Diamondback Energy Inc
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
FANG$178.17-0.4%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001539838-24-000019
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0001539838-25-000021
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 216 previous paragraphs and 197 current paragraphs.
152 unchanged; 39 reworded; 5 added; 25 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Changing political and social perspectives on climate change and other environmental, social and governance factors may create risks and uncertainties impacting our business.
Current report
It is unclear what effect recent executive orders by President Trump will have on investor and other stakeholders’ near-term and long-term ESG expectations for companies involved in fossil fuel exploration and production.
Current report
The IRA also imposes an excise tax of 1% on the fair market value of certain public company stock repurchases occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation, and the amount of the excise tax is generally 1% of the aggregate fair market value of the stock repurchased during the taxable year. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. To the extent the 1% excise tax applies to repurchases of shares under our common stock repurchase program, the number of shares we repurchase and our cash flow may be affected.
Current report
Evolving privacy-related laws could give rise to liabilities, which could adversely impact our business, results of operations or financial condition.
Current report
A variety of U.S. federal, state and international laws and regulations govern the collection, use, retention, sharing and security of personal data. All 50 states have enacted legislation on data breach notification requirements and many states continue to enact laws on matters of privacy, data protection and cybersecurity. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various U.S. federal, state and foreign legislative and regulatory bodies continue to enact new laws regarding privacy and data protection, as well as expand the scope of existing laws. For example, Texas recently passed the Texas Data Privacy and Security Act, which establishes new laws for collecting, storing, processing, and selling consumer information. Several other states, such as California, Utah, Colorado, Virginia, Connecticut, Michigan, Ohio, Pennsylvania, and New Jersey, among others, have proposed or passed legislation regarding data privacy and use. We cannot predict the impact of any such evolving privacy-related laws on our business, operations or financial condition, but may find it necessary to enhance our existing systems and procedures, which may involve substantial expense or distraction from other aspects of our business. In addition, any violations of applicable privacy-related laws or regulations may require us to address legal claims, sustain monetary penalties or incur other liabilities, as well as cause reputational damage, any of which could adversely impact our business, results of operations or financial condition.
Removed paragraphs (25)
Previous report
•The corporate opportunity provisions in our certificate of incorporation could enable affiliates of ours to benefit from corporate opportunities that might otherwise be available to us.
Previous report
Risks Related to the Pending Endeavor Acquisition
Previous report
•Our ability to complete the Endeavor Acquisition is subject to various closing conditions, including approval by our stockholders and regulatory clearance, which may impose conditions that could adversely affect us or cause the Endeavor Acquisition not to be completed.
Previous report
•The termination of the Merger Agreement could negatively impact our business or result in our having to pay a termination fee.
Previous report
•Whether or not the Endeavor Acquisition is completed, the announcement and pendency of the Endeavor Acquisition could cause disruptions in our business.
Previous report
•Combining our business with Endeavor’s may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated benefits of the Endeavor Acquisition.
Previous report
Continuing political and social concerns relating to climate change may result in significant litigation and related expenses.
Previous report
Investor and regulatory focus on ESG matters continues to increase. If our ESG initiatives do not meet our investors’ or other stakeholders’ evolving expectations and standards, investment in our stock may be viewed as less attractive and our reputation, contractual, employment and other business relationships may be adversely impacted.
Previous report
Our acreage must be drilled before lease expiration, generally within three to five years, in order to hold the acreage by production. In a highly competitive market for acreage, failure to drill sufficient wells to hold acreage may result in a substantial lease renewal cost or, if renewal is not feasible, loss of our lease and prospective drilling opportunities.
Previous report
The corporate opportunity provisions in our certificate of incorporation could enable affiliates of ours to benefit from corporate opportunities that might otherwise be available to us.
Previous report
Subject to the limitations of applicable law, our certificate of incorporation, among other things: permits us to enter into transactions with entities in which one or more of our officers or directors are financially or otherwise interested; permits any of our stockholders, officers or directors to conduct business that competes with us and to make investments in any kind of property in which we may make investments; and provides that if any director or officer of one of our affiliates who is also one of our officers or directors becomes aware of a potential business opportunity, transaction or other matter (other than one expressly offered to that director or officer in writing solely in his or her capacity as our director or officer), that director or officer will have no duty to communicate or offer that opportunity to us, and will be permitted to communicate or offer that opportunity to such affiliates and that director or officer will not be deemed to have (i) acted in a manner inconsistent with his or her fiduciary or other duties to us regarding the opportunity or (ii) acted in bad faith or in a manner inconsistent with our best interests.
Previous report
These provisions create the possibility that a corporate opportunity that would otherwise be available to us may be used for the benefit of one of our affiliates.
Previous report
Risks Related to the pending Endeavor Acquisition
Previous report
Our ability to complete the Endeavor Acquisition is subject to various closing conditions, including approval by our stockholders and regulatory clearance, which may impose conditions that could adversely affect us or cause the Endeavor Acquisition not to be completed.
Previous report
On February 11, 2024, we entered into the Merger Agreement to acquire Endeavor. The Endeavor Acquisition is subject to a number of conditions to closing as specified in the Merger Agreement. These closing conditions include, among others, (i) the approval of the issuance of our common stock in the first merger by our stockholders; (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the absence of any injunction, order, decree or law preventing, prohibiting or making illegal the consummation of the first merger; (iv) the authorization for listing on the Nasdaq of the shares of our common stock to be issued in the first merger; (v) with respect to each party, (a) the accuracy of the other party’s representations and warranties, subject to specified materiality qualifications, (b) compliance by the other party with its covenants in the Merger Agreement in all material respects, and (c) the absence of a “Material Adverse Effect” (as defined in the Merger Agreement) with respect to the other party since the date of the Merger Agreement that is continuing; and (vi) in the case of Endeavor, the receipt of an opinion of tax counsel that the Endeavor Acquisition will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Previous report
No assurance can be given that the required stockholder approval and regulatory clearance will be obtained or that the other required conditions to closing will be satisfied, and, if all required approvals and regulatory clearance are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such approvals and clearance, including whether any required conditions will materially adversely affect the combined company following the acquisition. Any delay in completing the Endeavor Acquisition could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we and Endeavor expect to achieve if the Endeavor Acquisition is successfully completed within its expected time frame. We can provide no assurance that these conditions will not result in the abandonment or delay of the acquisition. The occurrence of any of these events individually or in combination could have a material adverse effect on our results of operations and the trading price of our common stock.
Previous report
The termination of the Merger Agreement could negatively impact our business or result in our having to pay a termination fee.
Previous report
If the Endeavor Acquisition is not completed for any reason, including as a result of a failure to obtain the required approval from our stockholders, our ongoing business may be adversely affected and, without realizing any of the expected benefits of having completed the Endeavor Acquisition, we would be subject to a number of risks, including the following: (i) we may experience negative reactions from the financial markets, including negative impacts on our stock price; (ii) we may experience negative reactions from our commercial and vendor partners and employees; and (iii) we will be required to pay our costs relating to the Endeavor Acquisition, such as financial advisory, legal, financing and accounting costs and associated fees and expenses, whether or not the Endeavor Acquisition is completed.
