Feb 24, 2021

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

MIDLAND, Texas, Feb. 24, 2021 (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, 2020.

FOURTH QUARTER 2020 HIGHLIGHTS

  • Q4 2020 consolidated net income (including non-controlling interest) of $38.9 million
  • Q4 2020 consolidated Adjusted EBITDA (as defined and reconciled below) of $77.6 million
  • Board of Directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2020 of $0.20 per common unit ($0.80 annualized); implies a 7.5% annualized yield based on the February 23, 2021 closing unit price of $10.72
  • Repurchased 1,650,000 common units at an average unit price of $8.93 for a total cost of $14.7 million
  • Q4 2020 cash operated capital expenditures of $11.8 million
  • Q4 2020 average produced water gathering and disposal volumes of 810 MBbl/d
  • Q4 2020 average sourced water volumes of 287 MBbl/d; 8% of total sourced water volumes in Q4 2020 sourced from recycled produced water
  • Q4 2020 average crude oil gathering volumes of 89 MBbl/d
  • Q4 2020 average gas gathering volumes of 141 BBtu/d

FULL YEAR 2020 HIGHLIGHTS

  • Full year 2020 consolidated net income (including non-controlling interest) of $144.7 million
  • Full year 2020 consolidated Adjusted EBITDA (as defined and reconciled below) of $283.8 million; up 7% from full year 2019
  • Full year 2020 operated capital expenditures of $136.8 million; down 43% from full year 2019
  • Full year 2020 average produced water gathering and disposal volumes of 822 MBbl/d
  • Full year 2020 average sourced water volumes of 254 MBbl/d
  • Full year 2020 average crude oil gathering volumes of 92 MBbl/d
  • Full year 2020 average gas gathering volumes of 122 BBtu/d

“Rattler’s performance in the fourth quarter of 2020 reflects our continued progress in reducing capital spend after Diamondback’s growth trajectory dramatically slowed in the second quarter of 2020. We are also near the end of our multi-year investment cycle in non-operated equity method investments, with distributions from equity method investments nearly reaching parity with contributions in the fourth quarter. In 2021, we expect distributions from these investments to significantly exceed remaining contributions. Also, as previously announced, operated capital expenditures are expected to decrease by ~50% from 2020 levels. With our operated volumes normalizing in the fourth quarter, cash flow from our fixed fee agreements combined with declining capital investment resulted in robust free cash flow generation that was returned to unitholders via our distribution and repurchase program,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Looking forward to 2021, with Diamondback planning to keep fourth quarter 2020 oil production volumes relatively flat, Rattler's 2021 guidance reflects a continuation of the strong results seen in the second half of 2020. The stable operated business, underpinned by Diamondback's low-cost development of its top tier Permian assets, along with equity method distributions outpacing contributions, is expected to deliver increasing free cash flow to Rattler’s unitholders. Taken together with Rattler's conservative leverage profile and visibility into Diamondback's development plan, we believe Rattler presents a compelling story of financial strength and free cash flow generation with tangible returns to unitholders."

OPERATIONS AND FINANCIAL UPDATE

During the fourth quarter of 2020, the Company recorded total operating income of $48.2 million, an increase of 9% compared to the third quarter of 2020. During the fourth quarter of 2020, the Company recorded consolidated net income (including non-controlling interest) of $38.9 million, flat from the third quarter of 2020. Fourth quarter 2020 Adjusted EBITDA (as defined and reconciled below) was $77.6 million, an increase of 9% from the third quarter of 2020.

Fourth quarter operated capital expenditures totaled $11.8 million, and aggregate contributions to equity method joint ventures were $12.7 million. Rattler also received proceeds of $12.3 million in distributions from equity method investments during the quarter.

The following table summarizes the Company's throughput on its operated assets.

  Three Months Ended
December 31,		   Year Ended December 31,
  2020   2019   2020   2019
Crude oil gathering volumes (Bbl/d)         88,634      98,725      92,056      85,164   
Natural gas gathering volumes (MMBtu/d)         141,140      104,169      121,637      85,283   
Produced water gathering and disposal volumes (Bbl/d)         810,493      894,693      821,543      806,078   
Sourced water gathering volumes (Bbl/d)         287,255      478,232      253,907      415,939   

CASH DISTRIBUTION

On February 17, 2021, the Board of Directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2020 of $0.20 per common unit, payable on March 15, 2021 to unitholders of record at the close of business on March 8, 2021.

