Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 03, 2022 | |
Document Information [Line Items] | ||
Entity Registrant Name | Sitio Royalties Corp. | |
Entity Central Index Key | 0001703785 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2022 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity File Number | 001-38158 | |
Entity Tax Identification Number | 82-0820780 | |
Entity Address, Address Line One | 1401 Lawrence Street | |
Entity Address, Address Line Two | Suite 1750 | |
Entity Address, City or Town | Denver | |
Entity Address, State or Province | DE | |
Entity Address, Postal Zip Code | 80202 | |
City Area Code | 720 | |
Local Phone Number | 640-7620 | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | CO | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Class A common stock [Member] | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Class A common stock, par value $0.0001 per share | |
Trading Symbol | STR | |
Security Exchange Name | NYSE | |
Entity Common Stock Shares Outstanding | 12,706,082 | |
Warrants [Member] | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Warrants to purchase Class A common stock | |
Trading Symbol | STR WS | |
Security Exchange Name | NYSEAMER | |
Class C common stock [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock Shares Outstanding | 71,134,752 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 10,812 | $ 12,379 |
Accrued revenue and accounts receivable, net | 83,514 | 36,202 |
Prepaid assets | 1,297 | 235 |
Derivative asset | 22,531 | |
Total current assets | 118,154 | 48,816 |
Oil and natural gas properties, successful efforts method: | ||
Unproved properties | 1,473,142 | 817,873 |
Proved properties | 1,042,257 | 447,369 |
Other property and equipment | 3,201 | 8,187 |
Accumulated depreciation, depletion and amortization | (186,004) | (121,536) |
Net oil and gas properties and other property and equipment | 2,332,596 | 1,151,893 |
Other long-term assets | ||
Long-term derivative asset | 28,888 | |
Deferred financing costs | 6,131 | 2,145 |
Other long-term assets | 648 | |
Total long-term assets | 35,667 | 2,145 |
TOTAL ASSETS | 2,486,417 | 1,202,854 |
Current liabilities | ||
Accounts payable and accrued expenses | 15,877 | 4,140 |
Due to affiliates | 442 | |
Warrant liability | 2,770 | |
Derivative liability | 150 | |
Total current liabilities | 18,797 | 4,582 |
Long-term liabilities | ||
Long-term debt | 666,834 | 134,000 |
Deferred tax liability | 4,782 | |
Deferred rent | 1,138 | 1,129 |
Total long-term liabilities | 672,754 | 135,129 |
Total liabilities | 691,551 | 139,711 |
Commitments and contingencies (see Note 15) | ||
Temporary equity | 1,573,201 | |
Equity | ||
Additional paid-in capital | 221,819 | |
Accumulated deficit | (162) | |
Partners' capital | 560,622 | |
Noncontrolling interests | 502,521 | |
Total equity | 221,665 | 1,063,143 |
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY | 2,486,417 | $ 1,202,854 |
Class A common stock [Member] | ||
Equity | ||
Common stock, value | 1 | |
Class C common stock [Member] | ||
Equity | ||
Common stock, value | $ 7 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Accumulated amortization | $ 184,989 | $ 118,175 |
Common stock, shares outstanding | 71,134,752 | |
Class A common stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 240,000,000 | 240,000,000 |
Common stock, shares issued | 12,706,082 | 0 |
Common stock, shares outstanding | 12,706,082 | 0 |
Class C common stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 120,000,000 | 120,000,000 |
Common stock, shares issued | 71,134,752 | 0 |
Common stock, shares outstanding | 71,134,752 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues: | ||||
Oil, natural gas and natural gas liquids revenues | $ 108,761 | $ 33,152 | $ 260,219 | $ 69,221 |
Lease bonus and other income | 6,736 | 557 | 9,445 | 1,207 |
Total revenue | 115,497 | 33,709 | 269,664 | 70,428 |
Operating expenses: | ||||
Management fees to affiliates | 1,870 | 3,241 | 5,610 | |
Depreciation, depletion and amortization | 32,005 | 12,813 | 67,302 | 28,614 |
General and administrative | 13,381 | 954 | 24,043 | 2,232 |
General and administrative - affiliates | 1,686 | 74 | 4,903 | |
Severance and ad valorem taxes | 7,215 | 2,192 | 18,019 | 4,766 |
Total operating expenses | 52,601 | 19,515 | 112,679 | 46,125 |
Net income from operations | 62,896 | 14,194 | 156,985 | 24,303 |
Other income (expense): | ||||
Interest expense, net | (14,986) | (276) | (18,096) | (800) |
Change in fair value of warrant liability | 536 | 3,842 | ||
Loss on extinguishment of debt | (11,487) | (11,487) | ||
Commodity derivatives gains | 34,613 | 53,508 | ||
Income before income tax expense | 71,572 | 13,918 | 184,752 | 23,503 |
Income tax expense | (2,561) | (143) | (5,206) | (233) |
Net income | 69,011 | 13,775 | 179,546 | 23,270 |
Net income attributable to Predecessor | $ (13,775) | (78,104) | $ (23,270) | |
Net income attributable to temporary equity | (59,872) | (86,143) | ||
Net income attributable to Class A stockholders | $ 9,139 | $ 15,299 | ||
Net income per Class A common share | ||||
Basic | $ 0.70 | $ 1.19 | ||
Diluted | $ 0.70 | $ 1.19 | ||
Weighted average Class A common shares outstanding | ||||
Basic | 12,703 | 12,665 | ||
Diluted | 12,703 | 12,665 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | |||
Net income including noncontrolling interests and temporary equity | $ 69,011 | $ 179,546 | $ 23,270 |
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities: | |||
Depreciation, depletion and amortization | 67,302 | 28,614 | |
Amortization and write off of deferred financing costs and long-term debt discount | 5,419 | 247 | |
Share-based compensation | 4,947 | ||
Change in fair value of warrant liability | (536) | (3,842) | |
Loss on extinguishment of debt | 11,487 | 11,487 | |
Commodity derivative gains | (34,613) | (53,508) | |
Net cash received for derivative settlements | 2,239 | ||
Deferred tax expense | 2,645 | ||
Change in operating assets and liabilities: | |||
Accrued revenue and accounts receivable, net | (29,785) | (13,606) | |
Other prepaid assets | (1,903) | (187) | |
Other long-term assets | (115) | ||
Accrued expenses and other liabilities | (12,986) | 451 | |
Due to affiliates | (380) | 1,810 | |
Other long-term liabilities | 9 | (36) | |
Net cash provided by operating activities | 171,075 | 40,563 | |
Cash flows from investing activities: | |||
Acquisition of Falcon, net of cash | (4,484) | ||
Predecessor cash not contributed in the Falcon Merger | (15,229) | ||
Purchases of oil and gas properties | (558,062) | (26,834) | |
Proceeds from sales of oil and gas properties | (103) | ||
Purchases of other property and equipment | (819) | ||
Net cash used in investing activities | (569,626) | (26,937) | |
Cash flows from financing activities: | |||
Borrowings on Revolving Credit Facility | 196,895 | 20,000 | |
Repayments on Revolving Credit Facility | (147,000) | (41,600) | |
Borrowings on Bridge Loan Facility | 425,000 | ||
Repayments on bridge loan facility | (425,000) | ||
Bridge loan facility issuance costs | (14,909) | ||
Borrowings on 2026 Senior Note | 444,500 | ||
2026 Senior Notes issuance costs | (4,169) | ||
Issuance of equity in consolidated subsidiary | 1,467 | ||
Capital contributions | 8,000 | ||
Distributions to non-controlling interests | (13,318) | ||
Dividends paid to Class A stockholders | (9,017) | ||
Distribution paid to Temporary Equity | (50,510) | ||
Dividend equivalent rights paid | (283) | ||
Payments of deferred financing costs | (3,964) | (195) | |
Deferred initial public offering costs | (61) | (179) | |
Other | (1,180) | ||
Net cash provided by (used) in financing activities | 396,984 | (12,507) | |
Net change in cash and cash equivalents | (1,567) | 1,119 | |
Cash and cash equivalents, beginning of year | 12,379 | 7,531 | |
Cash and cash equivalents, end of period | 10,812 | 10,812 | 8,650 |
Supplemental disclosure of non-cash transactions: | |||
Increase (decrease) in current liabilities for additions to property and equipment: | (163) | 909 | |
Oil and gas properties acquired through issuance of Class C Common Stock in consolidated subsidiary: | 692,197 | ||
Oil and gas properties acquired through issuance of equity in consolidated subsidiary: | 571,166 | ||
Oil and gas properties acquired through deemed distribution in connection with common control transaction: | 37,459 | ||
Temporary equity cumulative adjustment to redemption value: | $ (101,282) | 153,086 | |
Supplemental disclosure of cash flow information: | |||
Cash paid for income taxes: | 1,866 | 32 | |
Cash paid for interest expense: | $ 13,389 | $ 634 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Equity - USD ($) shares in Thousands | Total | General Partner and Limited Partner [Member] | Non-controlling interests | Common Stock Class A common stock [Member] | Common Stock Class C common stock [Member] | Additional Paid In Capital | Accumulated Deficit [Member] |
Balance at Dec. 31, 2020 | $ 562,397,000 | $ 562,397,000 | |||||
Net income | 4,476,000 | 4,476,000 | |||||
Balance at Mar. 31, 2021 | 566,873,000 | 566,873,000 | |||||
Balance at Dec. 31, 2020 | 562,397,000 | 562,397,000 | |||||
Dividend equivalent rights paid | 0 | ||||||
Net income | 23,270,000 | ||||||
Net income attributable to Predecessor | 23,270,000 | ||||||
Balance at Sep. 30, 2021 | 1,166,299,000 | 615,828,000 | $ 550,471,000 | ||||
Balance at Mar. 31, 2021 | 566,873,000 | 566,873,000 | |||||
Issuance of equity by consolidated subsidiary | 320,690,000 | 59,237,000 | 261,453,000 | ||||
Excess of consideration paid over the carrying value of oil and gas properties purchased from entity under common control | (37,459,000) | 37,459,000 | |||||
Net income | 5,019,000 | 4,991,000 | 28,000 | ||||
Balance at Jun. 30, 2021 | 892,582,000 | 593,642,000 | 298,940,000 | ||||
Dividend equivalent rights paid | 0 | ||||||
Capital contributions | 8,000,000 | 8,000,000 | |||||
Issuance of equity by consolidated subsidiary | 251,942,000 | 6,625,000 | 245,317,000 | ||||
Net income | 13,775,000 | 7,561,000 | 6,214,000 | ||||
Net income attributable to Predecessor | 13,775,000 | ||||||
Balance at Sep. 30, 2021 | 1,166,299,000 | 615,828,000 | 550,471,000 | ||||
Balance at Dec. 31, 2021 | 1,063,143,000 | 560,622,000 | 502,521,000 | ||||
Net income | 38,522,000 | 19,280,000 | 19,242,000 | ||||
Balance at Mar. 31, 2022 | 1,101,665,000 | 579,902,000 | 521,763,000 | ||||
Balance at Dec. 31, 2021 | 1,063,143,000 | 560,622,000 | 502,521,000 | ||||
Deferred tax assset arising from conversion of shares of Class C Common Stock to Class A Common Stock | 462,000 | $ 462,000 | |||||
Balance at Jun. 30, 2022 | 116,558,000 | $ 1,000 | $ 7,000 | 116,550,000 | |||
Balance, shares at Jun. 30, 2022 | 12,701 | 71,140 | |||||
Balance at Dec. 31, 2021 | 1,063,143,000 | 560,622,000 | 502,521,000 | ||||
Dividend equivalent rights paid | (284,000) | ||||||
Net income | 179,546,000 | ||||||
Net income attributable to Predecessor | 78,104,000 | ||||||
Net income attributable to stockholders | 15,299,000 | ||||||
Adjustment of temporary equity to redemption amount | (153,086,000) | ||||||
Balance at Sep. 30, 2022 | 221,665,000 | $ 1,000 | $ 7,000 | 221,819,000 | $ (162,000) | ||
Balance, shares at Sep. 30, 2022 | 12,706 | 71,135 | |||||
Balance at Mar. 31, 2022 | 1,101,665,000 | 579,902,000 | 521,763,000 | ||||
Capital distribution | (13,318,000) | (13,318,000) | |||||
Net income attributable to Predecessor | 39,582,000 | 20,213,000 | 19,369,000 | ||||
Balance at Jun. 06, 2022 | 1,127,929,000 | 600,115,000 | 527,814,000 | ||||
Falcon Merger Transaction (effected for 1-for-4 reverse stock split) | (775,902,000) | $ (600,115,000) | $ (527,814,000) | $ 1,000 | $ 7,000 | 352,019,000 | |
Falcon Merger Transaction (effected for 1-for-4 reverse stock split). shares | 12,089 | 71,752 | |||||
Stock-based compensation | 830,000 | 830,000 | |||||
Conversion of Class C Common Stock to Class A Common Stock | 11,909,000 | 11,909,000 | |||||
Conversion of Class C Common Stock to Class A Common Stock, shares | 612 | (612) | |||||
Net income attributable to stockholders | 6,160,000 | 6,160,000 | |||||
Adjustment of temporary equity to redemption amount | (254,368,000) | (248,208,000) | (6,160,000) | ||||
Balance at Jun. 30, 2022 | 116,558,000 | $ 1,000 | $ 7,000 | 116,550,000 | |||
Balance, shares at Jun. 30, 2022 | 12,701 | 71,140 | |||||
Stock-based compensation | 3,401,000 | 3,401,000 | |||||
Conversion of Class C Common Stock to Class A Common Stock | 124,000 | 124,000 | |||||
Conversion of Class C Common Stock to Class A Common Stock, shares | 5 | (5) | |||||
Dividend equivalent rights paid | (284,000) | (284,000) | |||||
Net income | 69,011,000 | ||||||
Net income attributable to stockholders | 9,139,000 | 9,139,000 | |||||
Dividends to Class A stockholders | (9,017,000) | (9,017,000) | |||||
Adjustment of temporary equity to redemption amount | 101,282,000 | 101,282,000 | |||||
Balance at Sep. 30, 2022 | $ 221,665,000 | $ 1,000 | $ 7,000 | $ 221,819,000 | $ (162,000) | ||
Balance, shares at Sep. 30, 2022 | 12,706 | 71,135 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Equity (Parenthetical) | 3 Months Ended |
Sep. 30, 2022 $ / shares | |
Class A common stock [Member] | |
Dividends amount per share | $ 0.71 |
Description of Business and Bas
Description of Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Basis of Presentation | 1. Description of Business and Basis of Presentation Description of Business Sitio Royalties Corp. (together with its wholly owned subsidiaries, the “Company” or “Sitio”) was incorporated in Delaware. The Company is focused on large-scale consolidation of high-quality oil and gas mineral and royalty interests across premium basins. The Company’s portfolio is comprised of mineral and royalty interests in the Permian Basin in West Texas and southeastern New Mexico, the Eagle Ford Shale in South Texas, and the Appalachian Basin in Pennsylvania, Ohio and West Virginia. Falcon Reverse Merger Transaction On June 7, 2022 (the “Closing Date”), the Company, consummated the previously announced merger transactions contemplated by the Agreement and Plan of Merger, dated as of January 11, 2022 (the “Falcon Reverse Merger Agreement”), by and among the Company, Sitio Royalties Operating Partnership, LP, a Delaware limited partnership (formerly known as Falcon Minerals Operating Partnership, LP) (“Sitio OpCo”), Ferrari Merger Sub A LLC, a Delaware limited liability company (“Falcon Merger Sub”), and DPM HoldCo, LLC, a Delaware limited liability company (“Desert Peak”), pursuant to which Falcon Merger Sub merged with and into Desert Peak (the “Falcon Merger”), with Desert Peak continuing as the surviving entity in the Falcon Merger as a wholly owned subsidiary of Sitio OpCo. Prior to the effective time of the Falcon Merger (the “Falcon Merger Effective Time”), on June 3, 2022, the Company filed with the Secretary of State of the State of Delaware the Third Amended and Restated Certificate of Incorporation to effect the previously announced four-to- one reverse stock split (the “Reverse Stock Split”) for all of the Company’s issued and outstanding shares of common stock and outstanding equity awards. As a result of the Reverse Stock Split, every four shares of the Company’s issued and outstanding Class C Common Stock, par value $0.0001 per share (“Class C Common Stock”), were automatically converted into one share of Class C Common Stock, without any change in the par value per share , and every four shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock” and, together with the Class C Common Stock, the “Common Stock”) were automatically converted into one share of Class A Common Stock, without any change in the par value per share. No fractional shares were outstanding following the Reverse Stock Split. In lieu of any fractional share, any holder of Class C Common Stock who would have otherwise received less than one share of Class C Common Stock received cash equal to the fair value of such holder’s fractional share as determined by the Board. In lieu of any fractional share of Class A Common Stock, the transfer agent for the Class A Common Stock, as exchange agent, aggregated and sold all fractional interests and paid to stockholders that would have been entitled to such fractional shares their pro rata share of the net proceeds derived from the sale of such fractional interests. Additionally, as a result of the Reverse Stock Split, the Company’s outstanding warrants (the “Warrants”) were adjusted such that four whole Warrants became exercisable for one share of Class A Common Stock at an exercise price of $ 44.84 per share of Class A Common Stock. Pursuant to the terms of the Falcon Reverse Merger Agreement, at the Falcon Merger Effective Time and following effectiveness of the Reverse Stock Split, the limited liability company interests in Desert Peak issued and outstanding immediately prior to the Falcon Merger Effective Time were converted into the right to receive an aggregate of (a) 61,905,339 shares of Class C Common Stock and (b) 61,905,339 common units representing limited partner interests in Sitio OpCo (the “Sitio OpCo Partnership Units”) (the total amount under clauses (a) and (b), the “Falcon Merger Consideration”). The Company’s stockholders immediately prior to the closing of the Falcon Merger continued to hold their shares of Class A Common Stock immediately after the closing of the Falcon Merger, subject to the Reverse Stock Split. As a result of the Falcon Merger, immediately following the Closing, (a) Chambers DPM HoldCo, LLC, a Delaware limited liability company (“Chambers”), and KMF DPM HoldCo, LLC, a Delaware limited liability company (“KMF” and, together with Chambers, “Kimmeridge”), together own approximately 43.5 % of the issued and outstanding Common Stock, (b) Source Energy Leasehold, LP, a Delaware limited partnership (“Source”), and Permian Mineral Acquisitions, LP, a Delaware limited partnership (“Permian” and, together with Source, the “Source Stockholders”), together own approximately 15.4 % of the issued and outstanding Common Stock, (c) Rock Ridge Royalty Company, LLC, a Delaware limited liability company (“Rock Ridge”), and Royal Resources L.P., a Delaware limited partnership (“Royal Resources” and, together with Rock Ridge, “Blackstone”), together own approximately 25.0 % of the issued and outstanding Common Stock and (d) the Company’s remaining stockholders own approximately 16.1 % of the issued and outstanding Common Stock. Following the Falcon Merger and the Reverse Stock Split, there were 12,088,546 shares of Class A Common Stock outstanding, 71,752,285 shares of Class C Common Stock outstanding and 5,312,499 shares of Class A Common Stock issuable upon exercise of outstanding Warrants. There was no change to the number of authorized shares of Common Stock. Shortly prior to the Closing Date, the Company changed its name from “Falcon Minerals Corporation” to “Sitio Royalties Corp.” Basis of Presentation These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information. These unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, the accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the years ended December 31, 2021, 2020, and 2019 of the Predecessor included in the Current Report on Form 8-K filed with the SEC on June 10, 2022. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of September 30, 2022 and December 31, 2021, its results of operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2022. The company operates in one segment: oil and gas mineral and royalty interests. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is equal to its comprehensive income or loss. Certain prior period amounts have been reclassified to conform to the current period presentation. Prior to the closing of the Falcon Merger, the Company’s financial statements that were filed with the SEC were derived from the accounting records of Falcon Minerals Corporation. The Falcon Merger was accounted for as a reverse merger and a business combination for accounting purposes using the acquisition method of accounting with Desert Peak as the accounting acquirer. As such, the historical consolidated financial statements included in this report are based on the financial statements of Desert Peak’s predecessor, Kimmeridge Mineral Fund, LP (“KMF” or the “Predecessor”), prior to our corporate reorganization. Prior the Falcon Merger, Desert Peak was consolidated into the results of KMF. KMF’s surface rights, which generate revenue from the sale of water, payments for rights-of-way and other rights associated with the ownership of the surface acreage, are included in our historical financial statements. The assets contributed by KMF in the Falcon Merger did not include KMF’s surface rights. See “Note 6 – Acquisitions” for additional information. The condensed consolidated financial statements included in this report reflect the historical operating results of KMF prior to June 7, 2022 and the consolidated results of the Company following June 7, 2022. The balance sheet reflects the assets and liabilities of the Company, which include the assets and liabilities of KMF Land, LLC (a subsidiary of the Predecessor) (“KMF Land”) at their historical costs and the assets and liabilities of Falcon Mineral Corporation measured at fair value as of June 7, 2022. Earnings per share is calculated based on the consolidated results of the Company for the period June 7, 2022 through September 30, 2022. Subsequent to the Falcon Merger, the Company has acquired additional surface rights in connection with multiple acquisitions. The results of each subsequent acquisition are included in the combined company results for the period following the consummation of such acquisition. Except as otherwise indicated or required by the context, all references in this quarterly report to the “Company,” “Sitio,” “we,” “us,” “our” or similar terms refer to (i) for periods prior to the closing of the Falcon Merger, Desert Peak and its subsidiaries and (ii) for periods subsequent to the closing of the Falcon Merger, Sitio Royalties Corp. and its subsidiaries, including Desert Peak. All references in this Quarterly Report on Form 10-Q to “Falcon” refer to Sitio Royalties Corp. and its subsidiaries for periods prior to the Falcon Merger. JOBS Act The Company is an “emerging growth company” (“EGC”) as defined by the JOBS Act. The JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to avail itself of this exemption and, as a result, its financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable. The Company will lose its status as an EGC on December 31, 2022, which is the fiscal year following the fifth anniversary of the date of Falcon’s initial public offering. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries and any entities in which the Company owns a controlling interest. All intercompany accounts and transactions have been eliminated in consolidation. Noncontrolling interests in the Company’s condensed consolidated financial statements represented the ownership interests in a subsidiary of the Predecessor which were owned by outside parties. Noncontrolling interests in consolidated subsidiaries was included as a component of equity in the Company’s condensed consolidated balance sheets. As a result of the Falcon Merger, the Company no longer has noncontrolling interests. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s estimates and classification of oil and natural gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production. Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering, and geological interpretation and judgment. Estimates of economically recoverable oil and natural gas reserves and future net cash flows necessarily depend upon several variable factors and assumptions. These factors and assumptions include historical production from the area compared with production from other producing areas, the assumed effect of regulations by governmental agencies, and assumptions governing future oil and natural gas prices. For these reasons, estimates of the economically recoverable quantities of expected oil and natural gas and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions could materially affect the estimated quantity of reserves, which could affect the carrying value of the Company’s oil and natural gas properties and/or the rate of depletion related to oil and natural gas properties. Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases , which requires all leasing arrangements to be presented on the balance sheet as liabilities along with a corresponding asset. ASU 2016-02 does not apply to leases of mineral rights to explore for or use crude oil and natural gas. The ASU will replace most existing lease guidance in GAAP when it becomes effective. In January 2018, the FASB issued ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842 , to provide an optional practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued ASU 2018-11, Leases: Targeted Improvement s, which provides for another transition method, in addition to the existing transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption (i.e. comparative periods presented in the financial statements will continue to be in accordance with current GAAP (Topic 840, Leases )). The Company will adopt the new standard during the fiscal year ended December 31, 2022. The primary effect of adoption will be to record right-of-use assets and lease liabilities for office leases currently accounted for as operating leases under Topic 840. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses , which amends current impairment guidance by adding an impairment model (known as the current expected credit loss model (“CECL”)) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods. The Company is currently evaluating the impact of adoption of this standard but does not believe it will have a material impact on the Company’s financial statements. Cash and Cash Equivalents The Company considers all highly-liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any significant losses from such investments. Accrued Revenue and Accounts Receivable Accrued revenue and accounts receivable represent amounts due to the Company and are uncollateralized, consisting primarily of royalty revenue receivable. Royalty revenue receivable consists of royalties due from operators for oil, natural gas and NGL volumes sold to purchasers. Those purchasers remit payment for production to the operator of the properties and the operator, in turn, remits payment to the Company. Receivables from third parties for which we did not receive actual production information, either due to timing delays or due to the unavailability of data at the time when revenues are recognized, are estimated. The Company’s accrued revenue and accounts receivable consisted of the following as of the dates indicated (in thousands): September 30, December 31, Accrued revenue $ 82,099 $ 36,177 Accounts receivable 1,415 25 Total accrued revenue and accounts receivable, net $ 83,514 $ 36,202 The Company routinely assesses the recoverability of all material accounts receivable to determine their collectability. The Company accrues a reserve to the allowance for doubtful accounts when it is probable that a receivable will not be collected and the amount of the reserve may be reasonably estimated. As of September 30, 2022, and December 31, 2021 , the Company had no reserves for uncollectible amounts or deemed any amounts to be uncollectible. Oil and Gas Properties The Company uses the successful efforts method of accounting for oil and natural gas producing properties, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas . Under this method, costs to acquire mineral interests in oil and natural gas properties are capitalized. The costs of non-producing mineral interests and associated acquisition costs are capitalized as unproved properties pending the results of leasing efforts and drilling activities of Exploration and Production (“E&P”) operators on our interests. As unproved properties are determined to have proved reserves, the related costs are transferred to proved oil and gas properties. Capitalized costs for proved oil and natural gas mineral interests are depleted on a unit-of-production basis over total proved reserves. For depletion of proved oil and gas properties, interests are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic conditions. Impairment of Oil and Gas Properties The Company evaluates its producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing proved properties for impairment, the Company compares the expected undiscounted future cash flows of the proved properties to the carrying amount of the proved properties to determine recoverability. If the carrying amount of proved properties exceeds the expected undiscounted future cash flows, the carrying amount is written down to the properties’ estimated fair value, which is measured as the present value of the expected future cash flows of such properties. The factors used to determine fair value include estimates of proved reserves, future commodity prices, timing of future production, and a risk-adjusted discount rate. There was no impairment of proved properties for the three and nine months ended September 30, 2022 and 2021. The proved property impairment test is primarily impacted by future commodity prices, changes in estimated reserve quantities, estimates of future production, overall proved property balances, and depletion expense. If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation, we may incur proved property impairments in future periods. Unproved oil and gas properties are assessed periodically for impairment of value, and a loss is recognized at the time of impairment by charging capitalized costs to expense. Impairment is assessed when facts and circumstances indicate that the carrying value may not be recoverable, at which point an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Factors used in the assessment include but are not limited to commodity price outlooks and current and future operator activity in the respective Basins. The Company recognized no impairment of unproved properties for the three and nine months ended September 30, 2022 and 2021 . Other Property and Equipment Other property and equipment, which includes leasehold improvements, is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the useful lives of the assets. The Company recorded approximately $ 156,000 and $ 147,000 in depreciation for other property and equipment for the three months ended September 30, 2022 and 2021, respectively and $ 487,000 and $ 441,000 for the nine months ended September 30, 2022 and 2021, respectively. Additionally, we evaluate our other property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset that has been placed in service may not be recoverable. No impairment charge was recorded for the three and nine months ended September 30, 2022 and 2021 . Asset Acquisitions The Company generally accounts for acquisitions of mineral and royalty interests as asset acquisitions, through which it allocates the purchase price between proved and unproved properties, with no recognition of goodwill. The Company may use different techniques to determine the allocation, including the discounted net present value of estimated future net cash flows and market prices (where available). Business Combinations The Company accounts for all business combinations, including the Falcon Merger, using the acquisition method, which involves the use of significant judgement. Under the acquisition method, a business combination is accounted for based on the fair value of the consideration given. The assets acquired and liabilities assumed are measured at fair value and the purchase price is allocated to the assets and liabilities based on these fair values. The excess of the cost of an acquisition, if any, over the fair value of the assets acquired and liabilities assumed is recognized as goodwill. The excess of the fair value of assets acquired and liabilities assumed over consideration given for an acquisition, if any, is recognized immediately in earnings as a gain. Determining the fair values of the assets and liabilities acquired involves the use of judgment as fair values are not always readily determinable. Different techniques may be used to determine fair values, including market prices (where available), comparisons to transactions for similar assets and liabilities and the net present value of estimated future cash flows, among others. Derivative Financial Instruments In order to manage its exposure to oil, natural gas, and NGL price volatility as well as interest rate volatility, the Company may periodically enter into derivative transactions, which may include commodity swap agreements, basis swap agreements, two- and three-way collars, and other similar agreements which help manage the price risk associated with the Company’s production. From time to time, the Company may periodically enter into various interest rate derivative contracts to manage exposures to changes in interest rates from variable rate obligations. These derivatives are not entered into for trading or speculative purposes. To the extent legal right of offset exists with a counterparty, the Company reports derivative assets and liabilities on a net basis. The Company has exposure to credit risk to the extent that the counterparty is unable to satisfy its settlement obligations. The Company actively monitors the creditworthiness of the counterparty and assesses the impact, if any, on its derivative positions. All commodity derivative counterparties are current lenders under the Company’s Revolving Credit Facility (defined below). Accordingly, the Company is not required to provide any credit support to its commodity derivative counterparties other than cross collateralization with the properties securing the Revolving Credit Facility. The Company records derivative instruments on its condensed consolidated balance sheets as either assets or liabilities measured at fair value and records changes in the fair value of derivatives in current earnings as they occur. Changes in the fair value of commodity derivatives, including gains or losses on settled derivatives, are classified as other income or loss on the Company’s condensed consolidated statements of income. The Company’s derivatives have not been designated as hedges for accounting purposes. Accounts Payable and Accrued Expenses The Company’s accounts payable and accrued expenses consisted of the following as of the dates indicated (in thousands): September 30, December 31, Ad valorem taxes payable $ 5,348 $ 1,750 General and administrative 4,066 904 Payable to seller for pre-effective monies 2,438 104 Deferred financing costs 1,348 13 Other taxes payable 1,224 529 Interest expense 742 274 Capital expenditures 290 391 Other 421 175 Total accounts payable and accrued expenses $ 15,877 $ 4,140 Warrant Liability Falcon issued the Public Warrants and Private Placement Warrants (both defined below) in connection with its initial public offering in 2017. The Warrants remain outstanding following the Falcon Merger. Warrants are accounted for in accordance with applicable accounting guidance provided in ASC 815-40 – Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815”), as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. The Warrants were classified as liabilities and recorded at fair value at the time of the Falcon Merger and are subject to remeasurement at the end of each reporting period. Any change in fair value is recorded in our statements of income. Deferred Rent Under ASC 840 – Leases (“ASC 840”), the Company recognizes rental expense for operating leases on a straight-line basis over the term of the lease agreements. The deferred rent liability on the Company’s condensed consolidated balance sheets is attributable to the difference between rental expense (recognized on a straight-line basis) and the variable lease payments over the terms of the agreements. The Company leases office space under three operating leases. In December 2021, the Predecessor entered into a sublease of one of its office spaces with an unaffiliated third-party. Temporary Equity The Company accounts for the interests attributable to Class C Common Stock and Sitio OpCo Partnership Units as temporary equity as a result of certain redemption rights held as discussed in “Note 9 – Temporary Equity.” As such, the Company adjusts temporary equity to its maximum redemption amount at the balance sheet date, if higher than the carrying amount. Changes in the redemption value are recognized immediately as they occur, as if the end of the reporting period was also the redemption date for the instrument, with an offsetting entry to retained earnings or if a retained deficit, to additional paid-in capital. Temporary equity is reclassified to permanent equity upon conversion of Class C Common Stock (and an equivalent number of Sitio OpCo Partnership Units) or when holders of the Class C Common Stock no longer effectively control the Company’s determination of whether to make a cash payment upon the Sitio OpCo Partnership Unit holder’s exercise of its Redemption Right. See “Note 9 – Temporary Equity ” for additional information. Revenue Recognition Mineral and royalty interests represent the right to receive revenues from the sale of oil, natural gas and NGL, less production taxes and post-production expenses. The prices of oil, natural gas, and NGL from the properties in which we own a mineral or royalty interest are primarily determined by supply and demand in the marketplace and can fluctuate considerably. As an owner of mineral and royalty interests, we have no working interest or operational control over the volumes and methods of sale of the oil, natural gas, and NGL produced and sold from our properties. We do not explore, develop, or operate the properties and, accordingly, do not incur any of the associated costs. Oil, natural gas, and NGL revenues from our mineral and royalty interests are recognized when control transfers at the wellhead. The Company also earns revenue related to lease bonuses. The Company earns lease bonus revenue by leasing its mineral interests to E&P companies. The Company recognizes lease bonus revenue when the lease agreement has been executed and payment is determined to be collectible. See “Note 4 – Revenue from Contracts with Customers” for additional disclosures regarding revenue recognition. Concentration of Revenue Collectability of the Company’s royalty revenue is dependent upon the financial condition of the Company’s operators, the entities they sell their products to, as well as general economic conditions in the industry. Although the Company is exposed to a concentration of credit risk, the Company does not believe the loss of any single operator or entity would materially impact the Company’s operating results as crude oil, natural gas and NGL are fungible products with well-established markets and numerous purchasers. If multiple entities were to cease making purchases at or around the same time, we believe there would be challenges initially, but there would be ample markets to handle the disruption. Share-Based Compensation The Company recognizes share-based compensation expense associated with restricted stock units, deferred share units, and restricted stock awards which are time-based awards and performance stock units, which are performance-based awards. The Company accounts for forfeitures of share-based compensation awards as they occur. Share-based compensation expense for all awards is recognized based on the estimated grant date fair value of the award. See “Note 10 – Share-Based Compensation ” for additional information. Merger-Related Transaction Costs General and administrative expense of $ 13.4 million and $ 24.1 million for the three and nine months ended September 30, 2022 included $ 3.6 million and $ 6.8 million, respectively, of costs incurred by the Company in connection with the Falcon Merger and the Brigham Merger (defined below). No such expense was recognized for the three and nine months ended September 30, 2021. See “Note 6 – Acquisitions ” for additional disclosures regarding the Brigham Merger. Income Taxes The Company, under ASC 740 – Income Taxes (“ASC 740”), uses the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (a) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (b) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future periods when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. A valuation allowance will be provided for deferred tax assets if it is more likely than not the deferred tax assets will not be realized. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits (if any) as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2022 and December 31, 2021. Texas imposes a franchise tax, commonly referred to as the Texas margin tax, which is considered an income tax, at a rate of 0.75 % on gross revenues less certain deductions, as specifically set forth in the Texas margin tax statute. A significant portion of our mineral and royalty interests are located in Texas. As such, the Company recognized approximately $ 474,000 and $ 143,000 , respectively, for the three months ended September 30, 2022 and 2021 and $ 1.4 million and $ 233,000 , respectively, for the nine months ended September 30, 2022 and 2021, of state income tax expense, primarily attributable to the Texas margin tax. The Company’s ASC 740 balances and income tax expense reporting is significantly affected by the portion of the Company’s consolidated net income attributable to the holders of Sitio OpCo Partnership Units, which is not taxable income to the Company. Since the Company’s ownership interest in Sitio OpCo is 15.2 %, only tax attributes allocated to the Company are recorded at this level, except for Texas Gross Margins tax which is imposed on Sitio OpCo and reported herein. |
Falcon Reverse Merger
Falcon Reverse Merger | 9 Months Ended |
Sep. 30, 2022 | |
Business Combinations [Abstract] | |
Falcon Reverse Merger | 3. Falcon Reverse Merger In June 2022, the Company completed the acquisition of approximately 34,000 NRAs in the Eagle Ford Shale and Appalachian Basin from Falcon Minerals Corporation in a reverse merger. At closing, subject to the terms and conditions of the Falcon Reverse Merger Agreement, Falcon merged with and into Desert Peak, with Desert Peak continuing as the surviving entity in the Falcon Merger as a wholly owned subsidiary of Sitio OpCo. On June 3, 2022, prior to the consummation of the Falcon Merger, Falcon effected the four-to-one Reverse Stock Split. As a result of the Reverse Stock Split, every four shares of the Company’s issued and outstanding Class C Common Stock were automatically converted into one share of Class C Common Stock, without any change in the par value per share , and every four shares of the Company’s Class A Common Stock were automatically converted into one share of Class A Common Stock, without any change in the par value per share . No fractional shares were outstanding following the Reverse Stock Split. Additionally, as a result of the Reverse Stock Split, the Warrants were adjusted such that four whole Warrants became exercisable for one share of Class A Common Stock at an exercise price of $ 44.84 per share of Class A Common Stock. Pursuant to the terms of the Falcon Reverse Merger Agreement, following the closing of the Falcon Merger and the Reverse Stock Split, the issued and outstanding limited liability company interests in Desert Peak were converted into the right to receive aggregate Falcon Merger Consideration of (a) 61,905,339 shares of Class C Common Stock and (b) 61,905,339 Sitio OpCo Partnership Units. The Falcon Merger was accounted for as a business combination and, therefore, the acquired interests were recorded based on the fair value of the total assets acquired and liabilities assumed on the acquisition date. The following table summarized the consideration for the Falcon Merger: Falcon Common Stock — issued and outstanding as of June 7, 2022: 21,935,492 Class A Common Stock price on June 7, 2022 $ 29.12 Total consideration and fair value $ 638,761,527 Preliminary Purchase Price Allocation The Falcon Merger was accounted for as a business combination using the acquisition method. The Company completed the determination of the fair value attributable to the identifiable assets acquired and liabilities assumed based on the fair value at the acquisition date. Certain data necessary to complete the purchase price allocation is subject to change, and includes, but is not limited to, settlement of pre-acquisition working capital balances and assessments of deferred tax assets and liabilities acquired. We expect to complete the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed on June 7, 2022 (in thousands): Falcon fair values: Cash $ 4,484 Accrued revenue and accounts receivable 17,526 Unproved oil and gas properties 491,424 Proved oil and gas properties 200,773 Property and equipment 278 Current liabilities ( 23,408 ) Long-term debt ( 43,105 ) Deferred tax liability ( 2,598 ) Warrant liability ( 6,612 ) Total consideration and fair value $ 638,762 In connection with the Falcon Merger, the Company assumed, and immediately repaid, $ 43.1 million of borrowings under Falcon’s credit facility. The repayment of Falcon’s long-term debt was funded using cash on hand and borrowings on our Revolving Credit Facility, see “Note 7 – Debt” for further information. Transaction costs associated with the Falcon Merger incurred for the three and nine months ended September 30, 2022 were $ 166,000 and $ 3.4 million, respectively. These costs, which are comprised primarily of advisory, legal, and other professional and consulting fees, are included in General and administrative expense on our condensed consolidated statements of income. Pro Forma Financial Information The unaudited pro forma financial information for the three and nine months ended September 30, 2022 and 2021, respectively, gives effect to the Falcon Merger as if it had occurred on January 1, 2021 (in thousands, except per share amounts): Three Months Ended For the Nine Months 2022 2021 2022 2021 Total revenues $ 115,497 $ 52,923 $ 308,989 $ 118,308 Pro forma income available to common stockholders 12,230 3,785 28,802 6,362 Net income per share: Basic $ 0.96 $ 0.30 $ 2.27 $ 0.50 Diluted $ 0.96 $ 0.30 $ 2.25 $ 0.50 The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Falcon Merger been completed as of January 1, 2021 and should not be taken as indicative of the Company’ s future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 9 Months Ended |
Sep. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | 4. Revenue from Contracts with Customers Oil and natural gas sales Oil, natural gas and NGL sales revenues are generally recognized when control of the product is transferred to the customer, the performance obligations under the terms of the contracts with customers are satisfied and collectability is reasonably assured. All of the Company’s oil, natural gas and NGL sales are made under contracts with customers (operators). The performance obligations for the Company’s contracts with customers are satisfied at a point in time when control transfers at the wellhead, at which point payment is unconditional. Accordingly, the Company’s contracts do not give rise to contract assets or liabilities. The Company typically receives payment for oil, natural gas and NGL sales within 30 to 90 days of the month of delivery after initial production from the well. Such periods can extend longer due to factors outside of our control. The Company’s contracts for oil, natural gas and NGL sales are standard industry contracts that include variable consideration based on the monthly index price and adjustments that may include counterparty-specific provisions related to volumes, price differentials, discounts and other adjustments and deductions. During the three and nine months ended September 30, 2022 and 2021, the disaggregated revenues from sales of oil, natural gas and NGLs were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Crude oil sales $ 79,333 $ 24,199 $ 193,171 $ 49,040 Natural gas sales 19,086 4,827 39,186 11,118 NGL sales 10,342 4,126 27,862 9,063 Total royalty revenues $ 108,761 $ 33,152 $ 260,219 $ 69,221 Lease bonus and other income The Company also earns revenue from lease bonuses, delay rentals, and right-of-way payments. The Company generates lease bonus revenue by leasing its mineral interests to E&P companies. A mineral lease agreement represents our contract with a customer and generally transfers the rights, for a specified period of time, to explore for and develop any oil, natural gas and NGL discovered, grants us a specified royalty interest in the hydrocarbons produced from the leased property, and requires that drilling and completion operations commence within a specified time period. The Company recognizes lease bonus revenues when the lease agreement has been executed and payment is determined to be collectible. At the time the Company executes the lease agreement, the lease bonus payment is delivered to the Company. Upon receipt of the lease bonus payment, the Company will release the recordable original lease documents to the customer. The Company also recognizes revenue from delay rentals to the extent drilling has not started within the specified period and payment has been received. Right-of-way payments are recorded when the agreement has been executed and payment is determined to be collectable. The assets contributed by our Predecessor in the Falcon Merger did not include the Predecessor’s surface rights. Subsequent to the Falcon Merger, the Company has acquired additional surface rights in connection with multiple acquisitions. Payments for lease bonus and other income become unconditional upon the execution of an associated agreement. Accordingly, the Company’s lease bonus and other income transactions do not give rise to contract assets or liabilities. Allocation of transaction price to remaining performance obligations Oil and natural gas sales The Company’s right to royalty income does not originate until production occurs and, therefore, is not considered to exist beyond each day’s production. Therefore, there are no remaining performance obligations under any of our royalty income contracts. Lease bonus and other income Given that the Company does not recognize lease bonus or other income until an agreement has been executed, at which point its performance obligation has been satisfied, the Company does not record revenue for unsatisfied or partially unsatisfied performance obligations as of the end of the reporting period. Prior-period performance obligations The Company records revenue in the month production is delivered to the purchaser. As a royalty interest owner, the Company has limited visibility into the timing of when new wells start producing as production statements may not be received for 30 to 90 days or more after the date production is delivered. As a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. The expected sales volumes and prices for these properties are estimated and recorded within accrued revenue and accounts receivable in the accompanying condensed consolidated balance sheets. The difference between the Company’s estimates of royalty income and the actual amounts received for oil and natural gas sales are recorded in the month that the royalty payment is received from the customer. For the three and nine months ended September 30, 2022 and 2021 , revenue recognized related to performance obligations satisfied in prior reporting periods was primarily attributable to production revisions by operators or amounts for which the information was not available at the time when revenue was estimated. |
Oil and Gas Properties
Oil and Gas Properties | 9 Months Ended |
Sep. 30, 2022 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Oil and Gas Properties | 5. Oil and Gas Properties The Company has been and is actively engaged in the purchase of mineral rights in the Permian Basin in West Texas and southeastern New Mexico. Additionally, the Company owns mineral rights in the Eagle Ford Shale in South Texas and the Appalachian Basin in Pennsylvania, Ohio and West Virginia. The following is a summary of oil and natural gas properties as of September 30, 2022 and December 31, 2021 (in thousands): Oil and natural gas properties: September 30, December 31, Unproved properties $ 1,473,142 $ 817,873 Proved properties 1,042,257 447,369 Oil and natural gas properties, gross 2,515,399 1,265,242 Accumulated depletion and impairment ( 184,989 ) ( 118,175 ) Oil and natural gas properties, net $ 2,330,410 $ 1,147,067 As presented in the condensed consolidated statements of cash flows for the nine months ended September 30, 2022, the Company paid $ 558.1 million for mineral acquisition costs. Additionally, the Company acquired mineral and royalty interests of $ 692.2 million through issuance of Class C Common Stock as a result of the Merger. Please see “ Note 3 – Falcon Reverse Merger” for additional information regarding the Merger. As presented in the condensed consolidated statements of cash flows for the nine months ended September 30, 2021, the Predecessor paid $ 26.8 million for mineral acquisition costs and paid $ 103,000 related to purchase price adjustments from prior property sales. Additionally, the Predecessor acquired mineral and royalty interests of $ 571.2 million in three separate transactions in exchange for equity interests in a subsidiary of the Predecessor. Please see “Note 6 – Acquisitions” for additional information regarding these transactions. The Company uses the successful efforts method of accounting for its oil and gas properties. Capitalized costs are depleted on a unit of production basis based on proved oil and natural gas reserves. Depletion expense was $ 31.8 million and $ 12.7 million for the three months ended September 30, 2022 and 2021 , respectively. Depletion expense was $ 66.8 million and $ 28.2 million for the nine months ended September 30, 2022 and 2021 , respectively. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2022 | |
