Civitas Resources (CIVI) Valuation Update - Aug 4
Posted: Sun Aug 04, 2024 3:25 pm
I have updated my forecast/valuation model for CIVI and I have posted it to the EPG website.
I have lowered my valuation by $2 to $112/share.
> Q2 production beat my forecast, but the gas-to-oil ratio increased.
> Civitas actually raised their full-year production forecast and I think they will reach the high end of their range of 335,000 to 345,000. The only negative is that their production will be a bit more "gassy" than I expected.
> Production mix is 46% crude oil, 29% natural gas and 25% NGLs. They are selling some non-core DJ Basin assets that should improve the mix heading into 2025.
> I also increased the operating cash flow "cushions" that I have in 2H 2024 and 2025.
> 2024 capex guidance was lowered, which is a good thing.
Civitas should generate more than $1.3 billon of free cash flow this year. Total dividends paid in 2024 should be approximately $6.02/share for annualized yield based on the August 2 closing ($60.51) of 9.94%. They also have a stock buyback underway.
Since Civitas released Q2 results, four respected energy sector analysts have updated their price targets to $92, $103, $106, $100
Civitas is a classic "Growth + Income" stock. My valuation is just 3.5 X annualized operating CFPS, which is a VERY LOW multiple for a company of this size and quality. There is nothing that I see which justifies the current share price.
I have lowered my valuation by $2 to $112/share.
> Q2 production beat my forecast, but the gas-to-oil ratio increased.
> Civitas actually raised their full-year production forecast and I think they will reach the high end of their range of 335,000 to 345,000. The only negative is that their production will be a bit more "gassy" than I expected.
> Production mix is 46% crude oil, 29% natural gas and 25% NGLs. They are selling some non-core DJ Basin assets that should improve the mix heading into 2025.
> I also increased the operating cash flow "cushions" that I have in 2H 2024 and 2025.
> 2024 capex guidance was lowered, which is a good thing.
Civitas should generate more than $1.3 billon of free cash flow this year. Total dividends paid in 2024 should be approximately $6.02/share for annualized yield based on the August 2 closing ($60.51) of 9.94%. They also have a stock buyback underway.
Since Civitas released Q2 results, four respected energy sector analysts have updated their price targets to $92, $103, $106, $100
Civitas is a classic "Growth + Income" stock. My valuation is just 3.5 X annualized operating CFPS, which is a VERY LOW multiple for a company of this size and quality. There is nothing that I see which justifies the current share price.