Sitio Royalties Corp. (NYSE: STR) (“Sitio”, "STR" or the “Company”) today announced operational and financial results for the quarter ended June 30, 2023. Unless the context clearly indicates otherwise, references to "we," "our," "us" or similar terms refer to Sitio.
SECOND QUARTER 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- 2Q 2023 average daily production volume of 34,681 barrels of oil equivalent per day ("Boe/d"), (50% oil) comparable to 1Q 2023 average daily production volume; Pro forma average daily production volume of 36,462 Boe/d (50% oil), including volumes from the Stock & Cash Acquisitions(1) for the entire quarter
- Declared 2Q 2023 dividend of $0.40 per share of Class A Common Stock, of which approximately 1.5 cents per share uplift was from inclusion of an entire quarter of 2Q 2023 impacts from the Stock Acquisition(2)
- Net loss of $3.0 million, down $50.7 million relative to 1Q 2023 net income, primarily driven by a $25.6 million non-cash impairment charge related to Appalachian Basin proved properties and lower realized commodity prices
- 2Q 2023 Adjusted EBITDA(3) of $127.2 million, down 9% sequentially from 1Q 2023 Adjusted EBITDA, primarily due to a 9% reduction in realized hedged prices per Boe
- 2Q 2023 Pro forma Adjusted EBITDA(4) of $129.4 million, including contribution from the Stock Acquisition for the entire quarter
- In June 2023, made third consecutive quarterly amortization payment of $11.3 million at par value on senior unsecured notes, reducing principal from $427.5 million to $416.3 million
RECENT ACQUISITIONS HIGHLIGHTS
- Closed multiple accretive Permian Basin acquisitions since March 31, 2023 (the "Stock & Cash Acquisitions")(1) for an aggregate consideration of $247.9 million, funded with approximately 27% equity and 73% cash; In aggregate, the Stock & Cash Acquisitions were purchased for less than 7.0x projected next twelve months EBITDA at current strip pricing
- Stock & Cash Acquisitions are expected to increase Sitio's second half 2023 Discretionary Cash Flow by approximately 6% at current commodity strip pricing
- Pro forma 2Q 2023 production, as if Sitio had owned the Stock & Cash Acquisitions on April 1, 2023, of 36,462 Boe/d, which represents a 1,781 Boe/d, or 5% increase relative to reported 2Q 2023 production of 34,681 Boe/d
- Record high pro forma net line-of-sight ("LOS") wells of 50.8 net wells as of June 30, 2023, up by approximately 19% from March 31, 2023; Pro forma net LOS wells comprised of 27.1 net spuds and 23.7 net permits, of which 2.6 net spuds and 1.1 net permits were from the Stock & Cash Acquisitions(5)
2Q 2023 RESULTS RELATIVE TO FULL YEAR 2023 GUIDANCE ISSUED PRIOR TO STOCK & CASH ACQUISITIONS
The table below shows second quarter 2023 results relative to financial and operational guidance for full year 2023 that was reaffirmed on May 9, 2023.
Full Year 2023 Guidance Metric | 2Q 2023
| Full Year 2023 Guidance
| ||||
Average daily production (Boe/d) | 34,681 | 34,000 – 37,000 | ||||
Oil % | 50 | % | 49% – 51% | |||
Gathering and transportation ($/Boe) | $ | 1.30 | $1.25 – $1.75 | |||
Cash G&A ($ in millions) | $ | 6.7 | $25.0–$27.0 (annual) | |||
Production taxes (% of royalty revenue) | 7.8 | % | 6% – 8% | |||
Reported cash tax rate (% of pre-tax income)(6) | NM | 11% – 13% | ||||
(1) Stock & Cash Acquisitions are defined as five separate mineral and royalty interest acquisitions that closed between March 31, 2023 and August 7, 2023, containing 13,862 NRAs in aggregate, of which 99% are in the Permian Basin
(2) Stock Acquisition, a subset of the Stock & Cash Acquisitions, is defined as the one acquisition that closed on June 14, 2023. The Stock Acquisition was funded with approximately 2.5 million shares of Class C common stock and corresponding number of common units representing limited partner interests in Sitio Royalties Operating Partnership, LP
(3) For definitions of non-GAAP financial measures and reconciliations to their most directly comparable GAAP financial measures, please see “Non-GAAP financial measures”
(4) 2Q 2023 Pro Forma Adjusted EBITDA includes an incremental 74 days of EBITDA from the Stock Acquisition, which reflects as if Sitio had owned the Stock Acquisition for the entire second quarter of 2023
(5) Pro forma combined net line-of-sight wells represents the total net spuds and net permits assuming the Stock & Cash Acquisitions assets were owned on June 30, 2023
(6) Calculated as cash taxes paid of $8.3 million divided by net loss before taxes of $3.7 million for the three months ended June 30, 2023 for the "2Q 2023 Results" column. Shown as "NM", or "not meaningful" because the implied reported 2Q 2023 cash tax rate is negative
Chris Conoscenti, Chief Executive Officer of Sitio, commented, "We are excited to announce the closing of five mineral and royalty interest acquisitions since the end of 1Q 2023, which collectively increase our Permian acreage footprint by 7% and add 3.7 net LOS wells to our record-high LOS inventory. Given these recent acquisitions, we are issuing new guidance for 2H 2023 that includes a production guidance range of 35,000 - 37,000. I’m proud of the accomplishments of the Sitio team on these accretive acquisitions and on the management of our existing assets, which requires a culture of continuous improvement and differentiates our ability to continue to scale up.”