Previous report
Additionally, we are required to pay Endeavor a termination fee of $1.4 billion if the Merger Agreement is terminated by (i) Endeavor because our board of directors has made an adverse change to its recommendation that the our stockholders vote in favor of the issuance of our common stock in the Endeavor Acquisition or (ii) if either party terminates the Merger Agreement because our stockholders fail to approve the issuance of our common stock in the Endeavor Acquisition and, immediately prior to the failed vote, Endeavor would have been entitled to terminate the Merger Agreement because our board of directors had made an adverse change to its recommendation in favor of the issuance of our common stock in the Endeavor Acquisition. If the Merger Agreement is terminated under certain specified circumstances and, within 12 months following such termination, we consummate or enter into an alternative acquisition transaction, we are required to pay the termination fee to Endeavor. Additionally, if the Merger Agreement is terminated because our stockholders fail to approve the issuance of our stock in the Endeavor Acquisition and the termination fee is not payable in connection with such termination, we are required to reimburse Endeavor for its transaction related expenses, subject to a cap of $260 million. The payment of this reimbursement will reduce any termination fee that is subsequently payable by us.
Previous report
Whether or not the Endeavor Acquisition is completed, the announcement and pendency of the Endeavor Acquisition could cause disruptions in our business, which could have an adverse effect on our business and financial results.
Previous report
Whether or not the Endeavor Acquisition is completed, the announcement and pendency of the Endeavor Acquisition could cause disruptions in our business. Specifically: (i) our and Endeavor’s current and prospective employees will experience uncertainty about their future roles with the combined company, which might adversely affect the two companies’ abilities to retain key managers and other employees; (ii) uncertainty regarding the completion of the Endeavor Acquisition may cause our and Endeavor’s commercial and vendor partners or others that deal with us or Endeavor to delay or defer certain business decisions or to decide to seek to terminate, change or renegotiate their relationships with us or Endeavor, which could negatively affect our respective revenues, earnings and cash flows; (iii) the Merger Agreement restricts us and our subsidiaries from taking specified actions during the pendency of the Merger without Endeavor’s consent, which may prevent us from making appropriate changes to our business or organizational structure or prevent us from pursuing attractive business opportunities or strategic transactions that may arise prior to the completion of the Endeavor Acquisition; and (iv) the attention of our and Endeavor’s management may be directed toward the completion of the Endeavor Acquisition as well as integration planning, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to our business.
Previous report
We have and will continue to divert significant management resources in an effort to complete the Endeavor Acquisition and are subject to restrictions contained in the Merger Agreement on the conduct of our business. If the Endeavor Acquisition is not completed, we will have incurred significant costs, including the diversion of management resources, for which we will have received little or no benefit.
Previous report
Combining our business with Endeavor’s may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated benefits of the Endeavor Acquisition, which may adversely affect the combined company’s business results and negatively affect the value of the combined company’s common stock.
Previous report
The success of the Endeavor Acquisition will depend on, among other things, the ability of the two companies to combine their businesses in a manner that facilitates growth opportunities and realizes expected cost savings. The combined company may encounter difficulties in integrating our and Endeavor’s businesses and realizing the anticipated benefits of the Endeavor Acquisition. The combined company must achieve the anticipated improvement in free cash flow generation and returns and achieve the planned cost savings without adversely affecting current revenues or compromising the disciplined investment philosophy for future growth. If the combined company is not able to successfully achieve these objectives, the anticipated benefits of the Endeavor Acquisition may not be realized fully, or at all, or may take longer to realize than expected.
Previous report
The Endeavor Acquisition involves the combination of two companies which currently operate, and until the completion of the Endeavor Acquisition will continue to operate, as independent companies. There can be no assurances that our respective businesses can be integrated successfully. It is possible that the integration process could result in the loss of key employees from both companies; the loss of commercial and vendor partners; the disruption of our, Endeavor’s or both companies’ ongoing businesses; inconsistencies in standards, controls, procedures and policies; unexpected integration issues; higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. The combined company will be required to devote management attention and resources to integrating its business practices and operations, and prior to the Endeavor Acquisition, management attention and resources will be required to plan for such integration. An inability to realize the full extent of the anticipated benefits of the Endeavor Acquisition and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the common stock of the combined company. In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. There are a large number of processes, policies, procedures, operations and technologies and systems that must be integrated in connection with the Endeavor Acquisition and the integration of Endeavor’s business. Although we expect that the elimination of duplicative costs, strategic benefits, and additional income, as well as the realization of other efficiencies related to the integration of the business, may offset incremental transaction and Endeavor Acquisition-related costs over time, any net benefit may not be achieved in the near term or at all. If we and Endeavor are not able to adequately address integration challenges, we may be unable to successfully integrate operations or realize the anticipated benefits of the integration of the two companies.
Reworded paragraphs (39)
Previous wording
The nature of our business activities subjects us to certain hazards and risks. The following is a summary of some of the material risks relating to our business activities. Other risks are described in Item 1. “Business and Properties,” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” These risks are not the only risks we face. We could also face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. If any of these risks actually occurs, it could materially harm our business, financial condition or results of operations and the trading price of our shares could decline.
Current wording
The nature of our business activities subjects us to certain hazards and risks. The following is a summary of some of the material risks relating to our business activities. Other risks are described in Items 1 and 2. “Business and Properties,” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” These risks are not the only risks we face. We could also face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. If any of these risks actually occurs, it could materially harm our business, financial condition or results of operations and the trading price of our shares could decline.
Previous wording
•Market conditions and particularly volatility in prices for oil and natural gas may continue to adversely affect our revenue, cash flows, profitability, growth, production and the present value of our estimated reserves.
Current wording
•Market conditions and particularly volatility in prices for oil and natural gas may adversely affect our revenue, cash flows, profitability, growth, production and the present value of our estimated reserves.
Previous wording
•Following the closing of the Endeavor Acquisition, the Endeavor Stockholders will have the ability to significantly influence our business, and their interest in our business may be different from that of other stockholders.
Current wording
•Following the closing of the Endeavor Acquisition, the Endeavor equityholders have the ability to significantly influence our business, and their interest in our business may be different from that of other stockholders.
Previous wording
•We also expect to incur significant additional indebtedness in connection with the Endeavor Acquisition, which indebtedness may limit our operating or financial flexibility relative to our current position and make it difficult to satisfy our obligations with respect to our other indebtedness.
Current wording
•The significant additional indebtedness incurred in connection with the Endeavor Acquisition may limit our operating or financial flexibility relative to our current position and make it difficult to satisfy our obligations with respect to our other indebtedness.
Previous wording
Our revenues, operating results, profitability, future rate of growth and the carrying value of our oil and natural gas properties depend significantly upon the prevailing prices for oil and natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, including the domestic and foreign supply of oil and natural gas; the level of prices and expectations about future prices of oil and natural gas; the level of global oil and natural gas exploration and production; the cost of exploring for, developing, producing and delivering oil and natural gas; the price and quantity of foreign imports; political and economic conditions in oil producing countries, including the Middle East, Africa, South America and Russia; the potential impact of the war in Ukraine and the Israel-Hamas War on the global energy markets and macroeconomic conditions; the continued threat of terrorism and the impact of military and other action, including U.S. military operations in the Middle East; the ability of members of the OPEC+ to agree to and maintain oil price and production controls; speculative trading in crude oil and natural gas derivative contracts; the level of consumer product demand; extreme weather conditions and other natural disasters; risks associated with operating drilling rigs; technological advances affecting energy consumption; the price and availability of alternative fuels; domestic and foreign governmental regulations and taxes, including the Biden Administration’s energy and environmental policies; global or national health concerns, including the outbreak of pandemic or contagious disease; the proximity, cost, availability and capacity of oil and natural gas pipelines and other transportation facilities; and overall domestic and global economic conditions. Our results of operations may also be adversely impacted by any future government rule, regulation or order that may impose production limits, as well as pipeline capacity and storage constraints, in the Permian Basin where we operate.
