Filed by Sitio
Royalties Corp.
pursuant to Rule
425 under the Securities Act of 1933
and deemed filed
pursuant to Rule 14a-12
under the Securities
Exchange Act of 1934
Subject Company:
Sitio Royalties Corp.
Commission File
No. 001-38158
Date:
September 6, 2022
Sitio Royalties
and Brigham Minerals Merger Announcement Call
September 6,
2022
CORPORATE
PARTICIPANTS
Christopher
L. Conoscenti Sitio Royalties Corp. - CEO & Director
Robert M. Roosa
Brigham Minerals, Inc. - CEO & Director
Ross Wong
Sitio Royalties Corp. - Senior Director of Corporate Finance & IR
CONFERENCE
CALL PARTICIPANTS
Derrick Lee
Whitfield Stifel, Nicolaus & Company, Incorporated, Research Division - MD of E&P & Senior Analyst
Torrey Joseph
Schultz RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise
PRESENTATION
Operator
Thank you for joining.
I would like to welcome you all to the Sitio Royalties Brigham Minerals Merger Announcement Call. My name is Brika, and I'll be your
event specialist operating today’s call. (Operator Instructions)
I would now like
to hand the call over to our host for today, Ross Wong, Senior Director of Corporate Finance and Investor Relations for Sitio Royalties,
to begin. Ross, please go ahead when you’re ready.
Ross Wong
- Sitio Royalties Corp. - Senior Director of Corporate Finance & IR
Thanks, operator,
and good morning, everyone. Welcome to the Sitio Royalties and Brigham Minerals merger announcement call. If you don’t already
have a copy of our joint press release and investor
presentation, please
visit the Investor Relations section of Sitio's website at www.sitio.com or Brigham’s website at www.brighamminerals.net.
There are several
members of both the Sitio and Brigham teams with me today, including Rob Roosa, Brigham’s CEO; Blake Williams, Brigham’s
CFO; Chris Conoscenti, Sitio’s CEO; and Carrie Osicka, Sitio’s CFO.
Before we start,
I would like to remind you that our discussion today may contain forward-looking statements. These statements may include but are not
limited to, estimates of future volumes, operating expenses and other financial metrics. They may also include statements concerning
anticipated discretionary cash flow, liquidity, business strategy, other plans, objectives for Sitio, Brigham and the combined company.
Although we believe
that the expectations reflected in such forward-looking statements are reasonable, we can provide no assurance that such expectations
will prove to be correct. Please see recent SEC filings for both Sitio and Brigham, including Form 10-Q, proxy statement on Schedule
14A and annual reports on Form 10-K as well as other SEC filings for a listing of factors that could cause actual results to differ materially
from expected results. We expect to file a proxy statement related to the merger in the future, which should also be referenced once
available.
Please also note
that on this call, we will use the terms EBITDA, adjusted EBITDA, discretionary cash flow and cash G&A. These are financial measures
that are not presented in accordance with U.S. generally accepted accounting principles. While we believe such non-GAAP measures are
useful for investors, they are not measures of financial performance under GAAP and should not be considered in isolation or as an alternative
to any measure of such performance derived in accordance with GAAP.
These non-GAAP
measures have limitations as analytical tools, and you should not consider them in isolation or a substitute for analysis of results
as reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies in our industry
or across different industries.
And with that,
I will turn the call over to Rob.
Robert M. Roosa
- Brigham Minerals, Inc. - CEO & Director
Thanks, Ross. We
appreciate everyone joining today’s call to discuss what we view as the transformative transaction to date in the mineral space.
The combination of our two like-minded firms through a merger of equals gives investors exactly what is needed to take the minerals business
to the next level, scale, liquidity and float.
Scale at any price
has never been attractive to us, and we believe this transaction represents a fantastic opportunity for our shareholders. The combined
company will have significantly increased financial strength and create a platform uniquely positioned to accelerate consolidation of
a highly fragmented minerals market while continuing an unwavering commitment to the return of capital to shareholders.
