DENVER--(BUSINESS WIRE)--Sitio Royalties Corp. (NYSE: STR) ("Sitio", "STR" or the "Company") today announced third quarter 2024 operational and financial results. Robust production, coupled with strong year-to-date performance and the positive impact from five recent acquisitions, allowed the Company to enhance its 2024 outlook. Supplemental slides have been posted to Sitio's website, www.sitio.com. A conference call and webcast is planned for 7:30 a.m. CT / 8:30 a.m. ET on Thursday, November 7, 2024. Participation details can be found within this release.
HIGHLIGHTS
- Posted third quarter net income of $27.9 million and Adjusted EBITDA of $135.4 million. Financial results reflected strong production volumes from legacy assets and recent acquisitions
- Recorded third quarter production above full year guidance range, 38,585 barrels of oil equivalent per day ("Boe/d") (50% oil)
- Reduced long-term debt by approximately $56.5 million during the period with the Company's quarter-end credit facility balance at $403.0 million and liquidity of $455.5 million
- Ongoing benefit of diversified asset base, exposure to quality operators across top domestic basins and track record of value-add acquisitions. Line of sight ("LOS") wells increased 11% quarter-over-quarter and there were 7.7 net wells turned-in-line, providing high confidence in sustainable business model
- Continued to return cash to shareholders and enhance value on a per share basis; Sitio to return $0.47 per share of Class A Common Stock, comprised of a $0.28 per share cash dividend (payable November 27, 2024), and $0.19 per share of stock repurchases; Year-to-date, the buyback program has reduced outstanding shares by 3% and total return of capital (including dividends and stock repurchases) is $1.67 per share
- Repurchased 1.4 million shares of Class A Common Stock during the quarter ($21.47 per share avg. price); Repurchases year-to-date total $105.2 million with $94.8 million authorization remaining as of September 30, 2024
"We continued our streak of sound results, beating expectations for the third consecutive quarter. This allowed us to strengthen our full-year 2024 outlook with higher volumes and cash costs that are down by approximately 4% year-over-year," said Sitio CEO Chris Conoscenti. "We are proving the resiliency of our business model and offer investors an attractive option to own quality and high margin oil and gas assets across several of the best basins in the U.S. Through disciplined acquisitions and effective management of our resources, we are differentiating Sitio from its peers. The recent expansion of our line-of-sight wells and healthy operating activity levels today provide us with high-confidence in our ability to deliver value for our shareholders."
THIRD QUARTER 2024 FINANCIAL AND OPERATING RESULTS
Net income in the quarter was $27.9 million and Adjusted EBITDA was $135.4 million. Financial performance benefited from robust production from legacy assets and the impact of recent acquisitions.
Third quarter production exceeded full year 2024 guidance, averaging 38,585 Boe/d (50% oil and 72% liquids). Oil production for the period was 19,134 Bbl/d and was positively impacted by strong revenues from the Delaware, Midland and DJ Basins.
Average realized commodity prices during the third quarter were $74.67 per Bbl for oil (98% of NYMEX WTI and Midland Oil), $17.11 per Bbl for natural gas liquids, and $0.45 per Mcf for natural gas (21% of NYMEX Henry Hub; $0.90 per Mcf above Waha). Total average realized price for the period was $41.65 per barrel of oil equivalent ("Boe") on an unhedged basis. Realized prices benefited from approximately $4.3 million in net cash settlements for commodity derivative contracts and total average realized price for the period was $42.85 per Boe on a hedged basis.
General and administrative expenses was $14.4 million and Cash G&A in the period was in-line with expectations at $7.8 million, or $2.20 per Boe. With Sitio's diverse asset base and exposure to multiple operators, the Company benefits from industry's continued innovation and operational efficiency gains. Sitio believes that many of these gains are sustainable and will positively impact future margins.
3Q 2024 AND YTD PRO FORMA RESULTS VS. PRIOR 2024 FY GUIDANCE
The table below shows third quarter 2024 and pro forma 2024 results for the three months ended September 30, 2024 relative to the prior full year guidance previously issued on August 7, 2024. Primarily as a result of our legacy asset outperformance and the impact of recent acquisitions, we are providing updated full year guidance later in this press release under "Updated 2024 Full Year Financial and Operational Guidance."
