Energy Prospectus

On February 24 Civitas Resources reported Q4 2024 results that beat my forecast.
> Reported Net Income of $151 million (GAAP) with Adjusted Net Income of $171 million. < Beat my forecast was $137 million Adjusted Net Income.
> Reported Adjusted Operating Cash Flow of $799 million. < Beat my forecast of $730 million.

Management Quote

“The Civitas team performed well in 2024, establishing a successful operational track record in our first full year of operating in the Permian Basin
and building on our strong momentum in the DJ Basin. Our high-quality assets and strong execution delivered in-line to better-than-expected
sales volumes, capital expenditures, and operating costs. Along with enhancing our portfolio returns through sustainable capital efficiency gains
and improved cycle times, we also expanded our asset base with attractive inventory adds in our core areas. All of these actions strengthened our
business and our long-term free cash flow outlook,” said President and CEO Chris Doyle.

Fourth Quarter 2024 Financial and Operating Results
Total sales and oil volumes increased 1% and 3% sequentially to 352 MBoe/d and 164 MBbl/d, respectively. Sales volumes in the fourth quarter
were split 50% Permian Basin and 50% DJ Basin, as the DJ Basin grew significantly following a high number of third quarter turn-in-lines. < Beat my production forecast of 350 MBoepd.

Supported by strong sales volumes and commodity price realizations, higher than expected revenues offset higher cash operating costs, primarily
occurring in the Permian Basin, as a result of winterization efforts and increased workover and maintenance activities.

Capital expenditures of $278 million were consistent with plan and reflected continued efficiency gains, as the Company drilled, completed, and
turned to sales 21, 34, and 4 net operated wells, respectively, in the Permian Basin, and 9, 3, and 28 net operated wells, respectively, in the DJ
Basin. The Company's average lateral length completed in the quarter was approximately 2.2 miles and 3.0 miles for the Permian Basin and DJ
Basin, respectively.

Long-term debt was reduced by $350 million in the fourth quarter, while the Company also returned $205 million to its shareholders, including $48
million in dividends and $157 million in share repurchases. The Company repurchased nearly 3.5% of its outstanding shares in the fourth quarter.

2024 Financial Highlights

• Generated adjusted free cash flow of nearly $1.3 billion, representing a yield of 29% (based on year-end 2024 market capitalization)
• Delivered capital expenditures in the lower half of the Company's original guidance, with total sales volumes approximately 5% above
original guidance and oil volumes at the midpoint, adjusted for non-core DJ Basin divestments
◦ Cash operating costs, including lease operating, midstream, gathering, transportation, and processing, and cash G&A were
below the midpoint of original guidance
• Returned more than $920 million to shareholders throughout the year, including $494 million in dividends and $427 million of share
repurchases
◦ Repurchased 7.3 million outstanding shares (approximately 7% of shares outstanding)
• Increased the Company’s revolving credit facility borrowing base by $400 million (to $3.4 billion) and its elected commitment by
$350 million (to $2.2 billion)
• Received an upgrade on the Company's long-term issuer rating from Fitch Ratings to BB+, along with an upgrade from S&P Global to a
positive outlook
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MY TAKE: Nothing in their Q4 results press release justifies yesterday's selloff. I will update my forecast/valuation model later today.

TipRanks: Since Civitas released Q4 results, 8 energy sector analysts have submitted new price targets to TipRanks that range from $62 to $80 per share with an average price target of $70.50.

Civitas Resources, Inc. (NYSE: CIVI) ("Civitas" or the "Company"), today announced its 2025 outlook, including a new debt reduction goal for the year, as well as an enhanced asset portfolio and a recent bolt-on transaction in the Permian Basin.

Civitas President and CEO Chris Doyle said, "Our 2025 outlook is designed to maximize free cash flow, capitalizing on the sustainable efficiencies we have delivered in our first full year of operating in the Permian Basin and our strong track record of execution in the DJ Basin. We are maintaining a disciplined posture in 2025 in the face of market volatility, sustaining year-on-year activity levels, better level-loading investments through the year, and allocating more of our free cash flow to debt reduction. Along with our successful recent inventory capture, these actions are strengthening the durability of the business through the cycle and supporting our free cash flow delivery well into the future."