Business Combinations [Abstract] | |
Acquisitions | 6. Acquisitions Brigham Merger On September 6, 2022, Sitio, Sitio OpCo, Snapper Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of Sitio (“New Sitio”), Snapper Merger Sub IV, Inc., a Delaware corporation and wholly owned subsidiary of New Sitio (“Brigham Merger Sub”), Snapper Merger Sub V, Inc., a Delaware corporation and wholly owned subsidiary of New Sitio (“Sitio Merger Sub”), and Snapper Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Sitio OpCo (“Opco Merger Sub LLC”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brigham Minerals, Inc., a Delaware corporation (“Brigham”) and Brigham Minerals Holdings, LLC, a Delaware limited liability company and subsidiary of Brigham (“Brigham Opco”). Pursuant to the terms of the Merger Agreement, Sitio will acquire Brigham in an all-stock transaction through: (i) the merger of Brigham Merger Sub with and into Brigham (the “Brigham Subsidiary Merger”), with Brigham surviving the Brigham Subsidiary Merger as a wholly owned subsidiary of New Sitio, (ii) the merger of Sitio Merger Sub with and into Sitio (the “Sitio Merger”), with Sitio surviving the Sitio Merger as a wholly owned subsidiary of New Sitio, and (iii) the merger of Opco Merger Sub LLC with and into Brigham Opco (the “Opco Merger,” and, together with the Brigham Subsidiary Merger and the Sitio Merger, the “Brigham Merger”), with Brigham Opco surviving the Opco Merger as a wholly owned subsidiary of Sitio Opco, in each case on the terms set forth in the Merger Agreement. The Sitio Merger and the Brigham Subsidiary Merger shall become effective concurrently (such time as the Sitio Merger and the Brigham Subsidiary Merger become effective, the “First Effective Time”), and the Opco Merger shall become effective immediately following the First Effective Time (such time as the Opco Merger becomes effective, the “Second Effective Time”). On the terms and subject to the conditions set forth in the Merger Agreement, (i) at the First Effective Time, (A) each share of Brigham’s Class A common stock, par value $ 0.01 per share, issued and outstanding immediately prior to the First Effective Time will be converted into the right to receive 1.133 fully-paid and nonassessable shares of Class A common stock, par value $ 0.0001 per share, of New Sitio (the “New Sitio Class A Common Stock”), (B) each share of Brigham’s Class B common stock, par value $ 0.01 per share, issued and outstanding immediately prior to the First Effective Time will be converted into the right to receive 1.133 fully-paid and nonassessable shares of Class C common stock, par value $ 0.0001 per share, of New Sitio (the “New Sitio Class C Common Stock”), (C) each share of Class A Common Stock issued and outstanding immediately prior to the First Effective Time will be converted into one share of New Sitio Class A Common Stock and (D) each share of Class C Common Stock issued and outstanding immediately prior to the First Effective Time, will be converted into one share of New Sitio Class C Common Stock, in each case, excluding shares owned by Sitio, Brigham or any wholly owned subsidiary of Sitio or Brigham and, to the extent applicable, shares owned by stockholders who have perfected and not withdrawn a demand for appraisal rights pursuant to the Delaware General Corporation Law (the “DGCL”) and, (ii) at the Second Effective Time, each Brigham Opco Unit issued and outstanding immediately prior to the Second Effective Time will be converted into the right to receive 1.133 Sitio Opco Partnership Units. As a result of the Brigham Merger and as of the closing of the Brigham Merger (the “Closing”), Sitio stockholders immediately prior to the First Effective Time will own approximately 54 % of the outstanding shares of New Sitio, and Brigham stockholders immediately prior to the First Effective Time will own approximately 46 % of the outstanding shares of New Sitio. Following the Closing, New Sitio will operate under the name “Sitio Royalties Corp.” Momentum Acquisition On July 26, 2022, the Company acquired approximately 12,200 net royalty acres from Momentum Minerals Operating, LP, Momentum Minerals Operating II, LP, Momentum Minerals Nominee, Inc., Momentum Minerals Nominee II, Inc. and Athene Annuity & Life Assurance Company (collectively, “Momentum”) for a purchase price of $ 213.3 million, net of customary closing adjustments (the “Momentum Acquisition”). The Momentum Acquisition was funded through borrowings under the Bridge Loan Agreement and borrowings under the Revolving Credit Facility, in addition to cash on hand. The Momentum Acquisition was accounted for as an asset acquisition and, therefore, the acquired interests were recorded based on the fair value of the total assets acquired on the acquisition date. Based on the estimated fair values of the assets received, the Company recorded $ 51.5 million of the total consideration as unproved oil and gas property and $ 161.8 million as proved oil and gas property. Additionally, $ 0.7 million of transaction costs were capitalized related to the Momentum Acquisition. Foundation Acquisition In June 2022, the Company completed the acquisition of approximately 19,700 NRAs in the Permian Basin from Foundation Minerals, LLC ( “Foundation” ) for $ 320.6 million, net of customary closing adjustments, funded primarily by proceeds The Foundation acquisition was accounted for as an asset acquisition and, therefore, the acquired interests were recorded based on the fair value of the total assets acquired on the acquisition date. Based on the estimated fair values of the assets received, the Company recorded $ 189.3 million of the total consideration as unproved oil and gas property and $ 131.3 million as proved oil and gas property. Additionally, $ 0.8 million of transaction costs were capitalized related to the transaction. Falcon Acquisition In June 2022, the Company completed the acquisition of approximately 34,000 NRAs in the Eagle Ford Shale and Appalachian Basin from Falcon in a reverse merger. Refer to “Note 3 – Falcon Reverse Merger” for further information. Source Acquisition In August 2021, the Predecessor completed the acquisition of approximately 25,000 NRAs in the Midland and Delaware Basins from the Source Stockholders. At closing, subject to the terms and conditions of the transaction agreement, the Source Stockholders contributed their mineral and royalty interests to the Predecessor and in consideration for the contribution, Kimmeridge affiliates caused DPM HoldCo (a subsidiary of the Predecessor) to issue equity interests in DPM HoldCo to Source for total consideration of $ 252.9 million. The Source acquisition was accounted for as an asset acquisition and, therefore, the acquired interests were recorded based on the fair value of the total assets acquired on the acquisition date. Based on the estimated fair values of the assets received, the Predecessor recorded $ 183.2 million of the total consideration as unproved oil and gas property and $ 69.7 million as proved oil and gas property. Additionally, $ 3.5 million of transaction costs were capitalized related to the transaction. Rock Ridge Acquisition In June 2021, the Predecessor completed the acquisition of approximately 18,700 NRAs from Rock Ridge. At closing, subject to the terms and conditions of the transaction agreement, Rock Ridge contributed its mineral and royalty interests to the Predecessor and in consideration for the contribution, Kimmeridge affiliates caused DPM HoldCo to issue equity interests in DPM HoldCo to Rock Ridge for total consideration of $ 258.6 million. The Rock Ridge acquisition was accounted for as an asset acquisition and, therefore, the acquired interests were recorded based on the fair value of the total assets acquired on the acquisition date. Based on the estimated fair values of the assets received, the Predecessor recorded $ 190.3 million of the total consideration as unproved oil and gas property and $ 68.3 million as proved oil and gas property. Additionally, $ 1.1 million of transaction costs were capitalized related to the transaction. Delaware Basin ORRIs Acquisition In October 2020, a partnership owned and managed by Kimmeridge, (“Fund V”), acquired a 2.0 % (on an 8/8ths basis) overriding royalty interest in all of Callon Petroleum Company’s (“Callon”) operated assets in the Delaware Basin of which Fund V held an 84 % interest proportionately reduced to Callon’s net revenue interest (the “Chambers ORRI”). In June 2021, the Predecessor entered into a definitive agreement to acquire 84 % of the Delaware Basin portion of the Chambers ORRI from Chambers Minerals, LLC, a subsidiary of Fund V (the “Chambers Acquisition”). Immediately following the consummation of the contributions of assets to the Predecessor, Chambers HoldCo, LLC (the managing member of Chambers Minerals, LLC) was issued equity in DPM HoldCo. As the general partner of Fund V and the General Partner of the Predecessor were affiliated, the transaction was approved by the Predecessor’s Limited Partner Advisory Committee in June 2021. The Chambers Acquisition was accounted for as an asset acquisition. The Chambers Acquisition was also accounted for as a transaction between entities under common control; the controlling ownership and management of the general partner of Fund V and the general partner of the Predecessor had significant overlap, including responsibility for the management, control, and direction of the business affairs of the respective entities. As the Predecessor and Fund V were entities under common control, the Predecessor recorded the acquisition utilizing the properties’ net book value. The properties acquired by the Predecessor had a historical net book value to Fund V at the time of sale of approximately $ 60.6 million ($ 45.3 million was allocated to unproved property and $ 15.3 million was allocated to proved property). Accordingly, the $ 37.5 million excess of the fair value of the properties above their net book value was recorded as a decrease to the Predecessor’s partners’ capital at the date of the transaction. Refer to “Note 16 – Related Party Transactions” for further discussion. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Debt | 7. Debt As of September 30, 2022 , the borrowing base was $ 300.0 million as determined by the lenders and the outstanding balance under our Revolving Credit Facility was $ 227.0 million. As of December 31, 2021 , the borrowing base was $ 150.0 million as determined by the lenders and the outstanding balance under our Revolving Credit Facility was $ 134.0 million. The Revolving Credit Facility bears interest at a rate per annum equal to, at our option, at an adjusted Term SOFR rate or a base rate, plus an applicable margin and credit spread adjustment. The applicable margin is based on utilization of our Revolving Credit Facility and ranges from (a) in the case of adjusted base rate loans, 1.500 % to 2.500 % and (b) in the case of Term SOFR rate loans and letters of credit, from 2.500 % to 3.500 %. The credit spread adjustment ranges from 0.100 % to 0.250 % depending on the applicable interest rate and interest rate period. Sitio OpCo may elect an interest period of one, three or six months. Interest is payable in arrears at the end of each interest period, but no less frequently than quarterly. A commitment fee is payable quarterly in arrears on the daily undrawn available commitments under our Revolving Credit Facility in an amount ranging from 0.375 % to 0.500 % based on utilization of our Revolving Credit Facility. The Revolving Credit Facility is subject to other customary fee, interest and expense reimbursement provisions. As of September 30, 2022 and December 31, 2021 , the weighted average interest rate related to our outstanding borrowings under the Revolving Credit Facility was 6.11 % a nd 3.36 %, respectively. As of September 30, 2022 and December 31, 2021, the Company had unamortized debt issuance costs of $ 6.1 million and $ 2.1 million, respectively, in connection with its entry into the Revolving Credit Facility, including amendments. Such costs are capitalized as deferred financing costs within other long-term assets and are amortized over the life of the facility. For the three months ended September 30, 2022 and 2021, the Company recognize d $ 353,000 and $ 106,000 , respectively, in interest expense related to the amortization of deferred financing costs under the Revolving Credit Facility. For the nine months ended September 30, 2022 and 2021 , the Company recognized $ 817,000 a nd $ 247,000 , respectively, in interest expense related to the amortization of deferred financing costs. Our Revolving Credit Facility matures in June 2026 . Loans drawn under our Revolving Credit Facility may be prepaid at any time without premium or penalty (other than customary breakage costs for Term SOFR rate loans) and must be prepaid in the event that exposure exceeds the lesser of the borrowing base and the elected commitments of the lenders at such time. The principal amount of loans that are prepaid are required to be accompanied by accrued and unpaid interest and fees on such amounts. Loans that are prepaid may be reborrowed. In addition, Sitio OpCo may permanently reduce or terminate in full the commitments under our Revolving Credit Facility prior to maturity. Any excess exposure resulting from such permanent reduction or termination must be prepaid. Upon the occurrence of an event of default under our Revolving Credit Facility, the administrative agent acting at the direction of the lenders holding a majority of the aggregate commitments at such time may accelerate outstanding loans and terminate all commitments under our Revolving Credit Facility, provided that such acceleration and termination occurs automatically upon the occurrence of a bankruptcy or insolvency event of default. Our Revolving Credit Facility is subject to a borrowing base established by the lenders to reflect the loan value of our oil and gas mineral interests. The borrowing base under our Revolving Credit Facility is redetermined by the lenders on a semi-annual basis. Additionally, lenders holding two-thirds of the aggregate commitments are able to request one additional redetermination each year. Sitio OpCo could also request one additional redetermination each year, and such other redeterminations as appropriate when significant acquisition opportunities arose. The borrowing base is subject to adjustments for asset dispositions, material title deficiencies, certain terminations of hedge agreements and issuances of certain additional indebtedness. Increases to the borrowing base required unanimous approval of the lenders, while maintenance of the same borrowing base or decreases in the borrowing base only required approval of lenders holding two-thirds of the aggregate commitments at such time. The determination of the borrowing base took into consideration the estimated value of the Company’s oil and gas mineral interests in accordance with the lenders’ customary practices for oil and gas loans. The Revolving Credit Facility is collateralized by substantially all of the assets of Sitio OpCo and its subsidiaries. Our Revolving Credit Facility contains customary affirmative and negative covenants, including, without limitation, reporting obligations, restrictions on asset sales, restrictions on additional debt and lien incurrence and restrictions on making dividends or distributions, restrictions on paying other debt and restriction on certain investments. Our Revolving Credit Facility requires us to maintain (a) a current ratio of not less than 1.00 to 1.00 and (b) a ratio of total net funded debt to consolidated EBITDA of not more than 3.50 to 1.00. EBITDA for the period ending on September 30, 2022 is calculated as EBITDA for the period beginning on July 1, 2022 and ending on September 30, 2022 multiplied by four. The Company was in compliance with the terms and covenants of the Revolving Credit Facility at September 30, 2022 and December 31, 2021. First Amended and Restated Credit Agreement KMF Land was party to a credit agreement with a syndicate of banks led by Bank of America N.A. as Administrative Agent, Issuing Bank and Syndication Agent (the “Predecessor Revolving Credit Facility”). In October 2021, KMF Land, as borrower and Desert Peak, as parent, entered into the Amended and Restated Credit Agreement with a syndicate of banks led by Bank of America N.A. as Administrative Agent, Issuing Bank and Syndication Agent, pursuant to which the lenders thereunder made loans and extensions of credit to the borrower thereunder (the “A&R Credit Agreement”). The A&R Credit Agreement amended, restated and refinanced the Predecessor's Revolving Credit Facility in full. Falcon Credit Agreement On the Closing Date and in connection with the closing of the Falcon Merger, the Company repaid the outstanding borrowings under the Credit Agreement, dated as of August 23, 2018 (the “Falcon Credit Agreement”), among Falcon Minerals Operating Partnership, LP, as the borrower, the lenders from time to time party thereto, Citibank, N.A., as administrative agent and collateral agent for the lenders from time to time party thereto and each other issuing bank from time to time party thereto and terminated the Falcon Credit Agreement. Second Amended and Restated Credit Agreement Upon closing of the Falcon Merger on the Closing Date, the A&R Credit Agreement was amended, restated, and refinanced in its entirety pursuant to the Second Amended and Restated Credit Agreement (the “Credit Agreement” ), led by Bank of America N.A. as Administrative Agent, Issuing Bank and Syndication Agent. Pursuant to the terms and conditions of the Revolving Credit Facility, the Lenders committed to provide a senior secured revolving credit facility to Sitio OpCo in an aggregate principal amount of up to $ 750.0 million (as amended or otherwise modified from time to time the “Revolving Credit Facility” ). The availability under the Revolving Credit Facility, including availability for letters of credit, is generally limited to a borrowing base, which is determined by the required number of lenders in good faith by calculating a loan value of the proved reserves of Sitio OpCo and its subsidiaries and elected commitments provided by the Lenders. As of the Closing Date, the Revolving Credit Facility has a $ 300.0 million borrowing base and $ 300.0 million elected commitment amount. As part of the aggregate commitments under the revolving advances, the Revolving Credit Facility provides for letters of credit to be issued at the request of the borrower in an aggregate amount not to exceed $ 15.0 million. First Amendment to Second Amendment and Restated Credit Agreement On June 24, 2022, Sitio OpCo and the other guarantors party thereto entered into the First Amendment to Credit Agreement (the “RBL First Amendment”). The RBL First Amendment, among other things, amended the Revolving Credit Facility to permit the borrowings under the Bridge Loan Agreement, defined below, and permitted the transactions contemplated by the Bridge Loan Agreement and the Foundation Acquisition described in “Note 6 – Acquisitions.” The RBL First Amendment waived the borrowing base reduction that would otherwise apply to the incurrence of permitted additional debt up to an aggregate amount of $ 400.0 million incurred prior to the next borrowing base redetermination. Second Amendment to Second Amended and Restated Credit Agreement On July 8, 2022, Sitio OpCo and the other guarantors party thereto entered into the Second Amendment to Credit Agreement (the “RBL Second Amendment”), pursuant to which the Revolving Credit Facility was amended to permit the additional borrowings under the Bridge First Amendment and permit the transactions contemplated by the Bridge First Amendment. The RBL Second Amendment waives the borrowing base reduction that would otherwise apply to the incurrence of Permitted Additional Debt (as defined in the RBL Second Amendment) for an additional amount of $ 50.0 million, up to an aggregate amount of $ 450.0 million, if incurred within 30 days of the closing of the RBL Second Amendment to fund a portion of the purchase price of the Momentum Acquisition described in “Note 6 – Acquisitions.” Third Amendment to Second Amended and Restated Credit Agreement On September 21, 2022, Sitio OpCo and the other guarantors party thereto entered into the Third Amendment to Credit Agreement (the “RBL Third Amendment”), pursuant to which the Revolving Credit Facility was amended to permit the issuance of the 2026 Senior Notes and the transactions contemplated by the Note Purchase Agreement. 2026 Senior Notes On September 21, 2022, Sitio OpCo, as issuer, and certain subsidiaries of Sitio OpCo, as guarantors, entered into the Note Purchase Agreement (the “Note Purchase Agreement”) with certain institutional investors party thereto as holders (the “Holders”) and U.S. Bank Trust Company, National Association, as agent for the Holders (the “Agent”). Pursuant to the Note Purchase Agreement, Sitio OpCo issued senior unsecured notes to the Holders in an aggregate principal amount of $ 450.0 million (the “2026 Senior Notes”). Sitio OpCo used $ 425.0 million of the proceeds from the 2026 Senior Notes to repay in full all amounts outstanding under the Bridge Loan Facility (as defined below) with the remainder used for general corporate purposes. The 2026 Senior Notes mature on September 21, 2026. Sitio OpCo may elect, at its option, to prepay the 2026 Senior Notes in whole or in part at any time, subject to (except as described below) payment of a premium determined in accordance with the table below based on the length of time between the issuance date and the prepayment date: Period Premium Months 0 - 12 Customary “make-whole” premium plus 3.00 % Months 13 - 24 3.00 % Months 25 - 36 1.00 % Months 37 - 48 0.00 % Interest accrues on the 2026 Senior Notes at an adjusted Term SOFR rate (including a 0.150 % spread adjustment) for a three-month period plus a margin of 6.50 %, unless the Agent determines that adequate and reasonable means do not exist for ascertaining the Term SOFR rate or the Requisite Holders (as defined in the Note Purchase Agreement) determine that the Term SOFR rate will not reflect the cost of maintaining their 2026 Senior Notes for the relevant period, in which case the 2026 Senior Notes will bear interest at a base rate (defined on the basis of the prime rate) plus a margin of 5.50 %. From and after the closing date of the Brigham Merger, the applicable margin will be reduced to 5.75 % for 2026 Senior Notes bearing interest based on the adjusted Term SOFR rate and to 4.75 % for 2026 Senior Notes bearing interest based on the base rate. Interest payments on the 2026 Senior Notes are due quarterly. Sitio OpCo may elect, at its option, to prepay the 2026 Senior Notes on the last business day of each calendar quarter in an amount equal to 2.50 % of the initial principal amount of all the 2026 Senior Notes issued under the Note Purchase Agreement, which prepayments will not require the payment of any premium (each, an “Optional Quarterly Payment”). If Sitio OpCo does not make an Optional Quarterly Payment on any quarterly payment date, the applicable margin on the 2026 Senior Notes will increase to 9.50 % for 2026 Senior Notes bearing interest based on the adjusted Term SOFR rate and 8.50 % for 2026 Senior Notes bearing interest based on the base rate. Subsequent to the closing of the Brigham Merger, if an Optional Quarterly Payment is not made, the margin will increase to 7.75 % for 2026 Senior Notes bearing interest based on the adjusted Term SOFR rate and 6.75 % for 2026 Senior Notes bearing interest based on the base rate. The increased margin will apply until the earlier of the date on which Sitio OpCo makes such Optional Quarterly Payment or the next quarterly payment date. As of September 30, 2022, the weighted average interest rate of the 2026 Senior Notes was 10.14 %. As of September 30, 2022, the Company had unamortized debt issuance costs of $ 4.7 million in connection with its issuance of the 2026 Senior Notes. Such costs are reported as a reduction to long-term debt on our condensed consolidated balance sheets and are amortized over the life of the 2026 Senior Notes. The Note Purchase Agreement includes, among other terms and conditions, a maximum leverage ratio covenant, as well as customary mandatory prepayments, representations, warranties, covenants and events of default, including, among others, a change of control event of default and limitations on the incurrence of indebtedness and liens, new lines of business, mergers, transactions with affiliates and burdensome agreements. During the continuance of an event of default, the Holders may take a number of actions, including, among others, declaring the entire amount of the 2026 Senior Notes and other amounts then outstanding under the Note Purchase Agreement to be due and payable. The Note Purchase Agreement requires Sitio OpCo to maintain a leverage ratio as of the last day of each fiscal quarter (beginning December 31, 2022) of not more than 3.50 to 1.00. As of September 30, 2022, Sitio OpCo was in compliance with the terms and covenants of the 2026 Senior Notes. 364-Day Bridge Loan Agreement On June 24, 2022, Sitio OpCo, as borrower, entered into an unsecured 364-Day Bridge Loan Agreement with Bank of America, N.A. as Administrative Agent for the Lenders, BofA Securities, Inc., as joint lead arranger and sole bookrunner, and Barclays Bank PLC and KeyBank National Association, as joint lead arrangers (the “Bridge Loan Agreement”). The Bridge Loan Agreement was amended on July 8, 2022 (the “Bridge First Amendment”) to provide for additional delayed draw term loan commitment. The Bridge Loan Agreement and Bridge First Amendment provide for a 364-day term loan credit facility (the “Bridge Loan Facility” ) in the aggregate principal amount of $ 425.0 million. The Bridge Loan Facility was fully repaid and extinguished on September 21, 2022 using proceeds from the issuance of the 2026 Senior Notes. Upon the closure of the Bridge Loan Facility, the Company recognized a loss on extinguishment of debt of $ 11.5 million, associated with unamortized debt issuance costs and other fees incurred in connection with the payoff. For the three and nine months ended September 30, 2022 , the Company recognized $ 3.3 million and $ 3.4 million, respectively, of interest expense related to the amortization of issuance costs under the Bridge Loan Agreement. No such expense was recognized for the three and nine months ended September 30, 2021 . |
