Sitio Royalties Reports Third Quarter 2022 Operational and Financial Results
Record High Average Daily Production Volume of 17,990 Boe/d; Pro Forma Average Daily Production Volume of 18,571 Boe/d, Including Momentum Minerals Volumes for the Entire Third Quarter 2022
Declared $0.72 Dividend Per Share of Class a Common Stock, a Sequential Increase of $0.01 Per Share Despite a Decrease of 14% in Realized Unhedged Commodity Prices
Announced Transformative At-Market, All-Stock Merger With Brigham Minerals, Which Will Form a Premier Consolidator of Oil and Gas Mineral and Royalty Interests
Closed on Previously Announced Acquisition of Over 12,200 Permian Basin Net Royalty Acres From Momentum Minerals
Increased Pro Forma Combined Sitio and Brigham Minerals Average Daily Production Volume Guidance for the Twelve Months Ending June 30, 2023 to 32,750 – 34,250 Boe/d
Refinanced $425 Million 364-day Bridge Term Loan With $450 Million of Senior Unsecured Notes Due 2026
DENVER–(BUSINESS WIRE)–Sitio Royalties Corp. (NYSE: STR) (“Sitio”, “STR” or the “Company”) today announced operational and financial results for the quarter ended September 30, 2022.
THIRD QUARTER 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Average daily production volume of 17,990 barrels of oil equivalent per day (“Boe/d”), (51% oil), up 45% sequentially from 2Q 2022; Pro forma average daily production volume of 18,571 Boe/d, including Momentum Minerals volumes for the entire 3Q 2022
- Net income of $69.0 million, down 4% sequentially from 2Q 2022 and cash flow from operations of $82.6 million, up 89% sequentially from 2Q 2022
- Adjusted EBITDA of $106.3 million(1), up 38% sequentially from 2Q 2022 and Discretionary Cash Flow (“DCF”)(1) of $93.4 million, up 24% sequentially from 2Q 2022
- Declared 3Q 2022 dividend of $0.72 per share of Class A Common Stock; implied annualized dividend yield of 9.4% based on STR’s Class A Common Stock closing price of $30.64 on November 7, 2022
- 131.1 net producing wells online as of September 30, 2022, a sequential increase from 2Q 2022 of 4.3 net wells, or 3.4%(2)
- 4.1 net wells turned-in-line (“TIL”) during 3Q 2022, approximately 95% of which were in the Permian Basin
- 26.7 net line-of-sight (“LOS”) wells as of September 30, 2022, comprised of 15.9 net spuds and 10.8 net permits, with approximately 91% of total net LOS wells in the Permian Basin
- Closed previously announced acquisition of over 12,200 net royalty acres from Momentum Minerals in July 2022 for approximately $213 million after purchase price adjustments
- Signed definitive agreement to merge with Brigham Minerals in an at-market, all-stock transaction, which is expected to close in 1Q 2023 pending customary closing conditions and approvals
- Issued $450 million of senior unsecured notes due 2026 and used a portion of the proceeds to fully repay outstanding amounts on the Company’s $425 million 364-day Bridge Term Loan
In August of 2022, Sitio provided financial and operational guidance for the second half 2022. Third quarter 2022 results relative to guidance for the second half of 2022 are shown in the table below.
|
2H 2022 Guidance Metric |
|
3Q 2022 Results |
|
2H 2022 Guidance |
|
2022 Average daily production (Mboe/d) |
|
18.0 |
|
18.0 – 19.0 |
|
2022 Average daily production (% oil) |
|
51.1% |
|
50.0% – 53.0% |
|
2022 Gathering and transportation ($/Boe) |
|
$1.33 |
|
$1.15 – $1.65 |
|
Cash G&A ($ in millions)(1) |
|
$4.6 |
|
$15.0-$16.5(annualized) |
|
2022 Production taxes (% of royalty revenue) |
|
7% |
|
7% – 9% |
|
2022 Cash tax rate (% of pre-tax income) |
|
2% |
|
2% – 4% |
(1) Adjusted EBITDA, Discretionary Cash Flow and Cash G&A are non-GAAP financial measures. For definitions of such measures and reconciliations to their most directly comparable GAAP financial measures, please see “Non-GAAP financial measures.”
