Diamondback Energy Inc. (NASDAQ:FANG)

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Diamondback Energy Inc., effective income tax rate (EITR) reconciliation

		Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
	Federal statutory tax rate	21.00%	21.00%	21.00%	21.00%	35.00%
	Effective income tax rate	21.70%	19.10%	13.00%	151.00%	-3.93%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The analysis of income tax metrics reveals a significant shift in the statutory tax environment and substantial volatility in the effective income tax rate over the five-year period from 2017 to 2021.

Federal Statutory Tax Rate: A permanent reduction in the federal statutory tax rate is observed between 2017 and 2018, where the rate decreased from 35.00% to 21.00%. Following this adjustment, the statutory rate remained constant at 21.00% through the end of 2021.
Effective Income Tax Rate Volatility: The effective income tax rate exhibited extreme fluctuations during the early part of the period. In 2017, a negative rate of -3.93% indicates a tax benefit or the impact of tax credits. This was followed by an anomalous spike to 151.00% in 2018, suggesting significant one-time tax adjustments, potentially related to the revaluation of deferred tax assets and liabilities following the change in the federal statutory rate.
Normalization and Convergence: Starting in 2019, the effective income tax rate began to stabilize and converge toward the statutory rate. After dropping to 13.00% in 2019, the rate climbed to 19.10% in 2020 and reached 21.70% by 2021. This progression indicates a return to normalized tax operations, with the 2021 rate closely aligning with the 21.00% federal statutory benchmark.

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Diamondback Energy Inc., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating loss and other carryforwards	682)	524)	453)	154)	75)
Derivative instruments	36)	60)	—)	—)	23)
Stock based compensation	5)	7)	7)	7)	1)
Viper’s investment in Viper LLC	163)	150)	134)	94)	—)
Rattler’s investment in Rattler LLC	40)	58)	—)	—)	—)
Other	22)	8)	11)	9)	2)
Deferred tax assets	948)	807)	605)	265)	101)
Valuation allowance	(315)	(166)	(7)	(14)	—)
Deferred tax assets, net of valuation allowance	633)	641)	598)	251)	101)
Oil and natural gas properties and equipment	(1,702)	(1,156)	(2,275)	(1,825)	(203)
Midstream investments	(224)	(192)	(50)	(67)	(6)
Derivative instruments	—)	—)	(6)	(46)	—)
Rattler’s investment in Rattler LLC	—)	—)	(8)	—)	—)
Other	(5)	(3)	(3)	—)	—)
Deferred tax liabilities	(1,931)	(1,351)	(2,342)	(1,938)	(209)
Net deferred tax assets (liabilities)	(1,298)	(710)	(1,744)	(1,688)	(108)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The net deferred tax position shifted from a relatively small liability of 108 million US dollars in 2017 to a substantial net deferred tax liability of 1,298 million US dollars by 2021. This trajectory was characterized by a sharp increase in liabilities through 2019, a partial reversal in 2020, and a subsequent increase in 2021.

Deferred Tax Assets (DTA) Components: Gross deferred tax assets experienced consistent growth, rising from 101 million US dollars in 2017 to 948 million US dollars in 2021. The primary driver of this increase was the escalation of net operating loss and other carryforwards, which grew from 75 million US dollars to 682 million US dollars over the period. Additionally, the investment in Viper LLC emerged as a significant contributor, increasing from 94 million US dollars in 2018 to 163 million US dollars by 2021.
Valuation Allowance Trends: While gross assets increased, the application of valuation allowances grew more aggressive in later years. After remaining negligible or minimal between 2017 and 2019, the valuation allowance expanded significantly to 166 million US dollars in 2020 and 315 million US dollars in 2021. This resulted in a deceleration of the growth of net deferred tax assets, which peaked at 641 million US dollars in 2020 before declining to 633 million US dollars in 2021.
Deferred Tax Liabilities (DTL) Drivers: Deferred tax liabilities are dominated by oil and natural gas properties and equipment. This item saw a dramatic increase from 203 million US dollars in 2017 to a peak of 2,275 million US dollars in 2019, before fluctuating to 1,702 million US dollars in 2021. Midstream investments also exhibited a steady upward trend in liability, growing from 6 million US dollars in 2017 to 224 million US dollars in 2021.
Net Deferred Tax Position: The overall net position reflects a volatility in the company's long-term tax obligations. The net deferred tax liability reached its zenith in 2019 at 1,744 million US dollars. A notable contraction occurred in 2020, where the net liability decreased to 710 million US dollars, primarily due to a significant temporary reduction in liabilities related to oil and natural gas properties and equipment. However, by 2021, the net liability expanded again to 1,298 million US dollars, driven by a resurgence in property-related liabilities and an increased valuation allowance against assets.