COMMON UNIT REPURCHASE PROGRAM

On October 29, 2020, the Board of Directors of Rattler's general partner approved a common unit repurchase program to acquire up to $100 million of our outstanding common units through December 31, 2021. Pursuant to this program, during the fourth quarter of 2020, the Company repurchased 1,650,000 common units at an average unit price of $8.93 per unit for a total cost of $14.7 million. From the end of the fourth quarter of 2020 through February 12, 2021, Rattler repurchased an additional 664,610 common units for a total cost of $6.6 million. In total through February 12, 2021, Rattler repurchased 2,314,610 common units for a total cost of $21.4 million, utilizing 21% of the $100 million approved by the Board for the repurchase program.

GUIDANCE UPDATE

Below is Rattler's initial guidance for the full year 2021.

   
  Rattler Midstream LP Guidance
  2021
   
Rattler Operated Volumes (a)  
Produced Water Gathering and Disposal Volumes (MBbl/d) 800 - 900
Sourced Water Volumes (MBbl/d) 200 - 300
Crude Oil Gathering Volumes (MBbl/d) 75 - 85
Gas Gathering Volumes (BBtu/d) 120 - 140
   
Financial Metrics ($ millions except per unit metrics)  
Net Income $140 - $180
Adjusted EBITDA $280 - $320
Operated Midstream Capex $60 - $80
Equity Method Investment Contributions(b) $10 - $20
Equity Method Investment Distributions(b) $35 - $45
Depreciation, Amortization & Accretion $50 - $70

(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 fourth quarter and full year of 2020 on Thursday, February 25, 2021 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 5272909. A telephonic replay will be available from 12:00 p.m. CT on Thursday, February 25, 2021 through Thursday, March 4, 2021 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 5272909. 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 Delaware limited partnership formed by Diamondback Energy to own, operate, develop and acquire midstream and energy-related infrastructure assets. Rattler owns crude oil, natural gas and water-related midstream assets in the Permian Basin that provide services to Diamondback Energy and third party customers under primarily 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”), including its Forms 10-K, 10-Q and 8-K, 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,
  2020   2019
Assets      
Current assets:      
Cash         $ 23,927     $ 10,633  
Accounts receivable—related party         57,447     50,270  
Accounts receivable—third party, net         5,658     9,071  
Sourced water inventory         10,108     14,325  
Other current assets         1,127     1,428  
Total current assets         98,267     85,727  
Property, plant and equipment:      
Land         85,826     86,072  
Property, plant and equipment         1,012,777     930,768  
Accumulated depreciation, amortization and accretion         (100,728 )   (61,132 )
Property, plant and equipment, net         997,875     955,708  
Right of use assets         574     418  
Equity method investments         532,927     479,558  
Real estate assets, net         96,687     101,116  
Intangible lease assets, net         4,262     8,070  
Deferred tax asset         73,264     —  
Other assets         4,732     5,796  
Total assets         $ 1,808,588     $ 1,636,393  


Rattler Midstream LP
Consolidated Balance Sheets - Continued
(unaudited, in thousands, except unit amounts)
       
  December 31,   December 31,
  2020   2019
Liabilities and Unitholders’ Equity      
Current liabilities:      
Accounts payable         $ 139     $ 147  
Accrued liabilities         42,508     76,625  
Taxes payable         192     189  
Short-term lease liability         574     418  
Asset retirement obligations         35     —  
Total current liabilities         43,448     77,379  
Long-term debt         569,947     424,000  
Asset retirement obligations         15,093     11,347  
Deferred income taxes         —     7,827  
Total liabilities         628,488     520,553  
Commitment and contingencies      
Unitholders’ equity:      
General partner—Diamondback         899     979  
Common units—public (42,356,637 units issued and outstanding as of December 31, 2020 and 43,700,000 units issued and outstanding as of December 31, 2019)         385,189     737,777  
Class B units—Diamondback (107,815,152 units issued and outstanding as of December 31, 2020 and as of December 31, 2019)         899     979  
Accumulated other comprehensive income (loss)         (123 )   (198 )
Total Rattler Midstream LP unitholders’ equity         386,864     739,537  
Non-controlling interest         793,638     376,928  
Non-controlling interest in accumulated other comprehensive income (loss)         (402 )   (625 )
Total equity         1,180,100     1,115,840  
Total liabilities and unitholders’ equity         $ 1,808,588     $ 1,636,393  