Metric | 3Q 2024 Reported Results | YTD24 Pro Forma Results(1) | Prior 2024 FY Guidance(1) | |||||||
Average daily production (Boe/d) | 38,585 | 38,595 | 36,000 - 38,000 | |||||||
Oil % | 50 | % | 50 | % | 49% - 51% | |||||
Cash G&A ($ in millions) | $ | 7.8 | $ | 22.6 | $31.5 - $33.5 (annual) | |||||
Production taxes (% of royalty revenue) | 6.9 | % | 7.7 | % | 7.5% - 9.5% | |||||
Estimated cash taxes ($ in millions)(2) | $ | 4.6 | $ | 13.9 | $9.0 - $15.0 (annual) | |||||
(1) | Includes production from the DJ Basin Acquisition as if it was owned on January 1, 2024; The DJ Basin Acquisition is defined as the all-cash acquisition of approximately 13,000 NRAs in the DJ Basin from an undisclosed third party that closed on April 4, 2024 | |
(2) | Cash tax guidance is based on strip pricing when guidance was issued; Estimated cash taxes for YTD24 Pro Forma Results represents the estimated cash taxes used in the calculation of Discretionary Cash Flow and is not pro forma for the DJ Basin Acquisition |
UPDATED 2024 FULL YEAR FINANCIAL AND OPERATIONAL GUIDANCE
The table below includes Sitio's updated guidance for full year 2024 and includes impacts from the DJ Basin Acquisition as if the transaction had closed on January 1, 2024 for pro forma average daily production. Sitio today enhanced its full-year 2024 outlook and raised the midpoint of its pro forma average daily production range by 1,000 Boe/d due to robust legacy production year-to-date and expected impacts from five recent acquisitions. The midpoint of 2024 guidance for cash taxes increased by $7.0 million based on latest estimates.
Full Year 2024 Guidance | August 7, 2024 | November 6, 2024 | Change at Midpoint | ||||
Pro Forma Average Daily Production(1) | |||||||
Pro forma average daily production (Boe/d)(1) | 36,000 - 38,000 | 37,000 - 39,000 | 1,000 | ||||
Pro forma average daily production (% oil)(1) | 49% - 51% | 49% - 51% | - | ||||
Expenses and Taxes | |||||||
Cash G&A ($ in millions) | $31.5 - $33.5 | $30.0 - $32.0 | $ | (1.5 | ) | ||
Production taxes (% of royalty revenue) | 7.5% - 9.5% | 7.5% - 9.5% | - | ||||
Cash taxes ($ in millions)(2) | $9.0 - $15.0 | $17.0 - $21.0 | $ | 7.0 | |||
(1) | Includes production from the DJ Basin Acquisition as if it was owned on January 1, 2024 | |
(2) | Cash tax guidance range is based on expectations at strip pricing when guidance was issued |
OPERATOR ACTIVITY
The following table summarizes Sitio's net average daily production and net line-of-sight ("LOS") wells by area.
Delaware | Midland | DJ | Eagle Ford | Williston/Other | Total | ||||||||||||
Average Daily Production (Boe/d) for the three months ended September 30, 2024 | |||||||||||||||||
As reported | 20,167 | 8,446 | 5,648 | 3,386 | 938 | 38,585 | |||||||||||
% Oil | 50 | % | 57 | % | 37 | % | 54 | % | 45 | % | 50 | % | |||||
Net LOS Wells as of September 30, 2024 | |||||||||||||||||
Net spuds | 11.1 | 8.9 | 5.8 | 1.4 | 0.3 | 27.5 | |||||||||||
Net permits | 11.4 | 5.1 | 2.8 | 1.9 | 0.2 | 21.4 | |||||||||||
Net LOS wells as of September 30, 2024 | 22.5 | 14.0 | 8.6 | 3.3 | 0.5 | 48.9 | |||||||||||
FINANCIAL UPDATE
Sitio's third quarter 2024 average unhedged realized prices including all expected quality, transportation and demand adjustments were $74.67 per barrel of oil, $0.45 per Mcf of natural gas and $17.11 per barrel of natural gas liquids, for a total price of $41.65 per Boe. During the third quarter of 2024, the Company received $4.3 million in net cash settlements for commodity derivative contracts and as a result, average hedged realized prices were $75.96 per barrel of oil, $0.78 per Mcf of natural gas and $17.11 per barrel of natural gas liquids, for a total price of $42.85 per Boe.
