I have adjusted my forecast/valuation model for CIVI based on the Proforma Guidance that the Company provided this morning. I've also increased the "cushions" that I used for 2H 2023 and 2024. The size of the two deals will increase interest expense and should lower the current income tax expenses.
You can view the model directly from the EPG website home page.
Civitas did not have much Wall Street Gang coverage prior to the two deals announced this morning. Their entry into the Permian Basin and the Company's increased scale is sure to draw a lot of analysts' attention.
My initial valuation is $97.00 per share, which is just 3.5 X annualized operating cash flow per share.
TipRanks' price target was $85.67, not including the impact of the acquisitions announced this morning.
Civitas Resources (CIVI) Valuation Update - June 20
Civitas Resources (CIVI) Valuation Update - June 20
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Civitas Resources (CIVI) Valuation Update - June 20
See the slides at this link:
https://s28.q4cdn.com/138385969/files/doc_presentation/2023/06/Transformational-Permian-Acquisition.pdf
https://s28.q4cdn.com/138385969/files/doc_presentation/2023/06/Transformational-Permian-Acquisition.pdf
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Civitas Resources (CIVI) Valuation Update - June 20
Here is the first of many more updated opinions from the Wall Street Gang.
----------------------------
From Capital One Securities, Inc.
CIVI Enters the Permian Basin in a Big Way
$69.35, Overweight, $86.00 Target, Johnston
· We expect a mixed reaction to CIVI's large $4.7B entry into the Permian Basin. On one hand, the market historically hasn't been kind to stocks of companies that have made splashy deals to gain a foothold into a new geographic area. This one is not only very large in size (close to CIVI's existing enterprise value), but it also entails entering 2 sub-basins within the Permian (value of the transactions split close to 50/50 between the Midland and the Delaware). In late May, we actually removed CIVI from our E&P Focus List given the growing possibility that CIVI would make an out-of-basin acquisition. On the other hand, today's deals look to be reasonably priced, look to be accretive on various metrics (FCF yield, FCF/share, CFPS, etc), will provide needed basin diversity, and will help address investor concerns regarding CIVI's limited inventory life.
· Transaction summary. CIVI is acquiring properties in the Midland and Delaware Basins in two separate transactions from two portfolio companies of funds managed by NGP Energy, including Hibernia Energy III, LLC (Midland assets) and Tap Rock Resources (Delaware assets). The combined consideration is $4.7B, including $3.75B of cash and $0.95B of stock issued directly to Tap Rock. The total $4.7B purchase is split 48%/52% between the Midland properties owned by Hibernia and the Delaware properties owned by Tap Rock. Both transactions are expected to close in 3Q23 with effective dates of July 1. The properties include 100 Mboe/d (54% oil cut) of production, 68K net acres, and ~800 gross net locations.
· The scale of the combined transactions is very large relative to CIVI's standalone size. The price tag for the deal represents ~83% of CIVI's standalone enterprise value, and the 105 Mboe/d of estimated production for 2H23 represents ~63% of its estimated volumes over the same timeframe.
· Deal looks like a wash on EV/EBITDA. Back of the envelope, we forecast the assets will generate ~$1.5B of EBITDA in '24 at our $70/$3.50 price deck. CIVI thus looks to be paying ~3.1x EBITDA vs its standalone '24 multiple of 3.2x, so the deal will likely leave its pro-forma multiple fairly unchanged.
· Deal looks accretive to unlevered FCF yield. We estimate the assets will generate ~$700MM of FCF in '24 at $70/$3.50. This implies CIVI is acquiring the assets at a FCF yield of ~15%. That is higher than (accretive to) CIVI's standalone '24 unlevered FCF yield of ~10% at the same price deck.
· Undrilled location value looks reasonable. We estimate PDP value of the combined assets is ~$3.2B at the current strip. When allocating the remaining ~$1.5B to undeveloped acreage value, CIVI looks to be paying ~$22K per net acre, or ~$1.9MM per gross location for the ~800 gross locations. The latter is similar to recent deals in the Permian.
· Financing details. CIVI plans to fund the $4.7B outlay with $2.7B of unsecured senior debt, $950MM of stock issued to Tap Rock (13.5MM shares), $600MM of borrowings under the company’s undrawn RBL, and ~$400 million of cash on hand. The financing mix is therefore ~80% cash & debt and ~20% stock. Total share count dilution from the new shares issued to the seller is ~16%.
