UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission File Number 001-35700
(Exact Name of Registrant As Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | ||||||||||
| (Address of principal executive offices) | (Zip code) | ||||||||||
(432 ) 221-7400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| (NASDAQ Global Select Market) | ||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
| ☒ | Accelerated Filer | ☐ | ||||||||||||||||||
| Non-Accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||||||||
| Emerging Growth Company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 28, 2023, the registrant had 178,818,422 shares of common stock outstanding.
DIAMONDBACK ENERGY, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2023
TABLE OF CONTENTS
| Page | |||||
i
GLOSSARY OF OIL AND NATURAL GAS TERMS
The following is a glossary of certain oil and natural gas industry terms that are used in this Quarterly Report on Form 10-Q (this “report”):
| Argus WTI Houston | Grade of oil that serves as a benchmark price for oil at Houston, Texas. | ||||
| Argus WTI Midland | Grade of oil that serves as a benchmark price for oil at Midland, Texas. | ||||
| Basin | A large depression on the earth’s surface in which sediments accumulate. | ||||
| Bbl or barrel | One stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons. | ||||
| BO | One barrel of crude oil. | ||||
| BO/d | One BO per day. | ||||
| BOE | One barrel of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil. | ||||
| BOE/d | BOE per day. | ||||
| Brent | A major trading classification of light sweet oil that serves as a benchmark price for oil worldwide. | ||||
| 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. | ||||
| Gross acres or gross wells | The total acres or wells, as the case may be, in which a working interest is owned. | ||||
| Henry Hub | Natural gas gathering point that serves as a benchmark price for natural gas futures on the NYMEX. | ||||
| Horizontal wells | Wells drilled directionally horizontal to allow for development of structures not reachable through traditional vertical drilling mechanisms. | ||||
| MBbl | One thousand barrels of crude oil and other liquid hydrocarbons. | ||||
| MBOE | One thousand BOE. | ||||
| MBOE/d | One thousand BOE per day. | ||||
| Mcf | One thousand cubic feet of natural gas. | ||||
| Mineral interests | The interests in ownership of the resource and mineral rights, giving an owner the right to profit from the extracted resources. | ||||
| MMBtu | One million British Thermal Units. | ||||
| MMcf | Million cubic feet of natural gas. | ||||
| Net acres | The sum of the fractional working interest owned in gross acres. | ||||
| Oil and natural gas properties | Tracts of land consisting of properties to be developed for oil and natural gas resource extraction. | ||||
| Proved reserves | The estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions. | ||||
| Reserves | The estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to the market and all permits and financing required to implement the project. Reserves are not assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations). | ||||
| Reservoir | A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or crude oil that is confined by impermeable rock or water barriers and is separate from other reservoirs. | ||||
| Royalty interest | An interest that gives an owner the right to receive a portion of the resources or revenues without having to carry any costs of development, which may be subject to expiration. | ||||
| Waha Hub | Natural gas gathering point that serves as a benchmark price for natural gas at western Texas and New Mexico. | ||||
| Working interest | An operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations. | ||||
| WTI | West Texas Intermediate, a light sweet blend of oil produced from fields in western Texas and is a grade of oil that serves as a benchmark for oil on the NYMEX. | ||||
ii
GLOSSARY OF CERTAIN OTHER TERMS
The following is a glossary of certain other terms that are used in this report:
| ASU | Accounting Standards Update. | ||||
| Equity Plan | The Company’s 2021 Amended and Restated Equity Incentive Plan. | ||||
| Exchange Act | The Securities Exchange Act of 1934, as amended. | ||||
| FASB | Financial Accounting Standards Board. | ||||
| GAAP | Accounting principles generally accepted in the United States. | ||||
| LIBOR | The London interbank offered rate. | ||||
| Nasdaq | The Nasdaq Global Select Market. | ||||
| NYMEX | New York Mercantile Exchange. | ||||
| OPEC | Organization of the Petroleum Exporting Countries. | ||||
| SEC | United States Securities and Exchange Commission. | ||||
| Securities Act | The Securities Act of 1933, as amended. | ||||
| Guaranteed Senior Notes | The outstanding senior notes issued by Diamondback Energy, Inc. under indentures where Diamondback E&P is the sole guarantor, consisting of the 3.250% Senior Notes due 2026, 3.500% Senior Notes due 2029, 3.125% Senior Notes due 2031, 6.250% Senior Notes due 2033, 4.400% Senior Notes due 2051, 4.250% Senior Notes due 2052 and 6.250% Senior Notes due 2053. | ||||
| SOFR | The secured overnight financing rate. | ||||
| TSR | Total stockholder return of the Company’s common stock. | ||||
| Wells Fargo | Wells Fargo Bank, National Association. | ||||
iii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Various statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which involve risks, uncertainties and assumptions. All statements, other than statements of historical fact, including statements regarding our: future performance; business strategy; future operations (including drilling plans and capital plans); estimates and projections of revenues, losses, costs, expenses, returns, cash flow and financial position; reserve estimates and our ability to replace or increase reserves; anticipated benefits of strategic transactions (including acquisitions and divestitures); and plans and objectives of management (including plans for future cash flow from operations and for executing environmental strategies) are forward-looking statements. When used in this report, the words “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “model,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions (including the negative of such terms) as they relate to the Company are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. In particular, the factors discussed in this report and detailed under Part II, Item 1A. Risk Factors in this report and our Annual Report on Form 10–K for the year ended December 31, 2022 could affect our actual results and cause our actual results to differ materially from expectations, estimates or assumptions expressed, forecasted or implied in such forward-looking statements. Unless the context requires otherwise, references to “we,” “us,” “our” or the “Company” are intended to mean the business and operations of the Company and its consolidated subsidiaries.
