Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	Documents included in this report:
	1. Financial Statements
	Report of Independent Registered Public Accounting Firm	F-1
	Consolidated Balance Sheets	F-2
	Consolidated Statements of Operations	F-3
	Consolidated Statement of Stockholders' Equity	F-4
	Consolidated Statements of Cash Flows	F-5
	Notes to Consolidated Financial Statements	F-7
	2. Financial Statement Schedules
	Financial statement schedules have been omitted because they are either not required, not applicable or the information required to be presented is included in the Company’s consolidated financial statements and related notes.
	3. Exhibits
	The Exhibit Index beginning on page E–1 of this report is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			DIAMONDBACK ENERGY, INC.
Date:	February 15, 2017
			/s/ Travis D. Stice
			Travis D. Stice
			Chief Executive Officer
			(Principal Executive Officer)

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ Steven E. West		Chairman of the Board and Director		February 15, 2017
Steven E. West
/s/ Travis D. Stice		Chief Executive Officer and Director		February 15, 2017
Travis D. Stice		(Principal Executive Officer)
/s/ Michael P. Cross		Director		February 15, 2017
Michael P. Cross
/s/ David L. Houston		Director		February 15, 2017
David L. Houston
/s/ Mark L. Plaumann		Director		February 15, 2017
Mark L. Plaumann
/s/ Teresa L. Dick		Chief Financial Officer, Senior Vice President, and Assistant Secretary		February 15, 2017
Teresa L. Dick		(Principal Financial and Accounting Officer)

S-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Diamondback Energy, Inc.

We have audited the accompanying consolidated balance sheets of Diamondback Energy, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Diamondback Energy, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 15, 2017 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

February 15, 2017

F-1

Diamondback Energy, Inc. and Subsidiaries

Consolidated Balance Sheets

	December 31,
	2016				2015
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	1,666,574			$	20,115
Restricted cash	500				500
Accounts receivable:
Joint interest and other	49,476				41,309
Oil and natural gas sales	70,349				36,004
Related party	297				1,591
Inventories	1,983				1,728
Derivative instruments	—				4,623
Prepaid expenses and other	2,987				2,875
Total current assets	1,792,166				108,745
Property and equipment:
Oil and natural gas properties, full cost method of accounting ($1,730,519 and $1,106,816 excluded from amortization at December 31, 2016 and December 31, 2015, respectively)	5,160,261				3,955,373
Pipeline and gas gathering assets	8,362				7,174
Other property and equipment	58,290				48,621
Accumulated depletion, depreciation, amortization and impairment	(1,836,056		)		(1,413,543		)
Net property and equipment	3,390,857				2,597,625
Funds held in escrow	121,391				—
Derivative instruments	709				—
Other assets	44,557				44,349
Total assets	$	5,349,680			$	2,750,719
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	47,648			$	20,008
Accounts payable-related party	1				217
Accrued capital expenditures	60,350				59,937
Other accrued liabilities	55,330				44,293
Revenues and royalties payable	23,405				16,966
Derivative instruments	22,608				—
Total current liabilities	209,342				141,421
Long-term debt	1,105,912				487,807
Asset retirement obligations	16,134				12,518
Total liabilities	1,331,388				641,746
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 90,143,934 issued and outstanding at December 31, 2016; 66,797,041 issued and outstanding at December 31, 2015	901				668
Additional paid-in capital	4,215,955				2,229,664
Accumulated deficit	(519,394		)		(354,360		)
Total Diamondback Energy, Inc. stockholders’ equity	3,697,462				1,875,972
Non-controlling interest	320,830				233,001
Total equity	4,018,292				2,108,973
Total liabilities and equity	$	5,349,680			$	2,750,719

See accompanying notes to consolidated financial statements.

F-2

Diamondback Energy, Inc. and Subsidiaries

Consolidated Statements of Operations

	Year Ended December 31,
	2016				2015				2014
	(In thousands, except per share amounts)
Revenues:
Oil sales	$	470,528			$	405,715			$	449,244
Natural gas sales	22,506				19,592				18,028
Natural gas liquid sales	34,073				21,426				28,446
Total revenues	527,107				446,733				495,718
Costs and expenses:
Lease operating expenses	82,428				82,625				55,384
Production and ad valorem taxes	34,456				32,990				32,638
Gathering and transportation	11,606				6,091				3,288
Depreciation, depletion and amortization	178,015				217,697				170,005
Impairment of oil and natural gas properties	245,536				814,798				—
General and administrative expenses (including non-cash equity-based compensation, net of capitalized amounts, of $26,453, $18,529 and $9,816 for the year ended December 31, 2016, 2015 and 2014, respectively)	42,619				31,968				21,266
Asset retirement obligation accretion expense	1,064				833				467
Total costs and expenses	595,724				1,187,002				283,048
Income (loss) from operations	(68,617		)		(740,269		)		212,670
Other income (expense):
Interest income (expense)	(40,684		)		(41,510		)		(34,514		)
Other income	3,064				728				677
Other expense	—				—				(1,416		)
Gain (loss) on derivative instruments, net	(25,345		)		31,951				127,539
Loss on extinguishment of debt	(33,134		)		—				—
Total other income (expense), net	(96,099		)		(8,831		)		92,286
Income (loss) before income taxes	(164,716		)		(749,100		)		304,956
Provision for (benefit from) income taxes	192				(201,310		)		108,985
Net income (loss)	(164,908		)		(547,790		)		195,971
Net income attributable to non-controlling interest	126				2,838				2,216
Net income (loss) attributable to Diamondback Energy, Inc.	$	(165,034	)		$	(550,628	)		$	193,755
Earnings per common share:
Basic	$	(2.20	)		$	(8.74	)		$	3.67
Diluted	$	(2.20	)		$	(8.74	)		$	3.64
Weighted average common shares outstanding:
Basic	75,077				63,019				52,826
Diluted	75,077				63,019				53,297

See accompanying notes to consolidated financial statements.

F-3

Diamondback Energy, Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

	Common Stock						Additional Paid-in Capital				Retained Earnings (Accumulated Deficit)				Non-Controlling Interest
	Shares		Amount							Total
	(In thousands)
Balance December 31, 2013	47,106		$	471			$	842,557			$	2,513			$	—			$	845,541
Net proceeds from issuance of common units - Viper Energy Partners LP	—		—				—				—				232,198				232,198
Unit-based compensation	—		—				—				—				2,102				2,102
Distribution to non-controlling interest	—		—				—				—				(2,314		)		(2,314		)
Stock-based compensation	—		—				12,152				—				—				12,152
Tax benefits related to stock-based compensation	—		—				(749		)		—				—				(749		)
Common shares issued in public offering, net of offering costs	9,200		92				689,390				—				—				689,482
Exercise of stock options and vesting of restricted stock units	518		5				7,075				—				—				7,080
Equity payment- Wexford Advisory Services (See Note 11)	64		1				3,749				—				—				3,750
Net income	—		—				—				193,755				2,216				195,971
Balance December 31, 2014	56,888		569				1,554,174				196,268				234,202				1,985,213
Unit-based compensation	—		—				—				—				3,929				3,929
Distribution to non-controlling interest	—		—				—				—				(7,968		)		(7,968		)
Stock-based compensation	—		—				20,645				—				—				20,645
Common shares issued in public offering, net of offering costs	9,488		94				649,979				—				—				650,073
Exercise of stock options and awards of restricted stock	421		5				4,866				—				—				4,871
Net income (loss)	—		—				—				(550,628		)		2,838				(547,790		)
Balance December 31, 2015	66,797		668				2,229,664				(354,360		)		233,001				2,108,973
Net proceeds from issuance of common units - Viper Energy Partners LP	—		—				—				—				93,462				93,462
Unit-based compensation	—		—				—				—				3,815				3,815
Stock-based compensation	—		—				29,717				—				—				29,717
Distribution to non-controlling interest	—		—				—				—				(9,574		)		(9,574		)
Common shares issued in public offering, net of offering costs	23,000		229				1,956,079				—				—				1,956,308
Exercise of stock options and awards of restricted stock	347		4				495				—				—				499
Net income (loss)	—		—				—				(165,034		)		126				(164,908		)
Balance December 31, 2016	90,144		$	901			$	4,215,955			$	(519,394	)		$	320,830			$	4,018,292

See accompanying notes to consolidated financial statements.

F-4

Diamondback Energy, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(164,908	)		$	(547,790	)		$	195,971
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for (benefit from) deferred income taxes	—				(201,545		)		108,985
Impairment of oil and natural gas properties	245,536				814,798				—
Asset retirement obligation accretion expense	1,064				833				467
Depreciation, depletion, and amortization	178,015				217,697				170,005
Amortization of debt issuance costs	2,717				2,601				2,125
Loss on early extinguishment of debt	33,134				—				—
Change in fair value of derivative instruments	26,522				112,918				(117,109		)
Income from equity investment	(676		)		—				—
Equity-based compensation expense	26,453				18,529				9,816
(Gain) loss on sale of assets, net	(61		)		668				1,396
Changes in operating assets and liabilities:
Accounts receivable	(35,030		)		8,998				(39,442		)
Accounts receivable-related party	1,294				2,149				(2,699		)
Restricted cash	—				—				(500		)
Inventories	(255		)		224				915
Prepaid expenses and other	(709		)		(1,310		)		(4,601		)
Accounts payable and accrued liabilities	15,922				802				6,829
Accounts payable and accrued liabilities-related party	(216		)		218				(17		)
Accrued interest	(3,161		)		(255		)		3,473
Revenues and royalties payable	6,439				(13,034		)		20,775
Net cash provided by operating activities	332,080				416,501				356,389
Cash flows from investing activities:
Additions to oil and natural gas properties	(362,450		)		(419,241		)		(494,708		)
Additions to oil and natural gas properties-related party	(637		)		(271		)		(3,631		)
Acquisition of royalty interests	(205,721		)		(43,907		)		(57,689		)
Acquisition of leasehold interests	(611,280		)		(437,455		)		(845,826		)
Additions to pipeline and gas gathering assets	(1,188		)		—				(1,509		)
Purchase of other property and equipment	(9,891		)		(1,213		)		(44,213		)
Proceeds from sale of assets	4,661				9,739				56
Funds held in escrow	(121,391		)		—				—
Equity investments	(2,345		)		(2,702		)		(34,477		)
Net cash used in investing activities	(1,310,242		)		(895,050		)		(1,481,997		)
Cash flows from financing activities:
Proceeds from borrowings under credit facility	164,000				425,001				509,400
Repayment under credit facility	(89,000		)		(603,001		)		(295,900		)
Proceeds from senior notes	1,000,000				—				—
Repayment of senior notes	(450,000		)		—				—
Premium on extinguishment of debt	(26,561		)		—				—
Debt issuance costs	(15,063		)		(526		)		(3,469		)
Public offering costs	(1,182		)		(586		)		(2,994		)
Proceeds from public offerings	2,051,503				650,688				928,432
Proceeds from exercise of stock options	498				4,873				7,081

F-5

Diamondback Energy, Inc. and Subsidiaries

Consolidated Statements of Cash Flows - Continued

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Distributions to non-controlling interest	(9,574		)		(7,968		)		(2,314		)
Net cash provided by financing activities	2,624,621				468,481				1,140,236
Net increase (decrease) in cash and cash equivalents	1,646,459				(10,068		)		14,628
Cash and cash equivalents at beginning of period	20,115				30,183				15,555
Cash and cash equivalents at end of period	$	1,666,574			$	20,115			$	30,183

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest	$	38,177			$	38,758			$	31,621
Cash paid for income taxes	$	192			$	267			$	—
Supplemental disclosure of non-cash transactions:
Change in accrued capital expenditures	$	413			$	(69,460	)		$	54,748
Capitalized stock-based compensation	$	7,079			$	6,043			$	4,437

See accompanying notes to consolidated financial statements.

F-6

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Organization and Description of the Business

Diamondback Energy, Inc. (“Diamondback” or the “Company”) is an independent oil and gas company focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. Diamondback was incorporated in Delaware on December 30, 2011.

On June 17, 2014, Diamondback entered into a contribution agreement with Viper Energy Partners LP (the “Partnership”), Viper Energy Partners GP LLC (the “General Partner”) and Viper Energy Partners LLC to transfer Diamondback’s ownership interest in Viper Energy Partners LLC to the Partnership in exchange for 70,450,000 common units. Diamondback also owns and controls the General Partner, which holds a non-economic general partner interest in the Partnership. On June 23, 2014, the Partnership completed its initial public offering (the “Viper Offering”) of 5,750,000 common units, and the Company’s common units represented an approximate 92% limited partner interest in the Partnership. On September 19, 2014, the Partnership completed an underwritten public offering of 3,500,000 common units. At the completion of this offering, the Company owned approximately 88% of the common units of the Partnership. See Note 4–Viper Energy Partners LP for additional information regarding the Partnership.

The wholly-owned subsidiaries of Diamondback, as of December 31, 2016, include Diamondback E&P LLC, a Delaware limited liability company, Diamondback O&G LLC, a Delaware limited liability company, Viper Energy Partners GP LLC, a Delaware limited liability company, and White Fang Energy LLC, a Delaware limited liability company. The consolidated subsidiaries include the wholly-owned subsidiaries as well as Viper Energy Partners LP, a Delaware limited partnership, and Viper Energy Partners LLC, a Delaware limited liability company.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries after all significant intercompany balances and transactions have been eliminated upon consolidation.

The Partnership is consolidated in the financial statements of the Company. As of December 31, 2016, the Company owned approximately 83% of the common units of the Partnership and the Company’s wholly owned subsidiary, Viper Energy Partners GP LLC, is the General Partner of the Partnership.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Certain amounts included in or affecting the Company’s consolidated financial statements and related disclosures must be estimated by management, requiring certain assumptions to be made with respect to values or conditions that cannot be known with certainty at the time the consolidated financial statements are prepared. These estimates and assumptions affect the amounts the Company reports for assets and liabilities and the Company’s disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.

The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Significant items subject to such estimates and assumptions include, but are not limited to, estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, asset retirement obligations, the fair value determination of acquired assets and liabilities, equity-based compensation, fair value estimates of commodity derivatives and estimates of income taxes.

F-7

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less and money market funds to be cash equivalents. The Company maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any significant losses from such investments.

Restricted Cash

A subsidiary of the Company entered into an agreement to purchase certain overriding royalty interests and deposited $0.5 million in escrow. The agreement provided that the subsidiary would have the right to terminate the agreement and receive a return of the deposit if the subsidiary in good faith asserted title defects in excess of a certain amount. The subsidiary asserted title defects in excess of the amount and requested that the escrow agent return the deposit. The seller provided the escrow agent with notice alleging the subsidiary did not timely assert the defects in good faith. The escrow agent tendered the deposit to the court subject to a judicial determination of the proper payment of the funds.

Accounts Receivable

Accounts receivable consist of receivables from joint interest owners on properties the Company operates and from sales of oil and natural gas production delivered to purchasers. The purchasers remit payment for production directly to the Company. Most payments are received within three months after the production date.

Accounts receivable are stated at amounts due from joint interest owners or purchasers, net of an allowance for doubtful accounts when the Company believes collection is doubtful. For receivables from joint interest owners, the Company typically has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the debtor’s current ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. The Company writes off specific accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. No allowance was deemed necessary at December 31, 2016 or December 31, 2015.

Derivative Instruments

The Company is required to recognize its derivative instruments on the consolidated balance sheets as assets or liabilities at fair value with such amounts classified as current or long-term based on their anticipated settlement dates. The accounting for the changes in fair value of a derivative depends on the intended use of the derivative and resulting designation. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the cash and non-cash change in fair value on derivative instruments in the consolidated statements of operations.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, receivables, payables, derivatives and senior notes. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value because of the short-term nature of the instruments. The fair value of the revolving credit facility approximates its carrying value based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities. The fair value of the senior notes are determined using quoted market prices. Derivatives are recorded at fair value (see Note 14–Fair Value Measurements).

Oil and Natural Gas Properties

The Company uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain internal costs, are capitalized and amortized on a composite unit of production method based on proved oil, natural gas liquids and natural gas reserves. Internal costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other administrative costs associated with overseeing the exploration and development activities. Costs, including related employee costs, associated with production and operation of the properties are charged to expense as incurred. All other

F-8

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

internal costs not directly associated with exploration and development activities are charged to expense as they are incurred. Sales of oil and natural gas properties, whether or not being amortized currently, are accounted for as adjustments of capitalized costs, with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil, natural gas liquids and natural gas. Any income from services provided by subsidiaries to working interest owners of properties in which the Company also owns an interest, to the extent they exceed related costs incurred, are accounted for as reductions of capitalized costs of oil and natural gas properties proportionate to the Company’s investment in the subsidiary (see Note 7–Equity Method Investments). Depletion of evaluated oil and natural gas properties is computed on the units of production method, whereby capitalized costs plus estimated future development costs are amortized over total proved reserves. The average depletion rate per barrel equivalent unit of production was $11.23, $17.84 and $23.79 for the years ended December 31, 2016, 2015 and 2014, respectively. Depreciation, depletion and amortization expense for oil and natural gas properties was $176.4 million, $216.1 million and $168.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Under this method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the proved oil and natural gas properties. Net capitalized costs are limited to the lower of unamortized cost net of deferred income taxes, or the cost center ceiling. The cost center ceiling is defined as the sum of (a) estimated future net revenues, discounted at 10% per annum, from proved reserves, based on the trailing 12-month unweighted average of the first-day-of-the-month price, adjusted for any contract provisions, and excluding the estimated abandonment costs for properties with asset retirement obligations recorded on the balance sheet, (b) the cost of properties not being amortized, if any, and (c) the lower of cost or market value of unproved properties included in the cost being amortized, including related deferred taxes for differences between the book and tax basis of the oil and natural gas properties. If the net book value, including related deferred taxes, exceeds the ceiling, an impairment or non-cash writedown is required. During the years ended December 31, 2016 and 2015, the Company recorded impairments on proved oil and natural gas properties of $245.5 million and $814.8 million, respectively. No impairment on proved oil and natural gas properties was recorded for the year ended December 31, 2014.

Costs associated with unevaluated properties are excluded from the full cost pool until the Company has made a determination as to the existence of proved reserves. The Company assesses all items classified as unevaluated property on an annual basis for possible impairment. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization.

