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Form 8-K RATTLER MIDSTREAM LP For: Feb 24

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February 24, 2021 4:30 PM EST

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Exhibit 99.1
RATTLER MIDSTREAM LP, A SUBSIDIARY OF DIAMONDBACK ENERGY, INC., REPORTS FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL AND OPERATING RESULTS

MIDLAND, Texas, February 24, 2021 (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, 2020.

FOURTH QUARTER 2020 HIGHLIGHTS

•Q4 2020 consolidated net income (including non-controlling interest) of $38.9 million
•Q4 2020 consolidated Adjusted EBITDA (as defined and reconciled below) of $77.6 million
•Board of Directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2020 of $0.20 per common unit ($0.80 annualized); implies a 7.5% annualized yield based on the February 23, 2021 closing unit price of $10.72
•Repurchased 1,650,000 common units at an average unit price of $8.93 for a total cost of $14.7 million
•Q4 2020 cash operated capital expenditures of $11.8 million
•Q4 2020 average produced water gathering and disposal volumes of 810 MBbl/d
•Q4 2020 average sourced water volumes of 287 MBbl/d; 8% of total sourced water volumes in Q4 2020 sourced from recycled produced water
•Q4 2020 average crude oil gathering volumes of 89 MBbl/d
•Q4 2020 average gas gathering volumes of 141 BBtu/d

FULL YEAR 2020 HIGHLIGHTS

•Full year 2020 consolidated net income (including non-controlling interest) of $144.7 million
•Full year 2020 consolidated Adjusted EBITDA (as defined and reconciled below) of $283.8 million; up 7% from full year 2019
•Full year 2020 operated capital expenditures of $136.8 million; down 43% from full year 2019
•Full year 2020 average produced water gathering and disposal volumes of 822 MBbl/d
•Full year 2020 average sourced water volumes of 254 MBbl/d
•Full year 2020 average crude oil gathering volumes of 92 MBbl/d
•Full year 2020 average gas gathering volumes of 122 BBtu/d

“Rattler’s performance in the fourth quarter of 2020 reflects our continued progress in reducing capital spend after Diamondback’s growth trajectory dramatically slowed in the second quarter of 2020. We are also near the end of our multi-year investment cycle in non-operated equity method investments, with distributions from equity method investments nearly reaching parity with contributions in the fourth


quarter. In 2021, we expect distributions from these investments to significantly exceed remaining contributions. Also, as previously announced, operated capital expenditures are expected to decrease by ~50% from 2020 levels. With our operated volumes normalizing in the fourth quarter, cash flow from our fixed fee agreements combined with declining capital investment resulted in robust free cash flow generation that was returned to unitholders via our distribution and repurchase program,” stated Travis Stice, Chief Executive Officer of Rattler’s general partner.

Mr. Stice continued, “Looking forward to 2021, with Diamondback planning to keep fourth quarter 2020 oil production volumes relatively flat, Rattler's 2021 guidance reflects a continuation of the strong results seen in the second half of 2020. The stable operated business, underpinned by Diamondback's low-cost development of its top tier Permian assets, along with equity method distributions outpacing contributions, is expected to deliver increasing free cash flow to Rattler’s unitholders. Taken together with Rattler's conservative leverage profile and visibility into Diamondback's development plan, we believe Rattler presents a compelling story of financial strength and free cash flow generation with tangible returns to unitholders."

OPERATIONS AND FINANCIAL UPDATE

During the fourth quarter of 2020, the Company recorded total operating income of $48.2 million, an increase of 9% compared to the third quarter of 2020. During the fourth quarter of 2020, the Company recorded consolidated net income (including non-controlling interest) of $38.9 million, flat from the third quarter of 2020. Fourth quarter 2020 Adjusted EBITDA (as defined and reconciled below) was $77.6 million, an increase of 9% from the third quarter of 2020.

Fourth quarter operated capital expenditures totaled $11.8 million, and aggregate contributions to equity method joint ventures were $12.7 million. Rattler also received proceeds of $12.3 million in distributions from equity method investments during the quarter.

The following table summarizes the Company's throughput on its operated assets.
Three Months Ended December 31,Year Ended December 31,
2020201920202019
Crude oil gathering volumes (Bbl/d)88,634 98,725 92,056 85,164 
Natural gas gathering volumes (MMBtu/d)141,140 104,169 121,637 85,283 
Produced water gathering and disposal volumes (Bbl/d)810,493 894,693 821,543 806,078 
Sourced water gathering volumes (Bbl/d)287,255 478,232 253,907 415,939 

CASH DISTRIBUTION

On February 17, 2021, the Board of Directors of Rattler's general partner approved a cash distribution for the fourth quarter of 2020 of $0.20 per common unit, payable on March 15, 2021 to unitholders of record at the close of business on March 8, 2021.



