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Sitio Royalties (STR)
NYSE:STR

Sitio Royalties (STR) AI Stock Analysis

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Sitio Royalties

(NYSE:STR)

Rating:76Outperform
Price Target:
$22.00
▲(10.28%Upside)
Sitio Royalties demonstrates strong financial and operational performance, bolstered by positive earnings results and strategic corporate events. The technical indicators support a bullish outlook, although the high P/E ratio suggests some caution. The merger with Viper Energy and shareholder confidence are significant positives.

Sitio Royalties (STR) vs. SPDR S&P 500 ETF (SPY)

Sitio Royalties Business Overview & Revenue Model

Company DescriptionSitio Royalties (STR) is a company operating in the energy sector, specifically focusing on the acquisition and management of oil and gas mineral and royalty interests. The company's core services include the strategic acquisition of high-quality oil and gas properties, which are often located in prolific production areas across the United States. By managing these assets, Sitio Royalties aims to maximize the value of its portfolio and deliver consistent returns to its stakeholders.
How the Company Makes MoneySitio Royalties makes money primarily through the collection of royalties from its ownership of mineral and royalty interests in oil and gas properties. These royalties are generated from the production and sale of oil and gas extracted from the land in which the company holds interests. Revenue is driven by factors such as the volume of production, prevailing oil and gas prices, and the terms of the lease agreements with operators. The company may also engage in strategic partnerships or transactions to enhance its asset portfolio and optimize revenue potential. Additionally, Sitio Royalties focuses on cost-effective management of its assets to ensure profitability and sustainability in fluctuating market conditions.

Sitio Royalties Earnings Call Summary

Earnings Call Date:May 07, 2025
(Q1-2025)
|
% Change Since: 19.53%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong performance with record production, robust financial results, strategic acquisitions, and high margins. However, there is caution due to the uncertainty in commodity prices and potential production decline. The overall sentiment leans positive but acknowledges challenges in the market environment.
Q1-2025 Updates
Positive Updates
Record Production and Robust Activity
The first quarter of 2025 marked another record quarter of production for Sitio, supported by robust drilling and completion activity. Total production increased by 3% quarter-over-quarter, averaging over 42,000 BOE per day. Net wells turned in line were up 34% from the previous quarter.
Strong Financial Performance
Adjusted EBITDA was $142 million, a 1% increase from the prior quarter. Net income also rose to $26 million, representing a 36% increase over the same period. The results exceeded consensus estimates.
Strategic Acquisitions and Shareholder Returns
Over $20 million of acquisitions added 1,315 net royalty acres. The company repurchased 1.1 million shares for $22 million, equating to $0.15 per share in repurchases. A cash dividend of $0.35 per share was declared, with a total return of capital of $0.50 per share.
Lean Cost Structure and High Margins
Sitio reported a lean cost structure with adjusted EBITDA margins at 90%. The company is positioned to generate meaningful free cash flow even in lower commodity price environments.
Increased Inventory and Operator Quality
Inventory increased by 40 additional net normalized locations, a 10% quarter-over-quarter increase. The company has a diverse portfolio with operators like Exxon, Chevron, and Conoco.
Negative Updates
Uncertainty in Commodity Prices
The company updated its full-year 2025 cash taxes guidance to reflect lower anticipated commodity prices, reducing the estimate by $5 million.
Potential Decline in Production Trajectory
Despite strong first-quarter results, the unchanged full-year guidance implies declining volumes, potentially indicating a slowdown from operators due to commodity price volatility.
Company Guidance
During the Sitio Royalties first quarter 2025 earnings call, the company highlighted several key operational and financial metrics. Production reached a record level, increasing by 3% quarter-over-quarter to over 42,000 BOE per day, while net wells turned in line rose by 34% from Q4 2024. The company completed over $20 million in acquisitions, adding 1,315 net royalty acres, and reported an adjusted EBITDA of $142 million, up 1% from the previous quarter. Net income grew by 36% to $26 million, exceeding consensus estimates. The company declared a quarterly cash dividend of $0.35 per share and executed share repurchases totaling 1.1 million shares for $22 million, with a total return of capital of $0.50 per share. The Board extended the buyback plan, authorizing an additional $300 million in share repurchases, with current capacity at approximately $350 million. Sitio reported $1.1 billion in debt with $439 million available under its revolving credit facility, and adjusted net debt to free cash flow was approximately half of the peer group average. The company also updated its 2025 cash taxes guidance, reducing the estimate by $5 million to $23 million due to lower anticipated commodity prices.

