Diamondback Energy, Inc PRE 14A, filed Apr 13, 2021

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Diamondback Energy, Inc. (FANG)

PRE 14A 2021-04-13 For: 2021-06-03

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	Notice of Annual Meeting of Stockholders
TO BE HELD ON JUNE 3, 2021 11:30 a.m., local time 1200 N Walker Ave Oklahoma City, Oklahoma 73103		TO THE STOCKHOLDERS OF DIAMONDBACK ENERGY, INC.: The Annual Meeting of Stockholders of Diamondback Energy, Inc. will be held on June 3, 2021 at 11:30 a.m., local time, at 1200 N Walker Ave, Oklahoma City, Oklahoma 73103, for the following purposes:

		1.	To elect eight directors to serve until the Company’s 2021 Annual Meeting of Stockholders;
		2.	To hold an advisory vote on the Company’s executive compensation;
		3.	To approve an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares;
		4.	To approve the Company’s 2021 Amended and Restated Equity Incentive Plan;
		5.	To ratify the appointment of Grant Thornton LLP as the Company’s independent auditors for the fiscal year ending December 31, 2021; and
		6.	To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
		COVID-19 CONSIDERATIONS AND THE ANNUAL MEETING:

		We intend to hold the Annual Meeting in person. However, we are monitoring the public health, travel and business and social gathering concerns of our stockholders and employees in light of the ongoing COVID-19 pandemic, as well as any related restrictions and protocols from federal, state and local governments. We plan on taking any necessary and appropriate precautions with respect to attendance at and admission to the Annual Meeting. We may also determine it to be necessary or appropriate to hold a virtual annual meeting of stockholders by means of remote communication. We will announce any such alternative arrangements and provide detailed instructions as soon as practicable in advance of the meeting by press release and posting on our website at www.diamondbackenergy.com, as well as through an SEC filing. If you are planning to attend the Annual Meeting, please be sure to check our website for any updates in the days before the Annual Meeting. As always, we encourage you to vote your shares prior to the Annual Meeting.

PROXY SUMMARY	06
VOTING MATTERS	06

ABOUT THE ANNUAL MEETING	10

PROPOSAL 1: ELECTION OF DIRECTORS	14
DIRECTOR NOMINATIONS	14

CORPORATE GOVERNANCE MATTERS	20
CORPORATE GOVERNANCE HIGHLIGHTS	20
CORPORATE GOVERNANCE GUIDELINES	21
DIRECTOR QUALIFICATIONS AND NOMINATION PROCESS	21
DIRECTOR INDEPENDENCE	23
BOARD LEADERSHIP STRUCTURE	23
BOARD MEETINGS, COMMITTEES AND MEMBERSHIP	24
BOARD EVALUATION PROCESS	26
BOARD’S ROLE IN RISK OVERSIGHT	26
STOCKHOLDER ENGAGEMENT	27
CORPORATE RESPONSIBILITY AND SUSTAINABILITY	28
CODE OF BUSINESS ETHICS AND CONDUCT	30
COMMUNICATIONS WITH THE BOARD	31
DIRECTOR COMPENSATION	31

AUDIT COMMITTEE REPORT	32

EXECUTIVE OFFICERS	33

COMPENSATION DISCUSSION AND ANALYSIS	35
EXECUTIVE SUMMARY	35
2021 COMPENSATION DECISIONS AND EXECUTIVE COMPENSATION PROGRAM ENHANCEMENTS	39
HIGHLIGHTS OF EXECUTIVE COMPENSATION BEST PRACTICES	40
EXECUTIVE COMPENSATION POLICY AND OBJECTIVES	41
2020 COMPENSATION PROGRAM DESIGN AND STRUCTURE	41
EXECUTIVE COMPENSATION PROGRAM ELEMENTS	42
PROCESS FOR DETERMINING EXECUTIVE COMPENSATION	48
COMPETITIVE BENCHMARKING	49
OTHER SIGNIFICANT COMPENSATION POLICIES AND PRACTICES	50
BENEFIT PLANS	52
COMPENSATION COMMITTEE REPORT	54
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	54

