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SR

Sitio Royalties Corp. (STR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 production exceeded guidance midpoints (42.1 MBoe/d, oil 18.9 MBbls/d) and results “from production down to net income” beat consensus, with Adjusted EBITDA at $142.2M and net income at $26.3M .
  • Strong operator activity: net wells turned-in-line rose 34% QoQ to 11.1; line-of-sight wells increased 8% QoQ to 48.6, and inventory was raised by 40 net locations based on 2024 drilling .
  • Return of capital totaled $0.50/share (cash dividend $0.35 and $0.15 via buybacks), and buyback authorization was extended by $300M, bringing total authorization to $500M and remaining capacity to ~$350M .
  • Guidance: FY25 estimated cash taxes lowered by $5M at midpoint to $21.5–$24.5M due to lower anticipated commodity prices; production, oil mix, and Cash G&A ranges maintained .
  • CEO emphasized minerals/royalties resilience (no obligatory capex, no operating costs), noting LTM Adjusted EBITDA margin of 90% and advantaged free cash flow profile as catalysts for shareholder returns and buybacks .

What Went Well and What Went Wrong

What Went Well

  • Production outperformed: Q1 production of 42.1 MBoe/d and 18.9 MBbls/d oil exceeded full-year guidance midpoints; net wells TIL up 34% QoQ and LOS wells up 8% QoQ, evidencing strong operator activity .
  • Capital returns and authorization expansion: $0.50/share total capital return and $300M additional buyback authorization (total $500M; remaining ~$350M), signaling confidence in intrinsic value amid market dislocation .
  • Strategic positioning: CEO highlighted 90% LTM Adjusted EBITDA margin and “no direct tariff exposure,” reinforcing durability of cash flows and the merits of minerals/royalties as a hedge to inflation and a high-margin asset class (“our conviction…has never been stronger”) .

What Went Wrong

  • Pricing headwind YoY: combined unhedged realized price per BOE fell to $41.75 in Q1 2025 from $46.00 in Q1 2024, reflecting commodity price pressure despite volume growth .
  • Higher G&A YoY: GAAP G&A rose to $15.8M vs. $13.0M in Q1 2024 (partly offset by lower Cash G&A per BOE), and interest expense increased to $23.3M vs. $18.5M YoY .
  • Operating cash flow declined YoY: net cash provided by operating activities was $103.5M vs. $120.7M in Q1 2024, partly due to deferred tax benefit run-off and working capital movements .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$149.4 N/A$163.5
Net Income ($USD Millions)$27.9 $19.3 $26.3
Diluted EPS (Class A, $USD)$0.15 N/A$0.13
Adjusted EBITDA ($USD Millions)$135.4 $141.2 $142.2
Combined Realized Price ($/BOE, Unhedged)$41.65 $39.82 $41.75
Production Taxes (% of Royalty Revenue)6.9% 7.5% 8.2%

Segment/Area Production (Boe/d) and Mix

BasinQ3 2024 Boe/dQ3 Oil %Q4 2024 Boe/dQ4 Oil %Q1 2025 Boe/dQ1 Oil %
Delaware20,167 50% 20,570 47% 23,772 44%
Midland8,446 57% 8,353 52% 8,132 50%
DJ5,648 37% 6,619 42% 6,126 39%
Eagle Ford3,386 54% 4,540 47% 3,433 48%
Williston/Other938 45% 792 54% 673 58%
Total38,585 50% 40,874 47% 42,136 45%

Key Operating KPIs

KPIQ3 2024Q4 2024Q1 2025
Net Wells Turned-in-Line7.7 8.3 11.1
Net LOS Wells (Total)48.9 44.9 48.6
Inventory Add (Net Locations)——+40 (10% QoQ)
Acquisitions Closed ($USD Millions)Five deals; details not aggregated ~$140 (late 2024) $20.6 (DJ & Midland; ~1,350 NRAs)
Share Repurchases$29.0M in Q3; 1.4M shares $118.1M FY; 0.6M shares in Q4 $22.3M; 1.1M shares
Dividend per Share$0.28 (Q3) $0.41 (Q4) $0.35 (Q1)

Vs. Wall Street Estimates (SPGI)

