Guarantor Financial Statements

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Guarantor Financial Statements

GUARANTOR FINANCIAL STATEMENTS

As of June 30, 2019, Diamondback E&P LLC, Diamondback O&G LLC and Energen Corporation and its subsidiaries (the “Guarantor Subsidiaries”) are guarantors under the 2024 Indenture and the 2025 Indenture. In connection with the issuance of the 2024 Senior Notes and the 2025 Senior Notes, Viper, Viper’s General Partner, Viper LLC and Rattler LLC were designated as Non-Guarantor Subsidiaries. The following presents condensed consolidated financial information for the Company (which for purposes of this Note 22 is referred to as the “Parent”), the Guarantor Subsidiaries and the Non–Guarantor Subsidiaries on a consolidated basis. Elimination entries presented are necessary to combine the entities. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the Guarantor Subsidiaries operated as independent entities. The Company has not presented separate financial and narrative information for each of the Guarantor Subsidiaries because it believes such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the Guarantor Subsidiaries.

The Rattler entities were not guarantors under the 2024 Senior Notes or the 2025 Senior Notes for the previous periods presented; therefore, the schedules that follow have been adjusted to reflect this correction of an immaterial change.

Condensed Consolidated Balance Sheet
June 30, 2019
(in millions)
						Non–
			Guarantor			Guarantor
	Parent		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	295	$	15		$	16		$	—		$	326
Accounts receivable, net	—		468			49			—			517
Accounts receivable - related party	—		—			9			(9		)	—
Intercompany receivable	4,383		1,198			—			(5,581		)	—
Inventories	—		31			13			—			44
Derivative instruments	—		29			—			—			29
Prepaid expenses and other	1		50			5			—			56
Total current assets	4,679		1,791			92			(5,590		)	972
Property and equipment:
Oil and natural gas properties, at cost, full cost method of accounting	—		22,388			1,842			(154		)	24,076
Midstream assets	—		6			822			—			828
Other property, equipment and land	—		56			94			—			150
Accumulated depletion, depreciation, amortization and impairment	—		(3,123		)	(325		)	(3		)	(3,451		)
Net property and equipment	—		19,327			2,433			(157		)	21,603
Funds held in escrow	—		—			13			—			13
Equity method investments	—		—			187			—			187
Derivative instruments	—		23			—			—			23
Investment in subsidiaries	12,008		—			—			(12,008		)	—
Deferred tax asset	—		—			150			—			150
Investment in real estate, net	—		2			110			—			112
Other assets	—		88			23			—			111
Total assets	$	16,687	$	21,231		$	3,008		$	(17,755	)	$	23,171
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	—	$	204		$	17		$	(17	)	$	204
Intercompany payable	134		4,881			—			(5,015		)	—
Accrued capital expenditures	—		505			68			—			573
Other accrued liabilities	14		192			33			—			239
Revenues and royalties payable	—		139			—			—			139
Derivative instruments	—		25			—			—			25
Total current liabilities	148		5,946			118			(5,032		)	1,180
Long-term debt	2,036		2,222			214			—			4,472
Derivative instruments	—		8			—			—			8
Asset retirement obligations	—		137			5			—			142
Deferred income taxes	499		1,408			2			—			1,909
Other long-term liabilities	—		10			—			—			10
Total liabilities	2,683		9,731			339			(5,032		)	7,721
Commitments and contingencies
Stockholders’ equity	14,004		11,500			1,526			(13,026		)	14,004
Non-controlling interest	—		—			1,143			303			1,446
Total equity	14,004		11,500			2,669			(12,723		)	15,450
Total liabilities and equity	$	16,687	$	21,231		$	3,008		$	(17,755	)	$	23,171