Factors that could cause our outcomes to differ materially include (but are not limited to) the following:
•changes in supply and demand levels for oil, natural gas and natural gas liquids, and the resulting impact on the price for those commodities;
•the impact of public health crises, including epidemic or pandemic diseases and any related company or government policies or actions;
•actions taken by the members of OPEC and Russia affecting the production and pricing of oil, as well as other domestic and global political, economic, or diplomatic developments;
•changes in general economic, business or industry conditions, including changes in foreign currency exchange rates, interest rates and inflation rates, instability in the financial sector and concerns over a potential economic downturn or recession;
•regional supply and demand factors, including delays, curtailment delays or interruptions of production, or governmental orders, rules or regulations that impose production limits;
•federal and state legislative and regulatory initiatives relating to hydraulic fracturing, including the effect of existing and future laws and governmental regulations;
•physical and transition risks relating to climate change;
•restrictions on the use of water, including limits on the use of produced water and a moratorium on new produced water well permits recently imposed by the Texas Railroad Commission in an effort to control induced seismicity in the Permian Basin;
•significant declines in prices for oil, natural gas, or natural gas liquids, which could require recognition of significant impairment charges;
•changes in U.S. energy, environmental, monetary and trade policies;
•conditions in the capital, financial and credit markets, including the availability and pricing of capital for drilling and development operations and our environmental and social responsibility projects;
•challenges with employee retention and an increasingly competitive labor market;
•changes in availability or cost of rigs, equipment, raw materials, supplies, oilfield services;
•changes in safety, health, environmental, tax and other regulations or requirements (including those addressing air emissions, water management, or the impact of global climate change);
•security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, or from breaches of information technology systems of third parties with whom we transact business;
•lack of, or disruption in, access to adequate and reliable transportation, processing, storage and other facilities for our oil, natural gas and natural gas liquids;
iv
•failures or delays in achieving expected reserve or production levels from existing and future oil and natural gas developments, including due to operating hazards, drilling risks, or the inherent uncertainties in predicting reserve and reservoir performance;
•difficulty in obtaining necessary approvals and permits;
•severe weather conditions;
•acts of war or terrorist acts and the governmental or military response thereto;
•changes in the financial strength of counterparties to our credit agreement and hedging contracts;
•changes in our credit rating; and
•other risks and factors disclosed in this report.
In light of these factors, the events anticipated by our forward-looking statements may not occur at the time anticipated or at all. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. We cannot predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those anticipated by any forward-looking statements we may make. Accordingly, you should not place undue reliance on any forward-looking statements made in this report. All forward-looking statements speak only as of the date of this report or, if earlier, as of the date they were made. We do not intend to, and disclaim any obligation to, update or revise any forward-looking statements unless required by applicable law.
