Group 1 - Viper Energy has agreed to acquire Sitio Royalties in an all-stock transaction valued at approximately $4.1 billion, including net debt, significantly enhancing its oil and gas asset scale and inventory depth for stable production and cash flow growth over the next decade [1][2] - The transaction structure involves exchanging 0.4855 shares of the new holding company for each share of Sitio Class A common stock, implying a purchase value of $19.41 per share for Sitio shareholders based on Viper's closing price [1][2] - Following the merger, Viper's major shareholder, Diamondback Energy, will hold about 41% of the new company [1] Group 2 - The merger is expected to immediately increase the per-share distributable cash by 8% to 10% [2] - Viper's board has approved a 10% increase in the annual base dividend to $1.32 per share, with the dividend payout expected to represent about 45% of distributable cash at a WTI oil price scenario of around $50 [2] - The merger will enhance Viper's cash flow generation capacity and reduce the breakeven oil price for dividends, making the company's high-dividend, low-capital operating model more attractive [3]

Core Viewpoint - Viper Energy, Inc. has announced a definitive agreement to acquire Sitio Royalties Corp. in an all-equity transaction valued at approximately $4.1 billion, which includes Sitio's net debt of about $1.1 billion as of March 31, 2025 [1] Transaction Details - The acquisition will involve the exchange of 0.4855 shares of Class A common stock of a new holding company for each share of Sitio Class A common stock, and 0.4855 units of Viper's operating subsidiary for each unit of Sitio's operating subsidiary, implying a value of $19.41 per Sitio share based on Viper's stock price on June 2, 2025 [1] - The transaction has received unanimous approval from the Boards of Directors of both companies and has the consent of Diamondback Energy, Viper's majority stockholder [1] - Approximately 48% of Sitio's voting power has agreed to support the transaction [1] - The deal is subject to customary regulatory approvals and is expected to close in Q3 2025 [1] Financial Highlights - Viper has approved a 10% increase in its base dividend to $1.32 per share annually, which represents approximately 45% of cash available for distribution at $50 WTI [2][6] - The acquisition is expected to be approximately 8-10% accretive to cash available for distribution per Class A share immediately upon closing [6] - The pro forma Viper's base dividend breakeven is expected to decrease by approximately $2 per barrel to below $20 WTI [6] - Estimated annual synergies from the merger are projected to exceed $50 million, primarily from administrative and capital cost savings [6] Strategic Rationale - The merger is expected to create a leader in the minerals industry with enhanced size, scale, liquidity, and access to investment-grade capital [7] - The combined company will have approximately 34,300 net royalty acres in the Permian Basin and an additional ~9,000 net royalty acres in other major basins [6][7] - The merger will position the combined entity to compete effectively for capital with mid and large-cap North American exploration and production companies, benefiting from higher margins and lower operating costs [7] Production and Operational Highlights - The average production for Q1 2025 was reported at 18.9 mbo/d (42.1 mboe/d), with Permian production at 14.5 mbo/d (31.9 mboe/d) [6] - The pro forma Viper is expected to have an average production of 64-68 mbo/d (122-130 mboe/d) by Q4 2025, with a mid-single-digit percentage increase expected for the full year 2026 [6]

Core Insights - Sitio Royalties (NYSE: STR) reported strong Q1 2025 total production results, although there was a decline in oil cut [2] - The oil production for Q1 2025 was 2% above the midpoint of the company's full-year guidance [2] Company Overview - Sitio Royalties focuses on value opportunities and distressed plays, particularly in the energy sector [2] - The company has a beneficial long position in its shares, indicating confidence in its future performance [2]

