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Diamondback Energy, Inc.

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Business Summary

Diamondback Energy, Inc. is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. The Permian Basin is characterized by an extensive production history, a favorable operating environment, mature infrastructure, long reserve life, multiple producing horizons, enhanced recovery potential and a large number of operators. The Company reports operations in one reportable segment, the upstream segment, and its activities are primarily focused on horizontal development of the Spraberry and Wolfcamp formations of the Midland Basin and the Wolfcamp and Bone Spring formations of the Delaware Basin, both of which are part of the larger Permian Basin in West Texas and New Mexico.

The Company competes with other companies that may have greater resources, including those that carry on midstream and refining operations and market petroleum products on a regional, national or worldwide basis. Diamondback is the operator of approximately 97% of its Permian Basin acreage, which allows it to efficiently manage operating costs, pace of development activities and the gathering and marketing of its production. The Company's average 79% working interest in its acreage allows it to realize the majority of the benefits of these activities and cost efficiencies. As of December 31, 2025, the Company had an estimated 8,854 gross (6,541 net) identified economic potential horizontal drilling locations on its acreage at an assumed price of approximately $50.00 per Bbl WTI .

The Company generates revenue through the sale of oil, natural gas and natural gas liquids production. Substantially all of the Company's revenues are generated through these sales. The Company also enters into purchase transactions with third parties and separate sale transactions with third parties to satisfy certain of its unused oil pipeline capacity commitments, which are presented as sales of purchased oil and purchased oil expense. The Company's revenues are a function of production volumes sold and average sales prices received for those volumes.

For the year ended December 31, 2025, total oil, natural gas and natural gas liquid revenues were $13,453 million , compared to $10,100 million for the year ended December 31, 2024. Oil sales were $11,621 million for 2025 versus $9,067 million for 2024. Natural gas sales were $400 million for 2025 versus $89 million for 2024. Natural gas liquid sales were $1,432 million for 2025 versus $944 million for 2024. Sales of purchased oil were $1,476 million for 2025 versus $923 million for 2024. Other operating income was $97 million for 2025 versus $43 million for 2024.

During the year ended December 31, 2025, the Company drilled 463 gross (430 net) and completed 503 gross (476 net) operated horizontal wells and incurred capital expenditures for drilling, completing and equipping wells, infrastructure and midstream additions to oil and natural gas properties of $3.5 billion . The Company completed the Double Eagle Acquisition on April 1, 2025 for consideration of $3.1 billion in cash and approximately 6.84 million shares of the Company's common stock. On August 19, 2025, Viper completed the Sitio Acquisition in an all-equity transaction valued at approximately $4.0 billion . During the year ended December 31, 2025, the Company divested approximately $1.7 billion in non-core assets, including its 27.5% equity interest in EPIC Crude Holdings, LP and its subsidiary, Environmental Disposal Systems, LLC. The Company repurchased $2.0 billion of its common stock in 2025 and increased its common stock repurchase program authorization to $8.0 billion , excluding excise taxes. The Company paid dividends to stockholders of $1.2 billion during 2025.

The Company recorded net income of $1,547 million for the year ended December 31, 2025, which includes an impairment of approximately $3.7 billion recorded on its proved oil and natural gas properties during the fourth quarter of 2025. Net income attributable to Diamondback Energy, Inc. was $1,664 million for 2025, compared to $3,338 million for 2024. Total revenues were $15,026 million for 2025 versus $11,066 million for 2024. Cash operating costs were $10.23 per BOE , including lease operating expenses of $5.55 per BOE , cash general and administrative expenses of $0.62 per BOE and production and ad valorem taxes and gathering, processing and transportation expenses of $4.06 per BOE . Net cash provided by operating activities was $8,758 million for 2025 versus $6,413 million for 2024.

Business Outlook

The Company currently estimates that its 2026 cash capital budget will be $3.60 billion to $3.90 billion , which includes $3.05 billion to $3.27 billion for operated horizontal drilling and completions. The Company's 2026 plan is to keep activity and production essentially flat relative to its fourth quarter 2025 levels at approximately 926 MBOE/d to 962 MBOE/d , as adjusted for the impact of the Viper Non-Permian Divestiture. The Company currently intends to operate between 15 and 18 drilling rigs and approximately five completion crews on average in 2026 .

The Company successfully delineated the Barnett/Woodford zone across its Midland Basin acreage in 2025, confirming reservoir continuity and improving its development line of sight, which will add meaningful incremental drilling locations to its inventory. As a result, the Company plans to allocate approximately 3% to 4% of its 2026 total capital budget to further advance the Barnett/Woodford across its acreage.

The Company expects to continue to exercise capital discipline, with a focus on capital efficiency over volume growth. The Company's cash operating costs were $10.23 per BOE in 2025, including lease operating expenses of $5.55 per BOE , cash general and administrative expenses of $0.62 per BOE and production and ad valorem taxes and gathering, processing and transportation expenses of $4.06 per BOE . The Company currently estimates expenditures for lease operating expenses may range between approximately $2.0 billion and $2.2 billion in 2026 at the midpoint of expected production. The Company currently estimates expenditures for gathering, processing and transportation may range between approximately $507 million and $597 million in 2026 at the midpoint of expected production. The Company currently estimates expenditures for interest expense, net may range between approximately $237 million and $316 million in 2026.

