Adds 31,900 NRAs, bringing Company’s total
to 173,700 NRAs
Issues financial and operational guidance
for second half of 2022
Sitio Royalties Corp. (NYSE: STR) (“Sitio” or the “Company”)
today announced it has (i) completed the acquisition of over 19,700
net royalty acres ("NRAs") in the Permian Basin from Foundation
Minerals, a Midland-based portfolio company of Quantum Energy
Partners, for approximately $323 million (the “Foundation
Acquisition”) and (ii) entered into a definitive purchase and sale
agreement to acquire over 12,200 NRAs in the Permian Basin from
Momentum Minerals, a Houston-based portfolio company of funds and
accounts managed or advised by affiliates of Apollo Global
Management, for approximately $224 million (the “Momentum
Acquisition” and together with the Foundation Acquisition, the
“Acquisitions”). The Foundation Acquisition was funded utilizing
borrowings under the Company’s credit facility and proceeds from a
364-day unsecured bridge loan facility, and the Momentum
Acquisition is expected to be funded utilizing debt financing and
close in the third quarter of 2022, subject to customary closing
conditions.
In conjunction with the Acquisitions and consistent with the
Company’s strategy of protecting returns in times of above
mid-cycle pricing, Sitio also entered into crude oil and natural
gas derivative contracts to enhance the certainty of cash flows and
protect against adverse commodity price fluctuations.
ACQUISITION HIGHLIGHTS
- Continuation of Sitio’s strategy of consolidation of
large-scale, high-quality mineral and royalty positions
- Accretive to shareholders by approximately 15% on a cash flow
per share basis
- Expected to add approximately 15% to the Company’s second half
2022 dividends per share at current commodity strip pricing,
assuming a 65% dividend payout ratio per Sitio’s previously
announced capital allocation framework as compared to the Company’s
second half 2022 dividends per share had the Acquisitions not been
consummated
- Cash G&A per barrel of oil equivalent (“boe”) expected to
decrease by approximately 14% to $2.31 from pro forma 1Q 2022 to
the second half of 2022 based on the midpoint of guidance
range
- Increases expected second half 2022 production by approximately
3,500 boe/d and increases net line of sight inventory wells1 by
more than 30%
- Represents fourth and fifth transactions in excess of 10,000
NRAs closed or signed since June of 2021, during which time the
Company has grown its acreage position more than 300%, acquiring
over 100,000 NRAs
- Increases acreage 24,500 NRAs in the Delaware Basin and
approximately 7,400 NRAs in the Midland Basin, resulting in a 30%
increase in Sitio’s Permian Basin assets and a 22% increase in
Sitio’s total acreage to more than 173,000 NRAs
- Expands footprint in Eddy, Lea, Loving, Martin and Midland
counties by approximately 13,200 NRAs, or approximately 160%
- Provides exposure to a diversified set of high-quality and
active operators, including Coterra Energy, Colgate Energy,
ConocoPhillips, Devon Energy, ExxonMobil, Occidental Petroleum and
Pioneer Natural Resources
- Pro forma leverage upon closing of both Acquisitions expected
to be approximately 1.5x; STR expects pro forma leverage to return
to 1.0x or less by year-end 2023 based on current strip pricing for
oil and gas
1 Line of sight inventory wells are wells
that have been either spud or permitted.
Chris Conoscenti, Chief Executive Officer of Sitio, commented,
“We are excited to announce these highly accretive acquisitions in
the Permian Basin and continued execution of our returns-focused,
large-scale mineral and royalty consolidation strategy. We expect
our shareholders to significantly benefit from efficiencies due to
the increased scale of the Company and a substantial increase to
our dividend. These acquisitions are the latest in a series of
transactions in excess of 10,000 NRAs since June of 2021, building
on our track record of executing value-additive M&A and further
cementing our position as the top consolidator in the space.”
Noam Lockshin, Chairman of the Sitio Board of Directors, said,
“We believe that the mineral and royalty sector is ripe for
consolidation and are proud to announce these highly accretive
acquisitions soon after completing the Falcon Minerals merger and
rebranding the Company to Sitio. The acquired assets are in highly
valued areas of the Permian Basin, meaningfully increasing our line
of sight to strong production growth in the near-term and providing
substantial remaining inventory.”
SECOND HALF 2022 FINANCIAL AND OPERATIONAL GUIDANCE
In connection with the acquisitions, Sitio is providing
operational and financial guidance for the second half of 2022.