(2) 2Q 2022 net producing wells online included interests acquired from Momentum Minerals, which closed in July of 2022.
Chris Conoscenti, Chief Executive Officer of Sitio commented, “The third quarter was another impressive demonstration of the Sitio team’s focus on building long-term shareholder value by continuing large-scale consolidation of the highly-fragmented minerals and royalties space. We closed on our previously announced acquisition of approximately 12,200 NRAs in the Permian Basin from Momentum Minerals in July and we announced the all-stock merger with Brigham Minerals in September which will add over 85,000 NRAs to our portfolio, half of which are in the Permian Basin. In addition to executing on the largest minerals M&A transaction to date, our current asset base generated another quarter of compelling financial results, with increased per share metrics for Discretionary Cash Flow and dividends despite approximately 14% lower unhedged commodity prices than the second quarter on a per barrel of oil equivalent basis. Activity on our assets has been resilient and line-of-sight wells continue to be at the highest levels in our Company’s history and operated by a balanced mix of well-capitalized public and private E&P companies.”
OPERATOR ACTIVITY AND MERGERS AND ACQUISITIONS UPDATE
During the third quarter of 2022, the Company estimates that there were 4.1 net wells turned-in-line and that as of September 30, 2022, there were 26.7 net LOS wells comprised of 15.9 net spuds and 10.8 net permits on the Company’s acreage, approximately the same number of net LOS wells as of June 30, 2022. Third quarter 2022 daily production volume averaged 17,990 Boe/d, which included a full quarter of production from assets acquired from Foundation Minerals and 66 days of production from assets acquired from Momentum Minerals. Pro forma for a full quarter of production from the assets acquired from Momentum Minerals, third quarter 2022 daily production averaged 18,571 Boe/d.
Sitio completed its acquisition of more than 12,200 NRAs from Momentum Minerals on July 26, 2022 and on September 6, 2022, announced signing of a definitive agreement for an all-stock merger with Brigham Minerals, which would materially enhance Sitio’s scale to more than 259,000 NRAs, improve margins, reduce leverage and increase public float by nearly 6 times to approximately $2 billion. On October 11, 2022, Snapper Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of Sitio (“New Sitio”) filed a registration statement on Form S-4 related to the Brigham merger with the SEC. While the registration statement has not yet become effective and the information contained therein is subject to change, it provides important information about the transaction and the proposals to be considered by the shareholders of Brigham and Sitio. Sitio expects the transaction to close in 1Q 2023, subject to customary closing conditions, including regulatory clearance and approvals by the shareholders of Sitio and Brigham.
The following table summarizes Sitio’s net average daily production, net wells and net royalty acres by area:
|
|
Delaware |
|
Midland |
|
Eagle Ford |
|
Appalachia |
|
Total |
||||||||||
|
Average Daily Production (Boe/d) |
|
|
|
|
|
|
|
|
|
||||||||||
|
As reported for the three months ended September 30, 2022 |
|
10,943 |
|
|
|
3,719 |
|
|
|
2,440 |
|
|
|
888 |
|
|
|
17,990 |
|
|
% Oil |
|
48 |
% |
|
|
69 |
% |
|
|
57 |
% |
|
|
3 |
% |
|
|
51 |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net Well Activity (normalized to 5,000′ laterals) |
|
|
|
|
|
|
|
|
|
||||||||||
|
Net wells online as of September 30, 2022 |
|
71.8 |
|
|
|
22.6 |
|
|
|
33.4 |
|
|
|
3.3 |
|
|
|
131.1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net wells TIL for the three months ended September 30, 2022 |
|
1.6 |
|
|
|
2.3 |
|
|
|
0.2 |
|
|
|
– |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net LOS wells as of September 30, 2022 |
|
14.4 |
|
|
|
9.9 |
|
|
|
2.4 |
|
|
|
– |
|
|
|
26.7 |
|
|
Spuds |
|
7.1 |
|
|
|
7.6 |
|
|
|
1.2 |
|
|
0.0 |
|
|
|
