Asset acquisition, property acquired

[Table of Contents](#i31241139a24240ee889881d54ce4b5f1_7)Diamondback Energy, Inc. and Subsidiaries Condensed Notes to Consolidated Financial Statements - (Continued)(Unaudited)  
Williston Basin Divestiture  
On October 21, 2021, the Company completed the divestiture of its Williston Basin oil and natural gas assets, consisting of approximately 95,000 net acres, to Oasis Petroleum Inc., for net cash proceeds of approximately $586 million, after customary closing adjustments. This transaction did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the Company recorded the proceeds as a reduction of its full cost pool with no gain or loss recognized on the sale. The Company used its net proceeds from this transaction toward debt reduction.  
2021 Drop Down Transaction  
On December 1, 2021, Diamondback completed the sale of certain water midstream assets to Rattler in exchange for cash proceeds of approximately $164 million, including post-closing adjustments, in a drop down transaction (the “Drop Down”). The midstream assets consist primarily of produced water gathering and disposal systems, produced water recycling facilities, and sourced water gathering and storage assets acquired by the Company through the Guidon Acquisition and the QEP Merger with a carrying value of approximately $164 million. The Company and Rattler have also mutually agreed to amend their commercial agreements covering produced water gathering and disposal and sourced water gathering services to add certain Diamondback leasehold acreage to Rattler’s dedication. The Drop Down transaction was accounted for as a transaction between entities under common control.  
Viper’s Swallowtail Acquisition  
On October 1, 2021, Viper acquired certain mineral and royalty interests from the Swallowtail entities pursuant to a definitive purchase and sale agreement for 15.25 million of Viper’s common units and approximately $225 million in cash (the “Swallowtail Acquisition”). The mineral and royalty interests acquired in the Swallowtail Acquisition represent approximately 2,313 net royalty acres primarily in the Northern Midland Basin, of which approximately 62% are operated by Diamondback as of December 31, 2021. The Swallowtail Acquisition had an effective date of August 1, 2021. The cash portion of this transaction was funded through a combination of Viper’s cash on hand and approximately $190 million of borrowings under Viper LLC’s revolving credit facility.  
5.    PROPERTY AND EQUIPMENT  
Property and equipment includes the following as of the dates indicated:  


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|  | June 30, |  | December 31, |
|  | 2022 |  | 2021 |
|  | (In millions) |
| Oil and natural gas properties: |  |  |  |
| Subject to depletion | $ | 26,103  |  |  | $ | 24,418  |  |
| Not subject to depletion | 8,097  |  |  | 8,496  |  |
| Gross oil and natural gas properties | 34,200  |  |  | 32,914  |  |
| Accumulated depletion | (6,019) |  |  | (5,434) |  |
| Accumulated impairment | (7,954) |  |  | (7,954) |  |
| Oil and natural gas properties, net | 20,227  |  |  | 19,526  |  |
| Midstream assets | 1,139  |  |  | 1,076  |  |
| Other property, equipment and land | 190  |  |  | 174  |  |
| Accumulated depreciation, amortization, accretion and impairment | (187) |  |  | (157) |  |
| Total property and equipment, net  | $ | 21,369  |  |  | $ | 20,619  |  |
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Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter which determines a limit, or ceiling, on the book value of proved oil and natural gas properties. No impairment expense was recorded for the three and six months ended June 30, 2022 or 2021 based on the results of the respective quarterly ceiling tests. 13