- Before incorporating the Acquisitions into 2H 2022 guidance,
the Company expects 2H 2022 production volumes to increase by
approximately 7% at the midpoint compared to previous guidance for
1H 2022 issued in January 2022.
- Below is operational and financial guidance for the Company
after giving effect to the Acquisitions:
2H 2022 Guidance Production (Mboe/d) 18.0 - 19.0 % oil 50% - 53%
Expenses and taxes Gathering,
transportation and marketing ($ / boe) $1.25 - $1.75 Production
& ad valorem taxes (% of revenue) 7% - 9% Cash tax rate(1) 3% -
5% Annual cash G&A ($ mm) $15.0 - $16.5 (1) Percent of
pre-tax income attributable to Sitio Royalties Corp.
HEDGING UPDATE
Sitio entered into derivative contracts in connection with each
cash acquisition beginning in the second quarter of 2022. The
company’s oil and gas derivatives as of June 27, 2022 are
summarized below:
Oil (NYMEX WTI)
2H22
2023
2024
1H25
Swaps Total volume (bbls)
404,800
1,113,250
1,207,800
199,100
Average price ($/bbl)
$106.31
$93.71
$82.66
$74.65
Collars Total volume (bbls)
-
-
-
362,000
Average call ($/bbl)
-
-
-
$93.20
Average put ($/bbl)
-
-
-
$60.00
Gas (NYMEX Henry Hub)
2H22
2023
2024
1H25
Swaps Total volume (mmbtu)
92,000
182,500
183,000
-
Average price ($/mmbtu)
$4.63
$3.83
$3.41
-
Collars Total volume (mmbtu)
1,104,000
3,102,500
4,172,400
2,099,600
Average call ($/mmbtu)
$9.69
$7.93
$7.24
$10.34
Average put ($/mmbtu)
$6.00
$4.82
$4.00
$3.31
Additional Information
Sitio has posted an updated investor presentation to the
investor relations tab of its website, and will hold an investor
call on June 27, 2022 at 8:30 a.m. ET to discuss details of the
Acquisitions. Participants can access the call by dialing
1-844-200-6205 in the United States or 1-929-526-1599 in other
locations with access code 299158. The call will also be available
via webcast at https://events.q4inc.com/attendee/728055855.
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 shareholders and
reinvested, Sitio has accumulated over 173,000 net royalty acres
(“NRAs,” when normalized to a 1/8th royalty equivalent) through the
consummation of over 180 acquisitions to date, after giving effect
to the completion of the Momentum Acquisition. More information
about Sitio, including an updated investor presentation, is
available at www.sitio.com.
Forward Looking Statements
This presentation relates to Sitio Royalties Corp. (the
“Company” or “Sitio”) and its (i) completion of the acquisition of
over 19,700 net royalty acres ("NRAs") in the Permian Basin from
Foundation Minerals (the “Foundation Acquisition”) and (ii) entry
into a definitive purchase and sale agreement to acquire over
12,200 NRAs in the Permian Basin from Momentum Minerals (the
“Momentum Acquisition” and together with the Foundation
Acquisition, the “Acquisitions”). This presentation 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 benefits of the Acquisition, including with
respect to the Company’s expected results of operations, cash
flows, financial position and future dividends; as well as future
plans, expectations, and objectives for the Company’s operations,
including statements about strategy, synergies, 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. See “Risk
Factors” in Falcon Minerals Corporation’s (“Falcon”) definitive
proxy statement filed with the U.S. Securities and Exchange
Commission (the “SEC”) on May 5, 2022 for a discussion of risk
factors related to the merger between Falcon and Desert Peak
Minerals (“Desert Peak”) and Desert Peak’s business. See also Part
I, Item 1A “Risk Factors” in Falcon’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2021 and Part II, Item 1A
“Risk Factors” in Falcon’s Quarterly Reports on Form 10-Q , each
filed with the SEC for a discussion of risk factors that affect
Falcon’s business, and the “Risks Factors Relating to Desert Peak”
described in the Current Report on Form 8-K filed on June 10, 2022.
Any forward-looking statement made in this presentation 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220626005095/en/
IR contact: Ross Wong (720) 640-7647 IR@sitio.com
Media contact: Daniel Yunger or Hallie Wolff Kekst CNC
Kekst-Sitio@kekstcnc.com
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