Sitio Royalties (US:STR)2024-05-09 15:33Financial Data and Key Metrics Changes - The company reported first quarter pro forma discretionary cash flow of $118 million and pro forma adjusted EBITDA of $144 million, which includes cash flow from the DJ Basin acquisition [7] - The total return of capital approved by the board is equal to 65% of pro forma first quarter DCF, translating to $0.49 per share, comprised of a dividend of $0.41 per share and share repurchases of $13 million or $0.08 per share [7] Business Line Data and Key Metrics Changes - The company ended the first quarter with 52.9 pro forma net line of sight wells, indicating strong near-term activity [4] - First quarter pro forma production reached a record high of 37,970 BOEs per day, with 51% being oil, and a quarterly pro forma production growth rate of 3.7% [18] Market Data and Key Metrics Changes - The DJ Basin acquisition closed on April 4, contributing over 2,600 BOEs per day and asset-level cash flow of $8.5 million during the first quarter [19] - Approximately 40% of all newly producing wells in the quarter came online in March, which is expected to positively impact second quarter production [18] Company Strategy and Development Direction - The company aims to create long-term shareholder value through accretive acquisitions, proactive management of minerals, and fostering a culture of continuous innovation [8] - The minerals M&A pipeline remains strong, with the company evaluating acquisition opportunities across all regions with a focus on rate of return [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for the rest of 2024, highlighting robust operator activity and the strength of the business model [3][8] - The company will continue to monitor operator activity, the macro environment, and industry trends, with plans to update 2024 guidance if necessary [4] Other Important Information - The company repurchased over 545,000 shares of Class A common stock at an average price of $23.77 in March, and continued to buy back shares in April, including a block trade of approximately two million shares from large holders [22] Q&A Session Summary Question: How does the company think about capital allocation between buybacks and acquisitions? - Management stated that buybacks are part of the capital return strategy and do not exclude acquisitions, allowing for both to occur simultaneously [9] Question: What confidence does the company have regarding line-of-sight wells and volume growth? - Management noted that the absolute level of line-of-sight wells is near record highs, with good visibility into the next 12 months for conversions [10][11] Question: How has the integration of DJ Basin assets been and are there opportunities for additional production? - Management highlighted the use of technology to leverage data for better intelligence on well performance and operator activity, aiding in smarter acquisitions [27] Question: Will the dividend reflect the post-repurchase share count? - Management indicated that the dividend will be calculated based on the post-repurchase share count [30] Question: What is the role of the Eagle Ford going forward? - Management stated they are open to monetizing assets if competitive on a rate of return basis but are not currently looking to do so [33]