15.9 |
|
|
|
Permits |
|
7.3 |
|
|
|
2.3 |
|
|
|
1.2 |
|
|
|
– |
|
|
|
10.8 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net Royalty Acres (normalized to 1/8th royalty equivalent) |
|
|
|
|
|
|
|
|
|
||||||||||
|
June 30, 2022 |
|
102,200 |
|
|
|
25,200 |
|
|
|
21,800 |
|
|
|
12,400 |
|
|
|
161,600 |
|
|
September 30, 2022 |
|
110,300 |
|
|
|
29,500 |
|
|
|
21,500 |
|
|
|
12,500 |
|
|
|
173,800 |
|
|
NRA Increase since June 30, 2022 |
|
8,100 |
|
|
|
4,300 |
|
|
|
(300 |
) |
|
|
100 |
|
|
|
12,200 |
|
FINANCIAL UPDATE
Sitio’s third quarter 2022 average unhedged realized prices including all expected quality, transportation and demand adjustments were $93.81 per barrel of oil, $6.55 per Mcf of natural gas and $31.98 per barrel of natural gas liquids, for a total equivalent price of $65.71 per barrel of oil equivalent. During the third quarter, the Company received $2.7 million in net cash settlements for commodity derivative contracts and as a result, average hedged realized prices were $97.32 per barrel of oil, $6.46 per Mcf of natural gas and $31.98 per barrel of natural gas liquids, for a total equivalent price of $67.36 per barrel of oil equivalent. This represents an $8.92 per barrel of oil equivalent, or a 12% decrease relative to hedged realized prices for the three months ended June 30, 2022.
Consolidated net income for the third quarter of 2022 was $69.0 million, a decrease of 4% relative to the second quarter of 2022. Consolidated net income was positively impacted by a $32.0 million non-cash hedging gain from Sitio’s commodity derivative contracts and partially offset by increased interest expense of $13.0 million and increased general and administrative expenses of $6.7 million, which were driven primarily by $4.8 million of costs related to one-time transactions and write off of financing costs. For the three months ended September 30, 2022, Adjusted EBITDA was $106.3 million, up 39% from the three months ended June 30, 2022 primarily due to increased production volumes and partially offset by lower commodity prices.
As of September 30, 2022, the Company had $677.0 million of total debt (comprised of $227.0 million drawn on its revolving credit facility and $450.0 million of senior unsecured notes) and liquidity of $83.8 million, including $10.8 million of cash on hand. In late September of 2022, the Company issued $450.0 million of senior unsecured notes and used the net proceeds to fully pay down its $425.0 million 364-day unsecured term loan and for general corporate purposes. As of September 30, 2022, Sitio was in compliance with all financial covenants of its outstanding debt instruments.
|
|
|
Oil (NYMEX WTI) |
||||||||||
|
|
|
4Q22 |
|
2023 |
|
2024 |
|
1H25 |
||||
|
Swaps |
|
|
|
|
|
|
|
|
||||
|
Bbl per day |
|
|
2,200 |
|
|
3,050 |
|
|
3,300 |
|
|
1,100 |
|
Average price ($/Bbl) |
|
$ |
106.31 |
|
$ |
93.71 |
|
$ |
82.66 |
|
$ |
74.65 |
|
Collars |
|
|
|
|
|
|
|
|
||||
|
Bbl per day |
|
|
— |
|
|
— |
|
|
— |
|
|
2,000 |
|
Average call ($/Bbl) |
|
|
— |
|
|
— |
|
|
— |
|
$ |
93.20 |
|
Average put ($/Bbl) |
|
|
— |
|
|
— |
|
|
— |
|
$ |
60.00 |
|
|
|
Gas (NYMEX Henry Hub) |
||||||||||
|
|
|
4Q22 |
|
2023 |
|
2024 |
|
1H25 |
||||
|
Swaps |
|
|
|
|
|
|
|
|
||||
|
MMBtu per day |
|
|
500 |
|
|
500 |
|
|
500 |
|
|
— |
|
Average price ($/MMBtu) |
|
$ |
4.63 |
|
$ |
3.83 |
|
$ |
3.41 |
|
|
— |
|
Collars |
|
|
|
|
|
|
|
|
||||
|
MMBtu per day |
|
|
6,000 |
|
|
8,500 |
|
|
11,400 |
|
|
11,600 |
|
Average call ($/MMBtu) |
|
$ |
9.69 |
|
$ |
7.93 |
|
$ |
7.24 |
|
$ |
10.34 |
|
Average put ($/MMbtu) |
|
$ |
6.00 |
|
$ |
4.82 |
|
$ |
4.00 |
|
$ |
3.31 |
GUIDANCE UPDATE
After reviewing completed third quarter 2022 results, the Company is increasing average daily production to 32,750 – 34,250 Boe/d, increasing Cash G&A to $22.0 – $23.0 million, decreasing production taxes to 6% – 8% of royalty revenue and reaffirming guidance for all other metrics for the twelve months ending June 30, 2023 on a pro forma combined basis for the Brigham Minerals merger, which is shown in the table below.