Current wording
Our revenues, operating results, profitability, future rate of growth and the carrying value of our oil and natural gas properties depend significantly upon the prevailing prices for oil and natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, including the domestic and foreign supply of oil and natural gas; the level of prices and expectations about future prices of oil and natural gas; the level of global oil and natural gas exploration and production; the cost of exploring for, developing, producing and delivering oil and natural gas; the price and quantity of foreign imports; political and economic conditions in oil producing countries, including the Middle East, Africa, South America and Russia; the potential impact of the war in Ukraine, the Israel-Hamas War and other conflicts in the Middle East on the global energy markets and macroeconomic conditions; the continued threat of terrorism and the impact of military and other action, including U.S. military operations in the Middle East; the ability of members of the OPEC+ to agree to and maintain oil price and production controls; speculative trading in crude oil and natural gas derivative contracts; the level of consumer product demand; extreme weather conditions and other natural disasters; risks associated with operating drilling rigs; technological advances affecting energy consumption; the price and availability of alternative fuels; domestic and foreign governmental regulations and taxes, including the new administration’s energy and environmental policies; global or national health concerns, including the outbreak of pandemic or contagious disease; the proximity, cost, availability and capacity of oil and natural gas pipelines and other transportation facilities; and overall domestic and global economic conditions. Our results of operations may also be adversely impacted by any future government rule, regulation or order that may impose production limits, as well as pipeline capacity and storage constraints, in the Permian Basin where we operate.
Previous wording
These factors and the volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements with any certainty. During 2023, 2022 and 2021, NYMEX WTI prices ranged from $47.62 to $123.70 per Bbl and the NYMEX Henry Hub price of natural gas ranged from $1.99 to $9.68 per MMBtu. If the prices of oil and natural gas decline, our operations, financial condition and level of expenditures for the development of our oil and natural gas reserves may be materially and adversely affected.
Current wording
These factors and the volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements with any certainty. From the beginning of 2022 through the end of 2024, NYMEX WTI prices ranged from $65.75 to $123.70 per Bbl and the NYMEX Henry Hub price of natural gas ranged from $1.58 to $9.68 per MMBtu. If the prices of oil and natural gas decline, our operations, financial condition and level of expenditures for the development of our oil and natural gas reserves may be materially and adversely affected.
Previous wording
We expect to maintain our fourth quarter 2023 production levels in 2024. We cannot reasonably predict whether production levels will remain at current levels or the full extent of the impact of the events above and any subsequent recovery may have on our industry and our business.
Current wording
Primarily as a result of our Endeavor Acquisition, the Viper Tumbleweed Acquisitions, and the pending Double Eagle Acquisition, if consummated, we expect to increase our fourth quarter 2024 production levels in 2025. We cannot reasonably predict whether production levels will remain at current levels or the full extent of the impact of the events above and any subsequent recovery may have on our industry and our business.
Previous wording
We use commodity price derivatives, including swaps, basis swaps, swaptions, roll hedges, costless collars, puts and basis puts, to reduce price volatility associated with certain of our oil, natural gas liquids and natural gas sales. Currently, we have hedged a portion of our estimated 2024 and 2025 production. To the extent that the prices of oil, natural gas liquids and natural gas remain at current levels or decline further, we may not be able to economically hedge additional future production at the same level as our current commodity price derivatives, and our results of operations and financial condition may be negatively impacted. While these commodity price derivatives are intended to mitigate risk from commodity price volatility, we may be prevented from fully realizing the benefits of increases in the prices of oil, natural gas liquids and natural gas above the price levels of the commodity price derivatives used to manage price risk.
Current wording
We use commodity price derivatives, which have historically included swaps, basis swaps, swaptions, roll hedges, costless collars, puts and basis puts, to reduce price volatility associated with certain of our oil, natural gas liquids and natural gas sales. Currently, we have hedged a portion of our estimated 2025 and 2026 production. To the extent that the prices of oil, natural gas liquids and natural gas remain at current levels or decline further, we may not be able to economically hedge additional future production at the same level as our current commodity price derivatives, and our results of operations and financial condition may be negatively impacted. While these commodity price derivatives are intended to mitigate risk from commodity price volatility, we may be prevented from fully realizing the benefits of increases in the prices of oil, natural gas liquids and natural gas above the price levels of the commodity price derivatives used to manage price risk.
Previous wording
In recent years, federal, state and local governments have taken steps to reduce emissions of greenhouse gases. For example, the Infrastructure Investment and Jobs Act and the IRA include billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration. Also, the EPA has proposed ambitious rules to reduce harmful air pollutant emissions, including greenhouse gases, from light-, medium-, and heavy-duty vehicles beginning in model year 2027. These incentives and regulations could accelerate the transition of the economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for, and in turn the prices of, the oil and natural gas that we produce and sell and adversely impact our business. In addition, the IRA imposes the first ever federal fee on the emission of greenhouse gases through a methane emissions charge, which could increase our operating costs and thereby adversely impact our business, financial condition and cash flows.
Current wording
In recent years, federal, state and local governments have taken steps to reduce emissions of greenhouse gases. For example, the Infrastructure Investment and Jobs Act and the IRA include billions of dollars in incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles, investments in advanced biofuels and supporting infrastructure and carbon capture and sequestration. Also, in March 2024, the EPA finalized ambitious rules to reduce harmful air pollutant emissions, including greenhouse gases, from light-, medium-, and heavy-duty vehicles beginning in model year 2027. These incentives and regulations could accelerate the transition of the economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could decrease demand for, and in turn the prices of, the oil and natural gas that we produce and sell and adversely impact our business. In addition, the IRA imposes the first ever federal fee on the emission of greenhouse gases through a methane emissions charge, which could increase our operating costs and thereby adversely impact our business, financial condition and cash flows. On January 20, 2025, President Trump signed multiple executive orders seeking to reverse these climate incentives, including pausing the disbursement of funds under the IRA. The same day, President Trump also issued executive orders to encourage fossil fuel production and exploration on federal lands and waters, while moving away from incentivizing renewable energy and electric vehicles. It is unclear what effect those actions will have.
Previous wording
In addition to potentially reducing demand for our oil and natural gas and potentially reducing the availability of oilfield services and midstream and downstream customers, any of these developments may also create reputational risks associated with the exploration for, and production of, hydrocarbons, which may adversely affect the availability and cost to us of capital. For example, a number of prominent investors have publicly announced their intention to no longer invest in the oil and gas sector in response to concerns related to climate change, and other financial institutions and investors may decide to do likewise in the future. If financial institutions and other investors refuse to invest in or provide capital to the oil and gas sector in the future because of these reputational risks, that could result in capital being unavailable to us, or only at significantly increased costs.
Current wording
In addition to potentially reducing demand for our oil and natural gas and potentially reducing the availability of oilfield services and midstream and downstream customers, any further regulatory or other climate change incentives, to the extent they continue, may create reputational risks associated with the exploration for, and production of, hydrocarbons, which may adversely affect the availability and cost to us of capital. For example, in recent years, certain stakeholders and capital providers sought to restrict or seek more stringent conditions with respect to their investment in or financing of certain carbon intensive sectors. If financial institutions and other investors refuse to invest in or provide capital to the oil and gas sector in the future because of these reputational risks, that could result in capital being unavailable to us, or only at significantly increased costs.
