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Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports First Quarter 2020 Financial and Operating Results

MIDLAND, Texas, May 06, 2020 (GLOBE NEWSWIRE) -- Rattler Midstream LP (RTLR) (“Rattler” or the “Company”), a subsidiary of Diamondback Energy, Inc. (FANG) (“Diamondback”), today announced financial and operating results for the first quarter ended March 31, 2020.

FIRST QUARTER 2020 HIGHLIGHTS

  • Q1 2020 consolidated net income (including non-controlling interest) of $54.6 million, consolidated adjusted EBITDA (as defined and reconciled below) of $81.0 million

  • Board of Directors of Rattler's general partner approved a cash distribution for the first quarter of 2020 of $0.29 per common unit ($1.16 annualized)

  • Q1 2020 operated capital expenditures of $52.0 million

  • Q1 2020 average produced water gathering and disposal volumes of 942 MBbl/d, up 5% over Q4 2019 and up 32% over Q1 2019

  • Q1 2020 average sourced water volumes of 447 MBbl/d, down 7% from Q4 2019 and up 27% over Q1 2019; 17% of total sourced water volumes in Q1 2020 sourced from recycled produced water

  • Q1 2020 average crude oil gathering volumes of 97 MBbl/d, down 1% from Q4 2019 and up 30% over Q1 2019

  • Q1 2020 average gas gathering volumes of 118 BBtu/d, up 13% over Q4 2019 and up 95% over Q1 2019

“First of all, and most importantly, our thoughts and prayers go out to all of those affected by the coronavirus.  The first half of 2020 will be in the history books forever, for all of the wrong reasons, but our business must go on and we have taken swift and decisive action to adapt to rapidly changing circumstances and preserve our strength through this cycle,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Despite the impact of Diamondback's swift reduction of completion activity in March to Rattler’s sourced water volumes, the Company’s first quarter operating results built on the trend of increasing volumes, earnings and cash flow since the Company’s IPO nearly a year ago.  While the volatility of the energy markets has been more pronounced than ever in this short year, we are proud of how the business has performed, and look forward to displaying the resiliency of the business model in the face of this volatility.  The unprecedented conditions in the energy industry and overall economy today require companies to adjust their business plans, and Rattler has responded quickly by reducing capital expenditures and operating costs.  Therefore, despite the significantly reduced activity prudently announced by Diamondback, Rattler's operated business will continue to be free cash flow positive as growth capex has been significantly reduced, more than offsetting the reduction in expected Diamondback volumes."

OPERATIONS AND FINANCIAL UPDATE

During the first quarter of 2020, the Company recorded total operating income of $61.3 million, flat compared to the fourth quarter of 2019 and an increase of 22% over the first quarter of 2019. During the first quarter of 2020, the Company recorded consolidated net income (including non-controlling interest) of $54.6 million, an increase of 6% over the fourth quarter of 2019 and an increase of 39% over the first quarter of 2019.  First quarter 2020 Adjusted EBITDA (as defined and reconciled below) was $81.0 million, up 14% over the fourth quarter of 2019 and up 35% over the first quarter of 2019.

Average produced water gathering and disposal volumes for Q1 2020 were 942 MBbl/d, up 5% over Q4 2019 and up 32% over Q1 2019.  Average sourced water volumes were 447 MBbl/d, down 7% from Q4 2019 due to Diamondback reducing completion activity in March, and up 27% over Q1 2019.  Average crude oil gathering volumes were 97 MBbl/d, down 1% from Q4 2019 and up 30% over Q1 2019.  Average gas gathering volumes were 118 BBtu/d, up 13% over Q4 2019 and up 95% over Q1 2019.

First quarter operated capital expenditures totaled $52.0 million, and aggregate contributions to equity method joint ventures were $32.6 million.  Rattler also received proceeds of $9.8 million in distributions from equity method investments.  As of March 31, 2020, the Company had a cash balance of $16.2 million and $149.0 million available under its $600.0 million revolving credit facility, which is expandable to $1.0 billion upon Rattler's election, subject to obtaining lender commitments and satisfaction of customary conditions.