v
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Diamondback Energy, Inc. and Subsidiaries | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (Unaudited) | |||||||||||
| June 30, | December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| (In millions, except par values and share data) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable: | |||||||||||
| Joint interest and other, net | |||||||||||
| Oil and natural gas sales, net | |||||||||||
| Inventories | |||||||||||
| Derivative instruments | |||||||||||
| Income tax receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment: | |||||||||||
Oil and natural gas properties, full cost method of accounting ($ | |||||||||||
| Other property, equipment and land | |||||||||||
| Accumulated depletion, depreciation, amortization and impairment | ( | ( | |||||||||
| Property and equipment, net | |||||||||||
| Funds held in escrow | |||||||||||
| Equity method investments | |||||||||||
| Assets held for sale | |||||||||||
| Derivative instruments | |||||||||||
| Deferred income taxes, net | |||||||||||
| Investment in real estate, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable - trade | $ | $ | |||||||||
| Accrued capital expenditures | |||||||||||
| Current maturities of long-term debt | |||||||||||
| Other accrued liabilities | |||||||||||
| Revenues and royalties payable | |||||||||||
| Derivative instruments | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Derivative instruments | |||||||||||
| Asset retirement obligations | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 14) | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings (accumulated deficit) | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Total Diamondback Energy, Inc. stockholders’ equity | |||||||||||
| Non-controlling interest | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
1
Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except per share amounts, shares in thousands) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Oil sales | $ | $ | $ | $ | |||||||||||||||||||
| Natural gas sales | |||||||||||||||||||||||
| Natural gas liquid sales | |||||||||||||||||||||||
| Other operating income | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Lease operating expenses | |||||||||||||||||||||||
| Production and ad valorem taxes | |||||||||||||||||||||||
| Gathering and transportation | |||||||||||||||||||||||
| Depreciation, depletion, amortization and accretion | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Merger and integration expenses | |||||||||||||||||||||||
| Other operating expenses | |||||||||||||||||||||||
| Total costs and expenses | |||||||||||||||||||||||
| Income (loss) from operations | |||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense), net | ( | ||||||||||||||||||||||
| Gain (loss) on derivative instruments, net | ( | ( | ( | ( | |||||||||||||||||||
| Gain (loss) on extinguishment of debt | ( | ( | ( | ( | |||||||||||||||||||
| Income (loss) from equity investments | |||||||||||||||||||||||
| Total other income (expense), net | ( | ( | ( | ( | |||||||||||||||||||
| Income (loss) before income taxes | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | |||||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||
| Net income (loss) attributable to non-controlling interest | |||||||||||||||||||||||
| Net income (loss) attributable to Diamondback Energy, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Earnings (loss) per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Dividends declared per share | $ | $ | $ | $ | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
2
Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| ($ in millions, shares in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
| Unit-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Distribution equivalent rights payments | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Cash paid for tax withholding on vested equity awards | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Repurchased shares under buyback program | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Repurchased units under buyback programs | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Common shares issued for acquisition | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Dividend paid | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Exercise of stock options and issuance of restricted stock units and awards | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Change in ownership of consolidated subsidiaries, net | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance March 31, 2023 | ( | ||||||||||||||||||||||||||||||||||||||||
| Distribution equivalent rights payments | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Cash paid for tax withholding on vested equity awards | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Repurchased shares under buyback program | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Repurchased units under buyback programs | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Dividend paid | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Exercise of stock options and vesting of restricted stock units and awards | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Change in ownership of consolidated subsidiaries, net | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity - (Continued)
(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, 2021 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Unit-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Distribution equivalent rights payments | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Cash paid for tax withholding on vested equity awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Repurchased shares under buyback program | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Repurchased units under buyback programs | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Dividend paid | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Exercise of stock options and issuance of restricted stock units and awards | — | — | — | ||||||||||||||||||||||||||||||||
| Change in ownership of consolidated subsidiaries, net | — | — | ( | — | |||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | ||||||||||||||||||||||||||||||||
| Balance March 31, 2022 | ( | ||||||||||||||||||||||||||||||||||
| Unit-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Distribution equivalent rights payments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Cash paid for tax withholding on vested equity awards | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Repurchased shares under buyback program | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Repurchased units under buyback programs | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Dividend paid | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Exercise of stock options and vesting of restricted stock units and awards | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Change in ownership of consolidated subsidiaries, net | — | — | ( | — | |||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | ||||||||||||||||||||||||||||||||
| Balance June 30, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
Diamondback Energy, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| (In millions) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | |||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Provision for (benefit from) deferred income taxes | |||||||||||
| Depreciation, depletion, amortization and accretion | |||||||||||
| (Gain) loss on extinguishment of debt | |||||||||||
| (Gain) loss on derivative instruments, net | |||||||||||
| Cash received (paid) on settlement of derivative instruments | ( | ( | |||||||||
| (Income) loss from equity investment | ( | ( | |||||||||
| Equity-based compensation expense | |||||||||||
| Other | ( | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Income tax receivable | |||||||||||
| Prepaid expenses and other | |||||||||||
| Accounts payable and accrued liabilities | ( | ||||||||||
| Income tax payable | ( | ( | |||||||||
| Revenues and royalties payable | |||||||||||
| Other | ( | ||||||||||
| Net cash provided by (used in) operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Drilling, completions and infrastructure additions to oil and natural gas properties | ( | ( | |||||||||
| Additions to midstream assets | ( | ( | |||||||||
| Property acquisitions | ( | ( | |||||||||
| Proceeds from sale of assets | |||||||||||
| Other | ( | ( | |||||||||
| Net cash provided by (used in) investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from borrowings under credit facilities | |||||||||||
| Repayments under credit facilities | ( | ( | |||||||||
| Proceeds from senior notes | |||||||||||
| Repayment of senior notes | ( | ( | |||||||||
| Proceeds from (repayments to) joint venture | ( | ||||||||||
| Premium on extinguishment of debt | ( | ||||||||||
| Repurchased shares under buyback program | ( | ( | |||||||||
| Repurchased units under buyback program | ( | ( | |||||||||
| Dividends paid to stockholders | ( | ( | |||||||||
| Distributions to non-controlling interest | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | ( | ( | |||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
5
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Organization and Description of the Business
Diamondback Energy, Inc., together with its subsidiaries (collectively referred to as “Diamondback” or the “Company” unless the context otherwise requires), is an independent oil and natural gas company currently focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.