I would like to
personally thank each and every one of our Brigham Minerals employees for their efforts over the past 10 years. The Brigham Minerals
team has invested close to $1 billion in mineral acquisitions, returned close to $250 million in dividends and is currently valued at
approximately $2 billion. Further, investors in our 2019 IPO at $18 per share have achieved an annualized total shareholder return of
greater than 20%, assuming reinvested dividends.
All of this was
made possible through the relentless efforts of our employees. Executing a successful ground game is very intensive and requires significant
effort to close each and every deal. Our incredible financial performance is a direct result of their efforts. Together, we’ve
built a tremendous company that when combined with Sitio will become the premier mineral company in the U.S.
I remain incredibly
excited about the future prospects for our combined companies and believe Chris, Carrie and team will continue to drive consolidation
in a highly disciplined manner that generates substantial shareholder returns. I'll now turn the call over to Chris.
Christopher
L. Conoscenti - Sitio Royalties Corp. - CEO & Director
Thanks, Rob. Good
morning, everyone, and thank you for joining us to discuss this milestone transaction, which is the largest merger ever in our sector
and forms the leading public mineral and royalty interest consolidator that has the scale, balance sheet and proven strategy to lead
and accelerate industry consolidation and shareholder returns going forward.
Brigham has been
an industry pioneer and is one of the most respected companies in our sector. Brigham has built a high-quality, diversified asset portfolio,
consistently outperformed expectations and attracted a strong investor base that has minimal overlap and is highly complementary to Sitio’s.
The combination
brings together two strategically aligned organizations that have the same objectives of prioritizing asset quality, maintaining disciplined
underwriting standards, valuing the benefits of scale and maximizing cash flow and long-term value for shareholders. We both have incredibly
talented employees, entrepreneurial cultures, shareholder-centric governance and best practices that will be shared in leverage to ensure
that the combined company benefits from the best aspects of each individual company.
We are excited
about this transaction for three main reasons: first, the superior asset quality of the combined business; second, the advantages of
scale for our company; and third, the impacts on our float trading liquidity and capitalization.
First, on asset
quality. Sitio and Brigham both have diversified asset bases anchored by large-scale Permian positions in the heart of the Delaware and
Midland Basins. 70% of the combined company’s acreage and 75% of the combined company's production will be in the Permian. Also,
over 80% of our combined spuds and permits are in the Permian Basin.
Our combined reach
in the Permian is impressive. Our drilling spacing units cover over 32% of the entire Permian Basin. And we collectively own interest
in over 34% of all of the wells drilled in the Permian in 2021. The remainder of our assets will be in the core of the DJ, Eagle Ford,
Anadarko, Appalachia and Williston Basins, which together with the Permian are the most active regions in the country in terms of number
of rigs running and lateral feet drilled.
At the end of Q2,
there were approximately 100 horizontal rigs running on the combined company’s acreage, which represents an approximately 13% of
all horizontal rigs running in the Lower 48. In short, our assets are located where operators are economically incentivized to drill
the fastest to achieve the best rates of return for themselves, which translates into production and cash flow growth for us.
This is evidenced
by the large number of spuds and permits on our acreage today. As of June 30, the combined company had 50.3 net line of sight wells.
These are wells that are typically turned in line within the next 12 months. To put this 50.3 net well number into perspective, our two
companies have seen only 112 net wells turned in line in the past 3.5 years. So adding another 50 wells in just 12 months would be a
significant increase.
These spuds and
permits are operated by a diverse set of premier public and private operators, including EOG, ConocoPhillips, Pioneer, Oxy, PDC, Callon,
Endeavor, Chevron and so on. Another way to think about the magnitude of the line of sight inventory is that it is an 88% increase over
Sitio’s stand-alone line of sight inventory.
The second transaction
highlight I mentioned was the benefits of scale for our stakeholders. At Sitio, we have consistently articulated our strategy focused
on large-scale consolidation of high-quality mineral and royalty interests. Since June of 2021 and including this announced merger, Sitio
has consolidated more than 195,000 NRAs by executing a series of six large-scale transactions. These transactions were all executed using
a disciplined underwriting approach that emphasizes asset quality and returns. They were funded with a balanced mix of equity and debt.