Consolidated net income for the third quarter of 2024 was $27.9 million, which is $1.2 million, or 4.0% lower than consolidated net income in the second quarter of 2024. This decrease was primarily driven by $17.7 million lower oil, natural gas and natural gas liquids revenues and $1.5 million lower lease bonus and other income, partially offset by $8.4 million higher commodity derivative gains, $7.4 million of decreased depreciation, depletion and amortization, and $2.2 million of decreased severance and ad valorem taxes. For the three months ended September 30, 2024, Adjusted EBITDA was $135.4 million, down 10.7% compared to the second quarter 2024 Adjusted EBITDA of $151.7 million, largely due to lower unhedged realized oil prices.
As of September 30, 2024, the Company had $1,003.0 million principal value of total debt outstanding (comprised of $403.0 million drawn on Sitio's revolving credit facility and $600.0 million of senior unsecured notes) and liquidity of $455.5 million, including $8.5 million of cash and $447.0 million of remaining availability under its $850.0 million credit facility.
Sitio did not add to or extinguish any of its commodity swaps or collars during the third quarter of 2024. A summary of the Company's existing commodity derivative contracts as of September 30, 2024 is included in the table below.
Oil (NYMEX WTI) | |||||||
2024 | 1H25 | ||||||
Swaps | |||||||
Bbl per day | 3,300 | 1,100 | |||||
Average price ($/Bbl) | $ | 82.66 | $ | 74.65 | |||
Collars | |||||||
Bbl per day | - | 2,000 | |||||
Average call ($/Bbl) | - | $ | 93.20 | ||||
Average put ($/Bbl) | - | $ | 60.00 | ||||
Gas (NYMEX Henry Hub) | |||||||
2024 | 1H25 | ||||||
Swaps | |||||||
MMBtu per day | 500 | - | |||||
Average price ($/MMBtu) | $ | 3.41 | - | ||||
Collars | |||||||
MMBtu per day | 11,400 | 11,600 | |||||
Average call ($/MMBtu) | $ | 7.24 | $ | 10.34 | |||
Average put ($/MMBtu) | $ | 4.00 | $ | 3.31 | |||
RETURN OF CAPITAL FRAMEWORK
Sitio is committed to returning capital to shareholders while maintaining a balanced and durable capital structure. Since becoming public in 2022, Sitio has returned more than $765 million to owners, including year-to-date returns of $245 million.
Sitio's Board of Directors declared a cash dividend of $0.28 per share of Class A Common Stock with respect to the third quarter of 2024. The dividend is payable on November 27, 2024 to the stockholders of record at the close of business on November 19, 2024. During the third quarter of 2024, the Company repurchased an aggregate 1.4 million shares of Class A Common Stock at an average price of $21.47 per share, representing 26% of third quarter 2024 Discretionary Cash Flow, or $0.19 per share. As of September 30, 2024, the Company had repurchased a total of 4.5 million in Class A Common Stock and Sitio OpCo Partnership Units, representing approximately 3% of shares outstanding prior to the Board's authorization of Sitio's $200 million share repurchase program. In total, Sitio's return of capital for the third quarter of 2024 is $0.47 per share.
CONFERENCE CALL INFORMATION
Sitio will host a conference call at 7:30 a.m. CT / 8:30 a.m. ET on Thursday, November 7, 2024. Participants can access the call by dialing 1-833-470-1428 in the United States, or 1-404-975-4839 in other locations, with access code 296060, or by webcast at https://events.q4inc.com/attendee/861493711. Participants may also pre-register for the event via the following link: https://www.netroadshow.com/events/login'show=3a129c74&confId=71395. The conference call, live webcast, and replay can also be accessed through the Investor Relations section of Sitio's website at www.sitio.com.
