STR Sitio Royalties Corporation

RECORD HIGH AVERAGE DAILY PRODUCTION VOLUME OF 39,231 BOE/D (50% OIL)

RETURN OF CAPITAL OF $0.71 PER SHARE FOR SECOND QUARTER 2024, COMPRISED OF $0.30 CASH DIVIDEND PER SHARE OF CLASS A COMMON STOCK AND $0.41 PER SHARE OF STOCK REPURCHASES

RAISES FULL YEAR 2024 PRO FORMA PRODUCTION GUIDANCE TO 36,000 – 38,000 BOE/D(1) AND LOWERS MIDPOINT OF FULL YEAR 2024 CASH TAX GUIDANCE BY $21.5 MILLION

INCLUDING PREVIOUSLY ANNOUNCED DJ BASIN ACQUISITION(2), CLOSED 7 ACQUISITIONS DURING SECOND QUARTER 2024, ADDING 14,996 NRAS ACROSS THE DJ, DELAWARE, AND MIDLAND BASINS

Sitio Royalties Corp. (NYSE: STR) (“Sitio”, “STR” or the “Company”) today announced operational and financial results for the quarter ended June 30, 2024. Unless the context clearly indicates otherwise, references to “we,” “our,” “us” or similar terms refer to Sitio and its subsidiaries.

SECOND QUARTER 2024 OPERATIONAL, FINANCIAL AND ACQUISITION HIGHLIGHTS

• Average daily production volume of 39,231 barrels of oil equivalent per day (“Boe/d”) (50% oil), an all-time high, up 11% relative to 1Q 2024 average daily production volume of 35,349 Boe/d (52% oil) and up 3% relative to pro forma 1Q 2024 average daily production volume of 37,970 Boe/d (51% oil)(1)
• Return of capital of $0.71 per share of Class A Common Stock, comprised of a $0.30 per share cash dividend and $0.41 per share of stock repurchases; return of capital increase of $0.22 per share, or 45% relative to 1Q 2024 of $0.49 per share
• Repurchased an aggregate 2.6 million shares of Class A Common Stock and OpCo Units at an average price of $24.50 per share/unit, including 2.0 million shares/units from previously announced privately negotiated block trade
• In addition to the previously announced DJ Basin Acquisition(2), closed 6 acquisitions in 2Q 2024 for approximately $38.5 million, adding 2,110 NRAs (61% Permian Basin and 39% DJ Basin). The 6 2Q 2024 acquisitions are expected to contribute an estimated 200 Boe/d to full year 2024 production
• Including assets acquired in 2Q 2024, estimated 8.5 net wells turned-in-line ("TIL") during the quarter, of which approximately 80% were in the Permian Basin and 13% in the DJ Basin; estimated 8.0 net wells TIL on legacy Sitio and DJ Basin Acquisition assets
• Net income of $29.0 million, up 55% relative to 1Q 2024 net income of $18.7 million, primarily driven by $17.5 million higher oil, natural gas and natural gas liquids revenues and $9.4 million lower commodity derivatives losses, partially offset by $15.4 million of increased depreciation, depletion and amortization, interest expense and income tax expense
• Adjusted EBITDA(3) of $151.6 million, up 12% relative to 1Q 2024 Adjusted EBITDA(3) of $135.1 million, primarily driven by higher average daily production volume and higher unhedged realized oil prices; up 6% relative to 1Q 2024 Pro Forma Adjusted EBITDA of $143.7 million(3)(4)

2Q 2024 AND PRO FORMA 1H 2024 RESULTS RELATIVE TO 2024 GUIDANCE

The table below shows second quarter 2024 and pro forma first half 2024 results relative to financial and operational guidance for 2024 that was issued on February 28, 2024.

