Diamondback Energy, Inc.
For the period ended Mar 31, 2026. Filed May 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 6, 2026
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13. Fair Value Measurements
- FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As discussed in Note 13—Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, certain financial instruments of the Company are reported at fair value on the Company’s condensed consolidated balance sheets. The net amounts of derivative instruments are classified as current or noncurrent based on their anticipated settlement dates. The Company has an immaterial investment in the Class A common stock of Verde Clean Fuels, Inc., which is reported at fair value using observable, quoted stock prices and is included in “Other assets” on the Company’s condensed consolidated balance sheets at March 31, 2026, and December 31, 2025.
Viper LLC completed multiple acquisitions during 2024 with Tumbleweed Royalty IV, LLC, TWR IV SellCo Parent, LLC, Tumbleweed-Q Royalties, LLC, MC TWR Royalties, LP and MC TWR Intermediate, LLC. The terms of these acquisitions included provisions for contingent cash consideration based on the average price of WTI sweet crude oil prompt month futures contracts for the calendar year 2025 (the “2026 WTI Contingent Liability”), which resulted in an aggregate payment of $20 million in January 2026. The 2026 WTI Contingent Liability was reported at fair value using observable market data inputs and a Monte Carlo pricing model, which are considered Level 2 inputs within the fair value hierarchy.
The following table provides the fair value of financial instruments that are recorded at fair value in the condensed consolidated balance sheetsas of March 31, 2026, and December 31, 2025:
| As of March 31, 2026 | ||||||
|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total Gross Fair Value | Gross Amounts Offset in Balance Sheet | Net Fair Value Presented in Balance Sheet | |
| (In millions) | ||||||
| Assets: | ||||||
| Current assets- Prepaid expenses and other assets: | ||||||
| Commodity derivative instruments | $— | $403 | $— | $403 | $(238) | $165 |
| Other assets | ||||||
| Commodity derivative instruments | $— | $89 | $— | $89 | $(37) | $52 |
| Non-current assets- Other assets: | ||||||
| Investment | $25 | $— | $— | $25 | $— | $25 |
| Liabilities: | ||||||
| Derivative instruments | ||||||
| Commodity derivative instruments | $— | $300 | $— | $300 | $(238) | $62 |
| Other long-term liabilities | ||||||
| Commodity derivative instruments | $— | $37 | $— | $37 | $(37) | $— |
| As of December 31, 2025 | ||||||
|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total Gross Fair Value | Gross Amounts Offset in Balance Sheet | Net Fair Value Presented in Balance Sheet | |
| (In millions) | ||||||
| Assets: | ||||||
| Prepaid expenses and other current assets: | ||||||
| Commodity derivative instruments | $— | $335 | $— | $335 | $(101) | $234 |
| Other assets: | ||||||
| Commodity derivative instruments | $— | $49 | $— | $49 | $(42) | $7 |
| Investment | $30 | $— | $— | $30 | $— | $30 |
| Liabilities: | ||||||
| Derivative instruments: | ||||||
| Commodity derivative instruments | $— | $109 | $— | $109 | $(101) | $8 |
| Interest rate swaps | $— | $7 | $— | $7 | $— | $7 |
| Other accrued liabilities: | ||||||
| 2026 WTI Contingent Liability | $— | $20 | $— | $20 | $— | $20 |
| Other long-term liabilities: | ||||||
| Commodity derivative instruments | $— | $77 | $— | $77 | $(42) | $35 |
| Interest rate swaps | $— | $20 | $— | $20 | $— | $20 |
Assets and Liabilities Not Recorded at Fair Value
The following table provides the fair value of financial instruments that are not recorded at fair value in the condensed consolidated balance sheets:
| March 31, 2026 | December 31, 2025 | |||
|---|---|---|---|---|
| Carrying Value | Fair Value | Carrying Value | Fair Value | |
| (In millions) | ||||
| Debt | $13,898 | $13,799 | $14,489 | $14,497 |
The fair values of the Company’s borrowings under the Revolving Credit Facility, the Viper Revolving Credit Facility, the 2025 Term Loan and Viper 2025 Term Loan (prior to repayment and termination) approximate their carrying values based on borrowing rates available to the Company for bank loans with similar terms and maturities and are classified as Level 2 in the fair value hierarchy. The fair values of the outstanding notes were determined using the quoted market price at each period end, a Level 1 classification in the fair value hierarchy.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis in certain circumstances. These assets and liabilities can include those acquired in a business combination, inventory, proved and unproved oil and natural gas properties, equity method investments, asset retirement obligations and other long-lived assets that are written down to fair value when impaired or held for sale. Refer to Note 4—Acquisitions and Divestitures and Note 5—Property and Equipment for additional discussion of nonrecurring fair value adjustments.
Fair Value of Financial Assets
The carrying amount of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued capital expenditures and other accrued liabilities approximate their fair value because of the short-term nature of the instruments.
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