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

MIDLAND, Texas, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Rattler Midstream LP (NASDAQ: RTLR) (“Rattler” or the “Company”), a subsidiary of Diamondback Energy, Inc. (NASDAQ: FANG) (“Diamondback”), today announced financial and operating results for the third quarter ended September 30, 2020.

THIRD QUARTER 2020 HIGHLIGHTS

  • Q3 2020 consolidated net income (including non-controlling interest) of $38.8 million, consolidated adjusted net income (as defined and reconciled below) of $39.4 million
  • Consolidated Adjusted EBITDA (as defined and reconciled below) of $71.3 million
  • Board of Directors of Rattler's general partner approved a cash distribution for the third quarter of 2020 of $0.20 per common unit ($0.80 annualized); implies a 13% annualized yield based on the November 3, 2020 unit closing price of $6.23
  • Board of Directors of Rattler's general partner also approved an up to $100 million common unit repurchase program in conjunction with the reduction in the quarterly distribution from $0.29 to $0.20; repurchase program will be executed with a combination of cash on hand and cash flow from operations, including anticipated cash available as a result of the reduction in the quarterly distribution
  • Q3 2020 cash operated capital expenditures of $33.4 million
  • Q3 2020 average produced water gathering and disposal volumes of 763 MBbl/d, down 10% from Q3 2019 and down 1% from Q2 2020
  • Q3 2020 average sourced water volumes of 204 MBbl/d, down 47% from Q3 2019 and up 161% over Q2 2020; 34% of total sourced water volumes in Q3 2020 sourced from recycled produced water
  • Q3 2020 average crude oil gathering volumes of 91 MBbl/d, up 2% over Q3 2019 and flat from Q2 2020
  • Q3 2020 average gas gathering volumes of 120 BBtu/d, up 31% over Q3 2019 and up 12% over Q2 2020

“Rattler operations in the third quarter of 2020 stabilized after the interruption caused by the historic commodity price volatility in the second quarter of 2020. With Diamondback returning completion activity to stem production declines, and Rattler having adjusted its own operations to this new level of completion and production activity, the third quarter of 2020 offers a new baseline view of Rattler's volumes and earnings potential after the downturn experienced in the first half of the year,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Looking to the fourth quarter of 2020 and into 2021, Rattler will continue to reduce operated capex towards its goal of approximately half of 2020 levels, representing less than a third of 2019 operated capex. Combined with our equity method joint venture build cycle nearing its end and inflecting from a net outflow of capital contributions to a net inflow of cash distributions, this stabilized volume outlook presents meaningful free cash generation even in this depressed commodity price environment. We believe the combination of low leverage, current free cash flow generation and long term asset value supported by approximately 14 years of remaining contract life with a premier low cost domestic operator should be attractive not only within the energy industry, but against the broader investment universe. Regardless, we will continue to focus on what we can control, which is continuing to reduce operating and capital costs while providing our services at the highest level of efficiency and maintaining the highest standards of safety and environmental responsibility."

Mr. Stice further stated, "Rattler’s Board has authorized a $100 million common unit repurchase program to be executed through year-end 2021. This program will be funded with cash on hand and cash flow from operations, including with cash anticipated to be available from the announced reduction in the amount of our quarterly distribution. This change in capital allocation is not a change in Rattler’s strategy and is not a buy-in of Rattler by Diamondback, but is simply meant to capitalize on the opportunity presented by the disconnect between the fundamentals of Rattler’s forward outlook versus the market today. We believe that repurchasing units at these prices presents a return better than or comparable to the best capital projects in our plan, and we intend to repurchase units on a leverage neutral basis. We believe we can repurchase a significant percentage of our public float while continuing to pay a distribution with a double-digit yield at today’s prices, all while maintaining a best-in-class balance sheet for a midstream operator."

OPERATIONS AND FINANCIAL UPDATE

During the third quarter of 2020, the Company recorded total operating income of $44.1 million, an increase of 55% compared to the second quarter of 2020 and a decrease of 16% from the third quarter of 2019. During the third quarter of 2020, the Company recorded consolidated net income (including non-controlling interest) of $38.8 million, inclusive of a $0.7 million abandonment charge, an increase of 211% from the second quarter of 2020 and a decrease of 19% from the third quarter of 2019. Third quarter 2020 adjusted net income (as defined and reconciled below) was $39.4 million, up 41% from the second quarter of 2020 and down 18% from the third quarter of 2019. Third quarter 2020 Adjusted EBITDA (as defined and reconciled below) was $71.3 million, up 32% from the second quarter of 2020 and up 6% from the third quarter of 2019.