Equity
Equity | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Equity | 8. Equity Prior to the effective time of the Falcon Merger, on June 3, 2022, Falcon filed with the Secretary of State of the State of Delaware the Third Amended and Restated Certificate of Incorporation to effect the previously announced four-to-one Reverse Stock Split for all of Falcon’s, and subsequently the Company’s, issued and outstanding shares of common stock and outstanding equity awards. As a result of the Reverse Stock Split, every four shares of the Company’s issued and outstanding Class C Common Stock were automatically converted into one share of Class C Common Stock, without any change in the par value per share, and every four shares of the Company’s Class A Common Stock were automatically converted into one share of Class A Common Stock, without any change in the par value per share. No fractional shares were outstanding following the Reverse Stock Split. Class A Common Stock The Company had 12,706,082 shares of its Class A Common Stock outstanding as of September 30, 2022 . Holders of Class A Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders and are entitled to ratably receive dividends when and if declared by the Company’s Board of Directors. Class C Common Stock The Company had 71,134,752 shares of its Class C Common Stock outstanding as of September 30, 2022. Shares of Class C Common Stock are non-economic but entitle the holder to one vote per share. Current holders of Class C Common Stock also hold an equivalent number of Sitio OpCo Partnership Units. Sitio OpCo Partnership Units are redeemable on a one-for-one basis for shares of Class A Common Stock at the option of the holder. Upon the redemption by any holder of Sitio OpCo Partnership Units for shares of Class A Common Stock, a corresponding number of shares of Class C Common Stock held by such holder will be cancelled. During the nine months ended September 30, 2022 , 617,530 Sitio OpCo Partnership Units were redeemed for shares of Class A Common Stock, and an equivalent number of shares of Class C Common Stock were cancelled. Cash Dividends On August 31, 2022, the Company paid a cash dividend of $ 0.71 per share of Class A Common Stock, totaling $ 9.0 million. The dividend related to the quarter ending June 30, 2022 and was paid to stockholders of record on August 18, 2022. See “ Note 17 – Subsequent Events” for additional information regarding cash dividends. Earnings per Share Earnings per share is computed using the two-class method. The two-class method determines earnings per share of common stock and participating securities according to dividends or dividend equivalents and their respective participation rights in undistributed earnings. Participating securities represent certain equity-based compensation awards in which the recipients have non-forfeitable rights to dividend equivalents during the performance period. The following table sets forth the calculation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data): For the Three Months For the Nine Months 2022 2021 2022 2021 Numerator: Net income attributable to Class A stockholders $ 9,139 $ — $ 15,299 $ — Less: Earnings allocated to participating securities ( 284 ) — ( 284 ) — Net income attributable to Class A stockholders - basic $ 8,855 $ — $ 15,015 $ — Plus: net income attributable to temporary equity — — — — Net income attributable to Class A stockholders - diluted $ 8,855 $ — $ 15,015 $ — Denominator: Weighted average shares outstanding - basic 12,703 12,665 Effect of dilutive securities — — Weighted average shares outstanding - diluted 12,703 12,665 Net income per common share - basic $ 0.70 $ 1.19 Net income per common share - diluted $ 0.70 $ 1.19 The Company had the following shares that were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive for the periods presented but could potentially dilute basic earnings per share in future periods (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Warrants 5,312 5,312 Unvested share-based compensation awards 704 702 Total 6,016 6,014 Diluted net income per share also excludes the effects of Sitio OpCo Partnership Units (and related Class C Common Stock) associated with the earn-out, which are convertible into Class A Common Stock, because they are considered contingently issuable shares and the conditions for issuance were not satisfied as of September 30, 2022. Earn-Out Contributors of Falcon’s initial assets in 2018 will be entitled to receive earn-out consideration to be paid in the form of Sitio OpCo Partnership Units (with a corresponding number of shares of Class C Common Stock) if the volume-weighted average price of the trading days during any thirty (30) calendar days (the “30-Day VWAP”) of the Class A Common Stock equals or exceeds certain hurdles set forth in the Contribution Agreement. If the 30-Day VWAP of the Class A Common Stock is $50.00 or more per share (on a split-adjusted basis) at any time within the seven years following the 2018 closing, the contributors will receive (a) an additional 2.5 million Sitio OpCo Partnership Units (and an equivalent number of shares of Class C Common Stock), plus (b) an amount of Sitio OpCo Partnership Units (and an equivalent number of shares of Class C Common Stock) equal to (i) the amount by which annual cash dividends paid on each share of Class A Common Stock exceeds $2.00 in each year between the closing and the date the first earn-out is achieved (with any dividends paid in the stub year in which the first earn-out is achieved annualized for purposes of determining what portion of such dividends would have, on an annual basis, exceeded $2.00), multiplied by 2.5 million, (ii) divided by $50.00. If the 30-Day VWAP of the Class A Common Stock is $60.00 or more per share (on a split-adjusted basis) at any time within the seven years following the closing (which $60.00 threshold will be reduced by the amount by which annual cash dividends paid on each share of Class A Common Stock exceeds $2.00 in each year between the closing and the date the earn-out is achieved, but not below $60.00), the contributors will receive an additional 2.5 million Sitio OpCo Partnership Units (and an equivalent number of shares of Class C Common Stock). Upon recognition of the earn-out, as there is no consideration received, the Company would record the payment of the earn-out as adjustments through equity (temporary equity and additional-paid-in-capital). Partners’ Capital Committed Capital As of September 30, 2022 , as a result of the Falcon Merger, the Company no longer had any Partners’ Capital. As of December 31, 2021 , the Predecessor had aggregate capital commitments (the “Committed Capital”) of $ 618.4 million from Limited Partners and $ 8.0 million from the General Partner. At December 31, 2021 , approximately $ 29.5 million of this Committed Capital remained available to call for purposes of satisfying investment commitments, management fees, and expenses over the remaining life of the Predecessor. Through December 31, 2021 , the Predecessor’s contributed capital as a percentage of total Committed Capital was approximately 95 %. Distributions In June 2022 prior to the Falcon Merger, DPM HoldCo distributed $ 13.3 million to its outside owners, including $ 1.9 million to an affiliate Kimmeridge fund. In October 2021, DPM HoldCo distributed $ 60.9 million to its outside owners, including $ 8.7 million to an affiliate Kimmeridge fund. In November 2021, the Predecessor made a distribution of $ 67.5 million to its partners, comprised of approximately $ 66.6 million to Limited Partners and $ 0.9 million to its General Partner. |
Temporary Equity
Temporary Equity | 9 Months Ended |
Sep. 30, 2022 | |
Temporary Equity Disclosure [Abstract] | |
Temporary Equity | 9. Temporary Equity Temporary equity represents ownership interests held in the form of Class C Common Stock and Sitio OpCo Partnership Units. Pursuant to the Falcon Reverse Merger Agreement, Desert Peak became a subsidiary of Sitio OpCo Partnership. In connection with the Falcon Merger, the Predecessor’s equity holders received 62 million shares of the Company’s Class C Common Stock and a corresponding number of Sitio OpCo Partnership Units. In connection with the Falcon Merger, a prior Class C common stockholder in Falcon received 10 million Class C shares and a corresponding number of Sitio OpCo Partnership Units. Class C Common Stock is classified as temporary equity in the consolidated balance sheet as the redemption rights of each holder of Sitio OpCo Partnership Units for either shares of Class A Common Stock or an equivalent amount of cash is not solely within the Company’s control. This is due to the fact that the holders of Class C Common Stock control a majority of the votes of the board of directors through ownership of a majority of the voting stock, which allows the holders of Class C Common Stock to effectively control the determination of whether a redemption would be settled in shares of Class A Common Stock or an equivalent amount of cash. Temporary equity is recorded at the greater of the carrying value or redemption amount with a corresponding adjustment to retained earnings or if a retained deficit to additional paid-in capital. From the date of the Falcon Merger through September 30, 2022, the Company recorded adjustments to the value of temporary equity as presented in the table below (in thousands): Temporary equity adjustments Balance – June 7, 2022 (1) $ 1,395,799 Share-based compensation 148 Conversion of Class C Common Stock to Class A Common Stock ( 11,909 ) Net income attributable to temporary equity 26,271 Adjustment of temporary equity to redemption amount (2) 254,368 Balance – June 30, 2022 $ 1,664,677 Share-based compensation $ 568 Conversion of Class C Common Stock to Class A Common Stock ( 124 ) Distributions to holders of temporary equity ( 50,510 ) Net income attributable to temporary equity 59,872 Adjustment of temporary equity to redemption amount (3) ( 101,282 ) Balance – September 30, 2022 $ 1,573,201 (1) Based on 71,752,285 shares of Class C Common Stock outstanding at June 7, 2022. (2) Based on 71,140,064 shares of Class C Common Stock outstanding and Class A Common Stock 5-day volume-weighted average price of $ 23.40 at June 30, 2022. (3) Based on 71,134,752 shares of Class C Common Stock outstanding and Class A Common Stock 5-day volume-weighted average price of $ 22.12 at September 30, 2022 . |
Share-based Compensation
Share-based Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Share-Based Compensation | 10. Share-Based Compensation In connection with the Falcon Merger, the Company adopted the Sitio Royalties Corp. Long Term Incentive Plan (the “Plan”). An aggregate of 8,384,083 shares of Class A Common Stock are available for issuance under the Plan. The Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), stock awards, dividend equivalents, other stock-based awards, cash awards, and substitute awards. Shares that are cancelled, forfeited, exchanged, settled in cash or otherwise terminated will be available for delivery pursuant to other awards. Dividend equivalent rights (“DERs”) are also available for grant under the Plan, either alone or in tandem with other specific awards, which will entitle the recipient to receive an amount equal to dividends paid on a Class A Common Stock. Dividends paid in connection with the DERs are accounted for as a reduction in retained earnings for those awards that are expected to vest. Awards that are forfeited could cause a reclassification of any previously recognized DERs payments from a reduction in retained earnings to additional compensation cost. The Plan is administered by the Compensation Committee of the Sitio Board of Directors (the “Compensation Committee”). As of September 30, 2022 , a total of 7,673,641 shares of Class A Common Stock remain available for future grant under the Plan. For the three and nine months ended September 30, 2022 , the Company incurred $ 4.0 and $ 4.9 million, respectively, of share-based compensation which is included in general and administrative expense in the accompanying condensed consolidated statements of income. There was no share-based compensation expense recognized for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2022, the Company p aid $ 284,000 , respectively, rela ted to DERs. For the three and nine months ended September 30, 2021 , no DERs were paid. Restricted Stock Units In accordance with the Plan, the Compensation Committee is authorized to issue RSUs to eligible executive officers and employees. The Company estimates the fair value of the RSUs as the closing price of the Company’s Class A Common Stock on the grant date of the award, which is expensed over the applicable service period. RSUs granted by the Company include dividend equivalent rights. In connection with the Falcon Merger, the Board granted one-time equity-based awards to our executive officers and employees under the Plan, consisting of RSUs subject to a vesting period of one year. The Board also granted an annual equity-based award to our executive officers under the Plan, which consists of RSUs that vest in equal installments on the first three anniversaries of June 7, 2022. The following table summarizes activity related to unvested RSUs for the nine months ended September 30, 2022. Restricted Stock Units Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 347,291 29.04 Forfeited ( 348 ) 29.12 Vested — — Unvested at September 30, 2022 346,943 $ 29.04 For the three and nine months ended September 30, 2022 , the Company recognized $ 2.0 million and $ 2.5 million, respectively, of share-based compensation expense related to RSUs. As of September 30, 2022 , there was approximately $ 7.6 million of unamortized equity-based compensation expense related to unvested RSUs. That expense is expected to be recognized over a weighted average period of approximately 1.5 years. As of and for the three and nine months ended September 30, 2021 there was no share-based compensation expense and no unamortized expense related to RSUs. Deferred Share Units In accordance with the Plan, the Compensation Committee is authorized to issue deferred share units (“DSUs”) to our non-employee directors. The Company estimates the fair value of the DSUs as the closing price of the Company’s Class A Common Stock on the grant date of the award, which is expensed over the applicable vesting period. In connection with the Falcon Merger, the Board granted awards of DSUs under the Plan to each of our non-employee directors. The DSUs are expected to vest in equal quarterly installments over the one-year period beginning on June 7, 2022. The following table summarizes activity related to unvested DSUs for the nine months ended September 30, 2022. Deferred Share Units Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 62,586 28.80 Forfeited — — Vested — — Unvested at September 30, 2022 62,586 $ 28.80 For the three and nine months ended September 30, 2022 , the Company recognized $ 425,000 and $ 521,000 , respectively, of share-based compensation expense related to DSUs. As of September 30, 2022 , there was approximately $ 1.3 million of unamortized equity-based compensation expense related to unvested DSUs. That expense is expected to be recognized over a weighted average period of 0.7 years. For the three and nine months ended September 30, 2021 there was no share-based compensation expense and no unamortized expense related to DSUs. Performance Stock Units In accordance with the Plan, the Compensation Committee is authorized to issue performance stock units (“PSUs”) to eligible employees and directors. In connection with the Falcon Merger, the Board granted an annual equity-based award (“2022 Annual Equity Award”) to our executive officers under the Incentive Plan, which consisted of PSUs. The PSUs will be eligible to be earned based on achievement of certain pre-established goals for annualized absolute Total Shareholder Return (“TSR”) over a three-year period following the consummation of the Falcon Merger. The performance targets associated with the PSU award structure are outlined below: Annualized Percentage of Base of Range Less than 0 % 0 % Threshold 0 % 50 % Target 10 % 100 % Maximum 20 % 200 % For purposes of determining our annualized absolute TSR over the performance period, the beginning stock price will be based on our 20-day volume weighted average stock price beginning on June 8, 2022 and the ending price will generally be based on the 20-day volume weighted average stock price ending on the last day of the performance period. PSU payouts for results that fall in between a stated threshold will be interpolated linearly. The grant date fair values of the PSUs were determined using Monte Carlo simulations, which use a probabilistic approach for estimating the fair value of the awards. The expected volatility was derived from the historical volatility of Falcon. The risk-free interest rate was determined using the yield for zero-coupon U.S. Treasury bills that is commensurate with the performance measurement period. The PSU award agreements provide that TSR will be calculated assuming dividends distributed will be reinvested over the performance period. As such, we have applied a dividend yield of 0.00 %, which is mathematically equivalent to reinvesting dividends. The following table summarizes the weighted average fair value of the PSUs and the assumptions used to determine the fair value: 2022 Volatility 67.23 % Risk-free rate 2.89 % Dividend yield 0.00 % Weighted average fair value $ 39.11 The following table summarizes activity related to unvested PSUs for the nine months ended September 30, 2022. Preferred Stock Units Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 300,913 39.11 Forfeited — — Vested — — Unvested at September 30, 2022 300,913 $ 39.11 For the three and nine months ended September 30, 2022 , the Company recognized $ 988,000 and $ 1.2 million, respectively, of share-based compensation expense related to PSUs. As of September 30, 2022 , there was approximately $ 10.5 million of unamortized equity-based compensation expense related to unvested PSUs. That expense is expected to be recognized over a weighted average period of 2.7 years. For the three and nine months ended September 30, 2021 there was no share-based compensation expense and no unamortized expense related to PSUs. Sitio OpCo Restricted Stock Awards In connection with the Falcon Merger, legacy Desert Peak owners (the “Falcon Merger Sponsors”), desired to assign, transfer and convey their rights to receive a portion of their Falcon Merger Consideration to our executive officers as an incentive to continue to serve as executive officers following the Falcon Merger. The Falcon Merger Consideration consists of units of Sitio Royalties OpCo Partnership Units and an equal number of shares of Class C Common Stock. The conveyance of Falcon Merger Consideration, which consists of Class C Common Stock, is deemed to be a grant of restricted stock awards (each, an “RSA”) to our executive officers. Each Sitio OpCo RSA is expected to vest in equal installments on the first four anniversaries of June 6, 2022. The Company estimated the fair value of the RSAs as the closing price of the Company’s Class A Common Stock on the grant date of the award, which is expensed over the applicable vesting period. The following table summarizes activity related to unvested Sitio OpCo RSAs for the nine months ended September 30, 2022 Sitio OpCo Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 309,527 29.12 Forfeited — — Vested — — Unvested at September 30, 2022 309,527 $ 29.12 For the three and nine months ended September 30, 2022 , the Company recognized $ 568,000 and $ 716,000 , respectively, of share-based compensation expense related to the Sitio OpCo RSAs. As of September 30, 2022 , there was approximately $ 8.3 million of unamortized equity-based compensation expense related to the unvested Sitio OpCo RSAs. That expense is expected to be recognized over a weighted average period of approximately 3.7 years. As of and for the nine months ended September 30, 2021 there was no share-based compensation expense and no unamortized expense related to the Sitio OpCo RSAs. |
Warrants
Warrants | 9 Months Ended |
Sep. 30, 2022 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | 11. Warrants In July 2017, Falcon consummated its IPO of units, each consisting of one share of Class A Common Stock and one-half of one warrant (the “Public Warrants”). As a result of the Falcon Merger, the Company’s warrants were adjusted such that four whole Public Warrants became exercisable for one share of Class A Common Stock at an exercise price of $ 44.84 per share of Class A Common Stock. Pursuant to the Warrant Agreement, to the extent that any common stock dividend paid by the Company, when combined with other common stock dividends paid in the prior 365 days , exceeds $ 2.00 , it is categorized as an Extraordinary Dividend. Extraordinary Dividends reduce, penny for penny, the exercise price of the Warrants. As of September 30, 2022 , the exercise price of the Warrants was $ 44.73 after giving effect to the Reverse Stock Split and after the Extraordinary Dividend that was paid in August 2022. The Public Warrants will expire in August 2023 or earlier upon redemption or liquidation. The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $ 0.01 per warrant with not less than 30 days ’ notice provided to the Public Warrant holders. However, this redemption right can only be exercised if the last sale price of the Class A Common Stock equals or exceeds $ 72.0 0 per share, after giving effect to the Reverse Stock Split, for any 20 trading days within a 30 -day trading period ending three business days before we send the notice of redemption to the Public Warrant holders. Upon closing of the Company’s IPO, Osprey Sponsor, LLC (the “IPO Sponsor”) purchased an aggregate of 7,500,000 warrants (the “Private Placement Warrants”) at a price of $ 1.00 per warrant. As a result of the Falcon Merger, the Company’s Private Placement Warrants were adjusted such that four Private Placement Warrants are exercisable for one share of Class A Common Stock at an exercise price of $ 44.73 per share of Class A Common Stock. The Private Placement Warrants are identical to the Public Warrants discussed above, except (a) they will not be redeemable by the Company so long as they are held by the IPO Sponsor and (b) they may be exercisable by the holders on a cashless basis. The Company accounted for the Public Warrants and Private Placement Warrants in accordance with ASC 815 – Derivatives and Hedging (“ASC 815”). ASC 815 provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock. This applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative under ASC 815, including any freestanding financial instrument that is potentially settled in an entity’s own stock. Due to certain circumstances that could require the Company to settle the Warrants in cash, the Warrants have been classified as derivative liabilities, as opposed to an equity contract. Therefore, the Warrants were recorded at fair value at the time of the Falcon Merger and are remeasured at each reporting period with the change in fair value recorded in the statements of income. As of September 30, 2022 , there were 13,749,998 Public Warrants outstanding and 7,500,000 Private Placement Warrants outstanding. There were no Warrants outstanding for the Predecessor as of December 31, 2021. The fair value of the Public Warrants was determined using the readily observable publicly traded price (Level 1) as of the end of the reporting period. The fair value of the Public Warrants as of September 30, 2022 was $ 2.3 million. The fair value of the Private Placement Warrants was estimated utilizing a Black-Scholes model using the following range of significant unobservable inputs (Level 3) as of September 30, 2022: Stock price $ 22.11 Volatility 46.4 % Risk-free rate 3.98 % Dividend yield 9.05 % Term 0.9 years The following is a reconciliation of the beginning and ending balance for the Private Placement Warrant liability measured at fair value using significant unobservable inputs (Level 3) during the three months ended September 30, 2022 and from the date of the Falcon Merger through September 30, 2022 (in thousands). There were no warrants outstanding for the Predecessor prior to the date of the Falcon Merger. Three Months Ended 2022 Balance at June 30 $ 694 Decrease in fair value ( 263 ) Balance at September 30 $ 431 Nine Months Ended 2022 Balance at June 7 $ 2,213 Decrease in fair value ( 1,782 ) Balance at September 30 $ 431 |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Sep. 30, 2022 | |
Derivative Instrument Detail [Abstract] | |