We believe that
the combined company will be well positioned to accelerate industry consolidation due to its scale, wider asset footprint and increased
access to capital, which will create long-term value for stakeholders. The merger creates a large-scale entity with nearly 260,000 net
royalty acres and pro forma net daily production of over 32,700 barrels of oil equivalent per day, which includes full second quarter
production from Foundation, Momentum and Avant acquisitions.
Consolidation and
scale in the minerals business are critical to driving down cash G&A costs per barrel of oil equivalent. We have been able to reduce
this metric with each large transaction we’ve done, thereby increasing margins and generating more cash that can be returned to
shareholders and reinvested in additional consolidation.
Our estimated cash
G&A per barrel of oil equivalent over the next 12 months is approximately $1.70. This is a 62% reduction in cash G&A per BOE
compared to Sitio in 2020, all as a result of making attractive acquisitions and efficiently managing the acquired assets. We expect
to achieve approximately $15 million of annual cash cost savings as a result of this merger.
Both Sitio and
Brigham have invested in data management systems that facilitate additional consolidation of mineral and royalty interests and help ensure
that we are managing data well and collecting royalty payments owed to us in an efficient manner. We expect to realize advantages from
the sharing of best practices, industry relationships and integration of top-tier talent.
The other benefit
of scale is the competitive edge it gives us in large-scale acquisitions. Competition for minerals acquisitions under $100 million is
robust, but there are fewer companies with the scale and ability to transact on larger mineral acquisitions. Our combined company will
be the largest publicly traded mineral and royalty company focused on large-scale consolidation across the diverse set of operators.
The final highlight
of the transaction I want to mention is the direct benefits for our stakeholders in terms of public float, trading liquidity and balance
sheet strength. This merger increases the public float of Sitio’s equity by nearly 6x, going from approximately $320 million to
$1.9 billion. This increased float likely leads to additional trading liquidity in our stock versus Sitio on a stand-alone basis.
Additional float
and trading liquidity are critical to expanding the universe of potential investors in Sitio. It will also be a key selling point for
future minerals acquisitions in which we offer our equity as consideration. From Sitio’s perspective, this transaction greatly
accelerates the deleveraging plan we articulated following the foundation and momentum transactions.
Sitio’s leverage
falls from approximately 1.4x on a stand-alone basis to approximately 1x on a pro forma net debt to second quarter 2022 adjusted EBITDA
for the combined company. We plan on targeting
leverage of 1x
or less at the combined company with the ability to temporarily go above that target for strategic acquisitions, much like you saw Sitio
do for the acquisitions of Foundation and Momentum.
The combined company
will have significantly better access to capital than either stand-alone company and most companies in the mineral and royalty interest
sector. Increasing shareholder value and returning capital to shareholders are important tenets of both stand-alone companies and will
continue to be championed at the combined company.
The combined company
will maintain Sitio’s capital allocation framework of returning at least 65% of discretionary cash flow to shareholders and retaining
the remainder to protect our balance sheet and reinvest in additional consolidation opportunities.
We have structured
this merger as an all-stock transaction with a fixed exchange ratio of 1.133, which results in Sitio’s shareholders owning 54%
and Brigham's shareholders owning 46% of the combined company on a fully diluted basis. Sitio’s three largest shareholders, Kimmeridge,
Blackstone and Oaktree, who own approximately 84% of Sitio’s equity are strong believers in the merits of the transaction and have
entered into support agreements to vote in favor of the transaction.
The merger is expected
to close in the first quarter of 2023, has been unanimously approved by the Boards of Directors of both companies and is subject to customary
closing conditions, including regulatory clearance and approvals by the shareholders of Sitio and Brigham. The combined company will
be unlike any organization that has ever existed in the oil and gas mineral and royalty sector and will be well positioned to be the
leading consolidator in the space.
