Exhibit 99.1

Index to Consolidated Financial Statements

 

Report of Independent Registered Public Accounting Firm (KPMG LLP, Houston, TX Auditor Firm ID: 185)			F-2
Consolidated Balance Sheets			F-5
Consolidated Statements of Operations			F-6
Consolidated Statements of Cash Flows			F-7
Consolidated Statements of Equity			F-8
Notes to Consolidated Financial Statements			F-11

 

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Sitio Royalties Corp.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Sitio Royalties Corp. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

F-2

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Estimate of proved oil and natural gas reserves used in the depletion of proved oil and natural gas properties

As discussed in Notes 2 and 6 to the consolidated financial statements, the Company uses the successful efforts method of accounting for its oil and natural gas producing properties and depletes capitalized costs using the unit-of-production basis over total proved oil and natural gas reserves. The Company’s proved oil and natural gas reserves are estimated by internal petroleum engineers and separately evaluated by external petroleum engineers engaged by the Company. The Company recorded depletion expense of $319.8 million for the year-ended December 31, 2024.

We identified the assessment of estimated proved oil and natural gas reserves used in the depletion of proved oil and natural gas properties as a critical audit matter. Complex auditor judgment was required to evaluate the key assumptions used by the Company, specifically estimated future production quantities and oil and natural gas prices, inclusive of market differentials.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s depletion expense process, including certain controls related to the estimation of proved oil and natural gas reserves. We evaluated (1) the professional qualifications of the Company’s internal petroleum engineers as well as the external petroleum engineers and external engineering firm, (2) the knowledge, skills, and ability of the Company’s internal and external petroleum engineers, and (3) the relationship of the external petroleum engineers and external engineering firm to the Company. We read and considered the report issued by the external engineering firm engaged to audit the Company’s methods, processes, and reserve estimates. We assessed the method used by the Company’s internal petroleum engineers to estimate the proved oil and natural gas reserves for consistency with industry and regulatory standards. We compared the Company’s (1) historical estimates of future production quantities to actual production volumes to assess the Company’s ability to accurately forecast, (2) current estimates of future production quantities to actual production trends, and (3) oil and natural gas prices, inclusive of market differentials, to publicly available prices and historical differentials. We analyzed the depletion expense calculation for compliance with regulatory standards and checked the accuracy of the depletion expense calculation.

Accrued oil revenue

As discussed in Notes 2 and 5 to the consolidated financial statements, the Company accrues oil, natural gas and natural gas liquids revenue when information and payment has not been received from operators. This requires the Company to estimate the production volumes delivered and the prices that will be received for the sale of the product. As of December 31, 2024, the Company recorded accrued revenue and accounts receivable, net of $123.4 million, a portion of which related to accrued oil revenue.

We identified the assessment of accrued oil revenue as a critical audit matter. Complex auditor judgment was required to evaluate the estimate of oil production volumes delivered and prices the Company expects to receive, which were used in the Company’s calculation of accrued oil revenue.

 

F-3

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s revenue accrual process, including controls related to the development of the estimate of oil production volumes delivered and prices that the Company expects to receive for the sale of such volumes. We compared the Company’s historical accrued oil revenue to actual cash collections to assess the Company’s ability to accurately estimate. We compared (1) accrued oil revenue recorded by the Company as of December 31, 2024 to cash collected subsequent to year-end, (2) a sample of such cash collections to third-party documentation, and (3) the estimate of accrued oil production volumes used in the determination of accrued oil revenue to amounts obtained from the Company’s internal petroleum engineers. We compared (1) the Company’s historical estimates of accrued oil production volumes to actual production volumes received and (2) current estimates of accrued oil production volumes to actual production trends. We evaluated the Company’s estimate of prices expected to be received for the sale of oil produced by independently developing an expectation of such prices using publicly available market prices and historical differentials. We assessed the methods used to develop the accrual for consistency with industry standards and checked the mathematical accuracy of the calculation.

/s/ KPMG LLP

We have served as the Company’s auditor since 2020.

Houston, Texas

February 26, 2025

 

F-4

Sitio Royalties Corp.

Consolidated Balance Sheets

(In thousands, except par and share amounts)

 

		December 31, 2024				December 31, 2023
ASSETS
Current assets
Cash and cash equivalents		$	3,290			$	15,195
Accrued revenue and accounts receivable			123,361				107,347
Prepaid assets			6,760				12,362
Derivative asset			1,811				19,080
Total current assets			135,222				153,984
Property and equipment
Oil and natural gas properties, successful efforts method:
Unproved properties			2,464,836				2,698,991
Proved properties			2,941,347				2,377,196
Other property and equipment			3,737				3,711
Accumulated depreciation, depletion, amortization, and impairment			(818,633	)			(498,531	)
Total property and equipment, net			4,591,287				4,581,367
Long-term assets
Long-term derivative asset			—				3,440
Deferred financing costs			8,525				11,205
Operating lease right-of-use asset			5,940				5,970
Other long-term assets			2,746				2,835
Total long-term assets			17,211				23,450
TOTAL ASSETS		$	4,743,720			$	4,758,801
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses		$	46,385			$	30,050
Operating lease liability			1,646				1,725
Total current liabilities			48,031				31,775
Long-term liabilities
Long-term debt			1,078,181				865,338
Deferred tax liability			253,778				259,870
Non-current operating lease liability			5,462				5,394
Other long-term liabilities			1,150				1,150
Total long-term liabilities			1,338,571				1,131,752
Total liabilities			1,386,602				1,163,527
Commitments and contingencies (see Note 16)
Equity
Class A Common Stock, par value $0.0001 per share; 240,000,000 shares authorized; 83,205,330 and 82,451,397 shares issued and 78,980,516 and 82,451,397 outstanding at December 31, 2024 and December 31, 2023, respectively			8				8
Class C Common Stock, par value $0.0001 per share; 120,000,000 shares authorized; 73,443,992 and 74,965,217 shares issued and 73,391,244 and 74,939,080 outstanding at December 31, 2024 and December 31, 2023, respectively			8				8
Additional paid-in capital			1,710,372				1,796,147
Accumulated deficit			(146,792	)			(187,738	)
Class A Treasury Shares, 4,224,814 and 0 shares at December 31, 2024 and December 31, 2023, respectively			(96,910	)			—
Class C Treasury Shares, 52,748 and 26,137 shares at December 31, 2024 and December 31, 2023, respectively			(1,265	)			(677	)
Noncontrolling interest			1,891,697				1,987,526
Total equity			3,357,118				3,595,274
TOTAL LIABILITIES AND EQUITY		$	4,743,720			$	4,758,801

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5

Sitio Royalties Corp.

Consolidated Statements of Operations

(In thousands, except per share amounts)

 

		Years Ended December 31,
		2024				2023				2022
Revenues:
Oil, natural gas and natural gas liquids revenues		$	611,070			$	574,542			$	355,430
Lease bonus and other income			13,344				18,814				14,182
Total revenues			624,414				593,356				369,612
Operating expenses:
Management fees to affiliates			—				—				3,241
Depreciation, depletion and amortization			320,297				291,320				104,511
General and administrative			54,725				49,620				42,299
Production taxes and other			46,383				46,939				25,572
Impairment of oil and gas properties			—				25,617				—
Loss on sale of oil and gas properties			—				144,471				—
Total operating expenses			421,405				557,967				175,623
Net income from operations			203,009				35,389				193,989
Other income (expense):
Interest expense, net			(85,240	)			(93,413	)			(35,499	)
Change in fair value of warrant liability			—				2,950				3,662
Loss on extinguishment of debt			—				(21,566	)			(11,487	)
Commodity derivatives gains (losses)			(4,905	)			15,199				39,037
Interest rate derivatives gains			—				462				110
Net income (loss) before taxes			112,864				(60,979	)			189,812
Income tax benefit (expense)			(17,935	)			14,284				(5,681	)
Net income (loss)			94,929				(46,695	)			184,131
Net income attributable to Predecessor			—				—				(78,104	)
Net income attributable to temporary equity			—				—				(90,377	)
Net (income) loss attributable to noncontrolling interest			(53,983	)			31,159				51
Net income (loss) attributable to Class A stockholders		$	40,946			$	(15,536	)		$	15,701
Net income (loss) per share of Class A Common Stock
Basic		$	0.49			$	(0.20	)		$	1.10
Diluted		$	0.49			$	(0.20	)		$	1.10
Weighted average Class A Common Stock outstanding
Basic			80,621				81,269				13,723
Diluted			80,856				81,269				13,723

The accompanying notes are an integral part of these consolidated financial statements.

 

F-6

Sitio Royalties Corp.

Consolidated Statements of Cash Flows

(In thousands)

 