As of June 30, 2023, the wholly owned subsidiaries of Diamondback include Diamondback E&P LLC (“Diamondback E&P”), a Delaware limited liability company, Viper Energy Partners GP LLC, a Delaware limited liability company (“Viper’s General Partner”), Rattler Midstream GP LLC, a Delaware limited liability company (“Rattler’s GP”), Rattler Midstream LP, a Delaware limited partnership (“Rattler”) and QEP Resources, Inc. (“QEP”), a Delaware corporation.
Rattler Merger
On August 24, 2022 (the “Effective Date”), the Company completed the merger with Rattler pursuant to which the Company acquired all of the approximately 38.51 million publicly held outstanding common units of Rattler in exchange for approximately 4.35 million shares of the Company’s common stock (the “Rattler Merger”). Rattler continued as the surviving entity. Following the Rattler Merger, the Company owns all of Rattler’s outstanding common units and Class B units, and Rattler GP remains the general partner of Rattler. Following the closing of the Rattler Merger, Rattler’s common units were delisted from the NASDAQ Global Select Market and Rattler filed a certification on Form 15 with the SEC requesting the deregistration of its common units and suspension of Rattler’s reporting obligations under the Exchange Act.
The Rattler Merger was accounted for as a non-cash equity transaction resulting in increases to common stock of $44 thousand, additional paid-in-capital of $344 million, merger and integration expense of $11 million and a decrease in noncontrolling interests in consolidated subsidiaries of $344 million. For periods prior to the Effective Date, the results of operations attributable to the non-controlling interest in Rattler are presented within equity and net income and are shown separately from the equity and net income attributable to the Company.
Basis of Presentation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries after all significant intercompany balances and transactions have been eliminated upon consolidation. The Company has one reportable segment, the upstream segment.
Diamondback’s publicly traded subsidiary Viper Energy Partners LP (“Viper”) is consolidated in the Company’s financial statements. As of June 30, 2023, the Company owned approximately 57 % of Viper’s total units outstanding. The Company’s wholly owned subsidiary, Viper Energy Partners GP LLC, is the general partner of Viper. The results of operations attributable to the non-controlling interest in Viper are presented within equity and net income and are shown separately from the equity and net income attributable to the Company.
These condensed consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the SEC. They reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to SEC rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10–Q should be read in conjunction with the Company’s most recent Annual Report on Form 10–K for the fiscal year ended December 31, 2022, which contains a summary of the Company’s significant accounting policies and other disclosures.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These reclassifications had an immaterial effect on the previously reported total assets, total liabilities, stockholders’ equity, results of operations or cash flows.
6
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
Certain amounts included in or affecting the Company’s condensed consolidated financial statements and related disclosures must be estimated by management, requiring certain assumptions to be made with respect to values or conditions that cannot be known with certainty at the time the consolidated financial statements are prepared. These estimates and assumptions affect the amounts the Company reports for assets and liabilities and the Company’s disclosure of contingent assets and liabilities as of the date of the consolidated financial statements. Actual results could differ from those estimates.
Making accurate estimates and assumptions is particularly difficult in the oil and natural gas industry given the challenges resulting from volatility in oil and natural gas prices. For instance, the war in Ukraine, rising interest rates, global supply chain disruptions, concerns about a potential economic downturn or recession, recent measures to combat persistent inflation and instability in the financial sector have contributed to recent economic and pricing volatility. The financial results of companies in the oil and natural gas industry have been impacted materially as a result of these events and changing market conditions. Such circumstances generally increase uncertainty in the Company’s accounting estimates, particularly those involving financial forecasts.
The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, fair value estimates of derivative instruments, the fair value determination of acquired assets and liabilities assumed and estimates of income taxes, including deferred tax valuation allowances.
