Diamondback Energy, Inc.

6. PROPERTY AND EQUIPMENT

Property and equipment includes the following as of the dates indicated:

Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter which determines a limit, or ceiling, on the book value of proved oil and natural gas properties. No impairment expense was recorded for the three and nine months ended September 30, 2025, or 2024 based on the results of the respective quarterly ceiling tests.

In addition to commodity prices, the Company’s production rates, levels of proved reserves, future development costs, transfers of unevaluated properties and other factors will determine its actual ceiling test calculation and impairment analysis in future periods. If the future trailing 12-month commodity prices decline as compared to the commodity prices used in prior quarters, the Company may have material write downs in subsequent quarters. It is possible that circumstances requiring additional impairment testing will occur in future interim periods, which could result in potentially material impairment charges being recorded.

Assets Held for Sale

During the third quarter of 2025, the Company commenced plans to sell certain assets consisting of midstream water assets and inventory with a carrying value of $505 million. As of September 30, 2025, the Company had ceased depreciating these assets and classified them as held for sale on the Company’s condensed consolidated balance sheet. At December 31, 2024, the midstream water assets and inventory were included in the Company’s consolidated balance sheet under the caption “Other property, equipment and land” and “Inventories,” respectively.

At the time these assets were transferred to held for sale, their carrying values approximated or were less than their respective fair values less costs to sell based on observable exit prices obtained from third party bids. As such, no impairment loss was recorded on these assets upon their transfer to held for sale. The Company completed the sale of these assets in the fourth quarter of 2025. For further discussion on the sale of these assets, see Note 17—Subsequent Events.