Previous wording
Increasing attention to global climate change has resulted in increased investor attention and an increased risk of public and private litigation, which could increase our costs or otherwise adversely affect us. For example, shareholder activism has recently been increasing in our industry, and shareholders may attempt to effect changes to our business or governance to deal with climate change-related issues, whether by shareholder proposals, public campaigns, proxy solicitations or otherwise, which may result in significant management distraction and potentially significant expense.
Current wording
In recent years, increased attention to global climate change resulted in increased investor attention and an increased risk of public and private litigation. Further, shareholders have sought to effect changes to public companies’ businesses or governance to deal with climate change-related issues through shareholder proposals, public campaigns, proxy solicitations or other actions. Any such future actions may result in significant management distraction and potentially significant expense.
Previous wording
Additionally, cities, counties, and other governmental entities in several states in the U.S. have filed lawsuits against energy companies seeking damages allegedly associated with climate change. Similar lawsuits may be filed in other jurisdictions. If any such lawsuits were to be filed against us, we could incur substantial legal defense costs and, if any such litigation were adversely determined, we could incur substantial damages.
Current wording
Additionally, cities, counties, and other governmental entities in several states in the U.S. have filed lawsuits against energy companies seeking damages allegedly associated with climate change. Similar lawsuits may be filed in other jurisdictions. If any such lawsuits were to be filed against us, whether due to our activities or the activities of the acquired entities or operations prior to their acquisition by us, we could incur substantial legal defense costs and, if any such litigation were adversely determined, we could incur substantial damages.
Previous wording
ESG expectations, including both the matters in focus and the management of such matters, continue to evolve rapidly. For example, in addition to climate change, there is increasing attention on topics such as diversity and inclusion, human rights, and human and natural capital, in companies’ own operations as well as their supply chains. In addition, perspectives on the efficacy of ESG considerations continue to evolve, and we cannot currently predict how regulators’, investors’ and other stakeholders’ views on ESG matters may affect the regulatory and investment landscape and affect our business, financial condition, and results of operations. If we do not, or are perceived to not, adapt or comply with investor or stakeholder expectations and standards on ESG matters, we may suffer from reputational damage and our business, financial condition and results of operations could be materially and adversely affected. Any reputational damage associated with ESG factors may also adversely impact our ability to recruit and retain employees and customers.
Current wording
ESG expectations, including both the matters in focus and the management of such matters, as well as perspectives on the efficacy of ESG considerations, continue to evolve, and we cannot currently predict how regulators’, investors’ and other stakeholders’ views on ESG matters may affect the regulatory and investment landscape and affect our business, financial condition, and results of operations. Further, in response to the evolving regulatory environment and investor expectations, or due to our acquisitions of other companies or assets, we may, periodically, make adjustments to our environmental targets or goals. If we do not, or are perceived to not, adapt or comply with investor or stakeholder expectations and standards on ESG matters, we may suffer from reputational damage and our business, financial condition and results of operations could be materially and adversely affected. Any reputational damage associated with ESG factors may also adversely impact our ability to recruit and retain employees and customers.
Previous wording
In March 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks and other information. To the extent this rule is finalized as proposed, we and/or our customers could incur increased costs related to the assessment and disclosure of climate-related information. Enhanced climate disclosure requirements could also accelerate any trend by certain stakeholders and capital providers to restrict or seek more stringent conditions with respect to their financing of certain carbon intensive sectors.
Current wording
The SEC published final rules on March 28, 2024, relating to the disclosure of a range of climate-related risks and other information. Several lawsuits have been filed challenging the rules. In April 2024, the SEC agreed to pause the rules to facilitate an orderly judicial resolution. To the extent the rules are implemented, we and/or our customers could incur increased costs related to the assessment and disclosure of climate-related information.
Previous wording
Leases on oil and natural gas properties typically have a term of three to five years, after which they expire unless, prior to expiration, production is established within the spacing units covering the undeveloped acres. The cost to renew such leases may increase significantly, and we may not be able to renew such leases on commercially reasonable terms or at all. Any reduction in our current drilling program, either through a reduction in capital expenditures or the unavailability of drilling rigs, could result in the loss of acreage through lease expirations. Any non-renewal or other loss of leases could materially and adversely affect the growth of our asset basis, cash flows and results of operations.
Current wording
Leases on oil and natural gas properties typically have a term of three to five years, after which they expire unless, prior to expiration, production in paying quantities is established within the spacing units covering the undeveloped acres. The cost to renew such leases may increase significantly, and we may not be able to renew such leases on commercially reasonable terms or at all. Any reduction in our current drilling program, either through a reduction in capital expenditures or the unavailability of drilling rigs, could result in the loss of acreage through lease expirations. Any non-renewal or other loss of leases could materially and adversely affect the growth of our asset basis, cash flows and results of operations.
Previous wording
The oil and natural gas industry is capital intensive. We make and expect to continue to make substantial capital expenditures in our business and operations for the exploration for and development, production and acquisition of oil and natural gas reserves. In 2023, our total capital expenditures, including expenditures for drilling, completion, infrastructure and additions to midstream assets, were approximately $2.7 billion. Our 2024 capital budget for drilling, completion and infrastructure, including investments in water disposal infrastructure and gathering line projects, is currently estimated to be approximately $2.30 billion to $2.55 billion, representing a decrease of 10% from our 2023 capital expenditures. Since completing our initial public offering in October 2012, we have financed capital expenditures primarily with borrowings under our revolving credit facility, cash generated by operations and the net proceeds from public offerings of our common stock and our senior notes.
Current wording
The oil and natural gas industry is capital intensive. We make and expect to continue to make substantial capital expenditures in our business and operations for the exploration for and development, production and acquisition of oil and natural gas reserves. In 2024, our total capital expenditures, including expenditures for drilling, completion, infrastructure and additions to midstream assets, were approximately $2.9 billion. Our 2025 capital budget, which gives effect to the pending Double Eagle Acquisition, for drilling, completion, infrastructure and midstream, including investments in water disposal infrastructure and gathering line projects, is currently estimated to be approximately $3.80 billion to $4.20 billion, representing an increase of 40% from our 2024 capital expenditures. Since completing our initial public offering in October 2012, we have financed capital expenditures primarily with borrowings under our revolving credit facility, cash generated by operations, the net proceeds from public offerings of our common stock and our senior notes and sales of non-core assets.
Previous wording
We cannot assure you that our operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. Further, our actual capital expenditures in 2024 could exceed our capital expenditure budget. In the event our capital expenditure requirements at any time are greater than the amount of capital we have available, we could be required to seek additional sources of capital, which may include traditional reserve base borrowings, debt financing, joint venture partnerships, production payment financings, sales of assets, offerings of debt or equity securities or other means. We cannot assure you that we will be able to obtain debt or equity financing on terms favorable to us, or at all.
Current wording
We cannot assure you that our operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. Further, our actual capital expenditures in 2025 could exceed our capital expenditure budget. In the event our capital expenditure requirements at any time are greater than the amount of capital we have available, we could be required to seek additional sources of capital, which may include traditional reserve base borrowings, debt financing, joint venture partnerships, sales of assets, offerings of debt or equity securities or other means. We cannot assure you that we will be able to obtain debt or equity financing on terms favorable to us, or at all.
Previous wording
The accuracy of these assessments is inherently uncertain, and we may not be able to identify attractive acquisition opportunities. In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems, including title defects or environmental issues, nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms.
Current wording
The accuracy of these assessments is inherently uncertain, and we may not be able to identify attractive acquisition opportunities. In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems, including title defects or environmental issues, nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Environmental or other regulatory issues may arise with respect to acquired entities or operations years after the acquisitions. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms.
