August 6, 2019 - 4:01 PM EDT
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Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports Second Quarter 2019 Financial and Operating Results

MIDLAND, Texas, Aug. 06, 2019 (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 second quarter ended June 30, 2019.

HIGHLIGHTS

  • Q2 2019 consolidated net income (including non-controlling interest) of $46.7 million, consolidated adjusted EBITDA (as defined and reconciled below) of $66.6 million
  • Q2 2019 capital expenditures of $51.2 million; net cash position at quarter end
  • Q2 2019 average produced water volumes of 770 MBbl/d, up 8% over Q1 2019 and 256% over Q2 2018
  • Q2 2019 average fresh water volumes of 448 MBbl/d, up 27% over Q1 2019 and 104% over Q2 2018
  • Q2 2019 average crude oil gathering volumes of 78 MBbl/d, up 5% over Q1 2019 and 82% over Q2 2018
  • Q2 2019 average gas gathering volumes of 84 BBtu/d, up 39% over Q1 2019 and 154% over Q2 2018
  • Closed Initial Public Offering of 43.7 million common units on May 28, 2019
  • Announced participation in Wink to Webster Pipeline project with expected in service date of 1H 2021; expected capital outlay to be funded with a combination of cash on hand, cash flow from operations and borrowings under Rattler's revolving credit facility

“Rattler executed well in its first quarter as a public company.  All four midstream revenue streams grew in the second quarter, resulting in 11% quarter over quarter Adjusted EBITDA growth.  Rattler has been cash flow positive through the first two quarters of 2019 excluding pipeline equity investments.  Over the long term, Rattler expects to grow free cash flow per unit through top line growth based on our sponsor Diamondback’s long-term growth plans while controlling capital expenditures on a 'just-in-time' basis to meet these plans. This relationship, along with aligned incentives, differentiates the Rattler business model from the traditional midstream company and is expected to result in a higher return on capital and a growing distribution without the need for external capital to fund organic growth,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Further, the commitment to the Wink to Webster Pipeline project illustrates the strategic relationship between Diamondback and Rattler, allowing Rattler to invest in a world-class project with blue chip companies due to Diamondback’s size and scale, while Diamondback adds Gulf Coast exposure through the Houston market to its crude marketing portfolio.”

OPERATIONS AND FINANCIAL UPDATE

During the second quarter of 2019, the Company recorded total operating income of $55.6 million and consolidated net income (including non-controlling interest) of $46.7 million. This represents an increase in total operating income of 11% over the first quarter of 2019 and 165% over the second quarter of 2018 and an increase in consolidated net income (including non-controlling interest) of 19% over the first quarter of 2019 and 202% over the second quarter of 2018.

Second quarter 2019 Adjusted EBITDA (as defined and reconciled below) was $66.6 million, up 11% from $60.1 million in Q1 2019 and 161% from $25.5 million in Q2 2018.

During the second quarter of 2019, average produced water volumes were 770 MBbl/d, up 8% over Q1 2019 and 256% over Q2 2018. Average fresh water volumes were 448 MBbl/d, up 27% over Q1 2019 and 104% over Q2 2018. Average oil gathering volumes were 78 MBbl/d, up 5% over Q1 2019 and 82% over Q2 2018. Average gas gathering volumes were 84 BBtu/d, up 39% over Q1 2019 and 154% over Q2 2018.

Second quarter capital expenditures totaled $51.2 million, and aggregate contributions to equity method long-haul pipeline joint ventures were $37.4 million.

As of June 30, 2019, the Company had a cash balance of $3.7 million and $599.0 million available under its $600.0 million revolving credit facility.

WINK TO WEBSTER PIPELINE JOINT VENTURE

On July 30, 2019, Rattler's subsidiary, Rattler Midstream Operating LLC, joined Wink to Webster Pipeline LLC as a member, together with affiliates of ExxonMobil, Plains All American Pipeline, Delek US, MPLX LP and Lotus Midstream.  The joint venture is developing a crude oil pipeline with origin points at Wink and Midland in the Permian Basin for delivery to multiple Houston area locations. The project is expected to begin service in the first half of 2021. Rattler’s future capital contributions to the project are expected to be funded with a combination of cash on hand, cash flow from operations and borrowing under the Company’s $600.0 million revolving credit facility. Through the remainder of 2019, Rattler is expected to contribute less than $20 million to this project.

GUIDANCE UPDATE

Below is Rattler's guidance for the full year 2019.