2024 Guidance Metric

2Q 2024 Reported Results

 

1H 2024 Pro Forma Results(5)

 

Prior 2024 Full Year Guidance(6)

Average daily production (Boe/d)

39,231

 

 

38,601

 

35,000 – 38,000

Oil %

 

50

%

 

50

%

49% – 51%

 

 

 

 

 

 

Cash G&A ($ in millions)

$

7.1

 

$

14.8

 

$31.5 – $33.5 (annual)

Production taxes (% of royalty revenue)

 

7.5

%

 

7.8

%

7.5% – 9.5%

Estimated cash taxes ($ in millions)(7)

$

0.9

 

$

9.3

 

$30.0 – $37.0 (annual)

Chris Conoscenti, Chief Executive Officer of Sitio, commented, "Our strong second quarter results are a reflection of flush production from recently completed wells on our legacy assets combined with production volumes contributed from our disciplined acquisition program. Our team continued to allocate capital towards acquisitions of high quality mineral rights with the greatest potential to generate attractive returns for our shareholders diversified across multiple basins and operators. In addition to our previously announced DJ Basin Acquisition, we closed on the acquisition of 2,110 NRAs in the Permian and DJ Basins from 6 separate transactions for approximately $38.5 million. Due to Sitio's 1H 2024 outperformance and the expected impacts from our newly acquired minerals, we are raising our full year 2024 production guidance range from 35,000 – 38,000 Boe/d to 36,000 – 38,000 Boe/d."

(1)

Includes production from the DJ Basin Acquisition as if it was owned on January 1, 2024

(2)

The DJ Basin Acquisition is defined as the all-cash acquisition of approximately 13,000 NRAs in the DJ Basin from an undisclosed third party that closed on April 4, 2024

(3)

For definitions of non-GAAP financial measures and reconciliations to their most directly comparable GAAP financial measures, please see “Non-GAAP financial measures”

(4)

Includes DJ Basin Acquisition EBITDA as if it was owned on January 1, 2024

(5)

Includes production from the DJ Basin Acquisition in 1Q 2024 as if it was owned on January 1, 2024

(6)

Prior 2024 full year guidance issued on February 28, 2024

(7)

Cash tax guidance range is based on expectations at strip pricing when guidance was issued; Estimated cash taxes for 1H 2024 Pro Forma Results represents the estimated cash taxes used in the calculation of Discretionary Cash Flow(3) and is not pro forma for the DJ Basin Acquisition for 1H 2024

UPDATED 2024 FULL YEAR FINANCIAL AND OPERATIONAL GUIDANCE

The table below includes Sitio's updated guidance for full year 2024 and includes impacts from the DJ Basin Acquisition as if the transaction had closed on January 1, 2024 for pro forma average daily production. Pro forma average daily production guidance includes an increase of 500 Boe/d at the midpoint, of which approximately 200 Boe/d is related to volumes from the 6 2Q 2024 previously unannounced acquisitions and the remainder is attributed to Sitio's legacy assets and the DJ Basin Acquisition. The midpoint of 2024 guidance for cash taxes decreased by $21.5 million based on latest estimates and includes an increase to our expected 2024 federal tax credit.

 

 

February 28, 2024

 

August 7, 2024

Full Year 2024 Guidance

 

Low

 

High

 

Low

 

High

 

Change at Midpoint

Pro Forma Average Daily Production(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma average daily production (Boe/d)(1)

 

 

35,000

 

 

 

38,000

 

 

 

36,000

 

 

 

38,000

 

 

 

500

 

Pro forma average daily production (% oil)(1)

 

 

49

%

 

 

51

%

 

 

49

%

 

 

51

%

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses and Taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash G&A ($ in millions)

 

$

31.5

 

 

$

33.5

 

 

$

31.5

 

 

$

33.5

 

 

 

-

 

Production taxes (% of royalty revenue)

 

 

7.5

%

 

 

9.5

%

 

 

7.5

%

 

 

9.5

%

 

 

-

 

Cash taxes ($ in millions)(7)

 

$

30.0

 

 

$

37.0

 

 

$

9.0

 

 

$

15.0

 

 

$

(21.5

)

(1)

Includes production from the DJ Basin Acquisition as if it was owned on January 1, 2024

(7)

Cash tax guidance range is based on expectations at strip pricing when guidance was issued

OPERATOR ACTIVITY

The following table summarizes Sitio's net average daily production, net line-of-sight ("LOS") wells and net royalty acres by area. Pro forma NRAs assume that Sitio owned the DJ Basin Acquisition assets as of March 31, 2024.