Previous wording
As of December 31, 2023, we have approximately 7,905 gross (5,826 net) identified economic potential horizontal drilling locations in multiple horizons on our acreage at an assumed price of approximately $50.00 per Bbl WTI. As of December 31, 2023, only 802 of our gross identified economic potential horizontal drilling locations were attributed to proved reserves. These drilling locations, including those without proved undeveloped reserves, represent a significant part of our growth strategy. Our ability to drill and develop these locations depends on a number of uncertainties, including the availability of capital, construction of infrastructure, unusual or unexpected geological formations, title problems, facility or equipment malfunctions, unexpected operational events, inclement weather, environmental and other regulatory requirements and approvals, oil and natural gas prices, costs, drilling results and the availability of water. Further, our identified potential drilling locations are in various stages of evaluation, ranging from locations that are ready to drill to locations that will require substantial additional interpretation. In addition, as of December 31, 2023, we have identified approximately 2,561 horizontal drilling locations in intervals in which we have drilled very few or no wells, which are necessarily more speculative and based on results from other operators whose acreage may not be consistent with ours. We cannot predict in advance of drilling and testing whether any particular drilling location will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities to be economically viable. Even if sufficient amounts of oil or natural gas exist, we may damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing the well, possibly resulting in a reduction in production from the well or abandonment of the well. If we drill additional wells that we identify as dry holes in our current and future drilling locations, our drilling success rate may decline and materially harm our business. Through December 31, 2023, we are the operator of, have participated in, or have acquired working interest in a total of 3,356 horizontal producing wells completed on our acreage. We cannot assure you that the analogies we draw from available data from these or other wells, more fully explored locations or producing fields will be applicable to our drilling locations. Further, initial production rates reported by us or other operators in the Permian Basin may not be indicative of future or long-term production rates. Because of these uncertainties, we do not know i…
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Current wording
As of December 31, 2024, we have approximately 9,188 gross (7,130 net) identified economic potential horizontal drilling locations in multiple horizons on our acreage at an assumed price of approximately $50.00 per Bbl WTI. As of December 31, 2024, only 1,381 of our gross identified economic potential horizontal drilling locations in which we have a working interest were attributed to proved reserves. These drilling locations, including those without proved undeveloped reserves, represent a significant part of our growth strategy. Our ability to drill and develop these locations depends on a number of uncertainties, including the availability of capital, construction of infrastructure, unusual or unexpected geological formations, title problems, facility or equipment malfunctions, unexpected operational events, inclement weather, environmental and other regulatory requirements and approvals, oil and natural gas prices, costs, drilling results and the availability of water. Further, our identified potential drilling locations are in various stages of evaluation, ranging from locations that are ready to drill to locations that will require substantial additional interpretation. In addition, as of December 31, 2024, we have identified approximately 1,657 horizontal drilling locations in intervals in which we have drilled very few or no wells, which are necessarily more speculative and based on results from other operators whose acreage may not be consistent with ours. We cannot predict in advance of drilling and testing whether any particular drilling location will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities to be economically viable. Even if sufficient amounts of oil or natural gas exist, we may damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing the well, possibly resulting in a reduction in production from the well or abandonment of the well. If we drill additional wells that we identify as dry holes in our current and future drilling locations, our drilling success rate may decline and materially harm our business. Through December 31, 2024, we are the operator of, have participated in, or have acquired working interest in a total of 6,590 horizontal producing wells completed on our acreage. We cannot assure you that the analogies we draw from available data from these or other wells, more fully explored locations or producing fields will be applicable to our drilling locations. Further, initial production rates reported by us or other operators in the Permian Basin may not be indicative of future or long-term production rates. Because of…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
In addition to credit risk related to receivables from commodity derivative contracts, our principal exposure to credit risk is through receivables from joint interest owners on properties we operate (approximately $122 million at December 31, 2023) and receivables from purchasers of our oil and natural gas production (approximately $654 million at December 31, 2023). Joint interest receivables arise from billing entities that own partial interests in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we wish to drill. We are generally unable to control which co-owners participate in our wells.
Current wording
In addition to credit risk related to receivables from commodity derivative contracts, our principal exposure to credit risk is through receivables from joint interest owners on properties we operate and receivables from purchasers of our oil and natural gas production. Joint interest receivables arise from billing entities that own partial interests in the wells we operate. These entities participate in our wells primarily based on their ownership in leases on which we wish to drill. We are generally unable to control which co-owners participate in our wells.
Previous wording
Approximately 31% of our total estimated proved reserves as of December 31, 2023, were proved undeveloped reserves and may not be ultimately developed or produced. Recovery of proved undeveloped reserves requires significant capital expenditures and successful drilling and completion operations. The reserve data included in the reserve reports of our independent petroleum engineers assume that substantial capital expenditures are required to develop such reserves. We cannot be certain that the estimated costs of the development of these reserves are accurate, that development will occur as scheduled or that the results of such development will be as estimated. Delays in the development of our reserves, increases in costs to drill and develop such reserves, or further decreases in commodity prices will reduce the future net revenues of our estimated proved undeveloped reserves and may result in some projects becoming uneconomical. In addition, delays in the development of reserves could force us to reclassify certain of our proved reserves as unproved reserves.
Current wording
Approximately 33% of our total estimated proved reserves as of December 31, 2024, were proved undeveloped reserves and may not be ultimately developed or produced. Recovery of proved undeveloped reserves requires significant capital expenditures and successful drilling and completion operations. The reserve data included in the reserve reports of our independent petroleum engineers assume that substantial capital expenditures are required to develop such reserves. We cannot be certain that the estimated costs of the development of these reserves are accurate, that development will occur as scheduled or that the results of such development will be as estimated. Delays in the development of our reserves, increases in costs to drill and develop such reserves, or further decreases in commodity prices will reduce the future net revenues of our estimated proved undeveloped reserves and may result in some projects becoming uneconomical. In addition, delays in the development of reserves could force us to reclassify certain of our proved reserves as unproved reserves.
Previous wording
The oil and natural gas industry is cyclical, which can result in shortages of drilling rigs, equipment, raw materials (particularly sand and other proppants), supplies and personnel. When shortages occur, the costs and delivery times of rigs, equipment and supplies increase and demand for, and wage rates of, qualified drilling rig crews also rise with increases in demand. We cannot predict whether these conditions will exist in the future and, if so, what their timing and duration will be. In accordance with customary industry practice, we rely on independent third party service providers to provide most of the services necessary to drill new wells. If we are unable to secure a sufficient number of drilling rigs at reasonable costs, our financial condition and results of operations could suffer, and we may not be able to drill all of our acreage before our leases expire. In addition, we do not have long-term contracts securing the use of our existing rigs, and the operators of those rigs may choose to cease providing services to us. Shortages of drilling rigs, equipment, raw materials (particularly sand and other proppants), supplies, personnel, trucking services, tubulars, fracking and completion services and production equipment could delay or restrict our exploration and development operations, which in turn could impair our financial condition and results of operations.
Current wording
The oil and natural gas industry is cyclical, which can result in shortages of drilling rigs, equipment, raw materials (particularly sand and other proppants), supplies and personnel. When shortages occur, the costs and delivery times of rigs, equipment and supplies increase and demand for, and wage rates of, qualified drilling rig crews also rise with increases in demand. We cannot predict whether these conditions will exist in the future and, if so, what their timing and duration will be. In accordance with customary industry practice, we rely on independent third-party service providers to provide most of the services necessary to drill new wells. If we are unable to secure a sufficient number of drilling rigs at reasonable costs, our financial condition and results of operations could suffer, and we may not be able to drill all of our acreage before our leases expire. In addition, we do not have long-term contracts securing the use of our existing rigs, and the operators of those rigs may choose to cease providing services to us. Shortages of any of the items referenced above could delay or restrict our exploration and development operations, which in turn could impair our financial condition and results of operations.
