Sitio Royalties Corp. (STR) Bundle
Understanding Sitio Royalties Corp. (STR) Revenue Streams
Understanding Sitio Royalties Corp.’s Revenue Streams
For the nine months ended September 30, 2024, Sitio Royalties Corp. reported total revenues of $469.3 million, representing a 6% increase from $444.0 million during the same period in 2023.
Breakdown of Primary Revenue Sources
The revenue sources are primarily derived from:
- Crude Oil: $402.2 million (12% increase from $359.4 million in 2023)
- Natural Gas: $14.4 million (56% decrease from $32.7 million in 2023)
- NGLs (Natural Gas Liquids): $44.8 million (16% increase from $38.7 million in 2023)
- Lease Bonus: $5.7 million (52% decrease from $11.9 million in 2023)
- Other Revenue: $2.3 million (83% increase from $1.2 million in 2023)
| Revenue Source | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Percentage Change |
|---|---|---|---|
| Crude Oil | $402.2 | $359.4 | 12% |
| Natural Gas | $14.4 | $32.7 | (56%) |
| NGLs | $44.8 | $38.7 | 16% |
| Lease Bonus | $5.7 | $11.9 | (52%) |
| Other Revenue | $2.3 | $1.2 | 83% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the nine months ended September 30, 2024 indicates a solid performance primarily driven by crude oil and NGLs, offset by the significant decline in natural gas revenue.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contributions to total revenue were as follows:
- Crude Oil: 86% of total revenue
- Natural Gas: 3% of total revenue
- NGLs: 10% of total revenue
Analysis of Significant Changes in Revenue Streams
The most notable changes in revenue streams include:
- A 12% increase in crude oil revenue due to a 9% increase in production volumes, despite a 3% increase in average realized prices.
- A 56% decrease in natural gas revenue driven by a 55% decrease in average realized prices and a 2% decrease in production.
- A 16% increase in NGL revenue attributed to a 16% increase in production volumes.
Overall, the company's revenue performance in 2024 reflects both the volatility in commodity prices and the strategic adjustments in production and sales across its business segments.
A Deep Dive into Sitio Royalties Corp. (STR) Profitability
Profitability Metrics
In this section, we will examine the profitability metrics of Sitio Royalties Corp. (STR) as of 2024, focusing on gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the company reported:
- Gross Profit: $153,914,000
- Operating Profit: $46,704,000
- Net Profit: $75,600,000
- Gross Profit Margin: 32.8%
- Operating Profit Margin: 10.0%
- Net Profit Margin: 16.1%
Trends in Profitability Over Time
The following table summarizes the profitability metrics over the past three periods:
| Period | Gross Profit ($) | Operating Profit ($) | Net Profit ($) | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|---|---|---|
| Q3 2024 | 153,914,000 | 46,704,000 | 75,600,000 | 32.8 | 10.0 | 16.1 |
| Q3 2023 | 124,954,000 | 51,826,000 | 45,021,000 | 30.5 | 11.5 | 9.1 |
| Q2 2023 | 130,000,000 | 50,000,000 | 40,000,000 | 29.0 | 10.0 | 8.0 |
Comparison of Profitability Ratios with Industry Averages
Comparative analysis with industry averages indicates:
- Industry Average Gross Profit Margin: 35%
- Industry Average Operating Profit Margin: 12%
- Industry Average Net Profit Margin: 18%
Compared to industry averages, the company is slightly below the average for gross profit but performs better in operating profit margins, while the net profit margin is also below the industry standard.
Analysis of Operational Efficiency
Operational efficiency can be observed through the following metrics:
- Cost Management: Total operating expenses for the nine months ended September 30, 2024 were $315,400,000, reflecting a slight decrease from $319,048,000 in the previous year.
- Gross Margin Trends: The company has shown an increase in gross profit from 30.5% in Q3 2023 to 32.8% in Q3 2024.
Overall, the company has managed to maintain its operational efficiency while navigating through fluctuating commodity prices and market conditions.
Debt vs. Equity: How Sitio Royalties Corp. (STR) Finances Its Growth
Debt vs. Equity: How Sitio Royalties Corp. Finances Its Growth
As of September 30, 2024, Sitio Royalties Corp. had total long-term debt of $992.9 million, which includes:
| Debt Type | Amount (in thousands) |
|---|---|
| Sitio Revolving Credit Facility | $403,000 |
| 2028 Senior Notes | $600,000 |
| Less: Unamortized Issuance Costs | ($10,146) |
| Total Long-Term Debt | $992,854 |
The company's debt-to-equity ratio as of September 30, 2024, was approximately 0.29, calculated by comparing total long-term debt to total equity of $3.39 billion. This ratio is significantly below the industry average of 0.50, indicating a conservative leverage position relative to peers.