CASH DISTRIBUTION

On April 30, 2020, the Board of Directors of Rattler's general partner approved a cash distribution for the first quarter of 2020 of $0.29 per common unit, payable on May 26, 2020 to unitholders of record at the close of business on May 18, 2020.  Rattler expects to maintain the $1.16 annual distribution per unit for full year 2020, but the distribution may be changed at any time and the Board has the discretion to review and adjust the distribution quarterly should market conditions warrant.

GUIDANCE UPDATE

Below is Rattler's revised guidance for the full year 2020, with volume guidance updated to reflect the latest base case operating plan. EBITDA and capital expenditure guidance remain consistent with the Company's March 19 press release.

 

 

 

Rattler Midstream LP Guidance

 

 2020

 

 

Rattler Operated Volumes (a)

 

Produced Water Gathering and Disposal Volumes (MBbl/d)

800 - 900

Sourced Water Volumes (MBbl/d)

150 - 250

Crude Oil Gathering Volumes (MBbl/d)

85 - 95

Gas Gathering Volumes (BBtu/d)

95 - 115

 

 

Financial Metrics ($ millions except per unit metrics)

 

Net Income

$130 - $160

Adjusted EBITDA

$260 - $300

Equity Method Investment EBITDA(b)

$30 - $50

Operated Midstream Capex

$100 - $150

2020 Equity Method Investment Contributions(b)

$110 - $125

Depreciation, Amortization & Accretion

$45 - $60

Annualized Distribution per Unit

$1.16

(a)     Does not include volumes from the EPIC, Gray Oak, Wink to Webster, OMOG and Amarillo Rattler joint ventures
(b)     Includes EPIC, Gray Oak, Wink to Webster, OMOG and Amarillo Rattler joint ventures

CONFERENCE CALL

Rattler will host a conference call and webcast for investors and analysts to discuss its results for the first quarter and full year of 2020 on Thursday, May 7, 2020 at 9:00 a.m. CT.  Participants should call (877) 288-2756 (United States/Canada) or (470) 495-9481 (International) and use the confirmation code 3095396.  A telephonic replay will be available from 11:00 a.m. CT on Thursday, May 7, 2020 through Thursday, May 14, 2020 at 11:00 a.m. CT.  To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 3095396.  A live broadcast of the earnings conference call will also be available via the internet at www.rattlermidstream.com under the “Investors” section of the site.  A replay will also be available on the website following the call.

About Rattler Midstream LP

Rattler Midstream LP is a growth-oriented Delaware limited partnership formed in July 2018 by Diamondback Energy, Inc. to own, operate, develop and acquire midstream infrastructure assets in the Midland and Delaware Basins of the Permian Basin.  Rattler provides crude oil, natural gas and water-related midstream services to Diamondback under long-term, fixed-fee contracts.  For more information, please visit www.rattlermidstream.com.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.  For more information, please visit www.diamondbackenergy.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws.   All statements, other than historical facts, that address activities that Rattler assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements.  The forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, including specifically the statements regarding expectations of plans, strategies, objectives and anticipated financial and operating results of Rattler, including Rattler's capital expenditure levels and other guidance discussed above.  These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Rattler.  Information concerning these risks and other factors can be found in Rattler’s filings with the Securities and Exchange Commission (“SEC”), including its Final Prospectus, dated May 22, 2019 and filed May 24, 2019, Forms 10-Q and 8-K and Annual Report on Form 10-K for the year ended December 31, 2019 which can be obtained free of charge on the SEC’s web site at http://www.sec.gov.  Rattler undertakes no obligation to update or revise any forward-looking statement.

