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Biggest Energy IPO of 2019: Rattler Midstream Raises $665M

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Rattler Midstream Partners LP began trading on the NASDAQ Global Select Market on Thursday under the ticker symbol ‘RTLR’. The firm raised $665 million, making it the biggest energy IPO of 2019 so far, ahead of Brigham Minerals MNRL and New Fortress Energy LLC. The midstream limited partnership priced its IPO at $17.50 per share, in the middle of its previously indicated range of $16 to $19 per unit. In total, 38 million units were released, upsized from originally proposed offering of 33.3 million units.

A subsidiary of Midland, TX-headquartered Permian Basin operator Diamondback Energy FANG, Rattler Midstream opened at $18.06 a unit, up 3.2% on its list price. The stock finished the day at $19.24 – a 10% gain over the IPO price. The initial sale gives the partnership an implied valuation of around $3 billion.

The oil and gas gathering and takeaway master limited partnership, whose operations are spread over the Permian’s Midland and Delaware basins, earned ‎$63 million on revenues of $184 million in calendar 2018, up from $21 million on revenues of $39 million a year earlier.

Rattler Midstream was formed by Diamondback Energy to operate its Permian midstream assets. As of the end of first quarter, the partnership owned 781 miles of pipeline to carry about 232,000 barrels of crude, natural gas, and drilling and waste water daily. In 2018, Rattler Midstream drilled 176 new wells in those areas.

Zacks Rank & Stock Picks

Though Rattler Midstream is now an independent firm, its former parent – Diamondback Energy – still owns a majority stake (around 71-75%, depending on the underwriters’ exercise of options). Diamondback Energy currently carries a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the energy space could look at some better options like Continental Resources, Inc. (CLR - Free Report) and ConocoPhillips COP that sport a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over 30 days, the Oklahoma City-based Continental Resources has seen the Zacks Consensus Estimate for 2019 increase 10% to $2.86 per share.

ConocoPhillips has a 100% track of outperforming estimates over the last four quarters at an average rate of 10.5%.

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