Executive Summary

Q2 2025 was operationally steady but financially softer: total revenue was $145.659M, net income $14.548M, diluted EPS $0.08, and Adjusted EBITDA $125.419M; realized oil price fell to $63.03/bbl from $70.39 in Q1, compressing margins sequentially .
Sitio returned $0.42 per share in Q2 (dividend $0.36 plus $0.06 via buybacks), repurchasing ~0.5M shares; cumulative capital returned since 2022 exceeded $980M .
Management discontinued guidance and cancelled the investor call due to the pending all-stock sale to Viper Energy; the merger is expected to close in Q3 2025, a key stock catalyst near term .
Operational activity stayed resilient: 8.7 net wells turned-in-line; line-of-sight wells ended at 48.1, with Permian basins (Delaware/Midland) driving volumes; total Q2 production averaged 41.9 Mboe/d (46% oil) .

What Went Well and What Went Wrong

What Went Well

Cash returns and buybacks remained disciplined: $0.42/share in Q2, including $0.36 dividend and $8.9M buybacks (~0.5M shares at $16.30/share) .
Operational visibility: LOS wells totaled 48.1 (27.6 net spuds; 20.5 net permits) and 8.7 net wells turned-in-line, reinforcing near-term production confidence .
Management reiterated minerals model resiliency and superior margins in prior calls: “LTM adjusted EBITDA margins were 90%” and free cash flow margins per unit “more than 3x” E&P peers, highlighting defensiveness amid price volatility .

What Went Wrong

Sequential financial softness: Q2 revenue ($145.659M) and EPS ($0.08) declined versus Q1 ($163.515M, $0.13), driven mainly by lower realized oil prices ($63.03/bbl vs $70.39/bbl) .
Year-over-year compression: total revenues fell versus Q2 2024 ($168.548M → $145.659M) and net income contracted ($29.041M → $14.548M) as realized combined pricing per boe dropped ($46.36 → $36.95) .
Guidance visibility removed: due to the Viper transaction, STR withdrew forward guidance and did not host a Q2 call, limiting near-term estimate anchors and public commentary .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenues ($USD Millions)	$168.548	$163.515	$145.659
Net Income ($USD Millions)	$29.041	$26.285	$14.548
Diluted EPS ($USD)	$0.15	$0.13	$0.08
Adjusted EBITDA ($USD Millions)	$151.733	$142.176	$125.419
Adjusted EBITDA Margin (%)	90.0%	87.0%	86.1%
Net Income Margin (%)	17.2%	16.1%	10.0%

Notes: Adjusted EBITDA margin and Net Income margin are derived from reported Adjusted EBITDA and Revenues, and Net Income and Revenues, respectively (citations indicate source figures).

Realized commodity prices and production

Metric	Q2 2024	Q1 2025	Q2 2025
Avg daily production (boe/d)	39,231	42,136	41,879
Oil production (MBbls)	1,797	1,698	1,758
Natural gas (MMcf)	5,892	7,082	7,004
NGLs (MBbls)	791	914	885
Realized oil price ($/bbl, unhedged)	$79.85	$70.39	$63.03
Realized gas price ($/Mcf, unhedged)	$1.01	$2.30	$1.43
Realized NGL price ($/bbl, unhedged)	$20.32	$24.57	$22.57
Combined realized price ($/boe, unhedged)	$46.36	$41.75	$36.95

Segment breakdown (production by basin, boe/d)

Basin	Q4 2024	Q1 2025	Q2 2025
Delaware	20,570	23,772	23,789
Midland	8,353	8,132	8,072
DJ	6,619	6,126	5,982
Eagle Ford	4,540	3,433	3,208
Williston/Other	792	673	828
Total	40,874	42,136	41,879

KPIs and capital returns

KPI	Q1 2025	Q2 2025
Net wells turned-in-line (net)	11.1	8.7
LOS wells (net total)	48.6	48.1
Acquisitions closed ($USD Millions)	$20.6; +1,350 NRAs	$6.0; +430 NRAs
Dividend per share	$0.35 (payable May 30, 2025)	$0.36 (payable Aug 19, 2025)
Buybacks	$22.3M (~1.1M shares; $0.15/share equivalent)	$8.9M (~0.5M shares; $0.06/share equivalent)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Average daily production (boe/d)	FY 2025	38,250–41,250	Guidance discontinued due to pending merger	Withdrawn
Average daily oil (bbl/d)	FY 2025	17,750–19,250	Guidance discontinued	Withdrawn
Cash G&A ($M)	FY 2025	$36.5–$39.5	Guidance discontinued	Withdrawn
Production taxes (% of royalty revenue)	FY 2025	7.0%–9.0%	Guidance discontinued	Withdrawn
Estimated cash taxes ($M)	FY 2025	$26–$30 (Feb)	Updated to $21.5–$24.5 (May)	Lowered; then Withdrawn

