Texas Capital downgrades Sitio Royalties post-Viper Energy acquisition, impacting market dynamics and investor outlook.
In a recent development, Texas Capital has revised its recommendation for Sitio Royalties Corp (NYSE:STR), shifting from a ‘Buy’ to a ‘Hold’ stance. This change follows the announcement of Sitio’s acquisition by Viper Energy (NASDAQ:VNOM) in a comprehensive all-stock transaction valued at $19.41 per share.
The analysts attributed the downgrade to limited upside potential in light of the new deal. The acquisition positions Sitio at an approximate value of $4.1 billion. As part of the revision, Texas Capital has also adjusted its price target for Sitio from $29 to $20, aligning with the proposed merger’s conditions.
Texas Capital analysts commented, “We are positive on this transaction.” They emphasized several key benefits, including strategic alignment, enhanced scale, reduced leverage, and a notably attractive base dividend breakeven with WTI prices dipping below $20 per barrel. According to them, “This merger creates a must-own minerals company.”
Moreover, Texas Capital foresees no rival bids due to the industry’s scarcity of well-capitalized publicly listed competitors.
Viper Energy has stated that the acquisition will establish it as the largest publicly traded minerals and royalty entity in the United States, with significant stakes in the Permian Basin and other vital regions.
The transaction is anticipated to conclude in the latter half of 2025, contingent upon shareholder and regulatory endorsements.
Yorum Yap