2025 Outlook Highlights

Reducing capital investments nearly 5% year-over-year to a range of $1.8 to $1.9 billion

Delivering oil production between 150 and 155 thousand barrels per day ("MBbl/d") on average

Generating free cash flow of approximately $1.1 billion (at $70 WTI), representing a peer-leading free cash flow yield of 22%

Sustaining a strong base dividend of $0.50 per share quarterly (a nearly 4% yield)

Reducing year-end 2025 net debt below $4.5 billion, with the majority of free cash flow after the base dividend targeted for debt reduction

Expanding Permian Basin position with a $300 million bolt-on transaction that adds 19,000 net acres and approximately 130 future development locations in the Midland Basin

Executing on new divestment target of $300 million

For the year, slightly more than half of total capital investments are planned to be allocated to the Permian Basin, with the remainder to the DJ Basin. The Company expects to run approximately five drilling rigs and two completion crews in the Permian Basin, and two drilling rigs and two completion crews in the DJ Basin. The plan is anticipated to deliver about 210 net turn in lines ("TILs") for the year, and results are expected to benefit from long laterals in both basins, with an estimated lateral length of more than 10,500 feet. In the Permian Basin, an increasing percentage of capital is planned to be directed to the Delaware Basin (~40% of Permian Basin activity), following extensive land optimization initiatives. Estimated 2025 capital expenditures are 95% drilling, completion, and facility related.

Full-year capital investments are better level-loaded in support of sustainable capital efficiencies, with approximately 55% of investments planned for the first half of the year, as compared to 63% in the first half of 2024. This change is anticipated to lower average annual oil volumes by approximately 3 MBbl/d as compared to 2024.
> First quarter oil volumes are expected to be the low point for the year, averaging 140 to 145 MBbl/d, mostly as a result of few TILs in late 2024 and early 2025. As compared to the fourth quarter of 2024, lower volumes are primarily driven by the DJ Basin, due to natural declines following peak production in the fourth quarter, a low TIL count exiting 2024 and in the first quarter of 2025, as well as severe winter weather and unplanned third-party processing downtime in the first quarter.
> These items are all temporary, and production is expected to grow meaningfully in the middle part of the year, following TIL activity, with the full year expected to average 150 to 155 MBbl/d.

Additionally, to solidify the Company’s low-cost structure, Civitas announced an approximate 10% reduction in its workforce across all levels of the organization.

Guidance details are available in the Company’s supplemental materials provided on its website at www.civitasresources.com.

Free Cash Flow Allocation to Further Prioritize Balance Sheet

Civitas plans to maintain its base dividend, while shifting more of its free cash flow after the base dividend towards debt reduction.

Free cash flow generated in 2025 is anticipated to cover the payment of the base dividend and meet the Company’s year-end net debt target of below $4.5 billion. The Company has instituted a 2025 divestment target of at least $300 million, which will be prioritized to further debt reduction, and the Company will be opportunistic in executing share buybacks.

Civitas’ long-term leverage target remains unchanged at 0.75x EBITDAX (earnings before interest, taxes, depreciation and exploration).

Dividend to be Paid in March

The Company’s Board of Directors approved a quarterly dividend of $0.50 per share, payable on March 28, 2025 to shareholders of record as of March 14, 2025.

Enhanced Asset Portfolio with Land Initiatives and Bolt-on Transaction

Civitas has been successfully replacing and extending its high-quality inventory in both the DJ and Permian Basins through land transactions (acreage trades/swaps and lease acquisitions), optimized development strategy, and attractive bolt-on acquisitions. From the beginning of 2024 through the end of February 2025 (inclusive of the Permian bolt-on transaction announced today), the Company has added approximately two years of development to its Permian Basin and DJ Basin inventory. The Company has an estimated inventory of approximately 1,200 gross locations in the Permian Basin and 800 gross locations in the DJ Basin.

In early 2025, Civitas agreed to acquire certain operated Midland Basin assets consisting of 19,000 net acres in Howard, Glasscock, and Upton counties for approximately $300 million. Production associated with the assets represents approximately one percent of the Company’s full-year 2025 total volume and oil expectations.

The Company has identified 130 future drilling locations on the acquired acreage with an average lateral length of two miles. The identified locations include primary development in the Wolfcamp A, B, and D zones, with additional development in the Wolfcamp C and Barnett/Woodford.

Closing of the transaction is anticipated at the end of February 2025, and Civitas plans to fund the purchase price through additional borrowings on its revolving credit facility. In February 2025, the Company amended its revolving credit facility to increase elected commitments from $2.2 to $2.5 billion.