Diamondback Energy (FANG) risk factors, FY2024 10-K

Risks Related to the Oil and Natural Gas Industry and Our Business

1. 01Market conditions for oil and natural gas, and particularly volatility in prices for oil and natural gas, have in the past adversely affected, and may in the future adversely affect, our revenue, cash flows, profitability, growth, production and the present value of our estimated reserves
2. 02Our commodity price derivatives could result in financial losses, may fail to protect us from declines in commodity prices, prevent us from fully benefiting from commodity price increases and may expose us to other risks, including counterparty credit risk
3. 03The IRA and other risks relating to climate change could accelerate the transition to a low carbon economy and could impose new costs on our operations that may have a material and adverse effect on us
4. 04Any of these developments may reduce the demand for products manufactured with (or powered by) hydrocarbons and the demand for, and in turn the prices of, the oil and natural gas that we produce and sell, which would likely have a material adverse impact on us
5. 05Changing political and social perspectives on climate change and other environmental, social and governance factors may create risks and uncertainties impacting our business
6. 06Our targets related to sustainability and emissions reduction initiatives, including our public statements and disclosures regarding them, may expose us to numerous risks
7. 07and results of operations could be materially and adversely affected. Any reputational damage associated with ESG factors may also adversely impact our ability to recruit and retain employees and customers
8. 08Conservation measures and technological advances could reduce demand for oil and natural gas
9. 09Our development and exploration operations and our ability to complete acquisitions require substantial capital and we may be unable to obtain needed capital or financing on satisfactory terms or at all, which could lead to a loss of properties and a decline in our oil and natural gas reserves
10. 10Our success depends on finding, developing or acquiring additional reserves
11. 11Our failure to successfully identify, complete and integrate pending and future acquisitions of properties or businesses could reduce our earnings and slow our growth
12. 12Drilling for oil and natural gas often involves unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient oil or natural gas to return a profit at then realized prices after deducting drilling, operating and other costs
13. 13The inability of one or more of our customers to meet their obligations may adversely affect our financial results
14. 14Our method of accounting for investments in oil and natural gas properties may result in impairment of asset value
15. 15Our estimated reserves and EURs are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves
16. 16The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved oil reserves
17. 17The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate
18. 18Our producing properties are located in the Permian Basin of West Texas, making us vulnerable to risks (including weather-related risks) associated with operating in a single geographic area. In addition, we have a large amount of proved reserves attributable to a small number of producing horizons within this area
19. 19We depend upon several significant purchasers for the sale of most of our oil and natural gas production. The loss of one or more of these purchasers could, among other factors, limit our access to suitable markets for the oil and natural gas we produce
20. 20The unavailability, high cost or shortages of rigs, equipment, raw materials, supplies, oilfield services or personnel may restrict our operations
21. 21Our operations are substantially dependent on the availability of water. Restrictions on our ability to obtain water may have an adverse effect on our financial condition, results of operations and cash flows
22. 22The marketability of our production is dependent upon transportation and other facilities, certain of which we do not control. If these facilities are unavailable, our operations could be interrupted and our revenues reduced
23. 23Our operations are subject to various governmental laws and regulations which require compliance that can be burdensome and expensive
24. 24Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in some of the areas where we operate
25. 25Derivatives reform legislation and related regulations could have an adverse effect on our ability to hedge risks associated with our business
26. 26U.S. tax legislation may adversely affect our business, results of operations, financial condition and cash flow
27. 27We operate in areas of high industry activity, which may affect our ability to hire, train or retain qualified personnel needed to manage and operate our assets
28. 28We rely on a few key employees whose absence or loss could adversely affect our business
29. 29Operating hazards and uninsured risks may result in substantial losses and could prevent us from realizing profits
30. 30Our use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas, which could adversely affect the results of our drilling operations
31. 31We own interests in certain pipeline projects and other joint ventures, and we may in the future enter into additional joint ventures, and our control of such entities is limited by provisions of the governing documents of such entities and by our percentage ownership in such entities
32. 32We may not be able to keep pace with technological developments in our industry
33. 33A terrorist attack or armed conflict could harm our business
34. 34Our operations depend heavily on electrical power, internet and telecommunication infrastructure and information and computer systems. If any of these systems are compromised or unavailable, our business could be adversely affected
35. 35We are subject to cybersecurity risks. A cyber incident could occur and result in information theft, data corruption, operational disruption and/or financial loss
36. 36Evolving privacy-related laws could give rise to liabilities, which could adversely impact our business, results of operations or financial condition
37. 37Following the closing of the Endeavor Acquisition, the Endeavor equityholders have the ability to significantly influence our business, and their interest in our business may be different from that of other stockholders

Risks Related to Our Indebtedness

1. 38Servicing our indebtedness requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial indebtedness
2. 39We and our subsidiaries may still be able to incur substantial additional indebtedness in the future, which could further exacerbate the risks that we and our subsidiaries face
3. 40Restrictive covenants in certain of our existing and future debt instruments may limit our ability to respond to changes in market conditions or pursue business opportunities
4. 41We depend on our subsidiaries for dividends and other payments
5. 42If we experience liquidity concerns, we could face a downgrade in our debt ratings which could restrict our access to, and negatively impact the terms of, current or future financings or trade credit
6. 43Borrowings under our and Viper LLC’s revolving credit facilities expose us to interest rate risk

Risks Related to Our Common Stock

1. 44The market value of our common stock could decline if large amounts of our common stock are sold following the Endeavor Acquisition and the pending Double Eagle Acquisition
2. 45A change of control could limit our use of net operating losses and certain other tax attributes
3. 46to as the long-term tax-exempt rate, periodically promulgated by the IRS. This limitation, however, may be significantly increased if there is “net unrealized built-in gain” in the assets of the corporation undergoing the ownership change
4. 47We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock
5. 48Provisions in our certificate of incorporation and bylaws and Delaware law make it more difficult to effect a change in control of our company, which could adversely affect the price of our common stock