SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates Certain amounts included in or affecting the Company’s condensed 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 condensed 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 as of the date of the condensed consolidated financial statements. Actual results could differ from those estimates. Making accurate estimates and assumptions is particularly difficult in the oil and natural gas industry given the challenges resulting from volatility in oil and natural gas prices. For instance, geopolitical global conflicts, elevated interest rates, effects of tariffs, actions taken by OPEC and OPEC+, global supply chain disruptions and measures to combat persistent inflation have contributed to recent economic and pricing volatility. The financial results of companies in the oil and natural gas industry have been and may continue to be impacted materially as a result of these events and changing market conditions. Such circumstances generally increase uncertainty in the Company’s accounting estimates, particularly those involving financial forecasts. The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in each particular circumstance. 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 estimates of proved oil and natural gas reserves, including those acquired by the Company, and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, estimates of third-party operated royalty income related to expected sales volumes and prices, the recoverability of costs of unevaluated properties and estimates of income taxes, including deferred tax valuation allowances. Other areas requiring estimation include commodity derivatives and various fair values of non-oil and gas assets and liabilities. Related Party Transactions Royalty Income Receivable As of March 31, 2026 and December 31, 2025, Diamondback, either directly or through its consolidated subsidiaries, owed the Company $17 million and $88 million, respectively, for royalty income received from third parties for the Company’s production, which had not yet been remitted to the Company. Lease Bonus Income Diamondback and its subsidiaries paid the Company $1 million of lease bonus income for three new leases covering 61 acres in Martin and Pecos Counties, Texas during the three months ended March 31, 2026. Lease bonus income for the three months ended March 31, 2025 was immaterial. Other Related Party Transactions See Note 4—Acquisitions and Divestitures for significant related party acquisitions of oil and natural gas properties. See Note 7—Stockholders’ Equity for further details regarding equity transactions with related parties. All other significant related party transactions with Diamondback or its affiliates have been stated on the face of the condensed consolidated financial statements. Accrued Liabilities Accrued liabilities consist of the following as of the dates indicated:
Recent Accounting Pronouncements Recently Adopted Pronouncements There were no new accounting pronouncements adopted during the three months ended March 31, 2026. Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses,” which requires additional disclosure about specified categories of expenses included in relevant expense captions presented on the income statement. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively or retrospectively. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures. Adoption of the update will not impact the Company’s financial position, results of operations or liquidity. The Company considers the applicability and impact of all ASUs. ASUs not discussed above were assessed and determined to be either not applicable, previously disclosed, or not material upon adoption.
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