Sitio Royalties (STR)2024-11-06 21:55Production and Revenue - As of September 30, 2024, the company owned mineral and royalty interests representing approximately 270,000 NRAs, with average net daily production of 38,585 BOE/d, including 19,134 Bbls/d of oil, 64,130 Mcf/d of natural gas, and 8,763 Bbls/d of NGLs [111]. - For the three months ended September 30, 2024, total revenues were $149.375 million, a decrease of 5% compared to $156.710 million for the same period in 2023 [123]. - Crude oil production for the three months ended September 30, 2024, increased by 9% to 1,760 MBbls compared to 1,617 MBbls in the prior year [125]. - Natural gas production decreased by 5% to 5,900 MMcf from 6,203 MMcf in the same period last year [125]. - Total revenues for the three months ended September 30, 2024, decreased by 6% to $469,314,000 compared to $444,002,000 in the prior year [138]. - Oil revenue for the three months ended September 30, 2024, increased by 12% to $402,226,000, driven by a 9% increase in production volumes [138]. - Natural gas revenue for the three months ended September 30, 2024, decreased by 56% to $14,361,000 due to a 71% decrease in average realized prices [138]. - NGLs revenue for the three months ended September 30, 2024, increased by 16% to $44,758,000, attributed to an 8% increase in production volumes [138]. Pricing and Market Conditions - The average realized price for crude oil was $74.67 per Bbl, for natural gas was $0.45 per Mcf, and for NGLs was $17.11 per Bbl, resulting in an average realized price of $41.65 per BOE, down from $45.00 per BOE in the prior year [117]. - Average realized price for crude oil decreased by 7% to $74.67 per Bbl compared to $80.21 per Bbl in the prior year [125]. - Average realized price for natural gas decreased significantly by 71% to $0.45 per Mcf from $1.54 per Mcf in the same period last year [125]. - The company anticipates continued lower price realizations for natural gas due to pipeline capacity constraints in the Permian Basin [117]. - The prices of oil, natural gas, and NGLs can fluctuate considerably due to supply and demand in the marketplace [179]. Financial Performance - Net income from operations for the three months ended September 30, 2024, was $46.704 million, down 10% from $51.826 million in the prior year [123]. - Net income for the nine months ended September 30, 2024, increased by 68% to $75,600,000 compared to $45,021,000 in the prior year [138]. - Operating expenses for the three months ended September 30, 2024, totaled $102.671 million, a decrease of 2% from $104.884 million in the same period of 2023 [123]. - Impairment of oil and natural gas properties decreased to $0.0 million for the nine months ended September 30, 2024, compared to $25.6 million for the same period in 2023 [149]. - Interest expense decreased due to a lower average interest rate on the 2028 Senior Notes, resulting in reduced costs compared to the 2026 Senior Notes [150]. - Income tax expense increased due to a rise in net income before income tax expense compared to the prior period [153]. Cash Flow and Liquidity - Cash flows from operating activities were $356.7 million for the nine months ended September 30, 2024, a slight increase from $354.8 million in the prior year [158]. - Cash flows used in investing activities totaled $191.2 million, primarily due to acquisitions of oil and gas properties, compared to $172.1 million in the prior period [159]. - Cash flows used in financing activities decreased to $172.3 million from $200.2 million, with net borrowings under the Sitio Revolving Credit Facility increasing by $35.0 million [160]. - As of September 30, 2024, liquidity was $455.5 million, consisting of $8.5 million in cash and cash equivalents and $447.0 million available under the Sitio Revolving Credit Facility [157]. Shareholder Returns and Stock Activity - The company repurchased 3,582,033 shares of Class A Common Stock at a weighted average price of $23.20 during the nine months ended September 30, 2024, with remaining authorization of $94.8 million [115]. - The company does not expect to engage in upstream activities that would incur capital costs, maintaining a focus on returning cash flows to stockholders [112]. Acquisitions and Growth Strategy - The company evaluated over 1,000 potential acquisitions and completed 206 acquisitions to enhance cash flow per share [116]. - As of September 30, 2024, the company had 45,397 gross (333.1 net) producing horizontal wells and 5,503 gross (27.5 net) horizontal wells in various stages of drilling or completion [118]. Risk Management - The company is exposed to market risk from adverse changes in commodity prices and interest rates [183]. - The company may enter into derivative instruments to partially mitigate the impact of commodity price volatility [186]. - The process of estimating crude oil, natural gas, and NGLs reserves is complex and subject to significant revisions over time [177]. - The company does not explore, develop, or operate the properties, thus incurring no associated costs [179]. - The company recognizes lease bonus revenue when the lease agreement has been executed and payment is determined to be collectible [180].