Other Property and Equipment

Other property and equipment is recorded at cost. The Company expenses maintenance and repairs in the period incurred. Upon retirements or disposition of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheet with the resulting gains or losses, if any, reflected in operations. Depreciation of other property and equipment is computed using the straight line method over their estimated useful lives, which range from three to fifteen years. Depreciation expense for other property and equipment was $1.6 million, $1.6 million and $1.3 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Asset Retirement Obligations

The Company measures the future cost to retire its tangible long-lived assets and recognizes such cost as a liability for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction or normal operation of a long-lived asset.

The Company records a liability relating to the retirement and removal of all assets used in their businesses. Asset retirement obligations represent the future abandonment costs of tangible assets, namely wells. The fair value of a liability for an asset’s retirement obligation is recorded in the period in which it is incurred if a reasonable estimate of fair value can be made and the corresponding cost is capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount or if there is a change in the estimated liability, the difference is recorded in oil and natural gas properties.

F-9

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Impairment of Long-Lived Assets

Other property and equipment used in operations are reviewed whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable from its estimated future undiscounted cash flows. An impairment loss is the difference between the carrying amount and fair value of the asset. The Company had no such impairment losses for the years ended December 31, 2016, 2015 and 2014, respectively.

Capitalized Interest

The Company capitalizes interest on expenditures made in connection with exploration and development projects that are not subject to current amortization. Interest is capitalized only for the period that activities are in progress to bring these projects to their intended use. Capitalized interest cannot exceed gross interest expense. The Company capitalized interest of $5.3 million for the year ended December 31, 2014. The Company did not have any capitalized interest for the years ended December 31, 2016 and 2015.

Inventories

Inventories are stated at the lower of cost or market and consist of tubular goods and equipment at December 31, 2016 and 2015. The Company’s tubular goods and equipment are primarily comprised of oil and natural gas drilling or repair items such as tubing, casing and pumping units. The inventory is primarily acquired for use in future drilling or repair operations and is carried at lower of cost or market. “Market”, in the context of inventory valuation, represents net realizable value, which is the amount that the Company is allowed to bill to the joint accounts under joint operating agreements to which the Company is a party. As of December 31, 2016, the Company estimated that all of its tubular goods and equipment will be utilized within one year.

Debt Issuance Costs

Other assets included capitalized costs related to the credit facility of $8.2 million and $7.5 million, net of accumulated amortization of $4.9 million and $3.5 million, as of December 31, 2016 and 2015, respectively. Long-term debt included capitalized costs related to the senior notes of $14.8 million and $10.7 million, net of accumulated amortization of $0.2 million and $3.0 million, as of December 31, 2016 and 2015, respectively. The costs associated with the Senior Notes are being amortized over the term of the Senior Notes using the effective interest method. The costs associated with the Company’s credit facility are being amortized over the term of the facility.

Other Accrued Liabilities

Other accrued liabilities consist of the following:

	December 31,
	2016				2015
	(In thousands)
Prepaid drilling liability	$	21,595			$	12,683
Interest payable	5,445				8,606
Lease operating expense payable	13,857				14,100
Ad valorem taxes payable	776				518
Current portion of asset retirement obligations	1,288				193
Other	12,369				8,193
Total other accrued liabilities	$	55,330			$	44,293

Revenue and Royalties Payable

For certain oil and natural gas properties, where the Company serves as operator, the Company receives production proceeds from the purchaser and further distributes such amounts to other revenue and royalty owners. Production proceeds that

F-10

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

the Company has not yet distributed to other revenue and royalty owners are reflected as revenue and royalties payable in the accompanying consolidated balance sheets. The Company recognizes revenue for only its net revenue interest in oil and natural gas properties.

Revenue Recognition

Oil and natural gas revenues are recorded when title passes to the purchaser, net of royalty interests, discounts and allowances, as applicable. The Company accounts for oil and natural gas production imbalances using the sales method, whereby a liability is recorded when the Company’s overtake volumes exceed its estimated remaining recoverable reserves. No receivables are recorded for those wells where the Company has taken less than its ownership share of production. The Company did not have any gas imbalances as of December 31, 2016 or December 31, 2015. Revenues from oil and natural gas services are recognized when services are provided.

Investments

Equity investments in which the Company exercises significant influence but does not control are accounted for using the equity method. Under the equity method, generally the Company’s share of investees’ earnings or loss is recognized in the statement of operations. The Company reviews its investments to determine if a loss in value which is other than a temporary decline has occurred. If such loss has occurred, the Company would recognize an impairment provision. There was no impairment for the Company’s equity investments for the years ended December 31, 2016, 2015 and 2014.

For additional information on the Company’s investments, see Note 7–Equity Method Investments.

Accounting for Equity-Based Compensation

The Company grants various types of stock-based awards including stock options and restricted stock units. The Partnership grants various unit-based awards including unit options and phantom units to employees, officers and directors of the General Partner and the Company who perform services for the Partnership. These plans and related accounting policies are defined and described more fully in Note 10–Equity-Based Compensation. Equity compensation awards are measured at fair value on the date of grant and are expensed, net of estimated forfeitures, over the required service period.

Concentrations

The Company is subject to risk resulting from the concentration of its crude oil and natural gas sales and receivables with several significant purchasers. For the year ended December 31, 2016, three purchasers each accounted for more than 10% of our revenue: Shell Trading (US) Company (45%); Koch Supply & Trading LP (15%); and Enterprise Crude Oil LLC (13%). For the year ended December 31, 2015, two purchasers each accounted for more than 10% of our revenue: Shell Trading (US) Company (59%); and Enterprise Crude Oil LLC (15%). For the year ended December 31, 2014, two purchasers each accounted for more than 10% of our revenue: Shell Trading (US) Company (64%); and Enterprise Crude Oil LLC (16%). The Company does not require collateral and does not believe the loss of any single purchaser would materially impact its operating results, as crude oil and natural gas are fungible products with well-established markets and numerous purchasers.

Environmental Compliance and Remediation

Environmental compliance and remediation costs, including ongoing maintenance and monitoring, are expensed as incurred. Liabilities are accrued when environmental assessments and remediation are probable, and the costs can be reasonably estimated.

Income Taxes

Diamondback uses the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (1) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (2) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. A valuation allowance is provided for deferred tax assets when it is more likely than not the deferred tax assets will not be realized.

F-11

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The Company is subject to margin tax in the state of Texas. During the years ended December 31, 2016, 2015 and 2014, there was no margin tax expense. The Company’s 2012, 2013, 2014, 2015 and 2016 federal income tax and state margin tax returns remain open to examination by tax authorities. As of December 31, 2016 and December 31, 2015, the Company had no unrecognized tax benefits that would have a material impact on the effective tax rate. The Company is continuing its practice of recognizing interest and penalties related to income tax matters as interest expense and general and administrative expenses, respectively. During the years ended December 31, 2016, 2015 and 2014, there was no interest or penalties associated with uncertain tax positions recognized in the Company’s consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers”. This update supersedes most of the existing revenue recognition requirements in GAAP and requires (i) an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services and (ii) requires expanded disclosures regarding the nature, amount, timing and certainty of revenue and cash flows from contracts with customers. The standard will be effective for annual and interim reporting periods beginning after December 15, 2017, with early application permitted for annual reporting period beginning after December 31, 2016. The standard allows for either full retrospective adoption, meaning the standard is applied to all periods presented in the financial statements, or modified retrospective adoption, meaning the standard is applied only to the most current period presented. The Company is currently evaluating the impact of this standard; however, it does not believe this standard will have a material impact on the Company’s consolidated financial statements.

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, “Interest–Imputation of Interest”. This update requires that debt issuance costs related to a recognized debt liability (except costs associated with revolving debt arrangements) be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount, to simplify the presentation of debt issuance costs. This update is effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company retrospectively adopted this new standard effective January 1, 2016. Adoption of this standard only affects the presentation of the Company’s consolidated balance sheets and did not have a material impact on the Company’s consolidated financial statements.

In January 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-01, “Financial Instruments–Overall”. This update applies to any entity that holds financial assets or owes financial liabilities. This update requires equity investments (except for those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This update will be effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. While this update will not have a direct impact on the Company, the Partnership will be required to mark its cost method investment to fair value with the adoption of this update.

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-02, “Leases”. This update applies to any entity that enters into a lease, with some specified scope exemptions. Under this update, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. While there were no major changes to the lessor accounting, changes were made to align key aspects with the revenue recognition guidance. This update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Entities will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company believes the primary impact of adopting this standard will be the recognition of assets and liabilities on the balance sheet for current operating leases. The Company is still evaluating the impact of this standard.

In March 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”. Under this update, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update will be effective for annual and interim reporting periods beginning after December 15, 2017, with early application not permitted. This update allows for either full retrospective adoption, meaning this update is applied to all periods presented in the financial

F-12

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

statements, or modified retrospective adoption, meaning this update is applied only to the most current period presented. The Company is currently evaluating the impact, if any, that the adoption of this update will have on the Company’s financial position, results of operations and liquidity.

In March 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-09, "Compensation - Stock Compensation". This update applies to all entities that issue equity-based payment awards to their employees. Under this update, there were several areas that were simplified including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the impact that the adoption of this update will have on the Company's financial position, results of operations and liquidity.

In April 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-10, “Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing”. This update clarifies two principles of Accounting Standards Codification Topic 606: identifying performance obligations and the licensing implementation guidance. This standard has the same effective date as Accounting Standards Update 2016-08, the revenue recognition standard discussed above. The adoption of this standard is not expected to have a material impact on the Company's financial position, results of operations and liquidity.

In May 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-12, “Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients”. This update applies only to the following areas from Accounting Standards Codification Topic 606: assessing the collectability criterion and accounting for contracts that do not meet the criteria for step 1, presentation of sales taxes and other similar taxes collected from customers, non-cash consideration, contract modification at transition, completed contracts at transition and technical correction. This standard has the same effective date as Accounting Standards Update 2016-08, the revenue recognition standard discussed above. The adoption of this standard is not expected to have a material impact on the Company's financial position, results of operations and liquidity.

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses”. This update affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This update will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company does not believe the adoption of this standard will have a material impact on the Company’s consolidated financial statements since the Company does not have a history of credit losses.

In August 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments”. This update apples to all entities that are required to present a statement of cash flows. This update provides guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. This update will be effective for financial statements issued for fiscal years beginning after December 31, 2017, including interim periods within those fiscal years with early adoption permitted. This update should be applied using the retrospective transition method. Adoption of this standard will only affect the presentation of the Company’s cash flows and will not have a material impact on the Company’s consolidated financial statements.

3. ACQUISITIONS

2016 Activity

On December 13, 2016, the Company entered into a definitive agreement with an unrelated third party leasehold interests and related assets in the Delaware Basin for an aggregate purchase price consisting of $1.62 billion in cash and 7.69 million shares of the Company’s common stock, subject to certain adjustments. This transaction includes approximately 93,761 gross

F-13

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

(76,319 net) acres primarily in Pecos and Reeves counties. The Company intends to fund this acquisition with net proceeds from the December 2016 equity offering discussed in Note 9, net proceeds from the December 2016 debt offering discussed in Note 8, cash on hand and other financing sources. As required by terms of the agreement the Company deposited $121.4 million in escrow to be applied to the cash portion of the purchase price at closing. This acquisition is expected to close by the end of February 2017.

On September 1, 2016, the Company acquired from an unrelated third party leasehold interests and related assets in the Southern Delaware Basin for an aggregate purchase price of $558.5 million. This transaction included approximately 26,797 gross (19,262 net) acres primarily in Reeves and Ward counties. The Company financed this acquisition with net proceeds from the July 2016 equity offering discussed in Note 9 and cash on hand.

2015 Activity

During 2015, the Company completed acquisitions from unrelated third party sellers of an aggregate of approximately 16,940 gross (12,672 net) acres in the Midland Basin, primarily in northwest Howard County, for an aggregate purchase price of approximately $437.5 million. The acquisitions were accounted for according to the acquisition method, which requires the recording of net assets acquired and consideration transferred at fair value. These acquisitions were funded with the net proceeds of the May 2015 equity offering discussed in Note 9–Capital Stock and Earnings Per Share and borrowings under the Company’s revolving credit facility discussed in Note 8–Debt.

On July 9, 2015, the Company completed the sale of an approximate average 1.5% overriding royalty interest in certain of its acreage primarily located in Howard County, Texas to the Partnership for $31.1 million. The Partnership primarily funded this acquisition with borrowings under its revolving credit facility discussed in Note 8 – Debt.

2014 Activity

On September 9, 2014, the Company completed the acquisition of oil and natural gas interests in the Permian Basin from unrelated third party sellers. The Company acquired approximately 17,617 gross (12,967 net) acres with an approximate 74% working interest (approximately 75% net revenue interest). The acquisition was accounted for according to the acquisition method, which requires the recording of net assets acquired and consideration transferred at fair value. This acquisition was funded with the net proceeds of the July 2014 equity offering and borrowings under the Company’s revolving credit facility discussed in Note 8–Debt.

The following represents the estimated fair values of the assets and liabilities assumed on the acquisition date. The aggregate consideration transferred was $523.3 million in cash, subject to post-closing adjustments, resulting in no goodwill or bargain purchase gain.

	(in thousands)
Joint interest receivables	$	42
Proved oil and natural gas properties	128,589
Unevaluated oil and natural gas properties	400,527
Total assets acquired	529,158
Accrued production and ad valorem taxes	358
Revenues payable	3,174
Asset retirement obligations	2,366
Total liabilities assumed	5,898
Total fair value of net assets	$	523,260

The Company has included in its consolidated statements of operations revenues of $12.3 million and direct operating expenses of $4.6 million for the period from September 9, 2014 to December 31, 2014 due to the acquisition. The disclosure of net earnings is impracticable to calculate due to the full cost method of depletion.

On August 25, 2014, the Company completed an acquisition of surface rights in the Permian Basin from an unrelated third party seller. The Company acquired surface rights to approximately 4,200 acres for approximately $41.9 million.

F-14

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

On February 27 and 28, 2014, the Company completed acquisitions of oil and natural gas interests in the Permian Basin from unrelated third party sellers. The Company acquired approximately 6,450 gross (4,785 net) acres with a 74% working interest (56% net revenue interest). The acquisitions were accounted for according to the acquisition method, which requires the recording of net assets acquired and consideration transferred at fair value. These acquisitions were funded with the net proceeds of the February 2014 equity offering and borrowings under the Company’s revolving credit facility discussed in Note 8–Debt.

The following represents the estimated fair values of the assets and liabilities assumed on the acquisition dates. The aggregate consideration transferred was $292.2 million in cash, subject to post-closing adjustments, resulting in no goodwill or bargain purchase gain.

	(in thousands)
Proved oil and natural gas properties	$	170,174
Unevaluated oil and natural gas properties	123,243
Total assets acquired	293,417
Asset retirement obligations	1,258
Total liabilities assumed	1,258
Total fair value of net assets	$	292,159

The Company has included in its consolidated statements of operations revenues of $40.5 million and direct operating expenses of $7.8 million for the period from February 28, 2014 to December 31, 2014 due to the acquisitions. The disclosure of net earnings is impracticable to calculate due to the full cost method of depletion.

During the year ended December 31, 2014, the Partnership acquired (i) mineral interests underlying an aggregate of approximately 10,364 gross (3,261 net) acres in the Midland and Delaware basins for approximately $57.7 million and (ii) a minor equity interest in an entity that owns mineral, overriding royalty, net profits, leasehold and other similar interests for approximately $33.9 million. The equity interest is so minor that we have no influence over partnership operating and financial policies and is accounted for under the cost method.

Pro Forma Financial Information

The following unaudited summary pro forma consolidated statement of operations data of Diamondback for the year ended December 31, 2014 has been prepared to give effect to the February 27 and 28, 2014 acquisitions and the September 9, 2014 acquisition as if they had occurred on January 1, 2013. The pro forma data are not necessarily indicative of financial results that would have been attained had the acquisitions occurred on January 1, 2013. The pro forma data also necessarily exclude various operation expenses related to the properties and the financial statements should not be viewed as indicative of operations in future periods.

	Pro Forma
	(Unaudited)
	Year Ended December 31, 2014
	(in thousands)
Revenues	$	541,103
Income from operations	224,382
Net income	201,257

4. VIPER ENERGY PARTNERS LP

The Partnership is a publicly traded Delaware limited partnership, the common units of which are listed on the NASDAQ Global Market under the symbol “VNOM”. The Partnership was formed by Diamondback on February 27, 2014, to, among other things, own, acquire and exploit oil and natural gas properties in North America. The Partnership is currently focused on oil and natural gas properties in the Permian Basin. Viper Energy Partners GP LLC, a consolidated subsidiary of Diamondback, serves as the general partner of, and holds a non-economic general partner interest in, the Partnership. As of December 31, 2016,

F-15

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

the Company owned approximately 83% of the common units of the Partnership. Following Viper’s January 2017 underwritten public offering of common units, Diamondback owned approximately 74% of its outstanding common units.

Prior to the completion on June 23, 2014 of the Viper Offering, Diamondback owned all of the general and limited partner interests in the Partnership. The Viper Offering consisted of 5,750,000 common units representing approximately 8% of the limited partner interests in the Partnership at a price to the public of $26.00 per common unit, which included 750,000 common units issued pursuant to an option to purchase additional common units granted to the underwriters on the same terms. The Partnership received proceeds of approximately $137.2 million from the sale of these common units, net of offering expenses and underwriting discounts and commissions.

In connection with the Viper Offering, Diamondback contributed all of the membership interests in Viper Energy Partners LLC to the Partnership in exchange for 70,450,000 common units. In addition, in connection with the closing of the Viper Offering, the Partnership agreed to distribute to Diamondback all cash and cash equivalents and the royalty income receivable on hand in the aggregate amount of approximately $11.3 million and the net proceeds from the Viper Offering. As of December 31, 2014, the Partnership had distributed $148.8 million to Diamondback and the Partnership recorded a payable balance of approximately $11.3 million. The contribution of Viper Energy Partners LLC to the Partnership was accounted for as a combination of entities under common control with assets and liabilities transferred at their carrying amounts in a manner similar to a pooling of interests. During the year ended December 31, 2016, the Partnership distributed $55.3 million to Diamondback in respect of its common units.

On September 19, 2014, the Partnership completed an underwritten public offering of 3,500,000 common units. The common units were sold to the public at $28.50 per unit and the Partnership received proceeds of approximately $94.8 million from the sale of these common units, net of offering expenses and underwriting discounts and commissions.