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Diamondback Energy Inc., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
	Deferred tax assets, net	40)	73)	142)	97)	—)
	Deferred tax liabilities	1,338)	783)	1,886)	1,785)	108)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The analysis of deferred tax accounts between 2017 and 2021 reveals a significant predominance of deferred tax liabilities over deferred tax assets, indicating a consistent net liability position for the reporting entity.

Deferred Tax Liabilities Trends: A substantial increase in deferred tax liabilities occurred between 2017 and 2018, rising from 108 million to 1,785 million. This upward trajectory reached a peak of 1,886 million in 2019. A sharp contraction was observed in 2020, where liabilities decreased to 783 million, followed by a significant rebound to 1,338 million by the end of 2021.
Deferred Tax Assets Trends: Deferred tax assets, net, exhibited a period of growth peaking at 142 million in 2019. Subsequently, a steady downward trend was observed, with values declining to 73 million in 2020 and further decreasing to 40 million by the end of 2021.
Net Deferred Tax Position: The gap between deferred tax liabilities and assets widened drastically starting in 2018. While the net liability position narrowed in 2020 due to a reduction in liabilities, the trend reversed in 2021 as liabilities increased and available tax assets continued to diminish.

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Diamondback Energy Inc., Financial Data: Reported vs. Adjusted

Diamondback Energy Inc., adjustments to financial statements

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Adjustment to Total Assets
Total assets (as reported)	22,898)	17,619)	23,531)	21,596)	7,771)
Less: Noncurrent deferred tax assets, net	40)	73)	142)	97)	—)
Total assets (adjusted)	22,858)	17,546)	23,389)	21,499)	7,771)
Adjustment to Total Liabilities
Total liabilities (as reported)	9,653)	7,815)	8,625)	7,429)	2,189)
Less: Noncurrent deferred tax liabilities, net	1,338)	783)	1,886)	1,785)	108)
Total liabilities (adjusted)	8,315)	7,032)	6,739)	5,645)	2,081)
Adjustment to Total Diamondback Energy, Inc. Stockholders’ Equity
Total Diamondback Energy, Inc. stockholders’ equity (as reported)	12,088)	8,794)	13,249)	13,699)	5,255)
Less: Net deferred tax assets (liabilities)	(1,298)	(710)	(1,744)	(1,688)	(108)
Total Diamondback Energy, Inc. stockholders’ equity (adjusted)	13,386)	9,504)	14,993)	15,387)	5,363)
Adjustment to Net Income (loss) Attributable To Diamondback Energy, Inc.
Net income (loss) attributable to Diamondback Energy, Inc. (as reported)	2,182)	(4,517)	240)	846)	482)
Add: Deferred income tax expense (benefit)	606)	(1,042)	47)	169)	(21)
Net income (loss) attributable to Diamondback Energy, Inc. (adjusted)	2,788)	(5,559)	287)	1,015)	462)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The removal of deferred taxes results in a systematic modification of the balance sheet and income statement, primarily through the reduction of both deferred tax assets and deferred tax liabilities. This adjustment alters the perceived capital structure and the reported profitability of the organization over the five-year period analyzed.

