Sitio Royalties Corp. (STR) Valuation Update - Aug 11

[dan_s]

STR closed on August 9 at $22.10. They lowered their cash dividend from $0.41/share based on Q1 results to $0.30/share based on Q2 results. Q2 operating cash flow and free cash flow was higher than Q1, but the Company is now allocating more free cash flow to their aggressive stock buyback.

2nd Quarter Highlights
> RECORD HIGH AVERAGE DAILY PRODUCTION VOLUME OF 39,231 BOE/D (50% OIL) < Above their guidance and my forecast.
> RETURN OF CAPITAL OF $0.71 PER SHARE FOR SECOND QUARTER 2024, COMPRISED OF $0.30 CASH DIVIDEND PER SHARE OF CLASS A COMMON STOCK AND $0.41 PER SHARE OF STOCK REPURCHASES
> INCLUDING PREVIOUSLY ANNOUNCED DJ BASIN ACQUISITION, CLOSED 7 ACQUISITIONS DURING SECOND QUARTER 2024, ADDING 14,996 NRAS ACROSS THE DJ, DELAWARE, AND MIDLAND BASINS

I have updated my forecast/valuation model for Q2 actual results and fresh guidance. My valuation of STR increases by $1 to $31 per share.

Keep in mind that my valuations are based on reasonable multiples of Adjusted Operating Cash Flow per share. So, declining outstanding shares combined with strong Q2 results and increased 2H 2024 production caused my valuation to go up. The Company continues to add to its "Running Room". STR is a classic "Growth + Income" stock.

TipRanks: "In the last 3 months, 3 ranked analysts set 12-month price targets for STR. The average price target among the analysts is $27.50. The three price targets are $27.00, $27.50 and $28.00."

[KGardiner]

FYI, the Sitio Royalties Profile seems to have dropped off the High Yield page.

[dan_s]

Weird. I reposted it.