FINANCIAL RESULTS
Production Data | |||||||||||||||
Three Months Ended
| Nine Months Ended
| ||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
Production Data: | |||||||||||||||
Crude oil (MBbls) | 1,760 | 1,617 | 5,219 | 4,786 | |||||||||||
Natural gas (MMcf) | 5,900 | 6,203 | 16,808 | 17,214 | |||||||||||
NGLs (MBbls) | 806 | 744 | 2,316 | 1,996 | |||||||||||
Total (MBOE)(6:1) | 3,549 | 3,395 | 10,336 | 9,651 | |||||||||||
Average daily production (BOE/d)(6:1) | 38,585 | 36,900 | 37,725 | 35,349 | |||||||||||
Average Realized Prices: | |||||||||||||||
Crude oil (per Bbl) | $ | 74.67 | $ | 80.21 | $ | 77.07 | $ | 75.11 | |||||||
Natural gas (per Mcf) | $ | 0.45 | $ | 1.54 | $ | 0.85 | $ | 1.90 | |||||||
NGLs (per Bbl) | $ | 17.11 | $ | 18.14 | $ | 19.32 | $ | 19.39 | |||||||
Combined (per BOE) | $ | 41.65 | $ | 45.00 | $ | 44.63 | $ | 44.65 | |||||||
Average Realized Prices After Effects of Derivative Settlements: | |||||||||||||||
Crude oil (per Bbl) | $ | 75.96 | $ | 82.21 | $ | 77.95 | $ | 77.95 | |||||||
Natural gas (per Mcf) | $ | 0.78 | $ | 1.84 | $ | 1.21 | $ | 2.20 | |||||||
NGLs (per Bbl) | $ | 17.11 | $ | 18.14 | $ | 19.32 | $ | 19.39 | |||||||
Combined (per BOE) | $ | 42.85 | $ | 46.49 | $ | 45.66 | $ | 46.59 | |||||||
Selected Expense Metrics | |||||||
Three Months Ended
| |||||||
2024 | 2023 | ||||||
Severance and ad valorem taxes | 6.9 | % | 7.9 | % | |||
Depletion ($/Boe) | $ | 21.97 | $ | 23.74 | |||
General and administrative ($/Boe) | $ | 4.05 | $ | 3.55 | |||
Cash G&A ($/Boe) | $ | 2.20 | $ | 2.18 | |||
Interest expense, net ($/Boe) | $ | 6.34 | $ | 7.77 | |||
Condensed Consolidated Balance Sheets (In thousands except par and share amounts) | |||||||
September 30,
| December 31,
| ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 8,507 | $ | 15,195 | |||
Accrued revenue and accounts receivable | 118,635 | 107,347 | |||||
Prepaid assets | 8,023 | 12,362 | |||||
Derivative asset | 9,066 | 19,080 | |||||
Total current assets | 144,231 | 153,984 | |||||
Property and equipment | |||||||
Oil and natural gas properties, successful efforts method: | |||||||
Unproved properties | 2,514,348 | 2,698,991 | |||||
Proved properties | 2,752,715 | 2,377,196 | |||||
Other property and equipment | 3,688 | 3,711 | |||||
Accumulated depreciation, depletion, amortization, and impairment | (738,232 | ) | (498,531 | ) | |||
Total property and equipment, net | 4,532,519 | 4,581,367 | |||||
Long-term assets | |||||||
Long-term derivative asset | - | 3,440 | |||||
Deferred financing costs | 8,887 | 11,205 | |||||
Operating lease right-of-use asset | 4,949 | 5,970 | |||||
Other long-term assets | 2,778 | 2,835 | |||||
Total long-term assets | 16,614 | 23,450 | |||||
TOTAL ASSETS | $ | 4,693,364 | $ | 4,758,801 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities | |||||||
Accounts payable and accrued expenses | $ | 56,364 | $ | 30,050 | |||
Operating lease liability | 1,605 | 1,725 | |||||
Total current liabilities | 57,969 | 31,775 | |||||
Long-term liabilities | |||||||
Long-term debt | 992,854 | 865,338 | |||||
Deferred tax liability | 248,005 | 259,870 | |||||
Non-current operating lease liability | 4,511 | 5,394 | |||||
Other long-term liabilities | 1,150 | 1,150 | |||||
Total long-term liabilities | 1,246,520 | 1,131,752 | |||||
Total liabilities | 1,304,489 | 1,163,527 | |||||
Equity | |||||||
Class A Common Stock, par value $0.0001 per share; 240,000,000 shares authorized; 82,871,009 and 82,451,397 shares issued and 79,288,976 and 82,451,397 outstanding at September 30, 2024 and December 31, 2023, respectively | 8 | 8 | |||||