Derivative Instruments | 12. Derivative Instruments Commodity Derivatives The Company may enter into commodity derivative contracts to manage its exposure to oil and gas price volatility associated with its production. These derivatives are not entered into for trading or speculative purposes. While the use of these instruments limits the downside risk of adverse commodity price changes, their use may also limit future cash flows from favorable commodity price changes. Depending on acquisitions consummated, changes in oil and gas futures markets, and management’s view of underlying supply and demand trends, the Company may increase or decrease its derivative positions. The Company’s commodity derivative contracts have not been designated as hedges for accounting purposes; therefore, all gains and losses on commodity derivatives are recognized in the Company’s statement of income. The Company may utilize fixed price swaps, basis swaps, and two- and three-way collars to manage commodity price risks. The Company may enter into these contracts when management believes that favorable future sales prices for the Company’s production can be secured and acquisitions consummated are accretive. Under fixed price swap agreements, when actual commodity prices upon settlement exceed the fixed price provided by the swap contracts, the Company pays the difference to the counterparty. When actual commodity prices upon settlement are less than the contractually provided fixed price, the Company receives the difference from the counterparty. The Company may also enter into basis swap contracts in order to hedge the difference between the New York Mercantile Exchange (“NYMEX”) index price and a local index price that is representative of the price received by many of our operators. Under collar agreements, the Company receives the difference between the published index price and a floor price if the index price is below the floor price or the Company pays the difference between the ceiling price and the index price if the index price is above the ceiling price. No amounts are paid or received if the index is between the floor and the ceiling. By utilizing a collar, the Company has fixed the minimum and maximum prices received on the underlying production. The Company’s oil and gas swap contracts as of September 30, 2022 are summarized below: Oil (NYMEX WTI) Remaining Term Bbl per Day Weighted Average Price per Bbl October 2022 - December 2022 2,200 $ 106.31 January 2023 - December 2023 3,050 $ 93.71 January 2024 - December 2024 3,300 $ 82.66 January 2025 - June 2025 1,100 $ 74.65 Gas (NYMEX Henry Hub) Remaining Term MMBtu per Day Weighted Average Price per MMBtu October 2022 - December 2022 500 $ 4.63 January 2023 - December 2023 500 $ 3.83 January 2024 - December 2024 500 $ 3.41 The Company’s oil and gas two-way commodity collar contracts as of September 30, 2022 are summarized below: Oil (NYMEX WTI) Remaining Term Bbl per Day Weighted Average Floor Price per Bbl Weighted Average Ceiling Price per Bbl January 2025 – June 2025 2,000 $ 60.00 $ 93.20 Gas (NYMEX Henry Hub) Remaining Term MMBtu per Day Weighted Average Floor Price per MMBtu Weighted Average Ceiling Price per MMBtu October 2022 - December 2022 6,000 $ 6.00 $ 9.69 January 2023 - December 2023 8,500 $ 4.82 $ 7.93 January 2024 - December 2024 11,400 $ 4.00 $ 7.24 January 2025 – June 2025 11,600 $ 3.31 $ 10.34 The Company was not party to any basis swaps or three-way collar contracts as of September 30, 2022. The Company was not party to any derivative contracts as of December 31, 2021. Financial Summary The following table presents a summary of the Company’s derivative instruments and where such values are recorded on the condensed consolidated balance sheet as of September 30, 2022 (in thousands): September 30, 2022 Balance sheet Fair value Asset derivatives not designated as hedges for accounting purposes: Commodity contracts Current assets $ 22,531 Commodity contracts Long-term assets 28,888 Total asset derivatives $ 51,419 Liability derivatives not designated as hedges for accounting purposes: Commodity contracts Current liabilities $ 150 Commodity contracts Long-term liabilities — Total liability derivatives $ 150 Net derivatives $ 51,269 The following table presents the gross fair values of recognized derivative assets and liabilities, the amounts offset under master netting arrangements with counterparties, and the resulting net amounts presented on the condensed consolidated balances sheet (in thousands): September 30, 2022 Gross Fair Value Gross Amounts Offset Net Fair Value Commodit y derivative assets $ 58,531 $ ( 7,112 ) $ 51,419 Commodity derivative liabilities $ ( 7,262 ) $ 7,112 $ ( 150 ) The following table is a summary of derivative gains and losses, and where such values are recorded in the condensed consolidated statements of income for the nine months ended September 30, 2022 and 2021 (in thousands): Three Months Ended Nine Months Ended Statement of September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Comm odity derivative gain Other income $ 34,613 $ — $ 53,508 $ — The fair value of commodity derivative instruments was determined using Level 2 inputs. Credit Risk in Derivative Instruments The Company is exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above. All commodity derivative counterparties are current lenders under our Revolving Credit Facility. Accordingly, the Company is not required to provide any credit support to its commodity derivative counterparties other than cross collateralization with the properties securing the Revolving Credit Facility. The Company’s commodity derivative contracts are documented with industry standard contracts known as a Schedule to the Master Agreement and International Swaps and Derivative Association, Inc. Master Agreement (“ISDA”). Typical terms for each ISDA include credit support requirements, cross default provisions, termination events, and set-off provisions. The Company has set-off provisions with its lenders that, in the event of counterparty default, allow the Company to set-off amounts owed under the Revolving Credit Facility or other general obligations against amounts owed to the Company for commodity derivative contract assets. |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | 13. Fair Value Measurement The Company is subject to ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”) . ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management. Management considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to management’s perceived risk of that instrument. Level 1 – Fair values are based on unadjusted quoted prices in active markets that are accessible at the measurement date of identical, unrestricted assets. Level 2 – Fair values are based on quoted prices for markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 3 – Inputs that are unobservable and significant to the overall fair value measurement and include situations where there is little, if any, market activity for the asset or liability. The Company’s proved oil and gas properties are assessed for impairment on a periodic basis. If the Company’s proved properties are determined to be impaired, the carrying basis of the properties is adjusted down to fair value. This represents a fair value measurement that would qualify as a non-recurring Level 3 fair value measurement. The fair value represents management’s best estimate using the inputs available as of September 30, 2022 and December 31, 2021 . No impairment of proved properties was recorded for the nine months ended September 30, 2022 and 2021. The fair value of the Company’s derivative instruments (Level 2) was estimated using quoted forward prices for commodities, discounted cash flows and credit risk adjustments. See “Note 12 – Derivative Instruments” for further information on the fair value of the Company’s derivative instruments. The fair value of the Company’s Public Warrants was determined using readily observable, publicly-traded prices (Level 1) for the warrants as of September 30, 2022. The fair value of the Company’s Private Placement Warrants were estimated utilizing a Black-Scholes model using a range of significant unobservable inputs (Level 3). See “Note 11 – Warrants” for further information on the fair value of the Company’s Public Warrants and Private Placement Warrants. The carrying values of cash, accrued revenue, accounts receivable, and trade payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. The carrying amount of debt outstanding pursuant to our 2026 Senior Notes and Revolving Credit Facility approximates fair value as the borrowings bear interest at variable rates and are reflective of market rates (Level 2). Certain nonfinancial assets and liabilities, such as assets and liabilities acquired in a business combination, are measured at fair value on a nonrecurring basis on the acquisition date and are subject to fair value adjustments under certain circumstances. Inputs used to determine such fair values are primarily based upon internally-developed engineering and geology models, publicly-available drilling disclosures, a risk-adjusted discount rate, and publicly-available data regarding mineral transactions consummated by other buyers and sellers (Level 3). Mineral assets not acquired through a business combination are measured at fair value on a nonrecurring basis on the acquisition date. The original purchase price of mineral assets is allocated between proved and unproved properties based on the estimated fair values. Inputs used to determine such fair values are primarily based upon internally-developed engineering and geology models, publicly-available drilling disclosures, a risk-adjusted discount rate, and publicly-available data regarding mineral transactions consummated by other buyers and sellers (Level 3). |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 14. Income Taxes The Company uses the asset and liability method for accounting for income taxes and updates its annual effective income tax rate on a quarterly basis. Under this method an estimated annual effective rate is applied to the Company’s year-to-date income but for discrete items which are recorded when settled. Our effective tax rate may vary quarterly because of the mix and timing of our actual earnings compared to annual projections which may affect periodic comparisons. Income tax expense was $ 2.6 million and $ 5.2 million for the three and nine months ended September 30, 2022 , respectively, resulting in an effective tax rate of 3.6 % and 2.8 % for the three and nine months ended September 30, 2022, respectively. Total income tax expense for the three and nine months ended September 30, 2022 differed from amounts computed by applying the U.S. federal statutory tax rate of 21 % to pre-tax book income for those periods principally because of the Company ’ s temporary equity. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 15. Commitments and Contingencies The following table is a schedule of future minimum lease commitments for leases of office space under operating leases as of September 30, 2022 (in thousands): Year Total Remainder of 2022 $ 183 2023 741 2024 758 2025 653 2026 643 2027 658 Thereafter 875 Total $ 4,511 Legal Proceedings From time to time, the Company may be involved in various legal proceedings, lawsuits, and other claims in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Management does not believe that the resolution of these matters will have a material adverse impact on our financial condition, cash flows or results of operations. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 16. Related Party Transactions The Predecessor was founded by Kimmeridge Energy Management Company, LLC (collectively with its affiliates, “Kimmeridge” or the “Manager”). Common Control Transaction The Predecessor had acquired oil and gas properties from separate limited partnerships whereby the general partner of the Predecessor and the general partner of the separate limited partnerships were affiliated. These transactions were accounted for as a reduction to partners’ capital as the affiliated entities were under common control. The following transaction was completed during the year ended December 31, 2021: Delaware Basin ORRIs Acquisition In October 2020, another partnership owned and managed by Kimmeridge acquired a 2.0 % (on an 8/8ths basis) overriding royalty interest in all of Callon’s operated assets in the Delaware Basin, proportionately reduced to Callon’s net revenue interest. In June 2021, the Predecessor entered into a definitive agreement to acquire 84 % of the Delaware Basin portion of the Chambers ORRI from Chambers Minerals, LLC, a subsidiary of Fund V. Immediately following the consummation of the contributions of assets to the Predecessor, Chambers HoldCo, LLC (the managing member of Chambers Minerals, LLC) was issued equity in DPM HoldCo. As the general partner of Fund V and the General Partner of the Predecessor were affiliated, the transaction was required to be and was subsequently approved by the Predecessor’s Limited Partner Advisory Committee in June 2021. The Chambers Acquisition was accounted for as an asset acquisition. The Chambers Acquisition was also accounted for as a transaction between entities under common control; the controlling ownership and management of the general partner of Fund V and the general partner of the Predecessor had significant overlap, including responsibility for the management, control, and direction of the business affairs of the respective partnerships. As the Predecessor and Fund V are entities under common control, the Predecessor recorded the acquisition utilizing the properties’ net book value. The properties acquired by the Predecessor had a historical net book value to Fund V at the time of sale of approximately $ 60.6 million ($ 45.3 million was allocated to unproved property and $ 15.3 million was allocated to proved property). Accordingly, the $ 37.5 million excess of the fair value of the properties above their net book value was recorded as a decrease to partners’ capital at the date of the transaction. Predecessor Management Fees The Predecessor entered into a management services arrangement with the Manager. For the three months ended September 30, 2021 , the Manager earned and was paid approximately $ 1.9 million in management fees relating to management services, respectively. No such fees were earned or paid for the three months ended September 30, 2022. For the nine months ended September 30, 2022 and 2021 the Manager earned and was paid approximately $ 3.2 million and $ 5.6 million in management fees relating to management services, respectively. This arrangement terminated in connection with the Falcon Merger. Cost Reimbursements and Allocations from Affiliates General and administrative expenses and certain capitalizable costs are not directly associated with the generation of the Predecessor’s revenues and include costs such as employee compensation, office expenses and fees for professional services. These costs were allocated on a “time spent” basis, a pro rata basis, or by another manner which was designed to be fair and equitable. Some of those costs were incurred on the Predecessor’s behalf and allocated to the Predecessor by the Manager and its affiliates and reimbursed by the Predecessor. These costs may not be indicative of costs incurred by the Predecessor had such services been provided by an unaffiliated company during the period presented. We have not estimated what these costs and expenses would be if they were incurred by the Predecessor on a standalone basis as such estimate would be impractical and lack precision. We believe the methodology utilized by Kimmeridge Operations, LLC (a subsidiary of the Manager, “Kimmeridge Operations”) and the Manager for the allocation of these costs to be reasonable. From time to time, the Predecessor reimbursed Kimmeridge Operations and the Manager for general and administrative expenses. Kimmeridge Operations staff performed land and administrative services on behalf of the Predecessor and the Predecessor reimbursed the Manager for investment and expenses prefunded on behalf of the Predecessor. For the three months ended September 30, 2021, the Predecessor reimbursed approximately $ 1.1 million for these costs. No such costs were reimbursed for the three months ended September 30, 2022. For the nine months ended September 30, 2022 and 2021, the Predecessor reimbursed approximately $ 105,000 and $ 3.5 million related to these services. As of September 30, 2022 there were no amounts due to Kimmeridge Operations or the Manager. As of December 31, 2021 , approximately $ 142,000 was due to the Manager. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | 17. Subsequent Events Management has evaluated all subsequent events from the balance sheet date through the date these financial were available to be issued for disclosure or recognition within these financial statements and no items requiring disclosure were identified except for the events identified below. Cash Dividends On November 8, 2022, the Company declared a cash dividend of $ 0.72 per share of Class A Common Stock with respect to the third quarter of 2022. The dividend is payable on November 30, 2022 to the stockholders of record at the close of business on November 21, 2022. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries and any entities in which the Company owns a controlling interest. All intercompany accounts and transactions have been eliminated in consolidation. Noncontrolling interests in the Company’s condensed consolidated financial statements represented the ownership interests in a subsidiary of the Predecessor which were owned by outside parties. Noncontrolling interests in consolidated subsidiaries was included as a component of equity in the Company’s condensed consolidated balance sheets. As a result of the Falcon Merger, the Company no longer has noncontrolling interests. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s estimates and classification of oil and natural gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production. Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering, and geological interpretation and judgment. Estimates of economically recoverable oil and natural gas reserves and future net cash flows necessarily depend upon several variable factors and assumptions. These factors and assumptions include historical production from the area compared with production from other producing areas, the assumed effect of regulations by governmental agencies, and assumptions governing future oil and natural gas prices. For these reasons, estimates of the economically recoverable quantities of expected oil and natural gas and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions could materially affect the estimated quantity of reserves, which could affect the carrying value of the Company’s oil and natural gas properties and/or the rate of depletion related to oil and natural gas properties. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases , which requires all leasing arrangements to be presented on the balance sheet as liabilities along with a corresponding asset. ASU 2016-02 does not apply to leases of mineral rights to explore for or use crude oil and natural gas. The ASU will replace most existing lease guidance in GAAP when it becomes effective. In January 2018, the FASB issued ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842 , to provide an optional practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued ASU 2018-11, Leases: Targeted Improvement s, which provides for another transition method, in addition to the existing transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption (i.e. comparative periods presented in the financial statements will continue to be in accordance with current GAAP (Topic 840, Leases )). The Company will adopt the new standard during the fiscal year ended December 31, 2022. The primary effect of adoption will be to record right-of-use assets and lease liabilities for office leases currently accounted for as operating leases under Topic 840. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses , which amends current impairment guidance by adding an impairment model (known as the current expected credit loss model (“CECL”)) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for annual periods beginning after December 15, 2022 and interim periods within those annual periods. The Company is currently evaluating the impact of adoption of this standard but does not believe it will have a material impact on the Company’s financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly-liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any significant losses from such investments. |
Accrued Revenue and Accounts Receivable | Accrued Revenue and Accounts Receivable Accrued revenue and accounts receivable represent amounts due to the Company and are uncollateralized, consisting primarily of royalty revenue receivable. Royalty revenue receivable consists of royalties due from operators for oil, natural gas and NGL volumes sold to purchasers. Those purchasers remit payment for production to the operator of the properties and the operator, in turn, remits payment to the Company. Receivables from third parties for which we did not receive actual production information, either due to timing delays or due to the unavailability of data at the time when revenues are recognized, are estimated. The Company’s accrued revenue and accounts receivable consisted of the following as of the dates indicated (in thousands): September 30, December 31, Accrued revenue $ 82,099 $ 36,177 Accounts receivable 1,415 25 Total accrued revenue and accounts receivable, net $ 83,514 $ 36,202 The Company routinely assesses the recoverability of all material accounts receivable to determine their collectability. The Company accrues a reserve to the allowance for doubtful accounts when it is probable that a receivable will not be collected and the amount of the reserve may be reasonably estimated. As of September 30, 2022, and December 31, 2021 , the Company had no reserves for uncollectible amounts or deemed any amounts to be uncollectible. |
Oil and Gas Properties | Oil and Gas Properties The Company uses the successful efforts method of accounting for oil and natural gas producing properties, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas . Under this method, costs to acquire mineral interests in oil and natural gas properties are capitalized. The costs of non-producing mineral interests and associated acquisition costs are capitalized as unproved properties pending the results of leasing efforts and drilling activities of Exploration and Production (“E&P”) operators on our interests. As unproved properties are determined to have proved reserves, the related costs are transferred to proved oil and gas properties. Capitalized costs for proved oil and natural gas mineral interests are depleted on a unit-of-production basis over total proved reserves. For depletion of proved oil and gas properties, interests are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic conditions. Impairment of Oil and Gas Properties The Company evaluates its producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing proved properties for impairment, the Company compares the expected undiscounted future cash flows of the proved properties to the carrying amount of the proved properties to determine recoverability. If the carrying amount of proved properties exceeds the expected undiscounted future cash flows, the carrying amount is written down to the properties’ estimated fair value, which is measured as the present value of the expected future cash flows of such properties. The factors used to determine fair value include estimates of proved reserves, future commodity prices, timing of future production, and a risk-adjusted discount rate. There was no impairment of proved properties for the three and nine months ended September 30, 2022 and 2021. The proved property impairment test is primarily impacted by future commodity prices, changes in estimated reserve quantities, estimates of future production, overall proved property balances, and depletion expense. If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation, we may incur proved property impairments in future periods. Unproved oil and gas properties are assessed periodically for impairment of value, and a loss is recognized at the time of impairment by charging capitalized costs to expense. Impairment is assessed when facts and circumstances indicate that the carrying value may not be recoverable, at which point an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Factors used in the assessment include but are not limited to commodity price outlooks and current and future operator activity in the respective Basins. The Company recognized no impairment of unproved properties for the three and nine months ended September 30, 2022 and 2021 . |
Other Property and Equipment | Other Property and Equipment Other property and equipment, which includes leasehold improvements, is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the useful lives of the assets. The Company recorded approximately $ 156,000 and $ 147,000 in depreciation for other property and equipment for the three months ended September 30, 2022 and 2021, respectively and $ 487,000 and $ 441,000 for the nine months ended September 30, 2022 and 2021, respectively. Additionally, we evaluate our other property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset that has been placed in service may not be recoverable. No impairment charge was recorded for the three and nine months ended September 30, 2022 and 2021 . |
Asset Acquisitions | Asset Acquisitions The Company generally accounts for acquisitions of mineral and royalty interests as asset acquisitions, through which it allocates the purchase price between proved and unproved properties, with no recognition of goodwill. The Company may use different techniques to determine the allocation, including the discounted net present value of estimated future net cash flows and market prices (where available). |
Business Combinations | Business Combinations The Company accounts for all business combinations, including the Falcon Merger, using the acquisition method, which involves the use of significant judgement. Under the acquisition method, a business combination is accounted for based on the fair value of the consideration given. The assets acquired and liabilities assumed are measured at fair value and the purchase price is allocated to the assets and liabilities based on these fair values. The excess of the cost of an acquisition, if any, over the fair value of the assets acquired and liabilities assumed is recognized as goodwill. The excess of the fair value of assets acquired and liabilities assumed over consideration given for an acquisition, if any, is recognized immediately in earnings as a gain. Determining the fair values of the assets and liabilities acquired involves the use of judgment as fair values are not always readily determinable. Different techniques may be used to determine fair values, including market prices (where available), comparisons to transactions for similar assets and liabilities and the net present value of estimated future cash flows, among others. |
