Civitas Resources (CIVI) 1 Nov 222022 Q3 Earnings call transcript

Good morning. My name is Julianne and I will be your conference operator today. At this time, I would like to welcome everyone to Civitas Resources' Third Quarter 2022 Earnings Conference Call. At this time, all participants are now listen only mode. After the speaker's presentation, there will be a question-and-answer session. interest to we follow one the please that up. In themselves limit question instructions] of ask time, analysts [Operator and one Thank you. would introduce [Operator like I instructions] now Mr. to Wren. John Please go ahead.

open. is line Your

the SEC time also as metrics. and full of regarding over our one and allow questions. be our your will forward-looking other statements in found Please Thanks XX-Q our filings address be now, and operator, we Brian and website. certain non-gap call leadership statements Chief more for Investor read to question our forward-looking to all call. good earnings follow prepared release, us results which a Cain, I'll are one I'm our our to happy deck, remarks, financial uncertainties Marianella These our earnings our take turn limit on to brief by questions. XX-K of cause I Sustainability had Please to Chris the members up joined After our certain you, in release actual now On to chance Matt our Foschi; review may our Thank morning, risks our filings. Today other team today. Reconciliations metrics can to and joining could are third COO, hope subject statements. SEC our may differ quarter well. Slide will We non-GAAP your that projections. and to available to you've and our conference materially call, today's Chris Doyle, CFO, specific This your of By CEO, make disclosures Officer. refer everyone. Owens, from Chris. and

you Good for John. joining us. and thank everyone, Thanks, morning,

today forward and We to lot taking with shortly. questions good news to look your of you share have a

us pillars strategic flow for this our at fantastic designed shape positioning third deliver for success to allocation want our creating results, our a capital and navigating cash fundamental But strong before free at macro Our challenging environment of returns. are a team done which XXXX. investors. model, has year business delivering value term highlighting pretty here job on and long quarter Civitas to and key reiterate while promises I are These pillars to the generate in

to first pillar The free generate quality be maximize flow. cost starts our cash, the blessed with structure, to cash scale, and is us thanks asset cost a over and the it [ph] to scale, past and plus firmly XX We rock low We're operator. free quality optimize active in assets both have DJ position consolidation our high to and to which manage months.

Our among the reinvestment ratio is in industry. lowest today

this capital generated EBITDA, hedge In cash a in investments we've fact, month free our our third That's we $X year's expect and less will approximately quarter. of end to own XX% during nine XX% that period. through flow market cap the than that the be of nearly of

turn quarter, within significant about give which we this as back short, model. means a our free alone $XXX In in cash our and million. view generating well can we're Third We cash, to shareholders. was sustainable living

a to Civitas our The space debt strongest that and cycle target second total $XXX It's company, outstanding of be means against of for half maintain a ensuring sheet. the through Obviously term of $XXX leverage million turn. a sheets in with premier us balance a pillar is under long balance we cash, nearly one a million today. net has important of

to committing to is shareholders. that. pillar published we year, Earlier third to return do exactly cash this a framework The dividend

per our fixed X% share dividend a board dollar share. to strong and over increase and performance a million increase to $X.XX dividend. investors be $X.XX the elected dividends, $X.XX of pay we'll XX% By about of This through a and returned paid quarter, year $XXX to following than another the by variable represents variable have The including per dividend $XXX to total period base share end, last million in more quarter's per execution, December.

of offers today's an stock highest one industry's yield payout ratios, the and have price. We the at XX%

reducing Our scope the the business before and to carbon within guides emissions scope our do. field, the one our first regulatory is XXXX right attaining and IRA basis, pillar on two emissions our by environment. proud XXXX. success the fundamental committed unique decisions to we headquarters of our final total to neutral ESG E&P We're believe implemented thing goal From to XX% leadership. approach below the is to newly to scope and one, ESG Colorado's to threshold methane it's It in boardroom be Colorado company and reduction our tax

