GlobeNewswire Inc | Feb 24, 2021 04:01PM EST

February 24, 2021

MIDLAND, Texas, Feb. 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 December31, 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

Rattlers performance in the fourth quarter of 2020 reflects our continued progress in reducing capital spend after Diamondbacks 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 Rattlers 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 Rattlers 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 Year Ended December 31, December 31, 2020 2019 2020 2019Crude oilgathering volumes 88,634 98,725 92,056 85,164 (Bbl/d)

Natural gasgathering volumes 141,140 104,169 121,637 85,283 (MMBtu/d)

Produced watergathering anddisposal volumes 810,493 894,693 821,543 806,078 (Bbl/d)

Sourced watergathering volumes 287,255 478,232 253,907 415,939 (Bbl/d)

CASH DISTRIBUTION

On February17, 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 March15, 2021 to unitholders of record at the close of business on March8, 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 800 - 900/d)Sourced Water Volumes (MBbl/d) 200 - 300Crude Oil Gathering Volumes (MBbl/d) 75 - 85Gas Gathering Volumes (BBtu/d) 120 - 140 Financial Metrics ($ millions except per unit metrics)Net Income $140 - $180Adjusted EBITDA $280 - $320Operated Midstream Capex $60 - $80Equity Method Investment Contributions^(b) $10 - $20Equity Method Investment Distributions^(b) $35 - $45Depreciation, 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 managements 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 Rattlers 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 SECs web site at http://www.sec.gov. Rattler undertakes no obligation to update or revise any forward-looking statement.

Rattler Midstream LPConsolidated Balance Sheets(unaudited, in thousands) December 31, December 31, 2020 2019Assets Current assets: Cash $ 23,927 $ 10,633 Accounts receivable?related party 57,447 50,270 Accounts receivable?third party, net 5,658 9,071 Sourced water inventory 10,108 14,325 Other current assets 1,127 1,428 Total current assets 98,267 85,727 Property, plant and equipment: Land 85,826 86,072 Property, plant and equipment 1,012,777 930,768 Accumulated depreciation, amortization and (100,728 ) (61,132 )accretionProperty, plant and equipment, net 997,875 955,708 Right of use assets 574 418 Equity method investments 532,927 479,558 Real estate assets, net 96,687 101,116 Intangible lease assets, net 4,262 8,070 Deferred tax asset 73,264 ? Other assets 4,732 5,796 Total assets $ 1,808,588 $ 1,636,393

Rattler Midstream LPConsolidated Balance Sheets - Continued(unaudited, in thousands, except unit amounts) December 31, December 31, 2020 2019Liabilities and Unitholders? Equity Current liabilities: Accounts payable $ 139 $ 147 Accrued liabilities 42,508 76,625 Taxes payable 192 189 Short-term lease liability 574 418 Asset retirement obligations 35 ? Total current liabilities 43,448 77,379 Long-term debt 569,947 424,000 Asset retirement obligations 15,093 11,347 Deferred income taxes ? 7,827 Total liabilities 628,488 520,553 Commitment and contingencies Unitholders? equity: General partner?Diamondback 899 979 Common units?public (42,356,637 units issued andoutstanding as of December31, 2020 and 385,189 737,777 43,700,000 units issued and outstanding as ofDecember31, 2019)Class B units?Diamondback (107,815,152 unitsissued and outstanding as of December31, 2020 899 979 and as of December31, 2019)Accumulated other comprehensive income (loss) (123 ) (198 )

Total Rattler Midstream LP unitholders? 386,864 739,537 equityNon-controlling interest 793,638 376,928 Non-controlling interest in accumulated other (402 ) (625 )comprehensive income (loss)Total equity 1,180,100 1,115,840 Total liabilities and unitholders? equity $ 1,808,588 $ 1,636,393