Sitio Royalties Financial Statement Overview

Summary
Sitio Royalties demonstrates strong revenue growth and improved profitability, but high leverage and negative equity pose significant financial risks. The positive trend in free cash flow is encouraging but reliance on operating cash flows suggests caution.
Income Statement
75
Positive
Sitio Royalties has displayed robust revenue growth, with total revenue increasing significantly from $456.99 million in 2020 to $624.41 million in 2024. The net profit margin improved notably, moving from a net loss in 2020 to a net income of $130.80 million in 2024. The EBIT and EBITDA margins have also increased, indicating enhanced operational efficiency. However, fluctuations in net income in previous years indicate some volatility.
Balance Sheet
40
Negative
The company's balance sheet shows high leverage, with a substantial debt-to-equity ratio due to negative stockholders' equity in 2024. This poses significant financial risk. The equity ratio has deteriorated, reflecting reduced financial stability. On a positive note, the company has increased its total assets over time but must manage its liabilities better to improve financial health.
Cash Flow
68
Positive
The cash flow statements reveal positive free cash flow, which is a strong indicator of liquidity. Free cash flow grew from negative in 2020 to $462.43 million in 2024. However, the operating cash flow to net income ratio indicates heavy reliance on operating cash flows to sustain profitability, highlighting potential risk if operational performance declines.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
636.54M624.41M593.36M369.61M120.59M45.70M
Gross Profit
256.26M257.73M423.27M265.10M79.68M13.65M
EBIT
210.26M203.01M35.39M193.99M49.87M-3.22M
EBITDA
535.96M518.40M323.75M354.24M90.78M7.98M
Net Income Common Stockholders
42.74M40.95M-15.54M184.18M47.49M-14.21M
Balance SheetCash, Cash Equivalents and Short-Term Investments
11.75M3.29M15.20M18.82M12.38M2.72M
Total Assets
4.68B4.74B4.76B5.17B1.20B275.73M
Total Debt
855.64M1.09B872.46M945.76M134.00M39.80M
Net Debt
843.90M1.08B857.26M926.94M121.62M37.08M
Total Liabilities
1.15B1.39B1.16B1.28B139.71M47.33M
Stockholders Equity
1.57B1.47B1.61B1.72B560.62M139.76M
Cash FlowFree Cash Flow
113.43M132.54M316.95M-393.45M27.19M-9.82M
Operating Cash Flow
445.17M462.43M487.50M164.96M65.93M26.02M
Investing Cash Flow
-333.59M-329.96M-59.73M-558.10M-38.74M-21.56M
Financing Cash Flow
-121.58M-144.37M-431.40M399.20M-22.34M-15.06M

Sitio Royalties Technical Analysis

Technical Analysis Sentiment
Positive
Last Price19.95
Price Trends
50DMA
17.38
Positive
100DMA
18.43
Positive
200DMA
19.66
Positive
Market Momentum
MACD
0.51
Negative
RSI
67.91
Neutral
STOCH
73.06
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For STR, the sentiment is Positive. The current price of 19.95 is above the 20-day moving average (MA) of 18.01, above the 50-day MA of 17.38, and above the 200-day MA of 19.66, indicating a bullish trend. The MACD of 0.51 indicates Negative momentum. The RSI at 67.91 is Neutral, neither overbought nor oversold. The STOCH value of 73.06 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for STR.