Class C Common Stock, par value $0.0001 per share; 120,000,000 shares authorized; 73,730,215 and 74,965,217 shares issued and 73,677,467 and 74,939,080 outstanding at September 30, 2024 and December 31, 2023, respectively | 7 | 8 | |||||
Additional paid-in capital | 1,720,293 | 1,796,147 | |||||
Accumulated deficit | (153,853 | ) | (187,738 | ) | |||
Class A Treasury Shares, 3,582,033 and 0 shares at September 30, 2024 and December 31, 2023, respectively | (83,896 | ) | - | ||||
Class C Treasury Shares, 52,748 and 26,137 shares at September 30, 2024 and December 31, 2023, respectively | (1,265 | ) | (677 | ) | |||
Noncontrolling interest | 1,907,581 | 1,987,526 | |||||
Total equity | 3,388,875 | 3,595,274 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 4,693,364 | $ | 4,758,801 | |||
Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | |||||||||||||||
Three Months Ended
| Nine Months Ended
| ||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
Revenues: | |||||||||||||||
Oil, natural gas and natural gas liquids revenues | $ | 147,858 | $ | 152,766 | $ | 461,345 | $ | 430,887 | |||||||
Lease bonus and other income | 1,517 | 3,944 | 7,969 | 13,115 | |||||||||||
Total revenues | 149,375 | 156,710 | 469,314 | 444,002 | |||||||||||
Operating expenses: | |||||||||||||||
Depreciation, depletion and amortization | 78,093 | 80,716 | 239,896 | 222,718 | |||||||||||
General and administrative | 14,382 | 12,044 | 40,849 | 37,786 | |||||||||||
Severance and ad valorem taxes | 10,196 | 12,124 | 34,655 | 32,927 | |||||||||||
Impairment of oil and gas properties | - | - | - | 25,617 | |||||||||||
Total operating expenses | 102,671 | 104,884 | 315,400 | 319,048 | |||||||||||
Net income from operations | 46,704 | 51,826 | 153,914 | 124,954 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense, net | (22,511 | ) | (26,373 | ) | (63,709 | ) | (71,735 | ) | |||||||
Change in fair value of warrant liability | - | 8 | - | 2,950 | |||||||||||
Loss on extinguishment of debt | - | (687 | ) | - | (1,470 | ) | |||||||||
Commodity derivatives gains (losses) | 7,785 | (24,125 | ) | (2,872 | ) | (3,250 | ) | ||||||||
Interest rate derivative gains | - | 9 | - | 456 | |||||||||||
Net income before taxes | 31,978 | 658 | 87,333 | 51,905 | |||||||||||
Income tax expense | (4,111 | ) | (383 | ) | (11,733 | ) | (6,884 | ) | |||||||
Net income | 27,867 | 275 | 75,600 | 45,021 | |||||||||||
Net (income) loss attributable to noncontrolling interest | (15,304 | ) | 12 | (41,715 | ) | (22,877 | ) | ||||||||
Net income attributable to Class A stockholders | $ | 12,563 | $ | 287 | $ | 33,885 | $ | 22,144 | |||||||
Net income (loss) per share of Class A Common Stock | |||||||||||||||
Basic | $ | 0.15 | $ | - | $ | 0.41 | $ | 0.26 | |||||||
Diluted | $ | 0.15 | $ | - | $ | 0.41 | $ | 0.26 | |||||||
Weighted average Class A Common Stock outstanding | |||||||||||||||
Basic | 80,142 | 81,712 | 81,095 | 80,984 | |||||||||||
Diluted | 80,278 | 157,260 | 81,263 | 80,984 | |||||||||||
Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) | |||||||
Nine Months Ended
| |||||||
2024 | 2023 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 75,600 | $ | 45,021 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 239,896 | 222,718 | |||||
Amortization of deferred financing costs and long-term debt discount | 3,925 | 4,275 | |||||
Share-based compensation | 17,558 | 14,474 | |||||