we uncontested shareholder best-in-class action consent. for voting written Lastly, yesterday corporate governance and by are proxy announce ability to governance elections, of and director measures, importance pleased understand corporate meetings, shareholder-friendly to call several special access including majority the shareholder

from our Total you guidance, on quarter. I over XX,XXX includes per That more may a day. our Now, day, BOE was XXXX ahead to let per to updated few XXX,XXX third move well production share oil for me highlights the strong release results. I direct quarter both of barrels but expectations. of than

in and third That resilient, industry-wide below strong expectations land in capital to turning recent inflation, downtime and on proven $XXX performance $XX has quarter midstream. to includes base our came field investments well production million be the thanks from at Despite lines. Our minimal million.

over we to just billion. between For be the to total guidance reduced million year, $XXX a $X CapEx

continues Colorado program. support to with have team partner to hand to development ensure regulators in that we Our ample our permits

during We had of seven have approved total quarter, OGDP a That's the this year. last a fourth week. OGDPs and we approved three

CAP, of tomorrow, the CAP we just hearing We which a next low Box have our submitted and the wells. Elder nameplate recap, has XXX

our XX% remainder will submitted we will OGDPs, or to are been the next plan As XX% by in over fourth year quarter, the early and of is or be submitted as about complete be XXXX. approved half think another year, have permits and heard end

flow, our team XXXX low and transaction, protect our has in past the and much us how formative established strong 'XX our our in be strikes prioritizes that on returning executing from me early a flow, plan operator things, free focused program cash team, balance this that premier don't significant of the assured on free sheet, scale year, premier November this XX company shareholders the until balance board, leading accomplished built a shareholders. on here It be on we to to cash to this return transactions XX accretive us months; and to ESG. as significant maintaining driving anniversary that will this cash sheet cash guidance allowing closing and to four cost While issue

you for The first the we're forward joining Operator, the been have this ready morning. look XX the Q&A. new us again to months sharing in of for Civitas I exceptional, accomplishments now future. Thank team's and

Securities. [Operator instructions] go Truist Our ahead. first from comes Dingmann Please from Neal question

open. is line Your

these? Chris, the to Good -- the all details. buybacks? believe maybe the short you all. it, potential combining all Would I'm obviously well, Thanks and to Would stock for you about combining the to one talk dividends morning, first think be your group. how the speak for we continues in capital would the cheapest could of that's if you just just to themselves trade topic, continued jump wondering stock consider specifically, you allocation

Sure.

we quarter, an Everything I on is special think this increase that's it you fixed we dividend. buyback, dividends the the I'd tell a table, in did Neal, that at holistically. a whether look

things All a for as consideration of as business of extend are can those that under duration creative well our looking the transactions model.

chasing a sure to We past interested we to As return continue see and we in so. above that to fantastic. not hurdle make will them meet that we'll us do consider of the any we've shareholders. combination all if quarters few to and said them, couple that bring could in in, for opportunities the If make cash

on through hear to sure past, talked, and the to of then Great I just you permits. went make kind you just want

place. You've got the XXX like name

up. a got coming You've lot

sit you're end of you you Just than year wondering even and Matt had year? permits there. of kind mid quarter at of where maybe get ahead or like really you've It starting look third where think Could when actually what at drilled. more things seems sounds wells you'll it to and like about the next talk first, just I was sort you

past, doing and The really in year, Sure. us regulations under the it able ourselves taken program. Good Small run see to cap, quarter. week. box be the that which this four said this of victory us. last week, before for we've submitted in rate and COGCC will a the that said quarter hit our We starting of we support question, in, the end some came Lowry industry new both again being to cap heard that with third the which two the the team rig it's time the is is Neal. included one, legs And to get significant to elder

build to momentum. that starting are We

end, either on on keeping As cap be be as and that of that, feeling next because is we But on back think you and should get siding. the say before year end preliminary approved gone rig I keep the we're we of OGPs year, approved submitted process and clear that still we've have there these through this, somewhere or week, administrative into seller at production still most this were, we back the but and box let's least focused actively the four look end confident plan. conservative, look a ahead continue a have probably and and of development progressively strong the should broadly caps two gets piece. to ahead really mind, where but this to the to approved and of with certainly that year-over-year. COGCC flat, we'll in work We'll in underpin a be We're quarter we're the

