REVENUE FROM CONTRACTS WITH CUSTOMERSRoyalty income represents the right to receive revenues from oil, natural gas and natural gas liquids sales obtained from third-party purchasers by the operator of the wells in which the Company owns a royalty interest. Royalty income is recognized at the point control of the product is transferred to the purchaser at the wellhead or at the gas processing facility based on the Company’s percentage ownership share of the revenue, net of any deductions for gathering and transportation. Virtually all of the pricing provisions in the Company’s contracts are tied to a market index.
For the years ended December 31, 2025, 2024 and 2023, any revenues recognized in the current reporting period for performance obligations satisfied in prior reporting periods were not material.
The following tables disaggregate the Company’s revenue from oil, natural gas and natural gas liquids by revenue generated from production on properties operated by Diamondback and revenue generated from production on properties operated by third parties:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2025 |
| Revenue Generated from Diamondback Operated Properties | | Revenue Generated from Third-Party Operated Properties | | Total |
| (In millions) |
| Oil income | $ | 612 | | | $ | 519 | | | $ | 1,131 | |
| Natural gas income | 31 | | | 25 | | | 56 | |
| Natural gas liquids income | 98 | | | 61 | | | 159 | |
| Total royalty income | $ | 741 | | | $ | 605 | | | $ | 1,346 | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2024 |
| Revenue Generated from Diamondback Operated Properties | | Revenue Generated from Third-Party Operated Properties | | Total |
| (In millions) |
| Oil income | $ | 398 | | | $ | 352 | | | $ | 750 | |
| Natural gas income | 10 | | | 5 | | | 15 | |
| Natural gas liquids income | 51 | | | 38 | | | 89 | |
| Total royalty income | $ | 459 | | | $ | 395 | | | $ | 854 | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2023 |
| Revenue Generated from Diamondback Operated Properties | | Revenue Generated from Third-Party Operated Properties | | Total |
| (In millions) |
| Oil income | $ | 377 | | | $ | 242 | | | $ | 619 | |
| Natural gas income | 16 | | | 15 | | | 31 | |
| Natural gas liquids income | 42 | | | 25 | | | 67 | |
| Total royalty income | $ | 435 | | | $ | 282 | | | $ | 717 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.