Rattler Midstream LP
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
               
  Three Months Ended
December 31,		   Year Ended December 31,
  2020   2019   2020   2019
Revenues:              
Revenues—related party         $ 98,629     $ 112,612     $ 379,089     $ 409,120  
Revenues—third party         7,620     8,919     31,124     24,324  
Rental income—related party         2,394     1,401     7,495     4,771  
Rental income—third party         687     1,891     5,340     7,890  
Other real estate income—related party         (12 )   114     306     379  
Other real estate income—third party         (82 )   371     551     1,189  
Total revenues         109,236     125,308     423,905     447,673  
Costs and expenses:              
Direct operating expenses         29,968     29,930     131,393     106,311  
Cost of goods sold (exclusive of depreciation and amortization)         11,002     16,604     38,370     62,856  
Real estate operating expenses         549     680     2,361     2,643  
Depreciation, amortization and accretion         17,527     10,538     53,123     42,336  
Impairment         918     —     918     —  
General and administrative expenses         4,538     4,986     16,367     12,663  
(Gain) loss on disposal of property, plant and equipment         (3,494 )   1,528     (729 )   1,524  
Total costs and expenses         61,008     64,266     241,803     228,333  
Income (loss) from operations         48,228     61,042     182,102     219,340  
Other income (expense):              
Interest income (expense), net         (6,923 )   (401 )   (17,287 )   (1,039 )
Income (loss) from equity method investments         29     (5,634 )   (9,881 )   (6,329 )
Total other income (expense), net         (6,894 )   (6,035 )   (27,168 )   (7,368 )
Net income (loss) before income taxes         41,334     55,007     154,934     211,972  
Provision for (benefit from) income taxes         2,475     3,403     10,229     26,253  
Net income (loss)         38,859     51,604     144,705     185,719  
Less: Net income (loss) before initial public offering         —     —     —     65,995  
Net income (loss) subsequent to initial public offering         38,859     51,604     144,705     119,724  
Less: Net income (loss) attributable to non-controlling interest          29,239     39,136     110,014     90,922  
Net income (loss) attributable to Rattler Midstream LP         $ 9,620     $ 12,468     $ 34,691     $ 28,802  
Net income (loss) attributable to limited partners per common unit:              
Basic         $ 0.21     $ 0.27     $ 0.74     $ 0.64  
Diluted         $ 0.21     $ 0.27     $ 0.74     $ 0.64  
Weighted average number of limited partner common units outstanding:              
Basic         43,448     43,700     43,739     43,622  
Diluted         43,448     43,700     43,739     43,622  


Rattler Midstream LP
Consolidated Statements of Cash Flows
(unaudited, in thousands)
               
  Three Months Ended
December 31, 2020		   Year Ended December 31,
  2020   2019   2020   2019
Cash flows from operating activities:              
Net income (loss)         $ 38,859     $ 51,604     $ 144,705     $ 185,719  
Adjustments to reconcile net income to net cash provided by operating activities:              
Provision for deferred income taxes         2,475     3,403     10,229     26,253  
Depreciation, amortization and accretion         17,527     10,538     53,123     42,336  
Unit-based compensation expense         2,340     2,219     8,895     5,208  
Impairment         918     —     918     —  
(Income) loss from equity method investments         (29 )   5,634     9,881     6,329  
Other         (2,991 )   1,528     241     1,524  
Changes in operating assets and liabilities:              
Accounts receivable—related party         (8,826 )   (19,735 )   (7,177 )   (65,032 )
Accounts payable, accrued liabilities and taxes payable         2,625     3,508     2,742     34,299  
Other         (373 )   (4,370 )   6,342     (18,443 )
Net cash provided by (used in) operating activities         52,525     54,329     229,899     218,193  
Cash flows from investing activities:              
Additions to property, plant and equipment         (11,831 )   (54,242 )   (136,820 )   (241,786 )
Contributions to equity method investments         (12,748 )   (260,460 )   (102,499 )   (336,601 )
Distributions from equity method investments         12,277     —     39,767     —  
Proceeds from the sale of fixed assets         18,701     —     18,743     18  
Net cash provided by (used in) investing activities         6,399     (314,702 )   (180,809 )   (578,369 )
Cash flows from financing activities:              
Proceeds from Note Offering         —     —     500,000     —  
Proceeds from borrowings from credit facility         32,000     351,000     211,000     463,000  
Payments on credit facility         (38,000 )   (30,000 )   (556,000 )   (39,000 )
Debt issuance costs         (9 )   (381 )   (10,023 )   (4,310 )
Net proceeds from initial public offering—public          —     1     —     719,377  
Repurchased units as part of unit buyback         (14,741 )   —     (14,741 )   —  
Distribution to public          (8,802 )   (14,858 )   (46,906 )   (14,858 )
Distribution to Diamondback          (21,582 )   (36,678 )   (115,442 )   (763,191 )
Other         (439 )   (772 )   (3,684 )   1,227  
Net cash provided by (used in) financing activities         (51,573 )   268,312     (35,796 )   362,245  
Net increase (decrease) in cash         7,351     7,939     13,294     2,069  
Cash at beginning of period         16,576     2,694     10,633     8,564  
Cash at end of period         $ 23,927     $ 10,633     $ 23,927     $ 10,633  
               
