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

MIDLAND, Texas, Aug. 05, 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 second quarter ended June 30, 2020.

SECOND QUARTER 2020 HIGHLIGHTS

  • Q2 2020 consolidated net income (including non-controlling interest) of $12.5 million, consolidated adjusted net income (as defined and reconciled below) of $27.9 million

  • Consolidated Adjusted EBITDA (as defined and reconciled below) of $53.9 million

  • Board of Directors of Rattler's general partner approved a cash distribution for the second quarter of 2020 of $0.29 per common unit ($1.16 annualized); implies a 14% annualized yield based on the August 4, 2020 unit closing price of $8.06

  • Q2 2020 cash operated capital expenditures of $39.5 million

  • Q2 2020 average produced water gathering and disposal volumes of 771 MBbl/d, flat from Q2 2019 and down 18% from Q1 2020

  • Q2 2020 average sourced water volumes of 78 MBbl/d, down 83% from both Q2 2019 and Q1 2020; 30% of total sourced water volumes in Q2 2020 sourced from recycled produced water

  • Q2 2020 average crude oil gathering volumes of 91 MBbl/d, up 17% over Q2 2019 and down 6% from Q1 2020

  • Q2 2020 average gas gathering volumes of 108 BBtu/d, up 27% over Q2 2019 and down 9% from Q1 2020

“The second quarter of 2020 presented historic volatility in global energy demand and commodity prices. Rattler, despite all of its operations being located in the premier low-cost shale basin and operated by a low-cost operator in Diamondback, was not spared from this volatility. Diamondback made the prudent decision to suspend completion activity and curtail production in the quarter, directly impacting Rattler’s second quarter volumes,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

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Mr. Stice continued, “Looking ahead, while this quarter reflected the effects of a severe disruption in the pace of expected development activity on Rattler’s assets, we are focused on reducing capital expenditures and operating costs across our asset base to increase free cash flow in a lower growth environment. Additionally, with three of our major equity method investments in full service, and minimal operated growth capex expected to be required in the future, Rattler is positioned to provide significant free cash flow to support its distribution. Rattler, with its equity method investment build cycle nearing completion, operated assets generating free cash flow and conservative financial leverage, is well-situated to weather this commodity cycle."

OPERATIONS AND FINANCIAL UPDATE

During the second quarter of 2020, the Company recorded total operating income of $28.5 million, down 53% compared to the first quarter of 2020 and a decrease of 49% from the second quarter of 2019. During the second quarter of 2020, the Company recorded consolidated net income (including non-controlling interest) of $12.5 million, inclusive of a $15.8 million impairment charge associated with goodwill related to its interest in the OMOG JV, a decrease of 77% from the first quarter of 2020 and a decrease of 73% from the second quarter of 2019. Second quarter 2020 adjusted net income (as defined and reconciled below) was $27.9 million, down 49% from the first quarter of 2020 and down 40% from the second quarter of 2019. Second quarter 2020 Adjusted EBITDA (as defined and reconciled below) was $53.9 million, down 33% from the first quarter of 2020 and down 19% from the second quarter of 2019.

Average produced water gathering and disposal volumes for Q2 2020 were 771 MBbl/d, flat from Q2 2019 and down 18% from Q1 2020. Average sourced water volumes were 78 MBbl/d, down 83% from both Q2 2019 and Q1 2020 due to Diamondback suspending almost all completion activity between mid April and late June. Average crude oil gathering volumes were 91 MBbl/d, up 17% over Q2 2019 and down 6% from Q1 2020. Average gas gathering volumes were 108 BBtu/d, down 9% from Q1 2020 and up 27% over Q2 2019.

Second quarter operated capital expenditures totaled $39.5 million, and aggregate contributions to equity method joint ventures were $33.5 million. Rattler also received proceeds of $8.1 million in distributions from equity method investments. As of June 30, 2020, the Company had $11.2 million of cash and $77.0 million available under its $600.0 million revolving credit facility.

SENIOR NOTES OFFERING

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. The Company loaned the gross proceeds to Rattler Midstream LLC, which used such proceeds to pay down borrowings under its revolving credit facility. As of June 30, 2020, pro forma for this offering, Rattler had $11.2 million of cash and $566.5 million available under its $600.0 million revolving credit facility, resulting in total liquidity of $577.7 million.

CASH DISTRIBUTION

On July 31, 2020, the Board of Directors of Rattler's general partner approved a cash distribution for the second quarter of 2020 of $0.29 per common unit, payable on August 24, 2020 to unitholders of record at the close of business on August 17, 2020.