Balance Sheet Asset and Liability Adjustments: A consistent pattern is observed where adjusted total assets are lower than reported total assets from 2018 through 2021. The magnitude of this reduction is relatively small compared to the overall asset base, peaking in 2019. Conversely, a more substantial reduction is observed in liabilities. Adjusted total liabilities are significantly lower than reported liabilities in every year of the analysis. The most pronounced divergence occurred in 2018 and 2019, where reported liabilities exceeded adjusted liabilities by approximately 1.7 billion to 1.8 billion US dollars.
Impact on Stockholders' Equity: The removal of deferred taxes leads to a consistent increase in stockholders' equity. Because the reduction in reported liabilities exceeds the reduction in reported assets, the net effect is a positive adjustment to the equity position. This trend is evident across all years, with the highest equity uplift occurring in 2018 and 2019. This suggests that the company's reported financial position carries a significant deferred tax liability that, when removed, improves the net book value of the equity.
Net Income Volatility and Tax Adjustments: The relationship between reported and adjusted net income varies significantly over the period. In 2018, 2019, and 2021, the adjusted net income is higher than the reported figures, indicating that the removal of deferred tax expenses improves the reported bottom line. However, during the significant loss recorded in 2020, the adjusted net loss was substantially deeper than the reported loss, shifting from a reported loss of 4.5 billion US dollars to an adjusted loss of 5.5 billion US dollars. This indicates that deferred tax credits or benefits provided a buffer in the reported statements that is absent in the adjusted figures.
Overall Financial Position Trend: The adjustment process reveals a more leveraged reported balance sheet than the adjusted one. By removing the deferred tax components, the company exhibits a stronger equity ratio and a lower liability profile. The volatility in net income is further amplified in the adjusted figures, particularly during periods of financial distress, suggesting that deferred tax accounting serves to smooth the impact of earnings volatility on the reported financial statements.

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Diamondback Energy Inc., Financial Ratios: Reported vs. Adjusted

Diamondback Energy Inc., adjusted financial ratios

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net Profit Margin
Reported net profit margin	32.34%	-163.90%	6.17%	39.71%	40.65%
Adjusted net profit margin	41.32%	-201.71%	7.38%	47.66%	38.92%
Total Asset Turnover
Reported total asset turnover	0.29	0.16	0.17	0.10	0.15
Adjusted total asset turnover	0.30	0.16	0.17	0.10	0.15
Financial Leverage
Reported financial leverage	1.89	2.00	1.78	1.58	1.48
Adjusted financial leverage	1.71	1.85	1.56	1.40	1.45
Return on Equity (ROE)
Reported ROE	18.05%	-51.36%	1.81%	6.17%	9.18%
Adjusted ROE	20.83%	-58.49%	1.91%	6.60%	8.61%
Return on Assets (ROA)
Reported ROA	9.53%	-25.64%	1.02%	3.92%	6.21%
Adjusted ROA	12.20%	-31.68%	1.23%	4.72%	5.94%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The financial performance between 2017 and 2021 is characterized by significant volatility, with a severe contraction in profitability occurring in 2020 followed by a robust recovery in 2021. The removal of deferred taxes for adjusted ratios generally amplifies these fluctuations, suggesting that deferred tax accounting served as a smoothing mechanism for reported results during both peak and trough periods.

Profitability Margins: Net profit margins exhibited extreme variance, plummeting from reported levels of approximately 40% in 2017 and 2018 to a deficit of -163.90% in 2020. Adjusted net profit margins intensified this volatility; for instance, the 2020 deficit deepened to -201.71% when deferred taxes were removed. Conversely, the recovery in 2021 was more pronounced in the adjusted figures, reaching 41.32% compared to the reported 32.34%.
Asset Efficiency and Leverage: Total asset turnover remained relatively stable and showed minimal divergence between reported and adjusted figures, with a notable increase observed in 2021 where the adjusted ratio reached 0.30. Financial leverage showed a steady upward trend from 2017, peaking in 2020 at a reported 2.00. In all periods, adjusted financial leverage remained lower than reported leverage, indicating that deferred tax liabilities contribute significantly to the reported equity base and leverage calculations.
Returns on Equity and Assets: Both Return on Equity (ROE) and Return on Assets (ROA) mirrored the volatility of the profit margins. Reported ROE fell from 9.18% in 2017 to -51.36% in 2020, before rebounding to 18.05% in 2021. The adjusted ROE experienced more extreme swings, reaching a lower trough of -58.49% in 2020 and a higher peak of 20.83% in 2021. A similar pattern is evident in ROA, where adjusted figures were more severely negative during the 2020 downturn (-31.68% vs -25.64%) but stronger during the 2021 recovery (12.20% vs 9.53%).

