Civitas Resources (CIVI) 4 May 232023 Q1 Earnings call transcript

Thank you for standing by. My name is Kamika and I'll be your conference operator today. At this time, I would like to welcome everyone to the Civitas Resources First Quarter 2023 Earnings Conference Call. [Operator Instructions]

I will now hand today's call over to John Wren, Director and Head of Finance, Planning and Investor Relations. sir. ahead, go Please

Brian to morning, I'm thanks Chris joined our you've Walker; Marianella Good By Sustainability call I now Doyle; joining today. Foschi, hope and Hodge COO, Today, by a new our everyone operator. Chief for Officer. chance and had our CFO, Cain, Thanks, our CEO, on that forward-looking release today's call, On cause earnings our deck, statements, review to from website. are and slide differ uncertainties all projections. may our make risks of actual results to XX-Q which could which subject are and available materially we

as full regarding metrics. our well. and brief to SEC your refer our to a read be to and will can members remarks, to Please in other your After Please get limit questions also questions. SEC follow-up, earnings release and allows prepared leadership financial question time non-GAAP today. of team metrics disclosures in Reconciliations the our other XX-Q to found more as and Chris this certain may take filings one certain us statements of We filings. specific non-GAAP forward-looking to be your happy one

the Chris. to call turn now I'll over

morning, Thanks, Good John. everyone.

jump-in comments the Walker, table my to and operators. we're Officer. to into help quarter, jump of to welcome team reliable the the and bringing Hodge the Hodge position be DJ already-strong and an one I most Before is a me years strongest XX our experience of let Operating Chief company addition new on Hodge, great more to have than excited

is track delivering to to as off we're the from build on all continue start cylinders you on quarter-after-quarter. strong can on focused see to firing results, as quarterly Now promises of our and latest year. our record The team we a our

on relevant upfront topics Let our today. comments key to performance some high-level me provide

We use four and and we the the this return these including is sheet, allocation to decisions, believe flow, ESG. prioritize all long-term. right guide to lead significant a shareholders cash deliver to to to adhere free-cash framework We key First, over strong on continue capital pillars. we value our maintain balance and pillars create

an environment improvement. Second, focused on operational we've created continuous

certainty tremendous our our free delivering efficiency maintain and and execute our ensure the plan, that gains help on and business our are and strong deliver teams offset have We to cash on inflation ability we flow. margins

midst team winter further strengthens We highlight XX% and including slide in improvement improved quarter new weather. already returns examples difficult spud-to-spud model. higher first the which throughput times of our cycle cycle completions to very in a times, efficiency, Faster a and delivered couple the in of business this year, deck, higher that obviously X% in that's our lead our capital

one Third, the offers industry. underpin XX%, in dividend at we're of exceptional right most approximately in largest programs XX%. the yields our generating one which a of buyback frameworks as CIVI one of cap, financial our market at also return while percentage having industry, shareholder attractive the results, highest of

on the $XXX of flow year having cash and sheet. million returned in-stock. million variable and $XXX first million balance we the to generated dividends owners free $XXX the During after million quarter about $XXX started through during in Civitas repurchase almost the with the cash base of quarter,

buyback the to approach authorization continue disciplined billion this our We on executing full remaining have be and in our $X program. opportunistic and to we'll buyback

per Board $X.XX dividend our addition of has $X.XX in fixed the a quarter, share, second approved dividend. to the For variable

facility. $XXX we cash June shareholders industry. shareholder total an At program per undrawn of million paid executing and in The sheets share while record against maintaining XX June in return this the credit strongest million on debt We're total about had XX. balance one of of dividend on will quarter-end, be $X.XX the $XXX to in

per cold XXXX day our weather in of production record let Now equivalent and our operations. Like these the XXXX per impacted weather Those averaging are with of barrels early high me our barrels impacts has about XXX,XXX us behind in approximately end oil talk our and nicely production guidance XXX,XXX came field-level headwinds, per equivalent of XXX,XXX recovered operations. to of late of day. at day. others, April the Despite range XXX,XXX first-quarter production BOE oil

highest the due decreased some the low quarter. Our the us industry, with X% cold to GT&P higher expense weather G&A, quarter-over-quarter cost our on absolute the provide despite operating and operational the of side, margins Cash LOE, slightly in in costs

as our the million. XXXX design, capital in in anticipated, came and at quarter By program investments capital about are and first our loaded $XXX front-end levels activity

