Energy Prospectus

https://finance.yahoo.com/news/civitas-resources-reports-first-quarter-201500977.html

First Quarter 2024 Financial and Operating Results

Crude oil, natural gas, and natural gas liquids ("NGL") sales for the first quarter of 2024 were $1.3 billion, up 18% from the fourth quarter of 2023. The increase was primarily related to 19% higher sales volumes and slightly lower realized commodity pricing. Crude oil accounted for 81% of total revenue for the first quarter of 2024.

Sales volume for the first quarter 2024 were higher than expected at 336 MBoe/d, which benefited from continued strong well performance and accelerated turn-in-line ("TIL") timing. Compared to the fourth quarter of 2023, Permian Basin volumes were 58% higher, while DJ Basin volumes were slightly lower. The increase in Permian Basin sales volumes was primarily related to the inclusion of the Vencer Energy assets, following the closing of the acquisition on January 2, 2024. First quarter DJ Basin gas volumes were benefited by late 2023 TILs commencing production in the core of Wattenberg, while oil volumes were impacted by 1.6 MBbl/d as a result of DJ Basin barrels produced but not sold due to a new pipeline takeaway agreement and associated linefill requirements. Oil represented nearly 47% of total Company first quarter volumes, consistent with expectations.

In the first quarter of 2024, differentials for the Company's crude oil and natural gas sales volumes averaged negative $1.36 per barrel and $0.63 per thousand cubic feet, respectively. The Company's crude oil realization was in line with expectation for the quarter, while its natural gas differential was better than expectation as a result of strong Colorado Intrastate Gas pricing, which reflected local seasonal demand. NGL realizations per barrel represented 29% of West Texas Intermediate crude oil in the first quarter of 2024.

Civitas Resources, Inc. Announces Share Repurchase from Vitol
May 2, 2024
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DENVER--(BUSINESS WIRE)-- Civitas Resources, Inc. (NYSE: CIVI) (“Civitas” or the “Company”), today announced the execution of a definitive agreement to repurchase approximately 1.04 million shares of its common stock from Vitol at a price of $72.00 per share, totaling $75 million. Civitas’ acquisition of certain oil and gas assets in the Permian Basin from Vencer Energy, LLC, a Vitol investment, closed on January 2, 2024, in exchange for approximately 7.2 million shares of Civitas stock along with $1.55 billion in cash ($1 billion paid at closing and a remaining $550 million payable on January 3, 2025). Along with other open market sales since the first of the year, the repurchase brings Vitol’s current equity position in Civitas to less than 2% of Civitas’ outstanding shares.

Combined with share repurchases in the first quarter of 2024, Civitas has now bought back $142 million worth of its shares (2.07 million shares at an average price of $68.56) year-to-date. Following the completion of the transaction, Civitas’ remaining share repurchase authorization will be approximately $338 million through the end of 2024.

In addition to the share repurchases, Civitas has agreed to pay $75 million of its $550 million deferred payment obligation to Vitol prior to the due date. Of this amount, the Company will pay $37.5 million in May 2024 and plans to pay an additional $37.5 million in July 2024. The remaining $475 million will remain payable to Vitol on or before January 3, 2025.

About Civitas

Civitas Resources, Inc. is an independent, domestic oil and gas producer focused on development of its premier assets in the Denver-Julesburg (“DJ”) and Permian Basins. Civitas has a proven business model combining capital discipline, a strong balance sheet, cash flow generation and sustainable cash returns to shareholders. Civitas employs leading ESG practices and is Colorado’s first carbon neutral oil and gas producer. For more information about Civitas, please visit www.civitasresources.com.

Dan, I am a little bit amazed that Civitas has started boosting their shareholder returns so early in 2024. Civitas is spending 60-65% of their $ 1.8-2.1 B capex in H1. That means that the free cash flow in H2 will be a lot higher than in H1.

The Civitas balance sheet is not yet in the greatest shape. Solvency at the close of Q1 was a low 44%. The $ 325 M from the DJ basin assets will boost it to 45%, but that still is low. With the ongoing returns I cannot see solvency breaching 50% by the end of 2024.

Civitas would be wise to constrain itself a bit with share buybacks in the rest of 2024.

Petroleum economist, how are you defining 'solvency'?

Looking at the trading prices of their bonds, it seems that the bond market does not share your view of CIVI's financial situation. For example, their 8.375% notes due 7/1/28 last changed hands @ 104.

I believe the term solvency as used by PE means DEBT/CAPITALIZATION not that they are at risk of being insolvent which happens when the ratio is closer to 100 % or higher

when he says"" Solvency at the close of Q1 was a low 44%"

debt is 44%
equity is 56 %

Debt+equity = Capitalization

Fraser, I define solvency as equity/divided by the balance sheet total.
A good solvency is 50%, a really good solvency is > 60%.

Returning dividends to shareholders with solvency less than 50% I think is a bit dodgy.
I believe the money should flow towards the balance sheet to reduce debt.

Just remember that the balance sheets are based on GAAP accounting rules.
Each company's assets are based on historical cost, not on the true value of their assets.
GAAP accounting rules result in misleading balance sheets for a lot of the upstream companies.

Civitas should generate over $1.3 billion of free cash flow this year, which is more than enough to cover their dividends. The next dividend will be $1.50/share, payable on June 26.

I will update my forecast model for Civitas next week.

Looks like the Canadian PensionPlan didn’t like the dividend.


https://www.tradingview.com/news/reuters.com,2024:newsml_L1N3HJ15W:0-civitas-resources-drops-as-cppib-s-stake-sale-priced/