Sitio Royalties (STR) - 2024 Q1 - Quarterly Results

First Quarter 2024 Highlights and Recent Developments Sitio Royalties announced record pro forma average daily production of 37,970 Boe/d for Q1 2024, a 3.7% increase from Q4 2023. The company executed a return of capital of $0.49 per share, comprising a $0.41 dividend and $0.08 in share repurchases. Key developments include the closing of a significant DJ Basin asset acquisition in April 2024 and a substantial share repurchase from major non-sponsor shareholders Operational and Financial Highlights In Q1 2024, Sitio achieved pro forma production of 37,970 Boe/d (51% oil) and reported production of 35,349 Boe/d (52% oil). The company reported net income of $18.7 million, a significant turnaround from a $91.7 million net loss in Q4 2023, primarily due to lower operating expenses. Adjusted EBITDA remained stable at $135.1 million, with Pro Forma Adjusted EBITDA at $143.7 million Q1 2024 Key Metrics | Metric | Value | | :--- | :--- | | Pro Forma Avg. Daily Production | 37,970 Boe/d (51% oil) | | Reported Avg. Daily Production | 35,349 Boe/d (52% oil) | | Return of Capital per Share | $0.49 ($0.41 dividend + $0.08 repurchase) | | Net Income | $18.7 million | | Adjusted EBITDA | $135.1 million | | Pro Forma Adjusted EBITDA | $143.7 million | - Net income improved to $18.7 million from a net loss of $91.7 million in Q4 2023. This was mainly driven by a $137.6 million reduction in operating expenses, as there were no losses on asset sales or debt extinguishment, partially offset by higher commodity derivative losses and income tax expense[4] - The company repurchased 545,527 shares of Class A Common Stock during the quarter at an average price of $23.77 per share[4] Recent Developments Subsequent to the quarter's end, Sitio closed its previously announced acquisition of 13,062 net royalty acres (NRAs) in the DJ Basin on April 4, 2024, for $126.6 million. These assets produced approximately 2,621 Boe/d in Q1. Additionally, on April 8, 2024, the company repurchased approximately 2.0 million shares in a privately negotiated block trade - On April 4, 2024, Sitio closed the acquisition of 13,062 NRAs in the DJ Basin for $126.6 million. The acquired assets produced an average of 2,621 Boe/d (36% oil) in Q1 2024[4] - On April 8, 2024, the Company repurchased approximately 2.0 million shares from two of its largest non-sponsor Class C Shareholders in a private block trade[4] Operational and Financial Performance 1Q 2024 Results Relative to 2024 Guidance The company's Q1 2024 pro forma results are well-aligned with its full-year 2024 guidance. Pro forma average daily production of 37,970 Boe/d and an oil percentage of 51% fall comfortably within the guided ranges of 35,000-38,000 Boe/d and 49%-51%, respectively. Other metrics like production taxes and cash G&A are also on track Q1 2024 Pro Forma Results vs. 2024 Full Year Guidance | 2024 Guidance Metric | 1Q 2024 Pro Forma Results | 2024 Full Year Guidance | | :--- | :--- | :--- | | Average daily production (Boe/d) | 37,970 | 35,000 – 38,000 | | Oil % | 51% | 49% – 51% | | Production taxes (% of royalty revenue) | 8.0% | 7.5% – 9.5% | - CEO Chris Conoscenti noted that pro forma production growth was driven by activity in the Delaware Basin and Eagle Ford. He also highlighted that nearly 40% of pro forma net wells turned-in-line in Q1 came online in March, suggesting a more pronounced impact on Q2 production[6] Operator Activity Pro forma production was led by the Delaware Basin (20,000 Boe/d) and Midland Basin (8,259 Boe/d). As of March 31, 2024, the company had 52.9 pro forma net line-of-sight (LOS) wells, with 77% located in the Permian Basin (Delaware and Midland) and 14% in the DJ Basin, indicating a strong inventory of future production Pro Forma Average Daily Production by Area (Q1 2024) | Area | Boe/d | % Oil | | :--- | :--- | :--- | | Delaware | 20,000 | 50% | | Midland | 8,259 | 