COMPENSATION TABLES	55
SUMMARY COMPENSATION TABLE	55
2020 GRANTS OF PLAN-BASED AWARDS UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN	57
2020 GRANTS OF PLAN-BASED AWARDS UNDER THE VIPER LTIP	57
2020 GRANTS OF PLAN-BASED AWARDS UNDER THE RATTLER LTIP	58
OUTSTANDING EQUITY AWARDS AT FISCAL 2020 YEAR-END UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN	58
OUTSTANDING EQUITY AWARDS UNDER THE VIPER LTIP AT FISCAL 2020 YEAR-END	59
OUTSTANDING EQUITY AWARDS UNDER THE RATTLER LTIP AT FISCAL 2020 YEAR-END	60
STOCK VESTED DURING FISCAL YEAR 2020 UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN	60
PHANTOM UNITS VESTED UNDER THE RATTLER LTIP DURING FISCAL YEAR 2020	61
PAY RATIO DISCLOSURE	61

POTENTIAL PAYMENTS UPON TERMINATION, RESIGNATION OR CHANGE OF CONTROL FOR FISCAL YEAR 2020	62
2020 EQUITY COMPENSATION PLAN INFORMATION	63
2020 DIRECTOR COMPENSATION	64

STOCK OWNERSHIP	65
HOLDINGS OF MAJOR STOCKHOLDERS	65
HOLDINGS OF OFFICERS AND DIRECTORS	66

STOCK PERFORMANCE GRAPH	68

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	69
REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS	69
VIPER ENERGY PARTNERS LP	69
RATTLER MIDSTREAM PARTNERS LP	70

PROPOSAL 2: APPROVE, ON AN ADVISORY BASIS, THE COMPANY’S EXECUTIVE COMPENSATION	72
BOARD VOTING RECOMMENDATION	72

PROPOSAL 3: APPROVE AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 SHARES TO 400,000,000 SHARES	73
WHAT AM I VOTING ON?	73
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?	73
RATIONALE FOR APPROVAL	73
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?	75

PROPOSAL 4: APPROVE THE COMPANY’S 2021 AMENDED AND RESTATED EQUITY INCENTIVE PLAN	76
WHAT AM I VOTING ON?	76
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?	76
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?	81

PROPOSAL 5: RATIFY THE APPOINTMENT OF OUR INDEPENDENT AUDITORS	82
WHAT AM I VOTING ON?	82
WHAT SERVICES DO THE INDEPENDENT AUDITORS PROVIDE?	82
HOW MUCH WERE THE INDEPENDENT AUDITORS PAID IN 2020, 2019 AND 2018?	82
DOES THE AUDIT COMMITTEE APPROVE THE SEVICES PROVIDED BY GRANT THORNTON?	83
WILL A REPRESENTATIVE OF GRANT THORNTON BE PRESENT AT THE MEETING?	83
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?	83
HAS GRANT THORNTON ALWAYS SERVED AS DIAMONDBACK’S INDEPENDENT AUDITORS?	83
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?	83

SOLICITATION BY BOARD; EXPENSES OF SOLICITATION	84

SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS	85

AVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO STOCKHOLDERS	86
HOUSEHOLDING	86

OTHER MATTERS	87

SCHEDULE A: RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW	88


APPENDIX A: CERTIFICATE OF AMENDMENT NO. 2 TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION	A-1


APPENDIX B: 2021 AMENDED AND RESTATED EQUITY INCENTIVE PLAN	B-1

	PROXY SUMMARY

	THE SUMMARY BELOW HIGHLIGHTS SELECTED INFORMATION IN THIS PROXY STATEMENT. PLEASE REVIEW THE ENTIRE PROXY STATEMENT BEFORE VOTING YOUR SHARES.

Proposal		Board Recommendation	Page Reference
Proposal 1:	Election of Directors	FOR each Director	14
Proposal 2:	Approve, on an Advisory Basis, the Company’s Executive Compensation	FOR	72
Proposal 3:	Approve an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares	FOR	73
Proposal 4:	To approve the Company’s 2021 Amended and Restated Equity Incentive Plan	FOR	76
Proposal 5:	Ratify the Appointment of Our Independent Auditors	FOR	82

				Committee Memberships
Nominee	Age	Director Since	Independent	Audit	Compensation	Nominating and Corporate Governance	Safety, Sustainability and Corporate Responsibility	2020 Board and Committee Meeting Attendance Rate
Vincent K. Brooks	62	2020						100%
Michael P. Cross	69	2012						100%
David L. Houston	68	2012						96%
Stephanie K. Mains	53	2020						100%
Mark L. Plaumann	65	2012						100%
Travis D. Stice	59	2012						100%
Melanie M. Trent	56	2018						100%
Steven E. West*	60	2011						100%

•	The election of directors (see Proposal 1 beginning on page 14);
•	The approval, on an advisory basis, of the compensation paid to the Company’s named executive officers as reported in this proxy statement (see Proposal 2 on page 72);
•	The approval of an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares (see Proposal 3 on page 73);
•	To approve the Company’s 2021 Amended and Restated Equity Incentive Plan (see Proposal 4 on page 76);
•	The ratification of Grant Thornton LLP as our independent auditors for 2021 (see Proposal 5 beginning on page 82); and
•	Any other business properly coming before the meeting.