Overall, the adjustment for deferred taxes reveals a higher degree of underlying operational sensitivity to market conditions. The consistent gap in financial leverage and the amplified returns indicate that the tax treatment has a material impact on the perceived stability of the balance sheet and the efficiency of capital deployment.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Diamondback Energy, Inc.	2,182)	(4,517)	240)	846)	482)
Revenue from contracts with customers	6,747)	2,756)	3,887)	2,130)	1,186)
Profitability Ratio
Net profit margin¹	32.34%	-163.90%	6.17%	39.71%	40.65%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to Diamondback Energy, Inc.	2,788)	(5,559)	287)	1,015)	462)
Revenue from contracts with customers	6,747)	2,756)	3,887)	2,130)	1,186)
Profitability Ratio
Adjusted net profit margin²	41.32%	-201.71%	7.38%	47.66%	38.92%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Net profit margin = 100 × Net income (loss) attributable to Diamondback Energy, Inc. ÷ Revenue from contracts with customers
= 100 × 2,182 ÷ 6,747 = 32.34%

² Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Diamondback Energy, Inc. ÷ Revenue from contracts with customers
= 100 × 2,788 ÷ 6,747 = 41.32%

The financial performance of Diamondback Energy Inc. from 2017 to 2021 is characterized by extreme volatility, featuring a period of growth, a severe contraction, and a subsequent robust recovery. Net income and profit margins exhibited sharp fluctuations, reflecting significant sensitivity to market conditions during this five-year interval.

Adjusted Net Profit Margin Trends: The adjusted net profit margin experienced a peak of 47.66% in 2018, rising from 38.92% in 2017. A sharp decline followed, with the margin falling to 7.38% in 2019 and reaching a critical low of -201.71% in 2020. A strong recovery is observed in 2021, where the adjusted net profit margin rebounded to 41.32%, returning the company to a profitability level comparable to the 2017-2018 period.
Reported versus Adjusted Performance: Variances between reported and adjusted net income metrics are persistent. In 2018 and 2021, adjusted net income was higher than reported net income, with the gap being most pronounced in 2021 (2,788 million US$ adjusted vs. 2,182 million US$ reported). In contrast, the 2020 fiscal year showed a deeper loss on an adjusted basis (5,559 million US$) compared to the reported loss (4,517 million US$), indicating that specific adjustments exacerbated the recognized deficit during the downturn.
Analysis of Profitability Volatility: The transition from 2020 to 2021 represents a significant reversal in financial trajectory. The reported net profit margin shifted from -163.90% to 32.34% within a single year, and the reported net income moved from a loss of 4,517 million US$ to a profit of 2,182 million US$. This suggests a rapid restoration of margins and an effective recovery of the company's earnings capacity following the anomalies of 2020.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Revenue from contracts with customers	6,747)	2,756)	3,887)	2,130)	1,186)
Total assets	22,898)	17,619)	23,531)	21,596)	7,771)
Activity Ratio
Total asset turnover¹	0.29	0.16	0.17	0.10	0.15
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenue from contracts with customers	6,747)	2,756)	3,887)	2,130)	1,186)
Adjusted total assets	22,858)	17,546)	23,389)	21,499)	7,771)
Activity Ratio
Adjusted total asset turnover²	0.30	0.16	0.17	0.10	0.15

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Total asset turnover = Revenue from contracts with customers ÷ Total assets
= 6,747 ÷ 22,898 = 0.29

² Adjusted total asset turnover = Revenue from contracts with customers ÷ Adjusted total assets
= 6,747 ÷ 22,858 = 0.30

The financial data reflects a period of significant asset base volatility and a subsequent improvement in asset utilization efficiency between 2017 and 2021.