 

Rattler Midstream LP

Consolidated Balance Sheets

(unaudited, in thousands)

 

 

 

 

 

March 31,

 

December 31,

 

2020

 

2019

Assets

 

 

 

Current assets:

 

 

 

Cash

$

16,183

 

 

$

10,633

 

Accounts receivable—related party

18,244

 

 

50,270

 

Accounts receivable—third party, net

10,782

 

 

9,071

 

Sourced water inventory

13,265

 

 

14,325

 

Other current assets

1,051

 

 

1,428

 

Total current assets

59,525

 

 

85,727

 

Property, plant and equipment:

 

 

 

Land

88,309

 

 

88,509

 

Property, plant and equipment

987,336

 

 

930,768

 

Accumulated depreciation, amortization and accretion

(71,604

)

 

(61,132

)

Property, plant and equipment, net

1,004,041

 

 

958,145

 

Right of use assets

171

 

 

418

 

Equity method investments

502,040

 

 

479,558

 

Real estate assets, net

97,580

 

 

98,679

 

Intangible lease assets, net

7,274

 

 

8,070

 

Other assets

5,584

 

 

5,796

 

Total assets

$

1,676,215

 

 

$

1,636,393

 

 

 

 

 

 

 

 

 


Rattler Midstream LP

Consolidated Balance Sheets - Continued

(unaudited, in thousands, except unit amounts)

 

 

 

 

 

March 31,

 

December 31,

 

2020

 

2019

Liabilities and Unitholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

36

 

 

$

147

 

Accrued liabilities

72,906

 

 

76,625

 

Taxes payable

336

 

 

189

 

Short-term lease liability

171

 

 

418

 

Total current liabilities

73,449

 

 

77,379

 

Long-term debt

451,000

 

 

424,000

 

Asset retirement obligations

12,525

 

 

11,347

 

Deferred income taxes

11,483

 

 

7,827

 

Total liabilities

548,457

 

 

520,553

 

Commitment and contingencies

 

 

 

Unitholders' equity:

 

 

 

General partner—Diamondback

959

 

 

979

 

Common units—public (43,700,000 units issued and outstanding as of March 31, 2020 and as of December 31, 2019)

739,702

 

 

737,777

 

Class B units—Diamondback (107,815,152 units issued and outstanding as of March 31, 2020 and as of December 31, 2019)

959

 

 

979

 

Accumulated other comprehensive loss

(261

)

 

(198

)

Total Rattler Midstream LP unitholders’ equity

741,359

 

 

739,537

 

Non-controlling interest

387,219

 

 

376,928

 

Non-controlling interest in accumulated other comprehensive loss

(820

)

 

(625

)

Total equity

1,127,758

 

 

1,115,840

 

Total liabilities and unitholders’ equity

$

1,676,215

 

 

$

1,636,393

 

 

 

 

 

 

 

 

 


Rattler Midstream LP

Consolidated Statements of Operations

(unaudited, in thousands, except per unit data)

 

 

 

 

 

Three Months Ended
March 31,

 

2020

 

2019

 

 

 

Predecessor

Revenues:

 

 

 

Revenues—related party

$

116,583

 

 

$

88,576

 

Revenues—third party

9,100

 

 

3,487

 

Rental income—related party

1,402

 

 

715

 

Rental income—third party

1,901

 

 

2,067

 

Other real estate income—related party

116

 

 

73

 

Other real estate income—third party

293

 

 

258

 

Total revenues

129,395

 

 

95,176

 

Costs and expenses:

 

 

 

Direct operating expenses

32,874

 

 

20,186

 

Cost of goods sold (exclusive of depreciation and amortization)

15,961

 

 

13,053

 

Real estate operating expenses

728

 

 

526

 

Depreciation, amortization and accretion

12,506

 

 

9,904

 

General and administrative expenses

4,514

 

 

1,369

 

Loss on disposal of property, plant and equipment

1,538

 

 

 

Total costs and expenses

68,121

 

 

45,038

 

Income from operations

61,274

 

 

