, from proved reserves, based on the trailing 12-month unweighted average of the first-day-of-the-month price, adjusted for any contract provisions or financial derivatives, if any, that hedge the Company’s oil and natural gas revenue, and excluding

15


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


the estimated abandonment costs for properties with asset retirement obligations recorded on the balance sheet, (b) the cost of properties not being amortized, if any, and (c) the lower of cost or market value of unproved properties included in the cost being amortized, including related deferred taxes for differences between the book and tax basis of the oil and natural gas properties. If the net book value, including related deferred taxes, exceeds the ceiling, an impairment or non-cash writedown is required.

At March 31, 2019, there was $91 million in exploration costs and development costs and $71 million in capitalized interest that was not subject to depletion. At December 31, 2018, there were $68 million in exploration costs and development costs and $55 million in capitalized interest that was not subject to depletion.

8.    ASSET RETIREMENT OBLIGATIONS

The following table describes the changes to the Company’s asset retirement obligation liability for the following periods:
 
Three Months Ended March 31,
 
2019
2018
 
 
 
 
(in millions)
Asset retirement obligations, beginning of period
$
136

$
21

Additional liabilities incurred
1

1

Liabilities acquired
3


Liabilities settled
(2
)
(1
)
Accretion expense
2

1

Asset retirement obligations, end of period
140

22

Less current portion

1

Asset retirement obligations - long-term
$
140

$
21



The Company’s asset retirement obligations primarily relate to the future plugging and abandonment of wells and related facilities. The Company estimates the future plugging and abandonment costs of wells, the ultimate productive life of the properties, a risk-adjusted discount rate and an inflation factor in order to determine the current present value of this obligation. To the extent future revisions to these assumptions impact the present value of the existing asset retirement obligation liability, a corresponding adjustment is made to the oil and natural gas property balance. The current portion of the asset retirement obligation liability is included in other accrued liabilities in the Company’s consolidated balance sheets.

9.    EQUITY METHOD INVESTMENTS

In October 2014, the Company obtained a 25% interest in HMW Fluid Management LLC (“HMW LLC”), which was formed to develop, own and operate an integrated water management system to gather, store, process, treat, distribute and dispose of water to exploration and production companies operating in Midland, Martin and Andrews Counties, Texas.

On June 30, 2018, HMW LLC’s operating agreement was amended. As a result of the amendment, the Company no longer recognizes an equity investment in HMW LLC but instead consolidates its undivided interest in the salt water disposal assets owned by HMW LLC. In exchange for the Company’s 25% investment, the Company received a 50% undivided ownership interest in two of the four SWD wells and associated assets previously owned by HMW LLC. The Company’s basis in the assets is equivalent to its basis in the equity investment in HMW LLC.

For the three months ended March 31, 2019 and the year ended December 31, 2018, the Company did not invest in HMW LLC. For the three months ended March 31, 2019, the Company did not record any income from HMW LLC. For the three months ended March 31, 2018, the Company recorded, in other income, $2 million in income from HMW LLC.


16


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


On February 1, 2019, the Company obtained a 10% equity interest in EPIC Crude Holdings, LP (“EPIC”), which is building a pipeline (the “EPIC project”) that, once operational, will transport crude and NGL across Texas for delivery into the Corpus Christi market. As of March 31, 2019, the Company has invested $35 million in the EPIC project and recorded no income. The EPIC project is anticipated to be operational in the second half of 2019.

On February 15, 2019, the Company obtained a 10% equity interest in Gray Oak Pipeline, LLC (“Gray Oak”), which is building a pipeline (the “Gray Oak project”) that, once operational, will transport crude from the Permian to Corpus Christi on the Texas Gulf Coast. As of March 31, 2019, the Company has invested $115 million in the Gray Oak project and recorded, in other income, $50,000 in income related to interest. The Gray Oak project is anticipated to be operational in the second half of 2019.

On March 29, 2019, the Company executed a short-term promissory note to Gray Oak. The note allows for borrowing by Gray Oak of up to $123 million at 2.52% interest rate with a maturity date of March 31, 2022. There were no borrowings by Gray Oak under the note in the first quarter of 2019.

