Diamondback Energy : Investor Presentation

Investor Presentation

November 2020

Forward Looking Statement

Forward-Looking Statements

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this presentation that address activities, events or developments that Diamondback Energy, Inc. (the "Company" or "Diamondback") expects, believes or anticipates will or may occur in the future are forward-looking statements. The words "believe," "expect," "may," "estimates," "will," "anticipate," "plan," "intend," "foresee," "should," "would," "could," or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including as to the Company's acquisitions, dispositions, drilling programs, production, hedging activities, capital expenditure levels and other guidance included in this presentation. These statements are based on certain assumptions made by the Company based on management's expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the factors discussed or referenced in the Company's filings with the Securities and Exchange Commission ("SEC"), including its Forms 10-K,10-Q and 8-K and any amendments thereto, relating to financial performance and results, the volatility of realized oil and natural gas prices and the extent and duration of price reductions and increased production by the Organization of Petroleum Exporting Countries ("OPEC") members and other oil exporting nations, the threat, occurrence, potential duration or other implications of epidemic or pandemic diseases, including the ongoing coronavirus ("COVID-19") pandemic, or any government response to such threat, occurrence or pandemic; conditions of U.S. oil and natural gas industry and the effect of U.S. energy, monetary and trade policies, U.S. and global economic conditions and political and economic developments, including the outcome of the U.S. presidential election and resulting energy and environmental policies, current economic, business or industry conditions and resulting capital restraints, prices and demand for oil and natural gas, impact of impairment charges, effects of hedging arrangements, availability of drilling equipment and personnel, levels of production; impact of reduced drilling activity, availability of sufficient capital to execute the Company's business plan, impact of compliance with legislation and regulations, successful results from the Company's identified drilling locations, the Company's ability to replace reserves and efficiently develop and exploit its current reserves, the Company's ability to successfully identify, complete and integrate acquisitions of properties or businesses, and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and Diamondback undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

The presentation also contains the Company's updated capital expenditure and production guidance for 2020 and certain forward-looking information with respect to 2021. The actual levels of production, capital expenditures, expenses and other estimates may be higher or lower than these estimates due to, among other things, uncertainty in drilling schedules, changes in market demand and unanticipated delays in production. These estimates are based on numerous assumptions, including assumptions related to number of wells drilled, average spud to release times, rig count, and production rates for wells placed on production. All or any of these assumptions may not prove to be accurate, which could result in actual results differing materially from estimates. If any of the rigs currently being utilized or intended to be utilized becomes unavailable for any reason, and the Company is not able to secure a replacement on a timely basis, we may not be able to drill, complete and place on production the expected number of wells. Similarly, average spud to release times may not be maintained in 2020. No assurance can be made that new wells will produce in line with historic performance, or that existing wells will continue to produce in line with expectations. Our ability to fund our 2020 and future capital budgets is subject to numerous risks and uncertainties, including volatility in commodity prices and the potential for unanticipated increases in costs associated with drilling, production and transportation. In addition, our production estimate assumes there will not be any new federal, state or local regulation of portions of the energy industry in which we operate, or an interpretation of existing regulation, that will be materially adverse to our business. For additional discussion of the factors that may cause us not to achieve our production estimates, see the Company's filings with the SEC, including its forms 10-K,10-Q and 8-K and any amendments thereto. We do not undertake any obligation to release publicly the results of any future revisions we may make to this prospective data or to update this prospective data to reflect events or circumstances after the date of this presentation. Therefore, you are cautioned not to place undue reliance on this information.

Non-GAAP Financial Measures

Consolidated Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Consolidated Adjusted EBITDA as net income (loss) plus non-cash (gain) loss on derivative instruments, net, interest expense, net, depreciation, depletion and amortization expense, impairment of oil and natural gas properties, non-cash equity based compensation expense, capitalized equity-based compensation expense, asset retirement obligation accretion expense, loss from equity method investments, loss on damaged assets, gain (loss) on revaluation of investment, loss on extinguishment of debt and income tax (benefit) adjusted for non-controlling interest in net income (loss). Consolidated Adjusted EBITDA is not a measure of net income (loss) as determined by United States' generally accepted accounting principles, or GAAP. Management believes Consolidated Adjusted EBITDA is useful because the measure allows it to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We add the items listed above to net income (loss) in arriving at Consolidated Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Consolidated Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Consolidated Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets. Our computation of Consolidated Adjusted EBITDA may not be comparable to other similarly titled measures of other companies or to such measures in our revolving credit facility and the indenture governing our senior notes. For a reconciliation of Consolidated Adjusted EBITDA to net income (loss), and other non-GAAP financial measures, please refer to filings we make with the SEC.