Condensed Consolidated Balance Sheet
December 31, 2018
(in millions)
						Non–
			Guarantor			Guarantor
	Parent		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	84	$	100		$	31		$	—		$	215
Accounts receivable	—		351			41			—			392
Accounts receivable - related party	—		—			9			(9		)	—
Intercompany receivable	4,469		195			—			(4,664		)	—
Inventories	—		28			9			—			37
Derivative instruments	—		231			—			—			231
Prepaid expenses and other	3		43			4			—			50
Total current assets	4,556		948			94			(4,673		)	925
Property and equipment:
Oil and natural gas properties, at cost, full cost method of accounting	—		20,586			1,717			(4		)	22,299
Midstream assets	—		284			416			—			700
Other property, equipment and land	—		71			76			—			147
Accumulated depletion, depreciation, amortization and impairment	—		(2,486		)	(276		)	(12		)	(2,774		)
Net property and equipment	—		18,455			1,933			(16		)	20,372
Equity method investments	—		1			—			—			1
Investment in subsidiaries	11,576		112						(11,688		)	—
Investment in real estate, net	—		12			104			—			116
Deferred tax asset	—		—			97			—			97
Other assets	—		68			17			—			85
Total assets	$	16,132	$	19,596		$	2,245		$	(16,377	)	$	21,596
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	—	$	128		$	—		$	—		$	128
Intercompany payable	—		4,673			—			(4,673		)	—
Accrued capital expenditures	—		495			—			—			495
Other accrued liabilities	14		170			69			—			253
Revenues and royalties payable	—		143			—			—			143
Total current liabilities	14		5,609			69			(4,673		)	1,019
Long-term debt	2,036		2,017			411			—			4,464
Derivative instruments	—		15			—			—			15
Asset retirement obligations	—		136			—			—			136
Deferred income taxes	382		1,403			—			—			1,785
Other long-term liabilities	—		10			—			—			10
Total liabilities	2,432		9,190			480			(4,673		)	7,429
Commitments and contingencies
Stockholders’ equity	13,700		10,406			1,070			(11,476		)	13,700
Non-controlling interest	—		—			695			(228		)	467
Total equity	13,700		10,406			1,765			(11,704		)	14,167
Total liabilities and equity	$	16,132	$	19,596		$	2,245		$	(16,377	)	$	21,596

Condensed Consolidated Statement of Operations
Three Months Ended June 30, 2019
(in millions)
							Non–
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
Oil sales	$	—		$	881		$	—		$	66		$	947
Natural gas sales	—			(8		)	—			(1		)	(9		)
Natural gas liquid sales	—			56			—			6			62
Royalty income	—			—			70			(70		)	—
Lease bonus	—			—			2			—			2
Midstream services	—			—			108			(92		)	16
Other operating income	—			—			4			(1		)	3
Total revenues	—			929			184			(92		)	1,021
Costs and expenses:
Lease operating expenses	—			156			—			(29		)	127
Production and ad valorem taxes	—			60			4			—			64
Gathering and transportation	—			20			—			(3		)	17
Midstream services	—			—			42			(25		)	17
Depreciation, depletion and amortization	—			324			27			8			359
General and administrative expenses	9			12			5			(4		)	22
Asset retirement obligation accretion	—			3			—			—			3
Other operating expense	—			—			1			—			1
Total costs and expenses	9			575			79			(53		)	610
Income (loss) from operations	(9		)	354			105			(39		)	411
Other income (expense)
Interest expense, net	(11		)	(36		)	(2		)	—			(49		)
Other income (expense), net	1			3			—			(2		)	2
Gain on derivative instruments, net	—			94			—			—			94
Total other income (expense), net	(10		)	61			(2		)	(2		)	47
Income (loss) before income taxes	(19		)	415			103			(41		)	458
Provision for income taxes	100			—			2			—			102
Net income (loss)	(119		)	415			101			(41		)	356
Net income attributable to non-controlling interest	—			—			60			(53		)	7
Net income (loss) attributable to Diamondback Energy, Inc.	$	(119	)	$	415		$	41		$	12		$	349