I would like to
thank the employees, management teams and boards of both companies for their collective efforts to get to this point and for their partnership
as we work towards closing the transaction.
This concludes
our prepared remarks. I’d like to open the call up for questions now.
QUESTIONS
AND ANSWERS
Operator
(Operator Instructions)
The first question we have from the phone lines comes from TJ Schultz of RBC.
Torrey Joseph
Schultz - RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise
Great. Let me just
start with -- from a Sitio perspective. The Permian weighting, I guess, drops from, call it, 80% to 85% to 70% to 75% on a pro forma
basis. And I understand the Permian remains your primary target area as you look at consolidating minerals. But do you expect to continue
holding minerals across 5 or 6 basins moving forward or to narrow that scope?
Christopher
L. Conoscenti - Sitio Royalties Corp. - CEO & Director
TJ, thanks for
the question. Yes, the Permian has always been our favorite basin in terms of just the geologic qualities, the multiple stacked horizons
for development, the active operator universe, the infrastructure in place, the regulatory environment. So there’s really no place
else in the country that matches that set of qualities.
But that said,
the assets that come outside of the Permian that both Sitio and Brigham bring to the table are very attractive and were made (inaudible)
portfolio at attractive prices. So really, it’s about rate of returns. It’s not about like getting paid in one commodity
or another or from one basin versus the other. It’s just about what rate of return can we earn on the acquisitions and how is the
capital that's invested in our portfolio earning versus what could it earn elsewhere.
So we have no plans
to monetize any of the assets outside of the Permian. But really, in our entire history, we’ve never really had portfolio management
opportunities. So this is all new to us in terms of the company-wide, but we like the assets that Brigham is bringing into the table.
Torrey Joseph
Schultz - RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise
Okay. And then
kind of similarly, just given the larger scale and then also the fact there’s one less public buyer out there. You talked about
the advantages that scale gives you in looking at some of the larger transactions. Maybe if you can just provide a little bit more color
on how this changes the sandbox that you’re potentially claiming when you’re looking at consolidating minerals? Are there
larger packages out there that include minerals outside the Permian that maybe you’ll look at now that you weren't before? Just
any additional color.
Christopher
L. Conoscenti - Sitio Royalties Corp. - CEO & Director
Yes. So we’ve
articulated since the very beginning that we're very focused on large-scale consolidation just because we know that we need to be a larger
company to be more relevant for investors, but also because we find rates of return to be really compelling on the larger acquisitions.
So in terms of where we will look for those larger acquisitions, we know that there are dozens of opportunities out there that meet our
criteria for scale.
And then the question
becomes do they meet our criteria for returns and can we get them at a compelling enough price for our shareholders. But we don’t
see any shortage of opportunities either purely in the Permian or anchored by the Permian and come with assets elsewhere, some of which
overlap with what Brigham is introducing to the company.
Operator
Derrick Whitfield,
Stifel.
Derrick Lee
Whitfield - Stifel, Nicolaus & Company, Incorporated, Research Division - MD of E&P & Senior Analyst
Congrats on the
merger.
Robert M. Roosa
- Brigham Minerals, Inc. - CEO & Director
Thanks, Derrick.
Derrick Lee
Whitfield - Stifel, Nicolaus & Company, Incorporated, Research Division - MD of E&P & Senior Analyst
With regard to
your Minerals acquisition strategy, Brigham was particularly strong with its ground game focus. Do you guys plan to retain that element
of minerals acquisition in your go-forward strategy?
Robert M. Roosa
- Brigham Minerals, Inc. - CEO & Director
Yes. Thanks for
the question, Derrick. I think the equation for us is just about rates of return. And as we look at the discipline that Brigham has showed
in the ground game, it’s been impressive. And if we can continue to see rates of return like that, then it will compete for capital
from us as a combined business.
Derrick Lee
Whitfield - Stifel, Nicolaus & Company, Incorporated, Research Division - MD of E&P & Senior Analyst
Terrific. And then
with respect to your pro forma balance sheet, do you plan to hedge some portion of the acquired volumes to lock in the deleveraging nature
of the transaction?