Recent Accounting Pronouncements
Recently Adopted Pronouncements
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This update required the acquirer in a business combination to record contract asset and liabilities following Topic 606 – “Revenue from Contracts with Customers” at acquisition as if it had originated the contract, rather than at fair value. The Company adopted this update effective January 1, 2023. 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 March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842) – Common Control Arrangements.” This update (i) requires all lessees that are a party to a lease between entities under common control in which there are leasehold improvements to record amortization utilizing the shorter period of the remaining lease term and the useful life of the improvements, and (ii) requires leasehold improvements to be accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. This update is effective for public business entities beginning after December 15, 2023 with early adoption permitted. The Company may adopt this update (i) prospectively to all new leasehold improvements on or after the date of adoption, (ii) prospectively to all new and existing leasehold improvements on or after the date of adoption, or (iii) retrospectively to the beginning of the period in which the Company first applied Topic 842. The Company continues to evaluate the provisions of this update, but does not believe the adoption will have a material impact on its financial position, results of operations or liquidity.
The Company considers the applicability and impact of all ASUs. ASUs not discussed above were assessed and determined to be either not applicable, the effects of adoption are not expected to be material or are clarifications of ASUs previously disclosed.
7
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from Contracts with Customers
The following tables present the Company’s revenue from contracts with customers disaggregated by product type and basin:
| Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Midland Basin | Delaware Basin | Other | Total | Midland Basin | Delaware Basin | Other | Total | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Oil sales | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Natural gas sales | |||||||||||||||||||||||||||||||||||||||||||||||
| Natural gas liquid sales | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Midland Basin | Delaware Basin | Other | Total | Midland Basin | Delaware Basin | Other | Total | ||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Oil sales | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Natural gas sales | |||||||||||||||||||||||||||||||||||||||||||||||
| Natural gas liquid sales | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
4. ACQUISITIONS AND DIVESTITURES
2023 Activity
Lario Acquisition
On January 31, 2023, the Company closed on its acquisition of all leasehold interests and related assets of Lario Permian, LLC, a wholly owned subsidiary of Lario Oil and Gas Company, and certain associated sellers (collectively “Lario”). The acquisition included approximately 25,000 gross (16,000 net) acres in the Midland Basin and certain related oil and gas assets (the “Lario Acquisition”), in exchange for 4.33 million shares of the Company’s common stock and $814 million in cash, including certain customary post-closing adjustments. Approximately $113 million of the cash consideration was deposited in an indemnity holdback escrow account at closing to be distributed upon satisfactory settlement of any potential title defects on the acquired properties. The cash portion of the consideration for the Lario Acquisition was funded through a combination of cash on hand, a portion of the net proceeds from the Company’s December 2022 senior notes offering and borrowings under the Company’s revolving credit facility.
The following table presents the acquisition consideration paid in the Lario Acquisition (in millions, except per share data, shares in thousands):
| Consideration: | |||||
| Shares of Diamondback common stock issued at closing | |||||
| Closing price per share of Diamondback common stock on the closing date | $ | ||||
| Fair value of Diamondback common stock issued | $ | ||||
| Cash consideration | |||||
| Total consideration (including fair value of Diamondback common stock issued) | $ | ||||
8
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Purchase Price Allocation
The Lario Acquisition has been accounted for as a business combination using the acquisition method. The following table represents the allocation of the total purchase price paid in the Lario Acquisition to the identifiable assets acquired and the liabilities assumed based on the fair values at the acquisition date. Although the purchase price allocation is substantially complete as of the date of this filing, there may be further adjustments to the fair value of certain assets acquired and liabilities assumed, including but not limited to the Company’s oil and natural gas properties. The Company expects to complete the purchase price allocation during the 12-month period following the acquisition date and may revise the value of the assets and liabilities as appropriate within that time frame.
The following table sets forth the Company’s preliminary purchase price allocation (in millions):
| Total consideration | $ | ||||
| Fair value of liabilities assumed: | |||||
| Other long-term liabilities | |||||
| Fair value of assets acquired: | |||||
| Oil and natural gas properties | |||||
| Inventories | |||||
| Other property, equipment and land | |||||
| Amount attributable to assets acquired | |||||
| Net assets acquired and liabilities assumed | $ | ||||
Oil and natural gas properties were valued using an income approach utilizing the discounted cash flow method, which takes into account production forecasts, projected commodity prices and pricing differentials, and estimates of future capital and operating costs which were then discounted utilizing an estimated weighted-average cost of capital for industry market participants. The fair value of acquired midstream assets, vehicles and a field office were based on the cost approach, which utilized asset listings and cost records with consideration for the reported age, condition, utilization and economic support of the assets and were included in the Company’s consolidated balance sheets under the caption “Other property, equipment and land.” The majority of the measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and are therefore considered Level 3 inputs in the fair value hierarchy.
