Questions? +1 (202) 335-3939 Login
Trusted News Since 1995
A service for energy industry professionals · Saturday, March 28, 2020 · 513,218,907 Articles · 3+ Million Readers

Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports Fourth Quarter and Full Year 2019 Financial and Operating Results; Increases Distribution

/EIN News/ -- MIDLAND, Texas, Feb. 18, 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 fourth quarter and full year ended December 31, 2019.

FOURTH QUARTER 2019 HIGHLIGHTS

  • Q4 2019 consolidated net income (including non-controlling interest) of $51.6 million, consolidated adjusted EBITDA (as defined and reconciled below) of $71.0 million
  • Board of directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2019 of $0.29 per common unit ($1.16 annualized), up 16% from the initial annualized distribution
  • Q4 2019 capital expenditures of $54.2 million
  • Q4 2019 average produced water gathering and disposal volumes of 895 MBbl/d, up 6% over Q3 2019 and 164% over Q4 2018
  • Q4 2019 average sourced water volumes of 478 MBbl/d, up 25% over Q3 2019 and 137% over Q4 2018; 26% of total sourced water volumes in Q4 2019 was sourced from recycled produced water compared to ~10% for full year 2018
  • Q4 2019 average crude oil gathering volumes of 99 MBbl/d, up 11% over Q3 2019 and 63% over Q4 2018
  • Q4 2019 average gas gathering volumes of 104 BBtu/d, up 14% over Q3 2019 and 125% over Q4 2018
  • Entered into a 50/50 joint venture with Amarillo Midstream, LLC ("Amarillo Midstream"), a portfolio company of ArcLight Capital Partners, to operate a gas gathering and processing system and construct a new 60 MMcf/d cryogenic natural gas processing plant in Martin County for Diamondback's acreage acquired from Ajax Resources
  • Rattler and Oryx Midstream, a portfolio company of Stonepeak Infrastructure Partners, through their newly created joint venture OMOG JV LLC ("OMOG"), acquired Reliance Gathering, LLC (now known as Oryx Midland Oil Gathering LLC)

FULL YEAR 2019 HIGHLIGHTS

  • Full year 2019 consolidated net income (including non-controlling interest) of $185.7 million; up 195% from full year 2018
  • Full year 2019 consolidated adjusted EBITDA (as defined and reconciled below) of $264.7 million; up 151% from full year 2018
  • Full year 2019 capital expenditures of $241.8 million
  • Full year 2019 average produced water gathering and disposal volumes of 806 MBbl/d, up 186% over full year 2018
  • Full year 2019 average sourced water volumes of 416 MBbl/d, up 65% full year 2018
  • Full year 2019 average crude oil gathering volumes of 85 MBbl/d, up 80% over full year 2018
  • Full year 2019 average gas gathering volumes of 85 BBtu/d, up 117% over full year 2018

“Rattler's core business continued to operate extremely well with a strong final quarter of 2019.  Volumes in our produced water gathering and oil gathering service lines organically increased by 26% and 32%, respectively, since just the first quarter of 2019.  Moreover, Adjusted EBITDA of $265 million for full year 2019 exceeded pre-IPO estimates despite a ~$4 million drag from equity method investments for the year as we wait for full service of the EPIC and Gray Oak pipeline projects in 2020.  Looking forward to 2020, Rattler is expected to grow Adjusted EBITDA 42% year over year at the midpoint of guidance, underpinned by strong expected volume growth with declining operated Capex.  Our unchanged business plan in the face of volatility in energy equity and commodity markets highlights the strength and stability we see in our relationship with Diamondback and the insulating structure of fixed fee gathering agreements with a low cost operator,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Rattler also announced its entry into the Amarillo Rattler joint venture to develop a gathering, compression and processing system, including a new 60 MMcf/d cryogenic natural gas processing plant in northwest Martin County, an area expected to be a core growth area for Diamondback in the years to come.  This new investment, along with existing investments in the OMOG, EPIC, Gray Oak and Wink to Webster joint ventures, continues Rattler's strategy of leveraging the Diamondback relationship to invest in projects where Diamondback will participate as a major customer.  With all of the remaining projects in our joint ventures expected to reach full service by the end of 2021, and capital expenditures on Rattler's operated midstream assets expected to continue to decrease as various systems grow closer to full capacity, we believe that expected future volume and EBITDA growth will directly lead to sustained and increasing free cash flow.  Rattler, with its conservative capital structure and low leverage, intends to rely on this expected free cash flow to return capital to unitholders through distributions, as represented by a 16% higher distribution per unit for Q4 2019 and 2020."