•	“FOR” the proposal to elect nominated directors;
•	“FOR” the proposal to approve, on an advisory basis, the compensation paid to the Company’s named executive officers as reported in this proxy statement;
•	“FOR” the approval of an amendment to the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of common stock from 200,000,000 shares to 400,000,000 shares;
•	“FOR” the approval of the Company’s 2021 Amended and Restated Equity Incentive Plan; and
•	“FOR” the proposal to ratify Grant Thornton LLP as the Company’s independent auditors for 2021.

•	Submitting another valid proxy bearing a later date and returning it to us prior to the meeting;
•	Sending our Corporate Secretary a written document revoking your earlier proxy; or
•	Voting again at the meeting.

		In 2020, increased the size of the board of directors to eight directors, enhancing and diversifying our board’s skills, qualifications and viewpoints
		Enhanced the gender and racial diversity of our board of directors, adding three diverse candidates since 2018, currently representing approximately 38% of our board membership
		Adopted proxy access bylaw provision
		Supermajority of independent director nominees under the Nasdaq listing standards and SEC rules
		Independent chair of the board of directors
		Majority voting to elect directors (for uncontested elections)
		Mandatory resignation if a majority vote is not received (for uncontested elections)
		Emphasis on diversity in the nominating and corporate governance committee’s charter
		Declassified board of directors
		Active stockholder outreach with respect to corporate governance and other ESG topics and executive compensation
		Active board oversight of risk and risk management
		Independent director meetings in executive sessions
		Commitment to social responsibility with respect to our people, community and environment
		Adopted Human Rights Policy to reinforce our commitment to conducting our business in a manner that respects and promotes the fundamental rights and dignity of all people
		Implemented our “Net Zero Now” initiative under which, effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions
		In 2020, added specific environmental and safety metrics for determining annual STI compensation and for 2021 increased weighting of current environmental and safety metrics to 20% from 15% previously
		Released third annual Corporate Responsibility Report in August 2020, which included an assessment of our current portfolio in various low carbon scenarios as outlined by the International Energy Agency
		Maintain active safety, sustainability and corporate responsibility committee of the board of directors
		Adopted Corporate Governance Guidelines as another step to reinforce our commitment to sound governance practices and policies
		Adopted a comprehensive executive incentive compensation clawback policy
		Maintain rigorous stock ownership guidelines for non-employee directors and our executives
		Added both S&P 500 and the XOP Index as peers in our 2021 peer group
		Developed a comprehensive policy governing corporate political spending and disclosed Diamondback’s 2020 corporate political contribution activity
		Annual board and committee self-assessments
		Each director attended at least 96% of the 2020 board and committee meetings
		All financially literate audit committee members and three of the four members of the audit committee qualify as financial experts

	•	Role and responsibilities of the board and its committees;
	•	Size of the board;
	•	Selection, qualifications, independence, responsibilities, tenure and compensation of directors
	•	Director resignation process;
	•	Selection of chairman and chief executive officer;
	•	Other public company directorships and committee service;
	•	Board meetings and agendas;
	•	Director access to management and advisors;
	•	Executive sessions of independent directors;
	•	Director orientation and education;
	•	Annual performance evaluations of the board and its committees;
	•	Succession planning;
	•	Director compensation;
	•	Stockholder and third party communications with the board;
	•	Board communications with third parties; and
	•	Confidentiality.

*	Committee Chairperson.
**	Ms. Mains was appointed to serve on the compensation committee effective as of July 1, 2020.

	Chair
*	Chairman of the Board

*	Committee Chairperson.
**	Mr. Brooks was appointed to serve on the safety, sustainability and corporate responsibility committee effective as of July 1, 2020.

•	the effectiveness of the board and committee structure;
•	board and committee composition, including assessment of skills, experience and occupational and personal backgrounds;
•	board culture and dynamics, including the effectiveness of discussion and debate at board and committee meetings;
•	the quality of board and committee agendas and the appropriateness of board and committee priorities; and
•	the quality of communication between management and board members.