Tim Please Our next comes ahead. KeyBank. from from go [ph] question

is line open. You

I of was me, for the you're some and XX of and is you drilling pretty turning or excuse in everybody, the morning, down number the completions walk you wells increased, guidance, comp healthy time. your increase. The through of you Good down production, is number line, me thank could five. changes Chris, hoping

to is over because what production the in this So if in hoping look could change, inferring tick guidance a quarters, I going fourth next couple of kind down like, you frame quarter. the was that's your

think about we next should like, that meant how means those for the what what changes and quarters? So few

a outpace about quite quarter won't our a building broadly Sure. is in a Again, seen this productions We brought We bit in as keeping us what 'XX and duck fourth We bit. quarters the bit a to we backlog. looking flexibility into third crew actually and of production in for quarter. but think in expectations. second a of own the slow at get gave down flat, specifics frac were third we've third up XXXX, the

The cash. And it we're that. as production. with for on We we has line active to to focused in extremely and guidance on capital And maximizing head that, you'll have free growing we'll date And into down well. this quarter. focused similar pulled continue plan see XXXX. continue look, we not XXXX executed been We're something

of additionally touch terms Tim, anything Now, in guidance? on

keep first other quarter we thing the into so just the mind, we I would. would quarter, fourth say fourth quarter, early is in the healthier late we're winter, Tim, downtime in assumptions have than normally heading

So the bit guidance that's us. little you're of seeing implied on what a from

And margins. but cost up, GDP strong relation quarter side, marketed real lower barrels bring a leadership then of another get as to on cost continue we diff maximize to to that's that the see we in oil we did

quarter than where lower initially differential expecting. see were a another got So to we we

well. the So simple very one business pretty a and execute the said, I model it team is continues to like

more appreciate you're what it that from I on finish on box process coming color. line like the the the guess looks one here. to Okay. learned I Cap, And you on, based

get at broad line the expectations submitted any give [ph] You to mentioned when Can cap. some the could on that brush point XXXX? in finish you you Lowry

up it which should that's cap this with preliminary and was to learn that back the these you and would But line We'll as Brian the looked mean longer approvals. pursuing parallel pass submitted, process I would and GDPs detail a taken and COGCC the the elder. individual approvals, Lowry approval pull with approaching we're a means, processes cap first as we'll Lowry add it as that cap get would say The is siting, and GDP through on follow a off a over should preliminary system, half. I'll tell the Sure we siting so some administrative, but kick to Colorado's which approval We bit what it on box and be the these to little Brian, not see sooner over up to What then get cap, I continue industry are earlier the of regulator. what again, for week. is front, then two and, and different there? year end we we a as with this you company that's as finish

think I important parts. on the hit on Chris hit No, certainly it -- you

add landowner. X,XXX There's terms I and, of is think, precedent without feet the building we're rather there only units by encouraged thing for very is It's I for one cap would preliminary some nothing within business that residential cap. Lowry. units in or within that siding residential

that going than should a -- years off smooth So siting, to elder is seen as and be cap take that going we that preliminary on a rather think months has. the pretty than rather box without precedent process it we've

third that stayed an and production and as real an that's we it's is that the been success have spacing plateau add development The only And quarter area led really resilient some It's of area team Tim this longer. other is up on expectations. the as there. thing, in like. I'd outperforming had second that It's well really, to Matt

adding And down excited we're so about south. project another

you Thank comments. Okay. the for

question Leo from next Partners. Our Mariani go comes ahead. Please MKM from

Your line is open.