|
For the twelve months ending June 30, 2023 |
|
Low |
|
|
High |
|
||
|
Average Daily Production |
|
|
|
|
|
|
||
|
Average daily production (Boe/d) |
|
|
32,750 |
|
|
|
34,250 |
|
|
Average daily production (% oil) |
|
|
49 |
% |
|
|
51 |
% |
|
|
|
|
|
|
|
|
||
|
Revenue Deductions, Expenses and Taxes |
|
|
|
|
|
|
||
|
Gathering and transportation ($/Boe) |
|
$ |
1.25 |
|
|
$ |
1.75 |
|
|
Cash G&A ($ in millions) |
|
$ |
22.0 |
|
|
$ |
23.0 |
|
|
Production taxes (% of royalty revenue) |
|
|
6 |
% |
|
|
8 |
% |
|
Cash tax rate (% of pre-tax income) |
|
|
10 |
% |
|
|
12 |
% |
THIRD QUARTER CASH DIVIDEND
The Company’s Board of Directors declared a cash dividend of $0.72 per share of Class A Common Stock with respect to the third quarter of 2022. The dividend is payable on November 30, 2022 to the stockholders of record at the close of business on November 21, 2022.
THIRD QUARTER 2022 EARNINGS CONFERENCE CALL
Sitio will host a conference call at 8:30 a.m. Eastern on Wednesday, November 9, 2022 to discuss its third quarter 2022 operating and financial results. Participants can access the call by dialing 1-844-200-6205 in the United States or 1-929-526-1599 in other locations with access code 835942 or via webcast at https://events.q4inc.com/attendee/152608414. The conference call, live webcast and archive of the call can also be accessed through the Investor Relations section of Sitio’s website at www.sitio.com.
UPCOMING INVESTOR CONFERENCE
Members of Sitio’s management team will be attending the Capital One Securities 17th Annual Energy Conference on December 6, 2022. Presentation materials associated with this event will be accessible through the Investor Relations section of Sitio’s website at www.sitio.com.
|
FINANCIAL RESULTS |
||||||||||||
|
Production Data |
||||||||||||
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||
|
Production Data: |
|
|
|
|
|
|
|
|
||||
|
Crude oil (MBbls) |
|
|
846 |
|
|
363 |
|
|
1,969 |
|
|
783 |
|
Natural gas (Mmcf) |
|
|
2,916 |
|
|
1,290 |
|
|
6,481 |
|
|
3,244 |
|
NGLs (MBbls) |
|
|
323 |
|
|
140 |
|
|
760 |
|
|
320 |
|
Total (MBOE)(6:1) |
|
|
1,655 |
|
|
718 |
|
|
3,809 |
|
|
1,644 |
|
Average daily production (BOE/d)(6:1) |
|
|
17,990 |
|
|
7,810 |
|
|
13,950 |
|
|
6,021 |
|
Average Realized Prices: |
|
|
|
|
|
|
|
|
||||
|
Crude oil (per Bbl) |
|
$ |
93.81 |
|
$ |
66.61 |
|
$ |
98.12 |
|
$ |
62.63 |
|
Natural gas (per Mcf) |
|
$ |
6.55 |
|
$ |
3.74 |
|
$ |
6.05 |
|
$ |
3.43 |
|
NGLs (per Bbl) |
|
$ |
31.98 |
|
$ |
29.43 |
|
$ |
36.68 |
|
$ |
28.31 |
|
Combined (per BOE) |
|
$ |
65.71 |
|
$ |
46.14 |
|
$ |
68.33 |
|
$ |
42.11 |
|
Average Realized Prices After Effects of Derivative Settlements: |
|
|
|
|
|
|
|
|
||||
|
Crude oil (per Bbl) |
|
$ |
97.32 |
|
$ |
66.61 |
|
$ |
99.48 |
|
$ |
62.63 |
|
Natural gas (per Mcf) |
|
$ |
6.46 |
|
$ |
3.74 |
|
$ |
5.99 |
|
$ |
3.43 |
|
NGLs (per Bbl) |
|
$ |
31.98 |
|
$ |
29.43 |
|
$ |
36.68 |
|
$ |
28.31 |
|
Combined (per BOE) |
|
$ |
67.36 |
|
$ |
46.14 |
|
$ |
68.93 |
|
$ |
42.11 |
|
Selected Expense Metrics |