•	Our board of directors amended our bylaws to provide our stockholders with proxy access;
•	Our board of directors also previously amended our bylaws to provide for the majority vote requirement to elect directors to our board, which replaced the prior plurality voting standard applicable to our director election;
•	Our board of directors and the nominating and corporate governance committee approved enhancements to the nominating committee charter and director nomination process that focused on increasing the size of the board and number of independent directors, with a supermajority of the board currently being independent;
•	We increased the size and enhanced the ethnic and gender diversity and skill set of our board of directors, adding three diverse candidates between April 2018 and April 2020, currently representing approximately 38% of our board membership;
•	Our board of directors created the safety, sustainability and corporate responsibility committee focused on sound strategy and best policies and practices regarding environmental, safety and social responsibility matters;
•	Our board of directors adopted Corporate Governance Guidelines as an additional step to reinforce our commitment to prudent corporate governance practices and policies;
•	The compensation committee fully transitioned to three-year performance-based equity awards, with no two-year performance-based equity awards granted or vesting during 2019 or 2020 and no two-year performance-based awards contemplated in the future, and implemented double-trigger change of control provisions in Company equity awards granted since the beginning of 2018;
•	The compensation committee enhanced the disclosure of targets and goals for performance-based awards, the discussion of equity award process for our named executive officers and the underlying rationale for such awards;

•	The compensation committee added the return on average capital employed and ESG goals among metrics for determining cash performance awards in 2020 and increased the weighting attributable to the ESG component of our STI metrics to 20% for 2020;
•	Our board of directors implemented and maintains rigorous stock ownership guidelines for our non-employee directors in addition to the previously adopted stock ownership guidelines for all of our executive officers;
•	Our board of directors adopted a comprehensive executive incentive compensation clawback policy;
•	We released our third annual Corporate Responsibility Report, which included an assessment of our current portfolio in various low carbon scenarios as outlined by the International Energy Agency;
•	We adopted a Human Rights Policy;

•	Investing in and implementing the best available technology and innovative methods for drilling and completing wells, which has allowed us to achieve the same or improved results with less proppant, fewer wells and a greatly reduced environmental footprint;
•	Minimizing our environmental impact and improve safety for all stakeholders;
•	Implementing our “Net Zero Now” initiative under which, effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions;
•	Planning to purchase carbon credits to offset the remaining emissions to the extent our greenhouse gas and methane intensity targets do not eliminate our carbon footprint;
•	Committed to reducing Scope 1 GHG intensity by at least 50% from 2019 levels by 2024;
•	Committed to reducing methane intensity by at least 70% from 2019 levels by 2024;
•	Motivating our executive and senior management to strive to achieve measurable targets and goals with respect to flaring, GHG emissions and total recordable oil spills; increasing weighting of current ESG metrics to 20%;
•	Focusing on the hydrocarbon gathering infrastructure, as well as sourced water disposal and produced-water recycling;
•	Minimizing use of water fit for human consumption in our operations;
•	Safely transporting oil and gas and minimizing impacts from air emissions, flared gas and spills; and
•	Maximizing fluid transportation via pipelines rather than diesel powered trucks.

•	We made monetary donations to local charitable organizations to support their efforts during the COVID-19 pandemic, including the West Texas Food Bank and Regional Food Bank of Oklahoma, among others.
•	We donated personal protective equipment, including masks and gloves, to frontline workers, including healthcare professionals and law enforcement.
•	We donated iPads to the Midland Memorial Hospital Intensive Care Units to enable COVID-19 patients to see and interact safely with their loved ones.
•	We provided funding to several summer reading programs in Midland that specialize in helping disadvantaged children.
•	We held virtual reading sessions with students.
•	We planted trees at a local Midland park.