Total Asset Base Trends: A substantial increase in total assets is observed between 2017 and 2018, where reported assets rose from 7,771 million to 21,596 million. This growth peaked in 2019 at 23,531 million before experiencing a contraction to 17,619 million in 2020. A recovery followed in 2021, with reported assets increasing to 22,898 million. Adjusted total assets closely mirrored these movements, indicating that the adjustments made had a negligible impact on the overall asset valuation.
Asset Turnover Performance: The reported total asset turnover ratio exhibited a decline from 0.15 in 2017 to a low of 0.10 in 2018, coinciding with the rapid expansion of the asset base. Efficiency levels stabilized between 2019 and 2020, holding at 0.17 and 0.16, respectively. A significant upward trend is noted in 2021, where the reported ratio rose to 0.29, representing the highest level of efficiency in the analyzed period.
Comparative Analysis of Adjusted Metrics: The adjusted total asset turnover ratio remained consistent with reported figures throughout the period, following the same trajectory of a dip in 2018 and a peak in 2021. In 2021, the adjusted turnover ratio reached 0.30, slightly exceeding the reported ratio of 0.29. This minimal variance suggests that the adjustments applied to the assets did not materially alter the interpretation of the company's operational efficiency in utilizing its assets to generate revenue.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Total assets	22,898)	17,619)	23,531)	21,596)	7,771)
Total Diamondback Energy, Inc. stockholders’ equity	12,088)	8,794)	13,249)	13,699)	5,255)
Solvency Ratio
Financial leverage¹	1.89	2.00	1.78	1.58	1.48
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	22,858)	17,546)	23,389)	21,499)	7,771)
Adjusted total Diamondback Energy, Inc. stockholders’ equity	13,386)	9,504)	14,993)	15,387)	5,363)
Solvency Ratio
Adjusted financial leverage²	1.71	1.85	1.56	1.40	1.45

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Financial leverage = Total assets ÷ Total Diamondback Energy, Inc. stockholders’ equity
= 22,898 ÷ 12,088 = 1.89

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Diamondback Energy, Inc. stockholders’ equity
= 22,858 ÷ 13,386 = 1.71

An examination of the balance sheet metrics from 2017 to 2021 reveals significant fluctuations in total assets and stockholders' equity. Total assets experienced a substantial increase between 2017 and 2019, followed by a contraction in 2020 and a subsequent recovery in 2021. Stockholders' equity followed a similar trajectory, peaking in 2018 and experiencing its lowest point of the period in 2020.

Reported Financial Leverage Trends: The reported financial leverage ratio demonstrated a consistent upward trend from 2017 to 2020, rising from 1.48 to a peak of 2.00. This indicates an increasing reliance on debt relative to equity over this four-year span, before a slight correction to 1.89 occurred in 2021.
Adjusted Financial Leverage Trends: The adjusted financial leverage ratio remained consistently lower than the reported ratio from 2018 through 2021. Although it mirrored the overall peak in 2020 at 1.85, the adjusted metric showed greater stability in the early period, specifically decreasing to 1.40 in 2018 while the reported ratio was increasing.
Impact of Adjustments on Leverage: A consistent disparity is observed between reported and adjusted stockholders' equity, with adjusted equity remaining higher than reported equity in every period from 2017 to 2021. This increase in the equity base within the adjusted calculations results in a lower financial leverage ratio. This suggests that the adjustments, likely related to the treatment of income tax liabilities, mitigate the perceived leverage of the entity.
Asset and Equity Correlation: The peak leverage observed in 2020 for both reported (2.00) and adjusted (1.85) ratios coincides with the period of lowest total assets and lowest stockholders' equity since 2017. The recovery of these values in 2021 contributed to the subsequent decline in both leverage ratios.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Diamondback Energy, Inc.	2,182)	(4,517)	240)	846)	482)
Total Diamondback Energy, Inc. stockholders’ equity	12,088)	8,794)	13,249)	13,699)	5,255)
Profitability Ratio
ROE¹	18.05%	-51.36%	1.81%	6.17%	9.18%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to Diamondback Energy, Inc.	2,788)	(5,559)	287)	1,015)	462)
Adjusted total Diamondback Energy, Inc. stockholders’ equity	13,386)	9,504)	14,993)	15,387)	5,363)
Profitability Ratio
Adjusted ROE²	20.83%	-58.49%	1.91%	6.60%	8.61%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ ROE = 100 × Net income (loss) attributable to Diamondback Energy, Inc. ÷ Total Diamondback Energy, Inc. stockholders’ equity
= 100 × 2,182 ÷ 12,088 = 18.05%

