Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports Second Quarter 2020 Financial and Operating Results
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 theAugust 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
OPERATIONS AND FINANCIAL UPDATE
During the second quarter of 2020, the Company recorded total operating income of
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
SENIOR NOTES OFFERING
On
CASH DISTRIBUTION
On
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 | ||
Adjusted EBITDA | ||
Equity Method Investment EBITDA(b) | ||
Operated Midstream Capex | ||
2020 Equity Method Investment Contributions(b) | ||
Depreciation, Amortization & Accretion | ||
Annualized Distribution per Unit |
(a) Does not include any volumes from the EPIC,
(b) Includes the EPIC,
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
About
About
Diamondback is an independent oil and natural gas company headquartered in
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
Consolidated Balance Sheets | |||||||
(unaudited, in thousands) | |||||||
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 | |||
Consolidated Balance Sheets - Continued | |||||||
(unaudited, in thousands, except unit amounts) | |||||||
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 |
400,928 | 737,777 | |||||
Class B units—Diamondback (107,815,152 units issued and outstanding as of |
939 | 979 | |||||
Accumulated other comprehensive loss | (320 | ) | (198 | ) | |||
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 | |||
Consolidated Statements of Operations | ||||||||||||||||
(unaudited, in thousands, except per unit data) | ||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
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 |
$ | 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 | ||||||||||||
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Consolidated Statements of Cash Flows | ||||||||||||||||
(unaudited, in thousands) | ||||||||||||||||
Six Months Ended |
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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 |
(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 | ||||||||||||
Pipeline Infrastructure Assets | ||||||||||||||||
(unaudited, in miles) | ||||||||||||||||
As of |
||||||||||||||||
(miles)(a) | 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,
Capacity/Capability | |||||||||||
(unaudited) | |||||||||||
As of |
|||||||||||
(capacity/capability)(a) | 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,
Throughput and Volumes | |||||||||||
(unaudited) | |||||||||||
Three Months Ended |
Six Months Ended |
||||||||||
(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,
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
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:
Adjusted EBITDA | |||||||||||||||
(unaudited, in thousands) | |||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
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 |
$ | 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.
Adjusted Net Income | ||||
(unaudited, in thousands, except per unit data) | ||||
Three Months Ended |
||||
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 |
$ | 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
Investor Contact:
+1 432.221.7467
IR@rattlermidstream.com
Source:
Source: Rattler Midstream LP