With the completion of the Lario Acquisition, the Company acquired proved properties of $924 million and unproved properties of $536 million. The results of operations attributable to the Lario Acquisition since the acquisition date have been included in the condensed consolidated statements of operations and include $122 millions and $211 million of total revenue and $55 millions and $87 million of net income for the three and six months ended June 30, 2023, respectively.
Divestitures
On April 28, 2023, the Company divested non-core assets to an unrelated third-party buyer consisting of approximately 19,000 net acres in Glasscock County, TX for net cash proceeds at closing of $275 million, subject to certain customary post-closing adjustments including $3 million retained as an indemnity holdback in an escrow account for certain title defects. This transaction did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the Company recorded the proceeds as a reduction of its full cost pool with no gain or loss recognized on the sale. The Company used its net proceeds from this transaction for debt reduction and other general corporate purposes.
On March 31, 2023, the Company divested non-core assets consisting of approximately 4,900 net acres in Ward and Winkler counties to unrelated third-party buyers for $78 million in net cash proceeds, including customary post-closing adjustments.
On January 9, 2023, the Company divested its 10 % non-operating equity investment in Gray Oak Pipeline, LLC (“Gray Oak”) for $172 million in net cash proceeds and recorded a gain on the sale of equity method investments of approximately $53 million in the first quarter of 2023 that is included in the caption “Other income (expense), net” on the condensed consolidated statement of operations for the six months ended June 30, 2023.
9
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
2022 Activity
FireBird Energy LLC
On November 30, 2022, the Company closed on its acquisition of all leasehold interests and related assets of FireBird Energy LLC, which included approximately 75,000 gross (68,000 net) acres in the Midland Basin and certain related oil and gas assets, in exchange for 5.92 million shares of the Company’s common stock and $787 million in cash, including certain customary post-closing adjustments. Approximately $125 million of the cash consideration was deposited in an indemnity holdback escrow account at closing to be distributed upon satisfactory settlement of any potential title defects on the acquired properties. The cash portion of the consideration for the FireBird Acquisition was funded through a combination of cash on hand and borrowings under the Company’s revolving credit facility. As a result of the FireBird Acquisition, the Company added approximately 854 gross producing wells.
The following table presents the acquisition consideration paid in the FireBird Acquisition (in millions, except per share data, shares in thousands):
| Consideration: | |||||
| Shares of Diamondback common stock issued at closing | |||||
| Closing price per share of Diamondback common stock on the closing date | $ | ||||
| Fair value of Diamondback common stock issued | $ | ||||
| Cash consideration | |||||
| Total consideration (including fair value of Diamondback common stock issued) | $ | ||||
Purchase Price Allocation
The FireBird Acquisition has been accounted for as a business combination using the acquisition method. The following table represents the allocation of the total purchase price paid in the FireBird Acquisition to the identifiable assets acquired and the liabilities assumed based on the fair values at the acquisition date. Although the purchase price allocation is substantially complete as of the date of this filing, there may be further adjustments to the fair value of certain assets acquired and liabilities assumed, including but not limited to the Company’s oil and natural gas properties and other property, equipment and land. The Company expects to complete the purchase price allocation during the 12-month period following the acquisition date and may revise the value of the assets and liabilities as appropriate within that time frame.
The following table sets forth the Company’s preliminary purchase price allocation (in millions):
| Total consideration | $ | ||||
| Fair value of liabilities assumed: | |||||
| Other long-term liabilities | |||||
| Fair value of assets acquired: | |||||
| Oil and natural gas properties | |||||
| Inventories | |||||
| Other property, equipment and land | |||||
| Amount attributable to assets acquired | |||||
| Net assets acquired and liabilities assumed | $ | ||||
Oil and natural gas properties were valued using an income approach utilizing the discounted cash flow method, which takes into account production forecasts, projected commodity prices and pricing differentials, and estimates of future capital and operating costs which were then discounted utilizing an estimated weighted-average cost of capital for industry market participants. The fair value of acquired midstream assets was based on the cost approach, which utilized asset listings and cost records with consideration for the reported age, condition, utilization and economic support of the assets and were included in the Company’s consolidated balance sheets under the caption “Other property, equipment and land.” The majority of the measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and are therefore considered Level 3 inputs.
10
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
With the completion of the FireBird Acquisition, the Company acquired proved properties of $648 million and unproved properties of $910 million.
