STR - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Samantha and I will be your conference operator today. At this time, I would like to welcome everyone to the Sitio Royalties Second Quarter 2022 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Ross Wong, Senior Director of Corporate Finance and Investor Relations. Ross, you may begin your conference.

Ross Wong

morning, good and operator everyone. Thanks, Royalties Welcome XXXX call. quarter to Sitio earnings second

Chris you Osicka, Investor of Relations a don't our me today presentation, our Officer; other members is Chief executive quarter visit www.sitio.com you Chief leadership already Executive and copy updated please them operating where our XXXX at Financial website If to our section. financial With have Officer; our investor and of will in find release our team. recent discuss results second Conoscenti, and Carrie and press

They that and we discussion These anticipated concerning would Before objectives are of other plans I like liquidity, may start, flow, include cash metrics. operating may may to not strategy for statements. also remind forward-looking include volumes, and you to, company. other estimates and future our statements contain limited the business but today expenses statements financial

to are as in and can accordance it that financial on note expectations on on use discretionary cash XXXX, of year an results or Accepted in statements similarly also EBITDA, to actual measures to have call, and These the I’ll XX-Q measures should filed or limitations that which XXXX, industry accordance cause as by used with cash not the substitute different GAAP we from not XXA be forward-looking isolation measures financial for most GAAP. see companies a in Generally December in with other should comparable our SEC GAAP. filed presented not are we results. expectations U.S., which such measures as be measures are a turn Chris. reconciliations terms These G&A. the tools our are call investors, recent factors this Sitio performance proxy most XXXX, in over company's non-GAAP release. the Please SEC that and analysis X, the such fiscal may Schedule that, or to could such them with that not considered not directly titled assurance list Form our adjusted we results was we well XX-K differ non-GAAP such May XX, reflected ended comparable SEC measure under with flow in And believes of isolation are measures across EBITDA, filings These for of other analytical reasonable, have annual on financial GAAP any will measures of with are expected derived consider may under materially Accounting on correct. report Form to the no Please the alternative industries. non-GAAP measures in Although with for the provided August earnings they X, non-GAAP be useful believe statement for reported our performance prove and you These Principles. provide

Chris Conoscenti

changed of our NRAs the in and the which by occurred the transactions exceeded our name merger reverse quarterly quarter more call. explain comprises New there listed second we than results in of reporting completion Exchange I expectations June also with Permian Basin we which our Falcon closing progress of under with stock strategy the financial Thanks, York want for Royalties Class internal Peak Sitio everyone the Good XX% acquisition the company all on and acquisition the the approximately we'll execution Sitio's a were Minerals there you of In Ross. earnings and large-scale resulted is our aggregate, XXX,XXX. Foundation July. the that total during stock June on thank to call. and A acquisitions transactions portfolio significant common Overall, financial asset Stock our announcement minerals the our of towards Minerals joining our acquisition XX,XXX understanding Minerals and on the the than later Momentum quarter, quarter royalty on the made of Momentum acres Since X, Completing late XXXX signing and trades second and to of of late XXXX approximately the from our to metrics XX% methodology, large Desert more be the inaugural closed Minerals consolidation in operational and increased June, weighted to several further morning, referring In ticker net so Foundation clear STR. NRAs. which

This Our assets closed January merger In transaction financial XXXX XXXX legacy Minerals' dates contribution issued acquired to with assets have pro since quarter and from in based from comparability from Minerals second Minerals quarter. Minerals Desert contribution from which include from company. Falcon XXXX, the XX days half on as was entire the and combined combined Momentum there guidance legacy and reported operational Minerals closing assets to Therefore, Peak metrics reverse full refer the legacy sometimes first our Basin been Permian Minerals for quarter. quarter we acquired stuff will second legacy financials, financials first half for days the Peak the that and transaction Minerals the to the assets for its second XXXX. subsequent when forma in refers publicly I Foundation is contributions Desert no announced, a X assets assets. the Falcon legacy guidance, reported from XXXX to quarter include In combined

