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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company is subject to corporate income taxes and the Texas margin tax. The Company and its subsidiaries, other than Viper, Viper LLC and other certain subsidiaries classified as partnerships for U.S. federal income tax purposes, file a U.S. federal corporate income tax return on a consolidated basis. Viper’s provision for income taxes is included in the Company’s consolidated income tax provision and, to the extent applicable, in net income attributable to the non-controlling interest.

Subsequent to the Effective Date of the Rattler Merger, Rattler is a member of the group filing consolidated income tax returns with Diamondback Energy, Inc. and its subsidiaries. As such, Rattler’s current and deferred income taxes continue to be included in the Company’s consolidated income tax expense from continuing operations.

The Company’s effective income tax rates were 17.8%, 21.5% and 20.5% for the years ended December 31, 2024, 2023 and 2022, respectively. Total income tax expense for the year ended December 31, 2024 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to (i) the impact of removing the valuation allowance against Viper, (ii) state income taxes, net of federal benefit, and (iii) other permanent differences between book and taxable income for the year ended December 31, 2024. Total income tax expense for the year ended December 31, 2023 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income for the period primarily due to state income taxes, net of federal benefit, partially offset by the impact of permanent differences between book and taxable income and tax benefit resulting from a reduction in the valuation allowance on Viper’s deferred tax assets for the year ended December 31, 2023. Total income tax expense for the year ended December 31, 2022 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income for the period primarily due to (i) state income taxes, net of federal benefit, partially offset by (ii) the impact of permanent differences between book and taxable income and (iii) tax benefit resulting from a reduction in the valuation allowance on Viper’s and QEP’s deferred tax assets for the year ended December 31, 2022.

In connection with the closing of the Endeavor Acquisition, the Company assumed approximately $261 million of taxes payable and recognized a $7.2 billion deferred tax liability.
In connection with the Company’s public offering of Viper’s Class A common stock and resulting decrease in its ownership of Viper in March 2024, the Company recorded a $36 million increase in tax payable and a $3 million increase in deferred tax liability through paid in capital and an $18 million increase in the deferred tax asset, net of valuation allowance, through non-controlling interest on the Company’s condensed consolidated balance sheet.

The components of the Company’s consolidated provision for income taxes from continuing operations for the years ended December 31, 2024, 2023 and 2022 are as follows:

Year Ended December 31,
202420232022
(In millions)
Current income tax provision (benefit):
Federal$752 $505 $421 
State33 29 33 
Total current income tax provision (benefit)785 534 454 
Deferred income tax provision (benefit):
Federal10 370 706 
State5 8 14 
Total deferred income tax provision (benefit)15 378 720 
Total provision for (benefit from) income taxes$800 $912 $1,174 

A reconciliation of the statutory federal income tax amount from continuing operations to the recorded expense is as follows:

Year Ended December 31,
202420232022
(In millions)
Income tax expense (benefit) at the federal statutory rate (21%)$945 $892 $1,205 
State income tax expense, net of federal tax effect30 31 42 
Non-deductible compensation9 8 10 
Change in valuation allowance(156)(7)(71)
Other, net(28)(12)(12)
Provision for (benefit from) income taxes$800 $912 $1,174 
The components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows:

December 31,
20242023
(In millions)
Deferred tax assets:
Net operating loss and other carryforwards$225 $236 
Derivative instruments— 22 
Viper's investment in Viper LLC185 170 
Other75 28 
Deferred tax assets485 456 
Valuation allowance(119)(233)
Deferred tax assets, net of valuation allowance366 223 
Deferred tax liabilities:
Oil and natural gas properties and equipment9,850 2,463 
Midstream investments140 162 
Other29 2 
Total deferred tax liabilities10,019 2,627 
Net deferred tax liabilities$9,653 $2,404 

The Company had net deferred tax liabilities of approximately $9.7 billion and $2.4 billion at December 31, 2024 and 2023, respectively.

At December 31, 2024, the Company had approximately $332 million of federal NOLs and $4 million of federal tax credits expiring in 2037 and $206 million of federal NOLs with an indefinite carryforward life, including NOLs acquired from QEP. The Company principally operates in the state of Texas and is subject to Texas Margin Tax, which currently does not include an NOL carryover provision. The Company’s federal tax attributes, including those acquired from QEP and Rattler, are subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which relates to tax attribute limitations upon the 50% or greater change of ownership of an entity during any three-year look back period. Other than as described below regarding realization of tax attributes acquired from QEP, the Company believes that the application of Section 382 of the Code will not have an adverse effect on future usage of the Company’s NOLs and credits.