Delaware Basin Acquisition
On January 18, 2022, the Company acquired, from an unrelated third-party seller, approximately 6,200 net acres in the Delaware Basin for $232 million in cash, including customary post-closing adjustments. The acquisition was funded through cash on hand.
Other 2022 Acquisitions
Additionally during the year ended December 31, 2022, the Company acquired, from unrelated third-party sellers, approximately 4,000 net acres and over 200 gross wells in the Permian Basin for an aggregate purchase price of approximately $220 million in cash, including customary post-closing adjustments. The acquisitions were funded through cash on hand.
Divestitures of Certain Non-Core Assets
In October 2022, the Company completed the divestiture of non-core Delaware Basin acreage consisting of approximately 3,272 net acres, with net production of approximately 550 BO/d (800 BOE/d) for $155 million of net proceeds. The Company used the net proceeds from this transaction towards debt reduction.
Pro Forma Financial Information
The following unaudited summary pro forma financial information for the three and six months ended June 30, 2023 and 2022 has been prepared to give effect to the FireBird Acquisition and the Lario Acquisition as if they had occurred on January 1, 2022. The unaudited pro forma financial information does not purport to be indicative of what the combined company’s results of operations would have been if these transactions had occurred on the dates indicated, nor is it indicative of the future financial position or results of operations of the combined company.
The below information reflects pro forma adjustments for the issuance of the Company’s common stock as consideration for the FireBird Acquisition and the Lario Acquisition, as well as pro forma adjustments based on available information and certain assumptions that the Company believes are reasonable, including adjustments to depreciation, depletion and amortization based on the full cost method of accounting.
Additionally, pro forma earnings for the three and six months ended June 30, 2023 were adjusted to exclude acquisition-related costs incurred by the Company of $1 million and $8 million for the Lario Acquisition and $2 million and $3 million for the FireBird Acquisition, respectively, which consist primarily of legal and advisory fees. The pro forma results of operations do not include any cost savings or other synergies that may result from the Firebird Acquisition and the Lario Acquisition or any estimated costs that have been or will be incurred by the Company to integrate the acquired 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.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | |||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | |||||||||||||||||||
| Basic earnings (loss) per common share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings (loss) per common share | $ | $ | $ | $ | |||||||||||||||||||
11
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
5. PROPERTY AND EQUIPMENT
Property and equipment includes the following as of the dates indicated:
| June 30, | December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| (In millions) | |||||||||||
| Oil and natural gas properties: | |||||||||||
| Subject to depletion | $ | $ | |||||||||
| Not subject to depletion | |||||||||||
| Gross oil and natural gas properties | |||||||||||
| Accumulated depletion | ( | ( | |||||||||
| Accumulated impairment | ( | ( | |||||||||
| Oil and natural gas properties, net | |||||||||||
| Other property, equipment and land | |||||||||||
| Accumulated depreciation, amortization, accretion and impairment | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter which determines a limit, or ceiling, on the book value of proved oil and natural gas properties. No
In addition to commodity prices, the Company’s production rates, levels of proved reserves, future development costs, transfers of unevaluated properties and other factors will determine its actual ceiling test calculation and impairment analysis in future periods. If the future trailing 12-month commodity prices decline as compared to the commodity prices used in prior quarters, the Company may have material write downs in subsequent quarters. It is possible that circumstances requiring additional impairment testing will occur in future interim periods, which could result in potentially material impairment charges being recorded.
Assets Held For Sale
During the second quarter of 2023, the Company commenced separate plans to sell certain assets consisting of midstream water assets with a carrying value of $667 million and oil gathering assets with a carrying value of $75 million. As of June 30, 2023, the Company had ceased depreciating these assets and classified them as held for sale on the Company’s condensed consolidated balance sheet. At December 31, 2022, the midstream water assets and oil gathering assets were included in the Company’s consolidated balance sheet under the caption “Other property, equipment and land.” All of these assets are included in the midstream operating segment, which is categorized as “All Other” in the Company’s segment disclosures in Note 16—Segment Information.
12
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
6. ASSET RETIREMENT OBLIGATIONS
The following table describes the changes to the Company’s asset retirement obligations liability for the following periods:
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| (In millions) | |||||||||||
| Asset retirement obligations, beginning of period | $ | $ | |||||||||
| Additional liabilities incurred | |||||||||||
| Liabilities acquired | |||||||||||
| Liabilities settled and divested | ( | ( | |||||||||
| Accretion expense | |||||||||||
| Revisions in estimated liabilities | ( | ||||||||||
| Asset retirement obligations, end of period | |||||||||||
Less current portion(1) | |||||||||||
| Asset retirement obligations - long-term | $ | $ | |||||||||
(1) The current portion of the asset retirement obligation is included in other accrued liabilities in the Company’s condensed consolidated balance sheets.