In August 2016, the Partnership completed an underwritten public offering of 8,050,000 common units, which included 1,050,000 common units issued pursuant to an option to purchase additional common units granted to the underwriter. In this offering, Diamondback purchased 2,000,000 common units from the underwriter at $15.60 per unit, which is the price per common unit paid by the underwriter to the Partnership. Following the August 2016 public offering, Diamondback had an approximate 83% limited partner interest in the Partnership. The Partnership received net proceeds from this offering of approximately $125.0 million, after deducting underwriting discounts and commissions and estimated offering expenses, which it used to fund an acquisition and repaid outstanding borrowings under its revolving credit facility. See also Note 16–Subsequent Events.

Partnership Agreement

In connection with the closing of the Viper Offering, the General Partner and Diamondback entered into the first amended and restated agreement of limited partnership, dated as of June 23, 2014 (the “Partnership Agreement”). The Partnership Agreement requires the Partnership to reimburse the General Partner for all direct and indirect expenses incurred or paid on the Partnership’s behalf and all other expenses allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership’s business. The Partnership Agreement does not set a limit on the amount of expenses for which the General Partner and its affiliates may be reimbursed. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for the Partnership or on its behalf and expenses allocated to the General Partner by its affiliates. The General Partner is entitled to determine the expenses that are allocable to the Partnership.

Tax Sharing

In connection with the closing of the Viper Offering, the Partnership entered into a tax sharing agreement with Diamondback, dated June 23, 2014, pursuant to which the Partnership agreed to reimburse Diamondback for its share of state and local income and other taxes for which the Partnership’s results are included in a consolidated tax return filed by Diamondback with respect to taxable periods including or beginning on June 23, 2014. The amount of any such reimbursement is limited to the tax the Partnership would have paid had it not been included in a combined group with Diamondback. Diamondback may use its tax attributes to cause its consolidated group, of which the Partnership may be a member for this purpose, to owe less or no tax. In such a situation, the Partnership agreed to reimburse Diamondback for the tax the Partnership would have owed had the tax attributes not been available or used for the Partnership’s benefit, even though Diamondback had no cash tax expense for that period.

F-16

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Other Agreements

See Note 11–Related Party Transactions for information regarding the advisory services agreement the Partnership and the General Partner entered into with Wexford Capital LP (“Wexford”).

The Partnership has entered into a secured revolving credit facility with Wells Fargo Bank, National Association, (“Wells Fargo”) as administrative agent sole book runner and lead arranger. See Note 8–Debt for a description of this credit facility.

5. PROPERTY AND EQUIPMENT

Property and equipment includes the following:

	December 31,
	2016				2015
	(in thousands)
Oil and natural gas properties:
Subject to depletion	$	3,429,742			$	2,848,557
Not subject to depletion(1)	1,730,519				1,106,816
Gross oil and natural gas properties	5,160,261				3,955,373
Accumulated depletion	(687,685		)		(512,144		)
Accumulated impairment	(1,143,498		)		(897,962		)
Oil and natural gas properties, net	3,329,078				2,545,267
Pipeline and gas gathering assets	8,362				7,174
Other property and equipment	58,290				48,621
Accumulated depreciation	(4,873		)		(3,437		)
Property and equipment, net of accumulated depreciation, depletion, amortization and impairment	$	3,390,857			$	2,597,625
Balance of acquisition costs not subject to depletion
Incurred in 2016	$	790,234
Incurred in 2015	$	384,584
Incurred in 2014	$	453,480
Incurred in 2013	$	47,645
Incurred in 2012	$	54,576

(1)	There are no exploration costs, development costs or capitalized interest that are not subject to depletion at December 31, 2016.

The Company uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain internal costs, are capitalized and amortized on a composite unit of production method based on proved oil, natural gas liquids and natural gas reserves. Internal costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other administrative costs associated with overseeing the exploration and development activities. Costs, including related employee costs, associated with production and operation of the properties are charged to expense as incurred. All other internal costs not directly associated with exploration and development activities are charged to expense as they are incurred. Capitalized internal costs were approximately $17.2 million $15.2 million and $11.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Costs associated with unevaluated properties are excluded from the full cost pool until the Company has made a determination as to the existence of proved reserves. The inclusion of the Company’s unevaluated costs into the amortization base is expected to be completed within three to five years. Acquisition costs not currently being amortized are primarily related to unproved acreage that the Company plans to prove up through drilling. The majority of the Company’s acreage is held by production and the Company has no plans to let any acreage expire. Sales of oil and natural gas properties, whether or not being amortized currently, are accounted for as adjustments of capitalized costs, with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil, natural gas liquids and natural gas.

F-17

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Under this method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the proved oil and natural gas properties. Net capitalized costs are limited to the lower of unamortized cost net of deferred income taxes, or the cost center ceiling. The cost center ceiling is defined as the sum of (a) estimated future net revenues, discounted at 10% per annum, from proved reserves, based on the trailing 12-month unweighted average of the first-day-of-the-month price, adjusted for any contract provisions, and excluding the estimated abandonment costs for properties with asset retirement obligations recorded on the balance sheet, (b) the cost of properties not being amortized, if any, and (c) the lower of cost or market value of unproved properties included in the cost being amortized, including related deferred taxes for differences between the book and tax basis of the oil and natural gas properties. If the net book value, including related deferred taxes, exceeds the ceiling, an impairment or non-cash writedown is required.

As a result of the significant decline in prices during 2016 and 2015, the Company recorded non-cash ceiling test impairments for the years ended December 31, 2016 and 2015 of $245.5 million and $814.8 million, respectively, which are included in accumulated depletion. The impairment charge affected the Company’s reported net income but did not reduce its cash flow. 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.

6. ASSET RETIREMENT OBLIGATIONS

The following table describes the changes to the Company’s asset retirement obligations liability for the following periods:

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Asset retirement obligations, beginning of period	$	12,711			$	8,486			$	3,029
Additional liabilities incurred	637				594				703
Liabilities acquired	3,696				3,159				3,726
Liabilities settled	(711		)		(292		)		(27		)
Accretion expense	1,064				833				467
Revisions in estimated liabilities	25				(69		)		588
Asset retirement obligations, end of period	17,422				12,711				8,486
Less current portion	1,288				193				39
Asset retirement obligations - long-term	$	16,134			$	12,518			$	8,447

The Company’s asset retirement obligations primarily relate to the future plugging and abandonment of wells and related facilities. The Company estimates the future plugging and abandonment costs of wells, the ultimate productive life of the properties, a risk-adjusted discount rate and an inflation factor in order to determine the current present value of this obligation. To the extent future revisions to these assumptions impact the present value of the existing asset retirement obligation liability, a corresponding adjustment is made to the oil and natural gas property balance.

7. EQUITY METHOD INVESTMENTS

In October 2014, the Company paid $0.6 million for a 25% interest in HMW Fluid Management LLC, which was formed to develop, own and operate an integrated water management system to gather, store, process, treat, distribute and dispose of water to exploration and production companies operating in Midland, Martin and Andrews Counties, Texas. The board of this entity may also authorize the entity to offer these services to other counties in the Permian Basin and to pursue other business opportunities. For the years ended December 31, 2016 and 2015, the Company invested $2.3 million and $2.7 million, respectively, in this entity bringing its total investment to $6.3 million and $3.3 million at December 31, 2016 and 2015, respectively. The Company will retain a minority interest after all commitments are received. The entity was formed as a limited liability company and maintains a specific ownership account for each investor, similar to a partnership capital account structure. The Company accounts for this investment under the equity method of accounting.

F-18

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

8. DEBT

Long-term debt consisted of the following as of the dates indicated:

	December 31,
	2016				2015
	(in thousands)
7.625 % Senior Notes due 2021	$	—			$	450,000
4.750 % Senior Notes due 2024	500,000				—
5.375 % Senior Notes due 2025	500,000				—
Unamortized debt issuance costs	(14,588		)		(7,693		)
Revolving credit facility	—				11,000
Partnership revolving credit facility	120,500				34,500
Total long-term debt	$	1,105,912			$	487,807

2021 Senior Notes

On September 18, 2013, the Company completed an offering of $450.0 million in aggregate principal amount of 7.625% senior unsecured notes due 2021 (the “2021 Senior Notes”). The 2021 Senior Notes bore interest at the rate of 7.625% per annum, payable semi-annually, in arrears on April 1 and October 1 of each year, commencing on April 1, 2014 and were scheduled to mature on October 1, 2021. The net proceeds from the 2021 Senior Notes were used to fund the acquisition of mineral interests underlying approximately 14,804 gross (12,687 net) acres in Midland County, Texas in the Permian Basin.

The 2021 Senior Notes were issued under an indenture among the Company, the subsidiary guarantors party thereto and Wells Fargo, as the trustee, as supplemented (the “2021 Indenture”). The 2021 Indenture contained certain covenants that, subject to certain exceptions and qualifications, among other things, limited the Company’s ability and the ability of the restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, declare or pay dividends or make other distributions on, or redeem or repurchase, capital stock, prepay subordinated indebtedness, sell assets including capital stock of subsidiaries, agree to payment restrictions affecting the Company’s restricted subsidiaries, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions with affiliates, incur liens, engage in business other than the oil and gas business and designate certain of the Company’s subsidiaries as unrestricted subsidiaries.

Under the 2021 Indenture, the Company was given the option to redeem the 2021 Senior Notes, in whole or in part, at any time on or after October 1, 2016 at the redemption prices (expressed as percentages of principal amount) of 105.719% for the 12-month period beginning on October 1, 2016, 103.813% for the 12-month period beginning on October 1, 2017, 101.906% for the 12-month period beginning on October 1, 2018 and 100.000% beginning on October 1, 2019 and at any time thereafter with any accrued and unpaid interest to, but not including, the date of redemption.

Tender Offer and Redemption-Existing 2021 Senior Notes

On October 21, 2016, the Company commenced a cash tender offer to purchase any and all of its 2021 Senior Notes, which tender offer expired on October 27, 2016 and settled on October 28, 2016. Holders of the 2021 Senior Notes that were validly tendered and accepted at or prior to the expiration time of the tender offer, or who delivered the 2021 Senior Notes pursuant to the guaranteed delivery procedures, received total cash consideration of $1,059.69 per $1,000 principal amount of notes, plus any accrued and unpaid interest up to, but not including, the settlement date. An aggregate of $330.1 million principal amount of the 2021 Senior Notes was validly tendered in the tender offer. The remaining 2021 Senior Notes that were not tendered in the tender offer were redeemed by the Company. The redemption payment included approximately $119.9 million of outstanding principal at a redemption price of 105.719% of the principal amount of the redeemed 2021 Senior Notes, plus accrued and unpaid interest thereon to the redemption date. Upon deposit of the redemption payment with the paying agent on October 28, 2016, the 2021 Indenture was fully satisfied and discharged. The cash tender offer for the 2021 Senior Notes and redemption of the remaining 2021 Senior Notes were funded with a portion of the net proceeds from the offering of the 2024 Senior Notes in the aggregate principal amount of $500.0 million discussed in more detail below.

F-19

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

2024 Senior Notes

On October 28, 2016, the Company issued $500.0 million in aggregate principal amount of 4.750% Senior Notes due 2024 (the “2024 Senior Notes”). The 2024 Senior Notes bear interest at a rate of 4.750% per annum, payable semi-annually, in arrears on May 1 and November 1 of each year, commencing on May 1, 2017 and will mature on November 1, 2024. All of the Company’s existing and future restricted subsidiaries that guarantee its revolving credit facility or certain other debt guarantee the 2024 Senior Notes, provided, however, that the 2024 Senior Notes are not guaranteed by the Partnership, the General Partner, Viper Energy Partners LLC or White Fang Energy LLC, and will not be guaranteed by any of the Company’s future unrestricted subsidiaries.

The 2024 Senior Notes were issued under, and are governed by, an indenture among the Company, the subsidiary guarantors party thereto and Wells Fargo, as the trustee, as supplemented (the “2024 Indenture”). The 2024 Indenture contains certain covenants that, subject to certain exceptions and qualifications, among other things, limit the Company’s ability and the ability of the restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, declare or pay dividends or make other distributions on capital stock, prepay subordinated indebtedness, sell assets including capital stock of restricted subsidiaries, agree to payment restrictions affecting the Company’s restricted subsidiaries, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions with affiliates, incur liens, engage in business other than the oil and gas business and designate certain of the Company’s subsidiaries as unrestricted subsidiaries.

The Company may on any one or more occasions redeem some or all of the 2024 Senior Notes at any time on or after November 1, 2019 at the redemption prices (expressed as percentages of principal amount) of 103.563% for the 12-month period beginning on November 1, 2019, 102.375% for the 12-month period beginning on November 1, 2020, 101.188% for the 12-month period beginning on November 1, 2021 and 100.000% beginning on November 1, 2022 and at any time thereafter with any accrued and unpaid interest to, but not including, the date of redemption. Prior to November 1, 2019, the Company may on any one or more occasions redeem all or a portion of the 2024 Senior Notes at a price equal to 100% of the principal amount of the 2024 Senior Notes plus a “make-whole” premium and accrued and unpaid interest to the redemption date. In addition, any time prior to November 1, 2019, the Company may on any one or more occasions redeem the 2024 Senior Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 2024 Senior Notes issued prior to such date at a redemption price of 104.750%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from certain equity offerings.

In connection with the issuance of the 2024 Senior Notes, the Company and the subsidiary guarantors entered into a registration rights agreement (the “2024 Registration Rights Agreement”) with the initial purchasers on October 28, 2016, pursuant to which the Company agreed to file a registration statement with respect to an offer to exchange the 2024 Senior Notes for a new issue of substantially identical debt securities registered under the Securities Act. Under the 2024 Registration Rights Agreement, the Company also agreed to use its commercially reasonable efforts to have the registration statement declared effective by the SEC on or prior to the 360th day after the issue date of the 2024 Senior Notes and to keep the exchange offer open for not less than 30 days (or longer if required by applicable law). The Company may be required to file a shelf registration statement to cover resales of the 2024 Senior Notes under certain circumstances. If the Company fails to satisfy these obligations under the 2024 Registration Rights Agreement, it agreed to pay additional interest to the holders of the 2024 Senior Notes as specified in the 2024 Registration Rights Agreement.

2025 Senior Notes

On December 20, 2016, the Company issued $500.0 million in aggregate principal amount of 5.375% Senior Notes due 2025 (the “2025 Senior Notes”). The Company intends to use the net proceeds from this offering, together with the net proceeds from its December 2016 underwritten public offering of common stock discussed in more detail in Note 9-Capital Stock and Earnings Per Share, cash on hand and other financing sources, to fund the cash consideration for the Pending Acquisition discussed above. The 2025 Senior Notes bear interest at a rate of 5.375% per annum, payable semi-annually, in arrears on May 31 and November 30 of each year, commencing on May 31, 2017 and will mature on May 31, 2025. All of the Company’s existing and future restricted subsidiaries that guarantee its revolving credit facility or certain other debt guarantee the 2025 Senior Notes, provided, however, that the 2025 Senior Notes are not guaranteed by the Partnership, the General Partner, Viper Energy Partners LLC or White Fang Energy LLC, and will not be guaranteed by any of the Company’s future unrestricted subsidiaries.

The 2025 Senior Notes were issued under an indenture, dated as of December 20, 2016, among the Company, the guarantors party thereto and Wells Fargo Bank, as the trustee (the “2025 Indenture”). The 2025 Indenture contains certain covenants that,

F-20

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

subject to certain exceptions and qualifications, among other things, limit the Company’s ability and the ability of the restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, declare or pay dividends or make other distributions on capital stock, prepay subordinated indebtedness, sell assets including capital stock of restricted subsidiaries, agree to payment restrictions affecting the Company’s restricted subsidiaries, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions with affiliates, incur liens, engage in business other than the oil and gas business and designate certain of the Company’s subsidiaries as unrestricted subsidiaries.

The Company may on any one or more occasions redeem some or all of the 2025 Senior Notes at any time on or after May 31, 2020 at the redemption prices (expressed as percentages of principal amount) of 104.031% for the 12-month period beginning on May 31, 2020, 102.688% for the 12-month period beginning on May 31, 2021, 101.344% for the 12-month period beginning on May 31, 2022 and 100.000% beginning on May 31, 2023 and at any time thereafter with any accrued and unpaid interest to, but not including, the date of redemption. Prior to May 31, 2020, the Company may on any one or more occasions redeem all or a portion of the 2025 Senior Notes at a price equal to 100% of the principal amount of the 2025 Senior Notes plus a “make-whole” premium and accrued and unpaid interest to the redemption date. In addition, any time prior to May 31, 2020, the Company may on any one or more occasions redeem the 2025 Senior Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the 2025 Senior Notes issued prior to such date at a redemption price of 105.375%, plus accrued and unpaid interest to the redemption date, with an amount equal to the net cash proceeds from certain equity offerings.

In connection with the issuance of the 2025 Senior Notes, the Company and the subsidiary guarantors entered into a registration rights agreement (the “2025 Registration Rights Agreement”) with the initial purchasers on December 20, 2016, pursuant to which the Company agreed to file a registration statement with respect to an offer to exchange the 2025 Senior Notes for a new issue of substantially identical debt securities registered under the Securities Act. Under the 2025 Registration Rights Agreement, the Company also agreed to use its commercially reasonable efforts to have the registration statement declared effective by the SEC on or prior to the 360th day after the issue date of the 2025 Senior Notes and to keep the exchange offer open for not less than 30 days (or longer if required by applicable law). The Company may be required to file a shelf registration statement to cover resales of the 2025 Senior Notes under certain circumstances. If the Company fails to satisfy these obligations under the 2025 Registration Rights Agreement, it agreed to pay additional interest to the holders of the 2025 Senior Notes as specified in the 2025 Registration Rights Agreement.

The Company’s Credit Facility

On June 9, 2014, Diamondback O&G LLC, as borrower, entered into a first amendment and on November 13, 2014, Diamondback O&G LLC entered into a second amendment to the second amended and restated credit agreement, dated November 1, 2013 (the “credit agreement”). The first amendment modified certain provisions of the credit agreement to, among other things, allow one or more of the Company’s subsidiaries to be designated as “Unrestricted Subsidiaries” that are not subject to certain restrictions contained in the credit agreement. In connection with the Viper Offering, the Partnership, the General Partner and Viper Energy Partners LLC were designated as unrestricted subsidiaries under the credit agreement. As of December 31, 2016, the credit agreement was guaranteed by Diamondback, Diamondback E&P LLC and White Fang Energy LLC and will also be guaranteed by any future restricted subsidiaries of Diamondback. The credit agreement is also secured by substantially all of the assets of Diamondback O&G LLC, the Company and the other guarantors.

