Analysis of Performance:
Sitio Royalties Corp. had a successful year ending on December 31, 2022. The average net daily production associated with their mineral and royalty interest was 15,204 BOE/d, consisting of 7,838 Bbls/d of oil, 26,112 Mcf/d of natural gas and 3,015 Bbls/d of NGLs. The company’s revenue stream comprises a fixed percentage of the revenue from crude oil, natural gas, and NGLs produced from the acreage underlying their interests. The cost structure and business model of the company allow for a significant amount of cash flow to be returned to stockholders. The company also refinanced their existing credit agreements and amended them to provide a senior secured revolving credit facility up to $1.5 billion.
In addition to the above, the company made 187 mineral and royalty interest acquisitions from landowners and other mineral interest owners. They acquired only those lands that meet their investment criteria for geologic quality, operator capability, remaining growth potential, cash flow generation, and rate of return. All the acquisitions were made at a premium to achieve their objective of increasing cash flows per share. The company believes that they will be able to capitalize on these acquisitions to grow their revenue further.
Analysis of Forward-looking Performance:
The company believes that they will continue to grow their mineral and royalty interest acquisitions for geologic quality, operator capability, remaining growth potential, cash flow generation, and, most importantly, rate of return. Since their inception in November 2016, the company has successfully grown their acreage position by making 187 acquisitions, and they plan to continue to do so in the future.
The market fluctuations and uncertainties regarding the crude oil, natural gas, and NGLs’ prices could impact the company’s future revenue stream. However, the company believes that their cost structure and business model will allow them to return a significant amount of their cash flows to the stockholders, irrespective of these market price fluctuations.
With the completion of the Brigham Merger with Former Sitio, it is expected that the company will grow their asset base, which will result in increased net daily production and revenue. The company is also expected to leverage the key management team’s expertise and relationships to make value-enhancing mineral and royalty interest acquisitions, designed to increase their cash flows per share.