 

Delaware

 

Midland

 

DJ

 

Eagle Ford

 

Williston/Other

 

Total

Average Daily Production (Boe/d) for the three months ended June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

As reported

20,991

 

7,919

 

5,600

 

4,061

 

660

 

39,231

 

% Oil

51

%

57

%

36

%

56

%

56

%

50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net LOS Wells as of June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Net spuds

11.5

 

7.9

 

4.1

 

1.2

 

0.3

 

25.0

 

Net permits

10.6

 

3.5

 

3.0

 

1.7

 

0.3

 

19.1

 

Net LOS wells as of June 30, 2024

22.1

 

11.4

 

7.1

 

2.9

 

0.6

 

44.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Royalty Acres (normalized to 1/8th royalty equivalent)

 

 

 

 

 

 

 

 

 

 

 

 

As reported March 31, 2024

152,761

 

45,366

 

24,973

 

21,077

 

8,206

 

252,383

 

As reported June 30, 2024

153,871

 

45,517

 

38,680

 

21,077

 

8,206

 

267,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma March 31, 2024(8)

152,761

 

45,366

 

38,042

 

21,077

 

8,206

 

265,452

 

As reported June 30, 2024

153,871

 

45,517

 

38,680

 

21,077

 

8,206

 

267,351

 

Pro forma NRA increase (decrease) since March 31, 2024(9)

1,110

 

151

 

638

 

-

 

-

 

1,899

 

(8)

Includes NRAs from the DJ Basin Acquisition

(9)

Represents the difference from reported NRAs as of June 30, 2024 less pro forma NRAs as of March 31, 2024(8)

FINANCIAL UPDATE

Sitio's second quarter 2024 average unhedged realized prices including all expected quality, transportation and demand adjustments were $79.85 per barrel of oil, $1.01 per Mcf of natural gas and $20.32 per barrel of natural gas liquids, for a total price of $46.36 per barrel of oil equivalent ("Boe"). During the second quarter of 2024, the Company received $2.7 million in net cash settlements for commodity derivative contracts and as a result, average hedged realized prices were $80.21 per barrel of oil, $1.36 per Mcf of natural gas and $20.32 per barrel of natural gas liquids, for a total price of $47.13 per Boe. This represents a comparable $0.01 per Boe increase to hedged realized prices from the three months ended March 31, 2024.

Consolidated net income for the second quarter of 2024 was $29.0 million, which is $10.3 million, or 55% higher than consolidated net income in the first quarter of 2024. This increase was primarily driven by $17.5 million higher oil, natural gas and natural gas liquids revenues and $9.4 million lower commodity derivatives losses, partially offset by $9.2 million of increased depreciation, depletion and amortization, $4.2 million of increased interest expense and $2.1 million of increased income tax expense. For the three months ended June 30, 2024, Adjusted EBITDA was $151.6 million, up 12% compared to first quarter 2024 Adjusted EBITDA of $135.1 million largely due to higher average daily production volume and higher unhedged realized oil prices.

As of June 30, 2024, the Company had $1,060.0 million principal value of total debt outstanding (comprised of a $460.0 million drawn on Sitio's revolving credit facility and $600.0 million of senior unsecured notes) and liquidity of $406.3 million, including $16.3 million of cash and $390.0 million of remaining availability under its $850.0 million credit facility.

Sitio did not add to or extinguish any of its commodity swaps or collars during the second quarter of 2024. A summary of the Company's existing commodity derivative contracts as of June 30, 2024 is included in the table below.