Previous wording
Water is an essential component of deep shale oil and natural gas production during both the drilling and hydraulic fracturing processes. Historically, we have been able to purchase water from local land owners for use in our operations. Over the past several years, Texas has experienced extreme drought conditions. As a result of this severe drought, some local water districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supply. Also, in 2021, the Texas Legislature directed the Texas Railroad Commission to adopt rules encouraging fluid oil and gas waste recycling. In October 2023, the Commission announced draft amendments to its water protection rules to, among other things, encourage waste recycling. If we are unable to obtain water to use in our operations from local sources, or we are unable to effectively utilize flowback water, we may be unable to economically drill for or produce oil and natural gas, which could have an adverse effect on our financial condition, results of operations and cash flows.
Current wording
Water is an essential component of deep shale oil and natural gas production during both the drilling and hydraulic fracturing processes. Historically, we have been able to purchase water from local land owners for use in our operations. Over the past several years, Texas has experienced extreme drought conditions. As a result of this severe drought, some local water districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supply. Also, in 2021, the Texas Legislature directed the Texas Railroad Commission to adopt rules encouraging fluid oil and gas waste recycling. On January 3, 2025, the Commission published final amendments to its water protection rules to, among other things, encourage waste recycling. The revised rules will go into effect on July 1, 2025. If we are unable to obtain water to use in our operations from local sources, or we are unable to effectively utilize flowback water, we may be unable to economically drill for or produce oil and natural gas, which could have an adverse effect on our financial condition, results of operations and cash flows.
Previous wording
Oil and natural gas operations in our operating areas can be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife. Seasonal restrictions may limit our ability to operate in protected areas and can intensify competition for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages when drilling is allowed. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs. Permanent restrictions imposed to protect threatened or endangered species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures. The designation of previously unprotected species in areas where we operate as threatened or endangered, such as the recent designation of lesser prairie chickens in southwestern Texas as endangered, could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have an adverse impact on our ability to develop and produce our reserves.
Current wording
Oil and natural gas operations in our operating areas can be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife. Seasonal restrictions may limit our ability to operate in protected areas and can intensify competition for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages when drilling is allowed. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs. Permanent restrictions imposed to protect threatened or endangered species could prohibit drilling in certain areas or require the implementation of expensive mitigation measures. The designation of previously unprotected species in areas where we operate as threatened or endangered, such as the recent designation of lesser prairie chickens in southwestern Texas and the dunes sagebrush lizard in southeast New Mexico and west Texas as endangered, could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have an adverse impact on our ability to develop and produce our reserves.
Previous wording
On August 16, 2022, President Biden signed into law the IRA, which, among other changes, imposes a 15% corporate alternative minimum tax (“CAMT”) on the “adjusted financial statement income” of certain large corporations (generally, corporations reporting at least $1 billion average adjusted pre-tax net income on their consolidated financial statements) as well as an excise tax of 1% on the fair market value of certain public company stock repurchases for tax years beginning after December 31, 2022. If we are or become subject to CAMT, our cash obligations for U.S. federal income taxes could be significantly accelerated. To the extent the 1% excise tax applies to repurchases of shares under our common stock repurchase program, the number of shares we repurchase and our cash flow may be affected.
Current wording
On August 16, 2022, President Biden signed into law the IRA, which, among other changes, imposes a 15% corporate alternative minimum tax (“CAMT”) on the “adjusted financial statement income” of certain large corporations (generally, corporations reporting more than $1 billion average adjusted pre-tax net income on their consolidated financial statements) for tax years beginning after December 31, 2022. While we are subject to CAMT, we did not incur a CAMT liability for 2024.
Previous wording
The U.S. Treasury Department, the Internal Revenue Service and other standard-setting bodies are expected to issue guidance on how the CAMT, stock buyback excise tax and other provisions of the IRA will be applied or otherwise administered that may differ from our interpretations. We continue to evaluate the IRA and its effect on our financial results and operating cash flow.
Current wording
The U.S. Treasury Department, the Internal Revenue Service and other standard-setting bodies are expected to issue additional guidance on how CAMT, stock buyback excise tax and other provisions of the IRA will be applied or otherwise administered that may differ from our interpretations. We continue to evaluate the IRA and its effect on our financial results and operating cash flow.
Previous wording
We have ownership interests in several joint ventures, including the EPIC, Wink to Webster, BANGL, WTG and Deep Blue joint ventures, and we may enter into other similar arrangements in the future. While we own equity interests and have certain voting rights with respect to our ownership interest, we do not control our joint ventures. We have limited ability to influence the business decisions of these entities, and it may therefore be difficult or impossible for us to cause the joint venture to take actions that we believe would be in our or the relevant joint venture’s best interests. Moreover, joint venture arrangements involve various risks and uncertainties, such as committing us to fund operating and/or capital expenditures, the timing and amount of which we may not control. In addition, our joint venture partners may not satisfy their financial obligations to the joint venture and may have economic, business or legal interests or goals that are inconsistent with ours, or those of the joint venture.
Current wording
We have ownership interests in several joint ventures, and we may enter into other similar arrangements in the future. While we own equity interests and have certain voting rights with respect to our ownership interest, we do not control our joint ventures. We have limited ability to influence the business decisions of these entities, and it may therefore be difficult or impossible for us to cause the joint venture to take actions that we believe would be in our or the relevant joint venture’s best interests. Moreover, joint venture arrangements involve various risks and uncertainties, such as committing us to fund operating and/or capital expenditures, the timing and amount of which we may not control. In addition, our joint venture partners may not satisfy their financial obligations to the joint venture and may have economic, business or legal interests or goals that are inconsistent with ours, or those of the joint venture.
Previous wording
Risks from cybersecurity threats have not materially affected, and are not currently anticipated to materially affect our company, including our business strategy, results of operations and financial condition. However, our systems and networks, and those of our vendors, service providers and other third party providers, may become the target of cybersecurity attacks, including, without limitation, denial-of-service attacks; malicious software; data privacy breaches by employees, insiders or others with authorized access; cyber or phishing-attacks; ransomware; attempts to gain unauthorized access to our data and systems; and other electronic security breaches. If any of these security breaches were to occur, we could suffer disruptions to our normal operations, including our exploration, completion, production and corporate functions, which could materially and adversely affect us in a variety of ways, including, but not limited to, unauthorized access to, and release of, our business data, reserves information, strategic information or other sensitive or proprietary information, which could have a material and adverse effect on our ability to compete for oil and gas resources, or reduce our competitive advantage over other companies; data corruption, communication interruption, or other operational disruptions during our drilling activities, which could result in our failure to reach the intended target or a drilling incident; data corruption or operational disruptions of our production-related infrastructure, which could result in loss of production or accidental discharges; unauthorized access to, and release of, personal information of our employees, vendors, service providers or other third parties, which could expose us to allegations that we did not sufficiently protect such information; a cybersecurity attack on a vendor or service provider, which could result in supply chain disruptions and could delay or halt our operations; a cybersecurity attack on third-party gathering, transportation, processing, fractionation, refining or other facilities, which could result in reduced demand for our production or delay or prevent us from transporting and marketing our production, in either case resulting in a loss of revenues; a cybersecurity attack involving commodities exchanges or financial institutions could slow or halt commodities trading, thus preventing us from marketing our production or engaging in hedging activities, resulting in a loss of revenues; a deliberate corruption of our financial or operating data could result in events of non-compliance which could then lead to regulatory enforcement actions, fines or penalties; a cybersecurity attack on a communications network or power grid, which could cause operational disruptions resulting in a loss of revenues; and a cybersecurity attack on our automated and surveillance systems, which could cause a loss of production and potential environmental hazards.