OPERATIONS AND FINANCIAL UPDATE

During the fourth quarter of 2019, the Company recorded total operating income of $61.0 million, an increase of 16% over the third quarter of 2019 and an increase of 212% over the fourth quarter of 2018.  For the full year 2019, the Company recorded total operating income of $219.3 million, an increase of 173% over full year 2018.

During the fourth quarter of 2019, the Company recorded consolidated net income (including non-controlling interest) of $51.6 million, an increase of 7% over the third quarter of 2019 and an increase of 237% over the fourth quarter of 2018.  For the full year 2019, the Company recorded consolidated net income (including non-controlling interest) of $185.7 million, an increase of 195% over full year 2018.

Fourth quarter 2019 Adjusted EBITDA (as defined and reconciled below) was $71.0 million, up 6% from Q3 2019 and up 164% from Q4 2018.  Full year 2019 Adjusted EBITDA was $264.7 million, up 151% from full year 2018.

During the fourth quarter of 2019, average produced water gathering and disposal volumes were 895 MBbl/d, up 6% over Q3 2019 and 164% over Q4 2018.  Average sourced water volumes were 478 MBbl/d, up 25% over Q3 2019 and 137% over Q4 2018.  Average oil gathering volumes were 99 MBbl/d, up 11% over Q3 2019 and 63% over Q4 2018.  Average gas gathering volumes were 104 BBtu/d, up 14% over Q3 2019 and 125% over Q4 2018.

For the full year 2019, average produced water gathering and disposal volumes were 806 MBbl/d, up 186% over full year 2018.   Average sourced water gathering volumes were 416 MBbl/d, up 65% over full year 2018.  Average oil gathering volumes were 85 MBbl/d, up 80% over full year 2018.  Average gas gathering volumes were 85 BBtu/d, up 117% over full year 2018.

Fourth quarter capital expenditures totaled $54.2 million, and aggregate contributions to equity method joint ventures were $260.5 million.  Full year 2019 capital expenditures totaled $241.8 million, and aggregate contributions to equity method joint ventures were $336.6 million, with Diamondback contributing an additional $149.5 million in equity method investments prior to the Rattler initial public offering that was transferred to Rattler in the form of a non-cash contribution.

As of December 31, 2019, the Company had a cash balance of $10.6 million and $176.0 million available under its $600.0 million revolving credit facility, which is expandable to $1.0 billion upon Rattler's election.

CASH DISTRIBUTION

On February 13, 2020, the board of directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2019 of $0.29 per common unit, payable on March 10, 2020 to unitholders of record at the close of business on March 3, 2020.  In its updated 2020 guidance, Rattler expects to maintain this increased distribution per unit for full year 2020, an increase of 16% from its initial annualized distribution of $1.00 per unit.

AMARILLO RATTLER GAS PROCESSING JOINT VENTURE

On December 20, 2019, Rattler acquired a 50% equity interest in Amarillo Rattler, a joint venture with Amarillo Midstream, a portfolio company of ArcLight Capital Partners.  Amarillo Rattler currently owns and operates the Yellow Rose gas gathering and processing system with estimated total processing capacity of 40 MMcf/d and over 84 miles of gathering and regional transportation pipelines in Dawson, Martin and Andrews Counties, Texas.  This joint venture also intends to construct and operate a new 60 MMcf/d cryogenic natural gas processing plant in Martin County, Texas as well as incremental gas gathering and compression and regional transportation pipelines. The estimated aggregate capital outlay of the joint venture is anticipated to be approximately $100 million (or approximately $50 million from Rattler) to construct the new processing plant, gas gathering and compression, and regional transportation pipelines.

Rattler anticipates that the new processing plant will commence full commercial operations in mid 2021.  Diamondback has dedicated to this joint venture acreage and production from the acreage acquired from the Ajax Resources acquisition in October 2018.  Amarillo Midstream serves as construction manager and operator for this joint venture, and Rattler will account for the investment in the joint venture as an equity method investment.