On August 24, 2022, the Company completed the Rattler Merger. Management assessed the likelihood that the federal net operating losses and other tax attributes acquired from Rattler will be utilized, taking into consideration Rattler’s inclusion in consolidated income tax returns with Diamondback, and the annual limitation on utilization of tax attributes following Rattler’s ownership change pursuant to Section 382 of the Code. As a result of the assessment, including consideration of all available positive and negative evidence, management determined that it continues to be more likely than not that Rattler will realize its deferred tax assets as of December 31, 2024.

As of December 31, 2024, the Company had a valuation allowance of $11 million related to federal NOL and credit carryforwards acquired from QEP which are estimated not more likely than not to be realized prior to expiration. In addition, the Company had a valuation allowance of $108 million primarily related to certain state NOL carryforwards which the Company does not believe are realizable as it does not anticipate significant future operations in those states and fully released Viper’s remaining valuation allowance, as discussed further below. Management’s assessment at each balance sheet date included consideration of all available positive and negative evidence including the anticipated timing of reversal of deferred tax liabilities and the limitations imposed by Section 382 of the Code on certain of the Company’s NOLs and other carryforwards. Management believes that the balance of the Company’s NOLs is realizable to the extent of future taxable income primarily related to the excess of book carrying value of properties over their respective tax bases. As of December 31, 2024, management determined that it is more likely than not that the Company will realize its remaining deferred tax assets.
At December 31, 2024, the Company’s net deferred tax liabilities include deferred tax assets of approximately $185 million related to Viper’s investment in Viper LLC. Deferred taxes are provided on the difference between Viper’s basis for financial accounting purposes and basis for federal income tax purposes in its investment in Viper LLC.

As of December 31, 2024, Viper released its remaining valuation allowance of approximately $156 million as a result of management’s assessment of the realizability of future taxable income. During the years ended December 31, 2023 and 2022, Viper recognized deferred income tax benefits of $7 million and $50 million, respectively, related to a partial release in its beginning-of-the year valuation allowance, based on a change in judgment about the realizability of its deferred tax assets. Management’s assessment of all available evidence, both positive and negative, supporting realizability of Viper’s deferred tax assets as required by applicable accounting standards, resulted in recognition of tax benefit for the portion of Viper’s deferred tax assets considered more likely than not to be realized. The positive evidence assessed included recent cumulative income due in part to higher commodity prices remaining consistently high, acquisitions of additional oil and natural gas properties and an expectation of future taxable income based upon recent actual and forecasted production volumes and prices.

The following table sets forth changes in the Company’s unrecognized tax benefits:

December 31,
202420232022
(In millions)
Balance at beginning of year$— $7 $7 
Decrease resulting from expiration of statute— (7)— 
Balance at end of year— — 7 
Less: Effects of temporary items— — (4)
Total that, if recognized, would impact the effective income tax rate as of the end of the year$— $— $3 

The Company recognizes the tax benefit from a tax position only if it is more likely than not that it will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. The Company’s federal and state income tax returns for the years ended December 31, 2021 through December 31, 2023 remain open for all purposes of examination by the IRS and major state taxing jurisdictions. However, certain earlier tax years remain open for adjustment to the extent of their NOL carryforwards available for future utilization. It is reasonably possible that significant changes to the reserve for uncertain tax positions may occur as a result of various audits and the expiration of the statute of limitations. Although the timing and outcome of tax examinations is highly uncertain, the Company does not expect the change in unrecognized tax benefit within the next 12 months would have a material impact to the financial statements.
The Company recognizes interest and penalties related to income tax matters as interest expense and general and administrative expenses, respectively. During the year ended December 31, 2024, there was no interest associated with uncertain tax positions recognized in the Company’s consolidated financial statements. During the years ended December 31, 2023 and 2022, there was an insignificant amount of interest associated with uncertain tax positions recognized in the Company’s consolidated financial statements. During the years ended December 31, 2024, 2023 and 2022, there were no penalties related to each period associated with uncertain tax positions recognized in the Company’s consolidated financial statements.