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CST: 16/10/2019 21:41:43   

Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports Second Quarter 2019 Financial and Operating Results

71 Days ago

MIDLAND, Texas, Aug. 06, 2019 (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 second quarter ended June 30, 2019.

HIGHLIGHTS

  • Q2 2019 consolidated net income (including non-controlling interest) of $46.7 million, consolidated adjusted EBITDA (as defined and reconciled below) of $66.6 million
  • Q2 2019 capital expenditures of $51.2 million; net cash position at quarter end
  • Q2 2019 average produced water volumes of 770 MBbl/d, up 8% over Q1 2019 and 256% over Q2 2018
  • Q2 2019 average fresh water volumes of 448 MBbl/d, up 27% over Q1 2019 and 104% over Q2 2018
  • Q2 2019 average crude oil gathering volumes of 78 MBbl/d, up 5% over Q1 2019 and 82% over Q2 2018
  • Q2 2019 average gas gathering volumes of 84 BBtu/d, up 39% over Q1 2019 and 154% over Q2 2018
  • Closed Initial Public Offering of 43.7 million common units on May 28, 2019
  • Announced participation in Wink to Webster Pipeline project with expected in service date of 1H 2021; expected capital outlay to be funded with a combination of cash on hand, cash flow from operations and borrowings under Rattler's revolving credit facility

“Rattler executed well in its first quarter as a public company.  All four midstream revenue streams grew in the second quarter, resulting in 11% quarter over quarter Adjusted EBITDA growth.  Rattler has been cash flow positive through the first two quarters of 2019 excluding pipeline equity investments.  Over the long term, Rattler expects to grow free cash flow per unit through top line growth based on our sponsor Diamondback’s long-term growth plans while controlling capital expenditures on a 'just-in-time' basis to meet these plans. This relationship, along with aligned incentives, differentiates the Rattler business model from the traditional midstream company and is expected to result in a higher return on capital and a growing distribution without the need for external capital to fund organic growth,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Further, the commitment to the Wink to Webster Pipeline project illustrates the strategic relationship between Diamondback and Rattler, allowing Rattler to invest in a world-class project with blue chip companies due to Diamondback’s size and scale, while Diamondback adds Gulf Coast exposure through the Houston market to its crude marketing portfolio.”

OPERATIONS AND FINANCIAL UPDATE

During the second quarter of 2019, the Company recorded total operating income of $55.6 million and consolidated net income (including non-controlling interest) of $46.7 million. This represents an increase in total operating income of 11% over the first quarter of 2019 and 165% over the second quarter of 2018 and an increase in consolidated net income (including non-controlling interest) of 19% over the first quarter of 2019 and 202% over the second quarter of 2018.

Second quarter 2019 Adjusted EBITDA (as defined and reconciled below) was $66.6 million, up 11% from $60.1 million in Q1 2019 and 161% from $25.5 million in Q2 2018.

During the second quarter of 2019, average produced water volumes were 770 MBbl/d, up 8% over Q1 2019 and 256% over Q2 2018. Average fresh water volumes were 448 MBbl/d, up 27% over Q1 2019 and 104% over Q2 2018. Average oil gathering volumes were 78 MBbl/d, up 5% over Q1 2019 and 82% over Q2 2018. Average gas gathering volumes were 84 BBtu/d, up 39% over Q1 2019 and 154% over Q2 2018.

Second quarter capital expenditures totaled $51.2 million, and aggregate contributions to equity method long-haul pipeline joint ventures were $37.4 million.

As of June 30, 2019, the Company had a cash balance of $3.7 million and $599.0 million available under its $600.0 million revolving credit facility.

WINK TO WEBSTER PIPELINE JOINT VENTURE

On July 30, 2019, Rattler's subsidiary, Rattler Midstream Operating LLC, joined Wink to Webster Pipeline LLC as a member, together with affiliates of ExxonMobil, Plains All American Pipeline, Delek US, MPLX LP and Lotus Midstream.  The joint venture is developing a crude oil pipeline with origin points at Wink and Midland in the Permian Basin for delivery to multiple Houston area locations. The project is expected to begin service in the first half of 2021. Rattler’s future capital contributions to the project are expected to be funded with a combination of cash on hand, cash flow from operations and borrowing under the Company’s $600.0 million revolving credit facility. Through the remainder of 2019, Rattler is expected to contribute less than $20 million to this project.

GUIDANCE UPDATE

Below is Rattler's guidance for the full year 2019.

