Sitio Royalties (US:STR)2025-02-27 14:30Financial Data and Key Metrics Changes - The company achieved record fourth quarter production of approximately 41,000 barrels of oil equivalent per day, a 14% year-over-year increase, and averaged over 39,000 barrels of oil equivalent for the year [7] - Adjusted EBITDA for the fourth quarter was $141,200,000, which was 4% higher than the prior quarter, reflecting strong production and lower than expected cash G&A [15] - The company returned $330,000,000 to shareholders in 2024, representing over 70% of discretionary cash flow [12] Business Line Data and Key Metrics Changes - The company closed 16 high-value acquisitions throughout the year, totaling more than $350,000,000, which were immediately accretive to discretionary cash flow per share [10] - The fourth quarter acquisitions added 3,300 net royalty acres to the portfolio, primarily in the Delaware Basin [11] Market Data and Key Metrics Changes - The company expects oil production at the midpoint to be 18,500 barrels per day and total production just under 40,000 BOE per day in 2025, representing a 3% increase over reported full year 2024 production [18] - The company has a strong presence in the Permian Basin, covering about 36% of the entire basin, with a higher concentration in the Texas part of the Delaware Basin [40] Company Strategy and Development Direction - The company is committed to a strong balance sheet and financial flexibility, with a borrowing base increased to $925,000,000 [11] - The company prioritizes capital returns to shareholders while also investing in high-rate return acquisitions [60] - The company aims to leverage its proprietary asset management systems to enhance efficiency and scalability [23] Management's Comments on Operating Environment and Future Outlook - Management noted that the acquisition environment remains robust, with a healthy deal flow and attractive opportunities for high return investments [20] - The company views the current natural gas market as favorable, with increasing demand expected to support long-term growth [45] - Management expressed confidence in maintaining production growth and financial strength despite market fluctuations [78] Other Important Information - The company captured $19,000,000 of missing revenue payments in 2024, offsetting over two-thirds of cash G&A [9] - The company has returned nearly $850,000,000 to shareholders since going public in mid-2022, representing nearly 30% of its current market capitalization [12] Q&A Session Summary Question: Can you talk about your various marketed deals and how they compare to the deals you completed? - Management highlighted a robust year for deal flow, emphasizing the consistency in their acquisition program and the high rate of return opportunities they pursued [26][27] Question: What does activity look like for the remainder of the year versus expectations? - Management indicated that guidance for 2025 is underpinned by operator activity that has already commenced, suggesting a stable outlook for production growth [33] Question: How would you frame your production trajectory for 2025? - Management expects contributions primarily from the Permian Basin, with a focus on line of sight development in the DJ Basin [38] Question: Does the more constructive natural gas backdrop change the size of the opportunity set? - Management noted that the investments made in people and systems lend themselves to scale, enhancing their ability to capitalize on market opportunities [42] Question: Can you provide color behind the cash G&A increase? - Management explained that the increase is due to investments in people and systems, which are expected to scale effectively in the future [66] Question: What are your strategic priorities for free cash flow allocation in 2025? - Management emphasized returning capital to shareholders as the top priority while also looking for high-rate return acquisition opportunities [60]