||||||||
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
|
|
2022 |
|
|
2022 |
|
||
|
Severance and ad valorem taxes |
|
|
6.6 |
% |
|
|
6.9 |
% |
|
Depreciation, depletion and amortization ($/Boe) |
|
$ |
19.34 |
|
|
$ |
17.67 |
|
|
General and administrative ($/Boe) |
|
$ |
8.08 |
|
|
$ |
6.33 |
|
|
Cash general and administrative ($/Boe) |
|
$ |
2.80 |
|
|
$ |
2.94 |
|
|
Interest expense, net ($/Boe) |
|
$ |
9.05 |
|
|
$ |
4.75 |
|
|
Condensed Consolidated Balance Sheets |
||||||||
|
(In thousands except par and share amounts) |
||||||||
|
|
|
September 30, |
|
December 31, |
||||
|
|
|
2022 |
|
2021 |
||||
|
|
|
(Unaudited) |
|
|||||
|
ASSETS |
|
|
|
|||||
|
Current assets |
|
|
|
|||||
|
Cash and cash equivalents |
|
$ |
10,812 |
|
$ |
12,379 |
|
|
|
Accrued revenue and accounts receivable, net |
|
|
83,514 |
|
|
36,202 |
|
|
|
Prepaid assets |
|
|
1,297 |
|
|
235 |
|
|
|
Derivative asset |
|
|
22,531 |
|
|
— |
|
|
|
Total current assets |
|
|
118,154 |
|
|
48,816 |
|
|
|
Property and equipment |
|
|
|
|||||
|
Oil and natural gas properties, successful efforts method: |
|
|
|
|||||
|
Unproved properties |
|
|
1,473,142 |
|
|
817,873 |
|
|
|
Proved properties |
|
|
1,042,257 |
|
|
447,369 |
|
|
|
Other property and equipment |
|
|
3,201 |
|
|
8,187 |
|
|
|
Accumulated depreciation, depletion and amortization |
|
|
(186,004 |
) |
|
(121,536 |
) |
|
|
Net oil and gas properties and other property and equipment |
|
|
2,332,596 |
|
|
1,151,893 |
|
|
|
Other long-term assets |
|
|
|
|||||
|
Long-term derivative asset |
|
|
28,888 |
|
|
— |
|
|
|
Deferred financing costs |
|
|
6,131 |
|
|
2,145 |
|
|
|
Other long-term assets |
|
|
648 |
|
|
— |
|
|
|
Total long-term assets |
|
|
35,667 |
|
|
2,145 |
|
|
|
TOTAL ASSETS |
|
$ |
2,486,417 |
|
$ |
1,202,854 |
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|||||
|
Current liabilities |
|
|
|
|||||
|
Accounts payable and accrued expenses |
|
$ |
15,877 |
|
$ |
4,140 |
|
|
|
Due to affiliates |
|
|
— |
|
|
442 |
|
|
|
Warrant liability |
|
|
2,770 |
|
|
— |
|
|
|
Derivative liability |
|
|
150 |
|
|
— |
|
|
|
Total current liabilities |
|
|
18,797 |
|
|
4,582 |
|
|
|
Long-term liabilities |
|
|
|
|||||
|
Long-term debt |
|
|
666,834 |
|
|
134,000 |
|
|
|
Deferred tax liability |
|
|
4,782 |
|
|
— |
|
|
|
Deferred rent |
|
|
1,138 |
|
|
1,129 |
|
|
|
Total long-term liabilities |
|
|
672,754 |
|
|
135,129 |
|
|
|
|
|
|
|
|||||
|
Total liabilities |
|
|
691,551 |
|
|
139,711 |
|
|
|
Temporary equity |
|
|
1,573,201 |
|
|
— |
|
|
|
Equity |
|
|
— |
|
|
— |
|
|
|
Class A Common Stock, par value $0.0001 per share; 240,000,000 shares authorized; 12,706,082 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively |
|
|
1 |
|
|
— |
|
|
|
Class C Common Stock, par value $0.0001 per share; 120,000,000 shares authorized; 71,134,752 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively |
|
|
7 |
|
|
— |
|
|
|
Additional paid-in capital |
|
|
221,819 |
|
|
— |
|
|
|
Accumulated deficit |
|
|
(162 |
) |
|
— |
|
|
|
