Civitas Resources (CIVI) Valuation Update - Jan 3

[dan_s]

On January 2nd Civitas announced the closing of the previously announced Vencer Energy Acquisition. This a BIG DEAL for a company of this size!

In August, Civitas closed two other Permian Basin acquisition that increased the Company's production from 173,491 Boepd in Q2 to 235,268 Boepd in Q3 and to an estimated 272,000 Boepd in Q4. Closing of the Vencer Energy deal should push Q1 2024 production to ~330,000 Boepd. < Close to the size of Permian Resources (PR)

Financial results for 2023 should be close to my forecast of $3,424 million in revenues, $699 million net income ($8.26/share), $2,142 million in operating cash flow ($25.12/share). < TipRanks' 2023 forecasts are higher for all of the above.

Civitas has provided guidance for 2024 that includes the impact of the Vencer Acquisition. < ~335,000 Boepd, ~160,000 Bopd
Based on the Company's guidance, 2024 financial results should be close to TipRanks' forecasts, which are:
$6,100 million in revenues, $14.72 net income per share and $35.89 operating cash flow per share.
Free cash flow for 2024 should be in the range of $1.2 to $1.4 billion, $13/share at the midpoint. < More than enough to cover my 2024 dividend forecast of $8.08 per share, as shown on page 10 of yesterday's newsletter.

CIVI is a Top Pick in our High Yield Income Portfolio with an updated price target of $109 per share. See my updated forecast/valuation model, which has been posted to the EPG website.

At the time of this post, CIVI was trading at $68.37

TipRanks: "In the last 3 months, 6 ranked analysts set 12-month price targets for CIVI. The average price target among the analysts is $98.00. The 6 price targets range from $86 to $106."

[Cliff_N]

Considering the 2024 forecasted cash flow of $35.42 x 3.25 = 115.12, so $109 seems conservative and in line with other analysts following this stock.

Question: Dan, I believe you have explained the rationale in the past of adding in 2024 twice, can you please refresh me?

=(K50+Q50+Q50+S50)/4*3.25 =$109

=(K50+Q50+S50)/3*3.25 = $106.96 (Using the 3 years).



Thanks
Cliff