On October 10, 2012, the Board of Directors approved the Diamondback Energy, Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which is intended to provide eligible employees with equity-based incentives. The 2012 Plan provides for the granting of incentive stock options, nonstatutory stock options, restricted awards (restricted stock and restricted stock units), performance awards, and stock appreciation rights, or any combination of the foregoing. A total of 1,313,588 shares of the Company’s common stock has been reserved for issuance pursuant to this plan.



	Year Ended December 31,
	2019		2018		2017
	(In millions)
General and administrative expenses	$	48	$	27	$	25
Equity-based compensation capitalized pursuant to full cost method of accounting for oil and natural gas properties	$	17	$	10	$	9

Under the Equity Plan, approved by the Board of Directors, the Company is authorized to issue restricted stock and restricted stock units to eligible employees. The Company estimates the fair values of restricted stock awards and units as the closing price of the Company’s common stock on the grant date of the award, which is expensed over the applicable vesting period.



	Restricted Stock Awards & Units		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2018	324,224		$	116.01
Granted	697,679		$	99.36
Vested	(425,608	)	$	105.09
Forfeited	(90,428	)	$	106.55
Unvested at December 31, 2019	505,867		$	96.01

The aggregate fair value of restricted stock units that vested during the years ended December 31, 2019, 2018 and 2017 was $45 million, $19 million and $15 million, respectively. As of December 31, 2019, the Company’s unrecognized compensation cost related to unvested restricted stock awards and units was $38 million. Such cost is expected to be recognized over a weighted-average period of 2.2 years.

To provide long-term incentives for the executive officers to deliver competitive returns to the Company’s stockholders, the Company has granted performance-based restricted stock units to eligible employees. The ultimate number of shares awarded from these conditional restricted stock units is based upon measurement of total stockholder return of the Company’s common stock (“TSR”) as compared to a designated peer group during a three-year performance period.

In February 2017, eligible employees received performance restricted stock unit awards totaling 37,440 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2017 to December 31, 2018 and vested at December 31, 2018. Eligible employees received additional performance restricted stock unit awards totaling 74,880 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2017 to December 31, 2019 and vested at December 31, 2019.

In February 2018, eligible employees received performance restricted stock unit awards totaling 117,423 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2018 to December 31, 2020 and cliff vest at December 31, 2020.

In March 2019, eligible employees received performance restricted stock unit awards totaling 199,723 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2019 to December 31, 2021 and cliff vest at December 31, 2021. In March 2019, eligible employees received performance restricted stock unit awards totaling 32,958 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2019 to December 31, 2021 and vest in five equal installments beginning on March 1, 2025.

The fair value of each performance restricted stock unit is estimated at the date of grant using a Monte Carlo simulation, which results in an expected percentage of units to be earned during the performance period.



	2019			2018			2017
	Three-Year Performance Period			Three-Year Performance Period			Two-Year Performance Period			Three-Year Performance Period
Grant-date fair value	$	137.22		$	170.45		$	162.13		$	168.73
Grant-date fair value (5-year vesting)	$	132.48
Risk-free rate	2.55		%	1.99		%	1.27		%	1.59		%
Company volatility	35.00		%	35.90		%	39.32		%	41.14		%



	Performance Restricted Stock Units		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2018	196,203		$	169.76
Granted	356,227		$	131.30
Vested	(176,976	)	$	93.32
Forfeited	(103,635	)	$	155.23
Unvested at December 31, 2019⁽¹⁾	271,819		$	147.07

As of December 31, 2019, the Company’s unrecognized compensation cost related to unvested performance based restricted stock awards and units was $24 million. Such cost is expected to be recognized over a weighted-average period of 2.6 years.

In connection with the Energen merger, each outstanding stock appreciation right in respect of Energen common stock that was outstanding immediately prior to the effective time of the merger was converted into a fully vested stock appreciation right in respect of (i) that number of whole shares of Diamondback common stock (rounded down to the nearest whole share) equal to the product of (A) the total number of shares of Energen common stock subject to such stock appreciation right immediately prior to the effective time of the merger multiplied by (B) the exchange ratio, (ii) at an exercise price per share of Diamondback common stock (rounded up to the nearest whole cent) equal to the quotient of (A) the exercise price per share of Energen common stock of such stock appreciation right immediately prior to the effective time of the merger divided by (B) the exchange ratio. These awards have a three-year requisite service period.