  
 Rattler Midstream LP
  
Rattler Volumes 
Produced Water Gathering Volumes (MBbl/d)750 - 800
Fresh Water Gathering Volumes (MBbl/d)350 - 400
Oil Gathering Volumes (MBbl/d)75 - 90
Gas Gathering Volumes (BBtu/d)70 - 85
  
Financial Metrics ($ millions except per unit metrics) 
Adjusted EBITDA$245 - $265
Net Capex(a)$225 - $250
Long-Haul Pipeline Contributions(b)$245 - $255
Depreciation, Amortization & Accretion$40 - $50
Annualized Distribution per Unit$1.00

(a) Excludes Long-Haul Pipeline Contributions
(b) Includes contributions to Wink to Webster, EPIC and Gray Oak

CONFERENCE CALL

Rattler will host a conference call and webcast for investors and analysts to discuss its results for the second quarter of 2019 on Wednesday, August 7, 2019 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 9124338.  A telephonic replay will be available from 1:00 p.m. CT on Wednesday, August 7, 2019 through Wednesday, August 14, 2019 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 9124338.  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, and current report on Form 8-K filed with the SEC on May 29, 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, except unit amounts)
    
 June 30, December 31,
 2019 2018
Assets   
Current assets:   
Cash$3,737  $8,564 
Accounts receivable—related party  18,274 
Accounts receivable—third party1,676  1,849 
Fresh water inventory12,631  9,200 
Other current assets4,718  4,209 
Total current assets22,762  42,096 
Property, plant and equipment:   
Land88,509  70,373 
Property, plant and equipment822,307  415,888 
Accumulated depreciation, amortization and accretion(44,352) (28,317)
Property, plant and equipment, net866,464  457,944 
Right of use assets1,212   
Equity method investments186,902   
Real estate assets, net100,460  93,023 
Intangible lease assets, net9,464  10,954 
Total assets$1,187,264  $604,017 


 
Rattler Midstream LP
Consolidated Balance Sheets
(unaudited, in thousands, except unit amounts)
    
 June 30, December 31,
 2019 2018
Liabilities and Unitholders’ Equity   
Current liabilities:   
Accounts payable—related party$17,015  $ 
Accounts payable—third party246  100 
Other accrued liabilities96,511  51,804 
Taxes payable31  11,514 
Short term lease liability1,126   
Total current liabilities114,929  63,418 
Long-term debt1,000   
Asset retirement obligations4,746  561 
Long-term lease liability86   
Deferred income taxes1,342  12,912 
Total liabilities122,103  76,891 
Commitment and contingencies   
Unitholders' equity:   
Limited partners member's equity—Diamondback  527,125 
General partner—Diamondback1,000   
Common units—public (43,700,000 units issued and outstanding as of June 30, 2019)725,261   
Class B units—Diamondback (107,815,152 units issued and outstanding as of June 30, 2019)1,000  1 
Total Rattler Midstream LP unitholders’ equity727,261  527,126 
Non-controlling interest337,900   
Total equity1,065,161  527,126 
Total liabilities and unitholders’ equity$1,187,264  $604,017 


 
Rattler Midstream LP
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
        
 Three Months Ended June 30, Six Months Ended June 30,
  2019     2018         2019     2018 
        Predecessor         Predecessor 
 Revenues:               
Revenues—related party$103,066  $46,741  $191,642  $77,801 
Revenues—third party5,078    8,565  361 
Rental income—related party1,256  578  1,971  1,011 
Rental income—third party2,038  2,138  4,105  3,966 
Other real estate income—related party81  41  154  72 
Other real estate income—third party255  290  513  452 
Total revenues111,774  49,788  206,950  83,663 
Costs and expenses:       
Direct operating expenses26,406  10,992  46,592  16,198 
Cost of goods sold (exclusive of depreciation and amortization shown below)15,849  8,267  28,902  13,518 
Real estate operating expenses695  540  1,221  818 
Depreciation, amortization and accretion10,158  5,975  20,062  11,791 
General and administrative expenses3,068  426  4,437  680 
(Gain) loss on sale of property, plant and equipment(4) 2,568  (4) 2,568 
Total costs and expenses56,172  28,768  101,210  45,573 
Income from operations55,602  21,020  105,740  38,090 
Other income (expense):       
Interest expense, net(85)   (85)  
Expense from equity investments(114) (1,459) (64)  
Total other expense(199) (1,459) (149)  
Net income before income taxes55,403  19,561  105,591  38,090 
Provision for income taxes8,724  4,089  19,556  8,222 
Net income after taxes$46,679  $15,472  $86,035  $29,868 
        
Net income before initial public offering$26,639    $65,995   
        
Net income subsequent to initial public offering$20,040    $20,040   
Net income attributable to non-controlling interest subsequent to initial public offering15,237    15,237   
Net income attributable to Rattler Midstream LP$4,803    $4,803   
        
Net income attributable to common limited partners per unit - subsequent to initial public offering:       
Basic$0.11    $0.11   
Diluted$0.11    $0.11   
Weighted average number of limited partner units outstanding:       
Basic43,197    43,197   
Diluted44,340    44,340   