Current wording
Risks from cybersecurity threats have not materially affected, and are not currently anticipated to materially affect our company, including our business strategy, results of operations and financial condition. However, our systems and networks, and those of our vendors, service providers and other third-party providers, may become the target of cybersecurity attacks, including, without limitation, denial-of-service attacks; malicious software; data privacy breaches by employees, insiders or others with authorized access; cyber or phishing-attacks; ransomware; attempts to gain unauthorized access to our data and systems; and other electronic security breaches. Security incidents can also occur as a result of non-technical issues, such as physical theft. More recently, advancements in artificial intelligence (“AI”) may pose serious risks for many of the traditional tools used to identify individuals, including voice recognition (whether by machine or the human ear), facial recognition or screening questions to confirm identities. In addition, generative AI systems may also be used by malicious actors to create more sophisticated cyber-attacks (i.e., more realistic phishing or other attacks). The advancements in AI could lead to an increase in the frequency of identity fraud or cyberattacks (whether successful or unsuccessful), which could cause us to incur increasing costs, including costs to deploy additional personnel, protection technologies and policies and procedures, train employees, and engage third-party experts and consultants. If any of these security breaches were to occur, we could suffer disruptions to our normal operations, including our exploration, completion, production and corporate functions, which could materially and adversely affect us in a variety of ways, including, but not limited to, unauthorized access to, and release of, our business data, reserves information, strategic information or other sensitive or proprietary information, which could have a material and adverse effect on our ability to compete for oil and gas resources, or reduce our competitive advantage over other companies; data corruption, communication interruption, or other operational disruptions during our drilling activities, which could result in our failure to reach the intended target or a drilling incident; data corruption or operational disruptions of our production-related infrastructure, which could result in loss of production or accidental discharges; unauthorized access to, and release of, personal information of our employees, vendors, service providers, royalty and working interest owners, or other third parties, which could expose us to allegations that we did not sufficiently protect such information; a cybersecurity attack on a vendor, service provider or other business partner, which could result in supply chain disruptions and could delay or halt our operations; a cybersecurity attack on third-party gathering, transportation, processing,…
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Previous wording
Following the closing of the Endeavor Acquisition, the Endeavor Stockholders will have the ability to significantly influence our business, and their interest in our business may be different from that of other stockholders.
Current wording
Following the closing of the Endeavor Acquisition, the Endeavor equityholders have the ability to significantly influence our business, and their interest in our business may be different from that of other stockholders.
Previous wording
As a result of the Endeavor Acquisition, Endeavor’s Stockholders are expected to hold, at closing, approximately 39.5% of our outstanding common stock. The Stockholders Agreement will provide the Endeavor Stockholders with the right to propose for nomination four directors for election to our board of directors if they beneficially own at least 25% of the outstanding shares of our common stock, two directors if they beneficially own at least 20% but less than 25% of the outstanding shares of our common stock, and one director if they beneficially own at least 10% but less than 20% of the outstanding shares of our common stock, in each case subject to certain qualification requirements for such directors. We will not be permitted to take certain actions without the consent of the holders of a majority of the shares of our common stock held by the Endeavor Stockholders. The Endeavor Stockholders level of ownership and influence may make some transactions (such as those involving mergers, material share issuances or changes in control) more difficult or impossible without the support of the Endeavor Stockholders, which in turn could adversely affect the market price of our shares of common stock or prevent our shareholders from realizing a premium over the market price for their shares of our common stock. The interests of the Endeavor Stockholders may conflict with the interests of other stockholders.
Current wording
As of December 31, 2024, Endeavor’s equityholders held approximately 36% of our common stock. Pursuant to an agreement with the Endeavor equityholders (the “Stockholders Agreement), the Company appointed three additional directors to our board of directors of the Company at closing of the Endeavor Acquisition. We will not be permitted to take certain actions without the consent of the holders of a majority of the shares of our common stock held by the Endeavor equityholders. The Endeavor equityholders’ level of ownership and influence may make some transactions (such as those involving mergers, material share issuances or changes in control) more difficult or impossible, which in turn could adversely affect the market price of our shares of common stock or prevent our shareholders from realizing a premium over the market price for their shares of our common stock. The interests of the Endeavor equityholders may conflict with the interests of other stockholders.
Previous wording
We also expect to incur significant additional indebtedness in connection with the Endeavor Acquisition, which indebtedness may limit our operating or financial flexibility relative to our current position and make it difficult to satisfy our obligations with respect to our other indebtedness.
Current wording
The significant additional indebtedness incurred in connection with the Endeavor Acquisition, as well as additional indebtedness that may be incurred in connection with future acquisitions, may limit our operating or financial flexibility and make it difficult to satisfy our obligations with respect to our other indebtedness.
Previous wording
We will incur debt to finance all or a portion of the cash consideration for the Endeavor Acquisition and to repay certain existing indebtedness of Endeavor. Our increased level of debt in connection with this debt financing could have negative consequences on us and the combined company, including, among other things, (i) requiring us, and the combined company, to dedicate a larger portion of cash flow from operations to servicing and repayment of the debt, (ii) reducing funds available for strategic initiatives and opportunities, working capital and other general corporate needs, (iii) limiting our, and the combined company’s, ability to incur additional indebtedness, which could restrict its flexibility to react to changes in its business, its industry and economic condition and (iv) placing us, and the combined company, at a competitive disadvantage compared to our competitors that have less debt. See also the risks discussed above under “—Risks Related to Our Indebtedness.”
Current wording
We incurred a substantial amount of debt to finance the cash consideration of the Endeavor Acquisition and to repay certain existing indebtedness of Endeavor. Additionally, from time to time we may incur additional indebtedness in connection with other acquisitions in the future. Our increased level of debt could have negative consequences on us, including, among other things, (i) requiring us to dedicate a larger portion of cash flow from operations to servicing and repayment of the debt, (ii) reducing funds available for strategic initiatives and opportunities, working capital and other general corporate needs, (iii) limiting our ability to incur additional indebtedness, which could restrict our flexibility to react to changes in our business, our industry and economic conditions and (iv) placing us at a competitive disadvantage compared to our competitors that have less debt.
Previous wording
Our earnings are exposed to interest rate risk associated with borrowings under our and Viper LLC’s revolving credit facilities. The terms of our and Viper LLC’s revolving credit facilities provide for interest on borrowings at a floating rate equal to an alternate base rate tied to the secured overnight financing rate (“SOFR”). SOFR tends to fluctuate based on multiple factors, including general short-term interest rates, rates set by the U.S. Federal Reserve and other central banks and general economic conditions. From time to time, we use interest rate swaps to reduce interest rate exposure with respect to our fixed and/or floating rate debt. The weighted average interest rate on borrowings under our revolving credit facility was 6.31% during the year ended December 31, 2023. Viper LLC’s weighted average interest rate on borrowings from its revolving credit facility was 7.41% during the year ended December 31, 2023. If interest rates increase, so will our interest costs, which may have a material adverse effect on our results of operations and financial condition.