Supplemental disclosure of cash flow information:              
Interest paid         $ 612     $ 1,932     $ 7,381     $ 2,707  
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  


Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited)
           
  As of December 31, 2020
(miles)(a) Delaware Basin    Midland Basin    Permian Total
Crude oil         108      46      154   
Natural gas         155      —      155   
Produced water         269      248      517   
Sourced water         27      74      101   
Total         559      368      927   

(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 December 31, 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      60  %
Natural gas gathering (Mcf/d)         170,000      —      170,000      54  %
Produced water gathering and disposal (Bbl/d)         1,310,000      1,810,000      3,120,000      26  %
Sourced water gathering (Bbl/d)         120,000      455,000      575,000      44  %

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

Rattler Midstream LP
Throughput
(unaudited)
               
  Three Months Ended
December 31,		   Year Ended December 31,
(throughput)(a) 2020   2019   2020   2019
Crude oil gathering (Bbl/d)         88,634      98,725      92,056      85,164   
Natural gas gathering (MMBtu/d)         141,140      104,169      121,637      85,283   
Produced water gathering and disposal (Bbl/d)         810,493      894,693      821,543      806,078   
Sourced water gathering (Bbl/d)         287,255      478,232      253,907      415,939   

(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, depreciation, amortization and accretion on assets and liabilities of Rattler Midstream Operating LLC, its proportional depreciation and interest expense related to equity method investments, its proportional impairments and abandonments related to equity method investments, non-cash general and administrative expense 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
December 31,		   Year Ended December 31,
  2020   2019   2020   2019
Reconciliation of Net Income to Adjusted EBITDA:              
Net income         $ 38,859     $ 51,604     $ 144,705     $ 185,719  
Interest expense, net of amount capitalized         6,923     401     17,287     1,039  
Depreciation, amortization and accretion         17,527     10,538     53,123     42,336  
Depreciation and interest expense related to equity method investments          12,116     1,287     32,456     2,641  
Impairments and abandonments related to equity method investments         28     —     16,543     —  
Non-cash general and administrative         2,762     2,219     9,317     5,208  
Other non-cash transactions         (3,047 )   1,528     189     1,528  
Provision for income taxes         2,475     3,403     10,229     26,253  
Adjusted EBITDA         77,643     70,980     283,849     264,724  
Less: Adjusted EBITDA prior to the IPO         —     —     —     100,743  
Adjusted EBITDA subsequent to the IPO         77,643     70,980     283,849     163,981  
Less: Adjusted EBITDA attributable to non-controlling interest         55,411     50,508     201,994     116,685  
Adjusted EBITDA attributable to Rattler Midstream LP         $ 22,232     $ 20,472     $ 81,855     $ 47,296  

Adjusted net income is a supplemental non-GAAP financial measure equal to net income adjusted for impairments and abandonments related to equity method investments and related income tax adjustments. Management believes adjusted net income is useful because the measure provides useful information to analysts and investors for analysis of its operating results on a consistent, comparable basis from period to period. The Company'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
December 31, 2020		 Year Ended
December 31, 2020
Reconciliation of Net Income to Adjusted Net Income:    
Net income         $ 38,859   $ 144,705  
Impairments and abandonments related to equity method investments         28   16,543  
Adjusted income excluding above items         38,887   161,248  
Income tax adjustment for above items         (2 ) (1,132 )
Adjusted net income(1)         38,885   160,116  
Less: Adjusted net income attributable to non-controlling interest         29,259   121,763  
Adjusted net income attributable to Rattler Midstream LP         $ 9,626   $ 38,353  
     
Adjusted net income attributable to limited partners per common unit         $ 0.22   $ 0.83  

(1) Adjusted net income was equal to net income for the three months and year ended December 31, 2019.

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


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Source: Rattler Midstream LP