Civitas Resources, Inc. ((CIVI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Civitas Resources, Inc. recently held its earnings call, which was marked by a largely positive sentiment. The company showcased strong operational efficiencies, enhanced capital returns, and significant progress in debt reduction. However, there was some uncertainty due to a leadership change and concerns about debt levels.
Enhanced Capital Return Program
Civitas announced an ambitious capital return program, which includes a buyback authorization exceeding 25% of their market cap. This move is aimed at returning value to shareholders and demonstrates the company’s confidence in its financial stability and future prospects.
Debt Reduction and Asset Sales
The company has made significant strides in reducing its debt, having exceeded its asset sale target with $435 million in non-core DJ Basin asset sales. This achievement represents a 4x multiple on 2026 cash flow, and Civitas is on track to reach a net debt target of $4.5 billion by the end of the year.
Operational Efficiency Improvements
Civitas reported improvements in operational efficiency, with well costs reduced by 7% in the Delaware, 5% in the Midland, and 3% in the DJ Basin. These efficiencies have contributed to lower costs and faster cycle times, bolstering the company’s overall performance.
Strong Financial Results
The financial results for the quarter were robust, with Civitas reporting nearly $750 million in adjusted EBITDA and over $120 million in adjusted free cash flow. These figures underscore the company’s strong financial health and operational success.
Significant Hedging Strategy
To protect its cash flow, Civitas has hedged approximately 60% of its oil for the remainder of the year, doubling its normal levels. This strategic move is designed to mitigate risks associated with oil price volatility.
Leadership Change
In a notable development, the Board decided to part ways with former CEO Chris Doyle, signaling a shift in leadership to focus on execution, performance, and cost leadership. This change aims to drive the company towards achieving its strategic goals.
Debt Levels
Despite the progress in debt reduction, there were concerns raised about the overall debt levels. The decision to prioritize buybacks over further debt reduction has been a point of discussion among stakeholders.
Forward-Looking Guidance
Looking ahead, Civitas has set a goal to achieve $4.5 billion in net debt by year-end, supported by a strengthened balance sheet and significant asset divestitures. The company expects oil production growth of 6% quarter-over-quarter and a reduction in cash operating expenses by over 10%. With capital investments at the low end of their plan, Civitas anticipates a meaningful increase in EBITDA and free cash flow in the second half of 2025. Additionally, the company plans to allocate 50% of its free cash flow, post-dividend, towards share buybacks.
In summary, Civitas Resources, Inc.’s earnings call reflected a positive outlook with strong operational and financial performance. The company is making significant progress in debt reduction and capital returns, although concerns about debt levels and leadership changes add a layer of uncertainty. Overall, Civitas is well-positioned for future growth and shareholder value enhancement.