ENVIRONMENTAL
Emissions		• Engaged multiple third-party consultants to analyze and perform direct measurements of vent gasses on our petroleum storage tank emission-control systems and proactively identify, report and repair failures. • Continue to invest in and implement upgraded equipment and new, low impact technology, including compressed instrument air systems, and combustion equipment designed to have the highest burn efficiency possible under normal operations. • Continue our commitment to engineering and equipment designs that keep our gas in sealed, recoverable vessels to reduce the amount of gas that flashes in tanks.
Water Management		• Significantly increased use of recycled water in our production operations. • Continued to enhance our tank battery design to include more efficient control technologies, including installing free water knockouts in place of gun barrels on all new tank battery locations.
Spills and Spill Management		• Continue focus on low spill rate, reducing total fluid spill rate per 1,000 Bbl produced fluids, achieving spill rate of below industry average. • Installed high-liquid-level alarms on all storage tanks as well as high-level “well-kill” systems. • Investing in variable frequency drives to maintain pipeline operating pressures.
Climate Change		• Committed to understanding the potential impact of growing alternative energy sources and the transition to a lower-carbon economy on our oil and gas portfolio and seek to factor changing conditions into our strategic plans, primarily through scenario planning to assess portfolio resilience over the long term. • Implemented our “Net Zero Now” initiative under which, effective January 1, 2021, every hydrocarbon molecule we produce is anticipated to be produced with zero Scope 1 emissions. • To the extent our greenhouse gas and methane intensity reduction targets do not eliminate our carbon footprint, we intend to purchase carbon credits to offset the remaining emissions. • Continue to search for innovative ways to implement cost-effective, appropriate steps to monitor, measure and reduce our energy use, waste and emissions.
SAFETY		• We grew our Health, Safety and Environmental (HSE) organization by adding a full-time, field-dedicated coordinator to monitor specific facilities and help prevent potential issues. • We continued investing in new and improved safety technologies, including utilization of a cloud-based application that helps field employees identify and immediately report incidents, potential hazards and near misses using a mobile device. • We have an active safety, sustainability and corporate responsibility committee of our board of directors that oversees our policies on ESG matters and the quality of our procedures for identifying, assessing, monitoring and managing the principal environmental, health, safety and social risks in our business and provide leadership with respect to best practices in the areas environmental, sustainability and corporate and social responsibility. • Took responsible safety actions to protect health and well-being of our employees in response to the COVID-19 pandemic.
COMMUNITY		• Together with 19 fellow energy companies, we participate in the Permian Strategic Partnership, which has committed more than $100 million over a five-year period toward developing superior educational programs, accessible housing, a supportive healthcare system, safer roads and a more skilled workforce for communities across West Texas and south-eastern New Mexico.

Name	Age	Position
Travis D. Stice	59	Chief Executive Officer and Director
Kaes Van’t Hof	34	Chief Financial Officer and Executive Vice President—Business Development
Teresa L. Dick	50	Chief Accounting Officer, Executive Vice President and Assistant Secretary
Thomas F. Hawkins	66	Executive Vice President—Land
Russell D. Pantermuehl	60	Executive Vice President and Chief Engineer
Jennifer Soliman	51	Executive Vice President and Chief Human Resources Officer
Daniel N. Wesson	37	Executive Vice President—Operations
Matt Zmigrosky	42	Executive Vice President, General Counsel and Secretary

	EXECUTIVE SUMMARY	35
	2021 COMPENSATION DECISIONS AND EXECUTIVE COMPENSATION PROGRAM ENHANCEMENTS	39
	HIGHLIGHTS OF EXECUTIVE COMPENSATION BEST PRACTICES	40
	EXECUTIVE COMPENSATION POLICY AND OBJECTIVES	41
	2020 COMPENSATION PROGRAM DESIGN AND STRUCTURE	41
	EXECUTIVE COMPENSATION PROGRAM ELEMENTS	42
	PROCESS FOR DETERMINING EXECUTIVE COMPENSATION	48
	COMPETITIVE BENCHMARKING	49
	OTHER SIGNIFICANT COMPENSATION POLICIES AND PRACTICES	50
	BENEFIT PLANS	52
	COMPENSATION COMMITTEE REPORT	54
	COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	54