Condensed Consolidated Statement of Operations
Three Months Ended June 30, 2018
(in millions)
							Non–
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
Oil sales	$	—		$	395		$	—		$	66		$	461
Natural gas sales	—			9			—			3			12
Natural gas liquid sales	—			37			—			6			43
Royalty income	—			—			74			(74		)	—
Lease bonus	—			—			1			—			1
Midstream services	—			—			47			(39		)	8
Other operating income	—			—			3			(1		)	2
Total revenues	—			441			125			(39		)	527
Costs and expenses:
Lease operating expenses	—			56			—			(13		)	43
Production and ad valorem taxes	—			27			6			—			33
Gathering and transportation	—			11			—			(4		)	7
Midstream services	—			(1		)	19			—			18
Depreciation, depletion and amortization	—			106			19			5			130
General and administrative expenses	7			7			2			(1		)	15
Total costs and expenses	7			206			46			(13		)	246
Income (loss) from operations	(7		)	235			79			(26		)	281
Other income (expense)
Interest expense, net	(10		)	(3		)	(3		)	—			(16		)
Other income (expense), net	—			88			(4		)	—			84
Loss on derivative instruments, net	—			(59		)	—			—			(59		)
Gain on revaluation of investment	—			—			4			—			4
Total other income (expense), net	(10		)	26			(3		)	—			13
Income (loss) before income taxes	(17		)	261			76			(26		)	294
Provision for (benefit from) income taxes	65			—			(72		)	—			(7		)
Net income (loss)	(82		)	261			148			(26		)	301
Net income attributable to non-controlling interest	—			—			29			53			82
Net income (loss) attributable to Diamondback Energy, Inc.	$	(82	)	$	261		$	119		$	(79	)	$	219

Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2019
(In thousands)
					Non–
			Guarantor		Guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenues:
Oil sales	—		1,572		—		118		1,690
Natural gas sales	—		17		—		3		20
Natural gas liquid sales	—		122		—		10		132
Royalty income	—		—		131		(131	)	—
Lease bonus	—		—		3		—		3
Midstream services	—		—		200		(165	)	35
Other operating income	—		—		7		(2	)	5
Total revenues	—		1,711		341		(167	)	1,885
Costs and expenses:
Lease operating expenses	—		291		—		(55	)	236
Production and ad valorem taxes	—		111		8		—		119
Gathering and transportation	—		36		—		(7	)	29
Midstream services	—		—		75		(41	)	34
Depreciation, depletion and amortization	—		614		53		14		681
General and administrative expenses	24		22		8		(5	)	49
Asset retirement obligation accretion	—		5		—		—		5
Other operating expense	—		1		1		—		2
Total costs and expenses	24		1,080		145		(94	)	1,155
Income (loss) from operations	(24	)	631		196		(73	)	730
Other income (expense)
Interest expense, net	(21	)	(67	)	(7	)	—		(95	)
Other income (expense), net	1		4		1		(3	)	3
Loss on derivative instruments, net	—		(174	)	—		—		(174	)
Gain on revaluation of investment	—		—		4		—		4
Total other income (expense), net	(20	)	(237	)	(2	)	(3	)	(262	)
Income (loss) before income taxes	(44	)	394		194		(76	)	468
Provision for (benefit from) income taxes	102		—		(33	)	—		69
Net income (loss)	(146	)	394		227		(76	)	399
Net income (loss) attributable to non-controlling interest	—		—		101		(61	)	40
Net income (loss) attributable to Diamondback Energy, Inc.	(146	)	394		126		(15	)	359

Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2018
(In millions)
							Non–
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
Oil sales	$	—		$	758		$	—		$	122		$	880
Natural gas sales	—			21			—			5			26
Natural gas liquid sales	—			66			—			10			76
Royalty income	—			—			137			(137		)	—
Lease bonus	—			—			1			—			1
Midstream services	—			—			78			(59		)	19
Other operating income	—			—			5			(1		)	4
Total revenues	—			845			221			(60		)	1,006
Costs and expenses:
Lease operating expenses	—			100			—			(20		)	80
Production and ad valorem taxes	—			51			9			—			60
Gathering and transportation	—			18			—			(7		)	11
Midstream services	—			(1		)	30			—			29
Depreciation, depletion and amortization	—			200			37			8			245
General and administrative expenses	14			13			5			(1		)	31
Asset retirement obligation accretion	—			1			—			—			1
Other operating expenses	—			—			1			—			1
Total costs and expenses	14			382			82			(20		)	458
Income (loss) from operations	(14		)	463			139			(40		)	548
Other income (expense)
Interest expense, net	(19		)	(6		)	(5		)	—			(30		)
Other income (expense), net	—			90			(2		)	(1		)	87
Loss on derivative instruments, net	—			(91		)	—			—			(91		)
Gain on revaluation of investment	—			—			5			—			5
Total other income (expense), net	(19		)	(7		)	(2		)	(1		)	(29		)
Income (loss) before income taxes	(33		)	456			137			(41		)	519
Provision for (benefit from) income taxes	112			—			(72		)	—			40
Net income (loss)	(145		)	456			209			(41		)	479
Net income attributable to non-controlling interest	—			—			29			68			97
Net income (loss) attributable to Diamondback Energy, Inc.	$	(145	)	$	456		$	180		$	(109	)	$	382