COMMON UNIT REPURCHASE PROGRAM

On October 29, 2020, the Board of Directors of Rattler's general partner approved a common unit repurchase program to acquire up to $100 million of our outstanding common units through December 31, 2021. Pursuant to this program, during the fourth quarter of 2020, the Company repurchased 1,650,000 common units at an average unit price of $8.93 per unit for a total cost of $14.7 million. From the end of the fourth quarter of 2020 through February 12, 2021, Rattler repurchased an additional 664,610 common units for a total cost of $6.6 million. In total through February 12, 2021, Rattler repurchased 2,314,610 common units for a total cost of $21.4 million, utilizing 21% of the $100 million approved by the Board for the repurchase program.

GUIDANCE UPDATE

Below is Rattler's initial guidance for the full year 2021.

Rattler Midstream LP Guidance
2021
Rattler Operated Volumes (a)
Produced Water Gathering and Disposal Volumes (MBbl/d)800 - 900
Sourced Water Volumes (MBbl/d)200 - 300
Crude Oil Gathering Volumes (MBbl/d)75 - 85
Gas Gathering Volumes (BBtu/d)120 - 140
Financial Metrics ($ millions except per unit metrics)
Net Income$140 - $180
Adjusted EBITDA$280 - $320
Operated Midstream Capex
$60 - $80
Equity Method Investment Contributions(b)
$10 - $20
Equity Method Investment Distributions(b)
$35 - $45
Depreciation, Amortization & Accretion
$50 - $70
(a)Does not include any volumes from the EPIC, Gray Oak, Wink to Webster, OMOG and Amarillo Rattler joint ventures
(b)Includes the 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 2020 on Thursday, February 25, 2021 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 5272909. A telephonic replay will be available from 12:00 p.m. CT on Thursday, February 25, 2021 through Thursday, March 4, 2021 at 12:00 p.m. CT. To access the replay, call (855) 859-2056 (United States/Canada) or (404) 537-3406 (International) and enter confirmation code 5272909. 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 Delaware limited partnership formed by Diamondback Energy to own, operate, develop and acquire midstream and energy-related infrastructure assets. Rattler owns crude oil, natural gas and water-related midstream assets in the Permian Basin that provide services to Diamondback Energy and third party customers under primarily 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 Forms 10-K, 10-Q and 8-K, 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,
 20202019
Assets  
Current assets:  
Cash$23,927 $10,633 
Accounts receivable—related party57,447 50,270 
Accounts receivable—third party, net5,658 9,071 
Sourced water inventory10,108 14,325 
Other current assets1,127 1,428 
Total current assets98,267 85,727 
Property, plant and equipment:  
Land85,826 86,072 
Property, plant and equipment1,012,777 930,768 
Accumulated depreciation, amortization and accretion(100,728)(61,132)
Property, plant and equipment, net997,875 955,708 
Right of use assets574 418 
Equity method investments532,927 479,558 
Real estate assets, net96,687 101,116 
Intangible lease assets, net4,262 8,070 
Deferred tax asset73,264 — 
Other assets4,732 5,796 
Total assets$1,808,588 $1,636,393 


Rattler Midstream LP
Consolidated Balance Sheets - Continued
(unaudited, in thousands, except unit amounts)
 December 31,December 31,
 20202019
Liabilities and Unitholders’ Equity  
Current liabilities:  
Accounts payable$139 $147 
Accrued liabilities42,508 76,625 
Taxes payable192 189 
Short-term lease liability574 418 
Asset retirement obligations35 — 
Total current liabilities43,448 77,379 
Long-term debt569,947 424,000 
Asset retirement obligations15,093 11,347 
Deferred income taxes— 7,827 
Total liabilities628,488 520,553 
Commitment and contingencies  
Unitholders’ equity:  
General partner—Diamondback899 979 
Common units—public (42,356,637 units issued and outstanding as of December 31, 2020 and 43,700,000 units issued and outstanding as of December 31, 2019)
385,189 737,777 
Class B units—Diamondback (107,815,152 units issued and outstanding as of December 31, 2020 and as of December 31, 2019)
899 979 
Accumulated other comprehensive income (loss)(123)(198)
Total Rattler Midstream LP unitholders’ equity386,864 739,537 
Non-controlling interest793,638 376,928 
Non-controlling interest in accumulated other comprehensive income (loss)(402)(625)
Total equity1,180,100 1,115,840 
Total liabilities and unitholders’ equity$1,808,588 $1,636,393 





