No impairments were recorded for the Company’s equity method investment for the three months ended March 31, 2019 or 2018.

10.    DEBT

Long-term debt consisted of the following as of the dates indicated:
 
March 31,
December 31,
 
2019
2018
 
 
 
 
(in millions)
4.625% Notes due 2021(1)
$
399

$
400

7.320% Medium-term Notes, Series A, due 2022(1)
21

20

4.750 % Senior Notes due 2024
1,250

1,250

5.375 % Senior Notes due 2025
800

800

7.350% Medium-term Notes, Series A, due 2027(1)
11

10

7.125% Medium-term Notes, Series B, due 2028(1)
109

100

DrillCo Agreement
23


Unamortized debt issuance costs
(24
)
(27
)
Unamortized premium costs
10

10

Revolving credit facility
1,914

1,490

Partnership revolving credit facility
157

411

Total long-term debt
$
4,670

$
4,464


(1)
At the effective time of the Merger, Energen became a wholly owned subsidiary of the Company and remained the issuer of these notes (the “Energen Notes”).

Diamondback Notes

2024 Senior Notes

On October 28, 2016, the Company issued $500 million in aggregate principal amount of 4.750% Senior Notes due 2024 (the “existing 2024 Senior Notes”). The existing 2024 Senior Notes bear interest at a rate of 4.750% per annum, payable semi-annually, in arrears on May 1 and November 1 of each year and will mature on November 1, 2024. All of the Company’s existing and future restricted subsidiaries that guarantee its revolving credit facility or certain other debt guarantee the existing 2024 Senior Notes; provided, however, that the existing 2024 Senior Notes are not guaranteed by the Partnership, the General Partner, Viper Energy Partners LLC or Rattler Midstream Operating LLC, and will not be guaranteed by any of the Company’s future unrestricted subsidiaries.


17


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


On September 25, 2018, the Company issued $750 million aggregate principal amount of new 4.750% Senior Notes due 2024 (the “New 2024 Notes”), which together with the existing Senior Notes are referred to as the 2024 Senior Notes, as additional notes under, and subject to the terms of, the 2024 Indenture. The New 2024 Notes were issued in a transaction exempt from the registration requirements under the Securities Act. The Company received approximately $741 million in net proceeds, after deducting the initial purchasers’ discount and its estimated offering expenses, but disregarding accrued interest, from the issuance of the New 2024 Notes. The Company used a portion of the net proceeds from the issuance of the New 2024 Notes to repay the outstanding borrowings under its revolving credit facility and used the balance for general corporate purposes, including funding a portion of the cash consideration for the acquisition of assets from Ajax Resources, LLC.

The 2024 Senior Notes were issued under, and are governed by, an indenture among the Company, the subsidiary guarantors party thereto and Wells Fargo, as the trustee, as supplemented (the “2024 Indenture”). The 2024 Indenture contains certain covenants that, subject to certain exceptions and qualifications, among other things, limit the Company’s ability and the ability of the restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, declare or pay dividends or make other distributions on capital stock, prepay subordinated indebtedness, sell assets including capital stock of restricted subsidiaries, agree to payment restrictions affecting the Company’s restricted subsidiaries, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions with affiliates, incur liens, engage in business other than the oil and natural gas business and designate certain of the Company’s subsidiaries as unrestricted subsidiaries.

The Company may on any one or more occasions redeem some or all of the 2024 Senior Notes at any time on or after November 1, 2019 at the redemption prices (expressed as percentages of principal amount) of 103.563% for the 12-month period beginning on November 1, 2019, 102.375% for the 12-month period beginning on November 1, 2020, 101.188% for the 12-month period beginning on November 1, 2021 and 100.000% beginning on November 1, 2022 and at any time thereafter with any accrued and unpaid interest to, but not including, the date of redemption. Prior to November 1, 2019, the Company may on any one or more occasions redeem all or a portion of the 2024 Senior Notes at a price equal to 100% of the principal amount of the 2024 Senior Notes plus a “make-whole” premium and accrued and unpaid interest to the redemption date. In addition, any time prior to November 1, 2019, the Company may on any one or more occasions redeem the 2024 Senior Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 2024 Senior Notes issued prior to such date at a redemption price of 104.750%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from certain equity offerings.