OMOG JV (RELIANCE GATHERING)

On November 7, 2019, Rattler and Oryx Midstream, a portfolio company of Stonepeak Infrastructure Partners, through their newly created joint venture OMOG JV LLC acquired Reliance Gathering, LLC (now known as Oryx Midland Oil Gathering LLC) for approximately $356 million in cash. Rattler owns 60%, and Oryx owns 40%, of the joint venture.

GUIDANCE UPDATE

Below is Rattler's guidance for 2020, which is the same as the guidance for 2020 released by Rattler in November 2019, except to the extent updated to reflect (i) updated sourced water volumes, (ii) estimated 2020 equity method investment contributions and total remaining equity method investment contributions, (iii) the anticipated annualized increase to Rattler's distribution per unit and (iv) estimated Depreciation, Amortization & Accretion expense.

   
  Rattler Midstream LP Guidance
  2020
   
Rattler Operated Volumes (a)  
Produced Water Gathering and Disposal Volumes (MBbl/d) 950 - 1,050
Sourced Water Volumes (MBbl/d) 400 - 475
Oil Gathering Volumes (MBbl/d) 100 - 110
Gas Gathering Volumes (BBtu/d) 100 - 120
   
Financial Metrics ($ millions except per unit metrics)  
Adjusted EBITDA $350 - $400
Equity Method Investment EBITDA(b) $40 - $60
Operated Midstream Capex $200 - $225
2020 Equity Method Investment Contributions(b) $135 - $150
Total Remaining Equity Method Investment Contributions(b) $170 - $185
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 fourth quarter and full year of 2019 on Wednesday, February 19, 2020 at 10:00 a.m. CT.  Participants should call (877) 288-2756 (United States/Canada) or (470) 495-9481 (International) and use the confirmation code 8515009.  A telephonic replay will be available from 1:00 p.m. CT on Wednesday, February 19, 2020 through Wednesday, February 26, 2020 at 1:00 p.m. CT.  To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 8515009.  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 including fresh water sourcing and transportation and saltwater gathering and disposal 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 any pending, completed or future acquisitions 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, to be filed after the issuance of this earnings release, 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)
       
  December 31,   December 31,
  2019   2018
Assets      
Current assets:      
Cash $ 10,633     $ 8,564  
Accounts receivable—related party 50,270     18,274  
Accounts receivable—third party 9,071     1,849  
Sourced water inventory 14,325     9,200  
Other current assets 1,428     4,209  
Total current assets 85,727     42,096  
Property, plant and equipment:      
Land 88,509     70,373  
Property, plant and equipment 930,768     415,888  
Accumulated depreciation, amortization and accretion (61,132 )   (28,317 )
Property, plant and equipment, net 958,145     457,944  
Right of use assets 418      
Equity method investments 479,558      
Real estate assets, net 98,679     93,023  
Intangible lease assets, net 8,070     10,954  
Other assets 5,796      
Total assets $ 1,636,393     $ 604,017  


 
Rattler Midstream LP
Consolidated Balance Sheets - Continued
(unaudited, in thousands)
       
  December 31,   December 31,
  2019   2018
Liabilities and Unitholders’ Equity      
Current liabilities:      
Accounts payable $ 147     $ 100  
Accrued liabilities 76,625     51,804  
Taxes payable 189     11,514  
Short-term lease liability 418      
Total current liabilities 77,379     63,418  
Long-term debt 424,000      
Asset retirement obligations 11,347     561  
Deferred income taxes 7,827     12,912  
Total liabilities 520,553     76,891  
Commitment and contingencies      
Unitholders' equity:      
Limited partners member's equity—Diamondback     527,125  
General partner—Diamondback 979      
Common units—public (43,700,000 units issued and outstanding as of December 31, 2019) 737,777      
Class B units—Diamondback (107,815,152 units issued and outstanding as of December 31, 2019) 979     1  
Accumulated other comprehensive loss (198 )    
Total Rattler Midstream LP unitholders’ equity 739,537     527,126  
Non-controlling interest 376,928      
Non-controlling interest in accumulated other comprehensive loss (625 )    
Total equity 1,115,840     527,126  
Total liabilities and unitholders’ equity $ 1,636,393     $ 604,017  