58% | | DJ | 5,877 | 36% | | Eagle Ford | 3,139 | 59% | | Williston/Other | 695 | 61% | | Total | 37,970 | 51% | Pro Forma Net Line-of-Sight (LOS) Wells as of March 31, 2024 | Area | Net Spuds | Net Permits | Total Net LOS Wells | | :--- | :--- | :--- | :--- | | Delaware | 15.1 | 11.0 | 26.1 | | Midland | 10.3 | 4.1 | 14.4 | | DJ | 4.6 | 2.7 | 7.3 | | Eagle Ford | 2.6 | 1.8 | 4.4 | | Williston/Other | 0.4 | 0.3 | 0.7 | | Total | 33.0 | 19.9 | 52.9 | Financial Update In Q1 2024, Sitio's average hedged realized price was $47.12 per Boe, a 3.7% increase from Q4 2023. The company reported a consolidated net income of $18.7 million. As of March 31, 2024, Sitio had $860.0 million in total debt and maintained strong liquidity of $601.7 million, including $590.0 million available under its credit facility Average Realized Prices (Q1 2024) | Price Type | Oil (per Bbl) | Natural Gas (per Mcf) | NGLs (per Bbl) | Combined (per Boe) | | :--- | :--- | :--- | :--- | :--- | | Unhedged | $76.60 | $1.15 | $20.71 | $46.00 | | Hedged | $77.62 | $1.53 | $20.71 | $47.12 | - As of March 31, 2024, the company had $860.0 million of total debt outstanding and liquidity of $601.7 million[12] Commodity Derivative Summary as of March 31, 2024 | Commodity | Type | Volume (per day) | Period | Avg. Price / Range ($) | | :--- | :--- | :--- | :--- | :--- | | Oil | Swap | 3,300 Bbl | 2024 | 82.66 | | Oil | Swap | 1,100 Bbl | 1H25 | 74.65 | | Oil | Collar | 2,000 Bbl | 1H25 | 60.00 - 93.20 | | Gas | Swap | 500 MMBtu | 2024 | 3.41 | | Gas | Collar | 11,400 MMBtu | 2024 | 4.00 - 7.24 | | Gas | Collar | 11,600 MMBtu | 1H25 | 3.31 - 10.34 | Return of Capital Sitio's Board declared a Q1 2024 cash dividend of $0.41 per share. This, combined with share repurchases equivalent to $0.08 per share, resulted in a total return of capital of $0.49 per share, representing a 65% payout of Pro Forma Discretionary Cash Flow. A significant repurchase of approximately 2.0 million shares was also completed in April 2024 - A cash dividend of $0.41 per share of Class A Common Stock was declared for Q1 2024, payable on May 31, 2024[15] - The total return of capital for Q1 2024 was $0.49 per share, based on a 65% payout ratio of Pro Forma Discretionary Cash Flow[15] - In April 2024, the company repurchased approximately 2.0 million shares from two large non-sponsor Class C holders. This transaction will reduce the number of shares receiving the Q1 2024 dividend[16] Financial Statements Financial Results Summary For the three months ended March 31, 2024, average daily production increased to 35,349 Boe/d from 34,440 Boe/d in the prior-year period. Average realized prices after derivative settlements were $47.12 per Boe, a decrease from $48.87 per Boe in Q1 2023. Key per-unit expenses like DD&A and G&A saw increases compared to the previous year Production Data Comparison (Three Months Ended March 31) | Production Data | 2024 | 2023 | | :--- | :--- | :--- | | Crude oil (MBbls) | 1,662 | 1,589 | | Natural gas (MMcf) | 5,016 | 5,435 | | Total (MBoe) | 3,217 | 3,100 | | Average daily production (Boe/d) | 35,349 | 34,440 | Selected Expense Metrics ($/Boe) | Expense Metric | 2024 | 2023 | | :--- | :--- | :--- | | Depreciation, depletion and amortization | $23.72 | $21.86 | | General and administrative | $4.04 | $3.77 | | Interest expense, net | $5.75 | $7.16 | Condensed Consolidated Balance Sheets As of March 31, 2024, Sitio reported total assets of $4.68 billion, a slight decrease from $4.76 billion at year-end 2023. Total liabilities stood at $1.15 billion, down from $1.16 billion. Total equity was $3.52 billion, with cash and cash equivalents at $11.7 million Balance Sheet Summary (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $4.68 billion | $4.76 billion | | Cash and cash equivalents | $11.7 million | $15.2 million | | Total property and equipment, net | $4.50 billion | $4.58 billion | | Total Liabilities | $1.15 billion | $1.16 billion | | Long-term debt | $848.8 million | $865.3 million | | Total Equity | $3.52 billion | $3.59 billion | Unaudited Condensed Consolidated Statements of Income For the first quarter of 2024, Sitio generated total revenues of $151.4 million, slightly up from $150.8 million in Q1 2023. However, due to higher operating expenses and a loss on commodity derivatives, net income decreased to $18.7 million from $47.7 million in the prior-year quarter. Net income per Class A share was $0.10, compared to $0.28 in Q1 2023 Statement of Income Summary (in thousands, except per share amounts) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $151.4 million | $150.8 million | | Total operating expenses | $101.4 million | $89.9 million | | Net income from operations | $50.0 million | $60.9 million | | Commodity derivatives gains (losses) | ($10.1 million) | $14.8 million | | Net income | $18.7 million | $47.7 million | | Net income attributable to Class A stockholders | $8.5 million | $22.7 million | | Diluted Net income per Class A share | $0.10 | $0.28 | Unaudited Condensed Consolidated Statements of Cash Flow In Q1 2024, net cash from operating activities was $120.7 million. Investing activities used $13.3 million, primarily for a deposit on property acquisitions. Financing activities used $110.9 million, driven by $80.1 million in dividends and distributions and $12.7 million in share repurchases. The company's cash balance decreased by $3.4 million to $11.7 million Statement of Cash Flow Summary (in thousands) | Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $120.7 million | $128.8 million | | Net cash provided by (used in) investing activities | ($13.3 million) | $1.2 million | | Net cash used in financing activities | ($110.9 million) | ($138.6 million) | | Net change in cash and cash equivalents | ($3.4 million) | ($8.7 million) | | Cash and cash equivalents, end of period | $11.7 million | $10.2 million | Non-GAAP Financial Measures Sitio utilizes non-GAAP measures such as Adjusted EBITDA and Discretionary Cash Flow to evaluate performance. For Q1 2024, Adjusted EBITDA was $135.1 million, and Pro Forma Adjusted EBITDA, which includes the DJ Basin Acquisition, was $143.7 million. Discretionary Cash Flow was $109.5 million, while Pro Forma Discretionary Cash Flow was $118.1 million. These figures are reconciled from their nearest GAAP equivalents, such as net income and cash flow from operations Reconciliation of Net Income to Adjusted EBITDA The company reconciled its Q1 2024 net income of $18.7 million to an Adjusted EBITDA of $135.1 million by adding back items like interest, taxes, DD&A, and non-cash derivative losses. Including the contribution from the DJ Basin Acquisition, Pro Forma Adjusted EBITDA for the quarter was $143.7 million Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2024 | | :--- | :--- | | Net income | $18.7 million | | Interest expense, net | $18.5 million | | Income tax expense | $2.8 million | | Depreciation, depletion and amortization | $76.3 million | | Other adjustments | $18.8 million | | Adjusted EBITDA | $135.1 million | | DJ Basin Acquisition EBITDA | $8.6 million | | Pro Forma Adjusted EBITDA | $143.7 million | Reconciliation of Cash Flow to Discretionary Cash Flow Starting from Adjusted EBITDA of $135.1 million, the company subtracted $17.2 million in cash interest and $8.4 million in estimated cash taxes to arrive at Discretionary Cash Flow of $109.5 million for Q1 2024. Pro Forma Discretionary Cash Flow, including the DJ Basin assets, was $118.1 million Discretionary Cash Flow Reconciliation (in thousands) | Line Item | Q1 2024 | | :--- | :--- | | Adjusted EBITDA | $135.1 million | | Less: Cash and accrued interest expense | $17.2 million | | Less: Estimated cash taxes | $8.4 million | | Discretionary Cash Flow | $109.5 million | | DJ Basin Acquisition Discretionary Cash Flow | $8.6 million | | Pro Forma Discretionary Cash Flow | $118.1 million |