Sitio Royalties (US:STR)2023-08-09 15:13Financial Data and Key Metrics Changes - The company reported second quarter adjusted EBITDA of $127 million and discretionary cash flow of $95 million, down by 9% and 21% respectively compared to the first quarter of 2023, primarily driven by pricing changes [20][22][24] - The average hedged realized price per BOE for the second quarter was $44.45, a 9% decrease compared to the first quarter of 2023 [20] - Cash G&A for the first half of 2023 was $12.8 million, tracking just below the midpoint of the full year guidance [21] Business Line Data and Key Metrics Changes - The company closed five accretive acquisitions in the Permian Basin for approximately $248 million, adding 13,705 NRAs, or 7%, to its position [35][36] - The acquired assets produced an estimated 1,918 BOEs per day during the second quarter, contributing to a record high average production of 34,681 BOEs per day [37][15] - The company expects the recent acquisitions to be approximately 6% accretive to discretionary cash flow per share at current strip pricing [86] Market Data and Key Metrics Changes - DUCs in the Permian decreased by 73 from 930 to 857 between March and June 2023, the lowest level since July 2014 [17] - The current level of 857 DUCs is nearly a quarter of the peak of 3,519 DUCs in July 2020, indicating a nearing end to the DUC drawdown [18] Company Strategy and Development Direction - The company emphasizes a relationship-based approach to acquisitions, which has been a key differentiator in its growth strategy [86] - The company is focusing on smaller, impactful acquisitions rather than larger auction-based transactions, which have proven to be less successful [2][44] Management's Comments on Operating Environment and Future Outlook - Management noted that rig activity on their acreage has held steady, contrasting with broader declines in the market [54] - The company expects minimal cash tax payments for the rest of the year due to a tax benefit from 2022, with a shift back to normal tax rates expected in 2024 [28][32] Other Important Information - The board declared a dividend of $0.40 per share for the second quarter, down by $0.10 from the previous quarter [24] - The company has made progress in reducing its unsecured note principal to $416.3 million and is focused on maintaining adequate liquidity for future acquisitions [26][65] Q&A Session Summary Question: Can you provide any color on how the current commodity price environment is impacting your team's outlook for acquisitions? - Management stated that the commodity price environment does not significantly impact their acquisition underwriting standards, which remain consistent regardless of price fluctuations [46] Question: Was the stock deal the largest among the recent acquisitions? - The stock transaction was not the largest; it was approximately $65 million, while larger deals are characterized as being over a few hundred million dollars [42] Question: Can you discuss considerations for return of capital now that unsecured notes have been amended? - The company is monitoring stock behavior for potential buybacks and is focused on reducing leverage while maintaining liquidity for acquisitions [64]