----------------------------
From Capital One Securities, Inc.
CIVI Enters the Permian Basin in a Big Way
$69.35, Overweight, $86.00 Target, Johnston
· We expect a mixed reaction to CIVI's large $4.7B entry into the Permian Basin. On one hand, the market historically hasn't been kind to stocks of companies that have made splashy deals to gain a foothold into a new geographic area. This one is not only very large in size (close to CIVI's existing enterprise value), but it also entails entering 2 sub-basins within the Permian (value of the transactions split close to 50/50 between the Midland and the Delaware). In late May, we actually removed CIVI from our E&P Focus List given the growing possibility that CIVI would make an out-of-basin acquisition. On the other hand, today's deals look to be reasonably priced, look to be accretive on various metrics (FCF yield, FCF/share, CFPS, etc), will provide needed basin diversity, and will help address investor concerns regarding CIVI's limited inventory life.
· Transaction summary. CIVI is acquiring properties in the Midland and Delaware Basins in two separate transactions from two portfolio companies of funds managed by NGP Energy, including Hibernia Energy III, LLC (Midland assets) and Tap Rock Resources (Delaware assets). The combined consideration is $4.7B, including $3.75B of cash and $0.95B of stock issued directly to Tap Rock. The total $4.7B purchase is split 48%/52% between the Midland properties owned by Hibernia and the Delaware properties owned by Tap Rock. Both transactions are expected to close in 3Q23 with effective dates of July 1. The properties include 100 Mboe/d (54% oil cut) of production, 68K net acres, and ~800 gross net locations.
· The scale of the combined transactions is very large relative to CIVI's standalone size. The price tag for the deal represents ~83% of CIVI's standalone enterprise value, and the 105 Mboe/d of estimated production for 2H23 represents ~63% of its estimated volumes over the same timeframe.
· Deal looks like a wash on EV/EBITDA. Back of the envelope, we forecast the assets will generate ~$1.5B of EBITDA in '24 at our $70/$3.50 price deck. CIVI thus looks to be paying ~3.1x EBITDA vs its standalone '24 multiple of 3.2x, so the deal will likely leave its pro-forma multiple fairly unchanged.
· Deal looks accretive to unlevered FCF yield. We estimate the assets will generate ~$700MM of FCF in '24 at $70/$3.50. This implies CIVI is acquiring the assets at a FCF yield of ~15%. That is higher than (accretive to) CIVI's standalone '24 unlevered FCF yield of ~10% at the same price deck.
· Undrilled location value looks reasonable. We estimate PDP value of the combined assets is ~$3.2B at the current strip. When allocating the remaining ~$1.5B to undeveloped acreage value, CIVI looks to be paying ~$22K per net acre, or ~$1.9MM per gross location for the ~800 gross locations. The latter is similar to recent deals in the Permian.
· Financing details. CIVI plans to fund the $4.7B outlay with $2.7B of unsecured senior debt, $950MM of stock issued to Tap Rock (13.5MM shares), $600MM of borrowings under the company’s undrawn RBL, and ~$400 million of cash on hand. The financing mix is therefore ~80% cash & debt and ~20% stock. Total share count dilution from the new shares issued to the seller is ~16%.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Civitas Resources (CIVI) Valuation Update - June 20
Dan,
Listened to your Weekly Update this am for June 25th.
Re Civitas the podcast stated they have an $8.00 annual dividend so the yield would be 12.3%
Looked them up on my TD acct which said the dividend yield was $2.00 or 3.08%
Why the difference?
Listened to your Weekly Update this am for June 25th.
Re Civitas the podcast stated they have an $8.00 annual dividend so the yield would be 12.3%
Looked them up on my TD acct which said the dividend yield was $2.00 or 3.08%
Why the difference?
Re: Civitas Resources (CIVI) Valuation Update - June 20
Looks like .50 c a qtr is basic, the rest is bonus depending on actual results
https://ir.civitasresources.com/investor-relations/stock-info/dividend-history/default.aspx
Since oil prices are weak, you will probably get 2.00 +a smaller bonus
https://ir.civitasresources.com/investor-relations/stock-info/dividend-history/default.aspx
Since oil prices are weak, you will probably get 2.00 +a smaller bonus