Rattler Midstream LP
Consolidated Statements of Operations
(unaudited, in thousands, except per unit data)
Three Months Ended December 31,Year Ended December 31,
2020201920202019
Revenues:   
Revenues—related party$98,629 $112,612 $379,089 $409,120 
Revenues—third party7,620 8,919 31,124 24,324 
Rental income—related party2,394 1,401 7,495 4,771 
Rental income—third party687 1,891 5,340 7,890 
Other real estate income—related party(12)114 306 379 
Other real estate income—third party(82)371 551 1,189 
Total revenues109,236 125,308 423,905 447,673 
Costs and expenses:    
Direct operating expenses29,968 29,930 131,393 106,311 
Cost of goods sold (exclusive of depreciation and amortization)11,002 16,604 38,370 62,856 
Real estate operating expenses549 680 2,361 2,643 
Depreciation, amortization and accretion17,527 10,538 53,123 42,336 
Impairment918 — 918 — 
General and administrative expenses4,538 4,986 16,367 12,663 
(Gain) loss on disposal of property, plant and equipment(3,494)1,528 (729)1,524 
Total costs and expenses61,008 64,266 241,803 228,333 
Income (loss) from operations48,228 61,042 182,102 219,340 
Other income (expense):    
Interest income (expense), net(6,923)(401)(17,287)(1,039)
Income (loss) from equity method investments29 (5,634)(9,881)(6,329)
Total other income (expense), net(6,894)(6,035)(27,168)(7,368)
Net income (loss) before income taxes41,334 55,007 154,934 211,972 
Provision for (benefit from) income taxes2,475 3,403 10,229 26,253 
Net income (loss)38,859 51,604 144,705 185,719 
Less: Net income (loss) before initial public offering— — — 65,995 
Net income (loss) subsequent to initial public offering38,859 51,604 144,705 119,724 
Less: Net income (loss) attributable to non-controlling interest 29,239 39,136 110,014 90,922 
Net income (loss) attributable to Rattler Midstream LP$9,620 $12,468 $34,691 $28,802 
Net income (loss) attributable to limited partners per common unit:
Basic$0.21 $0.27 $0.74 $0.64 
Diluted$0.21 $0.27 $0.74 $0.64 
Weighted average number of limited partner common units outstanding:
Basic43,448 43,700 43,739 43,622 
Diluted43,448 43,700 43,739 43,622 


Rattler Midstream LP
Consolidated Statements of Cash Flows
(unaudited, in thousands)
 Three Months Ended December 31, 2020Year Ended December 31,
 2020201920202019
Cash flows from operating activities: 
Net income (loss)$38,859 $51,604 $144,705 $185,719 
Adjustments to reconcile net income to net cash provided by operating activities: 
Provision for deferred income taxes2,475 3,403 10,229 26,253 
Depreciation, amortization and accretion17,527 10,538 53,123 42,336 
Unit-based compensation expense2,340 2,219 8,895 5,208 
Impairment918 — 918 — 
(Income) loss from equity method investments(29)5,634 9,881 6,329 
Other(2,991)1,528 241 1,524 
Changes in operating assets and liabilities: 
Accounts receivable—related party(8,826)(19,735)(7,177)(65,032)
Accounts payable, accrued liabilities and taxes payable2,625 3,508 2,742 34,299 
Other(373)(4,370)6,342 (18,443)
Net cash provided by (used in) operating activities52,525 54,329 229,899 218,193 
Cash flows from investing activities: 
Additions to property, plant and equipment(11,831)(54,242)(136,820)(241,786)
Contributions to equity method investments(12,748)(260,460)(102,499)(336,601)
Distributions from equity method investments12,277 — 39,767 — 
Proceeds from the sale of fixed assets18,701 — 18,743 18 
Net cash provided by (used in) investing activities6,399 (314,702)(180,809)(578,369)
Cash flows from financing activities: 
Proceeds from Note Offering— — 500,000 — 
Proceeds from borrowings from credit facility32,000 351,000 211,000 463,000 
Payments on credit facility(38,000)(30,000)(556,000)(39,000)
Debt issuance costs(9)(381)(10,023)(4,310)
Net proceeds from initial public offering—public — 1 — 719,377 
Repurchased units as part of unit buyback(14,741)— (14,741)— 
Distribution to public (8,802)(14,858)(46,906)(14,858)
Distribution to Diamondback (21,582)(36,678)(115,442)(763,191)
Other(439)(772)(3,684)1,227 
Net cash provided by (used in) financing activities(51,573)268,312 (35,796)362,245 
Net increase (decrease) in cash7,351 7,939 13,294 2,069 
Cash at beginning of period16,576 2,694 10,633 8,564 
Cash at end of period$23,927 $10,633 $23,927 $10,633 
Supplemental disclosure of cash flow information:
Interest paid$612 $1,932 $7,381 $2,707 
Supplemental disclosure of non-cash financing activity: 
Contributions from Diamondback$— $— $— $456,055 
Supplemental disclosure of non-cash investing activity: 
Increase in long-term assets and inventory due to contributions from Diamondback$— $— $— $456,055 