Partners’ Capital |
|
|
— |
|
|
560,622 |
|
|
|
Noncontrolling interests |
|
|
— |
|
|
502,521 |
|
|
|
Total equity |
|
|
221,665 |
|
|
1,063,143 |
|
|
|
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY |
|
$ |
2,486,417 |
|
$ |
1,202,854 |
|
|
|
Unaudited Condensed Consolidated Statements of Income |
||||||||||||||||
|
(In thousands) |
||||||||||||||||
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
||||||||
|
Oil, natural gas and natural gas liquids revenues |
|
$ |
108,761 |
|
|
$ |
33,152 |
|
|
$ |
260,219 |
|
|
$ |
69,221 |
|
|
Lease bonus and other income |
|
|
6,736 |
|
|
|
557 |
|
|
|
9,445 |
|
|
|
1,207 |
|
|
Total revenues |
|
|
115,497 |
|
|
|
33,709 |
|
|
|
269,664 |
|
|
|
70,428 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
|
Management fees to affiliates |
|
|
— |
|
|
|
1,870 |
|
|
|
3,241 |
|
|
|
5,610 |
|
|
Depreciation, depletion and amortization |
|
|
32,005 |
|
|
|
12,813 |
|
|
|
67,302 |
|
|
|
28,614 |
|
|
General and administrative |
|
|
13,381 |
|
|
|
954 |
|
|
|
24,043 |
|
|
|
2,232 |
|
|
General and administrative – affiliates |
|
|
— |
|
|
|
1,686 |
|
|
|
74 |
|
|
|
4,903 |
|
|
Severance and ad valorem taxes |
|
|
7,215 |
|
|
|
2,192 |
|
|
|
18,019 |
|
|
|
4,766 |
|
|
Total operating expenses |
|
|
52,601 |
|
|
|
19,515 |
|
|
|
112,679 |
|
|
|
46,125 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income from operations |
|
|
62,896 |
|
|
|
14,194 |
|
|
|
156,985 |
|
|
|
24,303 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other expense: |
|
|
|
|
|
|
|
|
||||||||
|
Interest expense, net |
|
|
(14,986 |
) |
|
|
(276 |
) |
|
|
(18,096 |
) |
|
|
(800 |
) |
|
Change in fair value of warrant liability |
|
|
536 |
|
|
|
— |
|
|
|
3,842 |
|
|
|
— |
|
|
Loss on extinguishment of debt |
|
|
(11,487 |
) |
|
|
— |
|
|
|
(11,487 |
) |
|
|
— |
|
|
Commodity derivatives gains |
|
|
34,613 |
|
|
|
— |
|
|
|
53,508 |
|
|
|
— |
|
|
Income before income tax expense |
|
|
71,572 |
|
|
|
13,918 |
|
|
|
184,752 |
|
|
|
23,503 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income tax expense |
|
|
(2,561 |
) |
|
|
(143 |
) |
|
|
(5,206 |
) |
|
|
(233 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income |
|
|
69,011 |
|
|
|
13,775 |
|
|
|
179,546 |
|
|
|
23,270 |
|
|
Net income attributable to Predecessor(3) |
|
|
— |
|
|
|
(13,775 |
) |
|
|
(78,104 |
) |
|
|
(23,270 |
) |
|
Net income attributable to temporary equity |
|
|
(59,872 |
) |
|
|
— |
|
|
|
(86,143 |
) |
|
|
— |
|
|
Net income attributable to Class A stockholders |
|
$ |
9,139 |
|
|
$ |
— |
|
|
$ |
15,299 |
|
|
$ |
— |
|
|
(3) The Falcon Merger was accounted for as a reverse merger and a business combination for accounting purposes using the acquisition method of accounting with Desert Peak Minerals as the accounting acquirer. As such, the historical financial information included herein are based on the financial statements of Desert Peak Mineral’s predecessor, Kimmeridge Mineral Fund, LP (“KMF” or the “Predecessor”) prior to our corporate reorganization. KMF is the entity where the Company’s historical financial statements were generated. Prior the Falcon Merger, Desert Peak Minerals was consolidated into the results of KMF. |
