Sitio Royalties Corp. (STR): Business Model Canvas [11-2024 Updated]

In the ever-evolving landscape of the energy sector, Sitio Royalties Corp. (STR) stands out with its innovative business model that focuses on maximizing returns through strategic partnerships and royalty interests. This model not only minimizes operational risks but also ensures stable cash flows for investors. Delve deeper into the components of STR's Business Model Canvas to understand how this company navigates the complexities of the market while delivering value to its stakeholders.

Sitio Royalties Corp. (STR) - Business Model: Key Partnerships

Collaborations with exploration and production (E&P) companies

As of September 30, 2024, Sitio Royalties Corp. has established significant collaborations with various E&P companies. These partnerships allow Sitio to leverage the operational capabilities of these companies while maintaining a focus on its core business of mineral and royalty management. For the nine months ended September 30, 2024, Sitio's production data included:

Production Type	Volume (MBOE)	Percentage of Total Production
Crude Oil	5,219	50%
Natural Gas	16,808	16%
NGLs	2,316	23%
Total	10,337	100%

This production volume underscores the importance of E&P partnerships, as Sitio is not directly involved in the operational aspects of drilling but benefits from the revenue generated through its mineral interests.

Strategic alliances for mineral acquisition opportunities

Strategic alliances play a crucial role in Sitio's growth strategy. The company has completed 206 acquisitions of mineral and royalty interests since its inception, with a focus on premier basins that promise high returns on investment. For the nine months ended September 30, 2024, Sitio evaluated over 1,000 potential acquisitions, indicating a robust pipeline for future growth. The financial metrics relating to these acquisitions include:

Acquisition Activity	Value (in millions)	Number of Transactions
Total Acquisitions	$210.6	206
Evaluated Opportunities	N/A	1,000+

These strategic alliances not only enhance Sitio's asset base but also provide it with a competitive edge in the marketplace.

Partnerships with financial institutions for funding

Partnerships with financial institutions are essential for Sitio's operational flexibility and growth. As of September 30, 2024, Sitio had a liquidity position of $455.5 million, which includes:

Liquidity Components	Amount (in millions)
Cash and Cash Equivalents	$8.5
Availability under Sitio Revolving Credit Facility	$447.0

The Sitio Revolving Credit Facility, which has a borrowing base of $850 million, is a vital resource for funding acquisitions and managing operational expenses. The average interest rate on borrowings under this facility was approximately 8.43% for the nine months ended September 30, 2024. This financial partnership facilitates Sitio's ability to pursue growth opportunities while maintaining adequate liquidity to support its operations.

Sitio Royalties Corp. (STR) - Business Model: Key Activities

Acquiring mineral and royalty interests

As of September 30, 2024, Sitio Royalties Corp. has evaluated over 1,000 potential mineral and royalty interest acquisitions and completed 206 acquisitions since its formation in November 2016. The company continues to focus on acquiring high-quality mineral and royalty interests to enhance cash flow and shareholder value.

For the nine months ended September 30, 2024, Sitio closed on the acquisition of oil and gas properties for an aggregate purchase price of $210.6 million. The total mineral and royalty interests owned by Sitio represent approximately 270,000 net royalty acres (NRAs) when adjusted to a 1/8th royalty.

Managing and optimizing cash flow from royalties

For the nine months ended September 30, 2024, Sitio's total royalty revenues amounted to $461.3 million, marking an increase from $430.9 million for the same period in 2023. The breakdown of revenue sources is as follows:

Source	Revenue (in thousands)	Percentage of Total Revenue
Oil	$402,226	87%
Natural Gas	$14,361	3%
NGLs	$44,758	10%

Royalty payments are influenced by commodity prices, production volumes, and the performance of exploration and production (E&P) operators. For instance, a $1.00 per barrel change in realized oil prices results in approximately $5.2 million change in oil revenues. The average realized prices for the nine months ended September 30, 2024 were $77.07 per barrel for crude oil and $0.85 per Mcf for natural gas.

Monitoring commodity price trends and market conditions

As a royalty company, Sitio closely monitors commodity price trends and market conditions to optimize its operations and cash flow. The average realized prices after the effects of derivative settlements for the nine months ended September 30, 2024 are:

Commodity	Average Realized Price
Crude Oil (per Bbl)	$77.95
Natural Gas (per Mcf)	$1.21
NGLs (per Bbl)	$19.32
Combined (per BOE)	$45.66

For the three months ended September 30, 2024, the company reported a decrease in mineral and royalty revenue due to a 7% decrease in average realized prices. The average daily production during the same period was 38,585 BOE/d, consisting of 50% crude oil.