Derivative Financial Instruments | Derivative Financial Instruments In order to manage its exposure to oil, natural gas, and NGL price volatility as well as interest rate volatility, the Company may periodically enter into derivative transactions, which may include commodity swap agreements, basis swap agreements, two- and three-way collars, and other similar agreements which help manage the price risk associated with the Company’s production. From time to time, the Company may periodically enter into various interest rate derivative contracts to manage exposures to changes in interest rates from variable rate obligations. These derivatives are not entered into for trading or speculative purposes. To the extent legal right of offset exists with a counterparty, the Company reports derivative assets and liabilities on a net basis. The Company has exposure to credit risk to the extent that the counterparty is unable to satisfy its settlement obligations. The Company actively monitors the creditworthiness of the counterparty and assesses the impact, if any, on its derivative positions. All commodity derivative counterparties are current lenders under the Company’s Revolving Credit Facility (defined below). Accordingly, the Company is not required to provide any credit support to its commodity derivative counterparties other than cross collateralization with the properties securing the Revolving Credit Facility. The Company records derivative instruments on its condensed consolidated balance sheets as either assets or liabilities measured at fair value and records changes in the fair value of derivatives in current earnings as they occur. Changes in the fair value of commodity derivatives, including gains or losses on settled derivatives, are classified as other income or loss on the Company’s condensed consolidated statements of income. The Company’s derivatives have not been designated as hedges for accounting purposes. |
Accounts Payable and Accrued Expenses | Accounts Payable and Accrued Expenses The Company’s accounts payable and accrued expenses consisted of the following as of the dates indicated (in thousands): September 30, December 31, Ad valorem taxes payable $ 5,348 $ 1,750 General and administrative 4,066 904 Payable to seller for pre-effective monies 2,438 104 Deferred financing costs 1,348 13 Other taxes payable 1,224 529 Interest expense 742 274 Capital expenditures 290 391 Other 421 175 Total accounts payable and accrued expenses $ 15,877 $ 4,140 |
Warrant Liability | Warrant Liability Falcon issued the Public Warrants and Private Placement Warrants (both defined below) in connection with its initial public offering in 2017. The Warrants remain outstanding following the Falcon Merger. Warrants are accounted for in accordance with applicable accounting guidance provided in ASC 815-40 – Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815”), as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. The Warrants were classified as liabilities and recorded at fair value at the time of the Falcon Merger and are subject to remeasurement at the end of each reporting period. Any change in fair value is recorded in our statements of income. |
Deferred Rent | Deferred Rent Under ASC 840 – Leases (“ASC 840”), the Company recognizes rental expense for operating leases on a straight-line basis over the term of the lease agreements. The deferred rent liability on the Company’s condensed consolidated balance sheets is attributable to the difference between rental expense (recognized on a straight-line basis) and the variable lease payments over the terms of the agreements. The Company leases office space under three operating leases. In December 2021, the Predecessor entered into a sublease of one of its office spaces with an unaffiliated third-party. |
Temporary Equity | Temporary Equity The Company accounts for the interests attributable to Class C Common Stock and Sitio OpCo Partnership Units as temporary equity as a result of certain redemption rights held as discussed in “Note 9 – Temporary Equity.” As such, the Company adjusts temporary equity to its maximum redemption amount at the balance sheet date, if higher than the carrying amount. Changes in the redemption value are recognized immediately as they occur, as if the end of the reporting period was also the redemption date for the instrument, with an offsetting entry to retained earnings or if a retained deficit, to additional paid-in capital. Temporary equity is reclassified to permanent equity upon conversion of Class C Common Stock (and an equivalent number of Sitio OpCo Partnership Units) or when holders of the Class C Common Stock no longer effectively control the Company’s determination of whether to make a cash payment upon the Sitio OpCo Partnership Unit holder’s exercise of its Redemption Right. See “Note 9 – Temporary Equity ” for additional information. |
Revenue Recognition | Revenue Recognition Mineral and royalty interests represent the right to receive revenues from the sale of oil, natural gas and NGL, less production taxes and post-production expenses. The prices of oil, natural gas, and NGL from the properties in which we own a mineral or royalty interest are primarily determined by supply and demand in the marketplace and can fluctuate considerably. As an owner of mineral and royalty interests, we have no working interest or operational control over the volumes and methods of sale of the oil, natural gas, and NGL produced and sold from our properties. We do not explore, develop, or operate the properties and, accordingly, do not incur any of the associated costs. Oil, natural gas, and NGL revenues from our mineral and royalty interests are recognized when control transfers at the wellhead. The Company also earns revenue related to lease bonuses. The Company earns lease bonus revenue by leasing its mineral interests to E&P companies. The Company recognizes lease bonus revenue when the lease agreement has been executed and payment is determined to be collectible. See “Note 4 – Revenue from Contracts with Customers” for additional disclosures regarding revenue recognition. Concentration of Revenue Collectability of the Company’s royalty revenue is dependent upon the financial condition of the Company’s operators, the entities they sell their products to, as well as general economic conditions in the industry. Although the Company is exposed to a concentration of credit risk, the Company does not believe the loss of any single operator or entity would materially impact the Company’s operating results as crude oil, natural gas and NGL are fungible products with well-established markets and numerous purchasers. If multiple entities were to cease making purchases at or around the same time, we believe there would be challenges initially, but there would be ample markets to handle the disruption. |
Share-Based Compensation | Share-Based Compensation The Company recognizes share-based compensation expense associated with restricted stock units, deferred share units, and restricted stock awards which are time-based awards and performance stock units, which are performance-based awards. The Company accounts for forfeitures of share-based compensation awards as they occur. Share-based compensation expense for all awards is recognized based on the estimated grant date fair value of the award. See “Note 10 – Share-Based Compensation ” for additional information. |
Merger-Related Transaction Costs | Merger-Related Transaction Costs General and administrative expense of $ 13.4 million and $ 24.1 million for the three and nine months ended September 30, 2022 included $ 3.6 million and $ 6.8 million, respectively, of costs incurred by the Company in connection with the Falcon Merger and the Brigham Merger (defined below). No such expense was recognized for the three and nine months ended September 30, 2021. See “Note 6 – Acquisitions ” for additional disclosures regarding the Brigham Merger. |
Falcon Reverse Merger Transaction | On June 7, 2022 (the “Closing Date”), the Company, consummated the previously announced merger transactions contemplated by the Agreement and Plan of Merger, dated as of January 11, 2022 (the “Falcon Reverse Merger Agreement”), by and among the Company, Sitio Royalties Operating Partnership, LP, a Delaware limited partnership (formerly known as Falcon Minerals Operating Partnership, LP) (“Sitio OpCo”), Ferrari Merger Sub A LLC, a Delaware limited liability company (“Falcon Merger Sub”), and DPM HoldCo, LLC, a Delaware limited liability company (“Desert Peak”), pursuant to which Falcon Merger Sub merged with and into Desert Peak (the “Falcon Merger”), with Desert Peak continuing as the surviving entity in the Falcon Merger as a wholly owned subsidiary of Sitio OpCo. Prior to the effective time of the Falcon Merger (the “Falcon Merger Effective Time”), on June 3, 2022, the Company filed with the Secretary of State of the State of Delaware the Third Amended and Restated Certificate of Incorporation to effect the previously announced four-to- one reverse stock split (the “Reverse Stock Split”) for all of the Company’s issued and outstanding shares of common stock and outstanding equity awards. As a result of the Reverse Stock Split, every four shares of the Company’s issued and outstanding Class C Common Stock, par value $0.0001 per share (“Class C Common Stock”), were automatically converted into one share of Class C Common Stock, without any change in the par value per share , and every four shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock” and, together with the Class C Common Stock, the “Common Stock”) were automatically converted into one share of Class A Common Stock, without any change in the par value per share. No fractional shares were outstanding following the Reverse Stock Split. In lieu of any fractional share, any holder of Class C Common Stock who would have otherwise received less than one share of Class C Common Stock received cash equal to the fair value of such holder’s fractional share as determined by the Board. In lieu of any fractional share of Class A Common Stock, the transfer agent for the Class A Common Stock, as exchange agent, aggregated and sold all fractional interests and paid to stockholders that would have been entitled to such fractional shares their pro rata share of the net proceeds derived from the sale of such fractional interests. Additionally, as a result of the Reverse Stock Split, the Company’s outstanding warrants (the “Warrants”) were adjusted such that four whole Warrants became exercisable for one share of Class A Common Stock at an exercise price of $ 44.84 per share of Class A Common Stock. Pursuant to the terms of the Falcon Reverse Merger Agreement, at the Falcon Merger Effective Time and following effectiveness of the Reverse Stock Split, the limited liability company interests in Desert Peak issued and outstanding immediately prior to the Falcon Merger Effective Time were converted into the right to receive an aggregate of (a) 61,905,339 shares of Class C Common Stock and (b) 61,905,339 common units representing limited partner interests in Sitio OpCo (the “Sitio OpCo Partnership Units”) (the total amount under clauses (a) and (b), the “Falcon Merger Consideration”). The Company’s stockholders immediately prior to the closing of the Falcon Merger continued to hold their shares of Class A Common Stock immediately after the closing of the Falcon Merger, subject to the Reverse Stock Split. As a result of the Falcon Merger, immediately following the Closing, (a) Chambers DPM HoldCo, LLC, a Delaware limited liability company (“Chambers”), and KMF DPM HoldCo, LLC, a Delaware limited liability company (“KMF” and, together with Chambers, “Kimmeridge”), together own approximately 43.5 % of the issued and outstanding Common Stock, (b) Source Energy Leasehold, LP, a Delaware limited partnership (“Source”), and Permian Mineral Acquisitions, LP, a Delaware limited partnership (“Permian” and, together with Source, the “Source Stockholders”), together own approximately 15.4 % of the issued and outstanding Common Stock, (c) Rock Ridge Royalty Company, LLC, a Delaware limited liability company (“Rock Ridge”), and Royal Resources L.P., a Delaware limited partnership (“Royal Resources” and, together with Rock Ridge, “Blackstone”), together own approximately 25.0 % of the issued and outstanding Common Stock and (d) the Company’s remaining stockholders own approximately 16.1 % of the issued and outstanding Common Stock. Following the Falcon Merger and the Reverse Stock Split, there were 12,088,546 shares of Class A Common Stock outstanding, 71,752,285 shares of Class C Common Stock outstanding and 5,312,499 shares of Class A Common Stock issuable upon exercise of outstanding Warrants. There was no change to the number of authorized shares of Common Stock. Shortly prior to the Closing Date, the Company changed its name from “Falcon Minerals Corporation” to “Sitio Royalties Corp.” |
Basis of Presentation | Basis of Presentation These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information. These unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, the accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the years ended December 31, 2021, 2020, and 2019 of the Predecessor included in the Current Report on Form 8-K filed with the SEC on June 10, 2022. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of September 30, 2022 and December 31, 2021, its results of operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2022. The company operates in one segment: oil and gas mineral and royalty interests. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is equal to its comprehensive income or loss. Certain prior period amounts have been reclassified to conform to the current period presentation. Prior to the closing of the Falcon Merger, the Company’s financial statements that were filed with the SEC were derived from the accounting records of Falcon Minerals Corporation. The Falcon Merger was accounted for as a reverse merger and a business combination for accounting purposes using the acquisition method of accounting with Desert Peak as the accounting acquirer. As such, the historical consolidated financial statements included in this report are based on the financial statements of Desert Peak’s predecessor, Kimmeridge Mineral Fund, LP (“KMF” or the “Predecessor”), prior to our corporate reorganization. Prior the Falcon Merger, Desert Peak was consolidated into the results of KMF. KMF’s surface rights, which generate revenue from the sale of water, payments for rights-of-way and other rights associated with the ownership of the surface acreage, are included in our historical financial statements. The assets contributed by KMF in the Falcon Merger did not include KMF’s surface rights. See “Note 6 – Acquisitions” for additional information. The condensed consolidated financial statements included in this report reflect the historical operating results of KMF prior to June 7, 2022 and the consolidated results of the Company following June 7, 2022. The balance sheet reflects the assets and liabilities of the Company, which include the assets and liabilities of KMF Land, LLC (a subsidiary of the Predecessor) (“KMF Land”) at their historical costs and the assets and liabilities of Falcon Mineral Corporation measured at fair value as of June 7, 2022. Earnings per share is calculated based on the consolidated results of the Company for the period June 7, 2022 through September 30, 2022. Subsequent to the Falcon Merger, the Company has acquired additional surface rights in connection with multiple acquisitions. The results of each subsequent acquisition are included in the combined company results for the period following the consummation of such acquisition. Except as otherwise indicated or required by the context, all references in this quarterly report to the “Company,” “Sitio,” “we,” “us,” “our” or similar terms refer to (i) for periods prior to the closing of the Falcon Merger, Desert Peak and its subsidiaries and (ii) for periods subsequent to the closing of the Falcon Merger, Sitio Royalties Corp. and its subsidiaries, including Desert Peak. All references in this Quarterly Report on Form 10-Q to “Falcon” refer to Sitio Royalties Corp. and its subsidiaries for periods prior to the Falcon Merger. JOBS Act The Company is an “emerging growth company” (“EGC”) as defined by the JOBS Act. The JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to avail itself of this exemption and, as a result, its financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable. The Company will lose its status as an EGC on December 31, 2022, which is the fiscal year following the fifth anniversary of the date of Falcon’s initial public offering. |
Income Taxes | Income Taxes The Company, under ASC 740 – Income Taxes (“ASC 740”), uses the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (a) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (b) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future periods when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. A valuation allowance will be provided for deferred tax assets if it is more likely than not the deferred tax assets will not be realized. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits (if any) as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2022 and December 31, 2021. Texas imposes a franchise tax, commonly referred to as the Texas margin tax, which is considered an income tax, at a rate of 0.75 % on gross revenues less certain deductions, as specifically set forth in the Texas margin tax statute. A significant portion of our mineral and royalty interests are located in Texas. As such, the Company recognized approximately $ 474,000 and $ 143,000 , respectively, for the three months ended September 30, 2022 and 2021 and $ 1.4 million and $ 233,000 , respectively, for the nine months ended September 30, 2022 and 2021, of state income tax expense, primarily attributable to the Texas margin tax. The Company’s ASC 740 balances and income tax expense reporting is significantly affected by the portion of the Company’s consolidated net income attributable to the holders of Sitio OpCo Partnership Units, which is not taxable income to the Company. Since the Company’s ownership interest in Sitio OpCo is 15.2 %, only tax attributes allocated to the Company are recorded at this level, except for Texas Gross Margins tax which is imposed on Sitio OpCo and reported herein. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Accrued Revenue and Accounts Receivable | The Company’s accrued revenue and accounts receivable consisted of the following as of the dates indicated (in thousands): September 30, December 31, Accrued revenue $ 82,099 $ 36,177 Accounts receivable 1,415 25 Total accrued revenue and accounts receivable, net $ 83,514 $ 36,202 |
Schedule of Accounts Payable and Accrued Expenses | The Company’s accounts payable and accrued expenses consisted of the following as of the dates indicated (in thousands): September 30, December 31, Ad valorem taxes payable $ 5,348 $ 1,750 General and administrative 4,066 904 Payable to seller for pre-effective monies 2,438 104 Deferred financing costs 1,348 13 Other taxes payable 1,224 529 Interest expense 742 274 Capital expenditures 290 391 Other 421 175 Total accounts payable and accrued expenses $ 15,877 $ 4,140 |
Falcon Reverse Merger (Tables)
Falcon Reverse Merger (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Business Combinations [Abstract] | |
Schedule of Consideration for Falcon Merger | The following table summarized the consideration for the Falcon Merger: Falcon Common Stock — issued and outstanding as of June 7, 2022: 21,935,492 Class A Common Stock price on June 7, 2022 $ 29.12 Total consideration and fair value $ 638,761,527 |
Schedule of Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed | The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed on June 7, 2022 (in thousands): Falcon fair values: Cash $ 4,484 Accrued revenue and accounts receivable 17,526 Unproved oil and gas properties 491,424 Proved oil and gas properties 200,773 Property and equipment 278 Current liabilities ( 23,408 ) Long-term debt ( 43,105 ) Deferred tax liability ( 2,598 ) Warrant liability ( 6,612 ) Total consideration and fair value $ 638,762 |
Schedule of Unaudited Pro Forma Financial Information | The unaudited pro forma financial information for the three and nine months ended September 30, 2022 and 2021, respectively, gives effect to the Falcon Merger as if it had occurred on January 1, 2021 (in thousands, except per share amounts): Three Months Ended For the Nine Months 2022 2021 2022 2021 Total revenues $ 115,497 $ 52,923 $ 308,989 $ 118,308 Pro forma income available to common stockholders 12,230 3,785 28,802 6,362 Net income per share: Basic $ 0.96 $ 0.30 $ 2.27 $ 0.50 Diluted $ 0.96 $ 0.30 $ 2.25 $ 0.50 |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Disaggregation of Revenue [Abstract] | |
Summary of Disaggregated Revenues from Sales | During the three and nine months ended September 30, 2022 and 2021, the disaggregated revenues from sales of oil, natural gas and NGLs were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Crude oil sales $ 79,333 $ 24,199 $ 193,171 $ 49,040 Natural gas sales 19,086 4,827 39,186 11,118 NGL sales 10,342 4,126 27,862 9,063 Total royalty revenues $ 108,761 $ 33,152 $ 260,219 $ 69,221 |
Oil and Gas Properties (Tables)
Oil and Gas Properties (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Summary of Oil and Natural Gas Properties | The following is a summary of oil and natural gas properties as of September 30, 2022 and December 31, 2021 (in thousands): Oil and natural gas properties: September 30, December 31, Unproved properties $ 1,473,142 $ 817,873 Proved properties 1,042,257 447,369 Oil and natural gas properties, gross 2,515,399 1,265,242 Accumulated depletion and impairment ( 184,989 ) ( 118,175 ) Oil and natural gas properties, net $ 2,330,410 $ 1,147,067 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Prepay Premium determined Based on Length of Time Between Issuance Date and Prepayment | Sitio OpCo may elect, at its option, to prepay the 2026 Senior Notes in whole or in part at any time, subject to (except as described below) payment of a premium determined in accordance with the table below based on the length of time between the issuance date and the prepayment date: Period Premium Months 0 - 12 Customary “make-whole” premium plus 3.00 % Months 13 - 24 3.00 % Months 25 - 36 1.00 % Months 37 - 48 0.00 % |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Schedule of basic and diluted earnings per Share | The following table sets forth the calculation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data): For the Three Months For the Nine Months 2022 2021 2022 2021 Numerator: Net income attributable to Class A stockholders $ 9,139 $ — $ 15,299 $ — Less: Earnings allocated to participating securities ( 284 ) — ( 284 ) — Net income attributable to Class A stockholders - basic $ 8,855 $ — $ 15,015 $ — Plus: net income attributable to temporary equity — — — — Net income attributable to Class A stockholders - diluted $ 8,855 $ — $ 15,015 $ — Denominator: Weighted average shares outstanding - basic 12,703 12,665 Effect of dilutive securities — — Weighted average shares outstanding - diluted 12,703 12,665 Net income per common share - basic $ 0.70 $ 1.19 Net income per common share - diluted $ 0.70 $ 1.19 |
Schedule of computation of diluted earnings per share | The Company had the following shares that were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive for the periods presented but could potentially dilute basic earnings per share in future periods (in thousands): Three Months Ended Nine Months Ended 2022 2021 2022 2021 Warrants 5,312 5,312 Unvested share-based compensation awards 704 702 Total 6,016 6,014 |
Temporary Equity (Tables)
Temporary Equity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Temporary Equity Disclosure [Abstract] | |
Summary of Recorded Adjustments to Temporary Equity | Temporary equity adjustments Balance – June 7, 2022 (1) $ 1,395,799 Share-based compensation 148 Conversion of Class C Common Stock to Class A Common Stock ( 11,909 ) Net income attributable to temporary equity 26,271 Adjustment of temporary equity to redemption amount (2) 254,368 Balance – June 30, 2022 $ 1,664,677 Share-based compensation $ 568 Conversion of Class C Common Stock to Class A Common Stock ( 124 ) Distributions to holders of temporary equity ( 50,510 ) Net income attributable to temporary equity 59,872 Adjustment of temporary equity to redemption amount (3) ( 101,282 ) Balance – September 30, 2022 $ 1,573,201 (1) Based on 71,752,285 shares of Class C Common Stock outstanding at June 7, 2022. (2) Based on 71,140,064 shares of Class C Common Stock outstanding and Class A Common Stock 5-day volume-weighted average price of $ 23.40 at June 30, 2022. (3) Based on 71,134,752 shares of Class C Common Stock outstanding and Class A Common Stock 5-day volume-weighted average price of $ 22.12 at September 30, 2022 . |
Share-based Compensation (Table
Share-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Restricted Stock Units [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Summary of activity in unvested RSUs, DSUs, PSUs and unvested RSAs | The following table summarizes activity related to unvested RSUs for the nine months ended September 30, 2022. Restricted Stock Units Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 347,291 29.04 Forfeited ( 348 ) 29.12 Vested — — Unvested at September 30, 2022 346,943 $ 29.04 |
Deferred Share Units [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Summary of activity in unvested RSUs, DSUs, PSUs and unvested RSAs | The following table summarizes activity related to unvested DSUs for the nine months ended September 30, 2022. Deferred Share Units Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 62,586 28.80 Forfeited — — Vested — — Unvested at September 30, 2022 62,586 $ 28.80 |
Performance Stock Units [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Summary of activity in unvested RSUs, DSUs, PSUs and unvested RSAs | The following table summarizes activity related to unvested PSUs for the nine months ended September 30, 2022. Preferred Stock Units Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 300,913 39.11 Forfeited — — Vested — — Unvested at September 30, 2022 300,913 $ 39.11 |
Summary of Performance Targets Associated | The performance targets associated with the PSU award structure are outlined below: Annualized Percentage of Base of Range Less than 0 % 0 % Threshold 0 % 50 % Target 10 % 100 % Maximum 20 % 200 % |
Schedule of weighted average assumptions to determine fair value | The following table summarizes the weighted average fair value of the PSUs and the assumptions used to determine the fair value: 2022 Volatility 67.23 % Risk-free rate 2.89 % Dividend yield 0.00 % Weighted average fair value $ 39.11 |