While maintaining we we're two-frac at two-rig time. and operational continue to costs, this closely our monitor crew plan service

the permitted now XXX% progress, the last fourth which Our the make expedited siting will is over XXXX the months. plan XXXX preliminary in Notably, the permitting few year. we significant of being approved with inside next and expect with after to quarter receive development box cap, OGDPs elder review plan

continues total that and OGDP planned with X will beyond. the are with have our development program. currently make-up our COGCC schedule on Lowry for XXXX and state permits the of wells part advancing those significant CAP a We Notably, process XXXX and

by Finally, XX% will end-of-the-year. That on-time we remains pneumatic and continue to which retrofit one progress comprehensive effectively by reduce total our emission project our approximately scope project, on-budget. the

barrels to XXXX or total $XXX on-track our payouts and and already we're well fixed day paid approved to promise increased XXX,XXX full-year variable Furthermore, $XXX our dividends, per equivalent share to investments. of $X on-track capital over to XXX,XXX also million exceed compared XXXX. oil dividend with per million in deliver to in of Bottom-line, targets we're in of

team. all despite want and our exceptional delivered thank especially team they employees and our This record has results executed to say field temperatures. safely, you quarter-after-quarter operationally of I winter to

strength quarters sit ahead. we of the we're demonstrate just will While in years I'm able We I today be to together. continuing to company about excited we getting this the the what remain at pleased where I year, know started started how look-forward accomplish to and and we and

happy to now Operator, questions. take we're

from question Your Neal of Securities. is with first the line Truist Dingmann Instructions] [Operator

Chris. Starting out here.

had discipline strict mindset. capital always You've a

fourth-quarter on then this the commodity well between mentioned disconnect spend? given I see think for your and current disconnect this moderating wondering, to your year, on in the for thoughts spend be even release, since service maybe gotten year, it the capital prices costs. future just what's capital you've you'd that the I'm fact and for

between floated Neal. was no out guidance, Yes, XX some still that Thanks, come point at prices. as to more since there commodity ago and were months disconnect up service then market and a we're a discussion team saw we to that couple that proud a around a oil concessions there and price of the time real

weakness oil, conviction we real. in the seen we've have very disconnect with Now is that further where to that

and seen the sand. bit, have certainly diesel, on a adjust We tubulars service market

is very We'll it capital high form twice long-term made allocation our of of to we we've the we'll to continue surprisingly be proud But underpinned that last shareholder and that's be is And our -- right approach market flexible every quarter. continue and oil value. was service to and really moves where that capital by $XXX did today. call for allocation the that utilization make disciplined full gas, it's and plus in

so early you on speak impact it's hear the wondering, have any valorem capital and while you certainly new. nothing taxes, just maybe can I'm ad wouldn't nothing that this shareholder that allocation quarter, And just that. put second to this question, to great service Now glad out very return just occurred might my then and quarter? on

-- let I'll Sure,

to Hi known I Neal. Thanks. point your Good mean, that changed. going it's hasn't to you. material a not it's Really, something impact. talk to to have it

of portion of If the you valorem give what's the should an -- on look at at long-term you balance due April that XXXX. our taxes coming sheet, idea

to said, I we've -- that's have balance been nothing has like for if be we strong sheet, we a So I planning it. very mean, continue changed,

proposition. it's we with So the return shareholder that see interacting really, don't

Tim Rezvan the Your KeyBanc. next with is question from line of

on for Good morning, This today. is everyone. Tim Clade

for Just two you. questions

So that potential today I some that had about as the state was and much discussions remain? by and ago, Governor thought process to conditions Paul in-place permitting have the any steady-state confidence quality about Can condition the you a a with removed you will sponsored scripts. owner's environmentalists permitting has changes bill some how provisions you've weeks air talk permitting two

our backs by technical over in this a kick Sure. mentioned ahead progress to teams, Brian. year on and I'll by evidenced each of of that and our is for strong and tremendous lot with of going-in. then made then XX administration kick back, A team the I relationship siding a the and as approval calls that's second work We preliminary goal of rigs. to the few it a this get CAP of last COGCC CAP months off XX our to amount the the with

points. of But I'll wells. touch on So it we confident, Brian some me we're feel finer to on and XXXX, XXXX working let kick the

Hi, for question. the thanks Sure.

targets industry. We among we're of earlier, in focused targets So we're dual-fuel experience of to to have completion government on Because ozone-causing with call for we've a out leading feel for Chris said to put line-of-sight already our as Nox plan achieve late reachable, how these always are these some we policy requiring very from reductions we operations, letter on March other gained game benefit ESG of I'll be that frankly piloting already revenues. kind fleets and taking it they reduce as ahead the on e-frac Nox part topic. of steps, will the this new

his you operator program X which X protection mentioned letter, affects carbon and for permitting leading permitting to the meet Governor how operators, state. specifically announced will the the to standing includes path are environmental that part who phases. we're expedite part and announced, think and includes So criteria, reward best was be be the program Scope for I told, companies a it our the up It's as it of on called neutrality real COGCC it practices that to incentivize a news and of certain environmental