		Years Ended December 31,
		2024				2023				2022
Cash flows from operating activities:
Net income (loss)		$	94,929			$	(46,695	)		$	184,131
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization			320,297				291,320				104,511
Amortization of deferred financing costs and long-term debt discount			5,259				5,534				6,546
Share-based compensation			23,836				18,867				9,250
Change in fair value of warrant liability			—				(2,950	)			(3,662	)
Loss on extinguishment of debt			—				21,566				11,487
Impairment of oil and gas properties			—				25,617				—
Commodity derivative (gains) losses			4,905				(15,199	)			(39,037	)
Net cash received for commodity derivative settlements			15,803				24,613				7,104
Interest rate derivative gains			—				(462	)			(110	)
Net cash received (paid) for interest rate derivative settlements			—				781				(209	)
Loss on sale of oil and gas properties			—				144,471				—
Deferred tax (benefit) expense			(6,702	)			(42,946	)			1,631
Change in operating assets and liabilities:
Accrued revenue and accounts receivable			(16,014	)			33,564				(25,313	)
Prepaid assets			5,666				19,550				(616	)
Other long-term assets			2				2,089				(3,652	)
Accounts payable and accrued expenses			14,231				8,810				(88,558	)
Due to affiliates			—				—				(380	)
Operating lease liabilities and other long-term liabilities			216				(1,030	)			1,837
Net cash provided by operating activities			462,428				487,500				164,960
Cash flows from investing activities:
Acquisition of Falcon, net of cash			—				—				4,484
Acquisition of Brigham, net of cash			—				—				11,054
Predecessor cash not contributed in the Falcon Merger			—				—				(15,228	)
Purchases of oil and gas properties, net of post-close adjustments			(329,885	)			(170,545	)			(557,569	)
Proceeds from sale of oil and gas properties			—				113,298				—
Other, net			(74	)			(2,479	)			(840	)
Net cash used in investing activities			(329,959	)			(59,726	)			(558,099	)
Cash flows from financing activities:
Borrowings on credit facilities			474,400				644,500				348,895
Repayments on credit facilities			(263,600	)			(877,500	)			(209,000	)
Issuance of 2026 Senior Notes			—				—				444,500
Repayments on 2026 Senior Notes			—				(438,750	)			(11,250	)
Issuance of 2028 Senior Notes			—				600,000				—
Borrowings on Bridge Loan Facility			—				—				425,000
Repayments on Bridge Loan Facility			—				—				(425,000	)
Debt issuance costs			(598	)			(22,060	)			(24,889	)
Debt extinguishment costs			—				(12,176	)			—
Distributions paid to Temporary Equity			—				—				(115,375	)
Distributions to noncontrolling interest			(112,421	)			(158,968	)			(13,318	)
Dividends paid to Class A stockholders			(121,272	)			(161,951	)			(18,165	)
Dividend equivalent rights paid			(1,165	)			(1,048	)			(579	)
Repurchases of Class A Common Stock			(95,216	)			—				—
Repurchases of Sitio OpCo Partnership Units (including associated Class C Common Shares)			(22,141	)			—				—
Cash paid for taxes related to net settlement of share-based compensation awards			(2,361	)			(3,444	)			—
Deferred initial public offering costs			—				—				(61	)
Other			—				—				(1,180	)
Net cash (used in) provided by financing activities			(144,374	)			(431,397	)			399,578
Net change in cash and cash equivalents			(11,905	)			(3,623	)			6,439
Cash and cash equivalents, beginning of period			15,195				18,818				12,379
Cash and cash equivalents, end of period		$	3,290			$	15,195			$	18,818
Supplemental disclosure of non-cash transactions:
Increase (decrease) in current liabilities for additions to property and equipment:		$	343			$	(12	)		$	(379	)
Oil and gas properties acquired through issuance of Class C Common Stock and common units in consolidated subsidiary:			—				70,740				3,348,216
Temporary equity cumulative adjustment to redemption value:			—				—				706,940
Supplemental disclosure of cash flow information:
Cash paid for income taxes:		$	3,135			$	9,276			$	1,866
Cash paid for interest expense:			83,074				77,310				29,030

The accompanying notes are an integral part of these consolidated financial statements.

 

F-7

Sitio Royalties Corp.

Consolidated Statements of Equity

(In thousands)

 

		Predecessor Equity								Stockholders’ Equity
		Partners’ Capital				Noncontrolling Interest				Class A Common Stock								Class C Common Stock								Additional Paid-in Capital				Accumulated Deficit				Class A Treasury Shares								Noncontrolling Interest				Total Equity
										Shares				Amount				Shares				Amount												Shares				Amount
Balance at December 31, 2021		$	560,622			$	502,521				—			$	—				—			$	—			$	—			$	—				—			$	—			$	—			$	1,063,143
Net income attributable to Predecessor			39,493				38,611				—				—				—				—				—				—				—				—				—				78,104
Capital distribution			—				(13,318	)			—				—				—				—				—				—				—				—				—				(13,318	)
Balance prior to Falcon Merger at June 6, 2022		$	600,115			$	527,814				—			$	—				—			$	—			$	—			$	—				—			$	—			$	—			$	1,127,929
Falcon Merger Transaction (effected for 1-for-4 reverse stock split)			(600,115	)			(527,814	)			12,089				1				71,752				7				352,019				—				—				—				—				(775,902	)
Net income attributable to stockholders			—				—				—				—				—				—				—				15,751				—				—				—				15,751
Share-based compensation			—				—				—				—				—				—				7,965				—				—				—				—				7,965
Conversion of Class C Common Stock to Class A Common Stock			—				—				1,361				—				(1,361	)			—				34,038				—				—				—				—				34,038
Change in deferred taxes from conversion of shares of Class C Common Stock to Class A Common Stock			—				—				—				—				—				—				8,211				—				—				—				—				8,211
Dividends to Class A stockholders			—				—				—				—				—				—				—				(18,165	)			—				—				—				(18,165	)
Dividend equivalent rights paid			—				—				—				—				—				—				—				(579	)			—				—				—				(579	)
Adjustment of temporary equity to redemption amount			—				—				—				—				—				—				(700,779	)			(6,160	)			—				—				—				(706,939	)
Balance prior to Brigham Merger at December 28, 2022		$	—			$	—				13,450			$	1				70,391			$	7			$	(298,546	)		$	(9,153	)			—			$	—			$	—			$	(307,691	)
Brigham Merger Transaction			—				—				67,334				7				3,956				—				2,049,186				—				(633	)			(19,085	)			119,293				2,149,401
Reclassification from temporary equity to noncontrolling interest			—				—				—				—				—				—				—				—				—				—				2,044,986				2,044,986
Issuance of Class A Common Stock upon vesting of DSUs			—				—				21				—				—				—				—				—				—				—				—				—
Net income (loss) attributable to stockholders			—				—				—				—				—				—				—				(50	)			—				—				(51	)			(101	)
Balance at December 31, 2022		$	—			$	—				80,805			$	8				74,347			$	7			$	1,750,640			$	(9,203	)			(633	)		$	(19,085	)		$	2,164,228			$	3,886,595

 

F-8

		Stockholders’ Equity
		Class A Common Stock								Class C Common Stock								Additional Paid-in Capital				Accumulated Deficit				Class A Treasury Shares								Class C Treasury Shares								Noncontrolling Interest				Total Equity
		Shares				Amount				Shares				Amount												Shares				Amount				Shares				Amount
Balance at December 31, 2022			80,805			$	8				74,347			$	7			$	1,750,640			$	(9,203	)			(633	)		$	(19,085	)			—			$	—			$	2,164,228			$	3,886,595
Net income			—				—				—				—				—				(15,536	)			—				—				—				—				(31,159	)			(46,695	)
Share-based compensation			—				—				—				—				16,615				—				—				—				—				—				2,252				18,867
Conversion of Class C Common Stock to Class A Common Stock			2,090				—				(2,090	)			—				59,566				—				—				—				—				—				(59,566	)			—
Issuance of Class A Common Stock upon vesting of RSUs, net of shares withheld for income taxes			189				—				—				—				(2,906	)			—				—				—				—				—				—				(2,906	)
Class C Common Stock withheld for income taxes upon vesting of RSAs and held in treasury			—				—				—				—				—				—				—				—				(26	)			(677	)			—				(677	)
Change in deferred taxes from conversion of shares of Class C Common Stock to Class A Common Stock			—				—				—				—				(8,683	)			—				—				—				—				—				—				(8,683	)
Dividends to Class A stockholders			—				—				—				—				—				(161,951	)			—				—				—				—				—				(161,951	)
Dividend equivalent rights paid			—				—				—				—				—				(1,048	)			—				—				—				—				—				(1,048	)
Distributions to Noncontrolling interest			—				—				—				—				—				—				—				—				—				—				(158,968	)			(158,968	)
Issuance of Class C Common Stock in connection with acquisition			—				—				2,708				1				—				—				—				—				—				—				70,739				70,740
Cancellation of Treasury Stock			(633	)			—				—				—				(19,085	)			—				633				19,085				—				—				—				—
Balance at December 31, 2023			82,451			$	8				74,965			$	8			$	1,796,147			$	(187,738	)			—			$	—				(26	)		$	(677	)		$	1,987,526			$	3,595,274

 

F-9

		Stockholders’ Equity
		Class A Common Stock								Class C Common Stock								Additional Paid-in Capital				Accumulated Deficit				Class A Treasury Shares								Class C Treasury Shares								Noncontrolling Interest				Total Equity
		Shares				Amount				Shares				Amount												Shares				Amount				Shares				Amount
Balance at December 31, 2023			82,451			$	8				74,965			$	8			$	1,796,147			$	(187,738	)			—			$	—				(26	)		$	(677	)		$	1,987,526			$	3,595,274
Net income (loss)			—				—				—				—				—				40,946				—				—				—				—				53,983				94,929
Share-based compensation			—				—				—				—				21,578				—				—				—				—				—				2,258				23,836
Conversion of Class C Common Stock to Class A Common Stock			624				—				(624	)			—				15,958				—				—				—				—				—				(15,958	)			—
Issuance of Class A Common Stock upon vesting of share-based awards, net of shares withheld for income taxes			130				—				—				—				(1,593	)			—				—				—				—				—				—				(1,593	)
Class C Common Stock withheld for income taxes upon vesting of RSAs and held in treasury			—				—				—				—				—				—				—				—				(27	)			(588	)			—				(588	)
Change in deferred taxes from conversion of Class C Common Stock to Class A Common Stock			—				—				—				—				(610	)			—				—				—				—				—				—				(610	)
Dividends to Class A stockholders			—				—				—				—				(121,272	)			—				—				—				—				—				—				(121,272	)
Dividend equivalent rights			—				—				—				—				(1,165	)			—				—				—				—				—				—				(1,165	)
Distributions to noncontrolling interest			—				—				—				—				—				—				—				—				—				—				(112,421	)			(112,421	)
Repurchases of Class A Common Stock			—				—				—				—				—				—				(4,225	)			(96,910	)			—				—				—				(96,910	)
Repurchases of Sitio OpCo Partnership Units (including associated Class C Common Shares)			—				—				(897	)			—				1,329				—				—				—				—				—				(23,691	)			(22,362	)
Balance at December 31, 2024			83,205			$	8				73,444			$	8			$	1,710,372			$	(146,792	)			(4,225	)		$	(96,910	)			(53	)		$	(1,265	)		$	1,891,697			$	3,357,118

The accompanying notes are an integral part of these consolidated financial statements.

 

F-10

Sitio Royalties Corp.