Change in fair value of warrant liability | - | (2,950 | ) | ||||
Loss on extinguishment of debt | - | 1,470 | |||||
Impairment of oil and gas properties | - | 25,617 | |||||
Commodity derivatives losses | 2,872 | 3,250 | |||||
Net cash received for commodity derivatives settlements | 10,582 | 18,730 | |||||
Interest rate derivative gains | - | (456 | ) | ||||
Net cash paid for interest rate derivative settlements | - | 403 | |||||
Deferred tax benefit | (11,984 | ) | (15,107 | ) | |||
Change in operating assets and liabilities: | |||||||
Accrued revenue and accounts receivable | (11,288 | ) | 26,188 | ||||
Prepaid assets | 4,402 | 13,187 | |||||
Other long-term assets | 961 | 1,866 | |||||
Accounts payable and accrued expenses | 24,984 | (3,131 | ) | ||||
Operating lease liabilities and other long-term liabilities | (777 | ) | (737 | ) | |||
Net cash provided by operating activities | 356,731 | 354,818 | |||||
Cash flows from investing activities: | |||||||
Purchases of oil and gas properties, net of post-close adjustments | (190,834 | ) | (172,070 | ) | |||
Purchases of other property and equipment | - | (19 | ) | ||||
Other, net | (319 | ) | - | ||||
Net cash used in investing activities | (191,153 | ) | (172,089 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings on credit facilities | 329,000 | 588,500 | |||||
Repayments on credit facilities | (203,000 | ) | (497,500 | ) | |||
Repayments on 2026 Senior Notes | - | (33,750 | ) | ||||
2026 Senior Notes issuance costs | - | (351 | ) | ||||
Debt issuance costs | (144 | ) | - | ||||
Distributions to noncontrolling interest | (91,512 | ) | (121,924 | ) | |||
Dividends paid to Class A stockholders | (99,087 | ) | (121,555 | ) | |||
Dividend equivalent rights paid | (943 | ) | (982 | ) | |||
Repurchases of Class A Common Stock | (82,619 | ) | - | ||||
Repurchases of Sitio OpCo Partnership Units (including associated Class C Common Shares) | (22,142 | ) | - | ||||
Cash paid for taxes related to net settlement of share-based compensation awards | (1,819 | ) | (3,432 | ) | |||
Payments of deferred financing costs | - | (9,214 | ) | ||||
Net cash used in financing activities | (172,266 | ) | (200,208 | ) | |||
Net change in cash and cash equivalents | (6,688 | ) | (17,479 | ) | |||
Cash and cash equivalents, beginning of period | 15,195 | 18,818 | |||||
Cash and cash equivalents, end of period | $ | 8,507 | $ | 1,339 | |||
Supplemental disclosure of non-cash transactions: | |||||||
Increase in current liabilities for additions to property and equipment: | $ | 42 | $ | 224 | |||
Oil and gas properties acquired through issuance of Class C Common Stock and Sitio OpCo Partnership Units: | - | 66,256 | |||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for income taxes: | $ | 3,080 | $ | 9,268 | |||
Cash paid for interest expense: | 51,144 | 68,249 | |||||
Non-GAAP financial measures
Adjusted EBITDA, Pro Forma Adjusted EBITDA, Discretionary Cash Flow, Pro Forma Discretionary Cash Flow and Cash G&A are non-GAAP supplemental financial measures used by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets and their ability to sustain dividends and/or share repurchases over the long term without regard to financing methods, capital structure or historical cost basis. Sitio believes that these non-GAAP financial measures provide useful information to Sitio's management and external users because they allow for a comparison of operating performance on a consistent basis across periods.