Robert M. Roosa
- Brigham Minerals, Inc. - CEO & Director
No. Our hedging
strategy is not a speculative one. It’s really just driven by cash acquisitions and where commodity prices are at the time of those
cash acquisitions. So given that this is not a cash acquisition, we have no intention to hedge any volumes associated with this transaction.
But consistent with our prior policy, our policy going forward is to continue to look at hedging cash acquisitions that are made in times
when commodity prices are above mid-cycle pricing, which we have historically defined as roughly $50 to $75 oil.
Operator
We now have [Neil
Cox of Twilio Brothers].
Unidentified
Analyst
I do want to start
with sort of a housekeeping question. Could you just review the different share classes of each company and combination?
Christopher
L. Conoscenti - Sitio Royalties Corp. - CEO & Director
Sure. So Sitio
has the publicly traded Class A shares in our three largest shareholders, Kimmeridge, Blackstone and Oaktree on the Class C shares, which
are not publicly traded but have equal economic and voting rights as the Class A shares.
The equivalent
at Brigham, they have Class A shares and Class B shares. Their number of Class B shares is a lot smaller than Sitio’s number of
Class C shares. But structurally, what will happen is that the Class A shareholders of Brigham will get Class A shares of Sitio and the
Class B shareholders of Brigham will get Class C shares of Sitio.
Unidentified
Analyst
Okay. Got you.
And the similar as far as the voting rights and, as you said, the economic waiting and everything, all unchanged essentially pro forma?
Christopher
L. Conoscenti - Sitio Royalties Corp. - CEO & Director
Correct.
Unidentified
Analyst
Great. And let’s
see, you did also mention that the companies have each made substantial investments in data systems to help ensure that collections of
royalties are performed efficiently. I’m just curious, were those proprietary systems that each company has? Or were they vendor
systems that are similar?
Robert M. Roosa
- Brigham Minerals, Inc. - CEO & Director
Yes. Neil, I think
with respect to Brigham Minerals, our software is proprietary. When you think back to when we entered the mineral space in 2012, 2013,
there were -- we were so early in the evolution of the minerals business. It really required us to look for a new solution and realize
that. We started the process with a non-op system that was converted, quickly realized they were just, as Chris mentioned, so much data
in the space that needs to be aggregated and utilize that to your advantage, that really felt that there was a need to develop our own
in-house system and really work towards that.
So our system is
an integrated land management system with the vision order capabilities as well as fully integrating the reservoir engineering piece.
Our system goes out and scrapes public data sites to understand when permits have been added, when wells have been spud, all the plethora
of stats that we provide to shareholders each and every quarter as a result of that system that’s been built over the last several
years.
So I think there’s
a lot of optionality with respect to the system that Chris and Carrie and team can deploy and look at further monetizing. So -- and also
their advantage with respect to the acquisition environment going forward. So I think when I think about it, our five basins that we
invest in really required us to build it in its terrific system. And these guys now have access to that and can fully exploit it.
Christopher
L. Conoscenti - Sitio Royalties Corp. - CEO & Director
Yes. Thanks, Rob.
And very similar evolution at Sitio. We just -- we knew that as we continued our consolidation strategy that we were picking up interest
in thousands and thousands of wells. So it was going to be an impossible exercise to manually touch all those wells.
So the data management
system we built sounds very similar to what Rob has built out, scrapes the public domain, every single -- drops all publicly available
data into our database every night. Cross references all of our various land accounting, engineering data sets. Syncs them up and tells
us where new data has arrived and what we have to address.
So it's great because
it's highly scalable. This is not something that’s limited to the 23,000 wells that we’ll have as a combined company. It's
something that can handle multiples of that. So we feel good about what it does for us going forward.
Unidentified
Analyst
Great. And I was
just wondering, did the two companies in their modeling of sort of various scenarios for the future, did you each have similar outlook
on the service cost environment and the potential impact that would have on returns going forward?