As required under the terms of the registration rights agreement relating to the New 2024 Notes, on March 22, 2019, the Company filed with the SEC its registration Statement on Form S-4 relating to the exchange offer of the New 2024 Notes for substantially identical notes registered under the Securities Act of 1933, as amended.

2025 Senior Notes

On December 20, 2016, the Company issued $500.0 million in aggregate principal amount of 5.375% Senior Notes due 2025 (the “existing 2025 Senior Notes”). The existing 2025 Senior Notes bear interest at a rate of 5.375% per annum, payable semi-annually, in arrears on May 31 and November 30 of each year and will mature on May 31, 2025. All of the Company’s existing and future restricted subsidiaries that guarantee its revolving credit facility or certain other debt guarantee the existing 2025 Senior Notes, provided, however, that the existing 2025 Senior Notes are not guaranteed by the Partnership, the General Partner, Viper Energy Partners LLC or Rattler Midstream Operating LLC, and will not be guaranteed by any of the Company’s future unrestricted subsidiaries.
On January 29, 2018, the Company issued $300 million aggregate principal amount of new 5.375% Senior Notes due 2025 (the “New 2025 Notes”), which together with the existing 2025 Senior Notes are referred to as the 2025 Senior Notes, as additional notes under, and subject to the terms of, the 2025 Indenture. The New 2025 Notes were issued in a transaction exempt from the registration requirements under the Securities Act. The Company received approximately $308 million in net proceeds, after deducting the initial purchaser’s discount and its estimated offering expenses, but disregarding accrued interest, from the issuance of the New 2025 Notes. The Company used the net proceeds from the issuance of the New 2025 Notes to repay a portion of the outstanding borrowings under its revolving credit facility.

18


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


The 2025 Senior Notes were issued under an indenture, dated as of December 20, 2016, among the Company, the guarantors party thereto and Wells Fargo Bank, as the trustee (the “2025 Indenture”). The 2025 Indenture contains certain covenants that, subject to certain exceptions and qualifications, among other things, limit the Company’s ability and the ability of the restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, declare or pay dividends or make other distributions on capital stock, prepay subordinated indebtedness, sell assets including capital stock of restricted subsidiaries, agree to payment restrictions affecting the Company’s restricted subsidiaries, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions with affiliates, incur liens, engage in business other than the oil and natural gas business and designate certain of the Company’s subsidiaries as unrestricted subsidiaries.

The Company may on any one or more occasions redeem some or all of the 2025 Senior Notes at any time on or after May 31, 2020 at the redemption prices (expressed as percentages of principal amount) of 104.031% for the 12-month period beginning on May 31, 2020, 102.688% for the 12-month period beginning on May 31, 2021, 101.344% for the 12-month period beginning on May 31, 2022 and 100.000% beginning on May 31, 2023 and at any time thereafter with any accrued and unpaid interest to, but not including, the date of redemption. Prior to May 31, 2020, the Company may on any one or more occasions redeem all or a portion of the 2025 Senior Notes at a price equal to 100% of the principal amount of the 2025 Senior Notes plus a “make-whole” premium and accrued and unpaid interest to the redemption date. In addition, any time prior to May 31, 2020, the Company may on any one or more occasions redeem the 2025 Senior Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 2025 Senior Notes issued prior to such date at a redemption price of 105.375%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from certain equity offerings.