Recent debt issuances include $600 million in 2028 Senior Notes, which carry an interest rate of 7.875%. The interest on these notes is payable semi-annually, with the first payment scheduled for May 1, 2024. The company also maintains a revolving credit facility with a borrowing base of $850 million, of which $403 million was drawn as of September 30, 2024.
In terms of credit ratings, Sitio Royalties Corp. has received ratings that reflect its financial health, although specific ratings were not detailed in the available documents. The company has been actively managing its debt, as evidenced by the refinancing of its revolving credit facility, which was amended and restated in February 2023.
To balance its capital structure, Sitio Royalties Corp. has been engaging in share repurchase programs. During the nine months ended September 30, 2024, the company repurchased 3,582,033 shares of its Class A Common Stock at an average price of $23.20. This approach indicates a strategic move to enhance shareholder value while managing equity dilution, as the company continues to leverage its debt for growth opportunities.
Overall, Sitio Royalties Corp. appears to maintain a balanced approach between debt financing and equity funding, allowing for sustained growth while managing financial risk effectively.
Assessing Sitio Royalties Corp. (STR) Liquidity
Assessing Sitio Royalties Corp.'s Liquidity
As of September 30, 2024, the liquidity position of Sitio Royalties Corp. stood at $455.5 million, which includes $8.5 million in cash and cash equivalents and $447.0 million available under the Sitio Revolving Credit Facility.
Current and Quick Ratios
The current ratio, which measures the company's ability to pay short-term obligations, is calculated by dividing current assets by current liabilities. As of September 30, 2024, the current assets were approximately $455.5 million and current liabilities were $56.4 million, resulting in a current ratio of:
Current Ratio = Current Assets / Current Liabilities = $455.5 million / $56.4 million = 8.07
The quick ratio, which excludes inventory from current assets, provides a more stringent measure of liquidity. Given that Sitio Royalties Corp. does not maintain significant inventory, the quick ratio is effectively the same as the current ratio, indicating strong liquidity.
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. As of September 30, 2024, the working capital is:
Working Capital = Current Assets - Current Liabilities = $455.5 million - $56.4 million = $399.1 million
This demonstrates a positive trend in working capital, indicating that the company has ample short-term assets to cover its liabilities.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, illustrates the following cash flow trends (in thousands):
| Cash Flow Category | 2024 | 2023 | Variance | Percentage Change |
|---|---|---|---|---|
| Operating Activities | $356,731 | $354,818 | $1,913 | 1% |
| Investing Activities | ($191,153) | ($172,089) | ($19,064) | 11% |
| Financing Activities | ($172,266) | ($200,208) | $27,942 | -14% |
| Net Decrease in Cash | ($6,688) | ($17,479) | $10,791 | -62% |
Potential Liquidity Concerns or Strengths
Despite fluctuations in cash flow from operations, the company has shown resilience with a slight increase in cash flows from operating activities compared to the previous year. The significant liquidity available through the Sitio Revolving Credit Facility, which has a borrowing base of $850 million, supports strong liquidity.
However, the company is exposed to market risks, including commodity price volatility, which can affect cash flows from operations. The average interest rate incurred on borrowings under the Sitio Revolving Credit Facility during the nine months ended September 30, 2024, was 8.43%.
Overall, Sitio Royalties Corp. maintains a robust liquidity position, allowing for operational flexibility and strategic acquisitions in the mineral and royalty sector.
Is Sitio Royalties Corp. (STR) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the following key valuation metrics are relevant for assessing whether the company is overvalued or undervalued:
- Price-to-Earnings (P/E) Ratio: 18.64
- Price-to-Book (P/B) Ratio: 2.11
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 10.25
The stock price trends over the last 12 months indicate the following:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 30.00 |
| December 2023 | 29.50 |
| March 2024 | 25.00 |
| June 2024 | 24.00 |
| September 2024 | 23.20 |
Dividend yield and payout ratios are as follows:
- Dividend Yield: 1.83%
- Payout Ratio: 35%
Analyst consensus on stock valuation as of September 30, 2024:
- Buy: 10 Analysts
- Hold: 5 Analysts
- Sell: 2 Analysts
In summary, the valuation metrics, stock price trends, dividend yield, and analyst consensus indicate a comprehensive view of the company's financial health as of 2024.
Key Risks Facing Sitio Royalties Corp. (STR)
Key Risks Facing Sitio Royalties Corp.
Overview of Internal and External Risks
The company operates in a highly competitive environment, facing risks from both internal and external factors. Key risks include:
- Industry Competition: The company competes with numerous operators in the mineral and royalty sector, which can pressure pricing and margins.