   
  Rattler Midstream LP
   
Rattler Volumes  
Produced Water Gathering Volumes (MBbl/d) 750 - 800
Fresh Water Gathering Volumes (MBbl/d) 350 - 400
Oil Gathering Volumes (MBbl/d) 75 - 90
Gas Gathering Volumes (BBtu/d) 70 - 85
   
Financial Metrics ($ millions except per unit metrics)  
Adjusted EBITDA $245 - $265
Net Capex(a) $225 - $250
Long-Haul Pipeline Contributions(b) $245 - $255
Depreciation, Amortization & Accretion $40 - $50
Annualized Distribution per Unit $1.00

(a) Excludes Long-Haul Pipeline Contributions
(b)  Includes contributions to Wink to Webster, EPIC and Gray Oak

CONFERENCE CALL

Rattler will host a conference call and webcast for investors and analysts to discuss its results for the second quarter of 2019 on Wednesday, August 7, 2019 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 9124338.  A telephonic replay will be available from 1:00 p.m. CT on Wednesday, August 7, 2019 through Wednesday, August 14, 2019 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 9124338.  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, and current report on Form 8-K filed with the SEC on May 29, 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, except unit amounts)
       
  June 30,   December 31,
  2019   2018
Assets      
Current assets:      
Cash $ 3,737     $ 8,564  
Accounts receivable—related party     18,274  
Accounts receivable—third party 1,676     1,849  
Fresh water inventory 12,631     9,200  
Other current assets 4,718     4,209  
Total current assets 22,762     42,096  
Property, plant and equipment:      
Land 88,509     70,373  
Property, plant and equipment 822,307     415,888  
Accumulated depreciation, amortization and accretion (44,352 )   (28,317 )
Property, plant and equipment, net 866,464     457,944  
Right of use assets 1,212      
Equity method investments 186,902      
Real estate assets, net 100,460     93,023  
Intangible lease assets, net 9,464     10,954  
Total assets $ 1,187,264     $ 604,017  


 
Rattler Midstream LP
Consolidated Balance Sheets
(unaudited, in thousands, except unit amounts)
       
  June 30,   December 31,
  2019   2018
Liabilities and Unitholders’ Equity      
Current liabilities:      
Accounts payable—related party $ 17,015     $  
Accounts payable—third party 246     100  
Other accrued liabilities 96,511     51,804  
Taxes payable 31     11,514  
Short term lease liability 1,126      
Total current liabilities 114,929     63,418  
Long-term debt 1,000      
Asset retirement obligations 4,746     561  
Long-term lease liability 86      
Deferred income taxes 1,342     12,912  
Total liabilities 122,103     76,891  
Commitment and contingencies      
Unitholders' equity:      
Limited partners member's equity—Diamondback     527,125  
General partner—Diamondback 1,000      
Common units—public (43,700,000 units issued and outstanding as of June 30, 2019) 725,261      
Class B units—Diamondback (107,815,152 units issued and outstanding as of June 30, 2019) 1,000     1  
Total Rattler Midstream LP unitholders’ equity 727,261     527,126  
Non-controlling interest 337,900      
Total equity 1,065,161     527,126  
Total liabilities and unitholders’ equity $ 1,187,264     $ 604,017  


 
Rattler Midstream LP
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
               
  Three Months Ended June 30,   Six Months Ended June 30,
   2019           2018                   2019           2018  
                Predecessor                   Predecessor  
 Revenues:                              
Revenues—related party $ 103,066     $ 46,741     $ 191,642     $ 77,801  
Revenues—third party 5,078         8,565     361  
Rental income—related party 1,256     578     1,971     1,011  
Rental income—third party 2,038     2,138     4,105     3,966  
Other real estate income—related party 81     41     154     72  
Other real estate income—third party 255     290     513     452  
Total revenues 111,774     49,788     206,950     83,663  
Costs and expenses:              
Direct operating expenses 26,406     10,992     46,592     16,198  
Cost of goods sold (exclusive of depreciation and amortization shown below) 15,849     8,267     28,902     13,518  
Real estate operating expenses 695     540     1,221     818  
Depreciation, amortization and accretion 10,158     5,975     20,062     11,791  
General and administrative expenses 3,068     426     4,437     680  
(Gain) loss on sale of property, plant and equipment (4 )   2,568     (4 )   2,568  
Total costs and expenses 56,172     28,768     101,210     45,573  
Income from operations 55,602     21,020     105,740     38,090  
Other income (expense):              
Interest expense, net (85 )       (85 )    
Expense from equity investments (114 )   (1,459 )   (64 )    
Total other expense (199 )   (1,459 )   (149 )    
Net income before income taxes 55,403     19,561     105,591     38,090  
Provision for income taxes 8,724     4,089     19,556     8,222  
Net income after taxes $ 46,679     $ 15,472     $ 86,035     $ 29,868  
               
Net income before initial public offering $ 26,639         $ 65,995      
               
Net income subsequent to initial public offering $ 20,040         $ 20,040      
Net income attributable to non-controlling interest subsequent to initial public offering 15,237         15,237      
Net income attributable to Rattler Midstream LP $ 4,803         $ 4,803      
               
Net income attributable to common limited partners per unit - subsequent to initial public offering:              
Basic $ 0.11         $ 0.11      
Diluted $ 0.11         $ 0.11      
Weighted average number of limited partner units outstanding:              
Basic 43,197         43,197      
Diluted 44,340         44,340      


