FANG - Rattler Midstream LP a Subsidiary of Diamondback Energy Inc. Reports Fourth Quarter and Full Year 2019 Financial and Operating Results; Increases Distribution
MIDLAND, Texas, Feb. 18, 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 fourth quarter and full year ended December 31, 2019.
FOURTH QUARTER 2019 HIGHLIGHTS
- Q4 2019 consolidated net income (including non-controlling interest) of $51.6 million, consolidated adjusted EBITDA (as defined and reconciled below) of $71.0 million
- Board of directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2019 of $0.29 per common unit ($1.16 annualized), up 16% from the initial annualized distribution
- Q4 2019 capital expenditures of $54.2 million
- Q4 2019 average produced water gathering and disposal volumes of 895 MBbl/d, up 6% over Q3 2019 and 164% over Q4 2018
- Q4 2019 average sourced water volumes of 478 MBbl/d, up 25% over Q3 2019 and 137% over Q4 2018; 26% of total sourced water volumes in Q4 2019 was sourced from recycled produced water compared to ~10% for full year 2018
- Q4 2019 average crude oil gathering volumes of 99 MBbl/d, up 11% over Q3 2019 and 63% over Q4 2018
- Q4 2019 average gas gathering volumes of 104 BBtu/d, up 14% over Q3 2019 and 125% over Q4 2018
- Entered into a 50/50 joint venture with Amarillo Midstream, LLC ("Amarillo Midstream"), a portfolio company of ArcLight Capital Partners, to operate a gas gathering and processing system and construct a new 60 MMcf/d cryogenic natural gas processing plant in Martin County for Diamondback's acreage acquired from Ajax Resources
- Rattler and Oryx Midstream, a portfolio company of Stonepeak Infrastructure Partners, through their newly created joint venture OMOG JV LLC ("OMOG"), acquired Reliance Gathering, LLC (now known as Oryx Midland Oil Gathering LLC)
FULL YEAR 2019 HIGHLIGHTS
- Full year 2019 consolidated net income (including non-controlling interest) of $185.7 million; up 195% from full year 2018
- Full year 2019 consolidated adjusted EBITDA (as defined and reconciled below) of $264.7 million; up 151% from full year 2018
- Full year 2019 capital expenditures of $241.8 million
- Full year 2019 average produced water gathering and disposal volumes of 806 MBbl/d, up 186% over full year 2018
- Full year 2019 average sourced water volumes of 416 MBbl/d, up 65% full year 2018
- Full year 2019 average crude oil gathering volumes of 85 MBbl/d, up 80% over full year 2018
- Full year 2019 average gas gathering volumes of 85 BBtu/d, up 117% over full year 2018
“Rattler's core business continued to operate extremely well with a strong final quarter of 2019. Volumes in our produced water gathering and oil gathering service lines organically increased by 26% and 32%, respectively, since just the first quarter of 2019. Moreover, Adjusted EBITDA of $265 million for full year 2019 exceeded pre-IPO estimates despite a ~$4 million drag from equity method investments for the year as we wait for full service of the EPIC and Gray Oak pipeline projects in 2020. Looking forward to 2020, Rattler is expected to grow Adjusted EBITDA 42% year over year at the midpoint of guidance, underpinned by strong expected volume growth with declining operated Capex. Our unchanged business plan in the face of volatility in energy equity and commodity markets highlights the strength and stability we see in our relationship with Diamondback and the insulating structure of fixed fee gathering agreements with a low cost operator,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.
Mr. Stice continued, “Rattler also announced its entry into the Amarillo Rattler joint venture to develop a gathering, compression and processing system, including a new 60 MMcf/d cryogenic natural gas processing plant in northwest Martin County, an area expected to be a core growth area for Diamondback in the years to come. This new investment, along with existing investments in the OMOG, EPIC, Gray Oak and Wink to Webster joint ventures, continues Rattler's strategy of leveraging the Diamondback relationship to invest in projects where Diamondback will participate as a major customer. With all of the remaining projects in our joint ventures expected to reach full service by the end of 2021, and capital expenditures on Rattler's operated midstream assets expected to continue to decrease as various systems grow closer to full capacity, we believe that expected future volume and EBITDA growth will directly lead to sustained and increasing free cash flow. Rattler, with its conservative capital structure and low leverage, intends to rely on this expected free cash flow to return capital to unitholders through distributions, as represented by a 16% higher distribution per unit for Q4 2019 and 2020."
OPERATIONS AND FINANCIAL UPDATE
During the fourth quarter of 2019, the Company recorded total operating income of $61.0 million, an increase of 16% over the third quarter of 2019 and an increase of 212% over the fourth quarter of 2018. For the full year 2019, the Company recorded total operating income of $219.3 million, an increase of 173% over full year 2018.
During the fourth quarter of 2019, the Company recorded consolidated net income (including non-controlling interest) of $51.6 million, an increase of 7% over the third quarter of 2019 and an increase of 237% over the fourth quarter of 2018. For the full year 2019, the Company recorded consolidated net income (including non-controlling interest) of $185.7 million, an increase of 195% over full year 2018.
Fourth quarter 2019 Adjusted EBITDA (as defined and reconciled below) was $71.0 million, up 6% from Q3 2019 and up 164% from Q4 2018. Full year 2019 Adjusted EBITDA was $264.7 million, up 151% from full year 2018.
During the fourth quarter of 2019, average produced water gathering and disposal volumes were 895 MBbl/d, up 6% over Q3 2019 and 164% over Q4 2018. Average sourced water volumes were 478 MBbl/d, up 25% over Q3 2019 and 137% over Q4 2018. Average oil gathering volumes were 99 MBbl/d, up 11% over Q3 2019 and 63% over Q4 2018. Average gas gathering volumes were 104 BBtu/d, up 14% over Q3 2019 and 125% over Q4 2018.
For the full year 2019, average produced water gathering and disposal volumes were 806 MBbl/d, up 186% over full year 2018. Average sourced water gathering volumes were 416 MBbl/d, up 65% over full year 2018. Average oil gathering volumes were 85 MBbl/d, up 80% over full year 2018. Average gas gathering volumes were 85 BBtu/d, up 117% over full year 2018.
Fourth quarter capital expenditures totaled $54.2 million, and aggregate contributions to equity method joint ventures were $260.5 million. Full year 2019 capital expenditures totaled $241.8 million, and aggregate contributions to equity method joint ventures were $336.6 million, with Diamondback contributing an additional $149.5 million in equity method investments prior to the Rattler initial public offering that was transferred to Rattler in the form of a non-cash contribution.
As of December 31, 2019, the Company had a cash balance of $10.6 million and $176.0 million available under its $600.0 million revolving credit facility, which is expandable to $1.0 billion upon Rattler's election.
CASH DISTRIBUTION
On February 13, 2020, the board of directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2019 of $0.29 per common unit, payable on March 10, 2020 to unitholders of record at the close of business on March 3, 2020. In its updated 2020 guidance, Rattler expects to maintain this increased distribution per unit for full year 2020, an increase of 16% from its initial annualized distribution of $1.00 per unit.
AMARILLO RATTLER GAS PROCESSING JOINT VENTURE
On December 20, 2019, Rattler acquired a 50% equity interest in Amarillo Rattler, a joint venture with Amarillo Midstream, a portfolio company of ArcLight Capital Partners. Amarillo Rattler currently owns and operates the Yellow Rose gas gathering and processing system with estimated total processing capacity of 40 MMcf/d and over 84 miles of gathering and regional transportation pipelines in Dawson, Martin and Andrews Counties, Texas. This joint venture also intends to construct and operate a new 60 MMcf/d cryogenic natural gas processing plant in Martin County, Texas as well as incremental gas gathering and compression and regional transportation pipelines. The estimated aggregate capital outlay of the joint venture is anticipated to be approximately $100 million (or approximately $50 million from Rattler) to construct the new processing plant, gas gathering and compression, and regional transportation pipelines.
Rattler anticipates that the new processing plant will commence full commercial operations in mid 2021. Diamondback has dedicated to this joint venture acreage and production from the acreage acquired from the Ajax Resources acquisition in October 2018. Amarillo Midstream serves as construction manager and operator for this joint venture, and Rattler will account for the investment in the joint venture as an equity method investment.
OMOG JV (RELIANCE GATHERING)
On November 7, 2019, Rattler and Oryx Midstream, a portfolio company of Stonepeak Infrastructure Partners, through their newly created joint venture OMOG JV LLC acquired Reliance Gathering, LLC (now known as Oryx Midland Oil Gathering LLC) for approximately $356 million in cash. Rattler owns 60%, and Oryx owns 40%, of the joint venture.
GUIDANCE UPDATE
Below is Rattler's guidance for 2020, which is the same as the guidance for 2020 released by Rattler in November 2019, except to the extent updated to reflect (i) updated sourced water volumes, (ii) estimated 2020 equity method investment contributions and total remaining equity method investment contributions, (iii) the anticipated annualized increase to Rattler's distribution per unit and (iv) estimated Depreciation, Amortization & Accretion expense.
| Rattler Midstream LP Guidance |
| 2020 |
| Rattler Operated Volumes (a) |
| Produced Water Gathering and Disposal Volumes (MBbl/d) |
| 950 - 1,050 |
| Sourced Water Volumes (MBbl/d) |
| 400 - 475 |
| Oil Gathering Volumes (MBbl/d) |
| 100 - 110 |
| Gas Gathering Volumes (BBtu/d) |
| 100 - 120 |
| Financial Metrics ($ millions except per unit metrics) |
| Adjusted EBITDA |
| $350 - $400 |
| Equity Method Investment EBITDA(b) |
| $40 - $60 |
| Operated Midstream Capex |
| $200 - $225 |
| 2020 Equity Method Investment Contributions(b) |
| $135 - $150 |
| Total Remaining Equity Method Investment Contributions(b) |
| $170 - $185 |
| Depreciation, Amortization & Accretion |
| $45 - $60 |
| Annualized Distribution per Unit |
| $1.16 |
(a) Does not include volumes from the EPIC, Gray Oak, Wink to Webster, OMOG and Amarillo Rattler joint ventures
(b) Includes 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 2019 on Wednesday, February 19, 2020 at 10:00 a.m. CT. Participants should call (877) 288-2756 (United States/Canada) or (470) 495-9481 (International) and use the confirmation code 8515009. A telephonic replay will be available from 1:00 p.m. CT on Wednesday, February 19, 2020 through Wednesday, February 26, 2020 at 1:00 p.m. CT. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 8515009. 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 including fresh water sourcing and transportation and saltwater gathering and disposal 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 any pending, completed or future acquisitions 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 Final Prospectus, dated May 22, 2019 and filed May 24, 2019, Forms 10-Q and 8-K and Annual Report on Form 10-K for the year ended December 31, 2019, to be filed after the issuance of this earnings release, 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, |
| 2019 |
| 2018 |
| Assets |
| Current assets: |
| Cash |
| $ |
| 10,633 |
| $ |
| 8,564 |
| Accounts receivable—related party |
| 50,270 |
| 18,274 |
| Accounts receivable—third party |
| 9,071 |
| 1,849 |
| Sourced water inventory |
| 14,325 |
| 9,200 |
| Other current assets |
| 1,428 |
| 4,209 |
| Total current assets |
| 85,727 |
| 42,096 |
| Property, plant and equipment: |
| Land |
| 88,509 |
| 70,373 |
| Property, plant and equipment |
| 930,768 |
| 415,888 |
| Accumulated depreciation, amortization and accretion |
| (61,132 |
| ) |
| (28,317 |
| ) |
| Property, plant and equipment, net |
| 958,145 |
| 457,944 |
| Right of use assets |
| 418 |
| — |
| Equity method investments |
| 479,558 |
| — |
| Real estate assets, net |
| 98,679 |
| 93,023 |
| Intangible lease assets, net |
| 8,070 |
| 10,954 |
| Other assets |
| 5,796 |
| — |
| Total assets |
| $ |
| 1,636,393 |
| $ |
| 604,017 |
| Rattler Midstream LP |
| Consolidated Balance Sheets - Continued |
| (unaudited, in thousands) |
| December 31, |
| December 31, |
| 2019 |
| 2018 |
| Liabilities and Unitholders’ Equity |
| Current liabilities: |
| Accounts payable |
| $ |
| 147 |
| $ |
| 100 |
| Accrued liabilities |
| 76,625 |
| 51,804 |
| Taxes payable |
| 189 |
| 11,514 |
| Short-term lease liability |
| 418 |
| — |
| Total current liabilities |
| 77,379 |
| 63,418 |
| Long-term debt |
| 424,000 |
| — |
| Asset retirement obligations |
| 11,347 |
| 561 |
| Deferred income taxes |
| 7,827 |
| 12,912 |
| Total liabilities |
| 520,553 |
| 76,891 |
| Commitment and contingencies |
| Unitholders' equity: |
| Limited partners member's equity—Diamondback |
| — |
| 527,125 |
| General partner—Diamondback |
| 979 |
| — |
| Common units—public (43,700,000 units issued and outstanding as of December 31, 2019) |
| 737,777 |
| — |
| Class B units—Diamondback (107,815,152 units issued and outstanding as of December 31, 2019) |
| 979 |
| 1 |
| Accumulated other comprehensive loss |
| (198 |
| ) |
| — |
| Total Rattler Midstream LP unitholders’ equity |
| 739,537 |
| 527,126 |
| Non-controlling interest |
| 376,928 |
| — |
| Non-controlling interest in accumulated other comprehensive loss |
| (625 |
| ) |
| — |
| Total equity |
| 1,115,840 |
| 527,126 |
| Total liabilities and unitholders’ equity |
| $ |
| 1,636,393 |
| $ |
| 604,017 |
| Rattler Midstream LP |
| Consolidated Statements of Operations |
| (unaudited, in thousands, except per unit data) |
| Three Months Ended December 31, |
| Year Ended December 31, |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| Predecessor |
| Predecessor |
| Revenues: |
| Revenues—related party |
| $ |
| 112,612 |
| $ |
| 45,226 |
| $ |
| 409,120 |
| $ |
| 169,396 |
| Revenues—third party |
| 8,919 |
| 3,013 |
| 24,324 |
| 3,292 |
| Rental income—related party |
| 1,401 |
| 700 |
| 4,771 |
| 2,383 |
| Rental income—third party |
| 1,891 |
| 2,072 |
| 7,890 |
| 8,125 |
| Other real estate income—related party |
| 114 |
| (551 |
| ) |
| 379 |
| 228 |
| Other real estate income—third party |
| 371 |
| 1,043 |
| 1,189 |
| 1,043 |
| Total revenues |
| 125,308 |
| 51,503 |
| 447,673 |
| 184,467 |
| Costs and expenses: |
| Direct operating expenses |
| 29,930 |
| 9,058 |
| 106,311 |
| 33,714 |
| Cost of goods sold (exclusive of depreciation and amortization) |
| 16,604 |
| 14,484 |
| 62,856 |
| 38,852 |
| Real estate operating expenses |
| 680 |
| 501 |
| 2,643 |
| 1,872 |
| Depreciation, amortization and accretion |
| 10,538 |
| 7,304 |
| 42,336 |
| 25,134 |
| General and administrative expenses |
| 4,986 |
| 590 |
| 12,663 |
| 1,999 |
| Loss on disposal of property, plant and equipment |
| 1,528 |
| 9 |
| 1,524 |
| 2,577 |
| Total costs and expenses |
| 64,266 |
| 31,946 |
| 228,333 |
| 104,148 |
| Income from operations |
| 61,042 |
| 19,557 |
| 219,340 |
| 80,319 |
| Other income (expense): |
| Interest expense, net |
| (401 |
| ) |
| — |
| (1,039 |
| ) |
| — |
| Income (loss) from equity method investments |
| (5,634 |
| ) |
| — |
| (6,329 |
| ) |
| — |
| Total other income (expense), net |
| (6,035 |
| ) |
| — |
| (7,368 |
| ) |
| — |
| Net income before income taxes |
| 55,007 |
| 19,557 |
| 211,972 |
| 80,319 |
| Provision for income taxes |
| 3,403 |
| 4,245 |
| 26,253 |
| 17,359 |
| Net income after taxes |
| $ |
| 51,604 |
| $ |
| 15,312 |
| $ |
| 185,719 |
| $ |
| 62,960 |
| Net income before initial public offering |
| $ |
| 65,995 |
| Net income subsequent to initial public offering |
| $ |
| 119,724 |
| Net income attributable to non-controlling interest subsequent to initial public offering |
| 39,136 |
| 90,922 |
| Net income attributable to Rattler Midstream LP |
| $ |
| 12,468 |
| $ |
| 28,802 |
| Net income attributable to limited partners per common unit - subsequent to initial public offering: |
| Basic |
| $ |
| 0.27 |
| $ |
| 0.64 |
| Diluted |
| $ |
| 0.27 |
| $ |
| 0.64 |
| Weighted average number of limited partner common units outstanding: |
| Basic |
| 43,700 |
| 43,622 |
| Diluted |
| 43,700 |
| 43,622 |
| Rattler Midstream LP |
| Consolidated Statements of Cash Flows |
| (unaudited, in thousands) |
| Year Ended December 31, |
| 2019 |
| 2018 |
| Predecessor |
| Cash flows from operating activities: |
| Net income |
| $ |
| 185,719 |
| $ |
| 62,960 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
| Provision for deferred income taxes |
| 26,253 |
| 5,845 |
| Depreciation, amortization and accretion |
| 42,336 |
| 25,134 |
| Loss on disposal of property, plant and equipment |
| 1,524 |
| 2,577 |
| Unit-based compensation expense |
| 5,208 |
| — |
| Expense (Income) from equity method investment |
| 6,329 |
| — |
| Changes in operating assets and liabilities: |
| Accounts receivable—related party |
| (65,032 |
| ) |
| 17,625 |
| Accounts receivable—third party |
| (1,212 |
| ) |
| (1,849 |
| ) |
| Accounts payable, accrued liabilities and taxes payable |
| 34,299 |
| 61,139 |
| Other |
| (17,231 |
| ) |
| — |
| Net cash provided by operating activities |
| 218,193 |
| 173,431 |
| Cash flows from investing activities: |
| Additions to property, plant and equipment |
| (241,786 |
| ) |
| (164,876 |
| ) |
| Contributions to equity method investments |
| (336,601 |
| ) |
| — |
| Proceeds from the sale of fixed assets |
| 18 |
| — |
| Net cash used in investing activities |
| (578,369 |
| ) |
| (164,876 |
| ) |
| Cash flows from financing activities: |
| Proceeds from borrowings from credit facility |
| 463,000 |
| — |
| Payments on credit facility |
| (39,000 |
| ) |
| — |
| Distribution equivalent rights |
| (751 |
| ) |
| — |
| Debt issuance costs |
| (4,310 |
| ) |
| — |
| Net proceeds from initial public offering—public |
| 719,377 |
| — |
| Net proceeds from initial public offering—General Partner |
| 1,000 |
| — |
| Net proceeds from initial public offering—Diamondback |
| 999 |
| 1 |
| Distribution to General Partner (Note 1) |
| (21 |
| ) |
| — |
| Distribution to public (Note 1) |
| (14,858 |
| ) |
| — |
| Distribution to Diamondback (Note 1) |
| (763,191 |
| ) |
| — |
| Net cash provided by financing activities |
| 362,245 |
| 1 |
| Net increase in cash |
| 2,069 |
| 8,556 |
| Cash at beginning of period |
| 8,564 |
| 8 |
| Cash at end of period |
| $ |
| 10,633 |
| $ |
| 8,564 |
| Supplemental disclosure of cash flow information: |
| Interest paid |
| $ |
| 2,707 |
| $ |
| — |
| Supplemental disclosure of non-cash financing activity: |
| Contributions from Diamondback |
| $ |
| 456,055 |
| $ |
| 171,557 |
| Supplemental disclosure of non-cash investing activity: |
| Increase in long term assets and inventory due to contributions from Diamondback |
| $ |
| 456,055 |
| $ |
| 171,557 |
| Change in accrued liabilities related to property, plant and equipment |
| $ |
| 4,176 |
| $ |
| 2,693 |
| Rattler Midstream LP |
| Pipeline Infrastructure Assets |
| (unaudited, in miles) |
| (miles) |
| Delaware Basin |
| Midland Basin |
| Permian Total |
| Crude oil |
| 104 |
| 44 |
| 148 |
| Natural gas |
| 148 |
| — |
| 148 |
| Produced water |
| 257 |
| 217 |
| 474 |
| Sourced water |
| 26 |
| 71 |
| 97 |
| Total |
| 535 |
| 332 |
| 867 |
| Rattler Midstream LP |
| Capacity/Capability |
| (unaudited) |
| (capacity/capability) |
| Delaware Basin |
| Midland Basin |
| Permian Total |
| Utilization |
| Crude oil gathering (Bbl/d) |
| 180,000 |
| 56,000 |
| 236,000 |
| 42% |
| Natural gas compression (Mcf/d) |
| 135,000 |
| — |
| 135,000 |
| 70% |
| Natural gas gathering (Mcf/d) |
| 150,000 |
| — |
| 150,000 |
| 56% |
| Produced water gathering and disposal (Bbl/d) |
| 1,576,500 |
| 1,732,300 |
| 3,308,800 |
| 27% |
| Sourced water (Bbl/d) |
| 120,000 |
| 455,000 |
| 575,000 |
| 83% |
| Rattler Midstream LP |
| Throughput and Volumes |
| (unaudited) |
| Three Months Ended December 31, |
| Year Ended December 31, |
| (throughput) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| Crude oil gathering volumes (Bbl/d) |
| 98,725 |
| 60,581 |
| 85,164 |
| 47,338 |
| Natural gas gathering volumes (MMBtu/d) |
| 104,169 |
| 46,196 |
| 85,283 |
| 39,252 |
| Produced water gathering and disposal volumes (Bbl/d) |
| 894,693 |
| 339,110 |
| 806,078 |
| 281,916 |
| Sourced water gathering volumes (Bbl/d) |
| 478,232 |
| 202,177 |
| 415,939 |
| 252,118 |
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations period to period without regard to our financing methods or capital structure.
Rattler defines Adjusted EBITDA as net income before income taxes, interest expense, net of amount capitalized, interest expense related to equity method investments, non-cash unit-based compensation expense, depreciation, amortization and accretion and other non-cash transactions. Depreciation, amortization and accretion includes depreciation, amortization and accretion on assets and liabilities of Rattler Midstream Operating LLC, in addition to depreciation, amortization and accretion on our equity method investments. Interest expense related to equity method investments represents our proportional interest income (expense) from equity method investments. The GAAP measure most directly comparable to Adjusted EBITDA is net income. Adjusted EBITDA should not be considered an alternative to net income or any other measure of financial performance or liquidity presented in accordance with GAAP. 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 following table presents a reconciliation of Adjusted EBITDA to net income, on a historical basis and pro forma basis, as applicable, for each of the periods indicated:
| Rattler Midstream LP |
| (unaudited, in thousands) |
| Three Months Ended December 31, |
| Year Ended December 31, |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| Reconciliation of Net Income to Adjusted EBITDA: |
| Net income |
| $ |
| 51,604 |
| $ |
| 15,312 |
| $ |
| 185,719 |
| $ |
| 62,960 |
| Depreciation, amortization and accretion |
| 10,538 |
| 7,304 |
| 42,336 |
| 25,134 |
| Interest expense, net of amount capitalized |
| 401 |
| — |
| 1,039 |
| — |
| Interest expense (income) related to equity method investments |
| (156 |
| ) |
| — |
| 1,005 |
| — |
| Depreciation related to equity method investments |
| 1,443 |
| — |
| 1,636 |
| — |
| Non-cash unit-based compensation expense |
| 2,219 |
| — |
| 5,208 |
| — |
| Other non-cash transactions |
| 1,528 |
| — |
| 1,528 |
| — |
| Provision for income taxes |
| 3,403 |
| 4,245 |
| 26,253 |
| 17,359 |
| Adjusted EBITDA |
| 70,980 |
| $ |
| 26,861 |
| 264,724 |
| $ |
| 105,453 |
| Less: Adjusted EBITDA prior to the IPO |
| — |
| (100,743 |
| ) |
| Adjusted EBITDA subsequent to the IPO |
| 70,980 |
| 163,981 |
| Less: Adjusted EBITDA attributable to non-controlling interest |
| (50,508 |
| ) |
| (116,685 |
| ) |
| Adjusted EBITDA attributable to Rattler Midstream LP |
| $ |
| 20,472 |
| $ |
| 47,296 |
Investor Contact:
Adam Lawlis
+1 432.221.7467
IR@rattlermidstream.com
Source: Rattler Midstream LP; Diamondback Energy, Inc.