The second amendment increased the maximum amount of the credit facility to $2.0 billion, modified the dates and deadlines of the credit agreement relating to the scheduled borrowing base redeterminations based on the Company’s oil and natural gas reserves and other factors and added new provisions that allow the Company to elect a commitment amount that is less than its borrowing base as determined by the lenders. The borrowing base is scheduled to be re-determined semi-annually with effective dates of May 1st and November 1st. In addition, the Company may request up to three additional redeterminations of the borrowing base during any 12-month period. As of December 31, 2016, the borrowing base was set at $1.0 billion, of which the Company had elected a commitment amount of $500.0 million, and the Company had no outstanding borrowings.

The outstanding borrowings under the credit agreement bear interest at a rate elected by the Company that is equal to an alternative base rate (which is equal to the greatest of the prime rate, the Federal Funds effective rate plus 0.5% and 3-month LIBOR plus 1.0%) or LIBOR, in each case plus the applicable margin. The applicable margin ranges from 0.50% to 1.50% in the case of the alternative base rate and from 1.50% to 2.50% in the case of LIBOR, in each case depending on the amount of the loan outstanding in relation to the borrowing base. The Company is obligated to pay a quarterly commitment fee ranging from 0.375% to 0.500% per year on the unused portion of the borrowing base, which fee is also dependent on the amount of the loan outstanding in relation to the borrowing base. Loan principal may be optionally repaid from time to time without

F-21

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

premium or penalty (other than customary LIBOR breakage), and is required to be repaid (a) to the extent that the loan amount exceeds the borrowing base, whether due to a borrowing base redetermination or otherwise (in some cases subject to a cure period), (b) in an amount equal to the net cash proceeds from the sale of property when a borrowing base deficiency or event of default exists under the credit agreement and (c) at the maturity date of November 1, 2018.

The credit agreement contains various affirmative, negative and financial maintenance covenants. These covenants, among other things, limit additional indebtedness, additional liens, sales of assets, mergers and consolidations, dividends and distributions, transactions with affiliates and entering into certain swap agreements and require the maintenance of the financial ratios described below.

Financial Covenant	Required Ratio
Ratio of total debt to EBITDAX	Not greater than 4.0 to 1.0
Ratio of current assets to liabilities, as defined in the credit agreement	Not less than 1.0 to 1.0

The covenant prohibiting additional indebtedness, as amended in December 2016, allows for the issuance of unsecured debt of up to $1.0 billion in the form of senior or senior subordinated notes and, in connection with any such issuance, the reduction of the borrowing base by 25% of the stated principal amount of each such issuance. A borrowing base reduction in connection with such issuance may require a portion of the outstanding principal of the loan to be repaid. As of December 31, 2016, the Company had $1.0 billion of senior unsecured notes outstanding.

As of December 31, 2016 and 2015, the Company was in compliance with all financial covenants under its revolving credit facility, as then in effect. The lenders may accelerate all of the indebtedness under the Company’s revolving credit facility upon the occurrence and during the continuance of any event of default. The credit agreement contains customary events of default, including non-payment, breach of covenants, materially incorrect representations, cross-default, bankruptcy and change of control. There are no cure periods for events of default due to non-payment of principal and breaches of negative and financial covenants, but non-payment of interest and breaches of certain affirmative covenants are subject to customary cure periods.

The Partnership’s Credit Agreement

The Partnership entered into a $500.0 million secured revolving credit agreement, dated as of July 8, 2014, as amended, with Wells Fargo, as the administrative agent, sole book runner and lead arranger, and certain other lenders party thereto. The borrowing base is scheduled to be re-determined semi-annually with effective dates of April 1st and October 1st. In addition, the Partnership may request up to three additional redeterminations of the borrowing base during any 12-month period. As of December 31, 2016, the borrowing base was set at $275.0 million. The Partnership had $120.5 million outstanding under its credit agreement. Upon completion of Viper’s January 2017 underwritten public offering of common units, Viper repaid all of the outstanding borrowings under its revolving credit agreement and, as of February 13, 2017, had no borrowings outstanding under this facility.

The outstanding borrowings under the credit agreement bear interest at a rate elected by the Partnership that is equal to an alternative base rate (which is equal to the greatest of the prime rate, the Federal Funds effective rate plus 0.5% and 3-month LIBOR plus 1.0%) or LIBOR, in each case plus the applicable margin. The applicable margin ranges from 0.5% to 1.50% in the case of the alternative base rate and from 1.50% to 2.50% in the case of LIBOR, in each case depending on the amount of the loan outstanding in relation to the borrowing base. The Partnership is obligated to pay a quarterly commitment fee ranging from 0.375% to 0.500% per year on the unused portion of the borrowing base, which fee is also dependent on the amount of the loan outstanding in relation to the borrowing base. Loan principal may be optionally repaid from time to time without premium or penalty (other than customary LIBOR breakage), and is required to be repaid (a) to the extent that the loan amount exceeds the borrowing base, whether due to a borrowing base redetermination or otherwise (in some cases subject to a cure period) and (b) at the maturity date of July 8, 2019. The loan is secured by substantially all of the assets of the Partnership and its subsidiaries.

The credit agreement contains various affirmative, negative and financial maintenance covenants. These covenants, among other things, limit additional indebtedness, purchases of margin stock, additional liens, sales of assets, mergers and consolidations, dividends and distributions, transactions with affiliates and entering into certain swap agreements and require the maintenance of the financial ratios described below.

F-22

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Financial Covenant	Required Ratio
Ratio of total debt to EBITDAX	Not greater than 4.0 to 1.0
Ratio of current assets to liabilities, as defined in the credit agreement	Not less than 1.0 to 1.0

The covenant prohibiting additional indebtedness allows for the issuance of unsecured debt of up to $250.0 million in the form of senior unsecured notes and, in connection with any such issuance, the reduction of the borrowing base by 25% of the stated principal amount of each such issuance. A borrowing base reduction in connection with such issuance may require a portion of the outstanding principal of the loan to be repaid.

The lenders may accelerate all of the indebtedness under the Partnership’s credit agreement upon the occurrence and during the continuance of any event of default. The Partnership’s credit agreement contains customary events of default, including non-payment, breach of covenants, materially incorrect representations, cross-default, bankruptcy and change of control. There are no cure periods for events of default due to non-payment of principal and breaches of negative and financial covenants, but non-payment of interest and breaches of certain affirmative covenants are subject to customary cure periods.

Interest expense

The following amounts have been incurred and charged to interest expense for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Interest expense	$	39,642			$	40,221			$	36,669
Less capitalized interest	—				—				(5,275		)
Other fees and expenses	1,426				1,292				3,121
Total interest expense	$	41,068			$	41,513			$	34,515

9. CAPITAL STOCK AND EARNINGS PER SHARE

Diamondback completed the following equity offerings during the years ended December 31, 2016, 2015 and 2014:

In February 2014, the Company completed an underwritten public offering of 3,450,000 shares of common stock, which included 450,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriters. The stock was sold to the public at $62.67 per share and the Company received proceeds of approximately $208.4 million from the sale of these shares of common stock, net of offering expenses and underwriting discounts and commissions.

In July 2014, the Company completed an underwritten public offering of 5,750,000 shares of common stock, which included 750,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriters. The stock was sold to the public at $87.00 per share and the Company received proceeds of approximately $485.0 million from the sale of these shares of common stock, net of offering expenses and underwriting discounts and commissions.

In January 2015, the Company completed an underwritten public offering of 2,012,500 shares of common stock, which included 262,500 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriter. The stock was sold to the underwriter at $59.34 per share and the Company received proceeds of approximately $119.4 million from the sale of these shares of common stock, net of offering expenses and underwriting discounts and commissions.

In May 2015, the Company completed an underwritten public offering of 4,600,000 shares of common stock, which included 600,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriter. The stock was sold to the underwriter at $72.53 per share and the Company received proceeds of approximately $333.6 million from the sale of these shares of common stock, net of offering expenses and underwriting discounts and commissions.

F-23

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

In August 2015, the Company completed an underwritten public offering of 2,875,000 shares of common stock, which included 375,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriter. The stock was sold to the underwriter at $68.74 per share and the Company received proceeds of approximately $197.6 million from the sale of these shares of common stock, net of offering expenses and underwriting discounts and commissions.

In January 2016, the Company completed an underwritten public offering of 4,600,000 shares of common stock, which included 600,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriter. The stock was sold to the underwriter at $55.33 per share and the Company received proceeds of approximately $254.5 million from the sale of these shares of common stock, net of offering expenses and underwriting discounts and commissions.

In July 2016, the Company completed an underwritten public offering of 6,325,000 shares of common stock, which included 825,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriters. The stock was sold to the underwriters at $87.24 per share and the Company received proceeds of approximately $551.8 million from the sale of these shares of common stock, net of estimated offering expenses and underwriting discounts and commissions.

In December 2016, the Company completed an underwritten public offering of 12,075,000 shares of common stock, which included 1,575,000 shares of common stock issued pursuant to an option to purchase additional shares granted to the underwriters. The stock was sold to the underwriters at $95.3025 per share and the Company received proceeds of approximately $1,150.8 million from the sale of these shares of common stock, net of estimated offering expenses and underwriting discounts and commissions.

Earnings Per Share

The Company’s basic earnings per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share include the effect of potentially dilutive shares outstanding for the period. Additionally, for the diluted earnings per share computation, the per share earnings of the Partnership are included in the consolidated earnings per share computation based on the consolidated group’s holdings of the subsidiary.

A reconciliation of the components of basic and diluted earnings per common share is presented in the table below:

	2016
	Income				Shares			Per Share
	(in thousands, except per share amounts)
Basic:
Net loss attributable to common stock	$	(165,034	)		75,077			$	(2.20	)
Effect of Dilutive Securities:
Dilutive effect of potential common shares issuable	$	—			—
Diluted:
Net loss attributable to common stock	$	(165,034	)		75,077			$	(2.20	)

	2015
	Income				Shares			Per Share
	(in thousands, except per share amounts)
Basic:
Net loss attributable to common stock	$	(550,628	)		63,019			$	(8.74	)
Effect of Dilutive Securities:
Dilutive effect of potential common shares issuable	$	—			—
Diluted:
Net loss attributable to common stock	$	(550,628	)		63,019			$	(8.74	)

F-24

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

	2014
	Income				Shares			Per Share
	(in thousands, except per share amounts)
Basic:
Net income attributable to common stock	$	193,755			52,826			$	3.67
Effect of Dilutive Securities:
Dilutive effect of potential common shares issuable	$	—			471
Diluted:
Net income attributable to common stock	$	193,755			53,297			$	3.64

For the years ended December 31, 2016, 2015 and 2014, there were 243,654 shares, 100,924 shares and 624 shares, respectively, that were not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive for the periods presented but could potentially dilute basic earnings per share in future periods.

10. EQUITY-BASED COMPENSATION

On October 10, 2012, the Board of Directors approved the Diamondback Energy, Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which is intended to provide eligible employees with equity-based incentives. The 2012 Plan provides for the granting of incentive stock options, nonstatutory stock options, restricted awards (restricted stock and restricted stock units), performance awards, and stock appreciation rights, or any combination of the foregoing. A total of 2,500,000 shares of the Company’s common stock has been reserved for issuance pursuant to this plan.

The following table presents the effects of the equity and stock based compensation plans and related costs:

	2016				2015				2014
	(In thousands)
General and administrative expenses	$	26,453			$	18,529			$	9,816
Equity-based compensation capitalized pursuant to full cost method of accounting for oil and natural gas properties	7,079				6,043				4,437

On June 17, 2014, in connection with the Viper Offering, the Board of Directors of the General Partner adopted the Viper Energy Partners LP Long Term Incentive Plan (“Viper LTIP”), effective June 17, 2014, for employees, officers, consultants and directors of the General Partner and any of its affiliates, including Diamondback, who perform services for the Partnership. The Viper LTIP provides for the grant of unit options, unit appreciation rights, restricted units, unit awards, phantom units, distribution equivalent rights, cash awards, performance awards, other unit-based awards and substitute awards. A total of 9,144,000 common units has been reserved for issuance pursuant to the Viper LTIP. Common units that are cancelled, forfeited or withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The Viper LTIP is administered by the Board of Directors of the General Partner or a committee thereof.

Stock Options

In accordance with the 2012 Plan, the exercise price of stock options granted may not be less than the market value of the stock at the date of grant. The shares issued under the 2012 Plan will consist of new shares of Company stock. Unless otherwise specified in an agreement, options become exercisable ratably over a five-year period. However, as described above, options associated with the modification vest in four substantially equal annual installments and are exercisable for five years from the date of grant.

The fair value of the stock options on the date of grant is expensed over the applicable vesting period. The Company estimates the fair values of stock options granted using a Black-Scholes option valuation model, which requires the Company to make several assumptions. The Company does not have a long history of market prices, thus the expected volatility was determined using the historical volatility for a peer group of companies. The expected term of options granted was determined based on the contractual term of the awards and remaining vesting term at the modification date. The risk-free interest rate is based on the U.S. treasury yield curve rate for the expected term of the option at the date of grant. The Company does not

F-25

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

anticipate paying cash dividends; therefore, the expected dividend yield was assumed to be zero. All such amounts represent the weighted-average amounts for each year.

The following table presents the Company’s stock option activity under the Company’s 2012 Equity Incentive Plan (“2012 Plan”) for the year ended December 31, 2016.

				Weighted Average
				Exercise				Remaining		Intrinsic
	Options			Price				Term		Value
								(in years)		(in thousands)
Outstanding at December 31, 2015	39,500			$	21.66
Exercised	(23,750	)		$	20.96
Outstanding at December 31, 2016	15,750			$	22.72			1.03		$	1,234
Vested and Expected to vest at December 31, 2016	15,750			$	22.72			1.03		$	1,234
Exercisable at December 31, 2016	12,500			$	22.70			1.00		$	980

The aggregate intrinsic value of stock options that were exercised during the year ended December 31, 2016, 2015 and 2014 was $1.3 million, $15.7 million and $22.0 million, respectively. As of December 31, 2016, the unrecognized compensation cost related to unvested stock options was less than $0.1 million. Such cost is expected to be recognized over a weighted-average period of 0.1 years.

Restricted Stock Units

Under the 2012 Plan, approved by the Board of Directors, the Company is authorized to issue restricted stock and restricted stock units to eligible employees. The Company estimates the fair values of restricted stock awards and units as the closing price of the Company’s common stock on the grant date of the award, which is expensed over the applicable vesting period.

The following table presents the Company’s restricted stock units activity under the 2012 Plan during the year ended December 31, 2016.

	Restricted Stock Awards & Units			Weighted Average Grant-Date Fair Value
Unvested at December 31, 2015	159,759			$	64.66
Granted	228,020			$	68.79
Vested	(171,850	)		$	63.15
Forfeited	(9,925	)		$	68.13
Unvested at December 31, 2016	206,004			$	70.33

The aggregate fair value of restricted stock units that vested during the year ended December 31, 2016, 2015 and 2014 was $12.5 million, $10.1 million and $8.2 million, respectively. As of December 31, 2016, the Company’s unrecognized compensation cost related to unvested restricted stock awards and units was $8.2 million. Such cost is expected to be recognized over a weighted-average period of 1.5 years.

Performance-Based Restricted Stock Units

To provide long-term incentives for the executive officers to deliver competitive returns to the Company’s stockholders, the Company has granted performance-based restricted stock units to eligible employees. The ultimate number of shares awarded from these conditional restricted stock units is based upon measurement of total stockholder return of the Company’s common stock (“TSR”) as compared to a designated peer group during a three-year performance period.

In February 2014, eligible employees received performance restricted stock unit awards totaling 79,150 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January

F-26

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

1, 2013 to December 31, 2015 and vested at December 31, 2015, subject to certification by the compensation committee that the performance standards were satisfied.

In February 2015, eligible employees received performance restricted stock unit awards totaling 90,249 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2014 to December 31, 2016 and cliff vested at December 31, 2016.

In February 2016, eligible employees received performance restricted stock unit awards totaling 174,325 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2016 to December 31, 2017 and cliff vest at December 31, 2017. Eligible employees received additional performance restricted stock unit awards totaling 87,163 units from which a minimum of 0% and a maximum of 200% units could be awarded. The awards have a performance period of January 1, 2016 to December 31, 2018 and cliff vest at December 31, 2018.

The fair value of each performance restricted stock unit is estimated at the date of grant using a Monte Carlo simulation, which results in an expected percentage of units to be earned during the performance period. The following table presents a summary of the grant-date fair values of performance restricted stock units granted and the related assumptions.

	2016
	Two-Year Performance Period				Three-Year Performance Period				2015				2014
Grant-date fair value	$	103.41			$	102.35			$	137.14			$	125.63
Risk-free rate	0.86		%		1.10		%		0.49		%		0.30		%
Company volatility	41.91		%		42.16		%		43.36		%		39.60		%

The following table presents the Company’s performance restricted stock units activity under the 2012 Plan for the year ended December 31, 2016.

	Performance Restricted Stock Units			Weighted Average Grant-Date Fair Value
Unvested at December 31, 2015	90,249			$	137.14
Granted	261,488			$	103.06
Vested	(83,374	)		$	137.14
Forfeited	(15,892	)		$	117.80
Unvested at December 31, 2016(1)	252,471			$	103.06

(1)	A maximum of 504,942 units could be awarded based upon the Company’s final TSR ranking.

As of December 31, 2016, the Company’s unrecognized compensation cost related to unvested performance based restricted stock awards and units was $14.7 million. Such cost is expected to be recognized over a weighted-average period of 1.4 years.

Partnership Unit Options

In accordance with the Viper LTIP, the exercise price of unit options granted may not be less than the market value of the common units at the date of grant. The units issued under the Viper LTIP will consist of new common units of the Partnership. On June 17, 2014, the Board of Directors of the General Partner granted 2,500,000 unit options to the executive officers of the General Partner. The unit options vest approximately 33% ratably on each of the first three anniversaries of the date of grant or earlier upon a change of control (as defined in the Viper LTIP). All outstanding unit options were amended effective November 29, 2016 to provide that vested unit options will become exercisable upon the earlier to occur of (i) the “Exercise Window Period” beginning on the third anniversary of the date of grant and ending on December 31, 2017, or (ii) the “Change of Control Exercise Period” beginning ten days before and ending on the date a change of control occurs (the earlier occurring of such events, the “Exercise Period”). At any time within the Exercise Period, if a participant attempts to exercise a vested unit option and the fair market value per unit as of such date is less than the exercise price per option unit, the vested unit option will not be exercisable. At the end of the Exercise Period, any vested unit option that is not exercisable or that has not been exercised will automatically terminate and become null and void.

