STR - Sitio Royalties raised at RBC on faster than expected Permian execution

Sitio Royalties ( NYSE: STR ) +3.6% in Friday's trading as RBC Capital upgrades shares to Outperform from Sector Perform with a $43 price target, raised from $36, saying the company is executing its Permian consolidation strategy more quickly than expected.

RBC analyst TJ Schultz estimates Sitio ( STR ) currently trades at ~5.4x EBITDA, below the average of its mineral peers, but he believes "Sitio's increased size and scale should close this valuation discount as its new management team continues to crystallize its new Permian-centric growth strategy to the market."

Schultz says he expects additional cash flow generated by newly acquired acreage will result in higher overall distributions to shareholders at the 65% payout ratio as stated by Sitio.

Sitio Royalties ( STR ) recently was selected by Credit Suisse as its new Top Pick among oil and gas mineral royalty companies .

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