Sitio (STR) Q2 Revenue Beats Estimates

Sitio Royalties (STR 0.72%), a U.S. oil and gas mineral and royalty firm, announced its second quarter 2025 financial results on August 4, 2025. The company delivered GAAP revenue above Wall Street expectations, posting $145.7 million in GAAP revenue compared to the analyst estimate of $141.4 million and earnings per share (EPS, GAAP) of $0.08 against a $0.05 consensus. Despite beating estimates, Sitio’s net income (GAAP) and discretionary cash flow (non-GAAP) each fell year over year, a result shaped by lower realized commodity prices compared to Q1 2025 and higher administrative costs. Operationally, average daily production grew 6.7% versus Q2 2024. The quarter saw continued shareholder capital returns, active portfolio management, and increased expenses tied in part to Sitio’s planned merger with Viper Energy. Overall, the period featured strong operational execution but highlighted earnings pressure due to lower oil and gas prices and rising costs.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Focus Areas

Sitio Royalties holds mineral and royalty interests in several of the most active oil and gas basins in the United States. Rather than producing oil and gas itself, Sitio earns a share of revenue from production by energy companies operating on its land. Its business depends heavily on the productivity of its asset base, which spans the Delaware, Midland, DJ, Eagle Ford, and Williston basins. The quality and location of these assets, particularly in the Permian Basin, are at the heart of its ability to generate consistent cash flow.

In recent years, Sitio has concentrated on disciplined acquisitions to increase its mineral acreage and diversify its portfolio. The company’s strategy emphasizes acquiring high-quality mineral and royalty interests and maintaining scale in regions with steady operator activity. Key success factors include controlling costs, maximizing cash returns to shareholders, and sustaining growth in production volumes by expanding its royalty acreage and drilling inventory through deals and operator partnerships.

Quarterly Highlights and Financial Developments

Sitio Royalties surpassed expectations for revenue (GAAP). The revenue figure of $145.7 million (GAAP) topped estimates. EPS (GAAP) of $0.08 marked a significant decline from the previous year’s result. Production volumes were a bright spot, with average daily output reaching 41,879 barrels of oil equivalent per day, up 6.8% compared to the same period last year. This stemmed from successful integration of new acquisitions, as well as steady operator activity across its core basins.

Net income (GAAP) was $14.5 million, a steep fall from $29.0 million in Q2 2024. The biggest contributors to this earnings decline were much lower realized oil prices—oil averaged $63.03 per barrel versus $79.85 in Q2 2024—and an uptick in general and administrative costs. Administrative expenses increased in part because of $3.6 million in merger-related costs tied to the upcoming Viper Energy transaction. Discretionary cash flow, a key non-GAAP measure of cash available for capital returns, was $98.5 million, down almost a quarter compared to the prior year period. Cash flows from operations (GAAP) dropped to $85.5 million from $97.3 million in Q2 2024.

Despite the drop in profitability, Sitio maintained its focus on returning capital to shareholders. It distributed a $0.36 dividend per share and executed share repurchases representing another $0.06 per share, totaling $0.42 per share. It repurchased 0.5 million shares at an average price of $16.30 each, resulting in about $8.9 million of buybacks. Since its public debut in 2022, Sitio has returned more than $980 million to investors through dividends and buybacks, underlining shareholder returns as a core part of its strategy.

From an operations standpoint, Sitio’s production growth earlier in 2025 resulted mainly from strong drilling activity and ongoing acquisitions. The company closed $6.0 million of acquisitions, adding approximately 430 net royalty acres in the Delaware and DJ basins, though this level was smaller than in prior periods. Sitio’s asset portfolio as of June 30, 2025, consisted of 275,071 net royalty acres: 156,795 in the Delaware Basin, 45,688 in Midland, 43,338 in DJ, 21,047 in Eagle Ford, and 8,203 in Williston and other regions. The company’s "net line of sight wells," an indicator of future drilling potential, stood at 48.1, suggesting a healthy backlog for continued production.

Market conditions weighed on financial performance as commodity prices for oil and gas fell. The average realized price for oil dropped more than $16 per barrel from the prior year, falling from $79.85 in Q2 2024 to $63.03 in Q2 2025, while the combined oil, gas, and natural gas liquids price declined to $36.95 per barrel of oil equivalent from $46.36 in Q2 2024. While hedging helped slightly, lower overall pricing impacted revenues. On the cost side, production taxes and administrative expenses both increased as percentages of revenue, while depreciation and interest expense fell versus Q2 2024, based on GAAP measures. Notably, general and administrative (G&A) costs rose to $20.1 million, up sharply year over year, largely due to merger activity but also reflecting higher baseline costs.

The company’s financial position remained sound, ending the quarter with $1.1 billion in principal debt and $437.2 million in available liquidity. No major changes in debt or liquidity emerged during the quarter. As part of its capital return activities, Sitio paid a dividend of $0.36 per share, and continued an active share repurchase program.

Another critical development was Sitio’s announcement of its agreement to merge with Viper Energy, Inc. The merger is expected to close in the third quarter of 2025. As a result, Sitio ended the practice of providing forward-looking guidance and canceled its customary earnings conference call. The merger—and the accompanying cessation of management guidance—was a major shift, affecting the company’s transparency on future expectations and bringing a period of uncertainty until the transaction is completed.

Looking Ahead

With the merger with Viper Energy in progress, Sitio Royalties’ management suspended all future financial guidance and long-term strategic outlook. Sitio discontinued providing updated guidance and will not revise previously issued guidance for the remainder of fiscal 2025.

Until the merger is finalized, investors may need to monitor changes in production volumes, realized commodity prices, and administrative expenses closely, as these factors have driven significant swings in performance. Special attention should also be paid to any updates regarding the timing or structure of the Viper Energy merger, as well as trends in capital returns as Sitio transitions to its next phase. The company paid a dividend of $0.36 per share, compared to $0.35 per share for Q1 2025.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.