Diamondback Energy, Inc.FANG
Diamondback Energy, Inc. Income Taxes Disclosure
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company is subject to corporate income taxes and the Texas margin tax. The Company and its subsidiaries, other than Viper, Viper LLC and certain other subsidiaries classified as partnerships for U.S. federal income tax purposes, file a U.S. federal corporate income tax return on a consolidated basis. Viper’s provision for income taxes is included in the Company’s consolidated income tax provision and, to the extent applicable, in net income attributable to the non-controlling interest.
The Company’s effective income tax rates were 17.4%, 17.8% and 21.5% for the years ended December 31, 2025, 2024 and 2023, respectively. Total income tax expense for the year ended December 31, 2025 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to (i) state income taxes, net of federal benefit, (ii) the effect of research and development tax credits, and (iii) other permanent differences between book and taxable income. Total income tax expense for the year ended December 31, 2024 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to (i) the impact of removing the valuation allowance against Viper’s deferred tax assets, (ii) state income taxes, net of federal benefit, and (iii) other permanent differences between book and taxable income. Total income tax expense for the year ended December 31, 2023 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income for the period primarily due to state income taxes, net of federal benefit, partially offset by the impact of permanent differences between book and taxable income and tax benefit resulting from a reduction in the valuation allowance on Viper’s deferred tax assets.
Based on application of the Inflation Reduction Act of 2022 and related administrative guidance, the Company’s income tax expense for the years ended December 31, 2025, 2024 and 2023, was not impacted by the corporate alternative minimum tax.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBB”), was enacted. The OBBB included multiple provisions applicable to U.S. income taxes for businesses, including immediate expensing of research or experimental expenses, bonus depreciation for qualified tangible property, deductible intangible drilling costs for purposes of the corporate alternative minimum tax, and enhancements to limits on business interest expense deductions. The Company accounted for
the OBBB in the period of enactment and materially reduced its estimate of current tax expense for 2025, primarily offset by an increase in estimated deferred tax expense for 2025, with no material net impact on the effective tax rate for the year ended December 31, 2025.
In connection with Viper’s Sitio Acquisition, Viper acquired prepaid income tax balances of approximately $14 million and deferred tax assets of $5 million related to loss carryforwards. Viper also recognized a deferred tax liability of approximately $122 million.
In connection with the 2025 Drop Down, the Company recorded a $170 million increase in tax payable and a $164 million decrease in deferred tax liability through paid in capital. Due to the resulting increase in the Company’s ownership of Viper LLC, the Company recorded a $202 million decrease to deferred tax liability, and a $212 million decrease in the deferred tax asset through non-controlling interest on the Company’s consolidated balance sheet.
In connection with the closing of the Endeavor Acquisition, the Company recognized a $7.2 billion deferred tax liability.
The components of the Company’s consolidated provision for income taxes from continuing operations for the years ended December 31, 2025, 2024 and 2023 are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Current income tax provision (benefit): | |||||||||||||||||
| Federal | $ | 820 | $ | 752 | $ | 505 | |||||||||||
| State | 26 | 33 | 29 | ||||||||||||||
| Total current income tax provision (benefit) | 846 | 785 | 534 | ||||||||||||||
| Deferred income tax provision (benefit): | |||||||||||||||||
| Federal | (486) | 10 | 370 | ||||||||||||||
| State | (33) | 5 | 8 | ||||||||||||||
| Total deferred income tax provision (benefit) | (519) | 15 | 378 | ||||||||||||||
| Total provision for (benefit from) income taxes | $ | 327 | $ | 800 | $ | 912 | |||||||||||
A reconciliation of the statutory federal income tax amount from continuing operations to the recorded expense is as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount (In millions) | Percentage of Income (Loss) Before Taxes | Amount (In millions) | Percentage of Income (Loss) Before Taxes | Amount (In millions) | Percentage of Income (Loss) Before Taxes | ||||||||||||||||||||||||||||||
Income tax expense (benefit) at the federal statutory rate | $ | 393 | 21 | % | $ | 945 | 21 | % | $ | 892 | 21 | % | |||||||||||||||||||||||
State income tax, net of federal income tax effect(1) | (14) | (1) | 30 | 1 | 31 | 1 | |||||||||||||||||||||||||||||
| Tax Credits: | |||||||||||||||||||||||||||||||||||
| Research and development tax credits | (58) | (3) | (34) | (1) | — | — | |||||||||||||||||||||||||||||
| Other | (2) | — | — | — | — | — | |||||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | (156) | (3) | (7) | (1) | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Impact of nontaxable noncontrolling interest | 10 | — | (1) | — | — | — | |||||||||||||||||||||||||||||
| Other | (2) | — | 16 | — | (2) | — | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | — | — | — | — | (2) | — | |||||||||||||||||||||||||||||
| Other, net | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | $ | 327 | 17 | % | $ | 800 | 18 | % | $ | 912 | 21 | % | |||||||||||||||||||||||
(1)State taxes in Texas made up the majority of the tax effect in this category.
