Entering text into the input field will update the search result below

Rattler Midstream Continues The Growth Story While Raising The Distribution

May 01, 2022 8:19 AM ETDiamondback Energy, Inc. (FANG)33 Comments


  • The distribution increased 20% effective in the current calendar year.
  • The debt ratio will remain at a midstream industry leading 2.0 or lower.
  • Common unit purchases will continue opportunistically.
  • EBITDA is forecast to grow.
  • Not much capital expenditures is needed in the near future to accommodate growth plans.
  • This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. Learn More »

Oil Or Gas Transportation With Blue Gas Or Pipe Line Valves On Soil And Sunrise Background

onurdongel/E+ via Getty Images

Rattler Midstream (RTLR) announced a partial restoration of the distribution to $1.20 per share. That is in addition to guiding to still more growth in the latest fiscal year. Management reported adjusted EBITDA of slightly less

I analyze oil and gas companies, and related companies like Rattler Midstream in my service, Oil & Gas Value Research, where I look for undervalued names in the oil and gas space. I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. This article is an example of what I do. But for Oil & Gas Value Research members, they get it first and they get analysis on some companies that is not published on the free site. Interested? Sign up here for a free two-week trial.

This article was written by

Long Player profile picture

Long Player believes oil and gas is a boom-bust, cyclical industry. It takes patience, and it certainly helps to have experience. He has been focusing on this industry for years. He is a retired CPA, and holds an MBA and MA.

He leads the investing group Oil & Gas Value Research. He looks for under-followed oil companies and out-of-favor midstream companies that offer compelling opportunities. The group includes an active chat room in which Oil & Gas investors discuss recent information and share ideas. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of RTLR FANG VNOM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. Investors are advised to review all company documents and press releases to see if the company fits their own investment qualifications.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (33)

ckarabin profile picture
Way to go Long Player! You certainly are good at what you do! Thanks
Unfortunately it appears that FANG is taking it private. It appears to be a decent price but I would have preferred owning RTLR than Fang. Not sure what to do now since the distribution will be reduced from around 9% to 2%.
ButscherDoug profile picture
@seriousinvest I dumped mine this morning. At least I will get a last dividend since it went ex-div last week.
Long Player profile picture
@seriousinvest You have a choice. You can keep FANG and its rapidly growing dividend or switch to something like EPD for more income.
@Long Player I've had a couple of posters commenting to me saying that the RTLR report was disappointing because of the drop in net income for this quarter compared to last quarter. Are we talking apples to apples here or apples to oranges. I looked at the figures and I thought with EBITDA and FCF as it was reported that the report looked pretty solid, all of the equity pipelines are up and running now and with the production dynamics that are now taking place in the Permian as a whole, this can only benefit RTLR going forward. What am I missing or am I not the one missing anything? I don't think I am.
Long Player profile picture
@nyc3053 Australia They sold an interest and bought an interest late last fiscal year. Now they just got involved in yet another interest plus the drop down (the buy). So I don't think it was completely apples to apples. Now the latest buy was not that big. But the dropdown was more than $100 million. Depending upon the volumes sold and the dropdown volumes, it could account for the difference.
Long Player profile picture
@nyc3053 Australia See the fourth quarter report for the comments below
Long Player profile picture
@nyc3053 Australia I am looking at the cash flow report where I see $7 million from equity (all those long haul pipelines) vs zero the year before for a good jump in first quarter cash flow. All those pipelines are going to fill up sooner or later and the swing to incoming cash from capital expenditures will continue. That is where I think we need to focus. If you look there is like $700 million give or take that needs to earn a decent return.
I’ve made some nice returns on top of owning the RTLR common by selling Puts. Currently sitting mostly on May and August 10 and 12.50 strikes. The only risk I see is some sort of blowback on the earthquake stuff.
Long Player profile picture
@mikef413 Right now about 2/3 or more of the country could care less about earthquakes. Now let's see how Texas and Oklahoma feel about that.
Another solid quarter looks to be on tap. I think another distribution increase will come, but perhaps not now until Q1 2023. 3 more drips, then I start a cash stream next year with this one and AM from Q1. What a great little company, so well run with such strong support from FANG, those equity positions outside of FANG are going to be good earners over the next few years as well. The excess capacity that they have across their infrastructure network means lean Cap-ex budgets for several years at least. The water gathering and distribution strategies that they will implement will likely be the biggest consumer of cap-ex over the near to medium term. A very, very good investment for sure.
ckarabin profile picture
Thanks Long Player. I always enjoy your energy analysis. Very thorough and thoughtful.
Texas Hoosier profile picture
As usual, another great article on RTLR and the MLP Industry. Learned so much from LP over the last two years, made me a bunch of dollars !!! Getting close to another big purchase of RTLR in the near future. Thanks for the great analysis and forward look on Rattler !!! ....Texas Hoosier
Long Player profile picture
@Texas Hoosier Now let's hear the earnings report.
Thanks for the article. Added RTLR to the "Recommended By II" list
thebellsareringing profile picture
I will be adding to RTLR.
Long Player profile picture
@thebellsareringing RTLR just seems to keep getting better.
tom007 profile picture
Long, I took your advice, maybe over a year ago and bought something like 800sh @ 7.92 and have about a 23% unrealized gain on the purchase.

May add some more on the recent hysteria.

Just to let you know.

@tom007 I hate to be the bringer of good news :-) But your up way more than 23% unless your counting DRIP investments.
Long Player profile picture
@tom007 Thanks so much. I am near retirement so I may just hang on to these for as long as the good times last. This one is extremely well run and good management tends to surprise on the upside.
Long Player profile picture
@GuyRien1 There was a double back then and that price lasted awhile until management did something about it.
@Long Player
One specific question about RTLR then a general one about "captive midstream companies" (like the term).

Much of RTLRs growth depends on not only how much FANG grows but how committed they are for RTLR to service their new endevours. Any comments on this commitment?

Regarding captured mid streams vs free mid streams. Why buy the former with all it's issues like roll ups, not being mastered of their own destiny etc when the later yields the same? CEQP is yielding close to 9% now
Long Player profile picture
@GuyRien1 Obviously FANG is committed to RTLR. That part is easy. But RTLR does not come close to servicing all of FANG. So it can grow at a different rate until it gets to where the organization wants it to be.
Long Player profile picture
@GuyRien1 When it comes to CEQP and I do like that management. Realize they went with second tier customers in the hope there would be "upgrades" along the way. So they did have to deal with CHK bankruptcy for example and it did hurt the common for awhile. As far as I am concerned they proved themselves. But the units will be volatile in downturns for that reason.
Long Player profile picture
@GuyRien1 Here a rollup is not an issue as FANG is investment grade. I covered several when there are problems. CNX had a cash flow issue and so I warned up until it happened and caught a lot of flack for it. FANG seems to encourage some diversification away from FANG itself. So the model here may be closer to MPX. But this one appears to have excellent prospects with very good support by the parent company.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.