F-27

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The fair value of the unit options on the date of grant is expensed over the applicable vesting period. The Partnership estimates the fair values of unit options granted using a Black-Scholes option valuation model, which requires the Partnership to make several assumptions. At the time of grant the Partnership did not have a history of market prices, thus the expected volatility was determined using the historical volatility for a peer group of companies. The expected term of options granted was determined based on the contractual term of the awards. The risk-free interest rate is based on the U.S. treasury yield curve rate for the expected term of the unit option at the date of grant. The expected dividend yield was based upon projected performance of the Partnership.

	2014
Grant-date fair value	$	4.24
Expected volatility	36.0		%
Expected dividend yield	5.9		%
Expected term (in years)	3.0
Risk-free rate	0.99		%

The following table presents the unit option activity under the Viper LTIP for the year ended December 31, 2016.

				Weighted Average
	Unit Options			Exercise Price				Remaining Term		Intrinsic Value
								(in years)		(in thousands)
Outstanding at December 31, 2015	2,500,000			$	26.00
Granted	7,600			$	18.49
Forfeited	(83,334	)		$	26.00
Outstanding at December 31, 2016	2,424,266			$	—			0.47		$	—
Vested and Expected to vest at December 31, 2016	2,424,266			$	—			0.47		$	—
Exercisable at December 31, 2016	—			$	—			0.00		$	—

As of December 31, 2016, the unrecognized compensation cost related to unvested unit options was $1.4 million. Such cost is expected to be recognized over a weighted-average period of 0.5 years.

Phantom Units

Under the Viper LTIP, the Board of Directors of the General Partner is authorized to issue phantom units to eligible employees. The Partnership estimates the fair value of phantom units as the closing price of the Partnership’s common units on the grant date of the award, which is expensed over the applicable vesting period. Upon vesting the phantom units entitle the recipient one common unit of the Partnership for each phantom unit.

The following table presents the phantom unit activity under the Viper LTIP for the year ended December 31, 2016.

	Phantom Units			Weighted Average Grant-Date Fair Value
Unvested at December 31, 2015	25,348			$	16.89
Granted	21,696			$	16.57
Vested	(24,350	)		$	17.27
Forfeited	(1,646	)		$	15.48
Unvested at December 31, 2016	21,048			$	16.23

The aggregate fair value of phantom units that vested during the year ended December 31, 2016 was $0.4 million. As of December 31, 2016, the unrecognized compensation cost related to unvested phantom units was $0.3 million. Such cost is expected to be recognized over a weighted-average period of 1.8 years.

F-28

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

11. RELATED PARTY TRANSACTIONS

Immediately upon the completion of the Company’s initial public offering on October 17, 2012, Wexford beneficially owned approximately 44% of the Company’s outstanding common stock. As of December 31, 2016, Wexford beneficially owned less than 1% of the Company’s outstanding common stock. The Chairman of the Board of Directors of each of the Company and the General Partner was a partner at Wexford until his retirement from Wexford effective December 31, 2016. Another partner at Wexford serves a member of the Board of Directors of the General Partner.

The following table summarizes amounts included in the consolidated statements of operations attributable to related party transactions for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Revenues:
Natural gas sales	$	—			$	2,640			$	9,366
Natural gas liquid sales	—				2,544				15,038
Total related party revenues	$	—			$	5,184			$	24,404
Costs and expenses:
Lease operating expenses	$	3,298			$	221			$	218
Production and ad valorem taxes	—				153				1,478
Gathering and transportation	—				969				2,670
General and administrative expenses	2,198				2,328				1,345
Total related party costs and expenses	$	5,496			$	3,671			$	5,711
Other Income:
Other income	$	170			$	161			$	121
Total other related party income	$	170			$	161			$	121

The following table summarizes amounts paid to related parties during the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Wexford:
Advisory services(1)	$	500			$	500			$	8,000
Advisory services - The Partnership	—				500				268
Total amounts paid to Wexford	$	500			$	1,000			$	8,268
Wexford related entities:
Bison Drilling and Field Services LLC	$	—			$	32			$	3,544
Caliber	—				—				188
Fasken	1,490				1,018				435
Panther Drilling Systems LLC	—				—				305
WT Commercial Portfolio, LLC	164				163				84
Total amounts paid to Wexford related entities	$	1,654			$	1,213			$	4,556
The Partnership
Lease Bonus	$	309			$	—			$	—
Total amounts paid to related parties	$	2,463			$	2,213			$	12,824

F-29

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

(1)	For the year ended December 31, 2014, the total amount of $8.3 million was paid by cash payments of $4.3 million and the issuance to Wexford of 63,786 shares of the Company’s common stock.

The following table summarizes amounts received from related parties during the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Wexford related entities:
Bison Drilling and Field Services LLC	$	182			$	161			$	121
Coronado Midstream LLC(1)	$	—			$	4,062			$	20,300
Total amounts received from Wexford related entities	$	182			$	4,223			$	20,421

(1)	As of March 2015, Coronado Midstream LLC is no longer a related party.

Administrative Services

An entity then under common management with the Company provided technical, administrative and payroll services to the Company under a shared services agreement which began March 1, 2008. The initial term of this shared service agreement was two years. Since the expiration of such two-year period on March 1, 2010, the agreement, by its terms continued on a month-to-month basis. Effective August 31, 2014, this agreement was mutually terminated. For the year ended December 31, 2014, the Company incurred total costs of less than $0.1 million. Costs incurred unrelated to drilling activities are expensed and costs incurred in the acquisition, exploration and development of proved oil and natural gas properties have been capitalized.

Effective January 1, 2012, the Company entered into an additional shared services agreement with this entity. Under this agreement, the Company provided this entity and, at its request, certain affiliates, with consulting, technical and administrative services. The initial term of the additional shared services agreement was two years. Thereafter, the agreement continued on a month-to-month basis subject to the right of either party to terminate the agreement upon 30 days, prior written notice. Effective August 31, 2014, this agreement was mutually terminated. Costs that are attributable to and billed to other affiliates are reported as other income-related party. For the year ended December 31, 2014, the affiliate reimbursed the Company $0.1 million for services under the shared services agreement.

Advisory Services Agreement - The Company

The Company entered into an advisory services agreement (the “Advisory Services Agreement”) with Wexford, dated as of October 11, 2012, under which Wexford provides the Company with general financial and strategic advisory services related to the business in return for an annual fee of $0.5 million, plus reasonable out-of-pocket expenses. The Advisory Services Agreement had an initial term of two years commencing on October 18, 2012, and continues for additional one-year periods unless terminated in writing by either party at least ten days prior to the expiration of the then current term. It may be terminated at any time by either party upon 30 days prior written notice. In the event the Company terminates such agreement, it is obligated to pay all amounts due through the remaining term. In addition, the Company agreed to pay Wexford to-be-negotiated market-based fees approved by the Company’s independent directors for such services as may be provided by Wexford at the Company’s request in connection with acquisitions and divestitures, financings or other transactions in which the Company may be involved. The services provided by Wexford under the Advisory Services Agreement do not extend to the Company’s day-to-day business or operations. The Company has agreed to indemnify Wexford and its affiliates from any and all losses arising out of or in connection with the Advisory Services Agreement except for losses resulting from Wexford’s or its affiliates’ gross negligence or willful misconduct.

Advisory Services Agreement - The Partnership

In connection with the closing of the Viper Offering, the Partnership and the General Partner entered into an advisory services agreement (the “Viper Advisory Services Agreement”) with Wexford, dated as of June 23, 2014, under which Wexford provides the Partnership and the General Partner with general financial and strategic advisory services related to the business in return for an annual fee of $0.5 million, plus reasonable out-of-pocket expenses. The Viper Advisory Services Agreement had an initial term of two years commencing on June 23, 2014, and will continue for additional one-year periods unless terminated

F-30

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

in writing by either party at least ten days prior to the expiration of the then current term. It may be terminated at any time by either party upon 30 days prior written notice. In the event the Partnership or the General Partner terminates such agreement, the Partnership is obligated to pay all amounts due through the remaining term. In addition, the Partnership and the General Partner have agreed to pay Wexford to-be-negotiated market-based fees approved by the conflict committee of the board of directors of the General Partner for such services as may be provided by Wexford at the Partnership’s or the General Partner’s request in connection with acquisitions and divestitures, financings or other transactions in which we may be involved. The services provided by Wexford under the Viper Advisory Services Agreement do not extend to the Partnership or the General Partner’s day-to-day business or operations. The Partnership and General Partner have agreed to indemnify Wexford and its affiliates from any and all losses arising out of or in connection with the Viper Advisory Services Agreement except for losses resulting from Wexford’s or its affiliates’ gross negligence or willful misconduct.

Drilling Services

Bison Drilling and Field Services LLC (“Bison”), an entity controlled by Wexford, has performed drilling and field services for the Company under master drilling and field service agreements. Under the Company’s most recent master drilling agreement with Bison, effective as of January 1, 2013, Bison committed to accept orders from the Company for the use of at least two of its rigs. As of December 31, 2016, 2015 and 2014, the Company was not utilizing any Bison rigs. This master drilling agreement is terminable by either party on 30 days’ prior written notice, although neither party will be relieved of its respective obligations arising from a drilling contract being performed prior to the termination of the master drilling agreement.

Effective September 9, 2013, the Company entered into a master service agreement with Panther Drilling Systems LLC, under which Panther Drilling Systems LLC provides directional drilling and other services. This master service agreement is terminable by either party on 30 days’ prior written notice, although neither party will be relieved of its respective obligations arising from work performed prior to the termination of the master service agreement. In the third quarter 2013, the Company began using Panther Drilling Systems LLC’s directional drilling services. For the years ended December 31, 2016 and 2015, Panther Drilling Systems LLC did not perform any services for the Company.

Coronado Midstream

The Company is party to a gas purchase agreement, dated May 1, 2009, as amended, with Coronado Midstream LLC, formerly known as MidMar Gas LLC, an entity that was affiliated with Wexford, that owns a gas gathering system and processing plant in the Permian Basin. Under this agreement, Coronado Midstream LLC is obligated to purchase from the Company, and the Company is obligated to sell to Coronado Midstream LLC, all of the gas conforming to certain quality specifications produced from certain of the Company’s Permian Basin acreage. An entity controlled by Wexford had owned approximately 28% equity interest in Coronado Midstream LLC until Coronado Midstream LLC was sold in March 2015. Coronado Midstream LLC is no longer a related party and any revenues, production and ad valorem taxes and gathering and transportation expense after March 2015 are not classified as those attributable to a related party.

Midland Leases

Effective May 15, 2011, the Company occupied corporate office space in Midland, Texas under a lease with an initial term of five years. On November 10, 2014, the lease was amended to extend the term of the lease for an additional 10-year period and to increase the monthly base rent to $94,000 beginning in June 2016, with an increase of approximately 2% annually. The office space is owned by Fasken, which is an entity controlled by an affiliate of Wexford.

The following table contains amendments made to lease additional office space in the Midland corporate office during the years ended December 31, 2016, 2015 and 2014:

Date of Amendments	Rent for Additional Space	Approx. Annual Increase of Monthly Base Rent
2nd quarter 2014	$27,000	N/A
4th quarter 2014	$53,000	4%
April 2015	$23,000	N/A
June 2015	$22,000	2%

F-31

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Field Office Lease

The Company leased field office space in Midland, Texas from an unrelated third party from March 1, 2011. On March 1, 2014, the building was purchased by WT Commercial Portfolio, LLC, which is controlled by an affiliate of Wexford. The term of the lease expires on February 28, 2018. The monthly base rent is $11,000 which will increase 3% annually on March 1 of each year during the remainder of the lease term. During the third quarter of 2014, the Company entered into a sublease with Bison, in which Bison leased the field office space on the same terms as the Company’s lease for the remainder of the lease term.

Oklahoma City Lease

Effective January 1, 2012, the Company occupied corporate office space in Oklahoma City, Oklahoma under a lease with a 67 month term. The office space is owned by Caliber, which is controlled by an affiliate of Wexford. Effective April 1, 2013, the Company amended this lease to increase the size of the leased premises, at which time the monthly base rent increased to $19,000 for the remainder of the lease term. The Company was also responsible for paying a portion of specified costs, fees and expenses associated with the operation of the premises. Effective September 23, 2014, this lease agreement was mutually terminated.

The Partnership - Lease Bonus

During the year ended December 31, 2016, the Company paid the Partnership $0.3 million in lease bonus payments to extend the term of six leases, reflecting an average bonus of $1,371 per acre.

Secondary Offering Costs

On November 17, 2014, Gulfport Energy Corporation (“Gulfport”) and certain entities controlled by Wexford completed an underwritten secondary public offering of 2,000,000 shares of the Company’s common stock and, on November 13, 2014, the underwriters purchased an additional 300,000 shares of the Company’s common stock from these selling stockholders pursuant to an option to purchase such additional shares granted to the underwriters. The shares were sold to the underwriters at $64.54 per share and the selling stockholders received all proceeds from this offering after deducting the underwriting discount. The Company incurred costs of less than $0.1 million related to this secondary public offering.

On September 23, 2014, Gulfport and certain entities controlled by Wexford completed an underwritten secondary public offering of 2,500,000 shares of the Company’s common stock. The shares were sold to the underwriters at $75.44 per share and the selling stockholders received all proceeds from this offering after deducting the underwriting discount. The Company incurred costs of $0.1 million related to this secondary public offering.

On June 27, 2014, Gulfport and certain entities controlled by Wexford completed an underwritten secondary public offering of 2,000,000 shares of the Company’s common stock. The shares were sold to the public at $90.04 per share and the selling stockholders received all proceeds from this offering after deducting the underwriting discount. The Company incurred costs of approximately $0.1 million related to this secondary public offering.

12. 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.

F-32

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The components of the provision for income taxes for the years ended December 31, 2016, 2015 and 2014 are as follows:

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Current income tax provision (benefit):
Federal	$	—			$	(33	)		$	—
State	192				268				—
Total current income tax provision	192				235				—
Deferred income tax provision (benefit):
Federal	(579		)		(198,729		)		106,107
State	579				(2,816		)		2,878
Total deferred income tax provision (benefit)	—				(201,545		)		108,985
Total provision for (benefit from) income taxes	$	192			$	(201,310	)		$	108,985

A reconciliation of the statutory federal income tax amount to the recorded expense is as follows:

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Income tax expense (benefit) at the federal statutory rate (35%)	$	(57,694	)		$	(263,179	)		$	105,959
Income tax benefit relating to change in tax rate	—				(1,145		)		—
State income tax expense (benefit), net of federal tax effect	770				(2,548		)		2,878
Non-deductible expenses and other	3,780				4,506				148
Change in valuation allowance	53,336				61,056				—
Provision for (benefit from) income taxes	$	192			$	(201,310	)		$	108,985

F-33

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The components of the Company’s deferred tax assets and liabilities as of December 31, 2016 and 2015 are as follows:

	December 31,
	2016				2015
	(In thousands)
Current:
Deferred tax assets
Derivative instruments	$	7,771			$	—
Other	3,518				2,658
Current deferred tax assets	11,289				2,658
Valuation allowance	(11,289		)		(1,018		)
Current deferred tax assets, net of valuation allowance	—				1,640
Deferred tax liabilities
Derivative instruments	—				1,640
Total current deferred tax liabilities	—				1,640
Net current deferred tax assets	—				—
Noncurrent:
Deferred tax assets
Net operating loss carryforwards (subject to 20 year expiration)	139,065				82,635
Stock based compensation	6,234				3,873
Other	—				4,533
Noncurrent deferred tax assets	145,299				91,041
Valuation allowance	(103,112		)		(60,038		)
Noncurrent deferred tax assets, net of valuation allowance	42,187				31,003
Deferred tax liabilities
Oil and natural gas properties and equipment	42,187				31,003
Total noncurrent deferred tax liabilities	42,187				31,003
Net noncurrent deferred tax liabilities	—				—
Net deferred tax liabilities	$	—			$	—

The Company incurred a tax net operating loss ("NOL") in the current year due principally to the ability to expense certain intangible drilling and development costs under current law. There is no tax refund available to the Company, nor is there any current income tax payable. In light of the impairment of oil and gas properties, Management has recorded a $114.4 million valuation against the Company's federal NOLs. The valuation reduces the Company’s deferred assets to a zero value, as management does not believe that it is more-likely-than-not that this portion of the Company's NOLs are realizable. Management believes that the balance of the Company's NOLs are realizable only to the extent of future taxable income primarily related to the excess of book carrying value of properties over their respective tax bases. No other sources of future taxable income are considered in this judgment.

The Company's U.S. federal NOLs were incurred in the tax years 2016 and 2015, and will generally be available for use through the tax years 2036 and 2035, respectively. The State of Texas currently has no NOL carryover provision. The Company believes that Section 382 of the Internal Revenue Code of 1986, as amended, which relates to tax attribute limitations upon the 50% or greater change of ownership of an entity during any three-year look back period, will not have an adverse effect on future NOL usage.

F-34

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

13. DERIVATIVES

All derivative financial instruments are recorded at fair value in the accompanying balance sheet. The Company has not designated its derivative instruments as hedges for accounting purposes and, as a result, marks its derivative instruments to fair value and recognizes the cash and non-cash changes in fair value in the consolidated statements of operations under the caption “Gain (loss) on derivative instruments, net.”

The Company has used fixed price swap contracts, fixed price basis swap contracts and costless collars with corresponding put and call options to reduce price volatility associated with certain of its oil and natural gas sales. With respect to the Company’s fixed price swap and fixed price basis contracts, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is less than the swap price, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is greater than the swap price. The Company has fixed price basis swaps for the spread between the WTI Midland price and the WTI Cushing price. Under the Company’s costless collar contracts, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is less than the put option price, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is greater than the call option price. If the settlement price is between the put and the call price, there is no payment required. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate pricing and with natural gas derivative settlements based on the New York Mercantile Exchange Henry Hub pricing.

By using derivative instruments to economically hedge exposure to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are participants in the secured second amended and restated credit agreement, which is secured by substantially all of the assets of the guarantor subsidiaries; therefore, the Company is not required to post any collateral. The Company does not require collateral from its counterparties. The Company has entered into derivative instruments only with counterparties that are also lenders in our credit facility and have been deemed an acceptable credit risk.

As of December 31, 2016, the Company had the following outstanding derivative contracts. When aggregating multiple contracts, the weighted average contract price is disclosed.