Rattler Midstream LP
Pipeline Infrastructure Assets
(unaudited)
As of December 31, 2020
(miles)(a)
Delaware Basin Midland Basin Permian Total
Crude oil108 46 154 
Natural gas155 — 155 
Produced water269 248 517 
Sourced water27 74 101 
Total559 368 927 
(a) Does not include any assets of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.
Rattler Midstream LP
Capacity/Capability
(unaudited)
As of December 31, 2020
(capacity/capability)(a)
Delaware Basin Midland Basin Permian Total Utilization
Crude oil gathering (Bbl/d)210,000 65,000 275,000 36 %
Natural gas compression (Mcf/d)151,000 — 151,000 60 %
Natural gas gathering (Mcf/d)170,000 — 170,000 54 %
Produced water gathering and disposal (Bbl/d)1,310,000 1,810,000 3,120,000 26 %
Sourced water gathering (Bbl/d)120,000 455,000 575,000 44 %
(a) Does not include any assets of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.

Rattler Midstream LP
Throughput
(unaudited)
Three Months Ended December 31,Year Ended December 31,
(throughput)(a)
2020201920202019
Crude oil gathering (Bbl/d)88,634 98,725 92,056 85,164 
Natural gas gathering (MMBtu/d)141,140 104,169 121,637 85,283 
Produced water gathering and disposal (Bbl/d)810,493 894,693 821,543 806,078 
Sourced water gathering (Bbl/d)287,255 478,232 253,907 415,939 
(a) Does not include any volumes of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.




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, depreciation, amortization and accretion on assets and liabilities of Rattler Midstream Operating LLC, its proportional depreciation and interest expense related to equity method investments, its proportional impairments and abandonments related to equity method investments, non-cash general and administrative expense and other non-cash transactions. Adjusted EBITDA should not be considered an alternative to net income or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles in the United States ("GAAP"). The GAAP measure most directly comparable to Adjusted EBITDA is net income. 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
Adjusted EBITDA
(unaudited, in thousands)
Three Months Ended December 31,Year Ended December 31,
2020201920202019
Reconciliation of Net Income to Adjusted EBITDA:
Net income$38,859 $51,604 $144,705 $185,719 
Interest expense, net of amount capitalized6,923 401 17,287 1,039 
Depreciation, amortization and accretion17,527 10,538 53,123 42,336 
Depreciation and interest expense related to equity method investments 12,116 1,287 32,456 2,641 
Impairments and abandonments related to equity method investments28 — 16,543 — 
Non-cash general and administrative2,762 2,219 9,317 5,208 
Other non-cash transactions(3,047)1,528 189 1,528 
Provision for income taxes2,475 3,403 10,229 26,253 
Adjusted EBITDA77,643 70,980 283,849 264,724 
Less: Adjusted EBITDA prior to the IPO— — — 100,743 
Adjusted EBITDA subsequent to the IPO77,643 70,980 283,849 163,981 
Less: Adjusted EBITDA attributable to non-controlling interest55,411 50,508 201,994 116,685 
Adjusted EBITDA attributable to Rattler Midstream LP$22,232 $20,472 $81,855 $47,296 




Adjusted net income is a supplemental non-GAAP financial measure equal to net income adjusted for impairments and abandonments related to equity method investments and related income tax adjustments. Management believes adjusted net income is useful because the measure provides useful information to analysts and investors for analysis of its operating results on a consistent, comparable basis from period to period. The Company's computation of adjusted net income may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts.
Rattler Midstream LP
Adjusted Net Income
(unaudited, in thousands, except per unit data)
Three Months Ended December 31, 2020Year Ended December 31, 2020
Reconciliation of Net Income to Adjusted Net Income:
Net income$38,859 $144,705 
Impairments and abandonments related to equity method investments28 16,543 
Adjusted income excluding above items38,887 161,248 
Income tax adjustment for above items(2)(1,132)
Adjusted net income(1)
38,885 160,116 
Less: Adjusted net income attributable to non-controlling interest29,259 121,763 
Adjusted net income attributable to Rattler Midstream LP$9,626 $38,353 
Adjusted net income attributable to limited partners per common unit$0.22 $0.83 
(1) Adjusted net income was equal to net income for the three months and year ended December 31, 2019.




Investor Contact:
Adam Lawlis
+1 432.221.7467
IR@rattlermidstream.com
Source: Rattler Midstream LP; Diamondback Energy, Inc.


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