Notes to Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Description of Business

Sitio Royalties Corp. (together with its subsidiaries, the “Company” or “Sitio”) was incorporated in Delaware. The Company is focused on large-scale consolidation of high-quality oil and gas mineral and royalty interests across premium basins. The Company’s portfolio is comprised of mineral and royalty interests in the Permian Basin in West Texas and southeastern New Mexico, the Eagle Ford in South Texas, the DJ Basin in Colorado and Wyoming, and the Williston Basin in North Dakota. The Company also previously held mineral and royalty interests in the SCOOP and STACK plays in the Anadarko Basin in Oklahoma and the Appalachian Basin in Pennsylvania, Ohio and West Virginia, all of which were sold on December 22, 2023.

Falcon Reverse Merger Transaction

On June 7, 2022 (the “Closing Date”), the Company consummated the previously announced merger transactions contemplated by the Agreement and Plan of Merger, dated as of January 11, 2022 (the “Falcon Reverse Merger Agreement”), by and among the Company, Sitio Royalties Operating Partnership, LP, a Delaware limited partnership (formerly known as Falcon Minerals Operating Partnership, LP) (“Sitio OpCo”), Ferrari Merger Sub A LLC, a Delaware limited liability company (“Falcon Merger Sub”), and DPM HoldCo, LLC, a Delaware limited liability company (“Desert Peak”), pursuant to which Falcon Merger Sub merged with and into Desert Peak (the “Falcon Merger”), with Desert Peak continuing as the surviving entity in the Falcon Merger as a wholly owned subsidiary of Sitio OpCo.

Prior to the effective time of the Falcon Merger (the “Falcon Merger Effective Time”), on June 3, 2022, the Company effected a four-to-one reverse stock split (the “Reverse Stock Split”) for all of the Company’s issued and outstanding shares of common stock and outstanding equity awards. As a result of the Reverse Stock Split, every four shares of the Company’s issued and outstanding Class C Common Stock, par value $0.0001 per share (“Class C Common Stock”), were automatically converted into one share of Class C Common Stock, without any change in the par value per share, and every four shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock” and, together with the Class C Common Stock, the “Common Stock”) were automatically converted into one share of Class A Common Stock, without any change in the par value per share. No fractional shares were outstanding following the Reverse Stock Split.

Pursuant to the terms of the Falcon Reverse Merger Agreement, at the Falcon Merger Effective Time and following effectiveness of the Reverse Stock Split, the limited liability company interests in Desert Peak issued and outstanding immediately prior to the Falcon Merger Effective Time were converted into the right to receive shares of Class C Common Stock and common units representing limited partner interests in Sitio OpCo (the “Sitio OpCo Partnership Units” and, together with the receipt of Class C Common Stock, the “Falcon Merger Consideration”).

The Company’s stockholders immediately prior to the closing of the Falcon Merger continued to hold their shares of Class A Common Stock immediately after the closing of the Falcon Merger, subject to the Reverse Stock Split. Additionally, as a result of the Reverse Stock Split, the warrants, which expired in August 2023, were adjusted such that four whole warrants became exercisable for one share of Class A Common Stock at an exercise price of $44.84 per share of Class A Common Stock.

Pursuant to the terms of the Falcon Reverse Merger Agreement, following the closing of the Falcon Merger and the Reverse Stock Split, the issued and outstanding limited liability company interests in Desert Peak were converted into the right to receive aggregate Falcon Merger Consideration of (a) 61,905,339 shares of Class C Common Stock and (b) 61,905,339 Sitio OpCo Partnership Units.

Shortly prior to the Closing Date, the Company changed its name from “Falcon Minerals Corporation” to “Sitio Royalties Corp.” Refer to “Note 4 – Falcon Reverse Merger” for further information.

 

F-11

Brigham Merger

On December 29, 2022, the Company, consummated the previously announced merger transactions contemplated by the Agreement and Plan of Merger, dated as of September 6, 2022 (the “Brigham Merger Agreement”) by and among STR Sub Inc. (formerly Sitio Royalties Corp.) (“Former Sitio”), MNRL Sub Inc. (formerly Brigham Minerals, Inc.) (“Brigham”), Brigham Minerals Holdings, LLC, Sitio Royalties Operating Partnership, LP, Sitio Royalties Corp. (formerly Snapper Merger Sub I, Inc.) (“New Sitio”), Snapper Merger Sub IV, Inc., Snapper Merger Sub V, Inc., and Snapper Merger Sub II, LLC. The Brigham Merger Agreement provides for the acquisition of Brigham by Former Sitio in an all-stock transaction. Refer to “Note 3 – Brigham Merger” for further information.

Basis of Presentation

These consolidated financial statements have been prepared in accordance with GAAP. In the opinion of management, these consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position at December 31, 2024 and 2023, and its results of operations and cash flows for the years ended December 31, 2024, 2023, and 2022. The company operates in one reportable segment: oil and natural gas minerals. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is equal to its comprehensive income or loss. Certain prior period amounts have been reclassified to conform to the current period presentation.

Prior to the closing of the Falcon Merger, the Company’s financial statements that were filed with the SEC were derived from the accounting records of Falcon Minerals Corporation. 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 as the accounting acquirer. As such, the historical consolidated financial statements included in this report are based on the financial statements of Desert Peak’s predecessor, Kimmeridge Mineral Fund, LP (“KMF” or the “Predecessor”), prior to our corporate reorganization. Prior to the Falcon Merger, Desert Peak was consolidated into the results of KMF. KMF’s surface rights, which generate revenue from the sale of water, payments for rights-of-way and other rights associated with the ownership of the surface acreage, are included in our historical consolidated financial statements. The assets contributed by KMF in the Falcon Merger did not include KMF’s surface rights. The consolidated financial statements included in this report reflect the historical operating results of KMF prior to June 7, 2022 and the consolidated results of the Company following June 7, 2022, which include the results of Brigham following December 29, 2022. The consolidated balance sheets at December 31, 2024 and 2023 reflect the assets and liabilities of the Company, which include the assets and liabilities of KMF Land, LLC (a subsidiary of the Predecessor) (“KMF Land”) at their historical costs, the assets and liabilities of Falcon Minerals Corporation measured at fair value as of June 7, 2022, and the assets and liabilities of Brigham measured at fair value as of December 29, 2022. Earnings per share is calculated based on the consolidated results of the Company for the periods subsequent to the Falcon Merger. The Company has acquired additional surface rights in connection with multiple acquisitions subsequent to the Falcon Merger. The results of each subsequent acquisition are included in the consolidated company results for the periods following the consummation of such acquisition.

Except as otherwise indicated or required by the context, all references in these notes to financial statements to the “Company,” “Sitio,” “we,” “us,” “our” or similar terms refer to (i) for periods prior to the closing of the Falcon Merger, Desert Peak and its subsidiaries and (ii) for periods subsequent to the closing of the Falcon Merger, Sitio Royalties Corp. and its subsidiaries, including Desert Peak. All references in these notes to financial statements to “Falcon” refer to Sitio Royalties Corp. and its subsidiaries for periods prior to the Falcon Merger.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries and any entities in which the Company owns a controlling interest. All intercompany accounts and transactions have been eliminated in consolidation. Noncontrolling interest in the Company’s consolidated financial statements for periods prior to the Falcon Merger represented the ownership interests in a subsidiary of the Predecessor which were owned by outside parties. For the period between the Falcon Merger and the Brigham Merger, interests held in the form of Class C Common Stock and Sitio OpCo Partnership Units were classified as temporary equity. As a result of the Brigham Merger, the holders of Class C Common Stock no longer hold a majority of the voting share outstanding. Consequently, after December 29, 2022, interests held in the form of Class C Common Stock and Sitio OpCo Partnership Units are presented as noncontrolling interest in the consolidated balance sheets. See “Note 10 – Noncontrolling Interest and Temporary Equity” for additional information.

Sitio OpCo was determined to be a variable interest entity for which Sitio is the primary beneficiary, as Sitio has both the power to direct Sitio OpCo and the right to receive benefits from Sitio OpCo. As a result, Sitio consolidates the financial results of Sitio OpCo and its subsidiaries. Sitio conducts substantially all of its business through its consolidated subsidiaries, including Sitio OpCo, which, as of December 31, 2024, is owned approximately 52% by Sitio Royalties Corp.

 

F-12

and approximately 48% by holders of our noncontrolling interests. As the sole managing member of Sitio OpCo, Sitio is responsible for all operational, management and administrative decisions related to Sitio OpCo’s business.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

The Company’s estimates and classification of oil and natural gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production. Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering, and geological interpretation and judgment. Estimates of economically recoverable oil and natural gas reserves and future net cash flows necessarily depend upon several variable factors and assumptions. These factors and assumptions include historical production, the assumed effect of regulations by governmental agencies, assumptions regarding continued reservoir performance, and assumptions governing oil and natural gas prices. For these reasons, estimates of the economically recoverable quantities of expected oil and natural gas and estimates of the future net cash flows is inherently imprecise and may vary substantially.

Any significant variance in the assumptions could materially affect the estimated quantity of reserves, which could affect the carrying value of the Company’s oil and natural gas properties and/or the rate of depletion related to oil and natural gas properties.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We adopted this ASU in this Annual Report on Form 10-K for the year ended December 31, 2024. See “Note 18 – Segment” for further details.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information related to the effective tax rate reconciliation as well as information on income taxes paid. This ASU is effective for annual periods beginning after December 15, 2024, and requires prospective application with the option to apply the standard retrospectively. We are currently evaluating the impact of the ASU on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires disclosure of additional information about specific expense categories underlying certain income statement expense line items. This ASU is effective for annual periods beginning after December 15, 2026, and requires either prospective or retrospective application. We are currently evaluating the impact of the ASU on our disclosures.

Cash and Cash Equivalents

The Company considers all highly-liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any losses from such investments.