 

 

Oil (NYMEX WTI)

 

 

2024

 

1H25

Swaps

 

 

 

 

 

 

Bbl per day

 

 

3,300

 

 

 

1,100

 

Average price ($/Bbl)

 

$

82.66

 

 

$

74.65

 

Collars

 

 

 

 

 

 

Bbl per day

 

 

—

 

 

 

2,000

 

Average call ($/Bbl)

 

 

—

 

 

$

93.20

 

Average put ($/Bbl)

 

 

—

 

 

$

60.00

 

 

 

Gas (NYMEX Henry Hub)

 

 

2024

 

1H25

Swaps

 

 

 

 

 

 

MMBtu per day

 

 

500

 

 

 

—

 

Average price ($/MMBtu)

 

$

3.41

 

 

 

—

 

Collars

 

 

 

 

 

 

MMBtu per day

 

 

11,400

 

 

 

11,600

 

Average call ($/MMBtu)

 

$

7.24

 

 

$

10.34

 

Average put ($/MMBtu)

 

$

4.00

 

 

$

3.31

 

RETURN OF CAPITAL

The Company's Board of Directors declared a cash dividend of $0.30 per share of Class A Common Stock with respect to the second quarter of 2024. The dividend is payable on August 30, 2024 to the stockholders of record at the close of business on August 19, 2024. During the second quarter of 2024, the Company repurchased an aggregate 2,582,067 shares of Class A Common Stock and OpCo Units (associated Class C Common Stock was retired) at an average price of $24.50 per share/unit, representing 49% of second quarter 2024 Discretionary Cash Flow ("DCF"), or $0.41 per share. As of June 30, 2024, the Company had repurchased a total of 3.1 million shares/units, representing approximately 2% of shares outstanding prior to the Board's authorization of Sitio's $200 million share repurchase program. In total, Sitio's return of capital for the second quarter of 2024 is $0.71 per share and equates to a payout ratio of 85% of DCF.

SECOND QUARTER 2024 EARNINGS CONFERENCE CALL

Sitio will host a conference call at 8:30 a.m. Eastern on Thursday, August 8, 2024 to discuss its second quarter 2024 operating and financial results. Participants can access the call by dialing 1-833-470-1428 in the United States, or 1-404-975-4839 in other locations, with access code 292624, or by webcast at https://events.q4inc.com/attendee/523440225. Participants may also pre-register for the event via the following link: https://www.netroadshow.com/events/login?show=e84b684b&confId=67439. The conference call, live webcast, and replay can also be accessed through the Investor Relations section of Sitio’s website at www.sitio.com.

UPCOMING INVESTOR CONFERENCES

Members of Sitio's management team will be attending the Barclays 38th Annual CEO Energy-Power Conference from September 3-5, 2024, Bank of America Leveraged Finance Conference from December 2-3, 2024, Capital One Annual Energy Conference on December 10, 2024 and Mizuho Power, Energy & Infrastructure Conference from December 9-10, 2024. Any presentation materials associated with these events will be accessible through the Investor Relations section of Sitio's website at www.sitio.com.

FINANCIAL RESULTS

Production Data

 

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2024

2023

2024

2023

Production Data:

 

 

 

 

Crude oil (MBbls)

 

1,797

 

1,580

 

3,459

 

3,169

Natural gas (MMcf)

 

5,892

 

5,575

 

10,908

 

11,010

NGLs (MBbls)

 

791

 

647

 

1,510

 

1,252

Total (MBoe)(6:1)

 

3,570

 

3,156

 

6,787

 

6,256

Average daily production (Boe/d)(6:1)

 

39,231

 

34,681

 

37,290

 

34,561

Average Realized Prices:

 

 

 

 

Crude oil (per Bbl)

$

79.85

$

70.90

$

78.29

$

72.50

Natural gas (per Mcf)

$

1.01

$

1.53

$

1.08

$

2.10

NGLs (per Bbl)

$

20.32

$

18.63

$

20.51

$

20.14

Combined (per Boe)

$

46.36

$

42.01

$

46.19

$

44.46

Average Realized Prices After Effects of Derivative Settlements:

 

 

 

 

Crude oil (per Bbl)

$

80.21

$

74.40

$

78.96

$

75.78

Natural gas (per Mcf)

$

1.36

$

1.92

$

1.44

$

2.40

NGLs (per Bbl)