OPERATIONAL EXCELLENCE AND CAPITAL EFFICIENCY		• Achieved 2020 consolidated proved developed finding and development costs of $9.65 per BOE and drill bit finding and development costs of $5.00 per BOE • Reduced lease operating expense to $3.87 per BOE and reduced cash general and administrative expense to $0.46 per BOE
FINANCIAL STRENGTH		• Maintained investment grade credit ratings • Completed offering of $500 million of 4.75% senior notes due May 31, 2025, the proceeds of which were used to purchase a portion of Energen’s 4.65% senior notes due 2021 that were tendered pursuant to a tender offer by Energen for all of the outstanding 4.65% senior notes and to repay a portion of the outstanding borrowings under Diamondback’s revolving credit facility • Repurchased all of Energen’s outstanding 7.350% medium-term notes due on July 28, 2027 • In March 2021, used net proceeds from the senior note issuance discussed below to complete tender offers for (i) approximately 97% of QEP’s senior notes that remained outstanding following the closing of the QEP merger discussed below and 46% of Diamondback’s outstanding 5.375% senior notes due 2025
PORTFOLIO STRENGTH		• Increased our total proved reserves by 17%, with such reserves consisting of approximately 58% oil • Increased our proved developed reserves by 8%, with such revenues representing approximately 62% of our total proved reserves
PORTFOLIO MANAGEMENT		• Announced in December 2020 the proposed acquisition of QEP in an all-stock merger and the proposed acquisition of leasehold interests and related assets of Guidon, each of which was completed in the first quarter of 2021. These acquisitions added material Tier-1 Midland Basin inventory to our acreage portfolio, increasing our net acreage in the Northern Midland Basin by over 81,500 net acres • Completed Rattler’s first $500 million senior notes offering, proceeds from which were used to pay down borrowings under Rattler’s revolving credit facility • In March 2021, completed the issuance of 0.900% senior notes due 2023, 3.125% senior notes due 2031 and 4.400% senior notes due 2051 in the aggregate principal amount of $2.2 billion discussed above
STOCKHOLDER INITIATIVES		• Maintained our $1.50/share base dividend through the first three quarters of 2020 despite the challenges presented by the COVID-19 pandemic • Increased our quarterly common stock dividend by 6.7% beginning with the Q4 2020 dividend payment
ESG COMMITMENT		• Released our third annual Corporate Responsibility Report in August 2020, which included an assessment of our current portfolio in various low carbon scenarios as outlined by the International Energy Agency • Completed CDP’s water security questionnaire • Added two experienced, diverse members to our Board of Directors • Developed a comprehensive policy governing political spending and disclosed Diamondback’s 2020 political contribution activity • Adopted a Human Rights Policy • Adopted a clawback policy that allows for the recoupment and/or forfeiture of certain executive officer incentive compensation in the event of a restatement • Announced initiatives to reduce Scope 1 GHG intensity by at least 50% from 2019 levels by 2024 and reduce methane intensity by at least 70% from 2019 levels by 2024 • Announced “Net Zero Now” strategy under which, as of January 1, 2021, every hydrocarbon produced by Diamondback is anticipated to be produced with zero net Scope 1 emissions

	Stockholder Feedback		Diamondback Response
•	Short-term annual incentive compensation performance metrics should include more metrics focused on financial returns, with heavier weightings (e.g., free cash flow)	•	2021 short-term annual incentive compensation plan added a free cash flow per share performance metric with a 20% weighting
		•	Financial metrics will have an aggregate 40% weighting in our 2021 short-term annual incentive compensation scorecard
•	Short-term annual incentive compensation performance metrics focused on generation of free cash flow, return on average capital employed and environmental and safety should be weighted more heavily than those focused on cost and capital efficiency	•	The compensation committee has increased the weighting of the environmental and safety performance metrics in the 2021 short-term annual incentive compensation plan from 15% to 20%. The compensation committee maintained the return on average capital employed performance metric at 20% and set the new free cash flow per share performance metric at a 20% weighting
•	The peer group used for the Company’s performance based long-term incentive awards should include the S&P 500	•	The compensation committee included both the S&P 500 and the XOP in the 2021 peer group and maintained an Absolute TSR Modifier for 2021 long term incentive awards
•	The Company should adopt a clawback policy	•	The Company adopted a comprehensive clawback policy

Annual Base Salaries		No Adjustment to Base Salaries for any NEO. Did not adjust the 2021 annual base salaries for our NEOs from the prior year levels. Maintained Mr. Stice’s base salary at current level for second consecutive year.
LTI Awards		Reduced LTI Compensation for All NEOs. Reduced Mr. Stice’s LTI compensation target by 20% from 2020, and reduced the LTI compensation target for each other NEO by 10% from 2020. Additional Enhancements to Performance-based LTI Award (60% of the Total LTI Award). Added S&P 500 and XOP Index to peer group utilized to determine relative TSR performance, and maintained absolute TSR modifier to LTI compensation that reduces payouts if absolute TSR performance is negative and has a multiplier upon achieving a performance period annual TSR of greater than 15%.
Annual Short-Term Cash Incentive Awards		Increased focus on financial performance metrics and environmental and safety metrics. Added Free Cash Flow per Share Metrics having a weight of 20%. Increased weighting of environmental and safety metrics from 15% to 20% Made No Adjustment to Target Levels as Percentage of NEO Base Salary.
General Industry Benchmarking Data		Diverse Benchmarking Analysis. In addition to reviewing peer compensation information and advice provided by Meridian in connection with establishing 2021 executive compensation, the compensation committee guided by the chair, analyzed compensation information for 29 industrial and manufacturing companies with financial measures, including enterprise value, market capitalization and revenues, comparable to Diamondback.
Robust Clawback Policy		We adopted a standalone clawback policy that provides for the recoupment and/or forfeiture of certain executive officer incentive compensation in the event of financial errors that result in a restatement of financial statements, in addition to “clawback” provisions contained in our 2019 Amended and Restated Equity Incentive Plan.

