Q3 2021 Rattler Midstream LP Earnings Call

Good day, and thank you for spending by woke up to their Rottler Midstream Q C 2021 conference call.

At this time, all participants are and then listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero and now I would like to turn the conference will be to your first speaker today.

Adam Lawless vice-president of Investor Relations. Thank you. Please go ahead.

Thank you Paul Good morning, and welcome to rather midstream third quarter 2021 cope in school during.

During your call today, they'll reference an update is invested presentation.

But.

Representing rattler today are Travis died for you in case based on what president.

Drink with conference call participants, maybe certain forward looking statements related to the company to make a condition results of operations plays and just as a teacher's performance in businesses.

The coffee that actually goes can definitely materially from those that are indicated in the fall.

These statements due to a variety of factors information concerning these factors even company.

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In addition to make reference to certain non-GAAP measures. The reconciliation for the appropriate GAAP measures can be found in their early to release. It yesterday afternoon, I will now turn the Covid address thank you Adam and welcome everyone and thank you for listening does that Mitch dreams third quarter earnings call.

The third quarter of 2021 was another strong operational performance for the rat routine as a business generated $60 million in free cashflow.

While the boys were lower was down about completing eight Delaware relation wells outside of the rattler dedication during the quarter.

Robert team did an incredible job managing experiences and limited capex to more than offset the impact to free cashflow.

The best practices implemented our operations are beginning to bear fruit and are expected to have long term benefits to rattlers unitholders, despite inflationary headwinds it as an industry.

That will also announced recently a series of strategic transactions that collectively repositioned the rattler portfolio in line was down and bugs and shift to middle Dyson development, where 75% of its drilling capitalist currently being unallocated.

The W. T. G transaction gives <unk> exposure to a growing gas gathering and processing business in the northern Liberal basin.

And the new plant currently under development by debit T. G will help enable bombing back and other producers to continue their highly economic development there.

The dropdown transaction move down the back.

Is largely a sale of complementary adjacent assets.

And gives rattler additional scale.

Some advice and particularly with which to apply its learning and building out large integrated systems and the Delaware Basin.

Additionally by.

Purchasing the available water assets and increasing the exposure to download back development across the produced is a source water segments.

That mood expects to limit the volatility in volumes and earns.

Finally, the sale of the Pecos gas system presented a unique opportunity to divest an asset with little expected growth to a logical bar the system at an attractive multiple in order to fund the previously discussed acquisitions and maintain the conservative financial management.

With greater capital investment expected in the near future as Ratner integrates the acquired dropdown assets and construct a new system in southeast Martin County.

The proceeds from the gas gathering divestiture enhanced rattlers flexibility and continuing to return capital unitholders.

Altogether after a year and a half of reducing expenses limiting capital expenditures and focusing on free cash generation.

Once again, finding attractive investments that we believe just within our operating expertise.

And along with our strategy of leveraging the download back relationship to generate value for our unitholders.

With these comments now complete operator, please open the lines for questions.

Thank you Sir.

As a reminder to all participants if you have a question. Please press star one and your telephone keypad again, that's star one on your telephone keypad stand.

Standby, while we compiled a roster.

Sure first question comes from the line of the name <unk> J P. Morgan your line itself.

Hi, good morning.

On her to follow up on the volume's, commenting for next year ago. So.

A fine kind of assumed that maintenance more for 2022.

And then considering the activity shifting defending against still fine maybe if you could shed on how that would translate though.

Right now do you expect the Williams next year, it could be same or better than what sang as guiding right now.

Yeah.

With the dropdown the lines are certainly going to go up.

Consolidated basis, and I think you have a couple of slides to show what percent of Diamondbacks completions will will be dedicated to rattler on the source water side as well as the dispose water side.

That.

Dropdown, certainly cleans up the consistency of volume performance, you should see a pretty substantial increase from where we are today pre dropped down to the pro forma business in 2022.

Got it [noise]. Thanks, and then may be on the might've been guidance on the transactions yeah. Okay. I think you kind of maintain what the everyday expectations for the job done if it's out but any details on Newport shed on the JV and yeah that that's a tendency to attack.

Yeah.

After about 40 Bucks $39 million.

EBITDA for the dropdown in 2022 set to increase pretty dramatically in 2023 is capitals deployed to build out these recycling systems.

And then I'd say generally on the equity method EBITDA contribution next year definitely going up with the WCG deal as well as linked Webster coming on.

In full force and.

And our Omar JV.

Humming on all cylinders goings on that system route 40% from where they were a year ago. So I think generally.

We cut out we kind of hint that at $40 million to $45 million of distributions. This year, a little bit more on EBITDA side I bet, you that number goes up 20% to 30% next year.

Yeah, that's just something I think.

Thank you.

Once again, ladies and gentlemen, if you have a question. Please press star one now and Kenneth Starr one telephone keypad.

Your next question is from Kyle main with capital one securities you're lying need Hilton.

Hey, Good morning, guys, maybe just one question to start on the recycled water side I believe in the release you highlighted the 23% of source water volumes.

During the quarter were from recycled produced water.

Just curious if you have the ability to to grow the the amount of recycled water and kind of how much that could potentially grow.

Yeah. Good question call for a topical we're spending a lot of money.

<unk> recycling, particularly in the Midland Basin.

We kicked off our cycling program in the Delaware, where you have so much water production that you're able to poll, 100% of water you need for a crack.

From pharmaceutical sources and as we move into the minimum basic Diamondback consolidated with routers made commitments to recycle at least 65% of water by 2024 25.

And the key to that is going to be building these larger cycle pits.

And the minimum base and so it required a few of those from from QEP I think we're going to build some some larger ones.

Throughout the course of the next year to be able to kind of move and recycle water across all Martin County.

In other areas too, particularly Spanish trail in that area as well so it's picking up and we took the contracts up where recycling is incentivised 'cause diamondback paid less for recycled water, but rather makes a higher margin.

That's where we're headed in 22 and beyond.

Got it thanks for that case.

And then maybe just one more now that rattler has increased and extended the share buyback program.

Wanted to get your latest thoughts about balancing dividend caroche with buybacks going forward.

Good question I think we didn't touch the distribution this quarter, because there's a lot of cash going out from the dropdown as well as.

Instead of being TG deal.

A little bit of cash coming in from the Brazos sale to offset that we need to see where it leveraged settles.

All of that and then and then we will continue to to look at.

Touch.

Touching the distribution I think the the biomass been a good weapon for us.

Battler as well as the other two companies and the board recognize that having it out there is it good good time defense in times of market weakness and I think we're pretty consistent last quarter.

Using it and I think that's a decent run rate going forward.

Alright that sounds great I appreciate the time.

Thank you call.

I don't see additional questions at this time I will now hand, the conference back to Travis ties C O for clothing I'm like alright.

Thanks again to everyone participated in today's call you got any questions. Please contact us using the contact information provided.

Ladies and gentlemen. This concludes today's conference call. Thank you for joining you may now disconnect have a great day.

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