Energen Notes
At the effective time of the Merger, Energen became the Company’s wholly owned subsidiary and remained the issuer of $530 million aggregate principal amount of the Energen Notes, issued under an indenture dated September 1, 1996 with The Bank of New York as Trustee (the “Energen Indenture”). The Energen Notes consist of: (1) $400 million aggregate principal amount of 4.625% senior notes due on September 1, 2021, (2) $100 million of 7.125% notes due on February 15, 2028, (3) $20 million of 7.32% notes due on July 28, 2022, and (4) $10 million of 7.35% notes due on July 28, 2027.
The Energen Notes are the senior unsecured obligations of Energen and, post-merger, Energen, as a wholly owned subsidiary of the Company, continues to be the sole issuer and obligor under the Energen Notes. The Energen Notes rank equally in right of payment with all other senior unsecured indebtedness of Energen, including any unsecured guaranties by Energen of the Company’s indebtedness and are effectively subordinated to Energen’s senior secured indebtedness, including Energen’s secured guaranty of all borrowings and other obligations under the Company’s revolving credit facility, to the extent of the value of the collateral securing such indebtedness.
The Energen Indenture contains certain covenants that, subject to certain exceptions and qualifications, limit Energen’s ability to incur or suffer to exist liens, to enter into sale and leaseback transactions, to consolidate with or merge into any other entity, and to convey, transfer or lease its properties and assets substantially as an entirety to any person or entity. The Energen Indenture does not include a restriction on the payment of dividends.
On November 29, 2018, Energen guaranteed the Company’s indebtedness under its credit facility and granted a lien on certain of its assets to secure such indebtedness and, on December 21, 2018, Energen’s subsidiaries guaranteed the Company’s indebtedness under its credit agreement and granted liens on certain of their assets to secure such indebtedness. As a result of such guarantees, under the terms of the 2024 Indenture and the 2025 Indenture, Energen also guaranteed the 2024 Senior Notes and the 2025 Senior Notes.
The Company’s Credit Facility

The Company and Diamondback O&G LLC, as borrower, entered into the second amended and restated credit agreement, dated November 1, 2013, as amended, with a syndicate of banks, including Wells Fargo, as administrative agent, and its affiliate Wells Fargo Securities, LLC, as sole book runner and lead arranger. The credit agreement provides for a revolving credit facility in the maximum credit amount of $5 billion, subject to a borrowing base based on the Company’s oil and natural gas reserves and other factors (the “borrowing base”). The borrowing base is scheduled to be redetermined, under certain circumstances, annually with an effective date of May 1st, and, under certain

19


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


circumstances, semi-annually with effective dates of May 1st and November 1st. In addition, the Company and Wells Fargo each may request up to two interim redeterminations of the borrowing base during any 12-month period. Effective March 25, 2019, the Company increased its elected commitment amount from $2 billion to $3 billion. As of March 31, 2019, the borrowing base was set at $3 billion, the Company had elected a commitment amount of $3 billion and the Company had $2 billion of outstanding borrowings under the revolving credit facility and $1 billion available for future borrowings under its revolving credit facility.
Diamondback O&G LLC is the borrower under the credit agreement. As of March 31, 2019, the credit agreement is guaranteed by the Company, Diamondback E&P LLC, Rattler Midstream Operating LLC (formerly known as Rattler Midstream LLC) and Energen and its subsidiaries and will also be guaranteed by any of the Company’s future subsidiaries that are classified as restricted subsidiaries under the credit agreement. The credit agreement is also secured by substantially all of the assets of the Company, Diamondback O&G LLC and the guarantors.
The outstanding borrowings under the credit agreement bear interest at a per annum rate elected by the Company that is equal to an alternate base rate (which is equal to the greatest of the prime rate, the Federal Funds effective rate plus 0.5%, and 3-month LIBOR plus 1.0%) or LIBOR, in each case plus the applicable margin. The applicable margin ranges from 0.25% to 1.25% in the case of the alternate base rate and from 1.25% to 2.25% in the case of LIBOR, in each case depending on the amount of loans and letters of credit outstanding in relation to the commitment, which is defined as the least of the maximum credit amount, the borrowing base and the elected commitment amount. The Company is obligated to pay a quarterly commitment fee ranging from 0.375% to 0.500% per year on the unused portion of the commitment, which fee is also dependent on the amount of loans and letters of credit outstanding in relation to the commitment. Loan principal may be optionally repaid from time to time without premium or penalty (other than customary LIBOR breakage), and is required to be repaid (a) to the extent the loan amount exceeds the commitment or the borrowing base, whether due to a borrowing base redetermination or otherwise (in some cases subject to a cure period), (b) in an amount equal to the net cash proceeds from the sale of property when a borrowing base deficiency or event of default exists under the credit agreement and (c) at the maturity date of November 1, 2022.
The credit agreement contains various affirmative, negative and financial maintenance covenants. These covenants, among other things, limit additional indebtedness, additional liens, sales of assets, mergers and consolidations, dividends and distributions, transactions with affiliates and entering into certain swap agreements and require the maintenance of the financial ratios described below.
Financial Covenant
 