 
Rattler Midstream LP
Consolidated Statements of Cash Flows
(unaudited, in thousands)
       
  Six Months Ended June 30,
  2019     2018  
          Predecessor  
Cash flows from operating activities:               
Net income $ 86,035     $ 29,868  
Adjustments to reconcile net income to net cash provided by operating activities:      
Provision for deferred income taxes 19,556     8,222  
Depreciation, amortization and accretion 20,062     11,791  
(Gain) loss on sale of property, plant and equipment (4 )   2,568  
Unit-based compensation expense 831      
Expense from equity method investment 64      
Changes in operating assets and liabilities:      
Accounts receivable—related party (15,439 )   29,984  
Accounts receivable—third party 173      
Accounts payable, accrued liabilities and taxes payable 44,842     6,370  
Other assets, including inventory (16,723 )   338  
Net cash provided by operating activities 139,397     89,141  
Cash flows from investing activities:      
Additions to property, plant and equipment (102,935 )   (84,671 )
Contributions to equity method investments (37,420 )    
Proceeds from the sale of fixed assets 18      
Net cash used in investing activities (140,337 )   (84,671 )
Cash flows from financing activities:      
Proceeds from borrowings from credit facility 10,000      
Payments on credit facility (9,000 )    
Net proceeds from initial public offering - public 719,627      
Net proceeds from initial public offering - General Partner 1,000      
Net proceeds from initial public offering - Diamondback 999      
Distribution to Diamondback (Note 1) (726,513 )    
Net cash used in financing activities (3,887 )    
Net increase (decrease) in cash (4,827 )   4,470  
Cash at beginning of period 8,564     8  
Cash at end of period $ 3,737     $ 4,478  
Supplemental disclosure of non-cash financing activity:      
Contributions from Diamondback $ 456,055     $ 178,517  
Supplemental disclosure of non-cash investing activity:      
Increase in long term assets and inventory $ 456,055     $ 178,517  
Change in accrued liabilities related to property, plant and equipment $ (30,633 )   $ (7,039 )


 
Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited, in miles)
           
(miles) Delaware Basin   Midland Basin   Permian Total
Crude oil 99     43     142  
Natural gas 143         143  
SWD 239     195     434  
Fresh water 26     69     95  
Total 507     307     814  


 
Rattler Midstream LP
Capacity/Capability
(unaudited)
               
(capacity/capability) Delaware Basin   Midland Basin   Permian Total   Utilization
Crude oil (Bbl/d) 180,000     56,000     236,000       33 %
Natural gas compression (Mcf/d) 80,000         80,000       85 %
Natural gas pipeline (Mcf/d) 150,000         150,000       46 %
SWD (Bbl/d) 1,367,000     1,462,000     2,829,000       27 %
Fresh water (Bbl/d) 120,000     455,000     575,000       78 %


 
Rattler Midstream LP
Throughput and Crude Oil Volumes
(unaudited, in thousands)
               
  Three Months Ended June 30,   Six Months Ended June 30,
(throughput) 2019   2018   2019   2018
Crude oil gathering volumes (Bbl/d) 78,066     42,945     76,326     36,715  
Natural gas gathering volumes (MMBtu/d) 84,426     33,189     72,546     31,827  
Saltwater services volumes (Bbl/d) 770,091     216,193     740,807     228,744  
Fresh water services volumes (Bbl/d) 447,823     220,021     400,476     263,062  
                       

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.

We define Adjusted EBITDA as net income before income taxes, interest expense, net of amount capitalized, interest expense related to equity investments, non-cash unit-based compensation expense, depreciation, amortization and accretion. Depreciation, amortization and accretion includes depreciation, amortization and accretion on assets and liabilities of the Operating Company, in addition to depreciation, amortization and accretion on our equity investments. Interest expense related to equity investments represents our proportional income (loss) from equity investments plus interest on the amount. 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, the most directly comparable GAAP financial measures, 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 June 30,   Six Months Ended June 30,
  2019   2018   2019   2018
Reconciliation of net income to Adjusted EBITDA:                      
Net income $ 46,679   $ 15,472   $ 86,035   $ 29,868
Depreciation, amortization and accretion 10,158   5,975   20,062   11,791
Interest expense, net of amount capitalized 85     85  
Interest expense related to equity investments 149     149  
Non-cash unit-based compensation expense 831     831  
Provision for income taxes 8,724   4,089   19,556   8,222
Adjusted EBITDA 66,626   $ 25,536   126,718   $ 49,881
Less: Adjusted EBITDA prior to the Offering (40,651 )     (100,743 )  
Adjusted EBITDA subsequent to the Offering 25,975       25,975    
Less: Adjusted EBITDA attributable to non-controlling interest (18,483 )     (18,483 )  
Adjusted EBITDA attributable to Rattler Midstream LP $ 7,492       $ 7,492    
                   

Investor Contact:
Adam Lawlis
+1 432.221.7467
IR@rattlermidstream.com

Source: Rattler Midstream LP; Diamondback Energy, Inc.

 

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