Accrued Revenue and Accounts Receivable

Accrued revenue and accounts receivable represent amounts due to the Company and are uncollateralized, consisting primarily of royalty revenue receivable. Royalty revenue receivable consists of royalties due from operators for oil, natural gas and NGL volumes sold to purchasers. Those purchasers remit payment for production to the operator of the properties and the operator, in turn, remits payment to the Company. Because production statements and associated payments may not be received from operators for 30 to 90 days or more after the production is delivered, we are required to estimate the amount of production delivered to the purchaser and the price that we will receive for the sale of the product. The expected sales volumes and prices for these properties are estimated and recorded within accrued revenues.

 

F-13

The Company’s accrued revenue and accounts receivable consisted of the following as of the dates indicated (in thousands):

 

		December 31, 2024				December 31, 2023
Accrued revenue		$	121,836			$	104,832
Accounts receivable			1,525				2,515
Total accrued revenue and accounts receivable		$	123,361			$	107,347

Accounts receivable at December 31, 2024 are primarily composed of accrued receivables related to our derivative instruments. Refer to “Note 13 – Derivative Instruments” for more information. Accounts receivable as of December 31, 2023 were primarily composed of accrued revenues acquired in conjunction with the Brigham Merger. The Company routinely reviews outstanding balances, assesses the financial strength of its operators and records a reserve for amounts not expected to be fully recovered, using a current expected credit loss model. The Company did not record any credit losses for the years ended December 31, 2024, 2023, and 2022.

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and natural gas producing properties, as further defined under ASC 932, Extractive Activities—Oil and Natural Gas. Under this method, costs to acquire mineral interests in oil and natural gas properties are capitalized. The costs of non-producing mineral interests and associated acquisition costs are capitalized as unproved properties pending the results of leasing efforts and drilling activities of E&P operators on our interests. As unproved properties are determined to have proved reserves, the related costs are transferred to proved oil and gas properties. Capitalized costs for proved oil and natural gas mineral interests are depleted on a unit-of-production basis over total proved reserves. For depletion of proved oil and gas properties, interests are grouped in a reasonable aggregation of properties with common geological structural features or stratigraphic conditions.

Impairment of Oil and Gas Properties

The Company evaluates its producing properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing proved properties for impairment, the Company compares the expected undiscounted future net cash flows of the proved properties to the carrying amount of the proved properties to determine recoverability. If the carrying amount of proved properties exceeds the expected undiscounted future net cash flows, the carrying amount is written down to the properties’ estimated fair value, which is measured as the present value of the expected future net cash flows of such properties. The factors used to determine fair value include estimates of proved reserves, future commodity prices, timing of future production, and a risk-adjusted discount rate. The proved property impairment test is primarily impacted by future commodity prices, changes in estimated reserve quantities, estimates of future production, overall proved property balances, and depletion expense. If pricing conditions decline or are depressed, or if there is a negative impact on one or more of the other components of the calculation, we may incur proved property impairments in future periods. The Company recognized an impairment charge of $25.6 million related to its Appalachian Basin proved properties for the year ended December 31, 2023. There was no impairment of proved properties for the years ended December 31, 2024 and 2022.

Unproved oil and gas properties are assessed periodically for impairment of value, and a loss is recognized at the time of impairment by charging capitalized costs to expense. Impairment is assessed when facts and circumstances indicate that the carrying value may not be recoverable, at which point an impairment loss is recognized to the extent the carrying value exceeds the estimated recoverable value. Factors used in the assessment include but are not limited to commodity price outlooks and current and future operator activity in the respective Basins. The Company recognized no impairment of unproved properties for the years ended December 31, 2024, 2023, and 2022.

Other Property and Equipment

Other property and equipment, which includes leasehold improvements, is recorded at cost. Depreciation is calculated using the straight-line method over the shorter of the lease term or the useful lives of the assets.

We evaluate our other property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset that has been placed in service may not be recoverable. No impairment charges were recorded for the years ended December 31, 2024, 2023 and 2022.

 

F-14

Asset Acquisitions

The Company generally accounts for acquisitions of mineral and royalty interests as asset acquisitions, through which it allocates the purchase price between proved and unproved properties based on relative fair values, with no recognition of goodwill. The Company may use different techniques to determine the allocation, including the discounted net present value of estimated future cash flows and market prices (where available).

Business Combinations

The Company accounts for business combinations, such as the Falcon Merger and Brigham Merger, using the acquisition method. Under the acquisition method, a business combination is accounted for based on the fair value of the consideration given with each of the identifiable assets acquired and liabilities assumed being measured at fair value. The excess of the cost of an acquisition, if any, over the fair value of the assets acquired and liabilities assumed is recognized as goodwill. The excess of the fair value of assets acquired and liabilities assumed over consideration given for an acquisition, if any, is recognized immediately in earnings as a gain. Determining the fair values of the assets and liabilities acquired involves the use of judgment as fair values are not always readily determinable. Different techniques may be used to determine fair values, including market prices (where available), comparisons to transactions for similar assets and liabilities and the discounted net present value of estimated future cash flows, among others.

Derivative Financial Instruments

In order to manage its exposure to oil, natural gas, and NGL price volatility as well as interest rate volatility, the Company may periodically enter into derivative transactions, which may include commodity swap agreements, basis swap agreements, two- and three-way collars, and other similar agreements. From time to time, the Company may periodically enter into various interest rate derivative contracts to manage exposures to changes in interest rates from variable rate obligations. These derivatives are not entered into for trading or speculative purposes. To the extent legal right of offset exists with a counterparty, the Company reports derivative assets and liabilities on a net basis. The Company has exposure to credit risk to the extent that the counterparty is unable to satisfy its settlement obligations. All derivative counterparties are current lenders under Sitio’s Revolving Credit Facility (defined below). Accordingly, the Company is not required to provide any credit support to its derivative counterparties other than cross collateralization with the properties securing the Sitio Revolving Credit Facility.

The Company records derivative instruments on its consolidated balance sheets as either assets or liabilities measured at fair value and records changes in the fair value of derivatives in current earnings as they occur. Changes in the fair value of commodity and interest rate derivatives, including gains or losses on settled derivatives, are classified within Other income (expense) on the Company’s consolidated statements of operations. The Company’s derivatives have not been designated as hedges for accounting purposes.

Accounts Payable and Accrued Expenses

The Company’s accounts payable and accrued expenses consisted of the following as of the dates indicated (in thousands):

 

		December 31, 2024				December 31, 2023
Accrued interest expense		$	9,064			$	12,178
Ad valorem taxes payable			12,281				10,364
Payable to seller for pre-effective monies			3,393				2,268
Accrued general and administrative			2,006				1,889
Payable to buyer for post-effective monies			144				1,427
Income taxes payable			16,918				1,592
Other taxes payable			1,117				—
Other			1,462				332
Total accounts payable and accrued expenses		$	46,385			$	30,050

 

F-15

Temporary Equity

Subsequent to the Falcon Merger, the Company accounted for the interests attributable to Class C Common Stock and Sitio OpCo Partnership Units as temporary equity as a result of certain redemption rights held as discussed in “Note 10 – Noncontrolling Interest and Temporary Equity.” As such, the Company adjusted temporary equity to its maximum redemption amount at the balance sheet date, if higher than the carrying amount. Changes in the redemption value were recognized immediately as they occurred, as if the end of the reporting period was also the redemption date for the instrument, with an offsetting entry to retained earnings or, if a retained deficit, to additional paid-in capital. Temporary equity was reclassified to permanent equity upon conversion of Class C Common Stock (and an equivalent number of Sitio OpCo Partnership Units) or when holders of the Class C Common Stock no longer effectively controlled the Company’s determination of whether to make a cash payment upon the Sitio OpCo Partnership Unit holder’s exercise of its redemption right.

As a result of the Brigham Merger on December 29, 2022, the holders of Class C Common Stock no longer held a majority of the voting shares outstanding. Consequently, after December 29, 2022, interests held in the form of Class C Common Stock and Sitio OpCo Partnership Units are presented as noncontrolling interest in the consolidated balance sheets.

See “Note 10 – Noncontrolling Interest and Temporary Equity” for additional information.

Revenue Recognition

Mineral and royalty interests represent the right to receive revenues from the sale of oil, natural gas and NGLs, less production taxes and post-production expenses. The prices of oil, natural gas, and NGLs from the properties in which we own a mineral or royalty interest are primarily determined by supply and demand in the marketplace and can fluctuate considerably. As an owner of mineral and royalty interests, we have no working interest or operational control over the volumes and methods of sale of the oil, natural gas, and NGLs produced and sold from our properties. We do not explore, develop, or operate the properties and, accordingly, do not incur any of the associated costs.

Oil, natural gas, and NGLs revenues from our mineral and royalty interests are recognized when control transfers at the wellhead.

The Company also earns revenue related to lease bonuses. The Company earns lease bonus revenue by leasing its mineral interests to E&P companies. The Company recognizes lease bonus revenue when the lease agreement has been executed and payment is determined to be collectible.

See “Note 5 – Revenue from Contracts with Customers” for additional disclosures regarding revenue recognition.

Concentration of Revenue

Collectability of the Company’s royalty revenues is dependent upon the financial condition of the Company’s operators, the entities they sell their products to, as well as general economic conditions in the industry. During the years ended December 31, 2024, 2023, and 2022, the following operators represented 10% or more of total revenues:

 

		Year Ended December 31,
		2024				2023				2022
ConocoPhillips Company (NYSE: COP)			11	%			*				*
Oxy USA Inc. (NYSE: OXY)			10	%			*				*
Exxon Mobil Corporation (NYSE: XOM)			10	%			*				*
Chevron Corporation (NYSE: CVX)			*				10	%			*
Callon Petroleum Company (NYSE: CPE)			*				*				12	%

*Operator did not account for greater than 10% of revenue for the year.

Although the Company is exposed to a concentration of credit risk, the Company does not believe the loss of any single operator or entity would materially impact the Company’s operating results as crude oil, natural gas and NGLs are fungible products with well-established markets and numerous purchasers. If multiple entities were to cease making purchases at or around the same time, we believe there would be challenges initially, but there would be ample markets to handle the disruption.