$

20.32

$

18.63

$

20.51

$

20.14

Combined (per Boe)

$

47.13

$

44.45

$

47.12

$

46.64

 

Selected Expense Metrics

 

 

Three Months Ended June 30,

 

2024

2023

Severance and ad valorem taxes

 

7.5

%

 

7.8

%

Depreciation, depletion and amortization ($/Boe)

$

23.95

 

$

23.52

 

General and administrative ($/Boe)

$

3.77

 

$

4.46

 

Cash G&A ($/Boe)

$

1.98

 

$

2.12

 

Interest expense, net ($/Boe)

$

6.36

 

$

7.34

 

 

Condensed Consolidated Balance Sheets

(In thousands except par and share amounts)

 

 

June 30,

 

December 31,

 

2024

 

2023

.

(Unaudited)

 

 

 

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

$

16,348

 

$

15,195

 

Accrued revenue and accounts receivable

 

129,454

 

 

107,347

 

Prepaid assets

 

1,839

 

 

12,362

 

Derivative asset

 

5,547

 

 

19,080

 

Total current assets

 

153,188

 

 

153,984

 

 

 

 

 

 

Property and equipment

 

 

 

 

Oil and natural gas properties, successful efforts method:

 

 

 

 

Unproved properties

 

2,579,583

 

 

2,698,991

 

Proved properties

 

2,674,068

 

 

2,377,196

 

Other property and equipment

 

3,601

 

 

3,711

 

Accumulated depreciation, depletion, amortization, and impairment

 

(660,139

)

 

(498,531

)

Total property and equipment, net

 

4,597,113

 

 

4,581,367

 

 

 

 

 

 

Long-term assets

 

 

 

 

Deferred financing costs

 

9,689

 

 

11,205

 

Long-term derivative asset

 

—

 

 

3,440

 

Operating lease right-of-use asset

 

5,240

 

 

5,970

 

Other long-term assets

 

2,781

 

 

2,835

 

Total long-term assets

 

17,710

 

 

23,450

 

 

 

 

 

 

TOTAL ASSETS

$

4,768,011

 

$

4,758,801

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable and accrued expenses

$

27,081

 

$

30,050

 

Operating lease liability

 

1,596

 

 

1,725

 

Total current liabilities

 

28,677

 

 

31,775

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

Long-term debt

 

1,049,338

 

 

865,338

 

Deferred tax liability

 

252,450

 

 

259,870

 

Non-current operating lease liability

 

4,804

 

 

5,394

 

Other long-term liabilities

 

1,150

 

 

1,150

 

Total long-term liabilities

 

1,307,742

 

 

1,131,752

 

 

 

 

 

 

Total liabilities

 

1,336,419

 

 

1,163,527

 

 

 

 

 

 

Equity

 

 

 

 

Class A Common Stock, par value $0.0001 per share; 240,000,000 shares authorized; 82,825,703 and 82,451,397 shares issued and 80,595,566 and 82,451,397 outstanding at June 30, 2024 and December 31, 2023, respectively

 

8

 

 

8

 

Class C Common Stock, par value $0.0001 per share; 120,000,000 shares authorized; 73,771,109 and 74,965,217 shares issued and 73,718,361 and 74,939,080 outstanding at June 30, 2024 and December 31, 2023, respectively

 

7

 

 

8

 

Additional paid-in capital

 

1,737,960

 

 

1,796,147

 

Accumulated deficit

 

(166,416

)

 

(187,738

)

Class A Treasury Shares, 2,230,137 and 0 shares at June 30, 2024 and December 31, 2023, respectively

 

(54,583

)

 

—

 

Class C Treasury Shares, 52,748 and 26,137 shares at June 30, 2024 and December 31, 2023, respectively

 

(1,265

)

 

(677

)

Noncontrolling interest

 

1,915,881

 

 

1,987,526

 

Total equity

 

3,431,592

 

 

3,595,274

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

$

4,768,011

 

$

4,758,801

 

 

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

 

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2024

2023

2024

2023

Revenues:

 

 

 

 

 

 

 

 

Oil, natural gas and natural gas liquids revenues

$

165,516

 

$

132,567

 

$

313,487

 

$

278,121

 

Lease bonus and other income

 

3,032

 

 

3,899

 

 

6,452

 

 

9,171

 

Total revenues

 

168,548

 

 

136,466

 

 

319,939

 

 

287,292

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

85,485

 

 

74,239

 

 

161,803

 

 

142,002

 

General and administrative

 

13,456

 

 

14,066

 

 

26,467

 

 

25,742

 

Severance and ad valorem taxes

 

12,433

 

 

10,344

 

 

24,459

 

 

20,803

 

Impairment of oil and gas properties

 

—

 

 

25,617

 

 

—

 

 

25,617

 

Total operating expenses

 

111,374

 

 

124,266

 

 

212,729

 

 

214,164

 

 

 

 

 

 

 

 

 

 

Net income from operations

 

57,174

 

 

12,200

 

 

107,210

 

 

73,128

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense, net

 

(22,688

)

 

(23,159

)

 

(41,198

)

 

(45,362

)

Change in fair value of warrant liability

 

—

 

 

584

 

 

—

 

 

2,942

 

Loss on extinguishment of debt

 

—

 

 

—

 

 

—

 

 

(783

)

Commodity derivatives gains (losses)

 

(607

)

 

6,112

 

 

(10,657

)

 

20,875

 

Interest rate derivative gains

 

—

 

 

607

 

 

—

 

 

447

 

Net income (loss) before taxes

 

33,879

 

 

(3,656

)

 

55,355

 

 

51,247

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

(4,838

)

 

683

 

 

(7,622

)

 

(6,501

)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

29,041

 

 

(2,973

)

 

47,733

 

 

44,746

 

Net (income) loss attributable to noncontrolling interest

 

(16,187

)

 

2,177

 

 

(26,411

)

 

(22,889

)

Net income (loss) attributable to Class A stockholders

$

12,854

 

$

(796

)

$

21,322

 

$

21,857

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share of Class A Common Stock

 

 

 

 

 

 

 

 

Basic

$

0.16

 

$

(0.01

)

$

0.25

 

$

0.26

 

Diluted

$

0.15

 

$

(0.01

)

$

0.25

 

$

0.26

 

 

 

 

 

 

 

 

 

 

Weighted average Class A Common Stock outstanding

 

 

 

 

 

 

 

 

Basic

 

80,751

 

 

81,044

 

 

81,578

 

 

80,614

 

Diluted

 

80,879

 

 

81,044

 

 

81,761

 

 

80,614

 

 

Unaudited Condensed Consolidated Statements of Cash Flow

(In thousands)

 

 

Six Months Ended June 30,

 

2024

 

2023

Cash flows from operating activities:

 

 

 

 

Net income

$

47,733

 

$

44,746

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion and amortization

 

161,803

 

 

142,002

 

Amortization of deferred financing costs and long-term debt discount

 

2,603

 

 

2,793

 

Share-based compensation

 

11,307

 

 

10,106

 

Change in fair value of warrant liability

 

—

 

 

(2,942

)

Loss on extinguishment of debt

 

—

 

 

783

 

Impairment of oil and gas properties

 

—

 

 

25,617

 

Commodity derivatives (gains) losses

 

10,657

 

 

(20,875

)

Net cash received for commodity derivatives settlements

 

6,316

 

 

13,659

 

Interest rate derivative gains

 

—

 

 

(447

)

Net cash paid for interest rate derivative settlements

 

—

 

 

93

 

Deferred tax benefit

 

(7,494

)

 

(7,421

)

Change in operating assets and liabilities:

 

 

 

 

Accrued revenue and accounts receivable

 

(22,107

)

 

23,900

 

Prepaid assets

 

10,547

 

 

7,187

 

Other long-term assets

 

667

 

 

1,622

 

Accounts payable and accrued expenses

 

(3,487

)

 

(7,654

)