² Adjusted ROE = 100 × Adjusted net income (loss) attributable to Diamondback Energy, Inc. ÷ Adjusted total Diamondback Energy, Inc. stockholders’ equity
= 100 × 2,788 ÷ 13,386 = 20.83%

The financial performance from 2017 to 2021 is characterized by extreme volatility in profitability and shareholder returns, marked by a severe contraction in 2020 and a subsequent robust recovery in 2021. The divergence between reported and adjusted figures highlights the impact of non-recurring or adjusting items on the perceived financial health of the entity.

Net Income Trends: Reported net income exhibited significant fluctuations, growing from 482 million in 2017 to 846 million in 2018, before declining to 240 million in 2019. A substantial loss of 4,517 million was recorded in 2020, followed by a recovery to 2,182 million in 2021. Adjusted net income amplified these swings, showing a deeper loss of 5,559 million in 2020 and a higher recovery of 2,788 million in 2021.
Stockholders' Equity Evolution: Total stockholders' equity experienced a sharp increase between 2017 and 2018, rising from 5,255 million to 13,699 million. This equity base contracted in 2020 to 8,794 million, coinciding with the period of net losses, before rebounding to 12,088 million by the end of 2021. Adjusted equity remained consistently higher than reported equity from 2018 through 2021.
Analysis of Adjusted Return on Equity (ROE): The adjusted ROE reflects the high volatility of earnings relative to equity. The ratio declined from 8.61% in 2017 to 1.91% in 2019. In 2020, the adjusted ROE plummeted to -58.49%, a more severe decline than the reported ROE of -51.36%. By 2021, the adjusted ROE shifted to a peak of 20.83%, indicating a strong recovery in capital efficiency that exceeded the reported ROE of 18.05%.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Diamondback Energy, Inc.	2,182)	(4,517)	240)	846)	482)
Total assets	22,898)	17,619)	23,531)	21,596)	7,771)
Profitability Ratio
ROA¹	9.53%	-25.64%	1.02%	3.92%	6.21%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to Diamondback Energy, Inc.	2,788)	(5,559)	287)	1,015)	462)
Adjusted total assets	22,858)	17,546)	23,389)	21,499)	7,771)
Profitability Ratio
Adjusted ROA²	12.20%	-31.68%	1.23%	4.72%	5.94%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ ROA = 100 × Net income (loss) attributable to Diamondback Energy, Inc. ÷ Total assets
= 100 × 2,182 ÷ 22,898 = 9.53%

² Adjusted ROA = 100 × Adjusted net income (loss) attributable to Diamondback Energy, Inc. ÷ Adjusted total assets
= 100 × 2,788 ÷ 22,858 = 12.20%

The financial performance from 2017 through 2021 is characterized by extreme volatility in earnings and a fluctuating asset base, resulting in wide swings in return on assets (ROA).

Net Income Variability: Reported net income exhibited a peak in 2018 before declining sharply. A significant deficit occurred in 2020, with reported losses reaching 4,517 million US dollars, while adjusted net income showed an even deeper loss of 5,559 million US dollars. A robust recovery followed in 2021, with adjusted net income rising to 2,788 million US dollars.
Asset Base Dynamics: A substantial increase in total assets occurred between 2017 and 2018, where adjusted assets rose from 7,771 million US dollars to 21,499 million US dollars. Assets reached a peak in 2019 at 23,389 million US dollars before contracting to 17,546 million US dollars in 2020 and rebounding to 22,858 million US dollars by the end of 2021.
Adjusted ROA Interpretation: The adjusted ROA demonstrates more pronounced volatility than the reported ROA. Following a gradual decline from 5.94% in 2017 to 1.23% in 2019, the metric plummeted to -31.68% in 2020, reflecting the combined impact of significant net losses and a reduced asset base. By 2021, the adjusted ROA reached its highest level in the observed period at 12.20%, indicating a strong recovery in profitability relative to the asset base.

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