up wanted on to, the to a I bit permitting little here. side follow

have in a, into then OGDPs you to you of you today? that XXXX. rough cap but, box you you of assume kind have Are missed may third year year next get the You permit for approved do for I have as it, a you gets where of kind Just, next permitted you next that for elder that number, said roughly a would percentage permitted first off look like I year, of might, are kind assuming here, guys half the and may

of large approved? you part lot, for that program gets you might in the care put a if were 'XX? where of would where So, of terms this that the 'XX permitted Would take

permit. we approved XXXX half Leo, under of OGDP permitted either Sure. right our approved now, have so currently over plan or

we XX% plan before have hearings of heard they the or of the end been scheduled, next will XX% have We submitted. OGDPs year's and another and complete that's are year. be

the But The year. will it. of submitted be accelerate we're potentially next. see other help XX%, year, or wells XX% cap, later in a maybe end coming elder on not next box early It bit. us so the could we by The planning

And so starting build to we're cushion. some

collaboratively starting in build think we I on have today And than feel we and of an like the team that's the probably COGCC. The did that I front getting call, better out cushion lot Brian XX earlier with that efforts months hand. the to here year we'd permits Matt on certainly the regulatory of said is months, ago. standing a the and working team XX to and permits guys a with getting in

helpful. That's Okay.

you it if XXXX everything So pretty approved like darn gets start a elder box in give would sounds here. good

Absolutely.

little here. Wanted M&A bit piece wanted a follow to, to on up the

size kind You -- say just at barrels around commodities a volatile provide I kind of rough you basin of line the looking day Anything a color terms at in pretty two know you on far intimate just that that here with or some you're there. kind on of Could these? those it deals negotiations maybe little still bit on more matter in have deals? have a It front, the And of of price. you markets whatever pretty been do that like. down of

within names around. to well wouldn't we the but there I I say know deals. Yeah. -- that out what two don't you would the -- the deals are any are of that longer, have map I known. a pretty are dialogue I'd we give there continue handful Leo, basin say

We XXXX. have throughout

company. bigger. for in come would not our We but you to the any focused I of optimizing into what to consider a on be assets that with, base. tell these existing capital good, allocation would getting view that could have strong We on We're mean asset focused inventory that extent this of we're that operation we're to conservative. be an those folds going willing very good

we'll, conversations and you're I business in XX if down is then for of that see of dialogue opportunity makes the path we'll have We shareholders an we ago the we'll again, be Otherwise done companies are months tell larger and basin consolidation. basin. a continue those sense lean one within you, and our this this scaled will consolidation, isn't within that in. to the starting could we when

this Marianella. is Leo,

the we've at been look deals July. two other transformative, in you If was March, they this done in been haven't year, they haven't one big, was the one

accretion came it you the risk. little of the about talking digits, type if those In at at were come studies You high returns case right. we're alone, integration double of undeveloped. right PDP that with PDP primarily pretty looking as XXXX, and were at But from the those can look both look deals sum to we're on no done good opportunities

cases, for comfortable just where easy deals, that and It's -- those And we to We points. with in it's two point those decision we cause we transact. where basin more We'll you have have so not extremely it both those with those perspective a very the skill it do deal makes might be, and not and easy an just so don't are to attractive do. in it was deals, we entry transactions. But just to sense were are, won't something very right? the where given I'd

then and So that's anything you of out great M&A? basin guys are additional color looking on

our and and balance those look pretty within It'd back that to underpin returning being really significant while of would cash outside high base enable generate able protecting to it capital. cash shareholders. compete we at given something sheet to to have If accelerate hurdle have the pillars a have quality the free four to DJ. asset we It's of and were for

but hurdle. it that would consider pretty basin So going into a you is would high tell another we I

Pope from question Seaport Research. Please ahead. from Nicholas comes go Our next

Your is line open.

hoping going we think income this was the from that statement guys of income expect a whatever could is. item I was other what you line detail forward and in little the of up that I give showed million, on quarter. should kind $XX The kind