WHAT WE DO		WHAT WE DON’T DO
	We provide pay for performance - The majority of our executive officers’ compensation is long-term, “at risk” and is paid only if the Company achieves certain performance objectives, which are designed to increase the value of our stock.		No hedging of Company securities, including our publicly traded options, puts, calls and short sales, by executive officers or directors.
	All of our performance-based equity awards granted since 2018 vest over a three-year performance period, subject to achieving a specified total stockholder return measured against our peer group and satisfaction of continuous service requirements.		No pledging of our common stock as collateral for a loan or holding of our common stock in margin accounts by our directors and executive officers.
	All Diamondback equity awards granted in 2020 and thereafter contain double-trigger change of control provisions.		No tax gross-ups for executive officers.
	We require substantial stock ownership for our non-employee directors and executive officers and they must maintain their applicable stock ownership levels for as long as they serve on our board or are employed by us.		No repricing of underwater stock options or stock appreciation rights.
	We maintain a competitive compensation package designed to attract, motivate and reward experienced and talented executive officers.		No severance compensation unless departing executive officers agree not to compete with us for a specified period of time after the end of their employment.
	We hold annual advisory “say-on-pay” vote.		No performance metrics that would encourage excessive risk taking by our executive officers.
	We engage in active stockholder outreach with respect to executive compensation and corporate governance.		No significant perquisites to our executive officers.
	Each member of our compensation committee meets the independence requirements under SEC rules and Nasdaq listing standards.		No pension or supplemental retirement benefits to our executive officers (other than under our broad-based 401(k) plan).
	We use external, independent compensation consultants who are retained by, and report directly to, the compensation committee to assist the Company with, among other things, conducting competitive benchmarking to align the Company’s compensation program with prevailing market practices.		No employment agreements with our NEOs and other executive officers. All of such prior employment agreements (to the extent applicable) were replaced by the executive severance plan in February 2020 to provide a uniform framework for compensation and severance benefits that are consistent with market practices.
	We adopted a standalone clawback policy that provides for the recoupment and/or forfeiture of certain executive officer incentive compensation in the event of financial errors that result in a restatement of financial statements. Additionally, our 2019 Amended and Restated Equity Incentive Plan contains “clawback” provisions that each award pursuant to that plan is subject to repayment or forfeiture in accordance with applicable laws, our policies and any relevant provisions in the related award agreements. Under the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act, our Chief Executive Officer and Chief Financial Officer may be subject to clawbacks in the event of a restatement.
	We utilize a balanced approach to compensation, which combines performance and time-based, short-term and long-term, and cash and equity compensation components
	We benchmark executive compensation against general industry peers
	We devote significant time to analyzing and preparing for executive succession and related retention matters

Pay for Performance		• A majority of total compensation to our executive officers is performance-based, including both long-term performance-based equity and short-term performance-based cash incentive awards. Performance-based equity awards are based on relative TSR (enhanced in 2020 by an absolute TSR modifier and in 2021 by revisions to the peer group to include the S&P 500 and XOP Index to account for performance against the broader market) and annual cash incentive awards are based on rigorous operational, financial and environmental and safety performance metrics; and
		• Our compensation structure motivates executives and other employees to deliver outstanding financial performance and meet or exceed general and specific business, operational and individual objectives.
Alignment with Stockholder Interests		• We provide a majority of the total compensation to our executive officers in equity, thus ensuring an alignment of interests between our executives and senior management and our stockholders.
Competitive Compensation that Attracts, Motivates and Retains Talent		• Our compensation programs are competitive, with compensation and incentive levels that are relevant to the market and our industry, which enhances our ability to attract, motivate and retain knowledgeable and experienced senior management talent
Risk Management Principles		• Our compensation committee consists entirely of independent directors who engage external, independent compensation consultants to assist in constructing an executive compensation program that aligns with prevailing market trends and good governance practices.