Overall, Sitio's ability to effectively manage its mineral and royalty interests while monitoring market conditions is crucial for maintaining and optimizing cash flow, further enhancing its position in the energy sector.

Sitio Royalties Corp. (STR) - Business Model: Key Resources

Extensive portfolio of mineral and royalty interests

As of September 30, 2024, Sitio Royalties Corp. owned mineral and royalty interests representing approximately 270,000 net royalty acres (NRAs), adjusted to a 1/8th royalty. The average net daily production associated with these interests was 38,585 barrels of oil equivalent per day (BOE/d), comprising 19,134 barrels per day (Bbls/d) of oil, 64,130 thousand cubic feet per day (Mcf/d) of natural gas, and 8,763 Bbls/d of natural gas liquids (NGLs).

Experienced management team with industry knowledge

The management team at Sitio Royalties brings extensive experience in the energy sector, having executed 206 acquisitions since the company's inception in November 2016. This experience is crucial for identifying and capitalizing on value-enhancing mineral and royalty interest acquisitions in premier basins.

Access to capital through credit facilities and equity markets

As of September 30, 2024, Sitio Royalties reported a liquidity position of $455.5 million, which included $8.5 million in cash and cash equivalents and $447 million in availability under the Sitio Revolving Credit Facility. This facility has a borrowing base of $850 million and matures on June 30, 2027.

Key Resource	Details
Mineral and Royalty Interests	270,000 NRAs; 38,585 BOE/d average net daily production
Management Experience	206 acquisitions since inception; expertise in energy sector
Liquidity	$455.5 million total liquidity; $8.5 million cash; $447 million availability under credit facility
Credit Facility	$850 million borrowing base; matures June 30, 2027

Sitio Royalties Corp. (STR) - Business Model: Value Propositions

Provides stable cash flows without operational risks

Sitio Royalties Corp. operates on a business model that generates stable cash flows through its mineral and royalty interests. As of September 30, 2024, the company reported a net income of $75.6 million for the nine months ended, an increase of 68% compared to $45.0 million in the prior period. This income is primarily derived from its entitlement to a fixed percentage of the revenue from crude oil, natural gas, and natural gas liquids produced from its acreage, without the burden of operational costs associated with drilling and completion.

Offers attractive returns through royalty interests

For the nine months ended September 30, 2024, Sitio Royalties generated revenue of $469.3 million, with oil revenue accounting for $402.2 million, reflecting a 12% increase from $359.4 million in the same period of 2023. The company’s effective royalty structure allows it to benefit from increased production volumes, which rose by 7%, totaling 10,337 MBOE. The royalty revenues contributed 86% from oil, 3% from natural gas, and 10% from NGL sales.

Minimal capital expenditure requirements compared to traditional E&P companies

Sitio's capital expenditure requirements are significantly lower than those of traditional exploration and production (E&P) companies. For the nine months ended September 30, 2024, Sitio reported cash flows used in investing activities of $191.2 million, primarily for the acquisition of oil and gas properties. The company does not incur ongoing capital costs for drilling or operational expenses, which allows it to maintain a lean operational structure while still generating substantial cash flows. The average realized price per barrel of crude oil was $77.07, compared to $75.11 in the previous year, indicating a 3% increase.

Financial Metric	2024 (9 months)	2023 (9 months)	Variance
Net Income	$75.6 million	$45.0 million	+68%
Total Revenue	$469.3 million	$444.0 million	+6%
Oil Revenue	$402.2 million	$359.4 million	+12%
Natural Gas Revenue	$14.4 million	$32.7 million	-56%
NGL Revenue	$44.8 million	$38.7 million	+16%
Production Volumes (MBOE)	10,337	9,651	+7%

Sitio Royalties Corp. (STR) - Business Model: Customer Relationships

Strong communication with E&P operators for timely royalty payments

Sitio Royalties Corp. actively engages with exploration and production (E&P) operators to ensure timely royalty payments. As of September 30, 2024, the company owned mineral and royalty interests representing approximately 270,000 net royalty acres (NRAs). The average net daily production associated with these interests was 38,585 barrels of oil equivalent per day (BOE/d), comprising 19,134 barrels per day (Bbls/d) of oil, 64,130 thousand cubic feet per day (Mcf/d) of natural gas, and 8,763 Bbls/d of natural gas liquids (NGLs). The company's revenues are significantly impacted by the efficiency and timeliness of these payments, which are linked to commodity prices and production volumes.

Investor relations focused on transparency and shareholder value

In 2024, Sitio Royalties Corp. emphasized transparency in its investor relations, reflecting a commitment to shareholder value. The company reported a net income attributable to Class A stockholders of $33.9 million for the nine months ended September 30, 2024, translating to a net income per share of $0.41. The total equity of the company was $3.39 billion as of September 30, 2024, indicating a robust financial position. Furthermore, during the same period, Sitio initiated a share repurchase program, authorizing up to $200 million in share buybacks, which aligns with its strategy to enhance shareholder returns.