||||||||||||||||
|
Unaudited Condensed Consolidated Statements of Cash Flow |
||||||||
|
(In thousands) |
||||||||
|
|
|
Nine Months Ended September 30, |
||||||
|
|
|
2022 |
|
2021 |
||||
|
Cash flows from operating activities: |
|
|
|
|
||||
|
Net income |
|
$ |
179,546 |
|
|
$ |
23,270 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
||||
|
Depreciation, depletion and amortization |
|
|
67,302 |
|
|
|
28,614 |
|
|
Amortization and write off of deferred financing costs and long-term debt discount |
|
|
5,419 |
|
|
|
247 |
|
|
Share-based compensation |
|
|
4,947 |
|
|
|
— |
|
|
Change in fair value of warrant liability |
|
|
(3,842 |
) |
|
|
— |
|
|
Loss on extinguishment of debt |
|
|
11,487 |
|
|
|
— |
|
|
Commodity derivative gains |
|
|
(53,508 |
) |
|
|
— |
|
|
Net cash received for derivative settlements |
|
|
2,239 |
|
|
|
— |
|
|
Deferred tax expense |
|
|
2,645 |
|
|
|
— |
|
|
Change in operating assets and liabilities: |
|
|
|
|
||||
|
Accrued revenue and accounts receivable, net |
|
|
(29,785 |
) |
|
|
(13,606 |
) |
|
Other prepaid assets |
|
|
(1,903 |
) |
|
|
(187 |
) |
|
Other long-term assets |
|
|
(115 |
) |
|
|
— |
|
|
Accrued expenses and other liabilities |
|
|
(12,986 |
) |
|
|
451 |
|
|
Due to affiliates |
|
|
(380 |
) |
|
|
1,810 |
|
|
Other long-term liabilities |
|
|
9 |
|
|
|
(36 |
) |
|
Net cash provided by operating activities |
|
|
171,075 |
|
|
|
40,563 |
|
|
|
|
|
|
|
||||
|
Cash flows from investing activities: |
|
|
|
|
||||
|
Acquisition of Falcon, net of cash |
|
|
4,484 |
|
|
|
— |
|
|
Predecessor cash not contributed in the Falcon Merger |
|
|
(15,229 |
) |
|
|
— |
|
|
Purchases of oil and gas properties |
|
|
(558,062 |
) |
|
|
(26,834 |
) |
|
Proceeds from sales of oil and gas properties |
|
|
— |
|
|
|
(103 |
) |
|
Purchases of other property and equipment |
|
|
(819 |
) |
|
|
— |
|
|
Net cash used in investing activities |
|
|
(569,626 |
) |
|
|
(26,937 |
) |
|
|
|
|
|
|
||||
|
Cash flows from financing activities: |
|
|
|
|
||||
|
Borrowings on Revolving Credit Facility |
|
|
196,895 |
|
|
|
20,000 |
|
|
Repayments on Revolving Credit Facility |
|
|
(147,000 |
) |
|
|
(41,600 |
) |
|
Borrowings on Bridge Loan Facility |
|
|
425,000 |
|
|
|
— |
|
|
Repayments on Bridge Loan Facility |
|
|
(425,000 |
) |
|
|
— |
|
|
Bridge Loan Facility issuance costs |
|
|
(14,909 |
) |
|
|
— |
|
|
Borrowings on 2026 Senior Notes |
|
|
444,500 |
|
|
|
— |
|
|
2026 Senior Notes issuance costs |
|
|
(4,169 |
) |
|
|
— |
|
|
Issuance of equity in consolidated subsidiary |
|
|
— |
|
|
|
1,467 |
|
|
Capital contributions |
|
|
— |
|
|
|
8,000 |
|
|
Distributions to noncontrolling interests |
|
|
(13,318 |
) |
|
|
— |
|
|
Dividends paid to Class A stockholders |
|
|
(9,017 |
) |
|
|
— |
|
|
Distribution paid to Temporary Equity |
|
|
(50,510 |
) |
|
|
— |
|
|
Dividend equivalent rights paid |
|
|
(283 |
) |
|
|
— |
|
