Sitio Royalties price target lowered to $27 from $29 at KeyBanc

KeyBanc analyst Tim Rezvan lowered the firm’s price target on Sitio Royalties to $27 from $29 and keeps an Overweight rating on the shares. The firm comes away with mixed views on Sitio’s Q2 earnings report and update. KeyBanc acknowledges that steady-state activity in the Permian Basin persists and a modest decrease in line-of-sight wells may not be a negative harbinger of decreased activity, especially with a tick-up to 45 net seen by the end of July. It also sees benefit in repurchasing shares amid periods of dislocation. With that said, the firm does see some areas of concern. These include interest expense equal to $6.36/boe in Q2, which hurts unit margins and weighs on free cash flow generation, and an NTM distribution yield of 5.2%, which trails cash payments public peers make.