	2017					2018
	Volume (Bbls/MMBtu)		Fixed Price Swap (per Bbl/MMBtu)			Volume (Bbls/MMBtu)		Fixed Price Swap (per Bbl/MMBtu)
Oil Swaps	2,920,000		51.79			0		—
Oil Basis Swaps	8,760,000		(0.72	)		5,475,000		(0.88	)
Natural Gas Swaps	7,300,000		3.19			0		—

	Floor						Ceiling
	Volume (Bbls)		Fixed Price (per Bbl)				Volume (Bbls)		Fixed Price (per Bbl)
January 2017 - December 2017
Costless Collars	4,374,000		$	46.30			2,187,000		$	55.42

Balance sheet offsetting of derivative assets and liabilities

The fair value of swaps is generally determined using established index prices and other sources which are based upon, among other things, futures prices and time to maturity. These fair values are recorded by netting asset and liability positions that are with the same counterparty and are subject to contractual terms which provide for net settlement.

F-35

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The following tables present the gross amounts of recognized derivative assets and liabilities, the amounts offset under master netting arrangements with counterparties and the resulting net amounts presented in the Company’s consolidated balance sheets as of December 31, 2016 and 2015.

	December 31,
	2016				2015
	(in thousands)
Gross amounts of assets presented in the Consolidated Balance Sheet	$	709			$	4,623
Net amounts of assets presented in the Consolidated Balance Sheet	709				4,623
Gross amounts of liabilities presented in the Consolidated Balance Sheet	22,608				—
Net amounts of liabilities presented in the Consolidated Balance Sheet	$	22,608			$	—

The net amounts are classified as current or noncurrent based on their anticipated settlement dates. The net fair value of the Company’s derivative assets and liabilities and their locations on the consolidated balance sheet are as follows:

	December 31,
	2016				2015
	(in thousands)
Current Assets: Derivative instruments	$	—			$	4,623
Noncurrent Assets: Derivative instruments	709				—
Total Assets	$	709			$	4,623
Current Liabilities: Derivative instruments	$	22,608			$	—
Noncurrent Liabilities: Derivative instruments	—				—
Total Liabilities	$	22,608			$	—

None of the Company’s derivatives have been designated as hedges. As such, all changes in fair value are immediately recognized in earnings. The following table summarizes the gains and losses on derivative instruments included in the consolidated statements of operations:

	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Change in fair value of open non-hedge derivative instruments	$	(26,522	)		$	(112,918	)		$	117,109
Gain on settlement of non-hedge derivative instruments	1,177				144,869				10,430
Gain (loss) on derivative instruments	$	(25,345	)		$	31,951			$	127,539

14. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. The Company uses appropriate valuation techniques based on available inputs to measure the fair values of its assets and liabilities.

Level 1 - Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date.

F-36

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 - Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are reported at fair value on a recurring basis, including the Company’s derivative instruments. The fair values of the Company’s fixed price crude oil swaps are measured internally using established commodity futures price strips for the underlying commodity provided by a reputable third party, the contracted notional volumes, and time to maturity. These valuations are Level 2 inputs.

The following table provides fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015.

	December 31,
	2016				2015
	(in thousands)
Fixed price swaps:
Quoted prices in active markets level 1	$	—			$	—
Significant other observable inputs level 2	23,317				4,623
Significant unobservable inputs level 3	—				—
Total	$	23,317			$	4,623

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table provides the fair value of financial instruments that are not recorded at fair value in the consolidated balance sheets.

	December 31, 2016								December 31, 2015
	Carrying								Carrying
	Amount				Fair Value				Amount				Fair Value
	(in thousands)
Debt:
Revolving credit facility	$	—			$	—			$	11,000			$	11,000
7.625% Senior Notes due 2021	—				—				450,000				450,000
4.750% Senior Notes due 2024	500,000				491,250				—				—
5.375% Senior Notes due 2025	500,000				502,850				—				—
Partnership revolving credit facility	120,500				120,500				34,500				34,500

The fair value of the revolving credit facility approximates its carrying value based on borrowing rates available to the Company for bank loans with similar terms and maturities and is classified as Level 2 in the fair value hierarchy. The fair value of the Senior Notes was determined using the December 31, 2016 quoted market price, a Level 1 classification in the fair value hierarchy. The fair value of the Partnership’s revolving credit facility approximates its carrying value based on borrowing rates available to us for bank loans with similar terms and maturities and is classified as Level 2 in the fair value hierarchy.

F-37

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

15. COMMITMENTS AND CONTINGENCIES

The Company could be subject to various possible loss contingencies which arise primarily from interpretation of federal and state laws and regulations affecting the natural gas and crude oil industry. Such contingencies include differing interpretations as to the prices at which natural gas and crude oil sales may be made, the prices at which royalty owners may be paid for production from their leases, environmental issues and other matters. Management believes it has complied with the various laws and regulations, administrative rulings and interpretations.

Lease Commitments

The following is a schedule of minimum future lease payments with commitments that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2016:

Year Ending December 31,	Drilling Rig Commitments				Office and Equipment Leases
	(in thousands)
2017	$	27,817			$	2,468
2018	21,699				2,416
2019	6,790				2,294
2020	—				2,126
2021	—				2,168
Thereafter	—				10,070
Total	$	56,306			$	21,542

The Company leases office space in Midland, Texas from related parties and office space in Oklahoma City, OK from an unrelated third party. Refer to Note 11—Related Party Transactions for further information on the related party lease agreements. The following table presents rent expense for the years ended December 31, 2016, 2015 and 2014.

	Year ended December 31,
	2016				2015				2014
	(in thousands)
Rent Expense	$	1,961			$	1,449			$	852

Drilling contracts

As of December 31, 2016, the Company had entered into drilling rig contracts with various third parties in the ordinary course of business to ensure rig availability to complete the Company’s drilling projects. These commitments are not recorded in the accompanying consolidated balance sheets. Future commitments as of December 31, 2016 total approximately $56.3 million.

Oil production purchase agreement

On May 24, 2012, the Company entered into an oil purchase agreement with Shell Trading (US) Company, in which the Company is obligated to commence delivery of specified quantities of oil to Shell Trading (US) Company upon completion of the reversal of the Magellan Longhorn pipeline and its conversion for oil shipment, which occurred on October 1, 2013. The Company’s agreement with Shell Trading has an initial term of five years from the completion date. The Company’s maximum delivery obligation under this agreement is 8,000 gross barrels per day. The Company has a one-time right to elect to decrease the contract quantity by not more than 20% of the then-current quantity, which decreased contract quantity will be effective for the remainder of the term of the agreement. The Company will receive the price per barrel of oil based on the arithmetic average of the daily settlement price for “Light Sweet Crude Oil” Prompt Month future contracts reported by the NYMEX over the one-month period, as adjusted based on adjustment formulas specified in the agreement. If the Company fails to deliver the required quantities of oil under the agreement during any three-month period following the service commencement date, the Company has agreed to pay Shell Trading (US) Company a deficiency payment, which is calculated by multiplying (i) the volume of oil that the Company failed to deliver as required under the agreement during such period by (ii) Magellan’s Longhorn Spot tariff

F-38

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

rate in effect for transportation from Crane, Texas to the Houston Ship Channel for the period of time for which such deficiency volume is calculated. The agreement may be terminated by Shell Trading (US) Company in the event that Shell Trading (US) Company’s contract for transportation on the pipeline is terminated.

Defined contribution plan

The Company sponsors a 401(k) defined contribution plan for the benefit of substantially all employees at their date of hire. The plan allows eligible employees to contribute up to 100% of their annual compensation, not to exceed annual limits established by the federal government. The Company makes matching contributions of up to 6% of an employee’s compensation and may make additional discretionary contributions for eligible employees. Employer contributions vest in equal annual installments over a four year period. For the years ended December 31, 2016, 2015 and 2014 the Company paid $1.2 million, $1.4 million and $0.4 million, respectively, in contributions to the plan.

16. SUBSEQUENT EVENTS

Commodity Contracts

Subsequent to December 31, 2016, the Company entered into new fixed price swaps and costless collars with corresponding put and call options. The Company’s derivative contracts are based upon reported settlement prices on commodity exchanges, with crude oil derivative settlements based on New York Mercantile Exchange West Texas Intermediate pricing and with natural gas derivative settlements based on the New York Mercantile Exchange Henry Hub pricing.

The following tables present the derivative contracts entered into by the Company subsequent to December 31, 2016. When aggregating multiple contracts, the weighted average contract price is disclosed.

	Volume (Bbls/MMBtu)		Fixed Price Swap (per Bbl/MMBtu)
July 2017 - December 2017
Oil Swaps	552,000		$	55.83
January 2018 - March 2018
Oil Swaps	270,000		$	55.82
Natural Gas Swaps	1,350,000		$	3.60

	Floor							Ceiling
	Volume (Bbls)			Fixed Price (per Bbl)				Volume (Bbls)			Fixed Price (per Bbl)
July 2017 - December 2017
Costless Collars	1,104,000			$	47.00			552,000			$	57.32
January 2018 - March 2018
Costless Collars	540,000			$	47.00			270,000			$	56.34

The Partnership’s Equity Offering

On January 24, 2017, the Partnership completed an underwritten public offering of 9,775,000 common units, which included 1,275,000 common units issued pursuant to an option to purchase additional common units granted to the underwriters. Following the January 2017 public offering, the Company had an approximate 74% limited partner interest in the Partnership. The Partnership received net proceeds from this offering of approximately $147.6 million, after deducting underwriting discounts and commissions and estimated offering expenses, of which $120.5 million was used to repay the outstanding borrowings under its revolving credit agreement. The Partnership intends to use the balance of the net proceeds for general partnership purposes, which may include additional acquisitions.

F-39

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

17. GUARANTOR FINANCIAL STATEMENTS

As of December 31, 2016, Diamondback E&P LLC and Diamondback O&G LLC (the “Guarantor Subsidiaries”) are guarantors under the Indentures relating to the 2024 and 2025 Senior Notes. On June 23, 2014, in connection with the Viper Offering, the Company designated the Partnership, the General Partner and Viper Energy Partners LLC (the “Non-Guarantor Subsidiaries”) as unrestricted subsidiaries under the 2021 Indenture and, upon such designation, Viper Energy Partners LLC, which was a guarantor under the Indenture prior to such designation, was released as a guarantor under the 2021 Indenture. Viper Energy Partners LLC is a limited liability company formed on September 18, 2013 to own and acquire mineral and other oil and natural gas interests in properties in the Permian Basin in West Texas. In connection with the issuance of the 2024 Senior Notes and the 2025 Senior Notes, White Fang Energy LLC was designated as a Non-Guarantor Subsidiary. The following presents condensed consolidated financial information for the Company (which for purposes of this Note 17 is referred to as the “Parent”), the Guarantor Subsidiaries and the Non–Guarantor Subsidiaries on a consolidated basis. Elimination entries presented are necessary to combine the entities. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the Guarantor Subsidiaries operated as independent entities. The Company has not presented separate financial and narrative information for each of the Guarantor Subsidiaries because it believes such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the Guarantor Subsidiaries.

F-40

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Balance Sheet
December 31, 2016
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents	$	1,643,226			$	14,135			$	9,213			$	—			$	1,666,574
Restricted cash	—				—				500				—				500
Accounts receivable	—				109,782				10,043				—				119,825
Accounts receivable - related party	—				297				3,470				(3,470		)		297
Intercompany receivable	3,060,566				359,502				—				(3,420,068		)		—
Inventories	—				1,983				—				—				1,983
Other current assets	481				2,319				187				—				2,987
Total current assets	4,704,273				488,018				23,413				(3,423,538		)		1,792,166
Property and equipment:
Oil and natural gas properties, at cost, full cost method of accounting	—				4,400,002				760,818				(559		)		5,160,261
Pipeline and gas gathering assets	—				8,362				—				—				8,362
Other property and equipment	—				58,290				—				—				58,290
Accumulated depletion, depreciation, amortization and impairment	—				(1,695,701		)		(148,948		)		8,593				(1,836,056		)
Net property and equipment	—				2,770,953				611,870				8,034				3,390,857
Funds held in escrow	—				121,391				—				—				121,391
Derivative instruments	—				709				—				—				709
Investment in subsidiaries	(15,500		)		—				—				15,500				—
Other assets	—				9,291				35,266				—				44,557
Total assets	$	4,688,773			$	3,390,362			$	670,549			$	(3,400,004	)		$	5,349,680
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	30			$	45,838			$	1,780			$	—			$	47,648
Accounts payable-related party	1				—				—				—				1
Intercompany payable	—				3,423,538				—				(3,423,538		)		—
Other current liabilities	5,868				155,454				371				—				161,693
Total current liabilities	5,899				3,624,830				2,151				(3,423,538		)		209,342
Long-term debt	985,412				—				120,500				—				1,105,912
Asset retirement obligations	—				16,134				—				—				16,134
Total liabilities	991,311				3,640,964				122,651				(3,423,538		)		1,331,388
Commitments and contingencies
Stockholders’ equity	3,697,462				(250,602		)		547,898				(297,296		)		3,697,462
Non-controlling interest	—				—				—				320,830				320,830
Total equity	3,697,462				(250,602		)		547,898				23,534				4,018,292
Total liabilities and equity	$	4,688,773			$	3,390,362			$	670,549			$	(3,400,004	)		$	5,349,680

F-41

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Balance Sheet
December 31, 2015
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents	$	148			$	19,428			$	539			$	—			$	20,115
Restricted cash	—				—				500				—				500
Accounts receivable	—				67,942				9,369				2				77,313
Accounts receivable - related party	—				1,591				—				—				1,591
Intercompany receivable	2,246,846				205,915				—				(2,452,761		)		—
Inventories	—				1,728				—				—				1,728
Other current assets	450				6,572				476				—				7,498
Total current assets	2,247,444				303,176				10,884				(2,452,759		)		108,745
Property and equipment:
Oil and natural gas properties, at cost, full cost method of accounting	—				3,400,381				554,992				—				3,955,373
Pipeline and gas gathering assets	—				7,174				—				—				7,174
Other property and equipment	—				48,621				—				—				48,621
Accumulated depletion, depreciation, amortization and impairment	—				(1,347,296		)		(71,659		)		5,412				(1,413,543		)
Net property and equipment	—				2,108,880				483,333				5,412				2,597,625
Investment in subsidiaries	79,417				—				—				(79,417		)		—
Other assets	102				8,733				35,514				—				44,349
Total assets	$	2,326,963			$	2,420,789			$	529,731			$	(2,526,764	)		$	2,750,719
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	—			$	20,007			$	1			$	—			$	20,008
Accounts payable-related party	1				212				4				—				217
Intercompany payable	—				2,452,759				—				(2,452,759		)		—
Other current liabilities	8,683				112,431				82				—				121,196
Total current liabilities	8,684				2,585,409				87				(2,452,759		)		141,421
Long-term debt	442,307				11,000				34,500				—				487,807
Asset retirement obligations	—				12,518				—				—				12,518
Total liabilities	450,991				2,608,927				34,587				(2,452,759		)		641,746
Commitments and contingencies
Stockholders’ equity	1,875,972				(188,138		)		495,144				(307,006		)		1,875,972
Non-controlling interest	—				—				—				233,001				233,001
Total equity	1,875,972				(188,138		)		495,144				(74,005		)		2,108,973
Total liabilities and equity	$	2,326,963			$	2,420,789			$	529,731			$	(2,526,764	)		$	2,750,719

F-42

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Statement of Operations
Year Ended December 31, 2016
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues:
Oil sales	$	—			$	399,007			$	—			$	71,521			$	470,528
Natural gas sales	—				19,399				—				3,107				22,506
Natural gas liquid sales	—				29,864				—				4,209				34,073
Royalty income	—				—				78,837				(78,837		)		—
Lease bonus income	—				—				309				(309		)		—
Total revenues	—				448,270				79,146				(309		)		527,107
Costs and expenses:
Lease operating expenses	—				82,428				—				—				82,428
Production and ad valorem taxes	—				28,912				5,544				—				34,456
Gathering and transportation	—				11,189				415				2				11,606
Depreciation, depletion and amortization	—				151,376				29,820				(3,181		)		178,015
Impairment of oil and natural gas properties	—				198,067				47,469				—				245,536
General and administrative expenses	25,959				11,451				5,209				—				42,619
Asset retirement obligation accretion expense	—				1,064				—				—				1,064
Total costs and expenses	25,959				484,487				88,457				(3,179		)		595,724
Income (loss) from operations	(25,959		)		(36,217		)		(9,311		)		2,870				(68,617		)
Other income (expense)
Interest expense	(35,318		)		(2,911		)		(2,455		)		—				(40,684		)
Other income	437				2,010				867				(250		)		3,064
Loss on derivative instruments, net	—				(25,345		)		—				—				(25,345		)
Loss on extinguishment of debt	(33,134		)		—				—				—				(33,134		)
Total other expense, net	(68,015		)		(26,246		)		(1,588		)		(250		)		(96,099		)
Income (loss) before income taxes	(93,974		)		(62,463		)		(10,899		)		2,620				(164,716		)
Provision for income taxes	192				—				—				—				192
Net income (loss)	(94,166		)		(62,463		)		(10,899		)		2,620				(164,908		)
Net income attributable to non-controlling interest	—				—				—				126				126
Net income (loss) attributable to Diamondback Energy, Inc.	$	(94,166	)		$	(62,463	)		$	(10,899	)		$	2,494			$	(165,034	)

F-43

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Statement of Operations
Year Ended December 31, 2015
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues:
Oil sales	$	—			$	336,106			$	—			$	69,609			$	405,715
Natural gas sales	—				16,932				—				2,660				19,592
Natural gas liquid sales	—				18,836				—				2,590				21,426
Royalty income	—				—				74,859				(74,859		)		—
Total revenues	—				371,874				74,859				—				446,733
Costs and expenses:
Lease operating expenses	—				82,625				—				—				82,625
Production and ad valorem taxes	—				27,459				5,531				—				32,990
Gathering and transportation	—				5,832				259				—				6,091
Depreciation, depletion and amortization	—				182,395				35,436				(134		)		217,697
Impairment of oil and natural gas properties	—				814,798				3,423				(3,423		)		814,798
General and administrative expenses	17,077				9,056				5,835				—				31,968
Asset retirement obligation accretion expense	—				833				—				—				833
Total costs and expenses	17,077				1,122,998				50,484				(3,557		)		1,187,002
Income (loss) from operations	(17,077		)		(751,124		)		24,375				3,557				(740,269		)
Other income (expense)
Interest expense	(35,651		)		(4,749		)		(1,110		)		—				(41,510		)
Other income	1				(427		)		1,154				—				728
Gain on derivative instruments, net	—				31,951				—				—				31,951
Total other income (expense), net	(35,650		)		26,775				44				—				(8,831		)
Income (loss) before income taxes	(52,727		)		(724,349		)		24,419				3,557				(749,100		)
Benefit from income taxes	(201,310		)		—				—				—				(201,310		)
Net income (loss)	$	148,583			$	(724,349	)		$	24,419			$	3,557			$	(547,790	)
Net income attributable to non-controlling interest	—				—				—				2,838				2,838
Net income (loss) attributable to Diamondback Energy, Inc.	$	148,583			$	(724,349	)		$	24,419			$	719			$	(550,628	)