  • S&P Global consensus detail unavailable; management stated Q1 results beat consensus from “production down to net income” .
  • Note: SPGI estimates could not be retrieved due to mapping unavailability; will update when accessible.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Estimated Cash Taxes ($USD Millions)FY 2025$26.0–$30.0 $21.5–$24.5 Lowered ($5M midpoint)
Average Daily Production (Boe/d)FY 202538,250–41,250 38,250–41,250 Maintained
Average Daily Oil (Bbls/d)FY 202517,750–19,250 17,750–19,250 Maintained
Cash G&A ($USD Millions)FY 2025$36.5–$39.5 $36.5–$39.5 Maintained
Production Taxes (% of royalty revenue)FY 20257.0%–9.0% 7.0%–9.0% Maintained
Dividend per ShareQ1 2025N/A$0.35 (payable May 30, 2025) Declared
Share Repurchase AuthorizationOngoing$200M program with $81.9M remaining at 12/31/24 +$300M added on May 7 (total $500M; remaining ~ $350M) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Minerals/Royalties Margin & ResilienceHigh-margin model; cash costs down; robust operator activity LTM Adjusted EBITDA margin ~90%; no obligatory capex/operating costs; inflation hedge Reinforced resilience
Operator Activity & LOS WellsLOS up 11% QoQ; strong Permian/DJ LOS up 8% QoQ to 48.6; net TIL +34% QoQ Activity strengthening
Inventory AdditionsNot highlighted+40 net locations (Lower Wolfcamp, Upper Bone Spring) Positive surprise
Capital Returns & Buybacks$0.47/share in Q3; $0.49 in Q4; $94.8M remaining authorization $0.50/share in Q1; +$300M authorization; aggressive buyback grid at lower prices More aggressive
Macro/Commodity Prices & TariffsRealized prices recovered QoQ in Q3; derivative support Lower anticipated prices → reduced cash tax guidance; no direct tariff exposure Price headwind; guidance adjusted
Balance Sheet & LiquidityLT debt cut by ~$56.5M in Q3; liquidity $455.5M $1.1B debt; liquidity $440.5M; rev. facility availability $438.8M Stable leverage
Guidance PhilosophyFY24 guidance raised (Nov 6) Will revisit FY25 guidance after Q2 as more operator data arrives Cautious, data-driven

Management Commentary

  • CEO on asset class advantages: “With no obligatory capex, no operating costs and LTM Adjusted EBITDA margin of 90%, our cash flow is remarkably resilient… we have no direct tariff exposure and our diversified portfolio of perpetual real assets offers owners an attractive hedge to inflation.”
  • CEO on buybacks: “Our Board has authorized an additional $300 million of share buybacks and we will continue to take advantage of the current dislocation.”
  • CFO on Q1 results and capital return: “Adjusted EBITDA was $142 million… net income of $26 million… our Board declared a first quarter cash dividend of $0.35 per share… we repurchased 1.1 million shares… total return of capital of $0.50 per share.”
  • CEO on inventory: “We have increased our inventory estimate by 40 additional net normalized locations… a 10% quarter-over-quarter increase… not underwritten when we acquired these assets.”

Q&A Highlights

  • Production trajectory: With wells spud underpinning 2025 volumes, management “feels relatively good” about near-term production barring severe price declines or completion curtailments .
  • Buyback vs. M&A: Management sees a “tremendous opportunity” in the stock, emphasizing a steep buyback grid to purchase more at lower prices while remaining active in M&A with improved underwriting visibility vs. 2020 .
  • Geologic headwinds/productivity: Forecasts are based on achieved results and current horizons; not baking in future efficiency improvements, supporting confidence in forward projections .
  • Guidance stance: Despite Q1 beat vs guidance and consensus, management will revisit FY25 guidance after Q2 when more operator data is available (spuds, permits, TILs) .
  • Inventory detail: +40 net locations split between Midland (Lower Wolfcamp/Wolfcamp B) and Northern Delaware (Bone Spring), under Exxon, Diamondback, Oxy, Permian Resources, Conoco, Devon, Uber .

Estimates Context

  • S&P Global consensus detail was unavailable due to data mapping constraints; management stated Q1 results beat consensus from production to net income .
  • Potential estimate revisions:
    • Production trajectory likely to be revisited post-Q2 given Q1 outperformance vs guidance midpoints and stronger operator activity .
    • FY25 cash tax estimates should be reduced to the new $21.5–$24.5M range at lower anticipated commodity prices .

Key Takeaways for Investors

  • Q1 operational strength and production beat guidance midpoints; momentum supported by increased net wells TIL and LOS wells .
  • Durable free cash flow profile (90% LTM Adjusted EBITDA margin) with no capex/operating costs underpins robust capital return and opportunistic buybacks .
  • Authorization raised by $300M (total $500M); steep buyback grid implies heavier repurchases at lower prices, providing downside support .
  • FY25 estimated cash taxes lowered ($21.5–$24.5M), reflecting commodity price headwinds; production/oil mix/Cash G&A guidance maintained pending Q2 data .
  • Inventory add (+40 net locations) in Midland/Delaware increases development visibility and future production potential without incremental underwriting risk .
  • Basin diversification and top-tier operators reduce volatility in pace of development; management expects to reassess guidance after Q2 as operator strategies clarify .
  • Near-term trading: buyback expansion and Q1 beat vs guidance/consensus are positive catalysts; watch commodity price trajectory and Q2 operator activity disclosures for guidance updates .