Form 4: Sitio Royalties Corp. Executive Vice President Reports Stock Transactions

Britton L. James, Executive Vice President of Land at Sitio Royalties Corp., reports stock transactions including tax withholding and RSU/PSU grants.

Summary

• On February 27, 2025, Britton L. James had 3,787 Class A Common Stock shares disposed of to cover tax obligations at a price of $19.5 per share, leaving him with 63,196 shares.
• On February 28, 2025, James acquired 27,564 Class A Common Stock shares through Restricted Stock Units (RSUs) at $0, increasing his holdings to 90,760 shares.
• On March 1, 2025, 3,285 shares were disposed of to cover tax obligations at $20 per share, resulting in a final holding of 87,475 shares.
• James was also granted 82,692 Performance Stock Units (PSUs) on February 28, 2025, which could range from 0% to 200% of the target number based on performance.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. The transactions reflect standard executive compensation practices and alignment of interests with shareholders through performance-based incentives.

Positives

• The grant of 27,564 RSUs indicates continued investment in the executive's role within the company.
• The grant of 82,692 PSUs incentivizes the executive to drive shareholder value over a three-year performance period.

Risks

• The value of the PSUs is contingent on the company's performance, and the executive may not receive the full target amount.
• Tax obligations resulting from vesting RSUs can lead to dilution of holdings through share withholding.

Future Outlook

The RSUs will vest in equal one-third installments on each of the first three anniversaries of February 28, 2025, contingent on continuous service. The PSUs will be eligible to be earned based on an annualized absolute total shareholder return performance goal over a three-year period.

Industry Context

Executive compensation packages including RSUs and PSUs are common in the oil and gas industry to align management interests with shareholder value. The specific terms of the PSU grant, tied to total shareholder return, are designed to incentivize long-term value creation.

Comparison to Industry Standards

• Companies like Devon Energy (DVN) and Pioneer Natural Resources (PXD) also utilize RSUs and PSUs in their executive compensation plans.
• The vesting schedules and performance metrics associated with these grants are typically benchmarked against industry peers to ensure competitiveness and alignment with shareholder interests.
• The percentage of equity-based compensation in the total compensation package is also a key metric for comparison.

Stakeholder Impact

• Shareholders are impacted by the potential dilution from the vesting of RSUs and PSUs.
• Executive compensation structure aims to align management's interests with those of shareholders, potentially driving long-term value creation.

Next Steps

• Monitor the vesting of RSUs on the anniversaries of February 28, 2025.
• Track the company's performance against the total shareholder return goal to determine the ultimate payout of PSUs at the end of the three-year performance period.

Key Dates