Condensed Consolidated Statement of Cash Flows
Six Months Ended June 30, 2019
(in millions)
							Non–
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	4		$	798		$	241		$	—		$	1,043
Cash flows from investing activities:
Additions to oil and natural gas properties	—			(1,238		)	—			—			(1,238		)
Additions to midstream assets	—			(8		)	(103		)	—			(111		)
Purchase of other property, equipment and land	—			(7		)	—			—			(7		)
Acquisition of leasehold interests	—			(127		)	—			—			(127		)
Acquisition of mineral interests	—			—			(125		)	—			(125		)
Proceeds from sale of assets	—			36			—			—			36
Funds held in escrow	—			—			(13		)	—			(13		)
Equity investments	—			(149		)	(37		)	—			(186		)
Investment in real estate	—			(1		)	—			—			(1		)
Net cash used in investing activities	—			(1,494		)	(278		)	—			(1,772		)
Cash flows from financing activities:
Proceeds from borrowing under credit facility	—			745			180			—			925
Repayment under credit facility	—			(595		)	(378		)	—			(973		)
Proceeds from joint venture	—			43			—			—			43
Debt issuance costs	—			(8		)	—			—			(8		)
Public offering costs	—			3			(44		)	—			(41		)
Proceeds from public offerings	—			—			1,106			—			1,106
Distribution to parent	—			—			(727		)	727			—
Contributions from subsidiaries	—			727			—			(727		)	—
Distributions from subsidiary	65			—			—			(65		)	—
Dividends to stockholders	(51		)	—			—			—			(51		)
Proceeds from exercise of stock options	6			—			—			—			6
Repurchased for tax withholdings	(13		)	—			—			—			(13		)
Repurchased as part of share buyback	(104		)	—			—			—			(104		)
Distributions to non-controlling interest	—			—			(115		)	65			(50		)
Intercompany transfers	304			(304		)	—			—			—
Net cash provided by financing activities	207			611			22			—			840
Net increase (decrease) in cash and cash equivalents	211			(85		)	(15		)	—			111
Cash and cash equivalents at beginning of period	84			100			31			—			215
Cash and cash equivalents at end of period	$	295		$	15		$	16		$	—		$	326

Condensed Consolidated Statement of Cash Flows
Six Months Ended June 30, 2018
(in millions)
							Non–
				Guarantor			Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(21	)	$	584		$	201		$	—		$	764
Cash flows from investing activities:
Additions to oil and natural gas properties	—			(650		)	—			—			(650		)
Additions to midstream assets	—			(10		)	(85		)	—			(95		)
Purchase of other property, equipment and land	—			(4		)	—			—			(4		)
Acquisition of leasehold interests	—			(101		)	—			—			(101		)
Acquisition of mineral interests	—			—			(253		)	—			(253		)
Proceeds from sale of assets	—			3			1			—			4
Funds held in escrow	—			11			—			—			11
Intercompany transfers	(22		)	22			—			—			—
Investment in real estate	—			(110		)	—			—			(110		)
Net cash used in investing activities	(22		)	(839		)	(337		)	—			(1,198		)
Cash flows from financing activities:
Proceeds from borrowing under credit facility	—			313			256			—			569
Repayment under credit facility	—			(388		)	—			—			(388		)
Proceeds from senior notes	312			—			—			—			312
Debt issuance costs	(4		)	—			(1		)	—			(5		)
Public offering costs	—			—			(2		)	—			(2		)
Contributions to subsidiaries	(1		)	—			(1		)	2			—
Contributions by members	—			—			2			(2		)	—
Distributions from subsidiary	69			—			—			(69		)	—
Dividends to stockholders	(12		)	—			—			—			(12		)
Distributions to non-controlling interest	—			—			(107		)	69			(38		)
Intercompany transfers	(309		)	308			1			—			—
Net cash provided by financing activities	55			233			148			—			436
Net increase (decrease) in cash and cash equivalents	12			(22		)	12			—			2
Cash and cash equivalents at beginning of period	54			34			24			—			112
Cash and cash equivalents at end of period	$	66		$	12		$	36		$	—		$	114