 

F-16

Share-Based Compensation

The Company recognizes share-based compensation expense associated with restricted stock units, deferred share units, and restricted stock awards which are time-based awards and performance stock units, which are market-based awards. As the performance metric for the performance stock unit awards is absolute total shareholder return, the performance stock units awards are accounted for as market-based awards. The Company accounts for forfeitures of share-based compensation awards as they occur. Share-based compensation expense for all awards is recognized based on the estimated grant date fair value of the award. See “Note 11 – Share-Based Compensation” for additional information.

Merger-Related Transaction Costs

General and administrative expense for the years ended December 31, 2024, 2023 and 2022 included $0.7 million, $3.5 million and $16.7 million, respectively, of costs incurred by the Company in connection with the Falcon Merger and the Brigham Merger (defined below).

Income Taxes

The Company uses the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (a) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (b) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future periods when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted.

The Company evaluates the probability of realizing the future benefits of our deferred tax assets and provides a valuation allowance for the portion of any deferred tax assets where the likelihood of realizing an income tax benefit in the future does not meet the more likely than not criteria for recognition.

The Company accounts for uncertainty in income taxes by recognizing the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

3. Brigham Merger

In December 2022, the Company completed the acquisition of approximately 86,500 NRAs in the Delaware and Midland Basin in West Texas and New Mexico, the SCOOP and STACK plays in the Anadarko Basin of Oklahoma, the DJ Basin in Colorado and Wyoming and the Williston Basin in North Dakota from Brigham pursuant to the Brigham Merger. At closing, Former Sitio completed the acquisition of Brigham in an all-stock transaction through: (i) the merger of Brigham Merger Sub with and into Brigham (the “Brigham Sub Merger”), with Brigham surviving the Brigham Sub Merger as a wholly owned subsidiary of New Sitio, (ii) the merger of Sitio Merger Sub with and into Former Sitio (the “Sitio Sub Merger”), with Former Sitio surviving the Sitio Sub Merger as a wholly owned subsidiary of New Sitio, and (iii) the merger of Opco Merger Sub LLC with and into Brigham Opco (the “Opco Merger”), with Brigham OpCo surviving the Opco Merger as a wholly owned subsidiary of Sitio OpCo, in each case on the terms set forth in the Brigham Merger Agreement.

Pursuant to the Brigham Merger Agreement, at closing (a) each share of Brigham’s Class A common stock, par value $0.01 per share, issued and outstanding immediately prior to the First Effective Time (as defined in the Brigham Merger Agreement) was converted into 1.133 fully-paid and nonassessable shares of Class A Common Stock, par value $0.0001 per share, of New Sitio (the “New Sitio Class A Common Stock”), (b) each share of Brigham’s Class B common stock, par value $0.01 per share, issued and outstanding immediately prior to the First Effective Time was converted into 1.133 fully-paid and nonassessable shares of Class C Common Stock, par value $0.0001 per share, of New Sitio (the “New Sitio Class C Common Stock”), (c) each share of Class A Common Stock issued and outstanding immediately prior to the First Effective Time was converted into one share of New Sitio Class A Common Stock and (d) each share of Class C Common Stock issued and outstanding immediately prior to the First Effective Time, was converted into one share of New Sitio Class C Common Stock, in each case, excluding shares owned by Sitio, Brigham or any wholly owned subsidiary of Sitio or Brigham and, to the extent applicable, shares owned by stockholders who have perfected and not withdrawn a demand

 

F-17

for appraisal rights pursuant to the Delaware General Corporation Law (the “DGCL”) and, at the Second Effective Time (as defined in the Brigham Merger Agreement), each Brigham Opco Unit (as defined in the Brigham Merger Agreement) issued and outstanding immediately prior to the Second Effective Time was converted into 1.133 Sitio OpCo Partnership Units. No fractional shares were outstanding following the conversion.

As a result of the Brigham Merger and as of the closing of the Brigham Merger (the “Brigham Closing”), Sitio stockholders immediately prior to the First Effective Time owned approximately 54% of the outstanding shares of New Sitio, and Brigham stockholders immediately prior to the First Effective Time owned approximately 46% of the outstanding shares of New Sitio. Following the Closing, New Sitio operates under the name “Sitio Royalties Corp.”

The following table summarizes the consideration for the Brigham Merger:

 

Brigham Common Stock — issued and outstanding as of December 29, 2022:			71,290,265
Class A Common Stock price on December 29, 2022		$	30.15
Total consideration and fair value		$	2,149,401,490

Purchase Price Allocation

The Brigham Merger was accounted for as a business combination using the acquisition method, and therefore, the acquired interests were recorded based on the fair value of the total assets acquired and liabilities assumed on the acquisition date. The purchase price allocation was finalized during the year ended December 31, 2023.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed on December 29, 2022, including measurement period adjustments (in thousands):

 

Brigham fair values:		December 29, 2022				Adjustments				December 31, 2023
Cash		$	11,054			$	—			$	11,054
Accrued revenue and accounts receivable			61,745				3,637				65,382
Prepaid expenses			11,339				20,753				32,092
Unproved oil and gas properties			1,783,162				(41,083	)			1,742,079
Proved oil and gas properties			873,050				—				873,050
Property and equipment			200				—				200
Right-of-use asset			3,209				—				3,209
Other assets			1,064				(1,064	)			—
Current liabilities			(83,425	)			(617	)			(84,042	)
Long-term debt			(193,000	)			—				(193,000	)
Long-term operating lease liability			(2,387	)			—				(2,387	)
Deferred tax liability			(316,571	)			19,474				(297,097	)
Other long-term liability			(39	)			(1,100	)			(1,139	)
Total consideration and fair value		$	2,149,401			$	—			$	2,149,401

Transaction costs associated with the Brigham Merger incurred for the years ended December 31, 2024, 2023 and 2022 were $0.7 million, $2.8 million and $13.3 million, respectively. These costs, which are comprised primarily of advisory, legal, and other professional and consulting fees, are included in General and administrative expense on our consolidated statements of operations.

The results of Brigham’s operations have been included in our consolidated financial statements since the December 29, 2022 acquisition date. The amount of revenue and direct operating expenses resulting from the acquisition included in our Consolidated Statements of Operations from December 29, 2022 through December 31, 2022 was approximately $2.4 million and $113,000, respectively.

 

F-18

Pro Forma Financial Information

The unaudited pro forma financial information for the year ended December 31, 2022, gives effect to the Falcon Merger and Brigham Merger as if they had both occurred on January 1, 2021 (in thousands, except per share amounts):

 

		Year Ended December 31,
		2022
Total revenues		$	756,590
Pro forma income (loss) available to Class A stockholders			121,110
Net income (loss) per share:
Basic		$	1.50
Diluted		$	1.50

The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Company would have reported had the Falcon Merger and Brigham Merger been completed as of January 1, 2021 and should not be taken as indicative of the Company’s future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.

4. Falcon Reverse Merger

In June 2022, the Company completed the acquisition of approximately 34,000 NRAs in the Eagle Ford and Appalachian Basin from Falcon Minerals Corporation in the Falcon Merger. See “Note 1 – Description of Business and Basis of Presentation” for additional information.

The following table summarizes the consideration for the Falcon Merger:

 

Falcon Common Stock — issued and outstanding as of June 7, 2022:			21,935,492
Class A Common Stock price on June 7, 2022		$	29.12
Total consideration and fair value		$	638,761,527

Purchase Price Allocation

The Falcon Merger was accounted for as a business combination using the acquisition method, and therefore, the acquired interests were recorded based on the fair value of the total assets acquired and liabilities assumed on the acquisition date. The Company completed the determination of the fair value attributable to the identifiable assets acquired and liabilities assumed based on the fair value at the acquisition date. The purchase price allocation was finalized during the year ended December 31, 2022.

 

F-19

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed (in thousands):

 

		June 7, 2022				Adjustments				December 31, 2022
Falcon fair values:
Cash		$	4,484			$	—			$	4,484
Accrued revenue and accounts receivable			12,054				6,696				18,750
Unproved oil and gas properties			495,803				(4,572	)			491,231
Proved oil and gas properties			200,773				—				200,773
Property and equipment			278				—				278
Current liabilities			(22,315	)			(1,106	)			(23,421	)
Long-term debt			(43,105	)			—				(43,105	)
Deferred tax liability			(2,598	)			(1,018	)			(3,616	)
Warrant liability			(6,612	)			—				(6,612	)
Total consideration and fair value		$	638,762			$	—			$	638,762

In connection with the Falcon Merger, the Company assumed, and immediately repaid, $43.1 million of borrowings under Falcon’s credit facility. The repayment of Falcon’s long-term debt was funded using cash on hand and borrowings on the Sitio Revolving Credit Facility, see “Note 8 – Debt” for further information.

Transaction costs associated with the Falcon Merger incurred for the years ended December 31, 2023 and December 31, 2022 were $705,000 and $3.4 million, respectively. These costs, which are comprised primarily of advisory, legal, and other professional and consulting fees, are included in General and administrative expense on our consolidated statements of operations.

The results of Falcon’s operations have been included in our consolidated financial statements since the June 7, 2022 acquisition date. The amount of revenue and direct operating expenses resulting from the acquisition included in our Consolidated Statements of Operations from June 7, 2022 through December 31, 2022 was approximately $43.5 million and $2.9 million, respectively.

Pro Forma Financial Information

See “Note 3 – Brigham Merger” for the pro forma financial information.

5. Revenue from Contracts with Customers

Oil, Natural Gas and Natural Gas Liquids Revenues

Oil, natural gas and NGL revenues are generally recognized when control of the product is transferred to the customer, the performance obligations under the terms of the contracts with customers are satisfied and collectability is reasonably assured. All of the Company’s oil, natural gas and NGL sales are made under contracts with customers (operators). The performance obligations for the Company’s contracts with operators are satisfied at a point in time when control transfers to the operator at the wellhead, at which point payment is unconditional. Accordingly, the Company’s contracts do not give rise to contract assets or liabilities. The Company typically receives payment for oil, natural gas and NGL sales within 30 to 90 days of the month of delivery after initial production from the well. Such periods can extend longer due to factors outside of our control. The Company’s leasing contracts with operators are standard industry agreements that include variable consideration based on the monthly index price and adjustments that may include counterparty-specific provisions related to volumes, price differentials, discounts and other adjustments and deductions, including charges for gathering and transportation.