F-44

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Statement of Operations
Year Ended December 31, 2014
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues:
Oil sales	$	—			$	377,712			$	—			$	71,532			$	449,244
Natural gas sales	—				15,240				—				2,788				18,028
Natural gas liquid sales	—				24,545				—				3,901				28,446
Royalty income	—				—				77,767				(77,767		)		—
Total revenues	—				417,497				77,767				454				495,718
Costs and expenses:
Lease operating expenses	—				55,384				—				—				55,384
Production and ad valorem taxes	—				27,242				5,377				19				32,638
Gathering and transportation	—				3,294				—				(6		)		3,288
Depreciation, depletion and amortization	—				143,477				27,601				(1,073		)		170,005
General and administrative expenses	10,879				7,189				4,372				(1,174		)		21,266
Asset retirement obligation accretion expense	—				467				—				—				467
Total costs and expenses	10,879				237,053				37,350				(2,234		)		283,048
Income (loss) from operations	(10,879		)		180,444				40,417				2,688				212,670
Other income (expense)
Interest income - intercompany	10,755				—				—				(10,755		)		—
Interest expense	(30,281		)		(3,746		)		(11,242		)		10,755				(34,514		)
Other income	6				1,118				459				(906		)		677
Other expense	—				(1,416		)		—				—				(1,416		)
Gain on derivative instruments, net	—				127,539				—				—				127,539
Total other income (expense), net	(19,520		)		123,495				(10,783		)		(906		)		92,286
Income (loss) before income taxes	(30,399		)		303,939				29,634				1,782				304,956
Provision for income taxes	108,985				—				—				—				108,985
Net income (loss)	$	(139,384	)		$	303,939			$	29,634			$	1,782			$	195,971
Net income attributable to non-controlling interest	$	—			$	—			$	—			$	2,216			$	2,216
Net income (loss) attributable to Diamondback Energy, Inc.	$	(139,384	)		$	303,939			$	29,634			$	(434	)		$	193,755

F-45

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Statement of Cash Flows
Year Ended December 31, 2016
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net cash provided by (used in) operating activities	$	(39,894	)		$	303,347			$	68,627			$	—			$	332,080
Cash flows from investing activities:
Additions to oil and natural gas properties	—				(363,087		)		—				—				(363,087		)
Acquisition of leasehold interests	—				(611,280		)		—				—				(611,280		)
Acquisition of royalty interests	—				—				(205,721		)		—				(205,721		)
Purchase of other property and equipment	—				(9,891		)		—				—				(9,891		)
Proceeds from sale of assets	—				4,661				—				—				4,661
Funds held in escrow	—				(121,391		)		—				—				(121,391		)
Equity investments	—				(2,345		)		—				—				(2,345		)
Intercompany transfers	(796,053		)		796,053				—				—				—
Other investing activities	—				(1,188		)		—				—				(1,188		)
Net cash used in investing activities	(796,053		)		(308,468		)		(205,721		)		—				(1,310,242		)
Cash flows from financing activities:
Proceeds from borrowing on credit facility	—				—				164,000				—				164,000
Repayment on credit facility	—				(11,000		)		(78,000		)		—				(89,000		)
Proceeds from senior notes	1,000,000				—				—				—				1,000,000
Repayment of senior notes	(450,000		)		—				—				—				(450,000		)
Premium on extinguishment of debt	(26,561		)		—				—				—				(26,561		)
Debt issuance costs	(14,449		)		(172		)		(442		)		—				(15,063		)
Public offering costs	(636		)		—				(546		)		—				(1,182		)
Proceeds from public offerings	1,925,923				—				125,580				—				2,051,503
Distribution from subsidiary	55,250				—				—				(55,250		)		—
Exercise of stock options	498				—				—				—				498
Distribution to non-controlling interest	—				—				(64,824		)		55,250				(9,574		)
Intercompany transfers	(11,000		)		11,000				—				—				—
Net cash provided by (used in) financing activities	2,479,025				(172		)		145,768				—				2,624,621
Net increase in cash and cash equivalents	1,643,078				(5,293		)		8,674				—				1,646,459
Cash and cash equivalents at beginning of period	148				19,428				539				—				20,115
Cash and cash equivalents at end of period	$	1,643,226			$	14,135			$	9,213			$	—			$	1,666,574

F-46

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Statement of Cash Flows
Year Ended December 31, 2015
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net cash provided by (used in) operating activities	$	(37,597	)		$	390,266			$	63,832			$	—			$	416,501
Cash flows from investing activities:
Additions to oil and natural gas properties	—				(419,512		)		—				—				(419,512		)
Acquisition of leasehold interests	—				(437,455		)		—				—				(437,455		)
Acquisition of royalty interests	—				—				(43,907		)		—				(43,907		)
Purchase of other property and equipment	—				(1,213		)		—				—				(1,213		)
Proceeds from sale of assets	—				9,739				—				—				9,739
Equity investments	—				(2,702		)		—				—				(2,702		)
Intercompany transfers	(145,023		)		145,023				—				—				—
Net cash used in investing activities	(145,023		)		(706,120		)		(43,907		)		—				(895,050		)
Cash flows from financing activities:
Proceeds from borrowing on credit facility	—				390,501				34,500				—				425,001
Repayment on credit facility	—				(603,001		)		—				—				(603,001		)
Debt issuance costs	—				(85		)		(441		)		—				(526		)
Public offering costs	(586		)		—				—				—				(586		)
Proceeds from public offerings	650,688				—				—				—				650,688
Distribution from subsidiary	60,587				—				—				(60,587		)		—
Exercise of stock options	4,873				—				—				—				4,873
Distribution to non-controlling interest	—				—				(68,555		)		60,587				(7,968		)
Intercompany transfers	(532,800		)		532,800				—				—				—
Net cash provided by (used in) financing activities	182,762				320,215				(34,496		)		—				468,481
Net increase (decrease) in cash and cash equivalents	142				4,361				(14,571		)		—				(10,068		)
Cash and cash equivalents at beginning of period	6				15,067				15,110				—				30,183
Cash and cash equivalents at end of period	$	148			$	19,428			$	539			$	—			$	20,115

F-47

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Condensed Consolidated Statement of Cash Flows
Year Ended December 31, 2014
(In thousands)
									Non–
					Guarantor				Guarantor
	Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net cash provided by operating activities	$	(8,862	)		$	313,438			$	51,813			$	—			$	356,389
Cash flows from investing activities:
Additions to oil and natural gas properties	—				(493,063		)		(5,276		)		—				(498,339		)
Acquisition of leasehold interests	—				(845,826		)		—				—				(845,826		)
Acquisition of royalty interests	—				—				(57,689		)		—				(57,689		)
Purchase of other property and equipment	—				(44,213		)		—				—				(44,213		)
Equity investments	—				(627		)		(33,850		)		—				(34,477		)
Intercompany transfers	(642,978		)		642,978				—				—				—
Other investing activities	—				(1,453		)		—				—				(1,453		)
Net cash used in investing activities	(642,978		)		(742,204		)		(96,815		)		—				(1,481,997		)
Cash flows from financing activities:
Proceeds from borrowing on credit facility	—				431,400				78,000				—				509,400
Repayment on credit facility	—				(217,900		)		(78,000		)		—				(295,900		)
Proceeds from public offerings	693,886				—				234,546				—				928,432
Distribution to parent	—				—				(148,760		)		148,760				—
Distribution from subsidiary	166,372				—				—				(166,372		)		—
Distribution to non-controlling interest	—				—				(19,926		)		17,612				(2,314		)
Intercompany transfers	(217,900		)		217,900				—				—				—
Other financing activities	8,962				(1,834		)		(6,510		)		—				618
Net cash provided by financing activities	651,320				429,566				59,350				—				1,140,236
Net increase (decrease) in cash and cash equivalents	(520		)		800				14,348				—				14,628
Cash and cash equivalents at beginning of period	526				14,267				762				—				15,555
Cash and cash equivalents at end of period	$	6			$	15,067			$	15,110			$	—			$	30,183

F-48

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

18. SUPPLEMENTAL INFORMATION ON OIL AND NATURAL GAS OPERATIONS (Unaudited)

The Company’s oil and natural gas reserves are attributable solely to properties within the United States.

Capitalized oil and natural gas costs

Aggregate capitalized costs related to oil and natural gas production activities with applicable accumulated depreciation, depletion, amortization and impairment are as follows:

	December 31,
	2016				2015
	(In thousands)
Oil and Natural Gas Properties:
Proved properties	$	3,429,742			$	2,848,557
Unproved properties	1,730,519				1,106,816
Total oil and natural gas properties	5,160,261				3,955,373
Accumulated depreciation, depletion, amortization	(687,685		)		(512,144		)
Accumulated impairment	(1,143,498		)		(897,962		)
Net oil and natural gas properties capitalized	$	3,329,078			$	2,545,267

Costs incurred in oil and natural gas activities

Costs incurred in oil and natural gas property acquisition, exploration and development activities are as follows:

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Acquisition costs
Proved properties	$	72,044			$	64,340			$	302,234
Unproved properties	752,117				448,638				601,188
Development costs	47,575				42,749				86,097
Exploration costs	329,122				319,102				475,756
Capitalized asset retirement costs	4,030				3,458				4,962
Total	$	1,204,888			$	878,287			$	1,470,237

F-49

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Results of Operations from Oil and Natural Gas Producing Activities

The following schedule sets forth the revenues and expenses related to the production and sale of oil and natural gas. It does not include any interest costs or general and administrative costs and, therefore, is not necessarily indicative of the contribution to consolidated net operating results of our oil, natural gas and natural gas liquids operations.

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Oil, natural gas and natural gas liquid sales	$	527,107			$	446,733			$	495,718
Lease operating expenses	(82,428		)		(82,625		)		(55,384		)
Production and ad valorem taxes	(34,456		)		(32,990		)		(32,638		)
Gathering and transportation	(11,606		)		(6,091		)		(3,288		)
Depreciation, depletion, and amortization	(176,369		)		(216,056		)		(168,674		)
Impairment	(245,536		)		(814,798		)		—
Asset retirement obligation accretion expense	(1,064		)		(833		)		(467		)
Income tax benefit (expense)	(192		)		201,310				(108,985		)
Results of operations	$	(24,544	)		$	(505,350	)		$	126,282

Oil and Natural Gas Reserves

Proved oil and natural gas reserve estimates as of December 31, 2016, 2015 and 2014 were prepared by Ryder Scott Company, L.P., independent petroleum engineers. Proved reserves were estimated in accordance with guidelines established by the SEC, which require that reserve estimates be prepared under existing economic and operating conditions based upon the 12-month unweighted average of the first-day-of-the-month prices.

There are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves. Oil and natural gas reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be precisely measured and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and natural gas that are ultimately recovered.

F-50

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

The changes in estimated proved reserves are as follows:

	Oil (Bbls)			Natural Gas Liquids (Bbls)			Natural Gas (Mcf)
Proved Developed and Undeveloped Reserves:
As of January 1, 2014	42,600,852			10,705,724			61,679,496
Extensions and discoveries	37,068,820			7,828,094			52,099,252
Revisions of previous estimates	(6,784,560	)		649,476			(17,726,552	)
Purchase of reserves in place	8,186,053			360,536			19,898,649
Production	(5,381,576	)		(1,001,898	)		(4,345,585	)
As of December 31, 2014	75,689,589			18,541,932			111,605,260
Extensions and discoveries	48,725,132			12,055,631			53,452,948
Revisions of previous estimates	(12,130,474	)		(4,080,886	)		(14,726,160	)
Purchase of reserves in place	2,775,599			1,165,090			7,101,933
Production	(9,081,135	)		(1,677,623	)		(7,931,237	)
As of December 31, 2015	105,978,711			26,004,144			149,502,744
Extensions and discoveries	55,069,092			13,962,103			64,758,390
Revisions of previous estimates	(12,482,657	)		(1,887,643	)		(34,518,746	)
Purchase of reserves in place	2,170,774			1,454,836			5,582,053
Production	(11,561,920	)		(2,399,440	)		(10,428,441	)
As of December 31, 2016	139,174,000			37,134,000			174,896,000
Proved Developed Reserves:
January 1, 2014	19,789,965			4,973,493			31,428,756
December 31, 2014	43,885,835			11,221,428			68,264,113
December 31, 2015	60,569,398			15,418,353			96,871,109
December 31, 2016	79,457,000			22,080,000			105,399,000
Proved Undeveloped Reserves:
January 1, 2014	22,810,887			5,732,231			30,250,740
December 31, 2014	31,803,754			7,320,504			43,341,147
December 31, 2015	45,409,313			10,585,791			52,631,635
December 31, 2016	59,717,000			15,054,000			69,497,000

Revisions represent changes in previous reserves estimates, either upward or downward, resulting from new information normally obtained from development drilling and production history or resulting from a change in economic factors, such as commodity prices, operating costs or development costs.

During the year ended December 31, 2016, the Company’s extensions and discoveries of 79,824 MBoe resulted primarily from the drilling of 59 new wells and from 51 new proved undeveloped locations added. The Company owns the mineral interests associated with 30 of the 59 new wells and 30 of the 51 proved undeveloped locations through the Partnership. The Company’s negative revisions of previous estimates were primarily the result of 5,978 MBoe of pricing revisions and 7,253 MBoe from reclassifying 17 locations from proved undeveloped due to pricing. Purchases of reserves in place of 4,556 MBoe were primarily the result of the purchase of producing wells included with the Reeves and Ward county acreage purchase and reserves associated with multiple purchases made by the Partnership.

During the year ended December 31, 2015, the Company made one large acquisition of oil and natural gas interests in 2015 located in western Howard and eastern Martin counties. Several small acquisitions were also made in various counties including Andrews, Midland, Martin, and Glasscock counties. The reserves from these acquisitions were primarily proved producing reserves from 136 vertical wells and four horizontal wells and three vertical wells where additional interest was acquired. All of the properties were acquired for horizontal exploitation. Although there were four producing horizontal wells on the properties no PUD’s were included in the acquired properties because of very limited production from the wells at the

F-51

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

time of acquisition. Significant extensions occurred in 2015 as a result of continued horizontal development of the Lower Spraberry and Wolfcamp B horizons. There was also initial development of the Wolfcamp A and Middle Spraberry horizons in some locations. The extensions resulted from two vertical wells and 119 horizontal wells in which the Company has a working interest and from 16 horizontal wells in which the Company has a mineral interest through its ownership in Viper. Of the two vertical wells and 135 horizontal wells, one of the vertical wells and 89 of the horizontal wells are in the proved undeveloped category. The revisions are primarily the result of lower product pricing. As a result of lower pricing, 80 vertical wells and 22 horizontal wells in which the Company has a working interest and 22 vertical wells in which the Company has a mineral interest were downgraded from the proved undeveloped category to probable or possible reserves. Additional downward revisions resulted from shorter producing lives on existing wells as a result of the wells reaching their economic limit sooner due to lower revenues.

During the year ended December 31, 2014, the Company made two major acquisitions of oil and natural gas interests in 2014. One involved properties located in southwest Martin County and the other involved properties located predominantly in Glasscock and Midland Counties. The reserves from these acquisitions were primarily proved producing reserves from 280 existing vertical wells and six existing horizontal wells. The properties were acquired for horizontal exploitation, however the only horizontal wells that existed on the properties were in one isolated block in Reagan County. As a result, no horizontal PUDs were included in the acquired reserves. Significant extensions occurred primarily as a result of continued horizontal development of the Wolfcamp B horizon and the initial horizontal development of the Lower Spraberry shale. The extensions resulted from development of 18 vertical wells and 103 horizontal wells in which the Company has a working interest and one vertical well and 14 horizontal wells in which the Company has a mineral interest through its ownership in Viper. Of the total 19 vertical wells and 117 horizontal wells, five of the vertical wells and 66 of the horizontal wells are in the proved undeveloped category. The revisions are primarily the result of 73 vertical wells that were downgraded from PUDs to probable reserves due to a shift in the Company’s focus to horizontal development rather than vertical development. As a result these wells are no longer expected to be developed within five years of when they were originally booked.

At December 31, 2016, the Company’s estimated PUD reserves were approximately 86,354 MBOE, a 21,587 MBOE increase over the reserve estimate at December 31, 2015 of 64,767 MBOE. The following table includes the changes in PUD reserves for 2016:

	(MBOE)
Beginning proved undeveloped reserves at December 31, 2015	64,767
Undeveloped reserves transferred to developed	(13,383	)
Revisions	(5,210	)
Extensions and discoveries	40,180
Ending proved undeveloped reserves at December 31, 2016	86,354

The increase in proved undeveloped reserves was primarily attributable to extensions and discoveries of 40,180 MBOE. Approximately 41% of the proved undeveloped reserve extensions are associated with well locations that are more than one offset away from existing producing wells. All of these locations are within 2,000 feet of producing wells. Partially offsetting the increase in proved undeveloped reserves were decreases due to pricing revisions. Downward revisions of approximately 5,210 MBOE were a result of reclassifying reserves attributable to 17 horizontal wells in which the Company has a working interest and two horizontal wells in which the Company has only a mineral interest held through the Partnership due to lower product prices.

As of December 31, 2016, all of the Company’s proved undeveloped reserves are planned to be developed within five years from the date they were initially recorded. During 2016, approximately $47.6 million in capital expenditures went toward the development of proved undeveloped reserves, which includes drilling, completion and other facility costs associated with developing proved undeveloped wells.

Standardized Measure of Discounted Future Net Cash Flows

The following information has been prepared in accordance with the provisions of the Financial Accounting Standards Board Codification, Topic 932–“Extractive Activities–Oil and Gas.” The standardized measure of discounted future net cash flows are based on the unweighted average, first-day-of-the-month price. The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted as representing current value to the Company.