	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2018	57,721		$	22.12
Exercised	(11,399	)	$	70.69
Expired	(3,775	)	$	96.91
Outstanding at December 31, 2019	42,547		$	90.89

In connection with the Energen Merger, each option to purchase shares of Energen common stock that was outstanding immediately prior to the effective time of the merger was converted into a fully vested option to purchase (i) that number of whole shares of Diamondback common stock (rounded down to the nearest whole share) equal to the product of (A) the total number of shares of Energen common stock subject to such option immediately prior to the effective time of the merger multiplied by (B) the exchange ratio, (ii) at an exercise price per share of Diamondback common stock (rounded up to the nearest whole cent) equal to the quotient of (A) the exercise price per share of Energen common stock of such option immediately prior to the effective time divided by (B) the exchange ratio. The exercise price of stock options granted may not be less than the market value of the stock at the date of grant.

The Company estimates the fair values of stock options granted using a Black-Scholes option valuation model, which requires the Company to make several assumptions. The expected term of options granted was determined based on the contractual term of the awards at effective time of the merger. The risk-free interest rate is based on the U.S. treasury yield curve rate for the expected term of the option at the date of grant. All such amounts represent the weighted-average amounts for each year.



			Weighted Average
			Exercise		Remaining	Intrinsic
	Options		Price		Term	Value
					(in years)	(in millions)
Outstanding at December 31, 2018	332,387		$	95.04
Exercised	(116,044	)	$	82.29
Outstanding at December 31, 2019	216,343		$	89.90	1.67	$	—

Vested and Expected to vest at December 31, 2019	216,343		$	89.90	1.67	$	—
Exercisable at December 31, 2019	216,343		$	89.90	1.67	$	—

On June 17, 2014, in connection with the Viper Offering, the Board of Directors of the General Partner adopted the Viper Energy Partners LP Long Term Incentive Plan (“Viper LTIP”), effective June 17, 2014, for employees, officers, consultants and directors of the General Partner and any of its affiliates, including Diamondback, who perform services for Viper. The Viper LTIP provides for the grant of unit options, unit appreciation rights, restricted units, unit awards, phantom units, distribution equivalent rights, cash awards, performance awards, other unit-based awards and substitute awards. A total of 8,892,918 common units has been reserved for issuance pursuant to the Viper LTIP. Common units that are cancelled, forfeited or withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The Viper LTIP is administered by the Board of Directors of the General Partner or a committee thereof.

Under the Viper LTIP, the Board of Directors of Viper’s General Partner is authorized to issue phantom units to eligible employees. Viper estimates the fair value of phantom units as the closing price of Viper’s common units on the grant date of the award, which is expensed over the applicable vesting period. Upon vesting the phantom units entitle the recipient one common unit of Viper for each phantom unit.



	Phantom Units		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2018	125,053		$	23.44
Granted	56,582		$	30.33
Vested	(85,359	)	$	23.96
Forfeited	(1,028	)	$	42.50
Unvested at December 31, 2019	95,248		$	26.87

The aggregate fair value of phantom units that vested during the year ended December 31, 2019 was $2 million. As of December 31, 2019, the unrecognized compensation cost related to unvested phantom units was $1 million. Such cost is expected to be recognized over a weighted-average period of 1.0 years.

On May 22, 2019, the board of directors of Rattler’s General Partner adopted the Rattler Midstream LP Long Term Incentive Plan (“Rattler LTIP”), for employees, consultants and directors of Rattler’s General Partner and any of its affiliates, including Diamondback, who perform services for Rattler. The Rattler LTIP provides for the grant of unit options, unit appreciation rights, restricted units, unit awards, phantom units, distribution equivalent rights, cash awards, performance awards, other unit-based awards and substitute awards.

Under the Rattler LTIP, the board of directors of Rattler’s General Partner is authorized to issue phantom units to eligible employees and non-employee directors. Rattler estimates the fair value of phantom units as the closing price of Rattler’s common units on the grant date of the award, which is expensed over the applicable vesting period. Upon vesting the phantom units entitle the recipient to one common unit of Rattler for each phantom unit. The recipients are also entitled to distribution equivalent rights, which represent the right to receive a cash payment equal to the value of the distributions paid on one phantom unit between the grant date and the vesting date.



	Phantom Units		Weighted Average Grant-Date Fair Value
Unvested at May 28, 2019	—		$	—
Granted	2,284,038		$	19.14
Forfeited	(57,143	)	$	19.21
Unvested at December 31, 2019	2,226,895		$	19.14

As of December 31, 2019, the unrecognized compensation cost related to unvested phantom units was $37 million. Such cost is expected to be recognized over a weighted-average period of 2.4 years.