Financial Data and Key Metrics Changes - The first quarter of 2025 marked a record production quarter for the company, with total production up 3% quarter over quarter, averaging over 42,000 BOE per day [6] - Adjusted EBITDA was $142 million, reflecting a 1% increase from the prior quarter, while net income rose 36% to $26 million [7] - The company declared a cash dividend of $0.35 per share and repurchased 1,100,000 shares for $22 million during the first quarter, representing a return of capital of $0.50 per share [7][8] Business Line Data and Key Metrics Changes - Net wells turned in line increased by 34% from Q4 2024, primarily driven by activity in the Delaware Basin [6] - The company closed over $20 million in acquisitions, adding 1,350 net royalty acres [6] Market Data and Key Metrics Changes - The company updated its full-year 2025 estimated cash taxes guidance to $23 million, reflecting a $5 million decrease from the original estimate due to lower anticipated commodity prices [9] Company Strategy and Development Direction - The company emphasizes the advantages of minerals and royalties as a high-margin investment opportunity, with no direct operating costs or obligatory capital spending [10][11] - The focus remains on asset quality, operator quality, and asset/operator diversity to maximize returns [19] - The company is actively evaluating consolidation opportunities in the fragmented minerals and royalties market [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the production trajectory for the next two quarters, underpinned by existing producing wells [26] - The company remains optimistic about the long-term outlook for oil and natural gas, despite short-term price fluctuations [60] - Management noted that operators are curtailing capital expenditures while maintaining production guidance, indicating a cautious approach to capital discipline [58] Other Important Information - The company has a remaining buyback capacity of approximately $350 million following the Board's authorization for an additional $300 million in share repurchases [8][22] - The company has increased its inventory estimate by 40 additional net normalized locations, a 10% quarter-over-quarter increase [16] Q&A Session Summary Question: Outlook on production trajectory for the next two quarters - Management feels relatively good about production trajectory, underpinned by existing producing wells and wells that have been spud [26][27] Question: Comparison of share repurchase value versus M&A opportunities - Management sees a balance between the value of buying back stock and pursuing M&A opportunities, noting the unique value proposition of their stock [28][30] Question: Changes in productivity of wells relative to underwritten assumptions - Management conducts look backs on past acquisitions and feels confident about future projections based on current geologic facts [32][36] Question: Clarification on 1Q production and full-year guidance - Management is pleased with 1Q production but expects to revisit guidance later in the year based on more data [40][41] Question: Trend of share repurchases in relation to commodity price volatility - Management's buyback program is designed to take advantage of price dislocations, with an expectation of increased repurchases at lower prices [44] Question: Context on the increase of 40 net locations - The increase was split between the Delaware and Midland Basins, based on positive well results and operator activity [50][52] Question: Observations on operators' strategies for managing base decline - Management noted that operators are being cautious with capital discipline, which may lead to a self-correcting nature in the industry [58][60]

Financial Data and Key Metrics Changes - The first quarter of 2025 marked a record production quarter for the company, with total production up 3% quarter over quarter, averaging over 42,000 BOE per day [5] - Adjusted EBITDA was $142 million, reflecting a 1% increase from the prior quarter, while net income rose 36% to $26 million [6] - The company declared a cash dividend of $0.35 per share and repurchased 1,100,000 shares for $22 million, representing a return of capital of $0.50 per share for the first quarter [6][7] Business Line Data and Key Metrics Changes - Net wells turned in line increased by 34% from Q4 2024, primarily driven by the Delaware Basin [5] - The company closed over $20 million in acquisitions, adding 1,350 net royalty acres [5] Market Data and Key Metrics Changes - The company updated its full-year 2025 estimated cash taxes guidance to $23 million, reflecting a decrease of $5 million from the original estimate due to lower anticipated commodity prices [8] Company Strategy and Development Direction - The company emphasizes the unique advantages of minerals and royalties as an asset class, highlighting their non-cost-bearing nature and high-margin investment opportunities [10][11] - The focus is on asset quality, operator quality, and asset/operator diversity to maximize returns [18] - The company is actively evaluating consolidation opportunities in a fragmented market, aiming to enhance its portfolio [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the quality of assets and their ability to compete for operator capital in various commodity price environments [20] - The company remains cautious about the current market dynamics but believes in the long-term value of its assets [60] Other Important Information - The company has maintained a disciplined approach to acquisitions, focusing on high-quality assets and operators [18] - The company has repurchased over 4% of its stock in the last fourteen months, with an additional $300 million authorized for share repurchases [21] Q&A Session Summary Question: Production trajectory outlook for the next two quarters - Management indicated confidence in production trajectory, supported by existing producing wells and wells that have been spud [26] Question: Comparison of share repurchase value versus M&A opportunities - Management highlighted a balance between share repurchases and M&A opportunities, noting the unique value proposition of their stock [27][29] Question: Insights on production guidance and operator strategies - Management acknowledged the strong first-quarter production but indicated that guidance may be revisited based on future data [40] Question: Context on inventory increase of 40 net locations - Management explained that the increase was due to successful well results in the Delaware and Midland Basins, reflecting ongoing operator activity [50] Question: Observations on operators' strategies for managing base decline - Management noted that operators are curtailing CapEx while maintaining production guidance, indicating a cautious approach to capital discipline [58]