50,138

 

Other income (expense):

 

 

 

Interest expense, net

(2,621

)

 

 

(Loss) income from equity method investments

(245

)

 

50

 

Total other income (expense), net

(2,866

)

 

50

 

Net income before income taxes

58,408

 

 

50,188

 

Provision for income taxes

3,820

 

 

10,832

 

Net income after taxes

$

54,588

 

 

$

39,356

 

Net income attributable to non-controlling interest

41,557

 

 

 

Net income attributable to Rattler Midstream LP

$

13,031

 

 

 

 

 

 

 

Net income attributable to limited partners per common unit:

 

 

 

Basic

$

0.28

 

 

 

Diluted

$

0.28

 

 

 

 

 

 

 

 

 

Weighted average number of limited partner common units outstanding:

 

 

 

Basic

43,700

 

 

 

Diluted

43,700

 

 

 


 

Rattler Midstream LP

Consolidated Statements of Cash Flows

(unaudited, in thousands)

 

 

 

 

 

Three Months Ended
March 31,

 

2020

 

2019

 

 

 

Predecessor

Cash flows from operating activities:

 

 

 

Net income

$

54,588

 

 

$

39,356

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Provision for deferred income taxes

3,820

 

 

2,867

 

Depreciation, amortization and accretion

12,506

 

 

9,904

 

Loss on disposal of property, plant and equipment

1,538

 

 

 

Unit-based compensation expense

2,219

 

 

 

Loss (income) from equity method investments

245

 

 

(50

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable—related party

31,674

 

 

(15,516

)

Accounts receivable—third party

(1,711

)

 

625

 

Accounts payable, accrued liabilities and taxes payable

(8,540

)

 

19,578

 

Other

1,648

 

 

(1,524

)

Net cash provided by operating activities

97,987

 

 

55,240

 

Cash flows from investing activities:

 

 

 

Additions to property, plant and equipment

(52,046

)

 

(51,743

)

Contributions to equity method investments

(32,563

)

 

 

Distributions from equity method investments

9,761

 

 

 

Proceeds from the sale of fixed assets

42

 

 

 

Net cash used in investing activities

(74,806

)

 

(51,743

)

Cash flows from financing activities:

 

 

 

Proceeds from borrowings from credit facility

27,000

 

 

 

Distribution equivalent rights

(652

)

 

 

Distribution to General Partner

(20

)

 

 

Distribution to public

(12,673

)

 

 

Distribution to Diamondback

(31,286

)

 

 

Net cash used in financing activities

(17,631

)

 

 

Net increase in cash

5,550

 

 

3,497

 

Cash at beginning of period

10,633

 

 

8,564

 

Cash at end of period

$

16,183

 

 

$

12,061

 

Supplemental disclosure of cash flow information:

 

 

 

Interest paid

$

2,978

 

 

$

 

Supplemental disclosure of non-cash financing activity:

 

 

 

Contributions from Diamondback

$

 

 

$

458,674

 

Supplemental disclosure of non-cash investing activity:

 

 

 

Increase in long term assets and inventory due to contributions from Diamondback

$

 

 

$

449,441

 

Change in accrued liabilities related to property, plant and equipment

$

5,063

 

 

$

15,856

 

Decrease in current liabilities

$

 

 

$

9,233

 


 

Rattler Midstream LP

Pipeline Infrastructure Assets

(unaudited, in miles)

 

 

 

 

 

 

 

As of March 31, 2020

(miles)

Delaware Basin

 

Midland Basin

 

Permian Total

Crude oil

106

 

 

44

 

 

150

 

Natural gas

149

 

 

 

 

149

 

Produced water

261

 

 

221

 

 

482

 

Sourced water

32

 

 

73

 

 

105

 

Total

548

 

 

338

 

 

886

 

 

 

 

 

 

 

 

 

 


Rattler Midstream LP

Capacity/Capability

(unaudited)

 

 

 

 

 

