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Mail Stop 3561
March 1, 2019
Teresa L. Dick
Executive Vice President and
Chief Financial Officer
Rattler Midstream LP
500 West Texas Avenue
Suite 1200
Midland, Texas 79701
Re: Rattler Midstream LP
Correspondence dated February 27, 2019
Amendment No. 3 to Registration Statement on Form S-1
Filed February 20, 2019
File No. 333-226645
Dear Ms. Dick:
We have reviewed your amended registration statement and your
correspondence filed
February 27, 2019, and have the following comments. In some of our
comments, we may ask
you to provide us with information so we may better understand your
disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell us
why in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Unless we note
otherwise, our references to prior comments are to comments in our February
4, 2019 letter.
Dilution, page 63
1. Please show us how you calculated net tangible book value as of
December 31, 2018
after giving effect to the transactions contemplated to occur at the
completion of this
offering, pro forma net tangible book value per common unit before
this offering, the
increase in net tangible book value per unit attributable to
purchasers in this offering, and
the decrease in as adjusted net tangible book value per common unit
attributable to the
distributions to Diamondback.
Teresa L. Dick
Rattler Midstream LP
March 1, 2019
Page 2
2. Reference is made to the second table. Please expand footnote (3) to
disclose the
distribution paid out of the offering proceeds to Diamondback reducing
the effective
consideration paid to $457,477.
3. Please tell us what consideration was given in calculating pro forma net
tangible book
value per common unit before this offering utilizing the number of units
to be issued to
Diamondback for their contribution of net assets.
Cash Distribution Policy and Restrictions on Distributions, page 65
4. We note you disclose you did not generate sufficient available cash to
pay distributions
during the 12 month period ended December 31, 2018. We also note you
disclose your
first distribution will be prorated for the period from the closing of
the offering through
March 31, 2019, based on the actual number of days in that period, and
that you will
adjust your distribution for the period ending June 30, 2019 to reflect
this amount. In
light of these disclosures, please revise to explain and reconcile how
you expect to
"generate sufficient cash available for distribution to support the
payment of [y]our
initially contemplated quarterly distribution," as you state on page 23,
when you did not
generate sufficient cash for the period ended December 31, 2018.
Unaudited Pro Forma EBITDA and Distributable Cash Flow for the Year Ended
December 31,
2018, page 67
5. Please explain to us how to reconcile capital expenditures in the table
on page 69 to your
historical financial statements.
6. We note you disclose here incremental public partnership general and
administrative
expenses of $836 thousand that you expect to incur assuming the offering
was completed
as of January 1, 2018; however, on page 75, you state you expect these
expenses will be
$1.4 million. Please disclose the reason for the increase or revise as
appropriate.
Estimated EBTIDA and Distributable Cash Flow for the Twelve Months Ending March
31,
2020, page 70
7. Reference is made to the table on page 72. Please add a footnote which
explains the
nature of the "Income from equity investment" line item including how
you plan to
account for the investment. Referencing authoritative literature,
explain to us your basis
for accounting.
8. Reference is made to footnotes (2) and (3) on page 73 where you disclose
you have
assumed no amounts have been drawn on the new revolving credit facility.
Please
reconcile this disclosure with your statement on page 70 that you will
use borrowings
under Rattler LLC's new revolving credit facility to pay for a portion
of your investments
in the EPIC and Gray Oak projects. If the pro rata interest paid on
equity investments in
the projects represents interest paid on borrowings under your new
revolving credit
Teresa L. Dick
Rattler Midstream LP
March 1, 2019
Page 3
facility with regard to these projects, please clarify and disclose the
interest rate used to
calculate interest expense. The rate should be based on either the
current interest rate or
the rate for which you have a commitment.
9. Please refer to the line "Cash used to fund capital expenditures and
equity investment."
If true, please revise to clearly state these amounts represent offering
proceeds retained to
fund capital expenditures and equity investment.
Significant Forecast Assumptions, page 73
10. Please revise to discuss why operating expenses, costs of goods sold,
general and
administrative expenses, depreciation, amortization and accretion and
income tax
expense is expected to increase in the twelve months ending March 31,
2020 as compared
to the pro forma year ended December 31, 2018.
Financial Statements
Rattler Midstream LP Unaudited Pro Forma Combined Financial Statements, page
F-2
11. Please revise to include a separate column for pro forma adjustments
other than the
offering transactions. Alternatively, please include a footnote showing
how you
calculated pro forma member's equity before the offering.
12. Reference is made to your response to comment 17 in our letter dated
September 5, 2018.
Please include pro forma per unit data giving effect to the number of
units whose
proceeds would be necessary to pay the distribution in excess of the
current year s
earnings. Please include your calculation as a footnote. Refer to SAB
Topic 1:B.3.
Notes to Pro Forma Combined Financial Statements, page F-6
13. You disclose that for purposes of the unaudited pro forma combined
balance sheet, it is
assumed that the transactions took place on January 1, 2018. The pro
forma presentation
should be based on the latest balance sheet included in your filing.
Refer to Rule 11-
02(b)(6) of Regulation S-X.
14. We note you are giving effect to the asset drop-down from Diamondback
as if such
transactions occurred on January 1, 2018. We also note your disclosure
that such assets
will be operated effective January 1, 2019 pursuant to your commercial
agreements with
Diamondback and its affiliates. In this regard, please disclose and
clarify the following:
The amount of additional depreciation expense associated with those
assets distinct
from the additional depreciation expense associated with the Fasken
Center; and
The nature of the midstream assets dropped down and the useful lives
or amortization
periods of those assets.
Teresa L. Dick
Rattler Midstream LP
March 1, 2019
Page 4
Rattler Midstream Operating LLC Audited Consolidated Financial Statements
Consolidated Statements of Cash Flows, page F-12
15. We note the entire provision for income taxes of $17,359 is shown as an
adjustment to
the provision for deferred income taxes. In this regard, it appears the
changes in accounts
payable, accrued liabilities, and taxes payable should be $61,275 as
determined from the
balance sheets on page F-9 versus $49,625 disclosed in the statements
of cash flows for
the year ended December 31, 2018. Please explain the differences or
revise as
appropriate.
Note 12. Subsequent Events, page F-27
16. Please revise to state when during the first quarter of 2019 the
additional midstream
assets of approximately $298 million were dropped down. If the assets
have not yet been
dropped down and will be contributed in conjunction with the offering,
please clarify that
fact.
You may contact Adam Phippen, Staff Accountant, at (202) 551-3336, or
Donna Di
Silvio, Staff Accountant, at (202) 551-3202 if you have questions regarding
comments on the
financial statements and related matters. Please contact Katherine Bagley,
Staff Attorney, at
(202) 551-2545, or me at (202) 551-3720 with any other questions.
Sincerely,
/s/ Mara L. Ransom
Mara L. Ransom
Assistant Director
Office of Consumer
Products