The Company was operating 15 drilling rigs and four completion crews at December 31, 2025 and currently intends to operate between 15 and 18 drilling rigs and approximately five completion crews on average in 2026 . The Company will continue monitoring the ongoing commodity price environment and expects to retain the financial flexibility to adjust its drilling and completion plans in response to market conditions.

The Company's board of directors has approved a return of capital commitment to its shareholders of at least 50% of its quarterly Adjusted Free Cash Flow through repurchases under its share repurchase program, base dividends and variable dividends. The remainder of its Adjusted Free Cash Flow will be used primarily to reduce debt. On July 31, 2025, the Company's board of directors approved an increase in its common stock repurchase program from $6.0 billion to $8.0 billion , excluding the 1% U.S. federal excise tax on certain repurchases of stock. Since the inception of the stock repurchase program through February 20, 2026, the Company has repurchased an aggregate 40.69 million shares of its common stock for a total cost of $5.7 billion , which includes $637 million for the repurchase of 4.0 million shares from SGF, excluding excise tax, leaving approximately $2.3 billion for future repurchases under such stock repurchase program. On February 19, 2026, the Company's board of directors declared a base cash dividend for the fourth quarter of 2025 of $1.05 per share of common stock.

Given the overall decline in SEC Prices through 2025 as compared to 2024, the Company believes a material non-cash impairment of its assets is reasonably likely to occur in the first quarter of 2026 . The Company's ability to achieve its ESG targets, including emissions reductions, is subject to numerous factors and conditions, some of which are outside of its control, and failure to achieve its announced targets or comply with ethical, environmental or other standards, including reporting standards, may expose it to government enforcement actions or private litigation and adversely impact its business. The Company's operations are subject to various governmental laws and regulations which require compliance that can be burdensome and expensive, and changes in U.S. trade policy and the impact of tariffs may have a material adverse effect on its business and results of operations.

Risk Factors

The Company's revenues, operating results and profitability depend significantly on the prevailing prices for oil and natural gas, which are volatile and subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors beyond its control. A non-cash ceiling test impairment charge of $3,652 million was recorded for the year ended December 31, 2025, and the Company believes an additional material non-cash impairment is reasonably likely to occur in the first quarter of 2026 . The Company's substantial indebtedness, with approximately $13.5 billion in aggregate outstanding principal amount of senior notes as of December 31, 2025, could adversely affect its results of operations, business flexibility and ability to service its debt. The Company's operations are concentrated in the Permian Basin of West Texas, making it vulnerable to risks associated with operating in a single geographic area, including regional supply and demand factors, delays or interruptions of production, and extreme weather conditions. The Company's identified potential drilling locations, of which approximately 8,854 gross (6,541 net) are economic at $50.00 per Bbl WTI, are susceptible to uncertainties that could materially alter the occurrence or timing of their drilling, and only 1,351 of these gross locations were attributed to proved reserves as of December 31, 2025.