 

 

 

 

As of March 31, 2020

(capacity/capability)

Delaware Basin

 

Midland Basin

 

Permian Total

 

Utilization

Crude oil gathering (Bbl/d)

180,000

 

 

56,000

 

 

236,000

 

 

41

%

Natural gas compression (Mcf/d)

135,000

 

 

 

 

135,000

 

 

63

%

Natural gas gathering (Mcf/d)

150,000

 

 

 

 

150,000

 

 

56

%

Produced water gathering and disposal (Bbl/d)

1,660,500

 

 

1,872,300

 

 

3,532,800

 

 

28

%

Sourced water (Bbl/d)

120,000

 

 

455,000

 

 

575,000

 

 

78

%


 

Rattler Midstream LP

Throughput and Volumes

(unaudited)

 

 

 

 

 

Three Months Ended
March 31,

(throughput)

2020

 

2019

Crude oil gathering volumes (Bbl/d)

97,293

 

 

74,567

 

Natural gas gathering volumes (MMBtu/d)

117,761

 

 

60,534

 

Produced water gathering and disposal volumes (Bbl/d)

941,628

 

 

711,198

 

Sourced water gathering volumes (Bbl/d)

446,713

 

 

352,603

 

 

 

 

 

 

 

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA is a supplemental non-GAAP financial measure used by management and external users of its financial statements, such as industry analysts, investors, lenders and rating agencies.  Management believes Adjusted EBITDA is useful because the measure allows it to more effectively evaluate the Company's operating performance and compare the results of its operations period to period without regard to its financing methods or capital structure.

The Company defines Adjusted EBITDA as net income before income taxes, interest expense, net of amount capitalized, its proportional interest expense related to equity method investments, non-cash unit-based compensation expense, depreciation, amortization and accretion on assets and liabilities of Rattler Midstream Operating LLC, its proportional interest of depreciation on its equity method investments and other non-cash transactions.  The GAAP measure most directly comparable to Adjusted EBITDA is net income.  Adjusted EBITDA should not be considered an alternative to net income or any other measure of financial performance or liquidity presented in accordance with GAAP.  Adjusted EBITDA excludes some, but not all, items that affect net income, and these measures may vary from those of other companies.  As a result, Adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies.

The Company does not provide guidance on the reconciling items between forecasted Net Income and forecasted Adjusted EBITDA due to the uncertainty regarding timing and estimates of these items. Rattler provides a range for the forecasts of Net Income and Adjusted EBITDA to allow for the variability in timing and uncertainty of estimates of reconciling items between forecasted Net Income and forecasted Adjusted EBITDA. Therefore, the Company cannot reconcile forecasted Net Income to forecasted Adjusted EBITDA without unreasonable effort.

The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure for each of the periods indicated:

 

Rattler Midstream LP

(unaudited, in thousands)

 

 

 

 

 

Three Months Ended
March 31,

 

2020

 

2019

Reconciliation of Net Income to Adjusted EBITDA:

 

 

 

Net income

$

54,588

 

 

$

39,356

 

Depreciation, amortization and accretion

12,506

 

 

9,904

 

Depreciation related to equity method investments

3,443

 

 

 

Interest expense, net of amount capitalized

2,621

 

 

 

Interest expense related to equity method investments

323

 

 

 

Non-cash unit-based compensation expense

2,219

 

 

 

Other non-cash transactions

1,460

 

 

 

Provision for income taxes

3,820

 

 

10,832

 

Adjusted EBITDA

80,980

 

 

$

60,092

 

Less: Adjusted EBITDA attributable to non-controlling interest

(57,624

)

 

 

Adjusted EBITDA attributable to Rattler Midstream LP

$

23,356

 

 

 

 

 

 

 

 

 

Investor Contact:
Adam Lawlis
+1 432.221.7467
IR@rattlermidstream.com
Source: Rattler Midstream LP; Diamondback Energy, Inc.