 
Rattler Midstream LP
Consolidated Statements of Cash Flows
(unaudited, in thousands)
    
 Six Months Ended June 30,
 2019  2018 
     Predecessor 
Cash flows from operating activities:        
Net income$86,035  $29,868 
Adjustments to reconcile net income to net cash provided by operating activities:   
Provision for deferred income taxes19,556  8,222 
Depreciation, amortization and accretion20,062  11,791 
(Gain) loss on sale of property, plant and equipment(4) 2,568 
Unit-based compensation expense831   
Expense from equity method investment64   
Changes in operating assets and liabilities:   
Accounts receivable—related party(15,439) 29,984 
Accounts receivable—third party173   
Accounts payable, accrued liabilities and taxes payable44,842  6,370 
Other assets, including inventory(16,723) 338 
Net cash provided by operating activities139,397  89,141 
Cash flows from investing activities:   
Additions to property, plant and equipment(102,935) (84,671)
Contributions to equity method investments(37,420)  
Proceeds from the sale of fixed assets18   
Net cash used in investing activities(140,337) (84,671)
Cash flows from financing activities:   
Proceeds from borrowings from credit facility10,000   
Payments on credit facility(9,000)  
Net proceeds from initial public offering - public719,627   
Net proceeds from initial public offering - General Partner1,000   
Net proceeds from initial public offering - Diamondback999   
Distribution to Diamondback (Note 1)(726,513)  
Net cash used in financing activities(3,887)  
Net increase (decrease) in cash(4,827) 4,470 
Cash at beginning of period8,564  8 
Cash at end of period$3,737  $4,478 
Supplemental disclosure of non-cash financing activity:   
Contributions from Diamondback$456,055  $178,517 
Supplemental disclosure of non-cash investing activity:   
Increase in long term assets and inventory$456,055  $178,517 
Change in accrued liabilities related to property, plant and equipment$(30,633) $(7,039)


 
Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited, in miles)
      
(miles)Delaware Basin Midland Basin Permian Total
Crude oil99  43  142 
Natural gas143    143 
SWD239  195  434 
Fresh water26  69  95 
Total507  307  814 


 
Rattler Midstream LP
Capacity/Capability
(unaudited)
        
(capacity/capability)Delaware Basin Midland Basin Permian Total Utilization
Crude oil (Bbl/d)180,000  56,000  236,000   33%
Natural gas compression (Mcf/d)80,000    80,000   85%
Natural gas pipeline (Mcf/d)150,000    150,000   46%
SWD (Bbl/d)1,367,000  1,462,000  2,829,000   27%
Fresh water (Bbl/d)120,000  455,000  575,000   78%


 
Rattler Midstream LP
Throughput and Crude Oil Volumes
(unaudited, in thousands)
        
 Three Months Ended June 30, Six Months Ended June 30,
(throughput)2019 2018 2019 2018
Crude oil gathering volumes (Bbl/d)78,066  42,945  76,326  36,715 
Natural gas gathering volumes (MMBtu/d)84,426  33,189  72,546  31,827 
Saltwater services volumes (Bbl/d)770,091  216,193  740,807  228,744 
Fresh water services volumes (Bbl/d)447,823  220,021  400,476  263,062 
            

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.

We define Adjusted EBITDA as net income before income taxes, interest expense, net of amount capitalized, interest expense related to equity investments, non-cash unit-based compensation expense, depreciation, amortization and accretion. Depreciation, amortization and accretion includes depreciation, amortization and accretion on assets and liabilities of the Operating Company, in addition to depreciation, amortization and accretion on our equity investments. Interest expense related to equity investments represents our proportional income (loss) from equity investments plus interest on the amount. 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, the most directly comparable GAAP financial measures, 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 June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Reconciliation of net income to Adjusted EBITDA:           
Net income$46,679 $15,472 $86,035 $29,868
Depreciation, amortization and accretion10,158 5,975 20,062 11,791
Interest expense, net of amount capitalized85  85 
Interest expense related to equity investments149  149 
Non-cash unit-based compensation expense831  831 
Provision for income taxes8,724 4,089 19,556 8,222
Adjusted EBITDA66,626 $25,536 126,718 $49,881
Less: Adjusted EBITDA prior to the Offering(40,651)  (100,743) 
Adjusted EBITDA subsequent to the Offering25,975   25,975  
Less: Adjusted EBITDA attributable to non-controlling interest(18,483)  (18,483) 
Adjusted EBITDA attributable to Rattler Midstream LP$7,492   $7,492  
          

Investor Contact:
Adam Lawlis
+1 432.221.7467
[email protected]

Source: Rattler Midstream LP; Diamondback Energy, Inc.

 

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Source: GlobeNewswire (August 6, 2019 - 4:01 PM EDT)

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