Oil and Gas Reserves

The SEC generally permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, and certain probable and possible reserves that meet the SEC's definitions for such terms. The Company discloses only estimated proved reserves in its filings with the SEC. The Company's estimated proved reserves (including those of its consolidated subsidiaries) as of December 31, 2019 referenced in this presentation were prepared by Ryder Scott Company, L.P., an independent engineering firm, and comply with definitions promulgated by the SEC. Additional information on the Company's estimated proved reserves is contained in the Company's filings with the SEC. This presentation also contains the Company's internal estimates of its potential drilling locations, which may prove to be incorrect in a number of material ways. Actual number of locations that may be drilled may differ substantially.

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Diamondback Energy: Leading Pure-play Permian Operator

Large Cap Permian pure-play E&P:

• >347,000 net Midland and Delaware basin acres(1)
• >12,300 gross (>8,100 net) horizontal locations(1)

Low Cost Structure and Capital Flexibility:

• Generated >$150 million of Free Cash Flow ("FCF") in Q3
  2020, with industry-leading cash operating costs of $7.61 per boe(2)
• Reduced consolidated net debt by $136 million in Q3 2020
• Significant backlog of drilled but uncompleted ("DUC") wells provides enhanced capital efficiency and flexibility for the remainder of 2020 and 2021
• Expect to maintain expected Q4 2020 oil production with 25% - 35% less capital than 2020 budget in 2021
• Targeting 2021 reinvestment rate of ~70% assuming WTI oil prices of $40/Bbl with significant Free Cash Flow(2)
• Flexibility to reduce capital further should commodity prices weaken

Significant Liquidity and Capital Return:

• >$2.0 billion of standalone liquidity as of September 30(3)
• >$3.0 billion of consolidated liquidity
• $191 million maturity in September 2021; no other material term debt maturities until 2024
• Maintaining $1.50 per share annual dividend(4)

Diamondback Acreage Map

Diamondback

Diamondback Market Snapshot

NASDAQ Symbol: FANG

Market Cap: $4,101 million

Net Debt: $5,797 million

Enterprise Value: $11,015 million

Share Count: 158 million

2020 Annual Dividend: $1.50 (5.8% current yield)(4)

	Source: Company data, public filings, and Bloomberg. Financial data as of 9/30/2020. Market data as of 10/30/2020.
3	(1)	Net acreage excludes exploratory, conventional and Quinn Ranch. Net locations internal company estimates as of 12/31/2019.
(2)	FCF defined as operating cash flow before changes in working capital less cash CAPEX. Reinvestment rate calculated as cash CAPEX divided by pre-dividend cash flow from operations before changes in working capital. See slides 6-7 for more detail.
	(3)	Excludes Viper and Rattler.
	(4)	Yield based on 10/30/2020 closing price. Future dividends subject to the discretion and approval of the Board of Directors.

Diamondback: Investment Highlights

Q3 2020 Highlights

2020 Guidance

2021 Investment Framework

Significant Liquidity

• Generated $153 million of FCF in Q3 2020(1)
• Q3 2020 oil production of 170.0 Mbo/d (287.3 Mboe/d)
• Q3 2020 cash operating costs of $7.61 per boe; including cash G&A of $0.42 per boe
• Q3 2020 dividend of $0.375 / share; payable November 19, 2020
• Reduced flaring to 0.5% of net production in Q3 2020, down 74% year over year
• Q4 2020 production guidance of 170 - 175 Mbo/d (280 - 290 Mboe/d)
• Lowering 2020 LOE / G&A unit guidance by a combined $0.40 per boe at the midpoint; implies FY 2020 cash cost savings of over $43 million versus prior guidance
• Current Midland Basin D,C&E costs of $510 - $530 per Ft.; down $215 per Ft. from 2019
• Current Delaware Basin D,C&E costs of $700 - $850 per Ft.; down $315 per Ft. from 2019
• Expect to exit 2020 with 110 - 140 drilled but uncompleted ("DUC") wells; expect to maintain estimated Q4 2020 oil production with 25% - 35% less capital than 2020 budget
• Expect to generate over $525 million of pre-dividend Free Cash Flow in 2021, with a reinvestment rate of ~70% assuming $40/Bbl WTI oil prices(1)
• Current 2021 hedges provide downside protection for >50% of expected 2021 oil production at a weighted average price of $38.18 per barrel(2)
• Free Cash Flow in excess of dividend to be used towards debt reduction
• Standalone liquidity of >$2.0 billion with $68 million net cash position(3)
• Consolidated net debt down $136 million quarter over quarter from Q2 2020
• Repurchased all $10 million in principal amount of 7.35% medium-term notes due 2027
• $191 million of Senior Notes maturing September 2021; no other maturities before 2024

Source: Company data and filings. Financial data as of 9/30/2020 unless otherwise noted.

4 (1) Free Cash Flow ("FCF") defined as operating cash flow before changes in working capital less cash CAPEX. Reinvestment rate defined as cash CAPEX divided by pre-dividend cash flow from operations before changes in working capital. See slides 6-7 for more detail.

1. As of 10/30/2020. Calculated as the average hedged volumes divided by the midpoint of Q4 2020 production guidance of 170 - 175 Mbo/d; excludes basis and roll hedges.
2. Excludes Viper and Rattler.