Sitio OpCo Restricted Stock Awards [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Summary of activity in unvested RSUs, DSUs, PSUs and unvested RSAs | The following table summarizes activity related to unvested Sitio OpCo RSAs for the nine months ended September 30, 2022 Sitio OpCo Number of Shares Grant Date Unvested at January 1, 2022 — $ — Granted 309,527 29.12 Forfeited — — Vested — — Unvested at September 30, 2022 309,527 $ 29.12 |
Warrants (Tables)
Warrants (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of Range of Significant Unobservable Inputs Used in Measurement of Fair Value of Warrants | The fair value of the Private Placement Warrants was estimated utilizing a Black-Scholes model using the following range of significant unobservable inputs (Level 3) as of September 30, 2022: Stock price $ 22.11 Volatility 46.4 % Risk-free rate 3.98 % Dividend yield 9.05 % Term 0.9 years |
Schedule of Reconciliation of Beginning and Ending Balance for Private Placement Warrant Liability Measured at Fair Value | The following is a reconciliation of the beginning and ending balance for the Private Placement Warrant liability measured at fair value using significant unobservable inputs (Level 3) during the three months ended September 30, 2022 and from the date of the Falcon Merger through September 30, 2022 (in thousands). There were no warrants outstanding for the Predecessor prior to the date of the Falcon Merger. Three Months Ended 2022 Balance at June 30 $ 694 Decrease in fair value ( 263 ) Balance at September 30 $ 431 Nine Months Ended 2022 Balance at June 7 $ 2,213 Decrease in fair value ( 1,782 ) Balance at September 30 $ 431 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Derivative [Line Items] | |
Summary of Derivative Instruments | The following table presents a summary of the Company’s derivative instruments and where such values are recorded on the condensed consolidated balance sheet as of September 30, 2022 (in thousands): September 30, 2022 Balance sheet Fair value Asset derivatives not designated as hedges for accounting purposes: Commodity contracts Current assets $ 22,531 Commodity contracts Long-term assets 28,888 Total asset derivatives $ 51,419 Liability derivatives not designated as hedges for accounting purposes: Commodity contracts Current liabilities $ 150 Commodity contracts Long-term liabilities — Total liability derivatives $ 150 Net derivatives $ 51,269 |
Summary of Gross Fair Values of Recognized Derivative Assets and Liabilities, Amounts Offset Under Master Netting Arrangements With Counterparties and Resulting Net Amounts | The following table presents the gross fair values of recognized derivative assets and liabilities, the amounts offset under master netting arrangements with counterparties, and the resulting net amounts presented on the condensed consolidated balances sheet (in thousands): September 30, 2022 Gross Fair Value Gross Amounts Offset Net Fair Value Commodit y derivative assets $ 58,531 $ ( 7,112 ) $ 51,419 Commodity derivative liabilities $ ( 7,262 ) $ 7,112 $ ( 150 ) |
Summary of Derivative Gains and Losses | The following table is a summary of derivative gains and losses, and where such values are recorded in the condensed consolidated statements of income for the nine months ended September 30, 2022 and 2021 (in thousands): Three Months Ended Nine Months Ended Statement of September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Comm odity derivative gain Other income $ 34,613 $ — $ 53,508 $ — |
Oil and Gas Swap Contracts [Member] | |
Derivative [Line Items] | |
Schedule of Oil and Gas Contracts | The Company’s oil and gas swap contracts as of September 30, 2022 are summarized below: Oil (NYMEX WTI) Remaining Term Bbl per Day Weighted Average Price per Bbl October 2022 - December 2022 2,200 $ 106.31 January 2023 - December 2023 3,050 $ 93.71 January 2024 - December 2024 3,300 $ 82.66 January 2025 - June 2025 1,100 $ 74.65 Gas (NYMEX Henry Hub) Remaining Term MMBtu per Day Weighted Average Price per MMBtu October 2022 - December 2022 500 $ 4.63 January 2023 - December 2023 500 $ 3.83 January 2024 - December 2024 500 $ 3.41 |
Oil and Gas Two-way Commodity Collar Contracts [Member] | |
Derivative [Line Items] | |
Schedule of Oil and Gas Contracts | The Company’s oil and gas two-way commodity collar contracts as of September 30, 2022 are summarized below: Oil (NYMEX WTI) Remaining Term Bbl per Day Weighted Average Floor Price per Bbl Weighted Average Ceiling Price per Bbl January 2025 – June 2025 2,000 $ 60.00 $ 93.20 Gas (NYMEX Henry Hub) Remaining Term MMBtu per Day Weighted Average Floor Price per MMBtu Weighted Average Ceiling Price per MMBtu October 2022 - December 2022 6,000 $ 6.00 $ 9.69 January 2023 - December 2023 8,500 $ 4.82 $ 7.93 January 2024 - December 2024 11,400 $ 4.00 $ 7.24 January 2025 – June 2025 11,600 $ 3.31 $ 10.34 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
Schedule of Future Minimum Lease Commitments | The following table is a schedule of future minimum lease commitments for leases of office space under operating leases as of September 30, 2022 (in thousands): Year Total Remainder of 2022 $ 183 2023 741 2024 758 2025 653 2026 643 2027 658 Thereafter 875 Total $ 4,511 |
Description of Business and B_2
Description of Business and Basis of Presentation (Details) | 9 Months Ended | ||
Jun. 07, 2022 $ / shares shares | Jun. 03, 2022 | Sep. 30, 2022 OperatingSegments | |
Business Combination, Separately Recognized Transactions [Line Items] | |||
Number of operating segments | OperatingSegments | 1 | ||
Falcon Minerals [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Reverse stock split conversion ratio | 0.25 | ||
Reverse stock split | four-to-one | four-to-one | |
Warrants, exercise price | $ / shares | $ 44.84 | ||
Warrant exercise description | the Company’s outstanding warrants (the “Warrants”) were adjusted such that four whole Warrants became exercisable for one share of Class A Common Stock at an exercise price of $44.84 per share of Class A Common Stock. | ||
Falcon Minerals [Member] | DPM HoldCo, LLC, KMF DPM HoldCo, LLC and Kimmeridge [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Ownership percentage by related parties | 43.50% | ||
Falcon Minerals [Member] | Source Energy Leasehold, LP and Permian Mineral Acquisitions, LP [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Ownership percentage by related parties | 15.40% | ||
Falcon Minerals [Member] | Rock Ridge Royalty Company, LLC and Royal Resources L.P. [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Ownership percentage by related parties | 25% | ||
Falcon Minerals [Member] | Other Shareholders [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Ownership percentage by related parties | 16.10% | ||
Falcon Minerals [Member] | Class C common stock [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Conversion of shares | 61,905,339 | ||
Shares outstanding after merger | 71,752,285 | ||
Falcon Minerals [Member] | Class A common stock [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Shares outstanding after merger | 12,088,546 | ||
Common stock issuable upon exercise of outstanding warrants | 5,312,499 | ||
Falcon Minerals [Member] | Common Units Limited Partner Interests [Member] | |||
Business Combination, Separately Recognized Transactions [Line Items] | |||
Conversion of shares | 61,905,339 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Summary of Significant Accounting Policy [Line Items] | |||||
Reserves for uncollectible amounts or deemed any amounts to be uncollectible | $ 0 | $ 0 | $ 0 | ||
Impairment of proved oil and natural gas properties | 0 | $ 0 | 0 | $ 0 | |
Impairment of unproved properties | 0 | 0 | 0 | 0 | |
State income taxes | 474,000 | 143,000 | 1,400,000 | 233,000 | |
General and administrative expense | $ 13,381,000 | 954,000 | 24,043,000 | 2,232,000 | |
General and administrative expense including affiliates expense | $ 24,100,000 | ||||
Percentage of franchise tax on gross revenues less certain deductions | 0.75% | ||||
Sitio OpCo | |||||
Summary of Significant Accounting Policy [Line Items] | |||||
Ownership percentage | 15.20% | 15.20% | |||
Merger-Related Transaction Costs [Member] | |||||
Summary of Significant Accounting Policy [Line Items] | |||||
General and administrative expense | $ 3,600,000 | 0 | $ 6,800,000 | 0 | |
Other Property and Equipment [Member] | |||||
Summary of Significant Accounting Policy [Line Items] | |||||
Depreciation | 156,000 | 147,000 | 487,000 | 441,000 | |
Impairment charge | $ 0 | $ 0 | $ 0 | $ 0 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Summary of Accrued Revenue and Accounts Receivable (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Accrued revenue and accounts receivable [Abstract] | ||
Accrued revenue | $ 82,099 | $ 36,177 |
Accounts receivable | 1,415 | 25 |
Total accrued revenue and accounts receivable | $ 83,514 | $ 36,202 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Accrued Liabilities and Other Liabilities [Abstract] | ||
Ad valorem taxes payable | $ 5,348 | $ 1,750 |
General and administrative | 4,066 | 904 |
Payable to seller for pre-effective monies | 2,438 | 104 |
Deferred financing costs | 1,348 | 13 |
Other taxes payable | 1,224 | 529 |
Interest expense | 742 | 274 |
Capital expenditures | 290 | 391 |
Other | 421 | 175 |
Total accounts payable and accrued expenses | $ 15,877 | $ 4,140 |
Falcon Reverse Merger (Details
Falcon Reverse Merger (Details Textual) | 3 Months Ended | 9 Months Ended | |||
Jun. 07, 2022 USD ($) NetRoyaltyAcres shares | Jun. 03, 2022 $ / shares | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2022 USD ($) $ / shares | Dec. 31, 2021 $ / shares | |
Revolving Credit Facility [Member] | |||||
Business Acquisition [Line Items] | |||||
Repayment of borrowings | $ | $ 43,100,000 | ||||
Class C common stock [Member] | |||||
Business Acquisition [Line Items] | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Class A common stock [Member] | |||||
Business Acquisition [Line Items] | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Falcon Minerals [Member] | |||||
Business Acquisition [Line Items] | |||||
Acquisition of net royalty acres | NetRoyaltyAcres | 34,000 | ||||
Reverse stock split | four-to-one | four-to-one | |||
Transaction costs associated with Merger | $ | $ 166,000 | $ 3,400,000 | |||
Falcon Minerals [Member] | Class C common stock [Member] | |||||
Business Acquisition [Line Items] | |||||
Common stock, conversion terms | every four shares of the Company’s issued and outstanding Class C Common Stock, par value $0.0001 per share (“Class C Common Stock”), were automatically converted into one share of Class C Common Stock, without any change in the par value per share | every four shares of the Company’s issued and outstanding Class C Common Stock were automatically converted into one share of Class C Common Stock, without any change in the par value per share | |||
Conversion of shares | shares | 61,905,339 | ||||
Falcon Minerals [Member] | Class A common stock [Member] | |||||
Business Acquisition [Line Items] | |||||
Common stock, conversion terms | every four shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock” and, together with the Class C Common Stock, the “Common Stock”) were automatically converted into one share of Class A Common Stock, without any change in the par value per share. | every four shares of the Company’s Class A Common Stock were automatically converted into one share of Class A Common Stock, without any change in the par value per share | |||
Exercise price per share | $ 44.84 | ||||
Falcon Minerals [Member] | Class A common stock [Member] | Warrants [Member] | |||||
Business Acquisition [Line Items] | |||||
Warrants, conversion terms | four whole Warrants became exercisable for one share of Class A Common Stock at an exercise price of $44.84 per share of Class A Common Stock. | ||||
Falcon Minerals [Member] | Common Units Limited Partner Interests [Member] | |||||
Business Acquisition [Line Items] | |||||
Conversion of shares | shares | 61,905,339 |
Falcon Reverse Merger - Schedul
Falcon Reverse Merger - Schedule of Consideration for Merger (Details) - USD ($) | Jun. 07, 2022 | Sep. 30, 2022 |
Business Acquisition [Line Items] | ||
Common stock, shares outstanding | 71,134,752 | |
Falcon Minerals [Member] | ||
Business Acquisition [Line Items] | ||
Common stock, shares issued | 21,935,492 | |
Common stock, shares outstanding | 21,935,492 | |
Common stock price | $ 29.12 | |
Total consideration and fair value | $ 638,761,527 |
Falcon Reverse Merger - Sched_2
Falcon Reverse Merger - Schedule of Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed (Details) - Falcon Minerals [Member] | Jun. 07, 2022 USD ($) |
Business Acquisition [Line Items] | |
Cash | $ 4,484,000 |
Accrued revenue and accounts receivable | 17,526,000 |
Unproved oil and gas properties | 491,424,000 |
Proved oil and gas properties | 200,773,000 |
Property and equipment | 278,000 |
Current liabilities | (23,408,000) |
Long-term debt | (43,105,000) |
Deferred tax liability | (2,598,000) |
Warrant liability | (6,612,000) |
Total consideration and fair value | $ 638,761,527 |
Falcon Reverse Merger - Sched_3
Falcon Reverse Merger - Schedule of Unaudited Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Business Acquisition, Pro Forma Information [Abstract] | ||||
Total revenues | $ 115,497 | $ 52,923 | $ 308,989 | $ 118,308 |
Pro forma income from operations | $ 12,230 | $ 3,785 | $ 28,802 | $ 6,362 |
Basic | $ 0.96 | $ 0.30 | $ 2.27 | $ 0.50 |
Diluted | $ 0.96 | $ 0.30 | $ 2.25 | $ 0.50 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Summary of Disaggregated Revenues From Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Disaggregation of Revenue [Line Items] | ||||
Total royalty revenues | $ 108,761 | $ 33,152 | $ 260,219 | $ 69,221 |
Crude Oil Sales [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total royalty revenues | 79,333 | 24,199 | 193,171 | 49,040 |
Natural Gas Sales [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total royalty revenues | 19,086 | 4,827 | 39,186 | 11,118 |
NGL Sales [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total royalty revenues | $ 10,342 | $ 4,126 | $ 27,862 | $ 9,063 |
Revenue from Contracts with C_4
Revenue from Contracts with Customers (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Payment receives description | The Company typically receives payment for oil, natural gas and NGL sales within 30 to 90 days of the month of delivery after initial production from the well. Such periods can extend longer due to factors outside of our control. |
Oil and Gas Properties - Summar
Oil and Gas Properties - Summary of Oil and Natural Gas Properties (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Oil and natural gas properties: | ||
Unproved properties | $ 1,473,142 | $ 817,873 |
Proved properties | 1,042,257 | 447,369 |
Oil and natural gas properties, gross | 2,515,399 | 1,265,242 |
Accumulated depletion and impairment | (184,989) | (118,175) |
Oil and natural gas properties, net | $ 2,330,410 | $ 1,147,067 |
Oil and Gas Properties (Details
Oil and Gas Properties (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | ||||
Acquired mineral and royalty interests | $ 692,200,000 | $ 571,200,000 | ||
Mineral acquisition costs | 558,100,000 | 26,800,000 | ||
Payment related to purchase price adjustments from prior property sales | 103,000 | |||
Depletion expense | $ 31,800,000 | $ 12,700,000 | $ 66,800,000 | $ 28,200,000 |
Leases - Schedule of Undiscount
Leases - Schedule of Undiscounted Cash Flows for Operating Lease Liabilities (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Lease obligations | |
Total | $ 4,511 |
2023 | 741 |
2024 | 758 |
2025 | 653 |
2026 | $ 643 |
Acquisitions (Details Textual)
Acquisitions (Details Textual) $ / shares in Units, $ in Millions | 1 Months Ended | |||||||
Sep. 06, 2022 $ / shares shares | Jul. 26, 2022 USD ($) NetRoyaltyAcres | Aug. 31, 2021 USD ($) a | Jun. 30, 2021 USD ($) a | Jun. 30, 2022 USD ($) a | Aug. 31, 2021 USD ($) a | Jun. 30, 2021 USD ($) a | Oct. 31, 2020 | |
Rock Ridge Royalty, LLC [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Net royalty acres | a | 18,700 | 18,700 | ||||||
Total consideration | $ 258.6 | |||||||
Transaction costs capitalized | $ 1.1 | |||||||
Rock Ridge Royalty, LLC [Member] | Unproved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 190.3 | |||||||
Rock Ridge Royalty, LLC [Member] | Proved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 68.3 | |||||||
Foundation Minerals, LLC [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Net royalty acres | a | 19,700 | |||||||
Total consideration | $ 320.6 | |||||||
Transaction costs capitalized | 0.8 | |||||||
Foundation Minerals, LLC [Member] | Unproved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | 189.3 | |||||||
Foundation Minerals, LLC [Member] | Proved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 131.3 | |||||||
Falcon Acquisition [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Net royalty acres | a | 34,000 | |||||||
Source Acquisition [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Net royalty acres | a | 25,000 | 25,000 | ||||||
Total consideration | $ 252.9 | |||||||
Transaction costs capitalized | $ 3.5 | |||||||
Source Acquisition [Member] | Unproved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 183.2 | |||||||
Source Acquisition [Member] | Proved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 69.7 | |||||||
Momentum [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of net royalty acres | NetRoyaltyAcres | 12,200 | |||||||
Purchase price | $ 213.3 | |||||||
Transaction costs capitalized | 0.7 | |||||||
Momentum [Member] | Unproved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | 51.5 | |||||||
Momentum [Member] | Proved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 161.8 | |||||||
Brigham Class A Common Stock [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Par value | $ / shares | $ 0.01 | |||||||
Brigham Class B Common Stock [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Par value | $ / shares | $ 0.01 | |||||||
Chambers Minerals, LLC [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Acquisition percentage | 84% | 84% | 84% | |||||
Business acquisition net book value from sale of assets | $ 60.6 | $ 60.6 | ||||||
Excess of fair value of properties above net book value | 37.5 | 37.5 | ||||||
Chambers Minerals, LLC [Member] | Unproved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Business acquisition net book value from sale of assets | 45.3 | |||||||
Chambers Minerals, LLC [Member] | Proved Oil And Gas Property [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Business acquisition net book value from sale of assets | $ 15.3 | $ 15.3 | ||||||
Chambers Minerals, LLC [Member] | Kimmeridge [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Royalty interest ownership percentage | 2% | |||||||
Brigham Merger [Member] | Sitio Stockholders [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Percentage of stockholding by stockholders after Merger | 54% | |||||||
Brigham Merger [Member] | Brigham Stockholders [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Percentage of stockholding by stockholders after Merger | 46% | |||||||
Brigham Merger [Member] | Sitio Class A Common Stock [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Par value | $ / shares | $ 0.0001 | |||||||
Conversion of shares | shares | 1.133 | |||||||
Brigham Merger [Member] | Sitio Class C Common Stock [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Par value | $ / shares | $ 0.0001 | |||||||
Conversion of shares | shares | 1.133 | |||||||
Brigham Merger [Member] | Opco LP Units [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Conversion of shares | shares | 1.133 |
Debt (Details)
Debt (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||
Sep. 21, 2022 | Jun. 07, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Jul. 08, 2022 | Jun. 24, 2022 | Dec. 31, 2021 | |
Line Of Credit Facility [Line Items] | |||||||||
Aggregate principal amount | $ 450,000,000 | ||||||||
Proceeds from notes | 425,000,000 | $ 425,000,000 | |||||||
Loss on extinguishment of debt | $ (11,500,000) | $ (11,487,000) | $ (11,487,000) | ||||||
Minimum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 0.10% | ||||||||
Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 0.25% | ||||||||
Bridge Loan Facility [Member] | 364-Day Bridge Loan Agreement [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Aggregate principal amount | $ 425,000,000 | ||||||||
Interest expense | 3,300,000 | $ 0 | $ 3,400,000 | $ 0 | |||||
Revolving Credit Facility [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Maturity date | Jun. 30, 2026 | ||||||||
Outstanding balance | $ 227,000,000 | $ 227,000,000 | $ 134,000,000 | ||||||
Weighted average interest rate | 6.11% | 6.11% | 3.36% | ||||||
Unamortized debt issuance costs | $ 6,100,000 | $ 6,100,000 | $ 2,100,000 | ||||||
Interest expense | 353,000 | $ 106,000 | 817,000 | $ 247,000 | |||||
Borrowing base | 300,000,000 | $ 300,000,000 | $ 150,000,000 | ||||||
Revolving Credit Facility [Member] | Minimum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Commitment fee percentage | 0.375% | ||||||||
Current ratio | 1% | ||||||||
Revolving Credit Facility [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Commitment fee percentage | 0.50% | ||||||||
Current ratio | 1% | ||||||||
Total net funded debt to consolidated EBITDA | 3.50% | ||||||||
Revolving Credit Facility [Member] | Adjusted Base Rate Loans [Member] | Minimum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 1.50% | ||||||||
Revolving Credit Facility [Member] | Adjusted Base Rate Loans [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 2.50% | ||||||||
Revolving Credit Facility [Member] | SOFR Rate Loans and Letter of Credit Fees [Member] | Minimum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 2.50% | ||||||||
Revolving Credit Facility [Member] | SOFR Rate Loans and Letter of Credit Fees [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 3.50% | ||||||||
Revolving Credit Facility [Member] | Credit Agreement [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Aggregate principal amount | $ 750,000,000 | $ 750,000,000 | |||||||
Borrowing base | $ 300,000,000 | ||||||||
Elected commitment amount | 300,000,000 | ||||||||
Maximum aggregate amount of letters of credit to be issued | $ 15,000,000 | ||||||||
Revolving Credit Facility [Member] | First Credit Agreement [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Permitted additional debt maximum amount waived | $ 400,000,000 | ||||||||
RBL Second Amendment [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Aggregate principal amount | $ 50,000,000 | ||||||||
Outstanding balance | $ 450,000,000 | ||||||||
2026 Senior Notes [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Debt repayment terms | option, to prepay the 2026 Senior Notes on the last business day of each calendar quarter in an amount equal to 2.50% of the initial principal amount of all the 2026 Senior Notes issued under the Note Purchase Agreement, which prepayments will not require the payment of any premium (each, an “Optional Quarterly Payment”). If Sitio OpCo does not make an Optional Quarterly Payment on any quarterly payment date, the applicable margin on the 2026 Senior Notes will increase to 9.50% for 2026 Senior Notes bearing interest based on the adjusted Term SOFR rate and 8.50% for 2026 Senior Notes bearing interest based on the base rate. Subsequent to the closing of the Brigham Merger, if an Optional Quarterly Payment is not made, the margin will increase to 7.75% for 2026 Senior Notes bearing interest based on the adjusted Term SOFR rate and 6.75% for 2026 Senior Notes bearing interest based on the base rate. The increased margin will apply until the earlier of the date on which Sitio OpCo makes such Optional Quarterly Payment or the next quarterly payment date. | ||||||||
Percentage of aggregate principal amount quarterly payments | 2.50% | ||||||||
Weighted average interest rate | 10.14% | 10.14% | |||||||
Unamortized debt issuance costs | $ 4,700,000 | $ 4,700,000 | |||||||
2026 Senior Notes [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Leverage ratio | 3.50 | ||||||||
2026 Senior Notes [Member] | SOFR [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 6.50% | ||||||||
Credit spread adjustment | 0.15% | ||||||||
2026 Senior Notes [Member] | SOFR [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 9.50% | ||||||||
2026 Senior Notes [Member] | SOFR [Member] | From and after Closing date of Merger [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 5.75% | ||||||||
2026 Senior Notes [Member] | SOFR [Member] | Subsequent to Brigham Merger [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 7.75% | ||||||||
2026 Senior Notes [Member] | Interest based on Base Rate [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 5.50% | ||||||||
2026 Senior Notes [Member] | Interest based on Base Rate [Member] | Maximum [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 8.50% | ||||||||
2026 Senior Notes [Member] | Interest based on Base Rate [Member] | From and after Closing date of Merger [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 4.75% | ||||||||
2026 Senior Notes [Member] | Interest based on Base Rate [Member] | Subsequent to Brigham Merger [Member] | |||||||||
Line Of Credit Facility [Line Items] | |||||||||
Applicable margin | 6.75% |
Schedule of Prepay Premium dete
Schedule of Prepay Premium determined Based on Length of Time Between Issuance Date and Prepayment (Details) - 2026 Senior Notes [Member] | 9 Months Ended |
Sep. 30, 2022 | |
Months 0 - 12 [Member] | |
Debt Instrument, Redemption [Line Items] | |
Prepay premium percentage | 3% |
Months 13 - 24 [Member] | |
Debt Instrument, Redemption [Line Items] | |
Prepay premium percentage | 3% |
Months 25 - 36 [Member] | |
Debt Instrument, Redemption [Line Items] | |
Prepay premium percentage | 1% |
Months 37 - 48 [Member] | |
Debt Instrument, Redemption [Line Items] | |
Prepay premium percentage | 0% |
Equity (Details Textual)
Equity (Details Textual) - USD ($) | 1 Months Ended | 2 Months Ended | 9 Months Ended | 12 Months Ended | |||
Aug. 31, 2022 | Jun. 30, 2022 | Nov. 30, 2021 | Oct. 31, 2021 | Jun. 06, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Shareholders Equity and Dividends (Textual) | |||||||
Common stock, shares outstanding | 71,134,752 | ||||||
Consideration received | $ 0 | ||||||
Partners' capital | 0 | ||||||
Distributions of non-controlling interest holders | $ 13,318,000 | ||||||
Dividends paid | $ 9,017,000 | ||||||
Subsidiaries [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Additional partnership units may be issued | 2,500,000 | ||||||
Predecessor [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Committed capital from limited partner | $ 618,400,000 | ||||||
