Sitio Royalties Corp.

for 2023 earnings call my name is chat and i'll be the coordinator for this call today after the presentation there'll be a q a session where you'll have the opportunity to ask questions by pressing star 4x1 on your telephone keypad if you change your mind please press star 4x2 i'd now like to hand over to ross wong vice president of finance and investor relations to begin ross please go ahead good morning everyone

Welcome to the Citio Realty's fourth quarter and full year 2023 earnings call. If you don't already have a copy of our recent press release and updated investor presentation, please visit our website at www.citio.com or you will find them in our investor relations section. With me today to discuss fourth quarter and full year 2023 financial and operating results is Chris Conocenti, our Chief Executive Officer, Kerry Osika, our Chief Financial Officer, and Dr. David our EVP of corporate development, and other members of our executive leadership team. Before we start, I would like to remind you that our discussion today may contain forward-looking statements and non-GAAP measures. Please refer to our earnings press release, investor presentation, and publicly filed documents for additional information regarding such forward-looking statements and non-GAAP measures. And with that, I'll turn the call over to Chris.

Thanks, Ross. Good morning, everyone, and thank you for joining CTO's fourth quarter and full year 2023 earnings call. Before discussing fourth quarter results, I want to provide an update on our return of capital framework, which going forward will include dividends and the ability to layer in share repurchases. And I would like to share some exciting news regarding our first acquisition of 2024. Regarding repurchases, our board has authorized a $200 million share buyback program. which provides an additional avenue to maximize long-term value for our shareholders. We remain confident in the outlook for our business and believe there is a compelling opportunity to repurchase our shares given this outlook. Under this updated framework, which is effective immediately and applies starting with the first quarter of 2024, we still plan to return at least 65% of discretionary cash flow to our shareholders and to retain up to 35% of discretionary cash flow for balance sheet management and opportunistic cash acquisitions. However, instead of allocating the full 65% of discretionary cash flow exclusively to cash dividends like we've done historically, we intend to pay a minimum dividend equal to 35% of discretionary cash flow and allocate at least 30% of discretionary cash flow to additional cash dividends, share repurchases, or a mix of both. Committing to a minimum dividend equal to 35% of discretionary cash flow provides our shareholders with the certainty of a minimum cash dividend that is a compelling size While avoiding the pitfalls of setting a minimum dollar amount of dividends, history has shown that fixed minimum dividends expressed in a set dollar amount for a cyclical, commodity-exposed business turn out to be variable in a commodity price down cycle when companies inevitably cut their so-called fixed dividend. This introduces the risk of the company buying back more stock when it has more discretionary cash flow above the fixed dollar dividend, which is when commodity prices and stock prices are high. Our strategy is designed to avoid having to cut a minimum dollar amount of dividends during cyclical downturns and to avoid the pro-cyclical and potentially value-destructive behavior of allocating additional capital to repurchases during cyclical upturns. If our new return of capital framework had been applied to the fourth quarter of 2023, our minimum dividend would have been $0.27 per share, which implies an approximate 5% dividend yield. This would have been roughly 300 basis points higher than the dividend yields for EMP companies and approximately 350 basis points higher than the S&P 500 yield over the last 12 months. Turning to the acquisition I mentioned earlier, in January, we signed a definitive agreement to acquire over 13,000 net royalty acres in the DJ Basin for $150 million, which enhances our overall DJ footprint and exposure to areas with higher levels of activity relative to our legacy assets in the area. As with most of our acquisitions, this deal originated through a relationship with a seller we've known for a while. The seller did an outstanding job of piecing together a differentiated asset base concentrated in the best parts of the DJ Basin. This transaction highlights our proactive approach to portfolio management and prudent capital allocation. By selling smaller scale declining assets in Appalachia and the Anadarko Basin at a nearly six times next 12 months cash flow multiple, and acquiring higher growth DJ Basin assets at a four times next 12 months cash flow multiple, we continue to focus on optimizing capital allocation and generating strong shareholder returns. I'd now like to turn the call over to Dax McDavid, our EVP of Corporate Development, to discuss the highlights of the DJ Basin acquisition and provide an update on other acquisition activities.