 
Rattler Midstream LP
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
               
  Three Months Ended December 31,   Year Ended December 31,
  2019   2018   2019   2018
      Predecessor       Predecessor
Revenues:              
Revenues—related party $ 112,612     $ 45,226     $ 409,120     $ 169,396  
Revenues—third party 8,919     3,013     24,324     3,292  
Rental income—related party 1,401     700     4,771     2,383  
Rental income—third party 1,891     2,072     7,890     8,125  
Other real estate income—related party 114     (551 )   379     228  
Other real estate income—third party 371     1,043     1,189     1,043  
Total revenues 125,308     51,503     447,673     184,467  
Costs and expenses:              
Direct operating expenses 29,930     9,058     106,311     33,714  
Cost of goods sold (exclusive of depreciation and amortization) 16,604     14,484     62,856     38,852  
Real estate operating expenses 680     501     2,643     1,872  
Depreciation, amortization and accretion 10,538     7,304     42,336     25,134  
General and administrative expenses 4,986     590     12,663     1,999  
Loss on disposal of property, plant and equipment 1,528     9     1,524     2,577  
Total costs and expenses 64,266     31,946     228,333     104,148  
Income from operations 61,042     19,557     219,340     80,319  
Other income (expense):              
Interest expense, net (401 )       (1,039 )    
Income (loss) from equity method investments (5,634 )       (6,329 )    
Total other income (expense), net (6,035 )       (7,368 )    
Net income before income taxes 55,007     19,557     211,972     80,319  
Provision for income taxes 3,403     4,245     26,253     17,359  
Net income after taxes $ 51,604     $ 15,312     $ 185,719     $ 62,960  
               
Net income before initial public offering         $ 65,995      
               
Net income subsequent to initial public offering         $ 119,724      
Net income attributable to non-controlling interest subsequent to initial public offering 39,136         90,922      
Net income attributable to Rattler Midstream LP $ 12,468         $ 28,802      
               
Net income attributable to limited partners per common unit - subsequent to initial public offering:              
Basic $ 0.27         $ 0.64      
Diluted $ 0.27         $ 0.64      
Weighted average number of limited partner common units outstanding:              
Basic 43,700         43,622      
Diluted 43,700         43,622      


 
Rattler Midstream LP
Consolidated Statements of Cash Flows
(unaudited, in thousands)
       
  Year Ended December 31,
  2019   2018
      Predecessor
Cash flows from operating activities:      
Net income $ 185,719     $ 62,960  
Adjustments to reconcile net income to net cash provided by operating activities:      
Provision for deferred income taxes 26,253     5,845  
Depreciation, amortization and accretion 42,336     25,134  
Loss on disposal of property, plant and equipment 1,524     2,577  
Unit-based compensation expense 5,208      
Expense (Income) from equity method investment 6,329      
Changes in operating assets and liabilities:      
Accounts receivable—related party (65,032 )   17,625  
Accounts receivable—third party (1,212 )   (1,849 )
Accounts payable, accrued liabilities and taxes payable 34,299     61,139  
Other (17,231 )    
Net cash provided by operating activities 218,193     173,431  
Cash flows from investing activities:      
Additions to property, plant and equipment (241,786 )   (164,876 )
Contributions to equity method investments (336,601 )    
Proceeds from the sale of fixed assets 18      
Net cash used in investing activities (578,369 )   (164,876 )
Cash flows from financing activities:      
Proceeds from borrowings from credit facility 463,000      
Payments on credit facility (39,000 )    
Distribution equivalent rights (751 )    
Debt issuance costs (4,310 )    
Net proceeds from initial public offering—public 719,377      
Net proceeds from initial public offering—General Partner 1,000      
Net proceeds from initial public offering—Diamondback 999     1  
Distribution to General Partner (Note 1) (21 )    
Distribution to public (Note 1) (14,858 )    
Distribution to Diamondback (Note 1) (763,191 )    
Net cash provided by financing activities 362,245     1  
Net increase in cash 2,069     8,556  
Cash at beginning of period 8,564     8  
Cash at end of period $ 10,633     $ 8,564  
Supplemental disclosure of cash flow information:      
Interest paid $ 2,707     $  
Supplemental disclosure of non-cash financing activity:      
Contributions from Diamondback $ 456,055     $ 171,557  
       