I Sure. that. is Nicholas, address can Marianella. This

outstanding the with finally time from outstanding a It's during of bulk quarter of legacy long the long at So $X.X It's time. to of one settled. the received in we had our a was from do million been refund and a companies. litigation that a been net It proceeds taxes. close that law for for

was us. net to that proceeds So

million an forward. So additional $XX I wouldn't going model

should associated should It to minimal. Going be pretty related cash our be forward interest income balance. with

related it. ad on that an is kind curious of item we're line well. was that's some seeing Got And of Is was increasing? I -- there's valorem why been -- the as balance liability there building on in a why, of connected that that sheet kind kind way? the,

connected of The claims at not proceeds from it's that legacy $X.X million one we companies. our purchased No, all. net in for pre-closing was

So been pay of that years increase we would've period oil So been example, increasing in essentially tax -- completely because would've XXXX on. pay ad valorem for XXXX with be in it we to the bill, you outside will prices, arrears, related liability production. The the two right? in will

oil example, we just that bill so XXXX? the pretty obviously low 'XX, to in what's And prices. related So tax for paid

and liability prices due given back give valorem alarm it So, at you years if you two in pretty every oil arrears, it's years. of April looking just should that the good ad in sense movement a look two

its progressed you if what kind at -- with happy kind this you now still progressing you may it, expand that I you're and at midstream the point. of with to appreciate where curious EBITDA at if right you are at want kind look looking of about if thinking I'm of how asset look production consolidation you are of midstream of want thoughts the kind different keep thing of been have that What side. within to assets where, it How asset? kind it it. is on you're that's of these And growing. kind the business has and the you other as

Sure.

upstream or of hurdle upstream enhance we So the on both, our just under at trade consolidation Civitas capital and model, side strength on a that margins. give the to a given for of consider. accelerate There as consider you business, they, we can us would we is additional owning business our we either currently those control bring And again, but look would of to I really. potentially like would allows in consolidation, we or high that us production. they side. the assets showing pretty to it's see midstream They of transactions those if assets on of following start would to consider our tent. value you to couple We midstream that the participating indicating on given assets midstream compete tell that something it's the execute where a bit

all Got had. the it. everyone. I time Makes sense. That's Appreciate

Our comes One. go Johnston from ahead. next from Capital Phillip question Please

line open. Your is

Hey guys, thanks.

on if I Just a question X, on remember snapshot included. the Lake locations Slide inventory French non-op not are correctly, the

have wanted get that or any in area that you 'XX. and to also and confirm for just just Lakes French a plans update So not general whether on

update Sure. there. have that to starting this this we supportive quarter development We're did as rock. approval we're of the We see, cap. good It's of just

with we an out. included have I'll, those kick what, me how playing it just as we and Matt in Oxy on, sort on of see partnering skyline. and, that Yeah, update let to But So that

their they So like Chris approved. get did said, cap

as starts presentations. there who's they're as on midstream But out. of year. now west right see to on end to partnerships the on the the side, compare working are midstream can of You right, chart, you old the potential the of left going gathering next they developments, looking skyline the hand on Eastern the -- Western And early our wells the that out or compare previous kind at side to chart, it if system build that you skyline or if

we that currently. our So to because non-op we move that's have, best a even why though of some adequate inventory into it's that view position chart felt that we skyline as the

included locations Okay, French area? in great. roughly would be Lake that many And how

whole XXX cap. French slate are the across -- whole the a and Roughly

Our XX%, XX%, XX%. is about working interest mid

Noel from Our comes Tuohy from next Brothers. go Please question ahead. Parks

Your line is open.

things. Couple

oil sort than the NGLs to cycle, before. if maybe this seasonal at we wondering say is XXXX picture big compare dominant in I Just lasting assume product prices, point. boom you do visibility current cycle think the gas, of are oil, how factors it back for less

Noel, say plan our we would on I commodity Yeah, term that business longer prices. on first view