7. DEBT
Long-term debt consisted of the following as of the dates indicated:
| June 30, | December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| (In millions) | |||||||||||
| $ | $ | ||||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||
| Unamortized discount costs | ( | ( | |||||||||
| Unamortized premium costs | |||||||||||
Unamortized basis adjustment of dedesignated interest rate swap agreements(1) | ( | ( | |||||||||
| Revolving credit facility | |||||||||||
| Viper revolving credit facility | |||||||||||
Viper | |||||||||||
| Total debt, net | |||||||||||
| Less: current maturities of long-term debt | |||||||||||
| Total long-term debt | $ | $ | |||||||||
(1) Represents the unamortized basis adjustment related to two receive-fixed, pay variable interest rate swap agreements which were previously designated as fair value hedges of the Company’s $1.2 billion 3.500 % fixed rate senior notes due 2029. These swaps were dedesignated in the second quarter of 2022 as discussed further in Note 11—Derivatives.
13
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
References in this section to the Company shall mean Diamondback Energy, Inc. and Diamondback E&P, collectively, unless otherwise specified.
Credit Agreement
As of June 30, 2023, Diamondback E&P, as borrower, and Diamondback Energy, Inc., as parent guarantor, have a credit agreement, as amended, which provides for a maximum credit amount of $1.6 billion. As of June 30, 2023, the Company had $343 million in outstanding borrowings under the credit agreement and $1.3 billion available for future borrowings. During the three and six months ended June 30, 2023 the weighted average interest rate on borrowings under the credit agreement was 6.37 % and 6.23 %, respectively. During both the three and six months ended June 30, 2022 the weighted average interest rate on borrowings under the credit agreement was 2.69
As of June 30, 2023, the Company was in compliance with all financial maintenance covenants under the credit agreement.
Repurchases of Notes
In the second quarter of 2023, the Company repurchased principal amounts of $30 million of its 3.250 % Senior Notes due 2026 and $100 million of its 3.500 % Senior Notes due 2029 for total cash consideration, including accrued interest paid of $124 million. These repurchases resulted in an immaterial loss on extinguishment of debt during the second quarter of 2023.
Viper’s Credit Agreement
On May 31, 2023, Viper LLC entered into a tenth amendment to its existing credit agreement, which among other things, (i) maintained the maximum credit amount under the Viper LLC credit agreement of $2.0 billion, (ii) increased the borrowing base from $580 million to $1.0 billion and (iii) increased the elected commitment amount from $500 million to $750 million. As of June 30, 2023, Viper LLC had $224 million of outstanding borrowings and $526 million available for future borrowings. During the three and six months ended June 30, 2023 and 2022, the weighted average interest rates on borrowings under the Viper credit agreement were 7.53 %, 7.24 % and 3.20 % and 2.88 %, respectively. The Viper credit agreement will mature on June 2, 2025. As of June 30, 2023, Viper LLC was in compliance with all financial maintenance covenants under the Viper credit agreement.
8. STOCKHOLDERS’ EQUITY AND EARNINGS (LOSS) PER SHARE
Stock Repurchase Program
In September 2021, the Company’s board of directors approved a stock repurchase program to acquire up to $2.0 billion of the Company’s outstanding common stock, excluding excise tax. On July 28, 2022, the Company’s board of directors approved an increase in the Company’s common stock repurchase program from $2.0 billion to $4.0 billion, excluding excise tax. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, contractual obligations and other factors. The repurchase program does not require the Company to acquire any specific number of shares. This repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. During the three and six months ended June 30, 2023 and 2022, the Company repurchased, excluding excise tax, approximately $321 million, $653 million, $303 million and $310 million of common stock under this repurchase program, respectively. As of June 30, 2023, approximately $1.8 billion remained available for use to repurchase shares under the Company’s common stock repurchase program, excluding excise tax.
14
Diamondback Energy, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements - (Continued)
(Unaudited)
Change in Ownership of Consolidated Subsidiaries
Non-controlling interests in the accompanying condensed consolidated financial statements represent minority interest ownership in Viper and Rattler through the Effective Date and are presented as a component of equity. When the Company’s relative ownership interests in Viper and Rattler change, adjustments to non-controlling interest and additional paid-in-capital, tax effected, will occur. The following table summarizes changes in the ownership interest in consolidated subsidiaries during the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net income (loss) attributable to the Company | $ | $ | $ | $ | |||||||||||||||||||
| Change in ownership of consolidated subsidiaries | ( | ( | ( | ( | |||||||||||||||||||
| Change from net income (loss) attributable to the Company's stockholders and transfers to non-controlling interest | $ | $ | $ | ||||||||||||||||||||