Civitas Resources (CIVI) Q1 Results - May 7

[dan_s]

Civitas reports Q1 results after the markets closed.
> Adjusted Net Income of $166 million beat my forecast of $117.5 million.
> Adjusted Operating Cash Flow of $666 million beat my forecast of $636 million.
> Production of 311,000 Boepd was slightly lower than my forecast of 315,000 Boepd, but realized prices were higher.

First Quarter 2025 Financial Highlights

Crude oil, natural gas and NGL revenues totaled $1.2 billion.

Crude oil realizations benefited from the Company's higher-quality crude production, while natural gas realizations reflected strong seasonal Colorado Interstate Gas pricing. Natural gas liquid realizations strengthened to 34% of the West Texas Intermediate oil price for the period.

Cash operating expenses, including lease operating expense ("LOE"), midstream operating expense, gathering, transportation, and processing, and cash G&A, totaled $11.39 per barrel of oil equivalent (“BOE”). Higher than anticipated LOE was impacted by a third-party’s inability to fulfill water takeaway obligations in the Permian Basin, along with additional repair and maintenance costs following adverse weather and wind storms in both basins.

Included in cash G&A was $4 million associated with a previously-announced workforce reduction.
These short-term items impacted cash operating cost per BOE by approximately $0.43 for the quarter.

Transaction fees totaled $6 million, primarily related to the Midland Basin bolt-on announced in the first quarter. In addition, other expenses include $9 million related to the mark-to-market on crude oil pipeline linefill agreements.

Financial liquidity at the end of the first quarter 2025 totaled $1.5 billion, representing cash on hand and borrowings available under the Company's revolving credit facility. Long-term debt at the end of the first quarter totaled $5.1 billion.

[dan_s]

Management Quote

CEO Chris Doyle commented, "Our high-quality, low-breakeven assets continue to position us well in the current environment, following our disciplined start to the year with a plan that prioritizes free cash flow generation and strengthens the balance sheet. We continue to take important steps to further enhance free cash flow and improve our performance, including launching a $100 million cost optimization and efficiency improvement plan across all aspects of the business. We are reiterating our full year 2025 outlook; however, we are positioned to adjust activity levels lower should market conditions deteriorate further."

Strengthening Civitas in Current Market Volatility

The Company has taken the following actions in response to current market volatility:

Removed over $150 million of capital when announcing the Company’s original 2025 plan

Elected to level-load and sustain activity rather than adding capex to maintain 2024 production level

Launched a $100-plus million cost optimization and efficiency initiative
Savings expected to come through capital efficiencies, production optimization, commercial/midstream opportunities, and streamlined corporate costs
Approximately $40 million to benefit 2025 free cash flow, with the entire amount additive to 2026

Added commodity downside protection through additional hedging
Nearly 50% of remaining 2025 oil production hedged with an average floor price of $68 per barrel WTI
Approximately 40% of remaining 2025 natural gas production hedged with an average floor price of $3.74 per MMBtu; added 93,000 MMBtu/d of basis swaps for the remainder of the year
Hedge positions at the end of April 2025 (including April settlements) valued at approximately $290 million

Increased elected commitment on the Company's revolving credit facility to $2.5 billion
Ended the first quarter with $1.5 billion in financial liquidity

Prioritized net debt reduction through free cash flow generation and asset divestments
Targeting $4.5 billion net debt by year-end 2025 (a reduction of approximately $800 million from pro-forma year-end 2024(1))
Pursuing $300 million in asset divestments by year-end 2025

Doyle added, "These actions will strengthen our Company as we focus on delivering sustainable returns for our shareholders. We are always looking for ways to optimize our diverse asset portfolio, and we were highly encouraged by the interest we saw in our divestment process earlier this year. Market volatility precluded a transaction at a value representative of the quality of the assets, yet we remain confident in achieving our divestment target for the year."