Rattler IPO Launched

Bloomberg: Rattler Midstream LP, a Subsidiary of Diamondback Energy, Inc., Announces Launch of Initial Public Offering

S-1

Diamondback spinning out it’s midstream business.  Won’t be an MLP.

We are a growth-oriented Delaware limited partnership formed in July 2018 by Diamondback to own, operate, develop and acquire midstream infrastructure assets in the Midland and Delaware Basinsof the Permian Basin, or the Permian, one of the most prolific oil producing areas in the world. Immediately following this offering, we expect to be the only publicly-traded, pure-play Permian midstream company focused on the Midland and Delaware Basins. We provide 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. As of March 31, 2019, the assets Diamondback has contributed to us include a total of 781 miles of pipeline across the Midland and Delaware Basins with a total of approximately 232,000 Bbl/d of crude oil gathering capacity, 2.720 MMBbl/d of permitted saltwater disposal, or SWD, capacity, 575,000 Bbl/d of fresh water gathering capacity, 80,000 Mcf/d of natural gas compression capability and 150,000 Mcf/d of natural gas gathering capacity. In addition to the midstream infrastructure assets that Diamondback contributed to us, we own equity interests in two long-haul crude oil pipelines, which, upon completion, will run from the Permian to the Texas Gulf Coast. We are critical to Diamondback’s growth plans because we provide a long-term midstream solution to its increasing crude oil, natural gas and water-related services needs through our robust infield gathering systems and SWD capabilities.

 

Saltwater gathering and disposal assets

Crude oil and natural gas cannot be produced without significant produced water transport and disposal capacity given the high water volumes produced alongside the hydrocarbons. Produced water volumes are of particular importance in the Delaware Basin where the average well produces four to six barrels of water for every one barrel of crude oil while the average Midland Basin well produces one to two barrels of water for every one barrel of crude oil. At the well site, crude oil and produced water are separated to extract the crude oil for sale and the produced water for proper disposal and recycling. As of March 31, 2019, we own strategically located produced water gathering pipeline systems spanning a total of approximately 414 miles that connect approximately 2,500 crude oil and natural gas producing wells to our SWD well sites. As of March 31, 2019, we have a total of 123 SWD wells with an aggregate capacity of 2.720 MMBbl/d located across the Midland and Delaware Basins. Diamondback has instituted a program in its operations in the Delaware Basin and Spanish Trail acreage in the Midland Basin to use treated water for 10% to 30% of the water used during completion operations, which may be between 5,500 and 16,500 Bbl/d per completion crew operating in each field, as Diamondback traditionally uses 55,000 Bbl/d per completion crew. We expect to realize increased margins for SWD as a result of this recycling program.

Fresh water sourcing and distribution assets

Our fresh water sourcing and distribution system, with storage capacity of 50.7 MMBbl as of March 31, 2019, is critical to Diamondback’s completion operations, and distributes water from fresh water wells sourced from the Capitan Reef formation, Edwards-Trinity, Pecos Alluvium and Rustler aquifers in the Permian. Our fresh water system consists of a combination of permanent buried pipelines, portable surface pipelines and fresh water storage facilities, as well as pumping stations to transport the fresh water throughout the pipeline network. To the extent necessary, we will move surface pipelines to service completion operations in concert with Diamondback’s drilling program. Having access to fresh water sources is an important element of the hydraulic fracturing process in the Delaware Basin because modern completion methods require significantly more fresh water relative to the Midland Basin. To hydraulically fracture a 10,000 foot well, Diamondback currently estimates that approximately 425,000 barrels of water are required in the Midland Basin and approximately 650,000 barrels of water are required in the Delaware Basin. Because hydraulic fracturing relies on substantial volumes of fresh water, we believe our fresh water distribution services will be in high demand as Diamondback proceeds with its full field development plan over the next several years.

I failed to find a clean revenue by segment breakout but growth (quote below) seems to be oriented towards water.  The company went from $39MM to $184MM in top line in 2018.  Will be interesting when they start reporting revenue and expense breakouts regularly.  Certainly provides some valuation clues to the extent we can can get similar info from TPL.

Revenues. Revenues increased by $145 million for the year ended December 31, 2018 as compared to the year ended December 31, 2017, primarily due to the contribution of fresh water assets by Diamondback on January 1, 2018 (which could not be segregated prior to that date), resulting in an additional $77.0 million in revenue. SWD services revenues increased by $44.5 million, crude oil gathering revenues increased by $8.4 million and natural gas gathering revenues increased by $3.5 million for the year ended December 31, 2018 as compared to the year ended December 31, 2017, while surface revenues remained relatively unchanged during that same period. Each of the increases in revenues was primarily due to additional asset contributions and asset buildouts, which led to continued increases of volume throughput. In addition, on January 31, 2018, Diamondback purchased certain real estate assets for approximately $110.0 million and contributed them to us effective as of that date. These real estate assets generated $11.8 million in revenue during the year ended December 31, 2018.

4 thoughts on “Rattler IPO Launched

  1. When they say fresh water, I wonder exactly what they mean. If they mean fresh water vs brackish water, that certainly isn’t consistent with the regular claims that salt water can be used to track.

    I wonder if they are just saying, “FU and your salt water. We have fresh water and its better than what everyone else has.”

    Weird.

    Can someone clarify?

    Liked by 1 person

  2. Salt water means produced water coming back out of the formation during oil recovery. Fresh water can be anything from low chlorides or high chlorides (brackish).

    Liked by 1 person

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