Disaggregation

 

F-20

The following table presents revenue disaggregated by commodity for the periods presented (in thousands):

 

		For the Year Ended December 31,
		2024				2023				2022
Crude oil revenue		$	526,910			$	480,843			$	266,179
Natural gas revenue			23,954				41,034				52,380
NGLs revenue			60,206				52,665				36,871
Total revenues		$	611,070			$	574,542			$	355,430

Lease Bonus and Other Income

The Company also earns revenue from lease bonuses, delay rentals, and right-of-way payments. The Company generates lease bonus revenue by leasing its mineral interests to E&P companies. A mineral lease agreement represents our contract with an operator and generally transfers the rights, for a specified period of time, to explore for and develop any oil, natural gas and NGLs discovered, grants us a specified royalty interest in the hydrocarbons produced from the leased property, and requires that drilling and completion operations commence within a specified time period. The Company recognizes lease bonus revenues when the lease agreement has been executed and payment is determined to be collectible. At the time the Company executes the lease agreement, the lease bonus payment is delivered to the Company. Upon receipt of the lease bonus payment, the Company will release the recordable original lease documents to the operator. The Company also recognizes revenue from delay rentals to the extent drilling has not started within the specified period and payment has been received. Right-of-way payments are recorded when the agreement has been executed and payment is determined to be collectible. The assets contributed by our Predecessor in the Falcon Merger did not include the Predecessor’s surface rights. Subsequent to the Falcon Merger, the Company has acquired additional surface rights in connection with multiple acquisitions. Payments for lease bonus and other income become unconditional upon the execution of an associated agreement. Accordingly, the Company’s lease bonus and other income transactions do not give rise to contract assets or liabilities.

Allocation of Transaction Price to Remaining Performance Obligations

Oil, natural gas and natural gas liquids revenues

The Company’s right to royalty income does not originate until production occurs and, therefore, is not considered to exist beyond each day’s production. Therefore, there are no remaining performance obligations under any of our royalty income contracts.

Lease bonus and other income

Given that the Company does not recognize lease bonus or other income until an agreement has been executed, at which point its performance obligation has been satisfied, the Company does not record revenue for unsatisfied or partially unsatisfied performance obligations as of the end of the reporting period.

Prior-period performance obligations

The Company records revenue in the month production is delivered to the customer. As a royalty interest owner, the Company has limited visibility into the timing of when new wells start producing as production statements may not be received for 30 to 90 days or more after the date production is delivered. As a result, the Company is required to estimate the amount of production delivered to the customer and the price that will be received for the sale of the product. The expected sales volumes and prices for these properties are estimated and recorded within accrued revenue and accounts receivable in the accompanying consolidated balance sheets. The difference between the Company’s estimates of royalty income and the actual amounts received for oil, natural gas and NGL sales are recorded in the month that the royalty payment is received from the operator. For the years ended December 31, 2024, 2023, and 2022, revenue recognized related to performance obligations satisfied in prior reporting periods was primarily attributable to production revisions by operators or amounts for which the information was not available at the time when revenue was estimated.

 

F-21

6. Oil and Natural Gas Properties

The Company owns mineral rights across multiple onshore basins in the United States. These basins include the Permian Basin in West Texas and southeastern New Mexico, the Eagle Ford in South Texas, the DJ Basin in Colorado and Wyoming, and the Williston Basin in North Dakota. The following is a summary of oil and natural gas properties as of December 31, 2024 and 2023 (in thousands):

 

		December 31, 2024				December 31, 2023
Oil and natural gas properties:
Unproved properties		$	2,464,836			$	2,698,991
Proved properties			2,941,347				2,377,196
Oil and natural gas properties, gross			5,406,183				5,076,187
Accumulated depletion and impairment			(816,664	)			(496,879	)
Oil and natural gas properties, net		$	4,589,519			$	4,579,308

As presented in the consolidated statements of cash flows, during the years ended December 31, 2024, 2023, and 2022, the Company paid $329.9 million, $170.5 million, and $557.6 million, respectively, for purchases of oil and gas properties. Additionally, the Company acquired oil and gas properties of $70.7 million and $3.3 billion during the years ended December 31, 2023 and 2022, respectively, through issuance of Class A Common Stock, Class C Common Stock, and Sitio OpCo Partnership Units. Please see “Note 7 – Acquisitions and Divestitures” for additional information regarding certain of these transactions.

The Company uses the successful efforts method of accounting for its oil and gas properties. Capitalized costs are depleted on a unit of production basis based on proved oil and natural gas reserves. Depletion expense was $319.8 million, $290.8 million, and $103.9 million for the years ended December 31, 2024, 2023, and 2022, respectively.

During the year ended December 31, 2023, the Company recognized an impairment charge of $25.6 million related to its Appalachian Basin proved properties. See “Note 14 – Fair Value Measurement” for additional information. No impairment was recognized for the years ended December 31, 2024 and 2022.

On December 22, 2023, the Company divested all of its mineral and royalty interests in the Appalachian and Anadarko Basins for approximately $113.3 million, net of third-party transaction costs. The assets sold had a carrying value of $257.8 million, resulting in a loss on sale of $144.5 million.

7. Acquisitions and Divestitures

For the twelve months ended December 31, 2024, the Company closed on the acquisition of oil and gas properties for an aggregate purchase price of $350.1 million, prior to the impact of purchase price adjustments, the significant majority of which was allocated to proved properties.

Appalachian and Anadarko Basins Divestiture

In December 2023, the Company divested all of its mineral and royalty interests in the SCOOP and STACK plays in the Anadarko Basin in Oklahoma and the Appalachian Basin in Pennsylvania, Ohio and West Virginia for $113.3 million, net of third-party transaction costs. The proceeds were used to fund repayments on the Sitio Revolving Credit Facility and for general corporate purposes.

Brigham Merger

In December 2022, the Company completed the acquisition of approximately 86,500 NRAs in the Delaware and Midland Basin in West Texas and New Mexico, the SCOOP and STACK plays in the Anadarko Basin of Oklahoma, the DJ Basin in Colorado and Wyoming and the Williston Basin in North Dakota from Brigham Minerals. Refer to “Note 3 – Brigham Merger” for further information.

Momentum Acquisition

In July 2022, the Company acquired approximately 12,200 NRAs from Momentum Minerals Operating, LP, Momentum Minerals Operating II, LP, Momentum Minerals Nominee, Inc., Momentum Minerals Nominee II, Inc. and Athene Annuity & Life Assurance Company for a purchase price of $213.3 million, net of customary closing adjustments (the “Momentum Acquisition”). The Momentum Acquisition was funded through borrowings under the 364-day term loan credit facility (as amended, the “Bridge Loan Facility”) and borrowings under the Sitio Revolving Credit Facility (defined below), in addition to cash on hand.

 

F-22

The Momentum Acquisition was accounted for as an asset acquisition and, therefore, the acquired interests were recorded based on the relative fair values of the total assets acquired on the acquisition date. Based on the estimated fair values of the assets acquired, the Company recorded $74.2 million of the total consideration as unproved oil and gas property and $139.1 million as proved oil and gas property. Additionally, $0.7 million of transaction costs were capitalized related to the Momentum Acquisition during the year ended December 31, 2022.

Foundation Acquisition

In June 2022, the Company completed the acquisition of approximately 19,700 NRAs in the Permian Basin from Foundation Minerals, LLC (“Foundation”) for $320.6 million, net of customary closing adjustments, funded primarily by proceeds from the Bridge Loan Facility, borrowings under the Sitio Revolving Credit Facility, and cash on hand.

The Foundation acquisition was accounted for as an asset acquisition and, therefore, the acquired interests were recorded based on the relative fair values of the total assets acquired on the acquisition date. Based on the estimated fair values of the assets acquired, the Company recorded $189.3 million of the total consideration as unproved oil and gas property and $131.3 million as proved oil and gas property. Additionally, $0.8 million of transaction costs were capitalized related to the transaction during the year ended December 31, 2022.

Falcon Acquisition

In June 2022, the Company completed the acquisition of approximately 34,000 NRAs in the Eagle Ford and Appalachian Basin from Falcon in a reverse merger. Refer to “Note 4 – Falcon Reverse Merger” for further information.

8. Debt

The following is a summary of long-term debt as of December 31, 2024 and 2023 (in thousands):

 

		As of December 31,
		2024				2023
Revolving Credit Facility		$	487,800			$	277,000
2028 Senior Notes			600,000				600,000
Less: Unamortized issuance costs			(9,619	)			(11,662	)
Total long-term debt		$	1,078,181			$	865,338

Sitio Revolving Credit Facility

On February 3, 2023, Sitio OpCo, as borrower, and certain of its subsidiaries as guarantors entered into the Third Amended and Restated Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Sitio Revolving Credit Facility”) among JPMorgan Chase Bank, N.A., as the administrative agent and as issuing bank, and the lenders and other financial institutions from time to time party thereto (the “Lenders”), which amended, restated and refinanced in its entirety the Second Amended and Restated Credit Agreement (as amended, the “RBL Credit Agreement”).

As of December 31, 2024, the borrowing base under the Sitio Revolving Credit Facility (the “Sitio Borrowing Base”) as determined by the Lenders was $925.0 million and the outstanding balance under the Sitio Revolving Credit Facility was $487.8 million. As of December 31, 2023, the Sitio Borrowing Base was $850.0 million as determined by the Lenders and the outstanding balance under the Sitio Revolving Credit Facility was $277.0 million.

The Sitio Revolving Credit Facility bears interest at a rate per annum equal to, at our option, an adjusted Term SOFR rate or a base rate, plus an applicable margin and credit spread adjustment. The applicable margin is based on utilization of the Sitio Revolving Credit Facility and ranges from (a) in the case of adjusted base rate loans, 1.500% to 2.500% and (b) in the case of Term SOFR rate loans and letters of credit, 2.500% to 3.500%. The credit spread adjustment for Term SOFR rate loans ranges from 0.100% to 0.250% depending on the applicable interest rate period. Sitio OpCo may elect an interest period of one, three or six months. Interest is payable in arrears at the end of each interest period, but no less frequently than quarterly. A commitment fee is payable quarterly in arrears on the daily undrawn available commitments under the Sitio Revolving Credit Facility in an amount ranging from 0.375% to 0.500% based on utilization of the Sitio Revolving Credit Facility. The Sitio Revolving Credit Facility is subject to other customary fees, interest, and expense reimbursement provisions.