Management Priorities

Management's message emphasizes the Company's execution track record, generating free cash flow while keeping capital costs under control, with total cash capital expenditure amount of $3.5 billion in 2025, consistent with guidance presented in November 2025. Management highlights the successful execution of the Endeavor Acquisition and the Double Eagle Acquisition, which have further strengthened existing operating experience and delivered certain operational synergies ahead of schedule. The Company exceeded its previously announced commitment to sell at least $1.5 billion of its non-core assets during 2025 to help accelerate debt reduction and maintain a strong balance sheet. Management states that the Company expects to continue to exercise capital discipline, with a focus on capital efficiency over volume growth and plans to spend between $3.60 billion and $3.90 billion in cash capital expenditures in 2026. The Company's board of directors has approved a return of capital commitment to its shareholders of at least 50% of its quarterly Adjusted Free Cash Flow. Management also notes that the Company has a target of reducing its net debt to $10.0 billion .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Our Strengths
  2. [2] Item 1, Business — Our Business Strategy
  3. [3] Item 1, Business — Potential Drilling Locations
  4. [4] Item 8, Note 3 — Revenue from Contracts with Customers
  5. [5] Item 8, Note 3 — Revenue from Contracts with Customers
  6. [6] Item 8, Consolidated Statements of Operations
  7. [7] Item 8, Consolidated Statements of Operations
  8. [8] Item 8, Consolidated Statements of Operations
  9. [9] Item 8, Consolidated Statements of Operations
  10. [10] Item 8, Consolidated Statements of Operations
  11. [11] Item 8, Consolidated Statements of Operations
  12. [12] Item 8, Consolidated Statements of Operations
  13. [13] Item 8, Consolidated Statements of Operations
  14. [14] Item 8, Consolidated Statements of Operations
  15. [15] Item 8, Consolidated Statements of Operations
  16. [16] Item 1, Business — Wells Drilled and Completed in 2025
  17. [17] Item 1, Business — Wells Drilled and Completed in 2025
  18. [18] Item 7, MD&A — 2025 Financial and Operating Highlights
  19. [19] Item 1, Business — Double Eagle Acquisition
  20. [20] Item 1, Business — Double Eagle Acquisition
  21. [21] Item 1, Business — Sitio Acquisition
  22. [22] Item 1, Business — Non-Core Asset Divestitures
  23. [23] Item 7, MD&A — EPIC Divestiture
  24. [24] Item 7, MD&A — 2025 Financial and Operating Highlights
  25. [25] Item 5, Issuer Purchases of Equity Securities
  26. [26] Item 7, MD&A — 2025 Financial and Operating Highlights
  27. [27] Item 8, Consolidated Statements of Operations
  28. [28] Item 7, MD&A — Impairment of Oil and Natural Gas Properties
  29. [29] Item 8, Consolidated Statements of Operations
  30. [30] Item 8, Consolidated Statements of Operations
  31. [31] Item 8, Consolidated Statements of Operations
  32. [32] Item 8, Consolidated Statements of Operations
  33. [33] Item 7, MD&A — 2025 Financial and Operating Highlights
  34. [34] Item 7, MD&A — 2025 Financial and Operating Highlights
  35. [35] Item 7, MD&A — 2025 Financial and Operating Highlights
  36. [36] Item 7, MD&A — 2025 Financial and Operating Highlights
  37. [37] Item 8, Consolidated Statements of Cash Flows
  38. [38] Item 8, Consolidated Statements of Cash Flows
  39. [39] Item 7, MD&A — Outlook
  40. [40] Item 7, MD&A — Outlook
  41. [41] Item 7, MD&A — Outlook
  42. [42] Item 7, MD&A — Outlook
  43. [43] Item 7, MD&A — Outlook
  44. [44] Item 7, MD&A — 2025 Financial and Operating Highlights
  45. [45] Item 7, MD&A — 2025 Financial and Operating Highlights
  46. [46] Item 7, MD&A — 2025 Financial and Operating Highlights
  47. [47] Item 7, MD&A — 2025 Financial and Operating Highlights
  48. [48] Item 7, MD&A — Lease Operating Expenses
  49. [49] Item 7, MD&A — Gathering, Processing and Transportation Expense
  50. [50] Item 7, MD&A — Other Income (Expense)
  51. [51] Item 1, Business — Recent and Future Activity
  52. [52] Item 7, MD&A — Outlook
  53. [53] Item 7, MD&A — Return of Capital Commitment
  54. [54] Item 5, Issuer Purchases of Equity Securities
  55. [55] Item 7, MD&A — Return of Capital Commitment
  56. [56] Item 7, MD&A — Return of Capital Commitment
  57. [57] Item 7, MD&A — Return of Capital Commitment
  58. [58] Item 7, MD&A — Return of Capital Commitment
  59. [59] Item 7, MD&A — Return of Capital Commitment
  60. [60] Item 7, MD&A — Return of Capital Commitment
  61. [61] Item 7, MD&A — Commodity Prices
  62. [62] Item 8, Note 5 — Property and Equipment
  63. [63] Item 7, MD&A — Commodity Prices
  64. [64] Item 7, MD&A — Payments of Principal and Interest on Debt Instruments
  65. [65] Item 1, Business — Potential Drilling Locations
  66. [66] Item 1A, Risk Factors — Identified Potential Drilling Locations
  67. [67] Item 7, MD&A — 2025 Financial and Operating Highlights
  68. [68] Item 7, MD&A — Outlook
  69. [69] Item 7, MD&A — Outlook
  70. [70] Item 7, MD&A — Return of Capital Commitment
  71. [71] Item 1, Business — Our Business Strategy
  72. [72] Item 8, Consolidated Statements of Operations
  73. [73] Item 8, Consolidated Statements of Operations
  74. [74] Item 8, Consolidated Statements of Operations
  75. [75] Item 8, Consolidated Statements of Operations
  76. [76] Item 8, Consolidated Statements of Operations
  77. [77] Item 8, Consolidated Statements of Operations
  78. [78] Item 8, Consolidated Statements of Operations
  79. [79] Item 8, Consolidated Statements of Operations
  80. [80] Item 8, Consolidated Statements of Cash Flows
  81. [81] Item 8, Consolidated Statements of Cash Flows
  82. [82] Item 8, Note 5 — Property and Equipment
  83. [83] Item 8, Consolidated Balance Sheets
  84. [84] Item 7, MD&A — Overview of Sources and Uses of Cash
  85. [85] Item 8, Consolidated Balance Sheets
  86. [86] Item 7, MD&A — Results of Operations
  87. [87] Item 7, MD&A — Results of Operations
  88. [88] Item 8, Note 2 — Oil and Natural Gas Properties
  89. [89] Item 8, Note 2 — Oil and Natural Gas Properties

Analysis on 6/9/2026