X we're very share. to company program. to basis, us very participate lead only think we good our this Scope could continued permit capability We're it and carbon-neutral Colorado on the about X to and and gain excited for excited in As things demonstrated that obviously

tender just a open maybe a repurchases. But of Or It chance in negotiated there the about more your committed anytime context. a or on market see form could Okay, the be thought then are or soon? that's release helpful very evolving. And seems the Is repurchases. to second to repurchase? repurchases on we press to likely process repurchasing be seems shares you

and has largest and at changed, trading. to has to Yes. demonstrated we're dynamics our where but track-record changed the discount shareholder disciplined large say our from What have January in chunk pull of opportunistic back market that we able some will a would is and I our a were philosophy down we not be

one at we and we're to that was struck where the all trading brought or For that where day that still down. we premium traded below quarter we a

buying. I the over confident the the done tell block and opportunistic end very or Again I'm by $X the likely of was would you whether open-market next we've in every that this to year complete we're an year, example of past. billion course trades that these very option look of at that we while tender saying, that's authorization.

the One Phillips of Your Johnston, next from line is Capital question Securities.

early than average or sort would conceptually Hi, you. the I but relatively little presumably guys. keep a average? fourth-quarter exit-rate, relative the to be flat the be Thank bit production it's it to will be higher with just more talk 'XX flat to of goal to 'XX, full-year the which know full-year

or couple flattened. 'XX to We be a our of months was going to core fourth-quarter fourth-quarter exit that couple 'XX to relatively of ago guided

and about year we're the exiting BOE XXX,XXX see day still on-track we that. to per so deliver And

mentioned that we end-of-the-year. the grow the you to prepared remarks, see cities, will As the production mid-one in on

to most down production guided when balance going probably year shareholders next story think to because one do generate call, model, really previous the get we be while we to on maintaining the lay we the flat, about plan, easiest maintain of premier focused free-cash to think for broadly XXXX sheet. how back on XXX which that year. As That's we this our said back XXXX, I as that so back come possible group business I've proven a come and we companies is XXX, and to

I on commodity capital When think price. this down right the with service and are where past. level lot also depends commodity costs in they've a disconnect think in those what from our the is between about be moving prices should that been we maintenance changing

the well. will how into that as think calculus I factor

You you us more could see rebalance, that see capital. deploy

continue, we'll this in very be we're how If allocating imbalance see disciplined continue capital. you to

I how the front. outside opportunities And look good. continuing sort of on sounds DJ guys within Okay, then of M&A the to just basin? there Basin. much at is do assume But this you appetite look you at point,

acquisition small this Yes, well, knows over $XX past in-basin couple of quarter, people a a little million. a

further trades has or for opportunities, optimize job bolt-on it's team continuing or DJ interest done good look and position. to acquisitions whether the to So a working very acquisitions of enhance our

basin. to optimize continue type volatility free-cash the as of really assets further every to at that the for DJ side with our Interestingly, generating some think We'll can things, and build-on of it's ways with industry within the that faced you commodity is our balance look look that to quality opportunity of about companies position. and sheet on price significant is an

it Now that we have and shareholders. buyback, to the generating it's of It's has that's us continue basin. We've organically look looking focus we'll got for compete business to our outside further scale model, ability deploying we'll with and say, whether back do asset right? with opportunities, inside capital the quality extend and look that, other to on for to compete looked get enhance free-cash to the bar to our a got to the to basin very-high and allows opportunities and or that

over Our help since past pick-up that record been that extend high-quality accretive business we've and that when right optimize track disciplined, our the but opportunistic is model. been assets also XX time to formation the very has are months

Okay. that versus Are versus the particular areas like basin any there more areas? outside of other look -- attractive

Because is, not But to there different, at it and assets. a can a will and we commitment bit overpay right? out-compete, premier and can to our for means same come go maintaining time, it down calculus back The sheet asset in the little balance be quality returns. does

So that assets after go don't sheet, reason there portfolio within for we'll that capital. compete our If look no compete, protect but those for will they balance is to them.

Mariani of MKM. next Roth Your question Leo the line from is with

current deals? of $XX wanted look a quarter. with little about follow-up Can all the it small of or availability more of deals a just at DJ you'd more you in-basin, the But talk interest little bit type more in to the are the you kind consolidated kind obviously deal things there that potential just kind maybe did acreage plus an or the of in the in-basin. color I landscape bit That lot about what's talked then more deal. And million Can that years. color M&A on it give or things here. any you projection you here to acreage was come additionally, continuing topic little of working is of us kind bit available around over are of chunkier what's type

was for net with valuation. bringing for transaction fits very glow accretive to right into our and opportunity that Leo, again, operations. and our existing development. for that us. start small the highly I'll question. opportunity of room Sure, it, thanks, acquisition team the with running the XX the wells, some wells, call It's development And an kudos identifying the about part acquisition an on-board gross XX very a with it's was largest accretive made, of pan reasonable But