Core Insights - Sitio Royalties reported revenue of $163.52 million for Q1 2025, an 8% year-over-year increase, with an EPS of $0.13 compared to $0.10 a year ago, indicating strong financial performance [1] - The revenue exceeded the Zacks Consensus Estimate of $151.5 million by 7.93%, while the EPS surpassed the consensus estimate of $0.10 by 30% [1] Financial Performance Metrics - The average daily combined production volume was 42,136 BOE/D, slightly above the estimated 42,055.56 BOE/D [4] - Average realized prices for natural gas were $2.30, exceeding the estimate of $2.09, while crude oil prices were $70.39, close to the estimate of $70.56 [4] - Average realized prices for NGLs were $24.57, significantly higher than the estimated $18.93, contributing to revenue of $22.46 million, which also surpassed the estimate of $17.68 million [4] Stock Performance - Sitio Royalties shares have returned +12.5% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change, indicating positive market sentiment [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

分组1 - Sitio Royalties reported quarterly earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.10 per share, and showing an earnings surprise of 30% [1] - The company achieved revenues of $163.52 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 7.93%, compared to $151.39 million in the same quarter last year [2] - Sitio Royalties has surpassed consensus EPS estimates two times and revenue estimates three times over the last four quarters [2] 分组2 - The stock has underperformed, losing about 11.6% since the beginning of the year, while the S&P 500 declined by 4.7% [3] - The current consensus EPS estimate for the upcoming quarter is $0.06 on revenues of $137.5 million, and for the current fiscal year, it is $0.34 on revenues of $578 million [7] - The Zacks Industry Rank for Oil and Gas - Royalty Trust - United States is currently in the bottom 5% of over 250 Zacks industries, indicating potential challenges for the sector [8]

Financial Performance & Returns - Sitio reported solid financial performance, exceeding consensus estimates for 1Q25 production at approximately 42 MBoe/d and Adjusted EBITDA at approximately $142 million[10] - The company boasts high Adjusted EBITDA Margins, exceeding 87%[10] - Sitio's cumulative return of capital since becoming public in 2022 is greater than $915 million, representing over 35% of the company's market capitalization[10, 34, 35] - The company returned $0.50 per share to shareholders in 1Q25, comprised of a $0.35 per share cash dividend and $0.15 per share of stock repurchases[11] Capital Allocation & Debt - Sitio is committed to returning at least 65% of Discretionary Cash Flow (DCF) to shareholders through dividends and share repurchases[37] - The board authorized an additional $300 million for share repurchases, bringing the total remaining buyback capacity to approximately $350 million[10, 37] - Sitio's Adjusted Net Debt to 2024 Free Cash Flow (FCF) ratio is approximately 0.3x, which is about half the peer group average of 4.7x[42] Acquisitions & Asset Management - The company closed 3 transactions in 1Q25 for approximately $21 million, adding approximately 1,350 NRAs[10, 11] - Missing payments captured in the last twelve months (LTM) ending March 31, 2025, amounted to $15 million, offsetting approximately 40% of the midpoint of the 2025 Cash G&A guidance[10, 74] Production & Outlook - Average daily production for 1Q25 was 42.1 MBoe/d, including 18.9 MBbls/d of oil production, representing a 19% year-over-year increase in total production[8, 11] - The company's 2025 full-year guidance projects average daily production between 38,250 and 41,250 Boe/d, and average daily oil production between 17,750 and 19,250 Bbls/d[45] Market Positioning - Sitio's Free Cash Flow (FCF) margin is greater than 3.5x higher than the E&P average[13] - The company has a large, diverse asset base with active operators and over 10 years of remaining development[56]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _________________________________________________________ FORM 10-Q ____________________________________________________ (Mark One) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Indicate by check mark whether the registrant is a large accelerated filer, an a ...

Sitio's Performance and Strategy - Sitio's 3Q24 annualized adjusted EBITDA was $542 million[7] - The company's total yield for 3Q24 was 8.0%, based on a return of capital per share of $0.47 and a share price of $23.46 on 11/15/24[7,8] - Sitio's average daily production in 3Q24 was 38.6 MBoe/d, with 50% being oil[7,14] - The company closed 5 transactions, adding 2,325 net royalty acres (NRAs) in the DJ Basin[13] - Sitio reduced long-term debt by $56.5 million, increasing liquidity to $455.5 million[14] Market Trends and Operator Activity - Operators are realizing efficiency improvements in the oilfield, with Permian Basin production growing despite decreasing rigs and frac fleets[15] - E&P M&A activity is improving Sitio's operator mix, with 62% of 3Q24 production coming from operators with market caps >$10B[18,19] - Net Line-of-Sight (LOS) wells in the Permian Basin increased by 11% quarter-over-quarter[32] Capital Allocation and Financials - Sitio returned 66% of its 3Q24 discretionary cash flow (DCF) to shareholders, amounting to $72.1 million or $0.47 per share[48] - The company is committed to returning at least 65% of DCF to shareholders through cash dividends and share repurchases[51] - As of 9/30/24, Sitio had ~$95 million remaining under its $200 million buyback authorization[51]