We define Adjusted EBITDA as net income plus (a) interest expense, (b) provisions for taxes, (c) depreciation, depletion and amortization, (d) non-cash share-based compensation expense, (e) impairment of oil and natural gas properties, (f) gains or losses on unsettled derivative instruments, (g) change in fair value of the warrant liability, (h) loss on debt extinguishment, (i) merger-related transaction costs and (j) write off of financing costs.
We define Pro Forma Adjusted EBITDA as Adjusted EBITDA plus Cash Acquisitions EBITDA from July 1, 2023 to September 30, 2023 that is not included in Adjusted EBITDA for the three months ended September 30, 2023. Cash Acquisitions is defined as the four acquisitions that closed in July and August 2023 for approximately $181 million.
We define Discretionary Cash Flow and Pro Forma Discretionary Cash Flow for the three months ended September 30, 2024 as Adjusted EBITDA, less cash and accrued interest expense and estimated cash taxes.
We define Discretionary Cash Flow for the three months ended September 30, 2023 as Adjusted EBITDA, less cash interest expense and cash taxes.
We define Pro Forma Discretionary Cash Flow for the three months ended September 30, 2023 as Discretionary Cash Flow for the three months ended September 30, 2023 plus Cash Acquisitions Discretionary Cash Flow from July 1, 2023 to September 30, 2023 that is not included in Discretionary Cash Flow for the three months ended September 30, 2023.
We define Cash G&A as general and administrative expense less (a) non-cash share-based compensation expense, (b) merger-related transaction costs and (c) rental income.
Merger-related transaction costs for the three months ended September 30, 2023 have been recast to conform to the current period presentation.
These non-GAAP financial measures do not represent and should not be considered an alternative to, or more meaningful than, their most directly comparable GAAP financial measures or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Non-GAAP financial measures have important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measure. Our computations of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Discretionary Cash Flow, Pro Forma Discretionary Cash Flow and Cash G&A may differ from computations of similarly titled measures of other companies.
The pro forma financial data is presented for illustrative purposes only and should not be relied upon as an indication of the financial condition that would have been achieved if the acquisitions had taken place on the specified dates. In addition, future results may vary significantly from the results reflected in such pro forma data and should not be relied on as an indication of future results.
The following tables present a reconciliation of Adjusted EBITDA and Pro Forma Adjusted EBITDA to the most directly comparable GAAP financial measure for the period indicated (in thousands).
Three Months Ended
| |||||||
2024 | 2023 | ||||||
Net income | $ | 27,867 | $ | 275 | |||
Interest expense, net | 22,511 | 26,373 | |||||
Income tax expense | 4,111 | 383 | |||||
Depreciation, depletion and amortization | 78,093 | 80,716 | |||||
EBITDA | $ | 132,582 | $ | 107,747 | |||
Non-cash share-based compensation expense | 6,251 | 4,368 | |||||
Losses (gains) on unsettled derivative instruments | (3,518 | ) | 29,497 | ||||
Change in fair value of warrant liability | - | (8 | ) | ||||
Loss on debt extinguishment | - | 687 | |||||
Merger-related transaction costs | 126 | 251 | |||||
Adjusted EBITDA | $ | 135,441 | $ | 142,542 | |||
Cash Acquisitions EBITDA1 | - | 1,144 | |||||
Pro Forma Adjusted EBITDA1 | $ | 135,441 | $ | 143,686 | |||
(1) | Cash Acquisitions closed in 2023 and are reflected in the full results for the three months ended September 30, 2024 |
Three Months Ended
| |||
2024 | |||
Net income | $ | 29,041 | |
Interest expense, net | 22,688 | ||
Income tax expense | 4,838 | ||
Depreciation, depletion and amortization | 85,485 | ||
EBITDA | $ | 142,052 | |
Non-cash share-based compensation expense | 6,203 | ||
Losses on unsettled derivative instruments | 3,329 | ||
Merger-related transaction costs | 149 | ||
Adjusted EBITDA | $ | 151,733 | |
The following table presents a reconciliation of Discretionary Cash Flow and Pro Forma Discretionary Cash Flow to the most directly comparable GAAP financial measure for the period indicated (in thousands).