	Direct Compensation Element	Form of Compensation	Purposes and Alignment with Long-Term Stockholder Interests
FIXED	Base Salary	Cash	• Provide a fixed level of compensation for performing applicable executive functions • Based on level of responsibility, experience, individual performance, industry and market criteria and competition for talent
VARIABLE, AT RISK	Performance-Based Annual Short-Term Incentive	Cash	• Reward short-term financial and operational performance over a one-year performance period • Based on pre-established performance metrics and goals (with payout caps).
	Performance-Based Restricted Stock Unit Award of LTI opportunity	Equity—PSUs with a three-year performance period	• Align interests of our executives with our stock performance and long-term interests of our stockholders • Based on attainment of specific performance goals established by the compensation committee, our TSR relative to our proxy peer group during the performance period and continuous service requirements.
	Time-Based Restricted Stock Unit Award of LTI opportunity	Equity (RSUs)	• Provide a retention incentive, facilitate stock ownership and align our executives’ interest with long-term stockholder interests • Vest in three approximately equal annual installments, with the first installment vesting on the date of grant and the remaining installments vesting in March of each subsequent year, assuming continuous service

•	the market and peer group data included in the study conducted by Meridian Compensation Partners (Meridian), the compensation committee’s independent compensation consultant for 2020, discussed below;
•	the recommendations of our Chief Executive Officer with respect to the base salaries for other NEOs;
•	the complexity of the individual’s role within the Company;
•	the individuals’ expertise and experience;
•	executive promotions and individual performance; and
•	contribution to the Company’s achievement of certain financial and operational metrics discussed in this compensation discussion and analysis.

Named Executive Officer	2020 Base Salary		2019 Base Salary
Travis D. Stice	$	1,250,000		$	1,250,000
Kaes Van’t Hof	$	520,000		$	520,000
Teresa L. Dick	$	447,000		$	447,000
Russell D. Pantermuehl	$	615,000		$	615,000
Daniel N. Wesson	$	450,000		$	370,000

Named Executive Officer	Base Salary as of December 31, 2020		Target Bonus Percentage as a % of Base Salary			Target Bonus Amount		Earned Annual Incentive Bonus Based on Company Performance		Actual Incentive Bonus Awarded
Travis D. Stice	$	1,250,000		125	%	$	1,562,500	$	2,500,000	$	1,562,500
Kaes Van’t Hof	$	520,000		90	%	$	468,000	$	748,800	$	468,000
Teresa L. Dick	$	447,000		80	%	$	357,600	$	576,160	$	357,600
Russell D. Pantermuehl	$	615,000		80	%	$	492,000	$	787,200	$	492,000
Daniel N. Wesson	$	450,000		80	%	$	360,000	$	576,000	$	360,000

	Performance-Based Restricted Stock Units⁽¹⁾	PSU % of Total LTI Award			Time-Based Restricted Stock Units⁽²⁾	RSU % of Total LTI Award			Targeted Value of Total LTI Award⁽³⁾
Travis D. Stice	66,714		60	%	44,476		40	%	$	7,500,000
Kaes Van’t Hof	31,133		60	%	20,756		40	%	$	3,500,000
Teresa L. Dick	17,790		60	%	11,860		40	%	$	2,000,000
Russell Pantermuehl	31,333		60	%	20,756		40	%	$	3,500,000
Daniel N. Wesson	13,343		60	%	8,895		40	%	$	1,500,000

(1)	The three-year performance-based restricted stock units are for the performance period from January 1, 2020 through December 31, 2022. Each NEO is also entitled to dividend equivalent rights on such NEO’s unvested performance-based restricted stock units.

(2)	Time-based restricted stock units of which one-third of the award vested in March 2020, with the remaining restricted stock units vesting in two substantially equal annual installments beginning in March 2021. Each NEO is also entitled to dividend equivalent rights on such NEO’s unvested time-based restricted stock units.

(3)	The aggregate number of performance-based and time-based restricted stock units for each NEO for 2019 was calculated by dividing the targeted value of the total LTI award for each NEO indicated in the table by $67.45 per share, representing the average closing price per share of our common stock on The Nasdaq Global Select Market for the five trading days immediately preceding the last trading day in February 2020, and allocated 60% to the performance-based restricted stock units and 40% to the time-based restricted stock units.