May 4, 2021

Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports First Quarter 2021 Financial and Operating Results

MIDLAND, Texas, May 04, 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 first quarter ended March 31, 2021.

FIRST QUARTER 2021 HIGHLIGHTS

  • Q1 2021 consolidated net income (including non-controlling interest) of $25.9 million
  • Q1 2021 consolidated Adjusted EBITDA (as defined and reconciled below) of $65.3 million
  • Q1 2021 cash flow provided by operating activities of $52.7 million; Q1 2021 Operating Cash Flow Before Working Capital Changes (as defined and reconciled below) of $47.9 million
  • Q1 2021 cash operated capital expenditures of $5.9 million
  • Q1 2021 consolidated Free Cash Flow (as defined and reconciled below) of $47.4 million
  • Board of Directors of Rattler's general partner approved a cash distribution for the first quarter of 2021 of $0.20 per common unit ($0.80 annualized); implies a 7.1% annualized yield based on the May 3, 2021 closing unit price of $11.24
  • Repurchased approximately 1.08 million common units at an average unit price of $10.27 for a total cost of $11.1 million during the quarter
  • Q1 2021 average produced water gathering and disposal volumes of 766 MBbl/d
  • Q1 2021 average sourced water volumes of 268 MBbl/d; 22% of total sourced water volumes in Q1 2021 sourced from recycled produced water
  • Q1 2021 average crude oil gathering volumes of 85 MBbl/d
  • Q1 2021 average gas gathering volumes of 130 BBtu/d
  • Subsequent to the quarter end, Rattler and Amarillo Midstream sold their 50/50 Amarillo Rattler joint venture to EnLink Midstream for total gross potential consideration of $75 million, consisting of $50 million at closing, $10 million upon the first anniversary of closing and up to $15 million in contingent earn-out payments
  • Subsequent to the quarter end, Rattler signed a definitive agreement to sell non-core real estate for $10 million, subject to certain closing adjustments

“Despite the impact of Winter Storm Uri on operations, the first quarter of 2021 saw strong free cash flow generation from Rattler that exhibits the resiliency of our business model. We'd like to thank our field personnel and industry partners that enabled this accomplishment by working around the clock to get our operations back online despite the conditions. While volumes on our operated business as well as our equity method joint ventures were affected, capital discipline and line of sight into Diamondback's development enabled Rattler to keep capital expenditures to a minimum. The resulting free cash flow was used to fund a combination of unitholder distributions, common unit repurchases and debt repayment in accordance with our stated priority of returning capital to investors,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, "For the first time since Rattler's initial public offering, distributions from Rattler's equity method investments exceeded our contributions to these projects. This trend is expected to continue and expand as our equity method joint venture build cycle comes to an end, accelerated by the announced sale of our Amarillo Rattler joint venture. This joint venture highlights the advantages of the mutually beneficial relationship between Diamondback and Rattler: Rattler was able to participate in an ultimately profitable venture underpinned by Diamondback volumes, and Diamondback was able to secure the midstream investment and capacity needed to develop one of its core operating areas.”

Mr. Stice further stated, “Looking forward to the remainder of 2021, the guidance and operating plan is unchanged from our initial guidance provided. There were no lasting effects of the first quarter's winter events on our equipment or operations, and Rattler expects to continue executing on its business plan, which is to provide the highest level of reliability and service to our customers in the most environmentally responsible manner."

OPERATIONS AND FINANCIAL UPDATE

During the first quarter of 2021, the Company recorded total operating income of $37.7 million, a decrease of 22% compared to the fourth quarter of 2020. During the first quarter of 2021, the Company recorded consolidated net income (loss) (including non-controlling interest) of $25.9 million, a decrease of 33% from the fourth quarter of 2020. First quarter 2021 Adjusted EBITDA (as defined and reconciled below) was $65.3 million, a decrease of 16% from the fourth quarter of 2020.

First quarter operated capital expenditures totaled $5.9 million, and aggregate contributions to equity method joint ventures were $3.7 million. Rattler also received proceeds of $9.1 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 March 31,
  2021   2020
Crude oil gathering (Bbl/d) 85,210     97,293  
Natural gas gathering (MMBtu/d) 130,437     117,761  
Produced water gathering and disposal (Bbl/d) 765,588     941,628  
Sourced water gathering (Bbl/d) 267,834     446,713  

CASH DISTRIBUTION

On April 28, 2021, the Board of Directors of Rattler's general partner approved a cash distribution for the first quarter of 2021 of $0.20 per common unit, payable on May 21, 2021 to unitholders of record at the close of business on May 14, 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 $100.0 million of Rattler's outstanding common units through December 31, 2021. Pursuant to this program, during the first quarter of 2021, the Company repurchased 1,081,855 common units at an average unit price of $10.27 per unit for a total cost of $11.1 million. From the end of the first quarter of 2021 through April 30, 2021, Rattler repurchased an additional 315,000 common units for a total cost of $3.5 million. In total from the program's inception through April 30, 2021, Rattler repurchased 3,046,855 common units for a total cost of $29.3 million, utilizing 29% of the $100.0 million approved by the Board for the repurchase program.