Operating lease liabilities and other long-term liabilities

 

(493

)

 

(492

)

Net cash provided by operating activities

 

218,052

 

 

232,677

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of oil and gas properties, net of post-close adjustments

 

(177,424

)

 

5,689

 

Deposits for property acquisitions

 

—

 

 

(17,947

)

Other, net

 

(237

)

 

(19

)

Net cash used in investing activities

 

(177,661

)

 

(12,277

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings on credit facilities

 

279,000

 

 

619,500

 

Repayments on credit facilities

 

(96,000

)

 

(643,500

)

Repayments on 2026 Senior Notes

 

—

 

 

(22,500

)

Debt issuance costs

 

(126

)

 

(8,196

)

Distributions to noncontrolling interest

 

(68,402

)

 

(91,162

)

Dividends paid to Class A stockholders

 

(75,016

)

 

(88,850

)

Dividend equivalent rights paid

 

(707

)

 

(783

)

Repurchases of Class A Common Stock

 

(54,075

)

 

—

 

Repurchases of Sitio OpCo Partnership Units (including associated Class C Common Shares)

 

(22,142

)

 

—

 

Cash paid for taxes related to net settlement of share-based compensation awards

 

(1,770

)

 

(3,379

)

Net cash used in financing activities

 

(39,238

)

 

(238,870

)

 

 

 

 

 

Net change in cash and cash equivalents

 

1,153

 

 

(18,470

)

Cash and cash equivalents, beginning of period

 

15,195

 

 

18,818

 

Cash and cash equivalents, end of period

$

16,348

 

$

348

 

 

 

 

 

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

Oil and gas properties acquired through issuance of Class C Common Stock and Sitio OpCo Partnership Units:

$

—

 

$

66,526

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

Cash paid for income taxes:

$

2,769

 

$

8,811

 

Cash paid for interest expense:

 

41,230

 

 

43,555

 

Non-GAAP financial measures

Adjusted EBITDA, Pro Forma Adjusted EBITDA, Discretionary Cash Flow, and Cash G&A are non-GAAP supplemental financial measures used by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets and their ability to sustain dividends over the long term without regard to financing methods, capital structure or historical cost basis. Sitio believes that these non-GAAP financial measures provide useful information to Sitio's management and external users because they allow for a comparison of operating performance on a consistent basis across periods.

We define Adjusted EBITDA as net income plus (a) interest expense, (b) provisions for taxes, (c) depreciation, depletion and amortization, (d) non-cash share-based compensation expense, (e) impairment of oil and natural gas properties, (f) gains or losses on unsettled derivative instruments, (g) change in fair value of the warrant liability, (h) loss on debt extinguishment, (i) merger-related transaction costs and (j) write off of financing costs.

We define Pro Forma Adjusted EBITDA for the three months ended March 31, 2024 as Adjusted EBITDA plus DJ Basin Acquisition EBITDA from January 1, 2024 to March 31, 2024 that is not included in Adjusted EBITDA for the three months ended March 31, 2024. A reconciliation of Pro Forma Adjusted EBITDA to the most directly comparable GAAP financial measure for the three months ended March 31, 2024 is available in Exhibit 99.1 of Sitio's Form 8-K filed with the SEC on May 8, 2024.

We define Discretionary Cash Flow as Adjusted EBITDA, less cash and accrued interest expense and estimated cash taxes for the three months ended June 30, 2024.

We define Discretionary Cash Flow as Adjusted EBITDA, less cash interest and cash taxes for the three months ended June 30, 2023.

We define Cash G&A as general and administrative expense less (a) non-cash share-based compensation expense, (b) merger-related transaction costs and (c) rental income.

These non-GAAP financial measures do not represent and should not be considered an alternative to, or more meaningful than, their most directly comparable GAAP financial measures or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Non-GAAP financial measures have important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measure. Our computations of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Discretionary Cash Flow, and Cash G&A may differ from computations of similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure for the period indicated (in thousands).