Average produced water gathering and disposal volumes for Q3 2020 were 763 MBbl/d, down 10% from Q3 2019 and down 1% from Q2 2020. Average sourced water volumes were 204 MBbl/d, down 47% from Q3 2019 and up 161% over Q2 2020. Average crude oil gathering volumes were 91 MBbl/d, up 2% over Q3 2019 and flat from Q2 2020. Average gas gathering volumes were 120 BBtu/d, up 31% over Q3 2019 and up 12% over Q2 2020.

Third quarter operated capital expenditures totaled $33.4 million, and aggregate contributions to equity method joint ventures were $23.7 million. Rattler also received proceeds of $9.6 million in distributions from equity method investments.

On July 14, 2020, the Company completed an offering (the “Notes Offering”) of $500.0 million in aggregate principal amount of its 5.625% Senior Notes due 2025. The Company received net proceeds of approximately $489.5 million from the Notes Offering, which were used to pay down borrowings under its revolving credit facility. As of September 30, 2020, the Company had $16.6 million of cash and $515.0 million available under its $600.0 million revolving credit facility.

CASH DISTRIBUTION

On October 29, 2020, the Board of Directors of Rattler's general partner approved a cash distribution for the third quarter of 2020 of $0.20 per common unit, payable on November 23, 2020 to unitholders of record at the close of business on November 16, 2020.

GUIDANCE UPDATE

Below is Rattler's revised guidance for the full year 2020, with distribution guidance updated to reflect the latest base case operating plan.

  
 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$120 - $150
Adjusted EBITDA$260 - $300
Equity Method Investment EBITDA(b)$30 - $50
Operated Midstream Capex$125 - $150
2020 Equity Method Investment Contributions(b)$85 - $105
Depreciation, Amortization & Accretion$45 - $60
Distribution per Unit(c)$1.07


(a) Does not include any volumes from the EPIC, Gray Oak, Wink to Webster, OMOG and Amarillo Rattler joint ventures
(b) Includes the EPIC, Gray Oak, Wink to Webster, OMOG and Amarillo Rattler joint ventures
(c) Represents distribution paid during calendar year


CONFERENCE CALL

Rattler will host a conference call and webcast for investors and analysts to discuss its results for the third quarter and full year of 2020 on Thursday, November 5, 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 4374698. A telephonic replay will be available from 12:00 p.m. CT on Thursday, November 5, 2020 through Thursday, November 12, 2020 at 12:00 p.m. CT. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 4374698. 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”), 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
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
    
 September 30, December 31,
 2020 2019
Assets   
Current assets:   
Cash$16,576  $10,633 
Accounts receivable—related party39,560  50,270 
Accounts receivable—third party, net8,138  9,071 
Sourced water inventory9,678  14,325 
Other current assets171  1,428 
Total current assets74,123  85,727 
Property, plant and equipment:   
Land85,826  86,072 
Property, plant and equipment1,026,212  930,768 
Accumulated depreciation, amortization and accretion(90,456) (61,132)
Property, plant and equipment, net1,021,582  955,708 
Right of use assets738  418 
Equity method investments532,008  479,558 
Real estate assets, net97,815  101,116 
Intangible lease assets, net5,745  8,070 
Deferred tax asset75,255   
Other assets4,977  5,796 
Total assets$1,812,243  $1,636,393 



Rattler Midstream LP
Condensed Consolidated Balance Sheets - Continued
(unaudited, in thousands, except unit amounts)
    
 September 30, December 31,
 2020 2019
Liabilities and Unitholders’ Equity   
Current liabilities:   
Accounts payable$263  $147 
Accrued liabilities37,265  76,625 
Taxes payable406  189 
Short-term lease liability679  418 
Total current liabilities38,613  77,379 
Long-term debt575,454  424,000 
Asset retirement obligations14,567  11,347 
Long-term lease liability59   
Deferred income taxes  7,827 
Total liabilities628,693  520,553 
Commitment and contingencies   
Unitholders’ equity:   
General partner—Diamondback919  979 
Common units—public (43,996,243 units issued and outstanding as of September 30, 2020 and 43,700,000 units issued and outstanding as of December 31, 2019)399,080  737,777 
Class B units—Diamondback (107,815,152 units issued and outstanding as of September 30, 2020 and as of December 31, 2019)919  979 
Accumulated other comprehensive income (loss)(223) (198)
Total Rattler Midstream LP unitholders’ equity400,695  739,537 
Non-controlling interest783,550  376,928 
Non-controlling interest in accumulated other comprehensive loss(695) (625)
Total equity1,183,550  1,115,840 
Total liabilities and unitholders’ equity$1,812,243  $1,636,393 