Engagement in community and stakeholder outreach

Community engagement and stakeholder outreach are pivotal aspects of Sitio's business model. The company has been involved in various initiatives to foster relationships with local communities and stakeholders. As of September 30, 2024, Sitio's liquidity stood at $455.5 million, which includes $8.5 million in cash and cash equivalents and $447 million available under its revolving credit facility. This financial stability enables Sitio to invest in community projects and maintain a positive rapport with stakeholders, contributing to its long-term operational sustainability.

Key Financial Metrics	2024 (Nine Months Ended September 30)	2023 (Nine Months Ended September 30)
Net Income Attributable to Class A Stockholders	$33.9 million	$22.1 million
Net Income Per Share	$0.41	$0.26
Total Equity	$3.39 billion	$3.60 billion
Total Revenue	$469.3 million	$444.0 million
Average Net Daily Production	38,585 BOE/d	36,900 BOE/d

Sitio Royalties Corp. (STR) - Business Model: Channels

Direct communication with E&P companies

Sitio Royalties Corp. maintains direct communication channels with exploration and production (E&P) companies to facilitate leasing and revenue collection. The company owns mineral and royalty interests representing approximately 270,000 net royalty acres (NRAs) as of September 30, 2024. This positioning allows Sitio to negotiate lease terms and ensure timely royalty payments directly from operators. The company has engaged in 206 acquisitions of mineral and royalty interests since its inception, enhancing its relationship with E&P operators.

Financial reporting and investor presentations

Sitio Royalties Corp. provides comprehensive financial reporting and investor presentations to communicate its performance and strategic direction. For the nine months ended September 30, 2024, the company reported total revenues of $469.3 million, a notable increase from $444.0 million for the same period in 2023. The financial reports highlight key metrics such as:

Financial Metric	2024 (Nine Months)	2023 (Nine Months)	Variance
Total Revenues	$469,314,000	$444,002,000	$25,312,000
Net Income	$75,600,000	$45,021,000	$30,579,000
Operating Cash Flow	$356,731,000	$354,818,000	$1,913,000

Investor presentations are regularly updated to reflect the company’s operational results, strategic initiatives, and market conditions, ensuring stakeholders are well-informed of Sitio’s performance and outlook.

Digital platforms for stakeholder updates

Sitio Royalties Corp. utilizes digital platforms to provide updates to stakeholders. These platforms include the company's website and investor relations portal, where stakeholders can access earnings reports, presentation materials, and other relevant information. The average realized prices for oil, natural gas, and natural gas liquids (NGLs) for the nine months ended September 30, 2024, were as follows:

Commodity	Average Realized Price
Crude Oil (per Bbl)	$77.07
Natural Gas (per Mcf)	$0.85
NGLs (per Bbl)	$19.32

These updates are crucial for maintaining transparency and fostering trust among investors and stakeholders, particularly in a volatile market where commodity prices can fluctuate significantly.

Sitio Royalties Corp. (STR) - Business Model: Customer Segments

Institutional investors seeking stable returns

Institutional investors are a primary customer segment for Sitio Royalties Corp. (STR). They typically seek stable, predictable returns on their investments and are often attracted to companies that provide consistent dividend payouts and revenue growth. For the nine months ended September 30, 2024, Sitio reported total revenues of $469.3 million, which marked an increase from $444.0 million for the same period in 2023. This growth is indicative of a stable revenue stream that institutional investors favor.

As of September 30, 2024, Sitio had a liquidity position of $455.5 million, comprised of $8.5 million in cash and cash equivalents and $447.0 million available under its revolving credit facility . This robust liquidity supports the company's ability to meet operational needs and maintain dividends, which are attractive to institutional investors.

Retail investors focused on energy sector investments

Retail investors represent another significant customer segment for Sitio. These investors are often interested in the energy sector, particularly in companies that focus on oil and gas royalties. Sitio's business model, which allows it to collect royalties without incurring the costs associated with drilling and production, appeals to this group. For the nine months ended September 30, 2024, Sitio's oil revenues were $461.3 million, reflecting a 7% increase from $430.9 million in the same period of the previous year.

Retail investors are also attracted to the company's share repurchase initiatives, which enhance shareholder value. During the nine months ended September 30, 2024, Sitio repurchased 3,582,033 shares of its Class A Common Stock at an average price of $23.20 . This action signals strong confidence in the company's future and can attract retail investors looking for growth potential in their investments.