Supplemental disclosure of non-cash investing activity:      
Increase in long term assets and inventory due to contributions from Diamondback $ 456,055     $ 171,557  
Change in accrued liabilities related to property, plant and equipment $ 4,176     $ 2,693  


 
Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited, in miles)
           
(miles) Delaware Basin   Midland Basin   Permian Total
Crude oil 104     44     148  
Natural gas 148         148  
Produced water 257     217     474  
Sourced water 26     71     97  
Total 535     332     867  


 
Rattler Midstream LP
Capacity/Capability
(unaudited)
               
(capacity/capability) Delaware Basin   Midland Basin   Permian Total   Utilization
Crude oil gathering (Bbl/d) 180,000     56,000     236,000     42%
Natural gas compression (Mcf/d) 135,000         135,000     70%
Natural gas gathering (Mcf/d) 150,000         150,000     56%
Produced water gathering and disposal (Bbl/d) 1,576,500     1,732,300     3,308,800     27%
Sourced water (Bbl/d) 120,000     455,000     575,000     83%


 
Rattler Midstream LP
Throughput and Volumes
(unaudited)
               
  Three Months Ended December 31,   Year Ended December 31,
(throughput) 2019   2018   2019   2018
Crude oil gathering volumes (Bbl/d) 98,725     60,581     85,164     47,338  
Natural gas gathering volumes (MMBtu/d) 104,169     46,196     85,283     39,252  
Produced water gathering and disposal volumes (Bbl/d) 894,693     339,110     806,078     281,916  
Sourced water gathering volumes (Bbl/d) 478,232     202,177     415,939     252,118  


NON-GAAP FINANCIAL MEASURES

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

Rattler defines Adjusted EBITDA as net income before income taxes, interest expense, net of amount capitalized, interest expense related to equity method investments, non-cash unit-based compensation expense, depreciation, amortization and accretion and other non-cash transactions.  Depreciation, amortization and accretion includes depreciation, amortization and accretion on assets and liabilities of Rattler Midstream Operating LLC, in addition to depreciation, amortization and accretion on our equity method investments.  Interest expense related to equity method investments represents our proportional interest income (expense) from equity method investments. 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 following table presents a reconciliation of Adjusted EBITDA to net income, on a historical basis and pro forma basis, as applicable, for each of the periods indicated:

Rattler Midstream LP
(unaudited, in thousands)
               
  Three Months Ended December 31,   Year Ended December 31,
  2019   2018   2019   2018
Reconciliation of Net Income to Adjusted EBITDA:              
Net income $ 51,604     $ 15,312     $ 185,719     $ 62,960  
Depreciation, amortization and accretion 10,538     7,304     42,336     25,134  
Interest expense, net of amount capitalized 401         1,039      
Interest expense (income) related to equity method investments (156 )       1,005      
Depreciation related to equity method investments 1,443         1,636      
Non-cash unit-based compensation expense 2,219         5,208      
Other non-cash transactions 1,528         1,528      
Provision for income taxes 3,403     4,245     26,253     17,359  
Adjusted EBITDA 70,980     $ 26,861     264,724     $ 105,453  
Less: Adjusted EBITDA prior to the IPO         (100,743 )    
Adjusted EBITDA subsequent to the IPO 70,980         163,981      
Less: Adjusted EBITDA attributable to non-controlling interest (50,508 )       (116,685 )    
Adjusted EBITDA attributable to Rattler Midstream LP $ 20,472         $ 47,296      


Investor Contact:
Adam Lawlis
+1 432.221.7467
IR@rattlermidstream.com

Source: Rattler Midstream LP; Diamondback Energy, Inc.

Primary Logo

Powered by EIN News
Distribution channels: Business & Economy, Energy Industry


EIN Presswire does not exercise editorial control over third-party content provided, uploaded, published, or distributed by users of EIN Presswire. We are a distributor, not a publisher, of 3rd party content. Such content may contain the views, opinions, statements, offers, and other material of the respective users, suppliers, participants, or authors.

Submit your press release