ASSET ACTIVITY UPDATE
The following table summarizes Sitio's net average daily production, pro forma net wells online, pro forma net line-of-sight wells and pro forma net royalty acres by area. All pro forma metrics assume that Sitio owned the Stock & Cash Acquisitions as of June 30, 2023.
Delaware | Midland | DJ | Eagle
| Appalachia | Anadarko | Williston | Total | ||||||||||||||||||||||||
Average Daily Production (Boe/d)
| |||||||||||||||||||||||||||||||
As reported | 17,187 | 8,088 | 2,853 | 3,803 | 1,074 | 1,048 | 628 | 34,681 | |||||||||||||||||||||||
% Oil | 49 | % | 65 | % | 32 | % | 55 | % | 1 | % | 29 | % | 63 | % | 50 | % | |||||||||||||||
Net Well Activity
| |||||||||||||||||||||||||||||||
Net wells online as of
| 109.2 | 51.7 | 35.5 | 34.4 | 3.7 | 9.8 | 9.0 | 253.3 | |||||||||||||||||||||||
Pro forma net wells online as of
| 121.8 | 60.1 | 35.6 | 35.3 | 3.7 | 9.9 | 9.2 | 275.6 | |||||||||||||||||||||||
Net wells online increase
| 12.6 | 8.4 | 0.1 | 0.9 | 0.0 | 0.1 | 0.2 | 22.3 | |||||||||||||||||||||||
Pro forma spuds | 14.1 | 7.5 | 3.8 | 1.0 | 0.0 | 0.1 | 0.6 | 27.1 | |||||||||||||||||||||||
Pro forma permits | 13.7 | 5.3 | 1.5 | 2.6 | - | 0.0 | 0.6 | 23.7 | |||||||||||||||||||||||
Pro forma net LOS wells as of
| 27.8 | 12.8 | 5.3 | 3.6 | 0.0 | 0.1 | 1.2 | 50.8 | |||||||||||||||||||||||
Net Royalty Acres
| |||||||||||||||||||||||||||||||
March 31, 2023 | 140,602 | 42,894 | 24,934 | 21,595 | 12,535 | 9,872 | 8,205 | 260,637 | |||||||||||||||||||||||
Pro forma June 30, 2023(9) | 152,234 | 45,339 | 24,978 | 21,752 | 12,669 | 9,872 | 8,203 | 275,047 | |||||||||||||||||||||||
NRA increase (decrease) since
| 11,632 | 2,445 | 44 | 157 | 134 | - | (2 | ) | 14,410 | ||||||||||||||||||||||
(8) Includes net wells from the Stock & Cash Acquisitions
(9) Includes NRAs from the Stock & Cash Acquisitions
FINANCIAL UPDATE
Sitio's second quarter 2023 average unhedged realized prices including all expected quality, transportation and demand adjustments were $70.90 per barrel of oil, $1.53 per Mcf of natural gas and $18.63 per barrel of natural gas liquids, for a total equivalent price of $42.01 per barrel of oil equivalent. During the second quarter of 2023, the Company received $7.7 million in net cash settlements for commodity derivative contracts and as a result, average hedged realized prices were $74.40 per barrel of oil, $1.92 per Mcf of natural gas and $18.63 per barrel of natural gas liquids, for a total equivalent price of $44.45 per barrel of oil equivalent. This represents a $4.42 per barrel of oil equivalent, or a 9% decrease relative to hedged realized prices for the three months ended March 31, 2023.
Consolidated net loss for the second quarter of 2023 was $3.0 million, which is $50.7 million less than consolidated net income in the first quarter of 2023. This decrease was driven primarily by a $25.6 million non-cash pre-tax impairment charge related to Appalachian Basin proved properties and 11% lower realized unhedged commodity prices, partially offset by $6.1 million of commodity derivative gains. For the three months ended June 30, 2023, Adjusted EBITDA was $127.2 million, down 9% sequentially from first quarter 2023 Adjusted EBITDA, primarily due to the aforementioned decrease in commodity prices.
As of June 30, 2023, the Company had $902.3 million principal value of total debt outstanding (comprised of $486.0 million drawn on Sitio's revolving credit facility and $416.3 million of senior unsecured notes) and liquidity of $264.3 million, including $0.3 million of cash and $264.0 million of remaining availability under its $750.0 million credit facility. In June 2023, Sitio made its third consecutive quarterly amortization payment of $11.3 million at par value on its senior unsecured notes, reducing the principal from $427.5 million to $416.3 million.
As of August 7, 2023, which was post closing of the Stock & Cash Acquisitions, Sitio had $1,021.3 million principal value of total debt outstanding (comprised of $605.0 million drawn on Sitio's revolving credit facility and $416.3 million of senior unsecured notes).
Sitio did not add to or extinguish any of its commodity swaps or collars during the second quarter of 2023. A summary of the Company's existing commodity derivative contracts as of July 1, 2023 is included in the table below.
Oil (NYMEX WTI) | ||||||||||||
2023 | 2024 | 1H25 | ||||||||||
Swaps | ||||||||||||
Bbl per day | 3,050 | 3,300 | 1,100 | |||||||||
Average price ($/Bbl) | $ | 93.71 | $ | 82.66 | $ | 74.65 | ||||||
Collars | ||||||||||||
Bbl per day | — | — | 2,000 | |||||||||
Average call ($/Bbl) | — | — | $ | 93.20 | ||||||||
Average put ($/Bbl) | — | — | $ | 60.00 | ||||||||
Gas (NYMEX Henry Hub) | ||||||||||||
2023 | 2024 | 1H25 | ||||||||||