|
Payments of deferred financing costs |
|
|
(3,964 |
) |
|
|
(195 |
) |
|
Deferred initial public offering costs |
|
|
(61 |
) |
|
|
(179 |
) |
|
Other |
|
|
(1,180 |
) |
|
|
— |
|
|
Net cash provided by (used) in financing activities |
|
|
396,984 |
|
|
|
(12,507 |
) |
|
|
|
|
|
|
||||
|
Net change in cash and cash equivalents |
|
|
(1,567 |
) |
|
|
1,119 |
|
|
Cash and cash equivalents, beginning of year |
|
|
12,379 |
|
|
|
7,531 |
|
|
Cash and cash equivalents, end of period |
|
$ |
10,812 |
|
|
$ |
8,650 |
|
Non-GAAP financial measures
Adjusted EBITDA, Discretionary Cash Flow and Cash G&A are non-GAAP supplemental financial measures used by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets and their ability to sustain dividends over the long term without regard to financing methods, capital structure or historical cost basis.
We define Adjusted EBITDA as net income (loss) plus (a) interest expense, (b) provisions for taxes, (c) depreciation, depletion and amortization, (d) non-cash share-based compensation expense, (e) impairment of oil and natural gas properties, (f) gains or losses on unsettled derivative instruments, (g) change in fair value of the warrant liability, (h) write off of deferred offering costs, (i) management fee to affiliates, (j) loss on debt extinguishment (k) one-time transaction costs and (l) write off of financing costs. Adjusted EBITDA is not a measure determined by accounting principles generally accepted in the United States of America (“GAAP”).
We define Discretionary Cash Flow as Adjusted EBITDA, less cash interest expense and cash taxes.
We define Cash G&A as general and administrative expense less (a) non-cash share-based compensation expense (b) one-time transaction costs and (c) write off of financing costs.
These non-GAAP financial measures do not represent and should not be considered an alternative to, or more meaningful than, their most directly comparable GAAP financial measures or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Non-GAAP financial measures have important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measure. Our computations of Adjusted EBITDA, Discretionary Cash Flow and Cash G&A may differ from computations of similarly titled measures of other companies.
The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure for the period indicated (in thousands).
|
|
|
Three Months Ended |
||
|
|
|
2022 |
||
|
Net income |
|
$ |
69,011 |
|
|
Interest expense, net |
|
|
14,986 |
|
|
Income tax expense |
|
|
2,561 |
|
|
Depreciation, depletion and amortization |
|
|
32,005 |
|
|
EBITDA |
|
$ |
118,563 |
|
|
Non-cash share-based compensation expense |
|
|
3,969 |
|
|
Gains on unsettled derivative instruments |
|
|
(31,954 |
) |
|
Change in fair value of warrant liability |
|
|
(536 |
) |
|
Loss on debt extinguishment |
|
|
11,487 |
|
|
One-time transaction costs |
|
|
3,599 |
|
|
Write off of financing costs |
|
|
1,180 |
|
|
Adjusted EBITDA |
|
$ |
106,308 |
|
Contacts
IR contact:
Ross Wong
(720) 640–7647
IR@sitio.com