GUIDANCE UPDATE

Below is Rattler's revised guidance for the full year 2020, with net income, capital expenditure and equity method contribution 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

Annualized Distribution per Unit

$1.16

(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

CONFERENCE CALL

Rattler will host a conference call and webcast for investors and analysts to discuss its results for the second quarter and full year of 2020 on Thursday, August 6, 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 1608579. A telephonic replay will be available from 11:20 a.m. CT on Thursday, August 6, 2020 through Thursday, August 13, 2020 at 11:20 a.m. CT. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 1608579. 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

Consolidated Balance Sheets

(unaudited, in thousands)

June 30,

December 31,

2020

2019

Assets

Current assets:

Cash

$

11,170

$

10,633

Accounts receivable—related party

4,456

50,270

Accounts receivable—third party, net

7,694

9,071

Sourced water inventory

10,400

14,325

Other current assets

688

1,428

Total current assets

34,408

85,727

Property, plant and equipment:

Land

88,309

88,509

Property, plant and equipment

1,037,264

930,768

Accumulated depreciation, amortization and accretion

(81,572

)

(61,132

)

Property, plant and equipment, net

1,044,001

958,145

Right of use assets

86

418

Equity method investments

514,110

479,558

Real estate assets, net

96,473

98,679

Intangible lease assets, net

6,579

8,070

Deferred tax asset

78,134

Other assets

5,232

5,796

Total assets

$

1,779,023

$

1,636,393

Rattler Midstream LP

Consolidated Balance Sheets - Continued

(unaudited, in thousands, except unit amounts)

June 30,

December 31,

2020

2019

Liabilities and Unitholders’ Equity

Current liabilities:

Accounts payable

$

149

$

147

Accrued liabilities

55,386

76,625

Taxes payable

406

189

Short-term lease liability

86

418

Total current liabilities

56,027

77,379

Long-term debt

523,000

424,000

Asset retirement obligations

13,272

11,347

Deferred income taxes

7,827

Total liabilities

592,299

520,553

Commitment and contingencies

Unitholders’ equity:

General partner—Diamondback

939

979

Common units—public (43,996,243 units issued and outstanding as of June 30, 2020 and 43,700,000 units issued and outstanding as of December 31, 2019)

400,928

737,777

Class B units—Diamondback (107,815,152 units issued and outstanding as of June 30, 2020 and as of December 31, 2019)

939

979

Accumulated other comprehensive loss

(320

)

(198

)

Total Rattler Midstream LP unitholders’ equity

402,486

739,537

Non-controlling interest

785,239

376,928

Non-controlling interest in accumulated other comprehensive loss

(1,001

)

(625

)

Total equity

1,186,724

1,115,840

Total liabilities and unitholders’ equity

$

1,779,023

$

1,636,393


Rattler Midstream LP

Consolidated Statements of Operations

(unaudited, in thousands, except per unit data)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Revenues:

Revenues—related party

$

78,031

$

103,066

$

194,614

$

191,642

Revenues—third party

7,175

5,078

16,275

8,565

Rental income—related party

1,417

1,256

2,819

1,971

Rental income—third party

1,885

2,038

3,786

4,105

Other real estate income—related party

53

81

169

154

Other real estate income—third party

174

255

467

513

Total revenues

88,735

111,774

218,130

206,950

Costs and expenses:

Direct operating expenses

37,378

26,406

70,252

46,592

Cost of goods sold (exclusive of depreciation and amortization)

4,744

15,849

20,705

28,902

Real estate operating expenses

590

695

1,318

1,221

Depreciation, amortization and accretion

12,100

10,158

24,606

20,062

General and administrative expenses

4,175

3,068

8,689

4,437

Loss (gain) on disposal of property, plant and equipment

1,243

(4

)

2,781

(4

)

Total costs and expenses

60,230

56,172

128,351

101,210

Income from operations

28,505

55,602

89,779

105,740

Other expense:

Interest expense, net

(1,926

)

(85

)

(4,547

)

(85

)

Loss from equity method investments

(13,034

)

(114

)

(13,279

)

(64

)

Total other expense, net

(14,960

)

(199

)

(17,826

)

(149

)

Net income before income taxes

13,545

55,403

71,953

105,591

Provision for income taxes

1,083

8,724

4,903

19,556

Net income

$

12,462

$

46,679

$

67,050

$

86,035

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

9,640

15,237

51,197

15,237

Net income attributable to Rattler Midstream LP

$

2,822

$

4,803

$

15,853

$

4,803

Net income attributable to limited partners per common unit:

Basic

$

0.05

$

0.11

$

0.33

$

0.11

Diluted

$

0.05

$

0.11

$

0.33

$

0.11

Weighted average number of limited partner common units outstanding:

Basic

43,812

43,197

43,756

43,197

Diluted

43,812

44,340

43,756

44,340

Rattler Midstream LP

Consolidated Statements of Cash Flows

(unaudited, in thousands)

Six Months Ended June 30,

Cash flows from operating activities:

2020

2019

Net income

$

67,050

$

86,035

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

Provision for deferred income taxes

4,903

19,556

Depreciation, amortization and accretion

24,606

20,062

Loss (gain) on disposal of property, plant and equipment

2,781

(4

)

Unit-based compensation expense

4,339

831

Loss from equity method investments

13,279

64

Changes in operating assets and liabilities:

Accounts receivable—related party

28,166

(15,439

)

Accounts receivable—third party

130

173

Accounts payable, accrued liabilities and taxes payable

(18,787

)

44,842

Other

5,397

(16,723

)

Net cash provided by operating activities

131,864

139,397

Cash flows from investing activities:

Additions to property, plant and equipment

(91,587

)

(102,935

)

Contributions to equity method investments

(66,032

)

(37,420

)

Distributions from equity method investments

17,870

Proceeds from the sale of fixed assets

42

18

Net cash used in investing activities

(139,707

)

(140,337

)

Cash flows from financing activities:

Proceeds from borrowings from credit facility

99,000

10,000

Payments on credit facility

(9,000

)

Distribution equivalent rights

(1,296

)

Net proceeds from initial public offering—public

719,627

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

(40

)

Distribution to public

(25,346

)

Distribution to Diamondback

(62,573

)

(726,513

)

Net cash provided by (used in) financing activities

8,380

(3,887

)

Net increase (decrease) in cash

537

(4,827

)

Cash at beginning of period

10,633

8,564

Cash at end of period

$

11,170

$

3,737

Supplemental disclosure of non-cash financing activity:

Contributions from Diamondback

$

$

456,055

Supplemental disclosure of non-cash investing activity:

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

$

$

456,055

Accounts payable related to capital expenditures

$

57,357

$

68,617

Rattler Midstream LP

Pipeline Infrastructure Assets

(unaudited, in miles)

As of June 30, 2020

(miles)(a)

Delaware Basin

Midland Basin

Permian Total

Crude oil

108

44

152

Natural gas

151

151

Produced water

266

237

503

Sourced water

27

74

101

Total

552

355

907

(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 June 30, 2020

(capacity/capability)(a)

Delaware Basin

Midland Basin

Permian Total

Utilization

Crude oil gathering (Bbl/d)

180,000

56,000

236,000

39

%

Natural gas compression (Mcf/d)

135,000

135,000

59

%

Natural gas gathering (Mcf/d)

150,000

150,000

53

%

Produced water gathering and disposal (Bbl/d)

1,481,500

1,842,300

3,323,800

23

%

Sourced water (Bbl/d)

120,000

455,000

575,000

14

%

(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 June 30,

Six Months Ended June 30,

(throughput)(a)

2020

2019

2020

2019

Crude oil gathering volumes (Bbl/d)

91,256

78,066

94,275

76,326

Natural gas gathering volumes (MMBtu/d)

107,502

84,426

112,631

72,546

Produced water gathering and disposal volumes (Bbl/d)

771,337

770,091

856,483

740,807

Sourced water gathering volumes (Bbl/d)

78,059

447,823

262,386

400,476

(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 impairment 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 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
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Reconciliation of Net Income to Adjusted EBITDA:

Net income

$

12,462

$

46,679

$

67,050

$

86,035

Interest expense, net of amount capitalized

1,926

85

4,547

85

Depreciation, amortization and accretion

12,100

10,158

24,606

20,062

Depreciation and interest expense related to equity method investments

7,244

149

11,010

149

Impairment related to equity method investments

15,839

15,839

Non-cash unit-based compensation expense

2,120

831

4,339

831

Other non-cash transactions

1,105

2,565

Provision for income taxes

1,083

8,724

4,903

19,556

Adjusted EBITDA

53,879

66,626

134,859

126,718

Less: Adjusted EBITDA prior to the IPO

40,651

100,743

Adjusted EBITDA subsequent to the IPO

53,879

25,975

134,859

25,975

Less: Adjusted EBITDA attributable to non-controlling interest

38,288

18,483

95,912

18,483

Adjusted EBITDA attributable to Rattler Midstream LP

$

15,591

$

7,492

$

38,947

$

7,492

Adjusted net income is a non-GAAP financial measure equal to net income adjusted for impairment 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

June 30, 2020

Pre-Tax
Amounts

Net income

$

12,462

Impairment related to equity method investments

15,839

Adjusted income excluding above items

28,301

Income tax adjustment for above items

(367

)

Adjusted net income(1)

27,934

Less: Adjusted net income attributable to non-controlling interest

20,889

Adjusted net income attributable to Rattler Midstream LP

$

7,045

Adjusted net income attributable to limited partners per common unit

$

0.15

(1) Adjusted net income was equal to net income for the three months ended March 31, 2020 and three months ended June 30, 2019.


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