combined combined daily or let's including January to summary, barrels, In daily percent production our production relative guidance XXXX. Permian in XXXX results half company and exceeded percent that we production BOE from was forma oil basis, oil review the guidance production-related a Basin. met pro in production metrics, provided first average on Now, the all briefly average

and XX,XXX turned day first wells forma of on day half BOE’s and the XXXX end strong Pro half production in the production above of second which range. was continued per first by end primarily oil our guidance BOE’s combined which performance exceeded production first the our of range of XX.X% was and of that midpoint line forma assets. half pro high is combined production forma pro This our X.X% X.X% quarter in Second quarter in on range. XX% lower resulted expectations XXXX XXXX XX,XXX Permian the combined XXXX of output timing driven XX% above guidance to the was per

of which is range oil oil per barrels combined guidance high X,XXX of volumes percent X%. implied Furthermore, alone However, half production looking XXXX a which combined per at the first first guidance bit because of exceeded oil barrels the end X,XXX forma production pro production misleading the of approximately barrels was from XXXX for XX% nearly Permian assets half day. came by pro exceeded volumes forma day

million and million slightly G&A onetime was issued transaction which June of cash the $X.X recent most that on quarterly in excludes costs, quarter our was XXXX XX. of share-based our midpoint of below year rate disclosed $X.X guidance full compensation Second run

realized integration $XX.X Now, and by per inclusive payout turning share the capital our for was driven Production results. which Board $XX.X quarter. highs to $XX.XX per determine Adjusted flow second Consistent with quarter Falcon primarily to cash BOE’s actual million XX,XXX Sitio were increase allocation a publicly XX% quarter-over-quarter impact ratio all from pricing, was assets framework, the during record the million, for the quarter. day. BOE volumes and a utilized XX% in and discretionary hedging dividend second disclosed declared of to reported of the Foundation per EBITDA were

a applying dividend merger. for merger. of cash flow related payout of intended of that $X.XX entire investors to per instead penalize forma second the resulted share the discretionary does of the of shareholders in to reported flow of believe quarter the the Minerals is Board which the reverse for However, Minerals flow discretionary dividend, closing the $XX.X second pro transaction cash ratio timing per share which on second approved dividend quarter the excludes a $X.XX $X.XX and returns, cash share would quarter per based Falcon fees quarter amount capital inclusive Falcon have to not We million of for the and

We quarter dividend to combined as only Falcon's to are we from framework moved dividend the enterprise $X.XX lower particularly first payout payout while compared in methodology. XX% our dividend pleased came XXX% that Falcon's split-adjusted historical for the

since end implying versus which XX only the XX,XXX to assets For and wells production of lowering the of of in transportation second strong BOE’s line-of-sight confidence per XX,XXX taxes range net currently that been turned half gives XXXX, of results. of growth reiterating our day there wells the the us On we production daily average as the BOE in this XX.X range. beginning were cash quarter, per have second owned after net slightly gathering quarter XXXX, for visible line and second and reviewing completed and are ranges

since As briefly we've nearest X over quarter earlier, continue to our consolidation the XXXX. July, Since of at beginning of acquisition mergers is strategy. NRAs I public large-scale execute closed that Including we touched Permian-weighted least our of X.Xx on grown XXX% acquisitions on more peer. XX,XXX by June active of had completed Momentum have our position transactions very XXXX, the the we and which front a in NRA than on and which

approximately the from was like X. end acquisition Momentum effective July, receipts cash you and was acquisition had these to Foundation the pre-closing received I'd remind April post-effective of $XX assets. million March form date in X the effective that Additionally, the we of Through on of

more the receipts cash will to cash us, receive to to accelerate repayment. required time debt preclosing utilized date post-effective and the we coming owed royalties the expect by months date Given which on date effective be over collect to