SUBSEQUENT EVENTS

On April 22, 2021, the Company signed a definitive agreement to sell one of its real estate properties located in Midland, Texas for estimated proceeds of $10 million, subject to certain closing adjustments. The transaction is expected to close in the second quarter of 2021.

On April 30, 2021, each of Rattler and its joint venture partner, Amarillo Midstream, LLC, sold its 50% interest in Amarillo Rattler LLC to EnLink Midstream for aggregate total gross potential consideration of $75 million, consisting of $50 million at closing, $10 million upon the first anniversary of closing and $15 million in contingent earn-out payments over a three-year span based upon Diamondback's development activity. Net of transaction expenses and working capital adjustments, Rattler received $23.5 million at closing, with an incremental $5 million due in April 2022, and could receive up to $7.5 million in contingent payments from 2023 to 2025.

GUIDANCE

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

   
  Rattler Midstream LP Guidance
  2021
   
Rattler Operated Volumes (a)  
Produced Water Gathering and Disposal (MBbl/d) 800 - 900
Sourced Water (MBbl/d) 200 - 300
Crude Oil Gathering (MBbl/d) 75 - 85
Gas Gathering (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 first quarter of 2021 on Wednesday, May 5, 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 9268528. A telephonic replay will be available from 12:00 p.m. CT on Wednesday, May 5, 2021 through Wednesday, May 12, 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 9268528. 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, asset sales 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)
       
  March 31,   December 31,
  2021   2020
Assets      
Current assets:      
Cash $ 9,760     $ 23,927  
Accounts receivable—related party 46,238     57,447  
Accounts receivable—third party, net 7,060     5,658  
Sourced water inventory 9,738     10,108  
Other current assets 948     1,127  
Total current assets 73,744     98,267  
Property, plant and equipment:      
Land 85,826     85,826  
Property, plant and equipment 1,017,574     1,012,777  
Accumulated depreciation, amortization and accretion (110,491 )   (100,728 )
Property, plant and equipment, net 992,909     997,875  
Right of use assets 406     574  
Equity method investments 525,078     532,927  
Real estate assets, net 96,751     96,687  
Intangible lease assets, net 4,050     4,262  
Deferred tax asset 71,397     73,264  
Other assets 4,463     4,732  
Total assets $ 1,768,798     $ 1,808,588  
Liabilities and Unitholders’ Equity      
Current liabilities:      
Accounts payable $ 524     $ 139  
Accrued liabilities 39,428     42,508  
Taxes payable 217     192  
Short-term lease liability 406     574  
Asset retirement obligations 35     35  
Total current liabilities 40,610     43,448  
Long-term debt 545,450     569,947  
Asset retirement obligations 15,621     15,093  
Total liabilities 601,681     628,488  
Commitment and contingencies      
Unitholders’ equity:      
General partner—Diamondback 879     899  
Common units—public (41,277,589 units issued and outstanding as of March 31, 2021 and 42,356,637 units issued and outstanding as of December 31, 2020) 374,432     385,189  
Class B units—Diamondback (107,815,152 units issued and outstanding as of March 31, 2021 and as of December 31, 2020) 879     899  
Accumulated other comprehensive income (loss) (30 )   (123 )
Total Rattler Midstream LP unitholders’ equity 376,160     386,864  
Non-controlling interest 791,060     793,638  
Non-controlling interest in accumulated other comprehensive income (loss) (103 )   (402 )
Total equity 1,167,117     1,180,100  
Total liabilities and unitholders’ equity $ 1,768,798     $ 1,808,588  