F-52

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

Material revisions to estimates of proved reserves may occur in the future; development and production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used; and actual costs may vary.

The following table sets forth the standardized measure of discounted future net cash flows attributable to the Company’s proved oil and natural gas reserves as of December 31, 2016, 2015 and 2014.

	December 31,
	2016				2015				2014
	(In thousands)
Future cash inflows	$	6,275,705			$	5,377,783			$	7,695,368
Future development costs	(617,636		)		(548,239		)		(602,438		)
Future production costs	(1,392,852		)		(1,279,101		)		(1,278,487		)
Future production taxes	(459,244		)		(363,129		)		(534,851		)
Future income tax expenses	(75,595		)		(28,233		)		(672,380		)
Future net cash flows	3,730,378				3,159,081				4,607,212
10% discount to reflect timing of cash flows	(2,018,965		)		(1,740,948		)		(2,561,988		)
Standardized measure of discounted future net cash flows	$	1,711,413			$	1,418,133			$	2,045,224

In the table below the average first-day-of–the-month price for oil, natural gas and natural gas liquids is presented, all utilized in the computation of future cash inflows.

	December 31,
	2016				2015				2014
	Unweighted Arithmetic Average
	First-Day-of-the-Month Prices
Oil (per Bbl)	$	39.94			$	45.07			$	87.15
Natural gas (per Mcf)	$	1.36			$	1.83			$	4.85
Natural gas liquids (per Bbl)	$	12.91			$	12.56			$	30.09

Principal changes in the standardized measure of discounted future net cash flows attributable to the Company’s proved reserves are as follows:

	Year Ended December 31,
	2016				2015				2014
	(In thousands)
Standardized measure of discounted future net cash flows at the beginning of the period	$	1,418,133			$	2,045,224			$	975,639
Sales of oil and natural gas, net of production costs	(411,558		)		(331,119		)		(404,409		)
Purchase of minerals in place	37,661				57,359				291,807
Extensions and discoveries, net of future development costs	779,359				629,149				1,135,293
Previously estimated development costs incurred during the period	85,696				129,901				111,527
Net changes in prices and production costs	(150,509		)		(1,383,698		)		(105,210		)
Changes in estimated future development costs	20,647				38,638				(4,877		)
Revisions of previous quantity estimates	(123,795		)		(377,160		)		(173,004		)
Accretion of discount	143,134				236,716				151,481
Net change in income taxes	(30,530		)		268,963				(12,326		)
Net changes in timing of production and other	(56,825		)		104,160				79,303
Standardized measure of discounted future net cash flows at the end of the period	$	1,711,413			$	1,418,133			$	2,045,224

F-53

Diamondback Energy, Inc. and Subsidiaries

Notes to Consolidated Financial Statements-(Continued)

19. QUARTERLY FINANCIAL DATA (Unaudited)

The Company’s unaudited quarterly financial data for 2016 and 2015 is summarized below.

	2016
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenues	$	87,481			$	112,483			$	142,131			$	185,012
Income (loss) from operations	(27,603		)		(134,786		)		6,693				87,079
Income tax expense (benefit)	—				368				—				(176		)
Net income (loss)	(35,627		)		(157,121		)		(600		)		28,440
Net income (loss) attributable to non-controlling interest	(2,715		)		(1,631		)		1,630				2,842
Net income (loss) attributable to Diamondback Energy, Inc.	$	(32,912	)		$	(155,490	)		$	(2,230	)		$	25,598
Earnings per common share
Basic	$	(0.46	)		$	(2.17	)		$	(0.03	)		$	0.32
Diluted	$	(0.46	)		$	(2.17	)		$	(0.03	)		$	0.32
	2015
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenues	$	101,401			$	119,063			$	111,946			$	114,323
Income (loss) from operations	1,437				(299,120		)		(254,773		)		(187,813		)
Income tax expense (benefit)	3,370				(116,732		)		(81,461		)		(6,487		)
Net income (loss)	6,439				(211,352		)		(156,042		)		(186,835		)
Net income attributable to non-controlling interest	590				935				739				574
Net income (loss) attributable to Diamondback Energy, Inc.	$	5,849			$	(212,287	)		$	(156,781	)		$	(187,409	)
Earnings per common share
Basic	$	0.10			$	(3.45	)		$	(2.40	)		$	(2.80	)
Diluted	$	0.10			$	(3.45	)		$	(2.40	)		$	(2.80	)

F-54

EXHIBIT INDEX

Exhibit Number		Description
2.1#		Purchase and Sale Agreement dated February 14, 2014, between Henry Resources LLC, Henry Production LLC, Henry Taw Production LP, Davlin LP, Good Providence LP, William R. Fair, UTH Investments LTD, Paloma Oil & Ranch LP, Chinati Oil & Ranch LP, J. Craig Corbett, Bambana Resources LP, and FC Permian Properties, Inc., as Sellers, and Diamondback E&P LLC, as Buyer (incorporated by reference to Exhibit 2.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on February 18, 2014).
2.2#		Purchase and Sale Agreement, dated February 14, 2014, between Henry Resources LLC, Henry Production LLC, Henry Taw Production LP, Davlin LP, Good Providence LP, William R. Fair, UTH Investments LTD, Paloma Oil & Ranch LP, Chinati Oil & Ranch LP, J. Craig Corbett, Bambana Resources LP, FC Permian Properties, Inc., Blake Braun, Richard D. Campbell, and Thomas J. Woodside, as Sellers, and Diamondback E&P LLC, as Buyer (incorporated by reference to Exhibit 2.2 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on February 18, 2014).
2.3#		Purchase and Sale Agreement by and among Rio Oil and Gas, LLC, Rio Oil and Gas (Permian) LLC, Rio Oil and Gas (OPCO), LLC, Bluestem Energy, LP, Bluestem Energy Partners, LP, Bluestem Energy Holdings, LLC, Bluestem Energy Assets, LLC, Bluestem Acquisitions, LLC, BC Operating, Inc., Crown Oil Partners V, LP and Crump Energy Partners II, LLC, as sellers, and Diamondback E&P LLC, as buyer, dated July 18, 2014 (incorporated by reference to Exhibit 2.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on July 21, 2014).
2.4#		Purchase and Sale Agreement, dated as of December 13, 2016, by and among Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC, as sellers, and Diamondback E&P LLC and Diamondback Energy, Inc., as buyers (incorporated by reference to Exhibit 2.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on December 14, 2016).
3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 16, 2012).
3.2		Certificate of Amendment No. 1 of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on December 12, 2016).
3.3		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 16, 2012).
4.1		Specimen certificate for shares of common stock, par value $0.01 per share, of the Company (incorporated by reference to Exhibit 4.1 to Amendment No. 4 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on August 20, 2012).
4.2		Registration Rights Agreement, dated as of October 11, 2012, by and between the Company and DB Energy Holdings LLC (incorporated by reference to Exhibit 4.2 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 16, 2012).
4.3		Indenture, dated as of October 28, 2016, among Diamondback Energy, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (including the form of Diamondback Energy, Inc.’s 4.750 % Senior Notes due 2024) (incorporated by reference to Exhibit 4.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on November 2, 2016).
4.4		Registration Rights Agreement, dated as of October 28, 2016, among Diamondback Energy, Inc., the guarantors party thereto and J.P. Morgan Securities LLC (incorporated by reference to Exhibit 4.2 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on November 2, 2016).
4.5		Indenture, dated as of December 20, 2016, among Diamondback Energy, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (including the form of Diamondback Energy, Inc.’s 5.375% Senior Notes due 2025) (incorporated by reference to Exhibit 4.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on December 21, 2016).
4.6		Registration Rights Agreement, dated as of December 20, 2016, among Diamondback Energy, Inc., the guarantors party thereto and Credit Suisse Securities (USA) LLC (incorporated by reference to Exhibit 4.2 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on December 21, 2016).
10.1		Diamondback Energy, Inc. 2016 Amended and Restated Equity Incentive Plan (incorporated by reference to Appendix A to Schedule DEFA 14A filed by the Company with the SEC on May 25, 2016).
10.2+		Form of Stock Option Agreement (incorporated by reference to Exhibit 10.13 to Amendment No. 4 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on August 20, 2012).
10.3+		Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.14 to Amendment No. 4 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on August 20, 2012).

E-1

Exhibit Number		Description
10.4+		Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.15 to Amendment No. 4 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on August 20, 2012).
10.5		Advisory Services Agreement, dated as of October 11, 2012, by and between Diamondback Energy, Inc. and Wexford Capital LP (incorporated by reference to Exhibit 10.4 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 16, 2012).
10.6		Merger Agreement, dated as of October 11, 2012, by and between the Company and Diamondback Energy LLC (incorporated by reference to Exhibit 10.5 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 16, 2012).
10.7+		Amended and Restated Employment Agreement, dated April 24, 2014, effective as of April 18, 2014, by and between Travis D. Stice and Diamondback E&P LLC (incorporated by reference to Exhibit 10.2 to the Form 10-Q, File No. 001-035700, filed by the Company with the SEC on May 9, 2014 ).
10.8+		Amended and Restated Employment Agreement, dated as of February 27, 2014, effective as of January 1, 2014, by and between Teresa Dick and Diamondback E&P LLC (incorporated by reference to Exhibit 10.3 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on March 5, 2014).
10.9+		Amended and Restated Employment Agreement, dated as of February 27, 2014, effective as of January 1, 2014, by and between Michael Hollis and Diamondback E&P LLC (incorporated by reference to Exhibit 10.4 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on March 5, 2014).
10.10+		Amended and Restated Employment Agreement, dated as of February 27, 2014, effective as of January 1, 2014, by and between Jeff White and Diamondback E&P LLC (incorporated by reference to Exhibit 10.5 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on March 5, 2014).
10.11+		Amended and Restated Employment Agreement, dated as of February 27, 2014, effective as of January 1, 2014, by and between Russell Pantermuehl and Diamondback E&P LLC (incorporated by reference to Exhibit 10.6 to the Form 10-Q, File No. 001-035700, filed by the Company with the SEC on May 9, 2014 ).
10.12+		2014 Executive Annual Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on April 2, 2014).
10.13+		Form of Time-Vesting Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on March 5, 2014).
10.14+		Form of Performance-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on March 5, 2014).
10.15		Lease Agreement, dated as of April 19, 2011, by and between Fasken Midland, LLC and Windsor Permian LLC (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on June 11, 2012).
10.16		Lease Amendment No. 1 to Lease Agreement, dated as of June 6, 2011, by and between Fasken Midland, LLC and Windsor Permian LLC (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.17		Lease Amendment No. 2 to Lease Agreement, dated as of August 5, 2011, by and between Fasken Midland, LLC and Windsor Permian LLC (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.18		Lease Amendment No. 3 to Lease Agreement, dated as of September 28, 2011, by and between Fasken Midland, LLC and Windsor Permian LLC (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.19		Lease Amendment No. 4 to Lease Agreement, dated February 6, 2012, by and between Fasken Midland, LLC and Windsor Permian LLC (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.20		Lease Amendment No. 5 to Lease Agreement, dated as of July 25, 2012, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.36 to Amendment No. 5 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on October 2, 2012).

E-2

Exhibit Number		Description
10.21		Contribution Agreement, dated May 7, 2012, by and between the Company and Gulfport Energy Corporation (incorporated by reference to Exhibit 10.18 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.22		Master Drilling Agreement, dated January 1, 2012, by and between Windsor Permian LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.23		Gas Purchase Agreement, dated May 1, 2009, by and between Windsor Permian LLC and Feagan Gathering Company (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.24		Amendment to Gas Purchase Agreement, dated July 1, 2011, by and between Windsor Permian LLC and MidMar Gas LLC (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.25		Amendment to Gas Purchase Agreement, dated January 11, 2012, by and between Windsor Permian LLC and MidMar Gas LLC (incorporated by reference to Exhibit 10.22 to Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on May 8, 2012).
10.26		Crude Oil Purchase Agreement, dated May 24, 2012, by and between Windsor Permian LLC and Shell Trading (US) Company (incorporated by reference to Exhibit 10.26 to Amendment No. 4 to the Registration Statement on Form S-1, File No. 333-179502, filed by the Company with the SEC on August 20, 2012).
10.27		Master Drilling Agreement, effective as of January 1, 2013, by and between Diamondback E&P LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on February 1, 2013).
10.28		Master Field Services Agreement, effective as of January 1, 2013, by and between Diamondback E&P LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.2 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on February 1, 2013).
10.29		First Amendment to Master Field Services Agreement, dated as of February 21, 2013, by and between Diamondback E&P LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.35 to the Form 10-K, file No. 001-35700, filed by the Company with the SEC on March 1, 2013).
10.30+		Form of Amendment to Restricted Stock Unit Certificate (incorporated by reference to Exhibit 10.38 to the Form 10-K/A, file No. 001-35700, filed by the Company with the SEC on April 10, 2013).
10.31		Lease Amendment No. 6 effective May 1, 2013 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Windsor Permian LLC (incorporated by reference to Exhibit 10.39 to the Form 10-K/A, file No. 001-35700, filed by the Company with the SEC on April 10, 2013).
10.32		Lease Amendment No. 7 effective September 1, 2013 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.4 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on August 8, 2013).
10.33		Lease Amendment No. 8 effective October 1, 2013 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.5 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on August 8, 2013).
10.34		Lease Amendment No. 9 effective August 1, 2013 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.6 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2013).
10.35		Lease Amendment No. 10 effective October 1, 2013 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.7 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2013).
10.36		Second Amended and Restated Credit Agreement, dated as of November 1, 2103, among Diamondback Energy, Inc., as parent guarantor, Diamondback O&G LLC, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2013).
10.37		First Amendment, dated June 9, 2014, to the Second Amended and Restated Credit Agreement, originally dated November 1, 2013, by and among the Company, as parent guarantor, Diamondback O&G LLC, as borrower, each of the guarantors party thereto, each of the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.4 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on August 7, 2014).

E-3

Exhibit Number		Description
10.38		Second Amendment to the Second Amended and Restated Credit Agreement, dated as of November 13, 2014, among Diamondback Energy, Inc., as parent guarantor, Diamondback O&G LLC, as borrower, the guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.2 to the Form 8-K, File No. 001-35700, filed by the Company with the SEC on November 18, 2014).
10.39		Third Amendment, dated as of June 21, 2016, to the Second Amended and Restated Credit Agreement, dated as of November 1, 2013, by and among Diamondback Energy, Inc., as parent guarantor, Diamondback O&G LLC, as borrower, certain other subsidiaries of Diamondback Energy, Inc., as guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 001-35700, filed by the Company with the SEC on June 27, 2016).
10.40		Senior Secured Revolving Credit Agreement, dated as of July 8, 2014, among Viper Energy Partners LP, as borrower, Wells Fargo Bank, National Association, as the administrative agent, sole book runner and lead arranger, and certain lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Form 8-K, File No. 001-36505, filed by Viper Energy Partners LP on July 14, 2014).
10.41		Contribution Agreement by and among Diamondback Energy, Inc., Viper Energy Partners LLC, Viper Energy Partners GP LLC and Viper Energy Partners LP, dated as of June 17, 2014 (incorporated by reference to Exhibit 10.2 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on May 9, 2014).
10.42		First Amendment, dated as of August 15, 2014, to Credit Agreement, dated as of July 8, 2014, among Viper Energy Partners LP, as borrower, the guarantors party thereto, Wells Fargo, National Association, as administrative agent, and certain lenders party thereto (incorporated by reference to Exhibit 10.1 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on August 6, 2015).
10.43		Second Amendment, dated as of May 22, 2015, to Credit Agreement, dated as of July 8, 2014, among Viper Energy Partners LP, as borrower, the guarantors party thereto, Wells Fargo, National Association, as administrative agent, and certain lenders party thereto (incorporated by reference to Exhibit 10.2 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on August 6, 2015).
10.44		Third Amendment, dated as of June 21, 2016, to the Credit Agreement, dated as of July 8, 2014, by and among Viper Energy Partners LP, as borrower, Viper Energy Partners LLC, as guarantor, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of Viper’s Current Report on Form 8-K (File No. 001-36505) filed June 27, 2016).
10.45		Fourth Amendment, dated as of October 28, 2016, to the Credit Agreement, dated as of July 8, 2014, by and among Viper Energy Partners LP, as borrower, Viper Energy Partners LLC, as guarantor, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of Viper’s Current Report on Form 8-K (File No. 001-36505) filed on November 3, 2016).
10.46		Lease Amendment No. 11 effective July 31, 2014 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.1 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).
10.47		Lease Amendment No. 12 effective October 23, 2014 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.2 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).
10.48		Lease Amendment No. 13 effective October 30, 2014 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.3 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).
10.49		Lease Amendment No. 14 effective November 10, 2014 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.4 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).
10.50		Lease Amendment No. 15 effective November 10, 2014 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.5 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).
10.51		Lease Amendment No. 16 effective April 1, 2015 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.6 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).

E-4

Exhibit Number		Description
10.52		Lease Amendment No. 17 effective June 1, 2015 to Lease Agreement dated as of April 19, 2011, as amended, by and between Fasken Midland, LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.7 to the Form 10-Q, File No. 001-35700, filed by the Company with the SEC on November 5, 2015).
21.1*		Subsidiaries of the Registrant.
23.1*		Consent of Grant Thornton LLP.
23.2*		Consent of Ryder Scott Company, L.P. with respect to the Diamondback Energy, Inc. reserve report included as Exhibit 99.1.
23.3*		Consent of Ryder Scott Company, L.P. with respect to the Viper Energy Partners LP reserve report included as Exhibit 99.2.
31.1*		Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2*		Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1**		Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2**		Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
99.1*		Report of Ryder Scott Company, L.P., dated January 21, 2016, with respect to an estimate of the proved reserves, future production and income attributable to certain leasehold interests of Diamondback Energy, Inc. as of December 31, 2015.
99.2*		Report of Ryder Scott Company, L.P., dated January 21, 2016, with respect to an estimate of the proved reserves, future production and income attributable to certain royalty interests of Viper Energy Partners LP, a subsidiary of Diamondback Energy, Inc., as of December 31, 2015.
101.INS*		XBRL Instance Document.
101.SCH*		XBRL Taxonomy Extension Schema Document.
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

---

*	Filed herewith.
**	The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompany this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
+	Management contract, compensatory plan or arrangement.
#	The schedules (or similar attachments) referenced in this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule (or similar attachment) will be furnished supplementally to the Securities and Exchange Commission upon request.

E-5