Rattler Midstream LP
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
        
 Three Months Ended September 30, Nine Months Ended September 30,
 2020 2019 2020 2019
Revenues:       
Revenues—related party$85,846  $104,866  $280,460  $296,508 
Revenues—third party7,229  6,840  23,504  15,405 
Rental income—related party2,282  1,399  5,101  3,370 
Rental income—third party867  1,894  4,653  5,999 
Other real estate income—related party149  111  318  265 
Other real estate income—third party166  305  633  818 
Total revenues96,539  115,415  314,669  322,365 
Costs and expenses:       
Direct operating expenses31,173  29,789  101,425  76,381 
Cost of goods sold (exclusive of depreciation and amortization)6,663  17,350  27,368  46,252 
Real estate operating expenses494  742  1,812  1,963 
Depreciation, amortization and accretion10,990  11,736  35,596  31,798 
General and administrative expenses3,140  3,240  11,829  7,677 
(Gain) loss on disposal of property, plant and equipment(16)   2,765  (4)
Total costs and expenses52,444  62,857  180,795  164,067 
Income (loss) from operations        44,095  52,558  133,874  158,298 
Other income (expense):       
Interest income (expense), net(5,817) (553) (10,364) (638)
Income (loss) from equity method investments3,369  (631) (9,910) (695)
Total other income (expense), net(2,448) (1,184) (20,274) (1,333)
Net income (loss) before income taxes        41,647  51,374  113,600  156,965 
Provision for (benefit from) income taxes2,851  3,294  7,754  22,850 
Net income (loss)        38,796  48,080  105,846  134,115 
Less: Net income (loss) before initial public offering      65,995 
Net income (loss) subsequent to initial public offering      68,120 
Less: Net income (loss) attributable to non-controlling interest29,578  36,549  80,775  51,786 
Net income (loss) attributable to Rattler Midstream LP$9,218  $11,531  $25,071  $16,334 
Net income (loss) attributable to limited partners per common unit:       
Basic$0.20  $0.26  $0.53  $0.37 
Diluted$0.20  $0.26  $0.53  $0.37 
Weighted average number of limited partner common units outstanding:       
Basic43,996  43,700  43,837  43,564 
Diluted43,996  44,836  43,837  44,710 



Rattler Midstream LP
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
        
  Three Months Ended September 30, 2020   Nine Months Ended September 30,
  2020   2019   2020   2019
Cash flows from operating activities:       
Net income (loss)$38,796  $48,080  $105,846  $134,115 
Adjustments to reconcile net income to net cash provided by operating activities:       
Provision for deferred income taxes2,851  3,294  7,754  22,850 
Depreciation, amortization and accretion10,990  11,736  35,596  31,798 
Amortization of debt issuance costs467    467   
(Gain) loss on disposal of property, plant and equipment(16)   2,765  (4)
Unit-based compensation expense2,216  2,158  6,555  2,989 
(Income) loss from equity method investments(3,369) 631  9,910  695 
Changes in operating assets and liabilities:       
Accounts receivable—related party(26,517) (29,858) 1,649  (45,297)
Accounts receivable—third party(444) (1,218) (314) (1,045)
Accounts payable, accrued liabilities and taxes payable18,904  (14,051) 117  30,791 
Other1,632  3,695  7,029  (13,028)
Net cash provided by (used in) operating activities45,510  24,467  177,374  163,864 
Cash flows from investing activities:       
Additions to property, plant and equipment(33,402) (84,609) (124,989) (187,544)
Contributions to equity method investments(23,719) (38,721) (89,751) (76,141)
Distributions from equity method investments9,620    27,490   
Proceeds from the sale of fixed assets    42  18 
Net cash provided by (used in) investing activities(47,501) (123,330) (187,208) (263,667)
Cash flows from financing activities:       
Proceeds from senior notes401,000    500,000   
Proceeds from borrowings from credit facility179,000  102,000  179,000  112,000 
Payments on credit facility(518,000)   (518,000) (9,000)
Distribution equivalent rights(524)   (1,820)  
Debt issuance costs(10,014) (3,929) (10,014) (3,929)
Net proceeds from initial public offering—public  (251)   719,376 
Net proceeds from initial public offering—General Partner      1,000 
Net proceeds from initial public offering—Diamondback      999 
Units repurchased for tax withholding    (1,365)  
Distribution to General Partner(20)   (60)  
Distribution to public(12,758)   (38,104)  
Distribution to Diamondback(31,287)   (93,860) (726,513)
Net cash provided by (used in) financing activities7,397  97,820  15,777  93,933 
Net increase (decrease) in cash        5,406  (1,043) 5,943  (5,870)
Cash at beginning of period11,170  3,737  10,633  8,564 
Cash at end of period$16,576  $2,694  $16,576  $2,694 



Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited, in miles)
      
 As of September 30, 2020
(miles)(a)Delaware Basin  Midland Basin  Permian Total
Crude oil108  46  154 
Natural gas155    155 
Produced water267  241  508 
Sourced water27  74  101 
Total557  361  918 

(a) Does not include any assets of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.

Rattler Midstream LP
Capacity/Capability
(unaudited)
        
 As of September 30, 2020
(capacity/capability)(a)Delaware Basin  Midland Basin  Permian Total  Utilization
Crude oil gathering (Bbl/d)210,000  65,000  275,000  36%
Natural gas compression (Mcf/d)151,000    151,000  56%
Natural gas gathering (Mcf/d)170,000    170,000  50%
Produced water gathering and disposal (Bbl/d)1,482,000  1,822,000  3,304,000  23%
Sourced water (Bbl/d)120,000  455,000  575,000  35%

(a) Does not include any assets of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.

Rattler Midstream LP
Throughput and Volumes
(unaudited)
        
 Three Months Ended September 30, Nine Months Ended September 30,
(throughput)(a)2020 2019 2020 2019
Crude oil gathering volumes (Bbl/d)91,090  88,990  93,205  80,594 
Natural gas gathering volumes (MMBtu/d)119,951  91,455  115,089  78,918 
Produced water gathering and disposal volumes (Bbl/d)763,475  845,877  825,254  776,215 
Sourced water gathering volumes (Bbl/d)203,785  384,066  242,710  394,946 

(a) Does not include any volumes of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.

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 impairments and abandonments 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 and interest expense on its equity method investments and other non-cash transactions. Adjusted EBITDA should not be considered an alternative to net income or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles in the United States ("GAAP"). The GAAP measure most directly comparable to Adjusted EBITDA is net income. 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
Adjusted EBITDA
(unaudited, in thousands)
        
 Three Months Ended September 30, Nine Months Ended September 30,
 2020 2019 2020 2019
Reconciliation of Net Income to Adjusted EBITDA:       
Net income$38,796  $48,080  $105,846  $134,115 
Interest expense, net of amount capitalized5,817  553  10,364  638 
Depreciation, amortization and accretion10,990  11,736  35,596  31,798 
Depreciation and interest expense related to equity method investments9,330  1,205  20,340  1,354 
Impairments and abandonments related to equity method investments676    16,515   
Non-cash unit-based compensation expense2,216  2,158  6,555  2,989 
Other non-cash transactions671    3,236   
Provision for income taxes2,851  3,294  7,754  22,850 
Adjusted EBITDA        71,347  67,026  206,206  193,744 
Less: Adjusted EBITDA prior to the IPO      100,743 
Adjusted EBITDA subsequent to the IPO        71,347  67,026  206,206  93,001 
Less: Adjusted EBITDA attributable to non-controlling interest50,670  47,694  146,582  66,177 
Adjusted EBITDA attributable to Rattler Midstream LP        $20,677  $19,332  $59,624  $26,824 

Adjusted net income is a non-GAAP financial measure equal to net income adjusted for impairments and abandonments related to equity method investments and related income tax adjustments. The Partnership's computation of adjusted net income may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts.

Rattler Midstream LP
Adjusted Net Income
(unaudited, in thousands, except per unit data)
      
 Three Months Ended September 30, 2020
 Nine Months Ended
September 30, 2020
 Pre-Tax Amounts
 Pre-Tax Amounts
Reconciliation of Net Income to Adjusted Net Income:  
Net income$38,796  $105,846 
Impairments and abandonments related to equity method investments676  16,515 
Adjusted income excluding above items39,472  122,361 
Income tax adjustment for above items(46) (1,130)
Adjusted net income(1)        39,426  121,231 
Less: Adjusted net income attributable to non-controlling interest30,058  92,504 
Adjusted net income attributable to Rattler Midstream LP        $9,368  $28,727 
   
Adjusted net income attributable to limited partners per common unit$0.20  $0.61 

(1) Adjusted net income was equal to net income for the three and nine months ended September 30, 2019.

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

 

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.