 
Rattler Midstream LP
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
       
  Three Months Ended March 31,
  2021   2020
Revenues:      
Revenues—related party $ 87,078     $ 116,583  
Revenues—third party 8,121     9,100  
Other income—related party 2,540     1,518  
Other income—third party 1,069     2,194  
Total revenues 98,808     129,395  
Costs and expenses:      
Direct operating expenses 32,511     32,874  
Cost of goods sold (exclusive of depreciation and amortization) 8,811     15,961  
Real estate operating expenses 517     728  
Depreciation, amortization and accretion 11,246     12,506  
Impairment and abandonments 3,371      
General and administrative expenses 4,634     4,514  
(Gain) loss on disposal of property, plant and equipment 6     1,538  
Total costs and expenses 61,096     68,121  
Income (loss) from operations 37,712     61,274  
Other income (expense):      
Interest income (expense), net (7,310 )   (2,621 )
Income (loss) from equity method investments (2,823 )   (245 )
Total other income (expense), net (10,133 )   (2,866 )
Net income (loss) before income taxes 27,579     58,408  
Provision for (benefit from) income taxes 1,671     3,820  
Net income (loss) 25,908     54,588  
Less: Net income (loss) attributable to non-controlling interest 19,893     41,557  
Net income (loss) attributable to Rattler Midstream LP $ 6,015     $ 13,031  
Net income (loss) attributable to limited partners per common unit:      
Basic $ 0.13     $ 0.28  
Diluted $ 0.13     $ 0.28  
Weighted average number of limited partner common units outstanding:      
Basic 41,742     43,700  
Diluted 41,742     43,700  


 
Rattler Midstream LP
Consolidated Statements of Cash Flows
(unaudited, in thousands)
       
  Three Months Ended March 31,
  2021   2020
Cash flows from operating activities:      
Net income (loss) $ 25,908     $ 54,588  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Provision for deferred income taxes 1,671     3,820  
Depreciation, amortization and accretion 11,246     12,506  
(Gain) loss on disposal of property, plant and equipment 6     1,538  
Impairment and abandonments 3,371      
Unit-based compensation expense 2,332     2,219  
(Income) loss from equity method investments 2,823     245  
Other 503      
Changes in operating assets and liabilities:      
Accounts receivable—related party 11,209     31,674  
Accounts payable, accrued liabilities and taxes payable (6,092 )   (8,540 )
Other (309 )   (63 )
Net cash provided by (used in) operating activities 52,668     97,987  
Cash flows from investing activities:      
Additions to property, plant and equipment (5,860 )   (52,046 )
Contributions to equity method investments (3,663 )   (32,563 )
Distributions from equity method investments 9,107     9,761  
Proceeds from the sale of fixed assets     42  
Net cash provided by (used in) investing activities (416 )   (74,806 )
Cash flows from financing activities:      
Proceeds from borrowings from credit facility 12,000     27,000  
Payments on credit facility (37,000 )    
Repurchased units as part of unit buyback (11,114 )    
Distribution to public (8,263 )   (12,673 )
Distribution to Diamondback (21,583 )   (31,286 )
Other (459 )   (672 )
Net cash provided by (used in) financing activities (66,419 )   (17,631 )
Net increase (decrease) in cash (14,167 )   5,550  
Cash at beginning of period 23,927     10,633  
Cash at end of period $ 9,760     $ 16,183  


 
Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited)
           
  As of March 31, 2021
(miles)(a) Delaware Basin    Midland Basin    Permian Total
Crude oil 108     46     154  
Natural gas 157         157  
Produced water 274     250     524  
Sourced water 27     74     101  
Total 566     370     936  

(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 March 31, 2021
(capacity/capability)(a) Delaware Basin    Midland Basin    Permian Total   Utilization
Crude oil gathering (Bbl/d) 210,000     65,000     275,000     31 %
Natural gas compression (Mcf/d) 151,000         151,000     62 %
Natural gas gathering (Mcf/d) 180,000         180,000     53 %
Produced water gathering and disposal (Bbl/d) 1,330,000     1,805,000     3,135,000     24 %
Sourced water gathering (Bbl/d) 120,000     455,000     575,000     47 %

(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 March 31,
(throughput)(a) 2021   2020
Crude oil gathering (Bbl/d) 85,210     97,293  
Natural gas gathering (MMBtu/d) 130,437     117,761  
Produced water gathering and disposal (Bbl/d) 765,588     941,628  
Sourced water gathering (Bbl/d) 267,834     446,713  

(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 (loss) attributable to Rattler Midstream LP plus net income (loss) attributable to non-controlling interest ("net income (loss)") 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 unit-based compensation expense, impairment and abandonments, (gain) loss on disposal of property, plant and equipment, provision for income taxes and other. The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss). However, Adjusted EBITDA should not be considered an alternative to net income (loss) or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles in the United States ("GAAP"). Adjusted EBITDA excludes some, but not all, items that affect net income (loss), 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 (loss) 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 (loss) and Adjusted EBITDA to allow for the variability in timing and uncertainty of estimates of reconciling items between forecasted net income (loss) and forecasted Adjusted EBITDA. Therefore, the Company cannot reconcile forecasted net income (loss) to forecasted Adjusted EBITDA without unreasonable effort.

The following table presents a reconciliation of net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA for each of the periods indicated:

Rattler Midstream LP
Adjusted EBITDA
(unaudited, in thousands)
       
  Three Months Ended March 31,
  2021   2020
Reconciliation of Net Income (Loss) to Adjusted EBITDA:      
Net income (loss) attributable to Rattler Midstream LP $ 6,015     $ 13,031  
Net income (loss) attributable to non-controlling interest 19,893     41,557  
Net income (loss) 25,908     54,588  
Interest expense, net of amount capitalized 7,310     2,621  
Depreciation, amortization and accretion 11,246     12,506  
Depreciation and interest expense related to equity method investments 10,525     3,766  
Impairments and abandonments related to equity method investments 2,933      
Non-cash unit-based compensation expense 2,332     2,219  
Impairment and abandonments 3,371      
(Gain) loss on disposal of property, plant and equipment 6     1,538  
Provision for income taxes 1,671     3,820  
Other 12     (78 )
Adjusted EBITDA 65,314     80,980  
Less: Adjusted EBITDA attributable to non-controlling interest 47,135     57,624  
Adjusted EBITDA attributable to Rattler Midstream LP $ 18,179     $ 23,356  

Adjusted net income (loss) is a supplemental non-GAAP financial measure equal to net income (loss) adjusted for impairments and abandonments related to equity method investments and related income tax adjustments. Management believes adjusted net income (loss) 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 (loss) 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.

The following table presents a reconciliation of net income (loss) attributable to Rattler Midstream LP to adjusted net income (loss) for each of the periods indicated:

Rattler Midstream LP
Adjusted Net Income (Loss)
(unaudited, in thousands, except per unit data)
       
  Three Months Ended March 31, 2021
  Amounts   Amounts Per
Dilutive Share
Reconciliation of Net Income (Loss) to Adjusted Net Income:      
Net income (loss) attributable to Rattler Midstream LP $ 6,015     $ 0.13  
Net income (loss) attributable to non-controlling interest 19,893     0.48  
Net income (loss) 25,908     0.61  
Impairments and abandonments related to equity method investments 2,933     0.07  
Impairments and abandonments 3,371     0.08  
Adjusted income (loss) excluding above items 32,212     0.76  
Income tax adjustment for above items (414 )   (0.01 )
Adjusted Net Income (Loss) 31,798     0.75  
Less: Adjusted net income (loss) attributable to non-controlling interest 24,443     0.59  
Adjusted net income (loss) attributable to Rattler Midstream LP $ 7,355     $ 0.16  
       
Weighted average common units outstanding:
Basic   41,742  
Diluted   41,742  

Operating cash flow before working capital changes, which is a supplemental non-GAAP financial measure, represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities. The GAAP financial measure most directly comparable to operating cash flow before working capital changes is net cash provided by operating activities. Management believes operating cash flow before working capital changes is an accepted measure which reflects cash flow from operating activities, additions to property, plant and equipment and net investments in its equity method investments across periods on a consistent basis. The Company also uses this measure because adjusted operating cash flow relates to the timing of cash receipts and disbursements that the Company may not control and may not relate to the period in which the operating activities occurred. This allows the Company to compare its operating performance with that of other companies without regard to financing methods and capital structure.

Free Cash Flow, which is a supplemental non-GAAP financial measure, is operating cash flow before working capital changes less net cash provided by (used in) investing activities. The GAAP financial measure most directly comparable to Free Cash Flow is net cash provided by operating activities. Management believes that Free Cash Flow is useful to investors as it provides the amount of cash available for reducing debt, investing in additional capital projects or paying dividends. These measures should not be considered as an alternative to, or more meaningful than, net cash provided by operating activities as an indicator of operating performance. The Company's computation of operating cash flow before working capital changes and Free Cash Flow may not be comparable to other similarly titled measures of other companies.

The following tables present a reconciliation of net cash provided by operating activities to operating cash flow before working capital changes and to Free Cash Flow:

Rattler Midstream LP
Operating Cash Flow
(unaudited, in thousands)
  Three Months Ended March 31,
  2021   2020
Net cash provided by operating activities $ 52,668     $ 97,987  
Less: Changes in cash due to changes in operating assets and liabilities:      
Accounts receivable—related party 11,209     31,674  
Accounts payable, accrued liabilities and taxes payable (6,092 )   (8,540 )
Other (309 )   (63 )
Total working capital changes 4,808     23,071  
Operating cash flow before working capital changes $ 47,860     $ 74,916  


Rattler Midstream LP
Free Cash Flow
(unaudited, in thousands)
  Three Months Ended March 31,
  2021   2020
Operating cash flow before working capital changes $ 47,860     $ 74,916  
       
Additions to property, plant and equipment (5,860 )   (52,046 )
Contributions to equity method investments (3,663 )   (32,563 )
Distributions from equity method investments 9,107     9,761  
Other     42  
Net cash provided by (used in) investing activities (416 )   (74,806 )
Free Cash Flow $ 47,444     $ 110  
               

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