Robert M. Roosa
- Brigham Minerals, Inc. - CEO & Director
I think we had
similar outlooks on the pace of development, which I think is a derivative of operator behavior. The view of this business, as you know,
is we don’t bear the direct impact of cost inflation that the operators face, either on the capital side or the operating side.
But the indirect
effect on us is if operators were to slow down their rig programs because of cost inflation. We just haven’t seen that yet. I think
it’s across both of our portfolios. We’ve actually seen operators increase capital budgets to reflect the inflation, not
slow down drilling to keep budgets flat.
Operator
(Operator Instructions)
We have had no other questions. So I’d like to conclude the call here. Thank you all for joining. You may now disconnect your lines.
* * *
Forward-Looking
Statements
This communication
relates to a proposed business combination transaction (the “Merger”) between Brigham Minerals, Inc. (“Brigham”)
and Sitio Royalties Corp. (“Sitio”) and the information included herein and in any oral statements made in connection herewith
include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included
herein, regarding the proposed Merger between Brigham and Sitio, the likelihood that the conditions to the consummation of the Merger
will be satisfied on a timely basis or at all, Brigham’s and Sitio’s ability to consummate the Merger at any time or at all,
the benefits of the Merger and the post-combination company’s future financial performance following the Merger, as well as the
post-combination company’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects,
plans and objectives of management are forward looking statements. When used herein, including any oral statements made in connection
herewith, the words “may,” “could,” “believe,” “anticipate,” “intend,” “estimate,”
“expect,” “project” and similar expressions and the negative of such words and similar expressions are intended
to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking
statements are based on Brigham’s and Sitio’s management’s current expectations and assumptions about future events
and are based on currently available information as to the outcome and timing of future events. Such statements may be influenced by
factors that could cause actual outcomes and results to differ materially from those projected. Except as otherwise required by applicable
law, Brigham and Sitio disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements
in this section, to reflect events or circumstances after the date hereof. Brigham and Sitio caution you that these forward-looking statements
are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of
Brigham and Sitio. These risks include, but are not limited to, the post-combination company’s ability to successfully integrate
Brigham’s and Sitio’s businesses and technologies; the risk that the expected benefits and synergies of the Merger may not
be fully achieved in a timely manner, or at all; the risk that Brigham or Sitio will not, or that following the Merger, the combined
company will not, be unable to retain and hire key personnel; the risk associated with Brigham’s and Sitio’s ability to obtain
the approvals of their respective shareholders required to consummate the Merger and the timing of the closing of the Merger, including
the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of the transaction to close
for any other reason or to close on the anticipated terms, including the anticipated tax treatment; the risk that any regulatory approval,
consent or authorization that may be required for the Merger is not obtained or is obtained subject to conditions that are not anticipated;
unanticipated difficulties or expenditures relating to the transaction, the response of business partners and retention as a result of
the announcement and pendency of the transaction; Sitio’s
ability to finance
the combined company (including the repayment of certain of Brigham’s indebtedness) on acceptable terms or at all; uncertainty
as to the long-term value of the combined company’s common stock; and the diversion of Brigham’s and Sitio’s management’s
time on transaction-related matters. Should one or more of the risks or uncertainties described herein and in any oral statements made
in connection therewith occur, or should underlying assumptions prove incorrect, actual results and plans could different materially
from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact Brigham’s
and Sitio’s expectations and projections can be found in Brigham’s periodic filings with the U.S. Securities and Exchange
Commission (“SEC”), including Brigham’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and
any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and Sitio’s periodic filings with the SEC, including
Sitio’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, Part II, Item 1A “Risk Factors” in
Sitio’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Brigham’s and Sitio’s SEC filings are available
publicly on the SEC’s website at www.sec.gov.
No Offer or
Solicitation
This communication
is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or
a solicitation of any vote or approval, in any jurisdiction, pursuant to the Merger or otherwise, nor shall there be any sale, issuance,
exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer
of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.