Rattler Midstream LPConsolidated Statements of Operations(unaudited, in thousands, except per unit data) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Revenues: Revenues?related $ 98,629 $ 112,612 $ 379,089 $ 409,120 partyRevenues?third 7,620 8,919 31,124 24,324 partyRental income?related 2,394 1,401 7,495 4,771 partyRental income?third 687 1,891 5,340 7,890 partyOther real estateincome?related (12 ) 114 306 379 partyOther real estate (82 ) 371 551 1,189 income?third partyTotal revenues 109,236 125,308 423,905 447,673 Costs and expenses: Direct operating 29,968 29,930 131,393 106,311 expensesCost of goods sold(exclusive of depreciation 11,002 16,604 38,370 62,856 and amortization)Real estate operating 549 680 2,361 2,643 expensesDepreciation, amortization 17,527 10,538 53,123 42,336 and accretionImpairment 918 ? 918 ? General and administrative 4,538 4,986 16,367 12,663 expenses(Gain) loss on disposal ofproperty, plant and (3,494 ) 1,528 (729 ) 1,524 equipmentTotal costs and 61,008 64,266 241,803 228,333 expensesIncome (loss) from 48,228 61,042 182,102 219,340 operationsOther income (expense): Interest income (expense), (6,923 ) (401 ) (17,287 ) (1,039 )netIncome (loss) from equity 29 (5,634 ) (9,881 ) (6,329 )method investmentsTotal other income (6,894 ) (6,035 ) (27,168 ) (7,368 )(expense), netNet income (loss) before 41,334 55,007 154,934 211,972 income taxesProvision for (benefit 2,475 3,403 10,229 26,253 from) income taxesNet income (loss) 38,859 51,604 144,705 185,719 Less: Net income (loss)before initial public ? ? ? 65,995 offeringNet income (loss)subsequent to initial 38,859 51,604 144,705 119,724 public offeringLess: Net income (loss)attributable to 29,239 39,136 110,014 90,922 non-controlling interest

Net income (loss)attributable to Rattler $ 9,620 $ 12,468 $ 34,691 $ 28,802 Midstream LPNet 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 oflimited partner common units outstanding:Basic 43,448 43,700 43,739 43,622 Diluted 43,448 43,700 43,739 43,622

Rattler Midstream LPConsolidated Statements of Cash Flows(unaudited, in thousands) Three Months Ended Year Ended December 31, December 31, 2020 2020 2019 2020 2019Cash flows from operating activities:Net income (loss) $ 38,859 $ 51,604 $ 144,705 $ 185,719 Adjustments to reconcilenet income to net cash provided by operatingactivities:Provision for deferred 2,475 3,403 10,229 26,253 income taxesDepreciation, amortization 17,527 10,538 53,123 42,336 and accretionUnit-based compensation 2,340 2,219 8,895 5,208 expenseImpairment 918 ? 918 ? (Income) loss from equity (29 ) 5,634 9,881 6,329 method investmentsOther (2,991 ) 1,528 241 1,524 Changes in operating assets and liabilities:Accounts receivable?related (8,826 ) (19,735 ) (7,177 ) (65,032 )partyAccounts payable, accruedliabilities and taxes 2,625 3,508 2,742 34,299 payableOther (373 ) (4,370 ) 6,342 (18,443 )Net cash provided by (usedin) operating 52,525 54,329 229,899 218,193 activitiesCash flows from investing activities:Additions to property, (11,831 ) (54,242 ) (136,820 ) (241,786 )plant and equipmentContributions to equity (12,748 ) (260,460 ) (102,499 ) (336,601 )method investmentsDistributions from equity 12,277 ? 39,767 ? method investmentsProceeds from the sale of 18,701 ? 18,743 18 fixed assetsNet cash provided by (usedin) investing 6,399 (314,702 ) (180,809 ) (578,369 )activitiesCash flows from financing activities:Proceeds from Note ? ? 500,000 ? OfferingProceeds from borrowingsfrom credit 32,000 351,000 211,000 463,000 facilityPayments on credit (38,000 ) (30,000 ) (556,000 ) (39,000 )facilityDebt issuance costs (9 ) (381 ) (10,023 ) (4,310 )Net proceeds from initialpublic offering?public ? 1 ? 719,377

