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Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Reports Fourth Quarter and Full Year 2019 Financial and Operating Results; Increases Distribution


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Source: Rattler Midstream LP

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.



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