Sitio Royalties to Exit Appalachia, Anadarko Basins

With 192 acquisitions under its belt, Sitio Royalties recently inked a deal to divest all of its assets in the Appalachia and Anadarko basins, the company said in its Nov. 8 earnings report.

Sitio signed a purchase and sale agreement on Nov. 3 to exit the Appalachia and Anadarko basins for $117.5 million, the company said in its Nov. 8 earnings report.

The company’s net royalty acreage, which Sitio described as “lower-margin,” was sold to an undisclosed third party for cash. In the second quarter, Sitio took a $25.6 non-cash impairment charge related to its Appalachia assets and lower realized commodity prices.

Regulatory filings show the company held a combined 22,541 net royalty acres in the basin. In the third quarter, the Anadarko and Appalachia assets averaged 2,095 boe/d (14% oil) and generated revenues of $3.8 million from oil, natural gas and NGLs, according to a Sitio regulatory filing. Through the first three quarters of this year, the assets averaged 2,113 boe/d (15% oil) and generated $14.2 million in revenue.

“Our position in each of these basins was sub-scale relative to our company size,” CEO Chris Conoscenti said on Sitio’s Nov. 9 earnings call.

Sitio said it intends to use the net proceeds from the sale to repay outstanding borrowings under the company’s revolving credit facility and for general corporate purposes.

The divestiture has an effective date of Sept. 1, 2023, and is expected to close at the end of the year, Conoscenti said.

Sitio also said it closed four previously announced Permian Basin deals for mineral and royalty interests at a cost of approximately $181 million. That follows a busy second quarter for Sitio’s M&A when the company closed multiple Permian acquisitions for aggregate consideration of $247.9 million.

In the third quarter, Sitio delivered steady performance from its assets despite the slowdown of drilling activity in the Permian and more broadly across the Lower 48, Conoscenti said.

The Permian accounts for approximately 80% of its line of sight well, he said.

“We continue to pursue multiple consolidation opportunities and are optimistic about improving competitive dynamics heading into 2024,” Conoscenti said.

Sitio reported third-quarter 2023 adjusted EBITDA of $142.4 million, up 12% sequentially from second quarter.