Current wording
Our earnings are exposed to interest rate risk associated with borrowings under our and Viper LLC’s revolving credit facilities. The terms of our and Viper LLC’s revolving credit facilities provide for interest on borrowings at a floating rate equal to an alternate base rate tied to the secured overnight financing rate (“SOFR”). SOFR tends to fluctuate based on multiple factors, including general short-term interest rates, rates set by the U.S. Federal Reserve and other central banks and general economic conditions. From time to time, we use interest rate swaps to reduce interest rate exposure with respect to our fixed and/or floating rate debt. The weighted average interest rate on borrowings under our revolving credit facility was 6.33% during the year ended December 31, 2024. Viper LLC’s weighted average interest rate on borrowings from its revolving credit facility was 7.34% during the year ended December 31, 2024. If interest rates increase, so will our interest costs, which may have a material adverse effect on our results of operations and financial condition.
Previous wording
In September 2021, our board of directors approved a stock repurchase program to acquire up to $2.0 billion of our outstanding common stock, and on July 28, 2022, approved an increase in the repurchase program to $4.0 billion. We may be limited in our ability to repurchase shares of our common stock by various governmental laws, rules and regulations which prevent us from purchasing our common stock during periods when we are in possession of material non-public information. Through December 31, 2023, approximately $2.4 billion has been repurchased through the repurchase program. Even though this program is in place, we may not repurchase any shares through the program and any such repurchases are completely within the discretion of our board of directors. In addition, the stock repurchase program has no time limit and may be suspended, modified, or discontinued by the board of directors at any time. Any elimination of, or reduction in, the Company’s base or variable dividend or common stock repurchase program could adversely affect the total return of an investment in and have a material adverse effect on the market price of our common stock.
Current wording
In September 2024, our board of directors approved an increase in our common stock repurchase program to acquire up to $6.0 billion. We may be limited in our ability to repurchase shares of our common stock by various governmental laws, rules and regulations which prevent us from purchasing our common stock during periods when we are in possession of material non-public information. Through December 31, 2024, approximately $3.3 billion has been repurchased through the repurchase program. Even though this program is in place, we may not repurchase any shares through the program and any such repurchases are completely within the discretion of our board of directors. In addition, the stock repurchase program has no time limit and may be suspended, modified, or discontinued by the board of directors at any time. Any elimination of, or reduction in, the Company’s base or variable dividend or common stock repurchase program could adversely affect the total return of an investment in and have a material adverse effect on the market price of our common stock.
Previous wording
Beginning in the first quarter of 2024, our board of directors approved a reduction to our return of capital commitment to at least 50% from 75% of free cash flow to be distributed quarterly to our stockholders in the primary form of a base dividend with additional return of capital expected to be in the form of a variable dividend and through our stock repurchase program. The amount of cash available to return to our stockholders, if any, can vary significantly from quarter to quarter for a number of reasons, including commodity prices, liquidity, debt levels, capital resources and other factors. The price of our common stock may deteriorate if we are unable to meet investor expectations with respect to the timing and amount of our return of capital commitment to our stockholders, and such deterioration may be material.
Current wording
Beginning in the first quarter of 2024, our board of directors approved a reduction to our return of capital commitment to at least 50% (down from 75%) of free cash flow to be distributed quarterly to our stockholders in the primary form of a base dividend with additional return of capital expected to be in the form of a variable dividend and through our stock repurchase program. The amount of cash available to return to our stockholders, if any, can vary significantly from quarter to quarter for a number of reasons, including commodity prices, liquidity, debt levels, capital resources and other factors. The price of our common stock may deteriorate if we are unable to meet investor expectations with respect to the timing and amount of our return of capital commitment to our shareholders, and such deterioration may be material.
Previous wording
The market value of our common stock could decline if large amounts of our common stock are sold following the Endeavor Acquisition.
Current wording
The market value of our common stock could decline if large amounts of our common stock are sold following the Endeavor Acquisition and the pending Double Eagle Acquisition.
Previous wording
If the Endeavor Acquisition is consummated, we will issue 117.27 million shares of our common stock to Endeavor’s equityholders, and as a result, the Endeavor Stockholders are expected to hold, at closing, approximately 39.5% of our outstanding common stock. At closing, we will enter into the Stockholders Agreement with the Endeavor Stockholders that will, among other things, provide the Endeavor Stockholders with certain shelf, demand and piggyback registration rights. While the Endeavor Stockholders will be subject to a lock-up with respect to 90% of the shares of our common stock issued in the Endeavor Acquisition, the lock-up will apply to 66.6% and 33.3% of the shares issued in the Endeavor Acquisition following the six and twelve month anniversaries, respectively, of the closing and will terminate following the eighteen month anniversary of the closing. Endeavor Stockholders may decide not to hold shares of our common stock that they will receive in the Endeavor Acquisition, and Endeavor Stockholders may decide to reduce their investment in us following the Endeavor Acquisition. Such sales of our common stock or the perception that these sales may occur, could have the effect of depressing the market price for our common stock.
Current wording
At closing, we entered into the Stockholders Agreement with the Endeavor equityholders that, among other things, provided the Endeavor equityholders with certain shelf, demand and piggyback registration rights. While the Endeavor equityholders are subject to a lock-up with respect to 90% of the shares of our common stock issued in the Endeavor Acquisition, the lock-up will apply to 66.6% and 33.3% of the shares issued in the Endeavor Acquisition following March 10, 2025 and September 10, 2025, respectively, and will terminate following March 10, 2026. Additionally, if the pending Double Eagle Acquisition is consummated, we will issue approximately 6.9 million shares of our common stock to the seller. Endeavor equityholders and Double Eagle equityholders may decide not to hold shares of our common stock that they received in the Endeavor Acquisition and Double Eagle Acquisitions, respectively, and may decide to reduce their investment in us. Such sales of our common stock or the perception that these sales may occur, could have the effect of depressing the market price for our common stock.
Previous wording
As of December 31, 2023, we had an NOL carryforward of approximately $590 million and tax credits of $4 million for U.S. federal income tax purposes, principally consisting of tax attributes acquired from QEP and Rattler. As a result of ownership changes for Diamondback Energy, Inc., QEP and Rattler, which occurred in connection with the acquisition of QEP and the Rattler Merger, our NOLs and other carryforwards, including those acquired from QEP and Rattler, are subject to an annual limitation under Section 382 of the Code. However, we have determined that our fair market value and our net unrealized built-in gain position resulted in a significant increase in our Section 382 limits. Accordingly, we believe that the application of Section 382 of the Code as a result of these ownership changes will not have a material adverse effect on our ability to utilize our NOLs and credits.
Current wording
As of December 31, 2024, we had an NOL carryforward of approximately $538 million and tax credits of $4 million for U.S. federal income tax purposes, principally consisting of tax attributes acquired from QEP Resources, Inc. (“QEP”) and Rattler. As a result of ownership changes for Diamondback Energy, Inc., QEP and Rattler, which occurred in connection with the acquisition of QEP and the Rattler Merger, our NOLs and other carryforwards, including those acquired from QEP and Rattler, are subject to an annual limitation under Section 382 of the Code. However, we have determined that our fair market value and our net unrealized built-in gain position resulted in a significant increase in our Section 382 limits. Accordingly, we believe that the application of Section 382 of the Code as a result of these ownership changes will not have a material adverse effect on our ability to utilize our NOLs and credits.
Previous wording
These provisions also could discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price that investors are willing to pay in the future for shares of our common stock.
Current wording
These provisions also could discourage proxy contests and make it more difficult for our stockholders to elect directors and take other corporate actions. As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price that investors are willing to pay in the future for shares of our common stock.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We rely on a few key employees whose absence or loss could adversely affect our business.