The components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and other carryforwards | $ | 209 | $ | 225 | |||||||
| Viper’s investment in Viper LLC | 28 | 185 | |||||||||
| Other | 109 | 75 | |||||||||
| Deferred tax assets | 346 | 485 | |||||||||
| Valuation allowance | (119) | (119) | |||||||||
| Deferred tax assets, net of valuation allowance | 227 | 366 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Oil and natural gas properties, midstream investments and equipment | 9,286 | 9,990 | |||||||||
| Other | 60 | 29 | |||||||||
| Total deferred tax liabilities | 9,346 | 10,019 | |||||||||
| Net deferred tax liabilities | $ | 9,119 | $ | 9,653 | |||||||
At December 31, 2025, the Company had approximately $245 million of federal net operating losses (“NOL”) and $4 million of federal tax credits expiring in 2037, $26 million federal capital loss carryforwards expiring principally in 2027 and an additional $191 million of federal NOLs with an indefinite carryforward life, which amounts include NOLs and credit carryforwards acquired from QEP. The Company principally operates in the state of Texas and is subject to Texas margin tax, which currently does not include an NOL carryover provision. The Company’s federal tax attributes, including those acquired from QEP, Rattler and Sitio, are subject to an annual limitation under Sections 382 and 383 of the Internal Revenue
Code of 1986, as amended (the “Code”), which relates to tax attribute limitations upon the 50% or greater change of ownership of an entity during any three-year look back period. Other than as described below regarding realization of tax attributes acquired from QEP, the Company believes that the application of Sections 382 and 383 of the Code will not have an adverse effect on future usage of the Company’s loss carryforwards and credits.
As of December 31, 2025, the Company had a valuation allowance of $11 million related to federal NOL and credit carryforwards acquired from QEP which the Company estimated have a remote likelihood of being realized prior to expiration. In addition, the Company had a valuation allowance of $108 million primarily related to certain state NOL carryforwards which the Company does not believe are realizable as it does not anticipate significant future operations in those states. Management’s assessment at each balance sheet date included consideration of all available positive and negative evidence including the anticipated timing of reversal of deferred tax liabilities and the limitations imposed by Sections 382 and 383 of the Code on certain of the Company’s NOLs and other carryforwards. Management believes that the balance of the Company’s NOLs is realizable, to the extent of future taxable income, due to an increase in our Section 382 limitations as a result of our fair market value and our net unrealized built-in gain position. As of December 31, 2025, management determined that it is more likely than not that the Company will realize its remaining deferred tax assets.
At December 31, 2025, the Company’s net deferred tax liabilities include deferred tax assets of approximately $28 million related to Viper’s investment in Viper LLC. Deferred taxes are provided on the difference between Viper’s basis for financial accounting purposes and basis for federal income tax purposes in its investment in Viper LLC.
During the year ended December 31, 2024, Viper released its remaining valuation allowance of approximately $156 million as a result of management’s assessment of the realizability of future taxable income. During the year ended December 31, 2023, Viper recognized deferred income tax benefit of $7 million related to a partial release in its beginning-of-the year valuation allowance, based on a change in judgment about the realizability of its deferred tax assets.
The following table sets forth changes in the Company’s unrecognized tax benefits:
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Balance at beginning of year | $ | — | $ | — | $ | 7 | |||||||||||
| Decrease resulting from expiration of statute | — | — | (7) | ||||||||||||||
| Balance at end of year | — | — | — | ||||||||||||||
| Less: Effects of temporary items | — | — | — | ||||||||||||||
| Total that, if recognized, would impact the effective income tax rate as of the end of the year | $ | — | $ | — | $ | — | |||||||||||
The Company recognizes the tax benefit from a tax position only if it is more likely than not that it will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. The Company’s federal and state income tax returns for the years ended December 31, 2022 through December 31, 2024 remain open for all purposes of examination by the Internal Revenue Service and major state taxing jurisdictions. However, certain earlier tax years remain open for adjustment to the extent of their NOL carryforwards available for future utilization. It is reasonably possible that significant changes to the reserve for uncertain tax positions may occur as a result of various audits and the expiration of the statute of limitations.
The Company recognizes interest and penalties related to income tax matters as interest expense and general and administrative expenses, respectively. During the years ended December 31, 2025 and 2024, there was no interest associated with uncertain tax positions recognized in the Company’s consolidated financial statements. During the year ended December 31, 2023, there was an insignificant amount of interest associated with uncertain tax positions recognized in the Company’s consolidated financial statements. During the years ended December 31, 2025, 2024 and 2023, there were no penalties related to each period associated with uncertain tax positions recognized in the Company’s consolidated financial statements.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 15, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.