Required Ratio
Ratio of total net debt to EBITDAX, as defined in the credit agreement
Not greater than 4.0 to 1.0
Ratio of current assets to liabilities, as defined in the credit agreement
Not less than 1.0 to 1.0


The covenant prohibiting additional indebtedness, as amended in November 2017, allows for the issuance of unsecured debt in the form of senior or senior subordinated notes if no default would result from the incurrence of such debt after giving effect thereto and if, in connection with any such issuance, the borrowing base is reduced by 25% of the stated principal amount of each such issuance.
As of March 31, 2019 and December 31, 2018, the Company was in compliance with all financial covenants under its revolving credit facility, as then in effect. The lenders may accelerate all of the indebtedness under the Company’s revolving credit facility upon the occurrence and during the continuance of any event of default. The credit agreement contains customary events of default, including non-payment, breach of covenants, materially incorrect representations, cross-default, bankruptcy and change of control. There are no cure periods for events of default due to non-payment of principal and breaches of negative and financial covenants, but non-payment of interest and breaches of certain affirmative covenants are subject to customary cure periods.

The Partnership’s Credit Agreement

On July 8, 2014, the Partnership entered into a secured revolving credit agreement with Wells Fargo, as administrative agent, certain other lenders and the Operating Company, the Partnership’s consolidated subsidiary, as guarantor. On May 8, 2018, the Operating Company assumed all liabilities as borrower under the credit agreement and the Partnership became a guarantor of the credit agreement. On July 20, 2018, the Operating Company, the Partnership, Wells Fargo and the other lenders amended and restated the credit agreement to reflect the assumption by the Operating Company.

20


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



The credit agreement, as amended and restated, provides for a revolving credit facility in the maximum credit amount of $2 billion and a borrowing base based on the Partnership’s oil and natural gas reserves and other factors (the “borrowing base”) of $555 million, subject to scheduled semi-annual and other elective borrowing base redeterminations. The borrowing base is scheduled to be re-determined semi-annually with effective dates of May 1st and November 1st. In addition, the Operating Company and Wells Fargo each may request up to three interim redeterminations of the borrowing base during any 12-month period. As of March 31, 2019, the borrowing base was set at $555 million, and the Partnership had $157 million of outstanding borrowings and $398 million available for future borrowings under its revolving credit facility.

The outstanding borrowings under the credit agreement bear interest at a per annum rate elected by the Operating Company that is equal to an alternate base rate (which is equal to the greatest of the prime rate, the Federal Funds effective rate plus 0.5% and 3-month LIBOR plus 1.0%) or LIBOR, in each case plus the applicable margin. The applicable margin ranges from 0.75% to 1.75% per annum in the case of the alternate base rate and from 1.75% to 2.75% per annum in the case of LIBOR, in each case depending on the amount of loans and letters of credit outstanding in relation to the commitment, which is defined as the lesser of the maximum credit amount and the borrowing base. The Operating Company is obligated to pay a quarterly commitment fee ranging from 0.375% to 0.500% per year on the unused portion of the commitment, which fee is also dependent on the amount of loans and letters of credit outstanding in relation to the commitment. Loan principal may be optionally repaid from time to time without premium or penalty (other than customary LIBOR breakage), and is required to be repaid (i) to the extent the loan amount exceeds the commitment or the borrowing base, whether due to a borrowing base redetermination or otherwise (in some cases subject to a cure period), (ii) in an amount equal to the net cash proceeds from the sale of property when a borrowing base deficiency or event of default exists under the credit agreement and (iii) at the maturity date of November 1, 2022. The loan is secured by substantially all of the assets of the Partnership and the Operating Company.

The credit agreement contains various affirmative, negative and financial maintenance covenants. These covenants, among other things, limit additional indebtedness, purchases of margin stock, additional liens, sales of assets, mergers and consolidations, dividends and distributions, transactions with affiliates and entering into certain swap agreements, and require the maintenance of the financial ratios described below: