RTLR - Rattler Midstream LP a Subsidiary of Diamondback Energy Inc. Reports First Quarter 2020 Financial and Operating Results
MIDLAND, Texas, May 06, 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 first quarter ended March 31, 2020.
FIRST QUARTER 2020 HIGHLIGHTS
- Q1 2020 consolidated net income (including non-controlling interest) of $54.6 million, consolidated adjusted EBITDA (as defined and reconciled below) of $81.0 million
- Board of Directors of Rattler's general partner approved a cash distribution for the first quarter of 2020 of $0.29 per common unit ($1.16 annualized)
- Q1 2020 operated capital expenditures of $52.0 million
- Q1 2020 average produced water gathering and disposal volumes of 942 MBbl/d, up 5% over Q4 2019 and up 32% over Q1 2019
- Q1 2020 average sourced water volumes of 447 MBbl/d, down 7% from Q4 2019 and up 27% over Q1 2019; 17% of total sourced water volumes in Q1 2020 sourced from recycled produced water
- Q1 2020 average crude oil gathering volumes of 97 MBbl/d, down 1% from Q4 2019 and up 30% over Q1 2019
- Q1 2020 average gas gathering volumes of 118 BBtu/d, up 13% over Q4 2019 and up 95% over Q1 2019
“First of all, and most importantly, our thoughts and prayers go out to all of those affected by the coronavirus. The first half of 2020 will be in the history books forever, for all of the wrong reasons, but our business must go on and we have taken swift and decisive action to adapt to rapidly changing circumstances and preserve our strength through this cycle,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.
Mr. Stice continued, “Despite the impact of Diamondback's swift reduction of completion activity in March to Rattler’s sourced water volumes, the Company’s first quarter operating results built on the trend of increasing volumes, earnings and cash flow since the Company’s IPO nearly a year ago. While the volatility of the energy markets has been more pronounced than ever in this short year, we are proud of how the business has performed, and look forward to displaying the resiliency of the business model in the face of this volatility. The unprecedented conditions in the energy industry and overall economy today require companies to adjust their business plans, and Rattler has responded quickly by reducing capital expenditures and operating costs. Therefore, despite the significantly reduced activity prudently announced by Diamondback, Rattler's operated business will continue to be free cash flow positive as growth capex has been significantly reduced, more than offsetting the reduction in expected Diamondback volumes."
OPERATIONS AND FINANCIAL UPDATE
During the first quarter of 2020, the Company recorded total operating income of $61.3 million, flat compared to the fourth quarter of 2019 and an increase of 22% over the first quarter of 2019. During the first quarter of 2020, the Company recorded consolidated net income (including non-controlling interest) of $54.6 million, an increase of 6% over the fourth quarter of 2019 and an increase of 39% over the first quarter of 2019. First quarter 2020 Adjusted EBITDA (as defined and reconciled below) was $81.0 million, up 14% over the fourth quarter of 2019 and up 35% over the first quarter of 2019.
Average produced water gathering and disposal volumes for Q1 2020 were 942 MBbl/d, up 5% over Q4 2019 and up 32% over Q1 2019. Average sourced water volumes were 447 MBbl/d, down 7% from Q4 2019 due to Diamondback reducing completion activity in March, and up 27% over Q1 2019. Average crude oil gathering volumes were 97 MBbl/d, down 1% from Q4 2019 and up 30% over Q1 2019. Average gas gathering volumes were 118 BBtu/d, up 13% over Q4 2019 and up 95% over Q1 2019.
First quarter operated capital expenditures totaled $52.0 million, and aggregate contributions to equity method joint ventures were $32.6 million. Rattler also received proceeds of $9.8 million in distributions from equity method investments. As of March 31, 2020, the Company had a cash balance of $16.2 million and $149.0 million available under its $600.0 million revolving credit facility, which is expandable to $1.0 billion upon Rattler's election, subject to obtaining lender commitments and satisfaction of customary conditions.
CASH DISTRIBUTION
On April 30, 2020, the Board of Directors of Rattler's general partner approved a cash distribution for the first quarter of 2020 of $0.29 per common unit, payable on May 26, 2020 to unitholders of record at the close of business on May 18, 2020. Rattler expects to maintain the $1.16 annual distribution per unit for full year 2020, but the distribution may be changed at any time and the Board has the discretion to review and adjust the distribution quarterly should market conditions warrant.
GUIDANCE UPDATE
Below is Rattler's revised guidance for the full year 2020, with volume guidance updated to reflect the latest base case operating plan. EBITDA and capital expenditure guidance remain consistent with the Company's March 19 press release.
| Rattler Midstream LP Guidance |
| 2020 |
| Rattler Operated Volumes (a) |
| Produced Water Gathering and Disposal Volumes (MBbl/d) |
| 800 - 900 |
| Sourced Water Volumes (MBbl/d) |
| 150 - 250 |
| Crude Oil Gathering Volumes (MBbl/d) |
| 85 - 95 |
| Gas Gathering Volumes (BBtu/d) |
| 95 - 115 |
| Financial Metrics ($ millions except per unit metrics) |
| Net Income |
| $130 - $160 |
| Adjusted EBITDA |
| $260 - $300 |
| Equity Method Investment EBITDA(b) |
| $30 - $50 |
| Operated Midstream Capex |
| $100 - $150 |
| 2020 Equity Method Investment Contributions(b) |
| $110 - $125 |
| 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 first quarter and full year of 2020 on Thursday, May 7, 2020 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 3095396. A telephonic replay will be available from 11:00 a.m. CT on Thursday, May 7, 2020 through Thursday, May 14, 2020 at 11:00 a.m. CT. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 3095396. 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 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 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 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 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, |
| 2020 |
| 2019 |
| Assets |
| Current assets: |
| Cash |
| $ |
| 16,183 |
| $ |
| 10,633 |
| Accounts receivable—related party |
| 18,244 |
| 50,270 |
| Accounts receivable—third party, net |
| 10,782 |
| 9,071 |
| Sourced water inventory |
| 13,265 |
| 14,325 |
| Other current assets |
| 1,051 |
| 1,428 |
| Total current assets |
| 59,525 |
| 85,727 |
| Property, plant and equipment: |
| Land |
| 88,309 |
| 88,509 |
| Property, plant and equipment |
| 987,336 |
| 930,768 |
| Accumulated depreciation, amortization and accretion |
| (71,604 |
| ) |
| (61,132 |
| ) |
| Property, plant and equipment, net |
| 1,004,041 |
| 958,145 |
| Right of use assets |
| 171 |
| 418 |
| Equity method investments |
| 502,040 |
| 479,558 |
| Real estate assets, net |
| 97,580 |
| 98,679 |
| Intangible lease assets, net |
| 7,274 |
| 8,070 |
| Other assets |
| 5,584 |
| 5,796 |
| Total assets |
| $ |
| 1,676,215 |
| $ |
| 1,636,393 |
| Rattler Midstream LP |
| Consolidated Balance Sheets - Continued |
| (unaudited, in thousands, except unit amounts) |
| March 31, |
| December 31, |
| 2020 |
| 2019 |
| Liabilities and Unitholders’ Equity |
| Current liabilities: |
| Accounts payable |
| $ |
| 36 |
| $ |
| 147 |
| Accrued liabilities |
| 72,906 |
| 76,625 |
| Taxes payable |
| 336 |
| 189 |
| Short-term lease liability |
| 171 |
| 418 |
| Total current liabilities |
| 73,449 |
| 77,379 |
| Long-term debt |
| 451,000 |
| 424,000 |
| Asset retirement obligations |
| 12,525 |
| 11,347 |
| Deferred income taxes |
| 11,483 |
| 7,827 |
| Total liabilities |
| 548,457 |
| 520,553 |
| Commitment and contingencies |
| Unitholders' equity: |
| General partner—Diamondback |
| 959 |
| 979 |
| Common units—public (43,700,000 units issued and outstanding as of March 31, 2020 and as of December 31, 2019) |
| 739,702 |
| 737,777 |
| Class B units—Diamondback (107,815,152 units issued and outstanding as of March 31, 2020 and as of December 31, 2019) |
| 959 |
| 979 |
| Accumulated other comprehensive loss |
| (261 |
| ) |
| (198 |
| ) |
| Total Rattler Midstream LP unitholders’ equity |
| 741,359 |
| 739,537 |
| Non-controlling interest |
| 387,219 |
| 376,928 |
| Non-controlling interest in accumulated other comprehensive loss |
| (820 |
| ) |
| (625 |
| ) |
| Total equity |
| 1,127,758 |
| 1,115,840 |
| Total liabilities and unitholders’ equity |
| $ |
| 1,676,215 |
| $ |
| 1,636,393 |
| Rattler Midstream LP |
| Consolidated Statements of Operations |
| (unaudited, in thousands, except per unit data) |
| Three Months Ended March 31, |
| 2020 |
| 2019 |
| Predecessor |
| Revenues: |
| Revenues—related party |
| $ |
| 116,583 |
| $ |
| 88,576 |
| Revenues—third party |
| 9,100 |
| 3,487 |
| Rental income—related party |
| 1,402 |
| 715 |
| Rental income—third party |
| 1,901 |
| 2,067 |
| Other real estate income—related party |
| 116 |
| 73 |
| Other real estate income—third party |
| 293 |
| 258 |
| Total revenues |
| 129,395 |
| 95,176 |
| Costs and expenses: |
| Direct operating expenses |
| 32,874 |
| 20,186 |
| Cost of goods sold (exclusive of depreciation and amortization) |
| 15,961 |
| 13,053 |
| Real estate operating expenses |
| 728 |
| 526 |
| Depreciation, amortization and accretion |
| 12,506 |
| 9,904 |
| General and administrative expenses |
| 4,514 |
| 1,369 |
| Loss on disposal of property, plant and equipment |
| 1,538 |
| — |
| Total costs and expenses |
| 68,121 |
| 45,038 |
| Income from operations |
| 61,274 |
| 50,138 |
| Other income (expense): |
| Interest expense, net |
| (2,621 |
| ) |
| — |
| (Loss) income from equity method investments |
| (245 |
| ) |
| 50 |
| Total other income (expense), net |
| (2,866 |
| ) |
| 50 |
| Net income before income taxes |
| 58,408 |
| 50,188 |
| Provision for income taxes |
| 3,820 |
| 10,832 |
| Net income after taxes |
| $ |
| 54,588 |
| $ |
| 39,356 |
| Net income attributable to non-controlling interest |
| 41,557 |
| Net income attributable to Rattler Midstream LP |
| $ |
| 13,031 |
| Net income attributable to limited partners per common unit: |
| Basic |
| $ |
| 0.28 |
| Diluted |
| $ |
| 0.28 |
| Weighted average number of limited partner common units outstanding: |
| Basic |
| 43,700 |
| Diluted |
| 43,700 |
| Rattler Midstream LP |
| Consolidated Statements of Cash Flows |
| (unaudited, in thousands) |
| Three Months Ended March 31, |
| 2020 |
| 2019 |
| Predecessor |
| Cash flows from operating activities: |
| Net income |
| $ |
| 54,588 |
| $ |
| 39,356 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
| Provision for deferred income taxes |
| 3,820 |
| 2,867 |
| Depreciation, amortization and accretion |
| 12,506 |
| 9,904 |
| Loss on disposal of property, plant and equipment |
| 1,538 |
| — |
| Unit-based compensation expense |
| 2,219 |
| — |
| Loss (income) from equity method investments |
| 245 |
| (50 |
| ) |
| Changes in operating assets and liabilities: |
| Accounts receivable—related party |
| 31,674 |
| (15,516 |
| ) |
| Accounts receivable—third party |
| (1,711 |
| ) |
| 625 |
| Accounts payable, accrued liabilities and taxes payable |
| (8,540 |
| ) |
| 19,578 |
| Other |
| 1,648 |
| (1,524 |
| ) |
| Net cash provided by operating activities |
| 97,987 |
| 55,240 |
| Cash flows from investing activities: |
| Additions to property, plant and equipment |
| (52,046 |
| ) |
| (51,743 |
| ) |
| Contributions to equity method investments |
| (32,563 |
| ) |
| — |
| Distributions from equity method investments |
| 9,761 |
| — |
| Proceeds from the sale of fixed assets |
| 42 |
| — |
| Net cash used in investing activities |
| (74,806 |
| ) |
| (51,743 |
| ) |
| Cash flows from financing activities: |
| Proceeds from borrowings from credit facility |
| 27,000 |
| — |
| Distribution equivalent rights |
| (652 |
| ) |
| — |
| Distribution to General Partner |
| (20 |
| ) |
| — |
| Distribution to public |
| (12,673 |
| ) |
| — |
| Distribution to Diamondback |
| (31,286 |
| ) |
| — |
| Net cash used in financing activities |
| (17,631 |
| ) |
| — |
| Net increase in cash |
| 5,550 |
| 3,497 |
| Cash at beginning of period |
| 10,633 |
| 8,564 |
| Cash at end of period |
| $ |
| 16,183 |
| $ |
| 12,061 |
| Supplemental disclosure of cash flow information: |
| Interest paid |
| $ |
| 2,978 |
| $ |
| — |
| Supplemental disclosure of non-cash financing activity: |
| Contributions from Diamondback |
| $ |
| — |
| $ |
| 458,674 |
| Supplemental disclosure of non-cash investing activity: |
| Increase in long term assets and inventory due to contributions from Diamondback |
| $ |
| — |
| $ |
| 449,441 |
| Change in accrued liabilities related to property, plant and equipment |
| $ |
| 5,063 |
| $ |
| 15,856 |
| Decrease in current liabilities |
| $ |
| — |
| $ |
| 9,233 |
| Rattler Midstream LP |
| Pipeline Infrastructure Assets |
| (unaudited, in miles) |
| As of March 31, 2020 |
| (miles) |
| Delaware Basin |
| Midland Basin |
| Permian Total |
| Crude oil |
| 106 |
| 44 |
| 150 |
| Natural gas |
| 149 |
| — |
| 149 |
| Produced water |
| 261 |
| 221 |
| 482 |
| Sourced water |
| 32 |
| 73 |
| 105 |
| Total |
| 548 |
| 338 |
| 886 |
| Rattler Midstream LP |
| Capacity/Capability |
| (unaudited) |
| As of March 31, 2020 |
| (capacity/capability) |
| Delaware Basin |
| Midland Basin |
| Permian Total |
| Utilization |
| Crude oil gathering (Bbl/d) |
| 180,000 |
| 56,000 |
| 236,000 |
| 41 |
| % |
| Natural gas compression (Mcf/d) |
| 135,000 |
| — |
| 135,000 |
| 63 |
| % |
| Natural gas gathering (Mcf/d) |
| 150,000 |
| — |
| 150,000 |
| 56 |
| % |
| Produced water gathering and disposal (Bbl/d) |
| 1,660,500 |
| 1,872,300 |
| 3,532,800 |
| 28 |
| % |
| Sourced water (Bbl/d) |
| 120,000 |
| 455,000 |
| 575,000 |
| 78 |
| % |
| Rattler Midstream LP |
| Throughput and Volumes |
| (unaudited) |
| Three Months Ended March 31, |
| (throughput) |
| 2020 |
| 2019 |
| Crude oil gathering volumes (Bbl/d) |
| 97,293 |
| 74,567 |
| Natural gas gathering volumes (MMBtu/d) |
| 117,761 |
| 60,534 |
| Produced water gathering and disposal volumes (Bbl/d) |
| 941,628 |
| 711,198 |
| Sourced water gathering volumes (Bbl/d) |
| 446,713 |
| 352,603 |
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 interest expense related to equity method investments, non-cash unit-based compensation expense, depreciation, amortization and accretion on assets and liabilities of Rattler Midstream Operating LLC, its proportional interest of depreciation on its equity method investments and other non-cash transactions. 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 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 |
| (unaudited, in thousands) |
| Three Months Ended March 31, |
| 2020 |
| 2019 |
| Reconciliation of Net Income to Adjusted EBITDA: |
| Net income |
| $ |
| 54,588 |
| $ |
| 39,356 |
| Depreciation, amortization and accretion |
| 12,506 |
| 9,904 |
| Depreciation related to equity method investments |
| 3,443 |
| — |
| Interest expense, net of amount capitalized |
| 2,621 |
| — |
| Interest expense related to equity method investments |
| 323 |
| — |
| Non-cash unit-based compensation expense |
| 2,219 |
| — |
| Other non-cash transactions |
| 1,460 |
| — |
| Provision for income taxes |
| 3,820 |
| 10,832 |
| Adjusted EBITDA |
| 80,980 |
| $ |
| 60,092 |
| Less: Adjusted EBITDA attributable to non-controlling interest |
| (57,624 |
| ) |
| Adjusted EBITDA attributable to Rattler Midstream LP |
| $ |
| 23,356 |
Investor Contact:
Adam Lawlis
+1 432.221.7467
IR@rattlermidstream.com
Source: Rattler Midstream LP; Diamondback Energy, Inc.