 

F-23

As of December 31, 2024 and 2023, the weighted average interest rate related to our outstanding borrowings under the Sitio Revolving Credit Facility was 7.50% and 8.21%, respectively. As of December 31, 2024 and 2023, the Company had unamortized debt issuance costs of $8.5 million and $11.2 million, respectively, in connection with its entry into the Sitio Revolving Credit Facility, including amendments. Such costs are capitalized as deferred financing costs within other long-term assets and are amortized over the life of the facility. For the years ended December 31, 2024, 2023, and 2022, the Company recognized $3.2 million, $2.9 million, and $1.2 million, respectively, in interest expense related to the amortization of deferred financing costs under its revolving credit facilities. In connection with the amendment and restatement of the Sitio Revolving Credit Facility in February 2023 and the First Amendment to the Sitio Revolving Credit Facility (as defined below) in September 2023, certain lenders did not elect to remain a party to the Sitio Revolving Credit Facility. As such, $1.5 million of previously capitalized deferred financing costs were written off to Loss on extinguishment of debt during the year ended December 31, 2023.

The Sitio Revolving Credit Facility matures on June 30, 2027. Loans drawn under the Sitio Revolving Credit Facility may be prepaid at any time without premium or penalty (other than customary breakage costs for Term SOFR rate loans) and must be prepaid in the event that exposure exceeds the lesser of the Sitio Borrowing Base and the elected commitments of the Lenders at such time. The principal amount of loans that are prepaid are required to be accompanied by accrued and unpaid interest and fees on such amounts. Loans that are prepaid may be reborrowed, subject to compliance with the Sitio Revolving Credit Facility. In addition, Sitio OpCo may permanently reduce or terminate in full the commitments under the Sitio Revolving Credit Facility prior to maturity. Any excess exposure resulting from such permanent reduction or termination must be prepaid and may not be reborrowed. Upon the occurrence of an event of default under the Sitio Revolving Credit Facility, the administrative agent acting at the direction of the lenders holding a majority of the aggregate commitments at such time may accelerate outstanding loans and terminate all commitments under the Sitio Revolving Credit Facility, provided that such acceleration and termination occurs automatically upon the occurrence of a bankruptcy or insolvency event of default.

The Sitio Revolving Credit Facility is subject to a borrowing base established by the Lenders to reflect the loan value of our oil and gas mineral interests. The Sitio Borrowing Base is redetermined by the Lenders on a semi-annual basis. Additionally, Lenders holding two-thirds of the aggregate commitments are able to request one additional redetermination between regularly scheduled redeterminations. Sitio OpCo could also request one additional redetermination between regularly scheduled redeterminations and may request additional redeterminations as appropriate after significant acquisitions of oil and gas properties. The Sitio Borrowing Base is subject to adjustments for asset dispositions, material title deficiencies, certain terminations of hedge agreements and issuances of certain additional indebtedness. The Sitio Revolving Credit Facility is collateralized by substantially all of the assets of Sitio OpCo and its restricted subsidiaries.

The Sitio Revolving Credit Facility contains customary affirmative and negative covenants, including, without limitation, reporting obligations, restrictions on asset sales, restrictions on additional debt and lien incurrence and restrictions on making dividends or distributions, restrictions on paying other debt and restrictions on certain investments. The Sitio Credit Agreement requires us to maintain (a) a current ratio of not less than 1.00 to 1.00 and (b) a ratio of total net funded debt to consolidated EBITDA of not more than 3.50 to 1.00, with cash netting capped at $25.0 million for purposes of the calculation of total net funded debt. EBITDA for the period ending on December 31, 2024 is calculated as EBITDA for the period beginning on January 1, 2024 and ending on December 31, 2024, as adjusted for material acquisitions and dispositions completed during the reference period. The Company was in compliance with the terms and covenants of the Sitio Revolving Credit Facility at December 31, 2024 and 2023.

Third Amended and Restated Credit Agreement

On February 3, 2023, Sitio OpCo, as borrower, and certain of its subsidiaries as guarantors entered into the Sitio Revolving Credit Facility among JPMorgan Chase Bank, N.A., as the administrative agent and as issuing bank, and the Lenders, which amended, restated and refinanced in its entirety the RBL Credit Agreement. The availability under the Sitio Credit Agreement, including availability for letters of credit, is generally limited to a borrowing base, which is determined by the required number of Lenders in good faith by calculating a loan value of the proved reserves of Sitio OpCo and its subsidiaries and elected commitments provided by the Lenders. As of February 3, 2023, the Sitio Credit Agreement had a $750.0 million Sitio Borrowing Base and $750.0 million elected commitment amount. As part of the aggregate commitments under the revolving advances, the Sitio Credit Agreement provides for letters of credit to be issued at the request of the borrower in an aggregate amount not to exceed $15.0 million.

 

F-24

First Amendment to Third Amended and Restated Credit Agreement

On September 22, 2023, Sitio OpCo and the guarantors party thereto entered into the First Amendment to Third Amended and Restated Credit Agreement (“First Amendment to the Sitio Revolving Credit Facility”), pursuant to which the Sitio Borrowing Base and the sum of the aggregate elected commitments under the Sitio Credit Agreement were each increased to $850.0 million.

Second Amendment to Third Amended and Restated Credit Agreement

On December 20, 2023, Sitio OpCo and the other guarantors party thereto entered into the Second Amendment to Third Amended and Restated Credit Agreement, pursuant to which the Sitio Credit Agreement was amended to (i) effectuate the scheduled redetermination of the Sitio Borrowing Base intended to be effective on or about November 1, 2023 by reaffirming the Sitio Borrowing Base at $850.0 million, (ii) document the exclusion of certain assets from the Sitio Borrowing Base properties solely for purposes of the Sitio Borrowing Base redetermination described in the foregoing clause (i), (iii) amend certain dates applicable to the semi-annual redetermination of the Sitio Borrowing Base and (iv) amend certain other terms of the Sitio Credit Agreement, in each case, on the terms and subject to the conditions set forth therein.

Third Amendment to Third Amended and Restated Credit Agreement

On May 3, 2024, Sitio OpCo and the other guarantors party thereto entered into the Third Amendment to Third Amended and Restated Credit Agreement, pursuant to which the Sitio Credit Agreement was amended to (i) effectuate the scheduled redetermination of the Sitio Borrowing Base intended to be effective on or about April 1, 2024 by reaffirming the Sitio Borrowing Base at $850.0 million, (ii) amend certain dates applicable to the scheduled redetermination of the Sitio Borrowing Base and (iii) amend certain other terms of the Sitio Credit Agreement, in each case, on the terms and subject to the conditions set forth therein.

Fourth Amendment to Third Amended and Restated Credit Agreement

On December 16, 2024, Sitio OpCo and the other guarantors party thereto entered into the Fourth Amendment to Third Amended and Restated Credit Agreement, pursuant to which the Sitio Credit Agreement was amended to (i) effectuate the scheduled redetermination of the Sitio Borrowing Base intended to be effective on or about November 1, 2024 by increasing the Sitio Borrowing Base to $925.0 million, (ii) increase the elected commitment amount to $925.0 million and (iii) amend certain other terms of the Sitio Credit Agreement, in each case, on the terms and subject to the conditions set forth therein.

2028 Senior Notes

On October 3, 2023, Sitio OpCo and Sitio Finance Corp., a Delaware corporation (“Finance Corp.” and, together with Sitio OpCo, the “Issuers”) issued and sold $600.0 million aggregate principal amount of 7.875% Senior Notes due 2028 (the “2028 Senior Notes”). The 2028 Senior Notes were issued at par. Sitio OpCo used proceeds from the issuance of the 2028 Senior Notes to repay and redeem the 2026 Senior Notes (as defined below) in full, inclusive of a redemption premium of 3.0%. Remaining proceeds from the 2028 Senior Notes offering were used to repay outstanding borrowings under the Sitio Revolving Credit Facility and for general corporate purposes.

The 2028 Senior Notes are governed by the indenture, dated as of October 3, 2023 (the “Indenture”), by and among the Issuers, solely for purposes of Section 4.16(b) therein, the Company, the guarantors named therein and Citibank, N.A., as trustee (the “Trustee”). The 2028 Senior Notes are senior unsecured obligations of the Issuers, and are fully and unconditionally guaranteed on a senior unsecured basis by all of Sitio OpCo’s subsidiaries, other than Sitio Finance Corp. The 2028 Senior Notes will mature on November 1, 2028 and bear interest at an annual rate of 7.875%, which accrues from October 3, 2023 and is payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2024.

At any time prior to November 1, 2025, the Issuers may, on any one or more occasions, redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes (including any additional notes issued under the Indenture) at a redemption price equal to 107.875% of the principal amount of the 2028 Senior Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, with an amount of cash not greater than the net cash proceeds of certain equity offerings, if at least 65% of the aggregate principal amount of the 2028 Senior Notes originally issued on the Issue Date (as defined in the Indenture) remains outstanding immediately after such redemption and the redemption occurs within 180 days of the closing date of such equity offering. At any time prior to November 1, 2025, the Issuers may, on any one or more occasions, redeem all or a part of the 2028 Senior Notes at a redemption price equal to 100% of the principal amount of the 2028 Senior Notes redeemed, plus the Applicable Premium (as defined in the Indenture) as of, and accrued and unpaid interest, if any, to, but excluding, the redemption date.