E&P companies looking for capital-efficient partnerships

Exploration and Production (E&P) companies constitute another critical customer segment for Sitio Royalties Corp. These firms often seek capital-efficient partnerships to optimize their operations while minimizing financial risks. Sitio's model allows E&P companies to lease mineral rights without the obligation to fund drilling and completion costs. As of September 30, 2024, Sitio owned approximately 270,000 net royalty acres, showcasing its extensive mineral and royalty interests.

The company's royalty structure entitles it to a fixed percentage of the revenue generated from oil, natural gas, and natural gas liquids produced from its leased properties. For the nine months ended September 30, 2024, royalties from oil, natural gas, and NGLs contributed 86%, 3%, and 10% respectively to Sitio's mineral and royalty revenues. This partnership model is attractive to E&P companies looking to enhance their operational efficiency and return on investment without incurring additional capital expenditures.

Customer Segment	Key Characteristics	Financial Data
Institutional Investors	Seeking stable, predictable returns	Revenues: $469.3 million (2024); Liquidity: $455.5 million
Retail Investors	Focused on growth in the energy sector	Oil Revenues: $461.3 million (2024); Share Repurchase: 3,582,033 shares at $23.20
E&P Companies	Capital-efficient partnerships	Royalty Structure: 86% Oil, 3% Natural Gas, 10% NGLs

Sitio Royalties Corp. (STR) - Business Model: Cost Structure

Minimal operational costs due to royalty-based model

Sitio Royalties Corp. operates primarily on a royalty-based model which significantly minimizes operational costs. The company does not incur capital expenditures related to drilling or completion costs, as these expenses are borne by E&P operators. For the nine months ended September 30, 2024, the company's production and ad valorem taxes were approximately $3.35 per BOE, relative to an average realized price of $44.63 per BOE.

Costs associated with acquisitions and due diligence

Acquisition costs remain a crucial part of Sitio's business model. For the nine months ended September 30, 2024, the company paid $210.6 million for the acquisition of oil and gas properties, reflecting an increase from $172.1 million in the same period of 2023. The total cash flows used in investing activities for the period were $(191.2 million).

Cost Type	Q3 2024 Amount	Q3 2023 Amount
Acquisition Costs	$210.6 million	$172.1 million
Total Cash Flows Used in Investing	$(191.2 million)	$(172.1 million)

Administrative expenses related to corporate governance

General and administrative expenses for the three months ended September 30, 2024, amounted to $14.4 million, an increase from $12.0 million in the same period of 2023. This rise is attributed primarily to a $1.9 million increase in stock-based compensation. The company also incurred interest expenses of $(22.5 million) for the same quarter.

Expense Type	Q3 2024 Amount	Q3 2023 Amount
General and Administrative Expenses	$14.4 million	$12.0 million
Interest Expenses	$(22.5 million)	$(26.4 million)

Sitio Royalties Corp. (STR) - Business Model: Revenue Streams

Royalties from oil, natural gas, and NGL production

For the nine months ended September 30, 2024, Sitio Royalties Corp. generated significant revenue from its mineral and royalty interests, which are structured to receive a fixed percentage of the revenue from crude oil, natural gas, and natural gas liquids (NGLs) produced from the underlying acreage. The breakdown of revenues for this period is as follows:

Revenue Source	Revenue ($ in thousands)	Percentage of Total Revenue
Crude Oil Sales	$402,226	86%
Natural Gas Sales	$14,361	3%
NGL Sales	$44,758	10%
Total Royalty Revenues	$461,345	100%

Additionally, a $1.00 per barrel change in realized oil prices would result in a $5.2 million change in oil revenues, while a $0.10 per Mcf change in natural gas prices would impact revenues by approximately $1.7 million.

Lease bonuses from mineral interest agreements

Lease bonuses represent another revenue stream for Sitio Royalties Corp., which it earns when leasing its mineral interests to exploration and production (E&P) companies. For the nine months ended September 30, 2024, lease bonus revenues totaled $7,969,000, reflecting a decrease from the $13,115,000 recorded during the same period in 2023. This decrease is attributed to variability in lease agreements based on specific tracts of land available for leasing.

Gains from equity investments and asset sales

In addition to royalties and lease bonuses, Sitio Royalties Corp. also realizes gains from equity investments and asset sales. In December 2023, the company divested its mineral and royalty interests in the SCOOP and STACK plays in the Anadarko Basin and the Appalachian Basin for $113.3 million, net of transaction costs. The proceeds from this sale were utilized for repayments on the company's credit facility and general corporate purposes.

For the nine months ended September 30, 2024, the total revenue from lease bonuses and other income was $8,236,000. This diversification of revenue streams enhances the company's financial stability and growth potential in the evolving energy market.

Updated on 16 Nov 2024

Resources:

1. 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.
2. 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.