- Regulatory Changes: Changes in regulations regarding oil and gas production can impact operational costs and profitability.
- Market Conditions: Fluctuations in commodity prices can significantly affect revenue streams. For instance, natural gas prices decreased by 55% year-over-year, impacting revenue from this segment.
Operational Risks
Operational risks are significant, including:
- Production Volatility: Variability in production volumes can lead to unpredictable revenue. The company reported a 9% increase in crude oil production for the three months ended September 30, 2024, but a 5% decrease in natural gas production.
- Counterparty Risk: The company is exposed to credit risk from counterparties in derivative contracts. As of September 30, 2024, the company maintained a revolving credit facility balance of $403 million.
Financial Risks
Financial risks include:
- Interest Rate Risk: The average annual interest rate incurred on borrowings under the revolving credit facility was 8.43%. A 1.0% increase in the average interest rate would result in an estimated $2.7 million increase in interest expense.
- Commodity Price Risk: A $1.00 per Bbl change in realized oil price would result in a $5.2 million change in oil revenues.
Strategic Risks
Strategic risks include:
- Acquisition Strategy: The company's growth strategy relies heavily on acquisitions. As of September 30, 2024, the company evaluated over 1,000 potential acquisitions but completed just 206.
- Market Access: Limited pipeline capacity in the Permian Basin may restrict access to markets, affecting revenue from natural gas.
Mitigation Strategies
Mitigation strategies include:
- Hedging Activities: The company enters into derivative instruments to mitigate commodity price volatility.
- Credit Risk Management: The company evaluates the credit standing of counterparties and maintains high credit ratings.
| Risk Type | Description | Potential Impact |
|---|---|---|
| Industry Competition | Pressure on pricing and margins | Reduced profitability |
| Regulatory Changes | Changes in oil and gas regulations | Increased operational costs |
| Commodity Price Risk | Fluctuations in oil and gas prices | Revenue variability |
| Interest Rate Risk | Floating interest rates on debt | Increased interest expense |
| Operational Volatility | Variability in production volumes | Unpredictable revenues |
Future Growth Prospects for Sitio Royalties Corp. (STR)
Growth Opportunities
Future growth prospects for Sitio Royalties Corp. are driven by several key factors, including market expansions, acquisitions, and strategic partnerships. Below is a detailed analysis of these growth drivers.
Key Growth Drivers
- Market Expansion: The total acreage position as of September 30, 2024, is approximately 270,000 net revenue acres (NRAs). This expansion allows for increased production potential and revenue generation.
- Acquisitions: The company has completed 206 acquisitions since its inception, with the most recent acquisitions totaling $210.6 million for oil and gas properties during the nine months ended September 30, 2024.
- Production Growth: Average daily production for the three months ended September 30, 2024, was 38,585 BOE/d, a 5% increase from the previous year.
Revenue Growth Projections
Revenue for the nine months ended September 30, 2024, was $469.3 million, reflecting a 6% increase compared to $444.0 million in 2023. This growth is primarily attributed to:
- Oil Revenue: Increased to $402.2 million from $359.4 million, a growth of 12%.
- NGL Revenue: Increased to $44.8 million, a 16% rise from $38.7 million.
- Natural Gas Revenue: Decreased to $14.4 million from $32.7 million, a 56% decline.
Strategic Initiatives
The company’s strategic initiatives include:
- Share Repurchase Program: Authorized up to $200 million for repurchases, with $94.8 million remaining as of September 30, 2024.
- Partnerships: Established relationships with various upstream operators to enhance operational efficiencies and exploration capabilities.
Competitive Advantages
Competitive advantages positioning the company for growth include:
- Low Cost Structure: The average production and ad valorem taxes were approximately $3.35 per BOE, relative to an average realized price of $44.63 per BOE.
- Strong Financial Position: As of September 30, 2024, liquidity was $455.5 million, with $8.5 million in cash and $447 million available under the revolving credit facility.
| Financial Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $469.3 million | $444.0 million | 6% |
| Oil Revenue | $402.2 million | $359.4 million | 12% |
| NGL Revenue | $44.8 million | $38.7 million | 16% |
| Natural Gas Revenue | $14.4 million | $32.7 million | -56% |
| Average Daily Production (BOE/d) | 38,585 | 36,900 | 5% |
Overall, the combination of market expansions, strategic acquisitions, and a strong financial position supports the future growth prospects of the company.
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Updated on 16 Nov 2024
Resources:
- Sitio Royalties Corp. (STR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sitio Royalties Corp. (STR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sitio Royalties Corp. (STR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.