 

Three Months Ended June 30,

 

2024

 

2023

Net income (loss)

$

29,041

$

(2,973

)

Interest expense, net

 

22,688

 

23,159

 

Income tax expense (benefit)

 

4,838

 

(683

)

Depreciation, depletion and amortization

 

85,485

 

74,239

 

Impairment of oil and gas properties

 

—

 

25,617

 

EBITDA

$

142,052

$

119,359

 

Non-cash share-based compensation expense

 

6,203

 

5,422

 

Losses on unsettled derivative instruments

 

3,329

 

1,140

 

Change in fair value of warrant liability

 

—

 

(584

)

Merger-related transaction costs

 

24

 

1,814

 

Adjusted EBITDA

$

151,608

$

127,151

 

The following table presents a reconciliation of Discretionary Cash Flow to the most directly comparable GAAP financial measure for the period indicated (in thousands).

 

Three Months Ended June 30,

 

2024

 

2023

Cash flow from operations

$

97,312

 

$

103,852

 

Interest expense, net

 

22,688

 

 

23,159

 

Income tax expense (benefit)

 

4,838

 

 

(683

)

Deferred tax benefit

 

3,256

 

 

10,172

 

Changes in operating assets and liabilities

 

24,799

 

 

(9,715

)

Amortization of deferred financing costs and long-term debt discount

 

(1,309

)

 

(1,448

)

Merger-related transaction costs

 

24

 

 

1,814

 

Adjusted EBITDA

$

151,608

 

$

127,151

 

Less:

 

 

 

 

Cash and accrued interest expense

 

21,385

 

 

24,040

 

Estimated cash taxes

 

875

 

 

8,261

 

Discretionary Cash Flow

$

129,348

 

$

94,850

 

The following table presents a reconciliation of Cash G&A to the most directly comparable GAAP financial measure for the period indicated (in thousands).

 

Three Months Ended June 30,

 

2024

 

2023

General and administrative expense

$

13,456

$

14,066

Less:

 

 

Non-cash share-based compensation expense

 

6,203

 

5,422

Merger-related transaction costs

 

24

 

1,814

Rental income

 

171

 

135

Cash G&A

$

7,058

$

6,695

About Sitio Royalties Corp.

Sitio is a shareholder returns-driven company focused on large-scale consolidation of high-quality oil & gas mineral and royalty interests across premium basins, with a diversified set of top-tier operators. With a clear objective of generating cash flow from operations that can be returned to stockholders and reinvested, Sitio has accumulated over 265,000 NRAs through the consummation of over 200 acquisitions to date. More information about Sitio is available at www.sitio.com.

Forward-Looking Statements

This news release contains statements that may constitute “forward-looking statements” for purposes of federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “seeks,” “possible,” “potential,” “predict,” “project,” “prospects,” “guidance,” “outlook,” “should,” “would,” “will,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about the Company's expected results of operations, cash flows, financial position and future dividends; as well as certain future plans, expectations and objectives for the Company’s operations, including statements about our return of capital framework, our share repurchase program, the implementation thereof and the intended benefits, financial and operational guidance, strategy, synergies, certain levels of production, future operations, financial position, prospects, and plans. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties that could cause our actual results, performance, and financial condition to differ materially from our expectations and predictions. Factors that could materially impact such forward-looking statements include, but are not limited to: commodity price volatility, the global economic uncertainty and market volatility related to slowing growth, the large-scale invasion of Ukraine by Russia, the conflict in the Israel-Gaza region and continued hostilities in the Middle East including tensions with Iran, announcements of voluntary production cuts by OPEC+ and others, including OPEC's recent extensions of its voluntary production cuts, and those other factors discussed or referenced in the "Risk Factors" section of Sitio’s Annual Report on Form 10-K for the year ended December 31, 2023 and other publicly filed documents with the SEC. Any forward-looking statement made in this news release speaks only as of the date on which it is made. Factors or events that could cause actual results to differ may emerge from time to time, and it is not possible to predict all of them. Sitio undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future development, or otherwise, except as may be required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807235262/en/

IR contact: Ross Wong (720) 640–7647 IR@sitio.com