We importance are our constructive and see to that. important our, responsible economy the across commodities board our gas. got on that We is and we the the a an we've and embrace of way oil very importantly, industry economy these part commodities underpinning to in and global developing in and bringing market

aspect prices plan. market. currently the actually what sort really think As protect with development this swings One service seeing in short conservative we of quarters tightness as seeing importance balance over the about business some we commodity still very of term sort the beauty past is the it of we're where a of sheet leverage weakened with of and is couple your have model, commodity which of that's to you're

of so and And said in probably way continues sticky on activity see service a we way conservative past, and very to bit call sticky disconnect model with a based were the gas on service to I've not oil are develop it see, sustainable where headed on the business down. model and term our This months again, not, And is six gas views on short up end is the costs price importance the it's we and a on We'll economy. over oil we'll price where the longer or ago. medium our to typically but calling bring costs as where they from that based term. up,

efforts had of wondering or either you in of thoughts I'm thought Great. on any just or you've far as just see basin things noticed you carving And the sequestration if happening? what

that close yes. to markets developed see or that continue capture will would to carbon consider carbon doing something sequestration would I can being and we of those it's interesting kick business. like think be much and it's our optimize now focused two understand of into an it decisions And credits that remarks. in and while decisions it we than carbon we're highlight and different think a within scope how carbon making neutrality of capital our say neutral carbon on commitment the front Brian prepared commercial the commitment. I'll that Civitas right color. accomplishing equation again, others, that reducing as again, bit committed capital we've make scope around operations? we all basin carbon a cost progress about one, to to maybe is -- neutral coming the will be past so The is additional we where be established it's to carbon off but in very approach. on, clear and the residual would By there We're we we've some and as I for allocation, I thing is what for which emissions. great that But drive footprint, offsets and allocation Sure. it's our maintaining

our transition. fossil without this that We clearly will We fuels. is would transition is Brian. believe into needed Yeah, add, decades decarbonizing I oil natural something just for There energy no the that clearly think industry and Chris, long in gas term. be and is strongly

a And so have life. place reliable we for energy that's our infrastructure in modern very system to us for delivers necessary that

looking now. standing associated And with are left from ones like we'll as that to scope ours the two transition companies that and significantly be molecules, the continues, emissions of reduce so decades hydrocarbon our the production we think one

or exploring which own us; are into looking is of will is something we rather on to the on that producing these sequestration line for that offsets all something carbon also we continue table and table voluntary the we believe to for certainly so well. And explore. aside options carbon is are we as have us. generating We're our It

the on So those table. options all are

Capital. comes go next Our Please ahead. instructions] question Tieton Dezellem from [Operator from Bill

line open. Your is

Thank you. income from that statement. questions is or of A million the cost, transactions. perspective for $X.X transaction completed couple The of merger

for Bill completed is That transactions,

in one closed July? the Specifically

smaller a still would you but helping costs to keep And those associated one really scale. in extent, perspective. year. mind have some G&A costs with still as the number ranch earlier still that of Correct. we to there transition that still, are of the where that this outstanding, possible us, with been in we from did small still contractors companies legacy deferral that trying are to lot it transactions, this be We're to transactions A related your it's there clean we know, of two -- a day, point it, would've have

And of G&A you. non-recurring then That's million thank other expense. Great. $X.X helpful, What of had speaking the was G&A, you that?

side, non-recurring have if still like been have software things trends out at and has suspend. break G&A continuing would services, look we far from those lot were we lot of We a year that to we professional perspective, still the so this you also costs, a to a the of duplicate contractor very try licenses On positive.

seven sitting what's $X quarter actual about $X.X million in And of the costs. currently implied we're at cash million that's recurring to So fourth guidance.

was $ If for in $X of fourth you what it quarter, million. the was, look at example, that north

is. be break as Or those provide like we out a really we team good cost a as the want able rate what those extracting really transparency job and quickly run as and can, possible have G&A we've done we So prioritized I costs. because to said, to access

That Great. on is and a congratulations quarter. helpful solid

Bill, Appreciate you. it. Thank

Doyle We have call remarks. no closing to for over to like turn further the back questions. I would Chris

for you a this everyone in and right. you day. joining your thank again continued for interest Have Civitas. All safe us morning, Thank

conference participation. today's for you your Thank concludes call. This

disconnect. now You may