Financial Information;
Non-GAAP Financial Measures
The financial information
and data contained in this presentation is unaudited and does not conform to Regulation S-X. Accordingly, such information and data may
not be included in, may be adjusted in or may be presented differently in, any proxy statement, registration statement, or prospectus
to be filed by Sitio with the SEC. Some of the financial information and data contained in this presentation, such as EBITDA, have not
been prepared in accordance with United States generally accepted accounting principles (“GAAP”). EBITDA is defined as net
earnings before interest expense, income tax expense, depreciation and amortization. Sitio and Brigham believe these EBTDA provides useful
information to management and investors regarding certain financial and business trends relating to Brigham’s financial condition
and results of operations. Sitio and Brigham believe that the use of EBITDA provides an additional tool for investors to use in evaluating
projected operating results and trends in and in comparing Brigham’s financial measures with other similar companies, many of which
present similar non-GAAP financial measures to investors. Management does not consider these EBTDA in isolation or as an alternative
to financial measures determined in accordance with GAAP. The principal limitation of EBITDA is that it excludes significant expenses
and income that are required by GAAP to be recorded in Brigham’s financial statements. In order to compensate for these limitations,
management presents non-GAAP financial measures in connection with GAAP results. Brigham is not providing a reconciliation of its projected
EBITDA for full years 2021-2024 to the most directly comparable measure prepared in accordance with GAAP because Brigham is unable to
provide this reconciliation without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence,
the financial impact, and the periods in which the adjustments may be recognized. For the same reasons, Brigham is unable to address
the probable significance of the unavailable information, which could be material to future results. You should review Brigham’s
audited financial statements, which will be included in the registration statement on Form S-4
relating to the
Merger. In addition, all Brigham historical financial information included herein is preliminary and subject to change.
Important Additional
Information
In connection with
the Merger, the post-combination company, Snapper Merger Sub I, Inc. (the “combined company”), will file with the SEC a registration
statement on Form S-4, which will include a proxy statement of Brigham, a consent solicitation statement of Sitio and a prospectus of
the combined company. The Merger will be submitted to Brigham’s shareholders for their consideration. Brigham, Sitio and the combined
company may also file other documents with the SEC regarding the Merger. After the registration statement has been declared effective
by the SEC, a definitive consent solicitation statement/proxy statement/prospectus will be mailed to the shareholders of Brigham and
Sitio. This document is not a substitute for the registration statement and consent solicitation statement/proxy statement/prospectus
that will be filed with the SEC or any other documents that Brigham, Sitio or the combined company may file with the SEC or send to shareholders
of Brigham or Sitio in connection with the Merger. INVESTORS AND SHAREHOLDERS OF BRIGHAM ARE URGED TO READ THE REGISTRATION STATEMENT
AND CONSENT SOLICITATION STATEMENT/PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED
OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND RELATED MATTERS.
Investors and shareholders
will be able to obtain free copies of the registration statement and the consent solicitation statement/proxy statement/prospectus (when
available) and all other documents filed or that will be filed with the SEC by Brigham, Sitio or the combined company, through the website
maintained by the SEC at http://www.sec.gov.
INVESTMENT IN
ANY SECURITIES DESCRIBED HEREIN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY OTHER REGULATORY AUTHORITY NOR HAS ANY AUTHORITY
PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Participants
in the Solicitation
Brigham, Sitio
and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Brigham shareholders
in connection with the Merger. Information regarding the directors and executive officers of Brigham is set forth in Brigham’s
Definitive Proxy Statement on Schedule 14A for its 2022 Annual Meeting of Shareholders, which was filed with the SEC on April 13, 2022.
Information regarding the directors and executive officers of Sitio is set forth in Sitio’s Definitive Proxy Statement on Schedule
14A for its Special Meeting of Shareholders, which was filed with the SEC on May 5, 2022, and certain of its Current Reports on Form
8-K. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests,
by security holdings or otherwise, will be contained in the consent solicitation statement/proxy statement/prospectus and other relevant
materials to be filed with the SEC when they become available. You may obtain free copies of these documents through the website maintained
by the SEC at http://www.sec.gov.
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