question your on size. additional M&A of then And

which acquisitions. said obviously of we But know everything in is let's the and the well. go bring do and at I that I think, the I've I team on-board very, types to in like can is, acquisitions the these integration at taking just believe in-basin lowest looked basin approach smaller past, look risk working that's we and interest think, I the tuck-in very about

advantage with where back could those interesting currently to it's coming think are us. I position of commodity that Civitas take prices to opportunities

it be No say ready. and our only demonstrates, going that do model. as I track very it, that, business disciplined will we're and happen, improves idea, if be But if extends our we'll records to will

of and broadly talked production. Okay. about appreciate on XXXX that it's early you flat then kind obviously, I

needed you've-two of and that's of bringing activity handful rig the see flat? strategy basically stay mode see sort maybe you kind of mid-two of the Guess, potentially you that to years a crews. operating would for of think continuing? been I kind mean, now. that do rigs two next broadly kind year back I third of How for keep to need

back Sure, our past. we'll optimize deployment we've mentioned, spreads up in and and done to that and obviously dial we capital two at that rigs as we're the two frac and

actually You rigs, third a in four period brought last up of spreads. us rigs a there went year dropped and grow, was to short back to saw we frac three time

best will up optimize we we the to capital So as move see allocation. path and down, our

because on It in of us was that and going industry that commodity was of got time I XXXX amount of as we ultimately that With the us where X, costs back-half the service inflation to think looks you weakness XXXX reverse May prices, wasn't year. commodity the last the sit year, history, activity lot you out. and sort prices today, where from on facing and a really saw get about subsequent like, walk-through view have a that what and in of And then where during are. are that inflation march where we've

I say, see I the those track thoughtful allocating continue continue subsequently to see capital which could bringing to bringing If on to up and capital very think you're it rig, and we're have be allocate us be moderated our think high-end pace, very bit that -- third on we lean-in in crew. flat way. in guidance. of if third more delivering disciplined of mean, I going built then will allocating and case, build broadly the If track us happy the record could we balance way capital that's a a drill and made or a a you promises and a appropriately, more will to puts the that frac in

Capital. Tieton next Your Bill question line of the from Dezellem with is

service really that if to have please that of acquisitions tied you the you and $X.X specifically costs advisory asking, been evaluating? is discuss Would you. Thank million

we advisory million, like question. on primarily and the on initiatives. and the related to I cost G&A the say press savings we $X.X your quarter, related first primarily primarily thanks that Bill, did to severance in it's release. It's said would some cost-saving LOE for

then multiple And you would say where ultimately secondarily, just acquisitions have you. to be, the given want that the today is at relative Thank you created company? culturally Civitas to that

the for questions. thanks Yes,

I on another this your part. is think check-in

I the company what promises. yet sitting from -- on growth anniversary I've string tremendous that almost is most importantly, and our date here, fair quarter another quarters year the think to this seen a it's delivering one of and

becoming This company that And I point, and only to together a other a that, quarters, culture most is is companies outperformed company. or that not your of say brought as quarters, because our part very a many in expectations. real executed four but five

You we're don't am also recognized halls, do without by the around I'm efforts there our basin I here. building it's as outside. the culture community that the we're and strong excited what performance the I as know excitement investment very with this culture by that within being or those more pleased about a very come. results. to that's integration building, is and peers that and But the evidenced

is game. this so a baseball And

the to or of quite think big was that fourth enhance of asked stretch. the inning, is we're on earlier and getting not to question or fifth, continuing stronger a second a you and we're third build performance. I and great culture company maybe probably this This is we're part

that you question. thank So for

formally going-forward, a then question if role final role? now you. -- see Thank may? COO that Hodge you plan I created you've you would if And that Discuss the

a all us excited collaboration. acquisition this I integrity, with is know long charge I'm last bring within perfect at to for off. Hodge before basin. high and with he year in career is and a I'll His will the coming but what is the continuous DNA with Novo Novo, got pear spent Chevron team. match, the assets Hodge room the Hodge company, by perfect and as us, Chevron. Hodge in Sure kick a fit for He improvement the off here was of onshore time to the a table. with

of of is impact where him of I and as truly three-ish already that part job culture. here. be think that all And week build the continuing see and go to He's good excited been team for is part making this a this on big have he to from a culture he on and our excited to will we

thank all. Great, you

you, Thank Bill.

Thank you.

today's for to remarks. hand now over any will I Doyle call Chris you. Thank closing

your sharing Thank interest be rest you safe. on we day everybody and to calls. our great Civitas and look-forward continued delivery in please your of Have and for upcoming progress a

today's This joining. Thank for you call. concludes

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