Civitas Resources downgraded to Market Perform from Outperform at BMO Capital

BMO Capital downgraded Civitas Resources (CIVI) to Market Perform from Outperform with a price target of $42, down from $50. The shares pulled back following the Q4 results, and remain inexpensive on free cash flow yield, but Civitas needs a higher oil price to achieve a re-rating, the analyst tells investors in a research note. The firm says the company’s balance sheet and inventory depth have “dragged” on the valuation, although de-leveraging and reaching sufficient scale will take time. The path is now “less clear” and the timeline is pushed out for Civitas lowering leverage and extending free cash flow duration with weaker crude prices, contends BMO.