Sitio Royalties Peers Comparison

Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
STSTR
76
Outperform
$2.93B37.342.86%6.89%7.18%
66
Neutral
$1.66B169.901.14%0.68%6.97%-87.87%
57
Neutral
$7.14B3.09-4.49%5.67%0.82%-49.15%
56
Neutral
$650.27M-16.64%12.30%42.72%
GSGSM
56
Neutral
$752.10M27.86-7.29%1.31%-4.98%-192.96%
MPMP
51
Neutral
$4.24B-9.62%4.63%-3189.81%
TMTMC
42
Neutral
$1.51B-667.42%-3.49%
* Energy Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
STR
Sitio Royalties
19.95
-1.52
-7.08%
MTRN
Materion
79.85
-28.83
-26.53%
GSM
Ferroglobe
4.18
-1.51
-26.54%
NEXA
Nexa Resources SA
4.83
-2.93
-37.76%
MP
MP Materials
25.70
10.71
71.45%
TMC
TMC the metals company Inc.
4.10
2.73
199.27%

Sitio Royalties Corporate Events

M&A Transactions
Sitio Royalties Announces Merger with Viper Energy
Neutral
Jun 3, 2025

On June 2, 2025, Sitio Royalties Corp. and Viper Energy, Inc. entered into a merger agreement where Viper will acquire Sitio in an all-equity transaction. The merger will result in Sitio becoming a wholly owned subsidiary of a new entity, New Cobra Pubco, Inc., which will operate under the name Viper Energy, Inc. Post-merger, Sitio stockholders will own approximately 20% of the new entity, while Viper stockholders will own about 80%. The merger is subject to customary closing conditions, including stockholder approvals and regulatory clearances. Sitio’s Board of Directors has unanimously approved the merger, deeming it fair and in the best interests of its stockholders.

The most recent analyst rating on (STR) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Sitio Royalties stock, see the STR Stock Forecast page.

M&A TransactionsBusiness Operations and Strategy
Sitio Royalties Announces Merger with Viper Energy
Positive
Jun 3, 2025

On June 2, 2025, Sitio Royalties Corp. and Viper Energy, Inc. announced a merger agreement in which Viper will acquire Sitio in an all-equity transaction valued at approximately $4.1 billion. The merger, expected to close in the third quarter of 2025, will result in former Viper and Sitio stockholders owning about 80% and 20% of the new parent company, respectively. This strategic move is anticipated to enhance Viper’s production profile, cash flow growth, and financial accretion, while also providing significant synergies and access to investment-grade capital. The merger positions the combined entity as a leader in the mineral and royalty interests sector, particularly in the Permian Basin, with improved scale and competitive advantage.

The most recent analyst rating on (STR) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Sitio Royalties stock, see the STR Stock Forecast page.

Executive/Board ChangesShareholder Meetings
Sitio Royalties Holds Successful 2025 Annual Meeting
Positive
May 15, 2025

On May 13, 2025, Sitio Royalties Corp. held its 2025 Annual Meeting of Stockholders, where stockholders voted on three key proposals. The election of directors saw high approval rates for all nine nominees, with Christopher L. Conoscenti receiving the highest support at 99.70%. Additionally, the company’s executive compensation was approved in a non-binding advisory vote, and KPMG LLP’s appointment as the independent registered public accounting firm for 2025 was ratified, indicating strong shareholder confidence in the company’s governance and financial oversight.

The most recent analyst rating on (STR) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Sitio Royalties stock, see the STR Stock Forecast page.

Private Placements and FinancingBusiness Operations and Strategy
Sitio Royalties Amends Credit Agreement with JPMorgan
Neutral
May 12, 2025

On May 8, 2025, Sitio Royalties Operating Partnership, LP, along with other guarantors, amended its Third Amended and Restated Credit Agreement with JPMorgan Chase Bank and other lenders. This Fifth Amendment reaffirmed the borrowing base at $925 million and adjusted certain terms and dates related to the semi-annual redetermination of the borrowing base, impacting the company’s financial operations and credit structure.

The most recent analyst rating on (STR) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Sitio Royalties stock, see the STR Stock Forecast page.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.