Repurchased units as part (14,741 ) ? (14,741 ) ? of unit buybackDistribution 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 (usedin) financing (51,573 ) 268,312 (35,796 ) 362,245 activitiesNet increase (decrease) in 7,351 7,939 13,294 2,069 cashCash at beginning of 16,576 2,694 10,633 8,564 periodCash at end of $ 23,927 $ 10,633 $ 23,927 $ 10,633 period Supplemental disclosure of cash flow information:Interest paid $ 612 $ 1,932 $ 7,381 $ 2,707 Supplemental disclosure ofnon-cash financing activity:Contributions from $ ? $ ? $ ? $ 456,055 DiamondbackSupplemental disclosure ofnon-cash investing activity:Increase in long-termassets and inventory due to $ ? $ ? $ ? $ 456,055 contributions fromDiamondback

Rattler Midstream LPPipeline Infrastructure Assets(unaudited) As of December 31, 2020(miles)^(a) Delaware Basin Midland Basin Permian TotalCrude oil 108 46 154 Natural gas 155 ? 155 Produced water 269 248 517 Sourced water 27 74 101 Total 559 368 927

(a) Does not include any assets of the EPIC, Gray Oak, Wink to Webster, Amarillo Rattler or OMOG joint ventures.

Rattler Midstream LPCapacity/Capability(unaudited) As of December 31, 2020(capacity/capability)^ Delaware Midland Permian Utilization(a) Basin Basin TotalCrude oil gathering 210,000 65,000 275,000 36 %(Bbl/d)Natural gascompression (Mcf/d) 151,000 ? 151,000 60 %

Natural gas gathering 170,000 ? 170,000 54 %(Mcf/d)Produced watergathering and disposal 1,310,000 1,810,000 3,120,000 26 %(Bbl/d)Sourced watergathering (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 LPThroughput(unaudited) Three Months Ended Year Ended December 31, December 31,(throughput)^(a) 2020 2019 2020 2019Crude oilgathering (Bbl/d) 88,634 98,725 92,056 85,164

Natural gasgathering (MMBtu/ 141,140 104,169 121,637 85,283 d)Produced watergathering and 810,493 894,693 821,543 806,078 disposal (Bbl/d)

Sourced watergathering (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 LPAdjusted EBITDA(unaudited, in thousands) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Reconciliation of Net Income to Adjusted EBITDA:Net income $ 38,859 $ 51,604 $ 144,705 $ 185,719 Interest expense, net of 6,923 401 17,287 1,039 amount capitalizedDepreciation, amortization 17,527 10,538 53,123 42,336 and accretionDepreciation and interestexpense related to equity 12,116 1,287 32,456 2,641 method investments Impairments andabandonments related to 28 ? 16,543 ? equity methodinvestmentsNon-cash general and 2,762 2,219 9,317 5,208 administrativeOther non-cash (3,047 ) 1,528 189 1,528 transactionsProvision for income 2,475 3,403 10,229 26,253 taxesAdjusted EBITDA 77,643 70,980 283,849 264,724 Less: Adjusted EBITDA prior ? ? ? 100,743 to the IPOAdjusted EBITDA subsequent 77,643 70,980 283,849 163,981 to the IPOLess: Adjusted EBITDAattributable to 55,411 50,508 201,994 116,685 non-controllinginterestAdjusted EBITDAattributable to Rattler $ 22,232 $ 20,472 $ 81,855 $ 47,296 Midstream LP

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 LPAdjusted Net Income(unaudited, in thousands, except per unit data) Three Months Year Ended Ended December 31, December 31, 2020 2020Reconciliation of Net Income to Adjusted Net Income: Net income $ 38,859 $ 144,705 Impairments and abandonments related to equity method 28 16,543 investmentsAdjusted income excluding above items 38,887 161,248 Income tax adjustment for above items (2 ) (1,132 )Adjusted net income^(1) 38,885 160,116 Less: Adjusted net income attributable to 29,259 121,763 non-controlling interestAdjusted net income attributable to Rattler Midstream $ 9,626 $ 38,353 LP Adjusted net income attributable to limited partners $ 0.22 $ 0.83 per common unit

(1) Adjusted net income was equal to net income for the three months and year ended December 31, 2019.

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