Three Months Ended
| |||||||
2024 | 2023 | ||||||
Cash flow from operations | $ | 138,679 | $ | 122,141 | |||
Interest expense, net | 22,511 | 26,373 | |||||
Income tax expense | 4,111 | 383 | |||||
Deferred tax benefit | 4,490 | 7,686 | |||||
Changes in operating assets and liabilities | (33,154 | ) | (12,810 | ) | |||
Amortization of deferred financing costs and long-term debt discount | (1,322 | ) | (1,482 | ) | |||
Merger-related transaction costs | 126 | 251 | |||||
Adjusted EBITDA | $ | 135,441 | $ | 142,542 | |||
Less: | |||||||
Cash and accrued interest expense | 21,189 | 24,694 | |||||
Estimated cash taxes | 4,625 | 457 | |||||
Discretionary Cash Flow | $ | 109,627 | $ | 117,391 | |||
Cash Acquisitions Discretionary Cash Flow1 | $ | - | $ | 1,144 | |||
Pro Forma Discretionary Cash Flow1 | $ | 109,627 | $ | 118,535 | |||
(1) | Cash Acquisitions closed in 2023 and are reflected in the full results for the three months ended September 30, 2024 |
The following table presents a reconciliation of Cash G&A to the most directly comparable GAAP financial measure for the period indicated (in thousands).
Three Months Ended
| |||||||
2024 | 2023 | ||||||
General and administrative expense | $ | 14,382 | $ | 12,044 | |||
Less: | |||||||
Non-cash share-based compensation expense | 6,251 | 4,368 | |||||
Merger-related transaction costs | 126 | 251 | |||||
Rental income | 183 | 136 | |||||
Cash G&A | $ | 7,822 | $ | 7,289 | |||
About Sitio Royalties Corp.
Sitio is a shareholder returns-driven company focused on large-scale consolidation of high-quality oil & gas mineral and royalty interests across premium basins, with a diversified set of top-tier operators. With a clear objective of generating cash flow from operations that can be returned to stockholders and reinvested, Sitio has accumulated over 265,000 NRAs through the consummation of over 200 acquisitions to date. More information about Sitio is available at www.sitio.com.
Forward-Looking Statements
This news release contains statements that may constitute "forward-looking statements" for purposes of federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "seeks," "possible," "potential," "predict," "project," "prospects," "guidance," "outlook," "should," "would," "will," and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about the Company's expected results of operations, cash flows, financial position and future dividends; as well as certain future plans, expectations and objectives for the Company's operations, including statements about our return of capital framework, our share repurchase program and its intended benefits, financial and operational guidance, strategy, synergies, certain levels of production, future operations, financial position, prospects, and plans. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties that could cause our actual results, performance, and financial condition to differ materially from our expectations and predictions. Factors that could materially impact such forward-looking statements include, but are not limited to: commodity price volatility, the global economic uncertainty and market volatility related to slowing growth and demand, especially from China, the conflict in Ukraine and associated economic sanctions on Russia, the conflict in the Israel-Gaza region and continued hostilities in the Middle East including heightened tensions and conflict with Iran, Lebanon and Yemen, voluntary production cuts by OPEC+ and others, including any additional extensions of such voluntary production cuts or the duration thereof, increased global oil, natural gas and natural gas liquids supply and those other factors discussed or referenced in the "Risk Factors" section of Sitio's Annual Report on Form 10-K for the year ended December 31, 2023 and other publicly filed documents with the SEC. Any forward-looking statement made in this news release speaks only as of the date on which it is made. Factors or events that could cause actual results to differ may emerge from time to time, and it is not possible to predict all of them. Sitio undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future development, or otherwise, except as may be required by law.
Contacts
IR contact:
Ross Wong
(720) 640-7647
IR@sitio.com