having between discretionary, and no traditional our one structure is. being E&P expenses is how the scalable of XXX% of expenditures key model business operator our to addition differences In operating cost a capital our versus lease

we since our assets margin operate BOE acquisition royalty and flow. headcount we linearly with don't each Our don't cash grow as per to increase mineral cash need improves and

cash per decrease NRA. $X.XX our questions. since $X we XXXX, in XX BOE we call was of had up prepared or This my That like XX,XXX BOE approaching BOE open than the to to the and a of second concludes less for $X.XX XX% boe. represents G&A per in remarks. context, falls our are For metric This $X.XX employees midpoint now per at per and half XXXX guidance. I'd

Operator

of with Jeanine the question [Operator Wai comes first line Barclays. Instructions] from Your

Jeanine Wai

leverage to Our maybe leverage is Xx. and improve Momentum and about Post your target deal that Foundation the X.Xx A&D. on question just and first to is

really in place forecast hedges on specifically strong for talk Sitio of you impacts terms of your and about the put cash front, leverage free future current We You A&D flow size structure or in cash protection. timing, Can how deals? flow.

Chris Conoscenti

getting back near large-scale acquisitions on I going towards say So would is Xx still weighted consolidation. and below our to focus focus is more on our that leverage. deleveraging be term,

think So adding and into transactions to a the I at you bringing enterprise but flow prioritize not would component expect transactions to us to or have continue allow that stock look assets should us that leverage. that deleveraging, cash

Jeanine Wai

And in then your accretive appetite elephant the acquisitions. maybe the room scale addressing larger on the for

currently as Minerals you in investor and dollars. business that versus, is? deals how how compete say, are you larger? your model of you Do currently in Sitio getting to peers operator model, upstream see in advantage the Or ability Given a for both Sitio terms about do the competitive scale you you’re versus think meaningful thinking compete

Chris Conoscenti

at investors allows for have is, public landscape. But the scale So, do as investment we transactions. they have the the us that the we relevancy scale today and larger look compete alternatives for across energy I to their question think

where And something acquisitions. so that’s truly purpose consolidation can all improve. continue we one large-scale across area that’s investable is the strategy that’s and to our really think building And I of competitive

the why ways business. we acquisitions. So the on and cash for add the to large-scale grow That’s that’s to focus more we look flow enterprise why

Operator

Derrick with from comes [Indiscernible] line Stifel. Whitfield of

Derrick Whitfield

during QX focus question, you trajectory on results, second your and on based see QX half the the my transaction how line-of-site of to inventory With closures, volumes QX? first wanted I other growth during do and trajectory your

Chris Conoscenti

closed just because quarterly you you're individual to I what Momentum see can transaction late a we specific July. in the guidance. have ramp going tell So don't But is

you quarter So Momentum full won't a going fourth the -- from see until see quarter. to you're contribution

visibility look see organic roughly today. at bit you you'll that gives inventory when us a line-of-sight ramp on have So of just line-of-sight asset where we wells, that. the a from net our normalized XX into growth And then

do we continue the through growth the the So half year. of back see organic

Derrick Whitfield

are we’re How where DUC you broadly, more spreads. cycle operators environment times. And just continuing about on conversions an commensurate thinking not add a increase are to rigs guys seeing frac in in but

Chris Conoscenti

when But else has, just we DUC look development. we the Well, in like the everybody seen, decrease at have inventory. of pace

number can that is year for have continuing line the that's any at rigs most is per It's and to line on when the important follow you per given not that's metric our is becoming year us, because per than net different on are wells closely the DSU To look So with turned wells we assets. we turn But that trend competitive that us, net per XXXX metric. metric of and most levels. up well. in interest wells unit,

Operator

[Operator there and questions Instructions] in gentlemen, this Q&A disconnect. time. for today's call. And now other no concludes this queue are the at you Ladies And may portion

Sitio Royalties (STR) 9 Aug 222022 Q2 Earnings call transcript