Committed capital from general partner | 8,000,000 | ||||||
Committed capital | $ 29,500,000 | ||||||
Contributed capital as percentage of committed capital | 95% | ||||||
Distributions | $ 67,500,000 | ||||||
Distribution to limited partners | 66,600,000 | ||||||
Distribution to general partner | $ 900,000 | ||||||
Warrants [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Business combination, description | Contributors of Falcon’s initial assets in 2018 will be entitled to receive earn-out consideration to be paid in the form of Sitio OpCo Partnership Units (with a corresponding number of shares of Class C Common Stock) if the volume-weighted average price of the trading days during any thirty (30) calendar days (the “30-Day VWAP”) of the Class A Common Stock equals or exceeds certain hurdles set forth in the Contribution Agreement. If the 30-Day VWAP of the Class A Common Stock is $50.00 or more per share (on a split-adjusted basis) at any time within the seven years following the 2018 closing, the contributors will receive (a) an additional 2.5 million Sitio OpCo Partnership Units (and an equivalent number of shares of Class C Common Stock), plus (b) an amount of Sitio OpCo Partnership Units (and an equivalent number of shares of Class C Common Stock) equal to (i) the amount by which annual cash dividends paid on each share of Class A Common Stock exceeds $2.00 in each year between the closing and the date the first earn-out is achieved (with any dividends paid in the stub year in which the first earn-out is achieved annualized for purposes of determining what portion of such dividends would have, on an annual basis, exceeded $2.00), multiplied by 2.5 million, (ii) divided by $50.00. If the 30-Day VWAP of the Class A Common Stock is $60.00 or more per share (on a split-adjusted basis) at any time within the seven years following the closing (which $60.00 threshold will be reduced by the amount by which annual cash dividends paid on each share of Class A Common Stock exceeds $2.00 in each year between the closing and the date the earn-out is achieved, but not below $60.00), the contributors will receive an additional 2.5 million Sitio OpCo Partnership Units (and an equivalent number of shares of Class C Common Stock). Upon recognition of the earn-out, as there is no consideration received, the Company would record the payment of the earn-out as adjustments through equity (temporary equity and additional-paid-in-capital). | ||||||
Class A common stock [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Common stock, shares issued | 12,706,082 | 0 | |||||
Common stock, shares outstanding | 12,706,082 | 0 | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | |||||
Voting rights description | Holders of Class A Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders and are entitled to ratably receive dividends when and if declared by the Company’s Board of Directors. | ||||||
Stock Redeemed or Called During Period, Shares | 617,530 | ||||||
Redemption of shares | 617,530 | ||||||
Common stock, shares authorized | 240,000,000 | 240,000,000 | |||||
Class C common stock [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Common stock, shares issued | 71,134,752 | 0 | |||||
Common stock, shares outstanding | 71,134,752 | 0 | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | |||||
Common stock, shares authorized | 120,000,000 | 120,000,000 | |||||
Common Class A and C [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Dividends amount per share | $ 0.71 | ||||||
Dividends paid | $ 9,000,000 | ||||||
DPM HoldCo [Member] | Outside Owners [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Distributions | $ 13,300,000 | $ 60,900,000 | |||||
DPM HoldCo [Member] | Affiliate Kimmeridge Fund [Member] | |||||||
Shareholders Equity and Dividends (Textual) | |||||||
Distributions | $ 1,900,000 | $ 8,700,000 |
Equity - Calculation of basic a
Equity - Calculation of basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended |
Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | |
Numerator: | |||
Net income attributable to Class A stockholders | $ 6,160 | $ 9,139 | $ 15,299 |
Less: Earnings allocated to participating securities | (284) | (284) | |
Net Income (Loss) Available to Common Stockholders, Basic, Total | 8,855 | 15,015 | |
Plus: net income attributable to temporary equity | 59,872 | 86,143 | |
Net income attributable to Class A stockholders - diluted | $ 8,855 | $ 15,015 | |
Denominator: | |||
Weighted average shares outstanding - basic | 12,703 | 12,665 | |
Weighted average shares outstanding - diluted | 12,703 | 12,665 | |
Net income per common share - basic | $ 0.70 | $ 1.19 | |
Net income per common share - diluted | $ 0.70 | $ 1.19 |
Equity - Computation of diluted
Equity - Computation of diluted earnings per share (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
Class of Stock [Line Items] | ||
Total diluted earnings | 6,016 | 6,014 |
Warrants [Member] | ||
Class of Stock [Line Items] | ||
Total diluted earnings | 5,312 | 5,312 |
Unvested Share-based Compensation Awards | ||
Class of Stock [Line Items] | ||
Total diluted earnings | 704 | 702 |
Temporary Equity (Details Textu
Temporary Equity (Details Textual) - Class C common stock [Member] shares in Millions | Sep. 30, 2022 shares |
KMF [Member] | |
Temporary Equity [Line Items] | |
Temporary equity, Shares issued | 62 |
Prior Class C Shareholder [Member] | |
Temporary Equity [Line Items] | |
Temporary equity, Shares issued | 10 |
Temporary Equity - Summary of R
Temporary Equity - Summary of Recorded Adjustments to Temporary Equity (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | |
Temporary Equity [Line Items] | ||||
Net income attributable to temporary equity | $ 59,872 | $ 86,143 | ||
Adjustment of temporary equity to redemption amount | $ 254,368 | (101,282) | 153,086 | |
Desert Peak [Member] | ||||
Temporary Equity [Line Items] | ||||
Beginning Balance | $ 1,395,799 | 1,664,677 | ||
Share-based compensation | 148 | 568 | ||
Conversion of Class C Common Stock to Class A Common Stock | 11,909 | 124 | ||
Distributions to holders of temporary equity | (50,510) | |||
Net income attributable to temporary equity | 26,271 | 59,872 | ||
Adjustment of temporary equity to redemption amount | 254,368 | (101,282) | ||
Ending Balance | $ 1,664,677 | $ 1,664,677 | $ 1,573,201 | $ 1,573,201 |
Temporary Equity - Summary of_2
Temporary Equity - Summary of Recorded Adjustments to Temporary Equity (Parenthetical) (Details) - Desert Peak [Member] - $ / shares | Sep. 30, 2022 | Jun. 30, 2022 | Jun. 07, 2022 |
Class A common stock [Member] | |||
Temporary Equity [Line Items] | |||
Temporary equity, Shares outstanding | 71,134,752 | 71,140,064 | |
Temporary equity, Value per share | $ 22.12 | $ 23.40 | |
Class C common stock [Member] | |||
Temporary Equity [Line Items] | |||
Temporary equity, Shares outstanding | 71,134,752 | 71,140,064 | 71,752,285 |
Temporary equity, Value per share | $ 22.12 | $ 23.40 |
Shareholders' Equity and Divide
Shareholders' Equity and Dividends (Details 1) $ / shares in Units, $ in Thousands | 3 Months Ended |
Sep. 30, 2022 USD ($) $ / shares | |
Class Of Stock [Line Items] | |
Total Cash Dividend | $ | $ 9,017 |
Class A common stock [Member] | |
Class Of Stock [Line Items] | |
Dividends amount per share | $ / shares | $ 0.71 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based Compensation Expense | $ 4,000,000 | $ 0 | $ 4,900,000 | $ 0 |
Dividend equivalent rights paid | 284,000 | 0 | 284,000 | 0 |
Amount paid to restricted stock award holders under distribution equivalent rights | $ 284,000 | 0 | $ 284,000 | 0 |
Dividend yield | 0% | |||
Class A common stock [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Aggregate common stock available for issuance | 8,384,083 | 8,384,083 | ||
Available for future grant | 7,673,641 | 7,673,641 | ||
Restricted Stock Units [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Number of shares issued | 347,291 | |||
Share-based Compensation Expense | $ 2,000,000 | 0 | $ 2,500,000 | 0 |
Unamortized equity-based compensation expense | 7,600,000 | $ 7,600,000 | ||
Unamortized equity-based compensation expense | 0 | 0 | ||
Weighted average period expected to be recognized | 1 year 6 months | |||
Equity based awards description | In connection with the Falcon Merger, the Board granted one-time equity-based awards to our executive officers and employees under the Plan, consisting of RSUs subject to a vesting period of one year. The Board also granted an annual equity-based award to our executive officers under the Plan, which consists of RSUs that vest in equal installments on the first three anniversaries of June 7, 2022. | |||
Deferred Share Units [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Number of shares issued | 62,586 | |||
Share-based Compensation Expense | 425,000 | 0 | $ 521,000 | 0 |
Unamortized equity-based compensation expense | 1,300,000 | 0 | $ 1,300,000 | 0 |
Weighted average period expected to be recognized | 8 months 12 days | |||
Equity based awards description | In connection with the Falcon Merger, the Board granted awards of DSUs under the Plan to each of our non-employee directors. The DSUs are expected to vest in equal quarterly installments over the one-year period beginning on June 7, 2022. | |||
Performance Stock Units [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based Compensation Expense | 988,000 | 0 | $ 1,200,000 | 0 |
Unamortized equity-based compensation expense | 10,500,000 | 0 | $ 10,500,000 | 0 |
Weighted average period expected to be recognized | 2 years 8 months 12 days | |||
Equity based awards description | In connection with the Falcon Merger, the Board granted an annual equity-based award (“2022 Annual Equity Award”) to our executive officers under the Incentive Plan, which consisted of PSUs. The PSUs will be eligible to be earned based on achievement of certain pre-established goals for annualized absolute Total Shareholder Return (“TSR”) over a three-year period following the consummation of the Falcon Merger. | |||
Dividend yield | 0% | |||
Sitio OpCo Restricted Stock Awards [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Share-based Compensation Expense | 0 | 0 | ||
Equity based awards description | In connection with the Falcon Merger, legacy Desert Peak owners (the “Falcon Merger Sponsors”), desired to assign, transfer and convey their rights to receive a portion of their Falcon Merger Consideration to our executive officers as an incentive to continue to serve as executive officers following the Falcon Merger. The Falcon Merger Consideration consists of units of Sitio Royalties OpCo Partnership Units and an equal number of shares of Class C Common Stock. The conveyance of Falcon Merger Consideration, which consists of Class C Common Stock, is deemed to be a grant of restricted stock awards (each, an “RSA”) to our executive officers. Each Sitio OpCo RSA is expected to vest in equal installments on the first four anniversaries of June 6, 2022. The Company estimated the fair value of the RSAs as the closing price of the Company’s Class A Common Stock on the grant date of the award, which is expensed over the applicable vesting period. | |||
Sitio OpCo Restricted Stock Awards [Member] | Class C common stock [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Number of shares issued | 309,527 | |||
Share-based Compensation Expense | 568,000 | $ 716,000 | ||
Unamortized equity-based compensation expense | $ 8,300,000 | $ 0 | $ 8,300,000 | $ 0 |
Weighted average period expected to be recognized | 3 years 8 months 12 days |
Share-Based Compensation - Sche
Share-Based Compensation - Schedule of weighted average assumptions to determine fair value (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Dividend yield | 0% |
Performance Stock Units [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Volatility | 67.23% |
Risk-free rate | 2.89% |
Dividend yield | 0% |
Weighted average fair value | $ 39.11 |
Share-Based Compensation - Summ
Share-Based Compensation - Summary of activity in unvested RSUs, DSUs, PSUs and unvested RSAs (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Restricted Stock Units [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Granted | shares | 347,291 |
Forfeited | shares | (348) |
Unvested, ending balance | shares | 346,943 |
Grant Date Fair Value, Granted | $ / shares | $ 29.04 |
Grant Date Fair Value, Forfeited | $ / shares | 29.12 |
Grant Date Fair Value, ending balance | $ / shares | $ 29.04 |
Deferred Share Units [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Granted | shares | 62,586 |
Unvested, ending balance | shares | 62,586 |
Grant Date Fair Value, Granted | $ / shares | $ 28.80 |
Grant Date Fair Value, ending balance | $ / shares | $ 28.80 |
Preferred Stock Units [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Granted | shares | 300,913 |
Unvested, ending balance | shares | 300,913 |
Grant Date Fair Value, Granted | $ / shares | $ 39.11 |
Grant Date Fair Value, ending balance | $ / shares | $ 39.11 |
Sitio OpCo Restricted Stock Awards [Member] | Class C common stock [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Granted | shares | 309,527 |
Unvested, ending balance | shares | 309,527 |
Grant Date Fair Value, Granted | $ / shares | $ 29.12 |
Grant Date Fair Value, ending balance | $ / shares | $ 29.12 |
Share-Based Compensation - Su_2
Share-Based Compensation - Summary of performance targets associated (Details) - Performance Stock Units [Member] | 9 Months Ended |
Sep. 30, 2022 | |
Maximum [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Annualized Absolute TSR Goal | 20% |
Percentage of Target PSUs Earned | 200% |
Base of Range [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Percentage of Target PSUs Earned | 0% |
Base of Range [Member] | Maximum [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Annualized Absolute TSR Goal | 0% |
Threshold [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Annualized Absolute TSR Goal | 0% |
Percentage of Target PSUs Earned | 50% |
Target [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Annualized Absolute TSR Goal | 10% |
Percentage of Target PSUs Earned | 100% |
Warrants (Details Textual)
Warrants (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |||||
Sep. 30, 2022 | Jun. 07, 2022 | Jun. 06, 2022 | Jun. 03, 2022 | Dec. 31, 2021 | Aug. 23, 2008 | |
Class Of Stock [Line Items] | ||||||
Warrant outstanding, shares | 0 | |||||
Fair value of warrants | $ 2,770 | |||||
Private Placement Warrants [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Warrants, description | As a result of the Falcon Merger, the Company’s Private Placement Warrants were adjusted such that four Private Placement Warrants are exercisable for one share of Class A Common Stock at an exercise price of $44.73 per share of Class A Common Stock. The Private Placement Warrants are identical to the Public Warrants discussed above, except (a) they will not be redeemable by the Company so long as they are held by the IPO Sponsor and (b) they may be exercisable by the holders on a cashless basis. | |||||
Number of warrants exercisable for one share of common stock | 4 | |||||
Warrants, exercise price | $ 1 | |||||
Warrant outstanding, shares | 7,500,000 | 0 | 7,500,000 | |||
Public Warrants [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Warrants, description | As a result of the Falcon Merger, the Company’s warrants were adjusted such that four whole Public Warrants became exercisable for one share of Class A Common Stock at an exercise price of $44.84 per share of Class A Common Stock. Pursuant to the Warrant Agreement, to the extent that any common stock dividend paid by the Company, when combined with other common stock dividends paid in the prior 365 days, exceeds $2.00, it is categorized as an Extraordinary Dividend. Extraordinary Dividends reduce, penny for penny, the exercise price of the Warrants. As of September 30, 2022, the exercise price of the Warrants was $44.73 after giving effect to the Reverse Stock Split and after the Extraordinary Dividend that was paid in August 2022. The Public Warrants will expire in August 2023 or earlier upon redemption or liquidation. The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right can only be exercised if the last sale price of the Class A Common Stock equals or exceeds $72.00 per share, after giving effect to the Reverse Stock Split, for any 20 trading days within a 30-day trading period ending three business days before we send the notice of redemption to the Public Warrant holders. | |||||
Number of warrants exercisable for one share of common stock | 4 | |||||
Warrants, exercise price | $ 44.73 | |||||
Class of warrant or right expiration period | 2023-08 | |||||
Redemption price per warrant | $ 0.01 | |||||
Redemption of warrants notice period | 30 days | |||||
Redemption of warrants threshold consecutive trading days | 20 days | |||||
Warrant outstanding, shares | 13,749,998 | |||||
Fair value of warrants | $ 2,300 | |||||
Public Warrants [Member] | Maximum [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Redemption of warrants threshold trading days | 30 days | |||||
Class A common stock [Member] | Private Placement Warrants [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Number of common stock into which warrant converted | 1 | |||||
Warrant to purchase shares of common stock exercise price | $ 44.73 | |||||
Class A common stock [Member] | Public Warrants [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Number of common stock into which warrant converted | 1 | |||||
Warrants, exercise price | $ 44.84 | |||||
Class A common stock [Member] | Public Warrants [Member] | Minimum [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Redemption of warrants common stock trigger price per share | $ 72 | |||||
Extraordinary Dividends [Member] | Public Warrants [Member] | ||||||
Class Of Stock [Line Items] | ||||||
Common stock dividends paid, period | 365 days | |||||
Extraordinary dividend threshold limit | $ 2 |
Warrants (Details)
Warrants (Details) - Level 3 [Member] | Sep. 30, 2022 $ / shares |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Warrants, outstanding, term | 10 months 24 days |
Stock Price [Member] | |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Warrants and rights outstanding measurement input | 22.11 |
Volatility [Member] | |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Warrants and rights outstanding measurement input | 46.4 |
Risk-Free Rate [Member] | |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Warrants and rights outstanding measurement input | 3.98 |
Dividend Yield [Member] | |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Warrants and rights outstanding measurement input | 9.05 |
Warrants (Details 1)
Warrants (Details 1) - Warrant Liability [Member] - Private Placement Warrant [Member] - Level 3 [Member] - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Beginning balance | $ 694 | $ 2,213 |
Decrease in fair value | (263) | (1,782) |
Ending balance | $ 431 | $ 431 |
Derivative Instruments - Schedu
Derivative Instruments - Schedule of Oil and Gas Swap Contracts (Details) - Oil and Gas Swap Contracts [Member] | Sep. 30, 2022 MMBTU $ / MMBTU $ / bbl bbl |
Oil (NYMEX WTI) Remaining Term From October 2022 to December 2022 [Member] | |
Derivative [Line Items] | |
Bbl per Day | bbl | 2,200 |
Weighted Average Price | $ / bbl | 106.31 |
Oil (NYMEX WTI) Remaining Term From January 2023 to December 2023 [Member] | |
Derivative [Line Items] | |
Bbl per Day | bbl | 3,050 |
Weighted Average Price | $ / bbl | 93.71 |
Oil (NYMEX WTI) Remaining Term From January 2024 to December 2024 [Member] | |
Derivative [Line Items] | |
Bbl per Day | bbl | 3,300 |
Weighted Average Price | $ / bbl | 82.66 |
Oil (NYMEX WTI) Remaining Term From January 2025 to June 2025 [Member] | |
Derivative [Line Items] | |
Bbl per Day | bbl | 1,100 |
Weighted Average Price | $ / bbl | 74.65 |
Gas (NYMEX Henry Hub) Remaining Term From October 2022 to December 2022 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 500 |
Weighted Average Price | $ / MMBTU | 4.63 |
Gas (NYMEX Henry Hub) Remaining Term From January 2023 to December 2023 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 500 |
Weighted Average Price | $ / MMBTU | 3.83 |
Gas (NYMEX Henry Hub) Remaining Term From January 2024 to December 2024 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 500 |
Weighted Average Price | $ / MMBTU | 3.41 |
Derivative Instruments - Sche_2
Derivative Instruments - Schedule of Oil and Gas Two-way Commodity Collar Contracts (Details) - Oil and Gas Two-way Commodity Collar Contracts [Member] | Sep. 30, 2022 MMBTU $ / MMBTU $ / bbl bbl |
Oil (NYMEX WTI) Remaining Term From January 2025 to June 2025 [Member] | |
Derivative [Line Items] | |
Bbl per Day | bbl | 2,000 |
Weighted Average Floor Price per Bbl | $ / bbl | 60 |
Weighted Average Ceiling Price per Bbl | $ / bbl | 93.20 |
Gas (NYMEX Henry Hub) Remaining Term From October 2022 to December 2022 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 6,000 |
Weighted Average Floor Price per Bbl | 6 |
Weighted Average Ceiling Price per Bbl | 9.69 |
Gas (NYMEX Henry Hub) Remaining Term From January 2023 to December 2023 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 8,500 |
Weighted Average Floor Price per Bbl | 4.82 |
Weighted Average Ceiling Price per Bbl | 7.93 |
Gas (NYMEX Henry Hub) Remaining Term From January 2024 to December 2024 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 11,400 |
Weighted Average Floor Price per Bbl | 4 |
Weighted Average Ceiling Price per Bbl | 7.24 |
Gas (NYMEX Henry Hub) Remaining Term From January 2025 to June 2025 [Member] | |
Derivative [Line Items] | |
MMBtu per Day | MMBTU | 11,600 |
Weighted Average Floor Price per Bbl | 3.31 |
Weighted Average Ceiling Price per Bbl | 10.34 |
Derivative Instruments - Summar
Derivative Instruments - Summary of Derivative Instruments (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Derivative [Line Items] | |
Derivative asset | $ 51,419 |
Total liability derivatives | 150 |
Derivatives Not Designated as Hedges [Member] | |
Derivative [Line Items] | |
Derivative asset | 51,419 |
Total liability derivatives | 150 |
Net derivatives | 51,269 |
Derivatives Not Designated as Hedges [Member] | Commodity Contracts [Member] | Current Assets [Member] | |
Derivative [Line Items] | |
Derivative asset | 22,531 |
Derivatives Not Designated as Hedges [Member] | Commodity Contracts [Member] | Long-term Assets [Member] | |
Derivative [Line Items] | |
Derivative asset | 28,888 |
Derivatives Not Designated as Hedges [Member] | Commodity Contracts [Member] | Current Liabilities [Member] | |
Derivative [Line Items] | |
Total liability derivatives | 150 |
Derivatives Not Designated as Hedges [Member] | Commodity Contracts [Member] | Long-term Liabilities [Member] | |
Derivative [Line Items] | |
Total liability derivatives | $ 0 |
Derivative Instruments - Summ_2
Derivative Instruments - Summary of Gross Fair Values of Recognized Derivative Assets and Liabilities, Amounts Offset Under Master Netting Arrangements With Counterparties and Resulting Net Amounts (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Derivative [Line Items] | |
Commodity derivative assets, Net Fair Value | $ 51,419 |
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Assets, Current |
Commodity derivative liabilities, Net Fair Value | $ 150 |
Derivative Liability, Statement of Financial Position [Extensible Enumeration] | Liabilities, Current |
Commodity Derivative Assets [Member] | |
Derivative [Line Items] | |
Commodity derivative assets, Gross Fair Value | $ 58,531 |
Commodity derivative assets, Gross Amounts Offset | (7,112) |
Commodity Derivative Liabilities [Member] | |
Derivative [Line Items] | |
Commodity derivative liabilities, Gross Fair Value | (7,262) |
Commodity derivative liabilities, Gross Amounts Offset | $ (7,112) |
Derivative Instruments - Summ_3
Derivative Instruments - Summary of Derivative Gains and Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
Derivative [Line Items] | ||
Commodity derivative gain | $ 34,613 | $ 53,508 |
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Commodity derivative gain | Commodity derivative gain |
Fair Value Measurement - Additi
Fair Value Measurement - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | ||||
Impairment of unproved properties | $ 0 | $ 0 | $ 0 | $ 0 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 2,561 | $ 143 | $ 5,206 | $ 233 |
Federal statutory tax rate | 21% | 21% | ||
Effective tax rate | 3.60% | 2.80% |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Commitments (Details)) $ in Thousands | Sep. 30, 2022 USD ($) |
Leases [Abstract] | |
Remainder of 2022 | $ 183 |
2023 | 741 |
2024 | 758 |
2025 | 653 |
2026 | 643 |
2027 | 658 |
Thereafter | 875 |
Total | $ 4,511 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Jun. 30, 2021 | Jun. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Oct. 31, 2020 | |
Chambers Minerals, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Acquisition percentage | 84% | 84% | 84% | |||||
Business acquisition net book value from sale of assets | $ 60,600,000 | $ 60,600,000 | ||||||
Excess of fair value of properties above net book value | 37,500,000 | 37,500,000 | ||||||
Unproved Oil And Gas Property [Member] | Chambers Minerals, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Business acquisition net book value from sale of assets | 45,300,000 | |||||||
Proved Oil And Gas Property [Member] | Chambers Minerals, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Business acquisition net book value from sale of assets | $ 15,300,000 | $ 15,300,000 | ||||||
Kimmeridge [Member] | Chambers Minerals, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Royalty interest ownership percentage | 2% | |||||||
Kimmeridge Operations, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Land and administrative service charges | $ 0 | $ 1,100,000 | $ 105,000 | $ 3,500,000 | ||||
Due to related parties | 0 | 0 | ||||||
Kimmeridge Energy Management Company, LLC [Member] | ||||||||
Related Party Transaction [Line Items] | ||||||||
Management fees | 0 | $ 1,900,000 | 3,200,000 | $ 5,600,000 | ||||
Due to related parties | $ 0 | $ 0 | $ 142,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Class A common stock [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 08, 2022 | |
Subsequent Event [Line Items] | ||
Dividends payable, description | with respect to the third quarter of 2022. The dividend is payable on November 30, 2022 to the stockholders of record at | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Cash dividend of per share | $ 0.72 |