 

F-25

On or after November 1, 2025, the Issuers may, on any one or more occasions, redeem all or a part of the 2028 Senior Notes at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding the redemption date, if redeemed during the twelve-month period beginning on November 1 of the years indicated below:

 

Year		Percentage
2025			103.938	%
2026			101.969	%
2027 and thereafter			100.000	%

If Sitio OpCo experiences certain kinds of changes of control (and, in some cases, followed by a ratings decline), each holder of 2028 Senior Notes may have the right to require the Issuers to repurchase all or any part of such holder’s 2028 Senior Notes at 101% of the aggregate principal amount of the 2028 Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The Indenture contains covenants that, among other things, limit Sitio OpCo’s ability and the ability of Sitio OpCo’s restricted subsidiaries to: (i) incur or guarantee additional indebtedness or issue certain types of preferred stock; (ii) pay dividends on capital stock or redeem, repurchase or retire its capital stock or subordinated indebtedness; (iii) transfer or sell assets; (iv) make investments; (v) create certain liens; (vi) enter into agreements that restrict dividends or other payments from its restricted subsidiaries to it or any guarantor; (vii) consolidate, merge or transfer all or substantially all of its assets; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries.

If an Event of Default (as defined in the Indenture) occurs and is continuing under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the then total outstanding 2028 Senior Notes (with a copy to the Trustee) may declare the principal of, and accrued and unpaid interest, if any, on all outstanding 2028 Senior Notes to be due and payable immediately; provided that the 2028 Senior Notes will be due and payable immediately without further action or notice if such an Event of Default arises from certain events of bankruptcy or insolvency described in the Indenture with respect to the Issuers, any restricted subsidiary of Sitio OpCo that is a significant subsidiary or any group of restricted subsidiaries of Sitio OpCo that, taken together, would constitute a significant subsidiary.

As of December 31, 2024 and 2023, the Company had $600.0 million of 2028 Senior Notes outstanding. As of December 31, 2024 and 2023, the Company had unamortized debt issuance costs of $9.6 million and $11.7 million in connection with the issuance of the 2028 Senior Notes, respectively. Debt issuance costs are reported as a reduction to long-term debt on our consolidated balance sheets and are amortized over the life of the 2028 Senior Notes. For the years ended December 31, 2024 and 2023, the Company recognized $2.0 million and $474,000, respectively, of interest expense attributable to the amortization of debt issuance costs related to the 2028 Senior Notes. No such expense was recognized for the year ended December 31, 2022.

2026 Senior Notes

On September 21, 2022, Sitio OpCo, as issuer, and certain subsidiaries of Sitio OpCo, as guarantors, entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with certain institutional investors as holders (the “Holders”) and U.S. Bank Trust Company, National Association, as agent for the Holders.

Pursuant to the Note Purchase Agreement, Sitio OpCo issued senior unsecured notes to the Holders in an aggregate principal amount of $450.0 million (the “2026 Senior Notes”) at 99% of par. Sitio OpCo used $425.0 million of the proceeds from the 2026 Senior Notes to repay in full all amounts outstanding under the Bridge Loan Facility with the remainder used for general corporate purposes. On October 3, 2023, the Company redeemed all of the outstanding 2026 Senior Notes. Upon redemption of the 2026 Senior Notes, the Company recognized a loss on extinguishment of debt of $20.1 million, associated with unamortized discount and debt issuance costs and other fees incurred in connection with the redemption.

For the years ended December 31, 2023 and 2022, the Company recognized $2.2 million and $342,000, respectively, of interest expense attributable to the amortization of discount and issuance costs related to the Note Purchase Agreement.

 

F-26

No such expense was recognized for the year ended December 31, 2024. For the years ended December 31, 2023 and 2022, the weighted average interest rate related to our borrowings under the 2026 Senior Notes was 10.58% and 8.62%, respectively.

Bridge Loan Facility

On June 24, 2022, Sitio OpCo, as borrower, entered into an unsecured 364-Day Bridge Loan Agreement with Bank of America, N.A. as Administrative Agent for the lenders party thereto, BofA Securities, Inc., as joint lead arranger and sole bookrunner, and Barclays Bank PLC and KeyBank National Association, as joint lead arrangers (the “Bridge Loan Agreement”). The Bridge Loan Agreement was amended on July 8, 2022 (the “Bridge First Amendment”) to provide for additional delayed draw term loan commitment.

The Bridge Loan Agreement and Bridge First Amendment provided for a 364-day term loan credit facility (the “Bridge Loan Facility”) in the aggregate principal amount of $425.0 million. The Bridge Loan Facility was fully repaid and extinguished on September 21, 2022 using proceeds from the issuance of the 2026 Senior Notes. Upon the closure of the Bridge Loan Facility, the Company recognized a loss on extinguishment of debt of $11.5 million associated with unamortized debt issuance costs and other fees incurred in connection with the payoff.

For the year ended December 31, 2022, the Company recognized $3.4 million of interest expense related to the amortization of issuance costs under the Bridge Loan Agreement. No such expense was recognized for the years ended December 31, 2024 or 2023.

9. Equity

Class A Common Stock

The Company had 78,980,516 shares of its Class A Common Stock outstanding as of December 31, 2024. Holders of Class A Common Stock, par value $0.0001 per share, are entitled to one vote per share on all matters to be voted upon by the stockholders and are entitled to ratably receive dividends when and if declared by the Company’s board of directors (the “Board”).

Class C Common Stock

The Company had 73,391,244 shares of its Class C Common Stock outstanding as of December 31, 2024. Shares of Class C Common Stock, par value $0.0001 per share, are non-economic but entitle the holder to one vote per share. Current holders of Class C Common Stock also hold an equivalent number of Sitio OpCo Partnership Units. Sitio OpCo Partnership Units are redeemable on a one-for-one basis for shares of Class A Common Stock at the option of the holder. Upon the redemption by any holder of Sitio OpCo Partnership Units for shares of Class A Common Stock, a corresponding number of shares of Class C Common Stock held by such holder will be canceled. During the year ended December 31, 2024, 623,768 Sitio OpCo Partnership Units were redeemed for shares of Class A Common Stock, and an equivalent number of shares of Class C Common Stock were canceled.

Share Repurchase Program

On February 28, 2024, the Board authorized a share repurchase program that allows us to repurchase up to $200.0 million of our Class A Common Stock and Sitio OpCo Partnership Units (the “Share Repurchase Program”). The shares may be repurchased from time to time through various methods including but not limited to in the open market transactions, through privately negotiated transactions or by other means in accordance with applicable securities laws, certain of which may be made pursuant to trading plans meeting the requirements of Rule 10b5-1 and 10b-18 under the Securities Exchange Act of 1934 (the “Exchange Act”). The timing of repurchases under the program, as well as the number and value of shares repurchased under the program, will be determined by the Company at its discretion and will depend on a variety of factors, including the market price of our Common Stock, oil and gas commodity prices, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements and other considerations. The exact number of shares to be repurchased by us is not guaranteed, and the program may be modified, suspended or discontinued at any time without prior notice. The Company is not obligated to repurchase any dollar amount or number of shares under the Share Repurchase Program.

 

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For the year ended December 31, 2024, the Company repurchased 4,224,814 shares of its Class A Common Stock in connection with the Share Repurchase Program. The shares were recorded at a weighted average price of $22.72 upon repurchase by the Company, inclusive of third-party commissions.

For the year ended December 31, 2024, the Company repurchased and immediately canceled 897,457 Sitio OpCo Partnership Units together with an equivalent number of shares of Class C Common Stock under our Share Repurchase Program. The repurchased Sitio OpCo Partnership Units were recorded at a weighted average price of $24.67.

The Inflation Reduction Act of 2022 provides for, among other things, the imposition of a 1% non-deductible U.S. federal excise tax on the fair market value of any stock repurchased by a publicly traded domestic corporation during any taxable year, with the fair market value of such repurchased stock reduced by the fair market value of certain stock issued by such corporation during such taxable year (such excise tax, the “Stock Buyback Tax”). In the past, there have been proposals to increase the amount of the Stock Buyback Tax from 1% to 4%; however, it is unclear whether such a change in the amount of the excise tax will be enacted and, if enacted, how soon any such change could take effect. The Stock Buyback Tax first applied to our Share Repurchase Program in the year ended December 31, 2024, and will continue to apply in subsequent taxable years. The Stock Buyback Tax is reflected as a component of the repurchased amounts within our Condensed Consolidated Statements of Equity.

Class A Treasury Shares

As of December 31, 2024, 4,224,814 shares of Class A Common stock were held in treasury at a weighted average price of $22.72.

Class C Treasury Shares

As of December 31, 2024, the Company held in treasury 52,748 shares of Class C Common Stock and a corresponding number of Sitio OpCo Units were withheld for income taxes upon vesting of Sitio OpCo Restricted Stock Awards and the income taxes were paid by the Company. The Company transferred the shares of Class C Common Stock to treasury. The treasury shares were recorded at a price of $24.19 per share upon repurchase by the Company, reflective of the economic value of Sitio OpCo Restricted Stock Awards that were withheld upon vesting. See “Note 11 – Share-Based Compensation” for additional information regarding these awards. As of December 31, 2023, 26,137 shares of Class C Common Stock were held in treasury.

Cash Dividends

The following table summarizes the quarterly dividends related to the Company’s quarterly financial results (in thousands, except per share data):

 

Quarter Ended		Total Quarterly Dividend per Class A Common Share				Class A Cash Dividends Paid				Payment Date				Stockholder Record Date
September 30, 2024		$	0.28			$	22,185				November 27, 2024				November 19, 2024
June 30, 2024		$	0.30			$	24,071				August 30, 2024				August 19, 2024
March 31, 2024		$	0.41			$	33,066				May 31, 2024				May 21, 2024
December 31, 2023		$	0.51			$	41,950				March 28, 2024				March 15, 2024
September 30, 2023		$	0.49			$	40,396				November 30, 2023				November 21, 2023
June 30, 2023		$	0.40			$	32,705				August 31, 2023				August 18, 2023
March 31, 2023		$	0.50			$	40,743				May 31, 2023				May 19, 2023
December 31, 2023		$	0.60			$	48,107				March 31, 2023				March 17, 2023
September 30, 2022		$	0.72			$	9,148				November 30, 2022				November 21, 2022
June 30, 2022		$	0.71			$	9,017				August 31, 2022				August 18, 2022

See “Note 19 – Subsequent Events” for additional information regarding cash dividends.

 

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