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
AI/technology in asset management	Proprietary automation captured $19M missing payments; scaling lowers cash G&A	Emphasized lean cost structure; 90% LTM Adjusted EBITDA margins	No call; operational data only	Positive, but muted disclosure in Q2
Minerals model resiliency	Return of capital >$840M since 2022; strong margins	Minerals offer multi-decade, high-margin optionality; inflation hedge; no tariffs	Realized prices down; model intact; continued capital return	Resilient despite price softness
Operator activity & LOS	LOS wells ~45; activity underpinning 2025 outlook	LOS wells up 8% q/q to 48.6; strong TILs	LOS wells 48.1; 8.7 net TILs	Stable-high
Natural gas trends	Mix shift; oil %, volumes; basis vigilance	Permian oil % trending lower; midstream expansions (e.g., Blackstone/Warrior) supportive	Gas realized price fell q/q ($2.30→$1.43/Mcf)	Mixed near term; constructive medium term
Capital returns	Q4: $0.49/share; buybacks ongoing	Q1: $0.50/share; buyback authorization +$300M	Q2: $0.42/share; repurchases continued	Consistent
Guidance posture	2025 guide issued Feb	Cash tax guide lowered $5M at midpoint	Guidance discontinued due to merger; no call	Withdrawn

Management Commentary

“LTM adjusted EBITDA margins were 90%… 2025 free cash flow margins on a per unit of production basis are more than 3x that of the average E&P peer.” — CEO Chris Conoscenti, Q1 call prepared remarks .
“We continue to generate significant free cash flow to support our dividend, opportunistic share buybacks, debt paydown and accretive acquisitions.” — Q1 earnings release highlights .
“Our balanced capital structure… helped ensure financial flexibility, ample liquidity and access to future capital at attractive rates.” — Q4 call prepared remarks .
Q2 release highlighted: no conference call and discontinuation of guidance given pending Viper merger .

Q&A Highlights

Production trajectory: Near-term volumes underpinned by existing producing and spud wells; management has not seen completions deferred for spud wells in current environment .
Buybacks vs M&A: Steeper buyback grid at lower share prices; remaining authorization ~$350M; M&A remains active with improved underwriting visibility vs 2020 cycle .
Natural gas and inventory: Added 40 net normalized locations (50/50 Delaware/Midland) from Lower Wolfcamp and Bone Spring delineation; mineral ownership optionality supports long-term value .
Operator strategies: Mixed approaches (some cutting CapEx but maintaining production or increasing wells online); minerals viewed as multi-decade call on hydrocarbons .
Guidance cadence: Q1 production above guide; management historically revisits after Q2, but subsequently removed guidance amid merger .

Estimates Context

S&P Global consensus estimates were unavailable via our system for STR due to a mapping issue; as a result, vs-estimate comparisons for Q2 2025 cannot be provided. If desired, we can update once the SPGI mapping is resolved (consensus fields would carry the “Values retrieved from S&P Global” disclaimer).
Management noted Q1 2025 results beat consensus “from production down to net income,” implying prior-quarter estimate alignment was favorable; no similar statement was issued for Q2 given the absence of a call and guidance withdrawal .

Key Takeaways for Investors

Near-term: Expect muted disclosure and limited guidance until the Viper transaction closes; focus on the merger timeline as the primary stock catalyst in Q3 2025 .
Operations: LOS inventory and steady TILs support stable production into H2; activity concentrated in Delaware/Midland supports margin quality .
Financials: Sequential revenue/EPS decline was largely price-driven; with combined realized price/boe down, Adjusted EBITDA margin remained high but compressed vs Q2 2024 .
Capital return: Dividend and buybacks remain central; Q2 returned $0.42/share with continued repurchases, signaling ongoing capital allocation discipline despite softer pricing .
Strategy: Minerals model’s high-margin, non-cost-bearing nature and diversified operator base continue to differentiate STR’s cash generation profile across commodity cycles .
Medium term: Natural gas macro (power demand/data centers) and ongoing Permian development provide optionality; midstream expansions help mitigate basis risks .
Post-merger lens: If/when the Viper deal closes, reassess forward metrics, dividend/buyback framework, and combined LOS/inventory to recalibrate the thesis under the new capital structure .

Sitio Royalties Corp. (STR)·Q2 2025 Earnings Summary