Civitas Resources (CIVI) 3 Aug 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. My name is Erica, and I will be the conference operator today. At this time, I would like to welcome everyone to the Civitas Resources Second Quarter 2023 Earnings Conference Call.

[Operator Instructions] At this time, I'll be turning over everything to John Wren. John. ahead, Go

good this and and for thanks Thanks, morning, us morning. joining operator, everyone,

today Chris available Chief I'm Foschi; our all earnings by joined CEO, slide and website. Walker; hope reviewed deck, Brian release, I XX-Q COO, which Doyle; and Cain, our Officer. our are Sustainability of you've our on Hodge Marianella CFO,

Please disclosures to subject that could uncertainties forward-looking will We differ from our other risks materially to XX-Q make full forward-looking SEC statements, and read our in statements filings. projections. actual regarding which results our are and cause

financial We be Reconciliations Instructions] I'll may take also and Chris' refer to the yesterday's will turn in now remarks, certain certain our can to over non-GAAP all metrics prepared questions. filings. to available Chris. After metrics. brief your non-GAAP [Operator release call SEC to found we be

everyone. Good John. Thanks, morning,

certainly extremely business. Permian, now deals X busy transformative year-to-date been deliver We've our quarter, to and and capturing in closing continuing on the particular, in this while DJ

You and can top both second for operating and estimates consensus strong financial production are quarter very flow. results and see cash that our

capital in In to for under some to allowing the and activity managing us investment Colorado. projects savings our with expectations capital quarter of value-adding our addition, levels we're expenditures reallocate and

are delivering on our on Our upon teams of laser-focused continuing our record track build to promises.

stock strong to the return Our alongside $XXX month, results a than continue Inclusive dividend dividend to one sheet. our shareholders cash with can will commodity program. active to shareholders, of E&P through while million Civitas assets an more payment prove maintaining an balance yields that of high-quality return repurchase cycles also year-to-date highest company next our

of simply well a sheet. that by quickly mid-XXXX. away acquisitions, plans while recent our reduce to we've our assets $XXX our part unwavering debt The million near-term We're commitment announced assets strong development to with our reiterated plan. will are from proceeds us noncore not divest to we allow high-grading our in Permian balance underway portfolio When

forward, a at returns. return quarters target business to of again, And maintaining capital we'll shareholder strong is deliver sustainable X key leverage Looking top can a of structure that mid-cycle pricing. building

taking quickly cover discuss Permian highlights. me second and closed transactions our today, quarter your Before our questions let recently

new assets advance and a our for create Our a pillars. an X is best into fit accretive into new oil perfect deals with Civitas basins America. diversified are North Permian duration scaled, Civitas in of the instant The strategic platform the Permian. These and scale entry provide in

focused focused free rewarding cycle. scale through does in bigger, getting before, we're sustainably said boxes. on we're we've really on cash matter generating those deals check not the As industry, and These commodity this but shareholders our

decade and asset a Civitas the now U.S. how metrics. on has provides we the about diverse low certainty top reduces basins breakeven locations delivering capital, high-quality, enhances base across X flexibility allocate Civitas A on with our risk well of of in

our business high-quality today's assets production for new and proven value shareholders. deliver Permian confidence matching in and ability inventory our deck, for to plan provide a activity and us Our duration deep In provided with we our assets. with updates scale

the quarter, in Permian expectations, XXX,XXX around was are DJ, of per There across Midland BOE about exit was look during currently into best for the in Production oil BOE heading day, closed, are levels on and rigs When our activity XXX,XXX XXX,XXX we investments day second fourth assets can running year around day. ways assets. allocate Delaware Currently, Basins. line the now our to and X averaged the the running and to per with the we'll quarter. which the third look maintain XX% which optimize BOE per

about in XXXX. throughout Permian run to the total rigs DJ expect We X and

investments, capital since operating include materials day XXXX, are when taxes outlook the and announced for we costs preliminary Permian the provided unchanged year Today's full production, our production Bottom transactions. costs, differentials. for the oil price cash announcement. line, guidance total of 'XX production we For outlook

about Our are full seen sand. at recent our year be assets, encouraged billion some certain casing, midpoint. we're the in mud, so include capital investments, for the We're the by including and X $X.X our of new guidance months early, to company. drilling, consumables softening capital of expected we've It's services and Permian maintaining combined

shareholders. this gains how but development As deflation to to disciplined programs Any early model we into be like we coming we and efficiency Certainly back in our potential into of our correct. be back savings the allocated the to half allocate to year on or our seeing beginning XXXX, back will we said heading too capital. opportunistic to the or year, sheet could balance or market

we've the announcement, for integration. planning been Since

our We have particular, obviously, with to this innings. the and experience, successfully teams very going companies, be recent behind integration combining success. assets, well, in upon We're is early impressed very we forward and look building it these

both X-month transition talent, in and Tap the a broader with the can. seamless building wherever We with Concurrently, identify to we align accelerate agreement ensure retain Hibernia service and to have organization, top transition place looking transition. out a we're Rock team, the

higher-than-expected expectations quickly quarter million strong production, results. of BOE and about expenses and managing really On production, our delivered of Civitas second investments. per summarize free $XXX delivered flow team in XXX,XXX the me quarter, production above day. lowering driven the second Let cash capital consensus by

for midpoint about our So of the first the of guidance. day, over XXX,XXX XXXX, midpoint BOE or right just annual the half at averaged per we

turned early, area. pads but with for to expect outperformed be to when XXX,XXX guidance Watkins our BOE performance we've exit strong per target the performance of high increased continue our seen, It's day date. productivity We now XXX,XXX combined primarily that of including expectations we Permian. oil strong end BOE to on an by recently Our we've driven recent this based laterals have our around per production the significantly X X-mile or year and DJ with day quarter was line from the seen TILs in the development XXXX

quarter, quarter-over-quarter out and got our look foundation per the we from the of returned G&A under the at to side the structure, we when were On cost production quarter normal and first winter as LOE in down levels. cash we BOE, expense XX%

continue consistent and million unchanged. for shareholders. we When flat. together, to year get and production, flow Finally, the higher second our $XXX our are the and returns higher free with expenses were manage to full inside quarter remained CapEx about investments capital higher Capital expectations cash relatively first to our capital levels in expectations quarter activity as taken lower

the our we've million now the $XX average share million an under year-to-date remaining in Finally, were and In repurchased under about $XXX we have million XXXX. of active price quarter. stock stock total, buyback authorization $XXX through million year-end at $XX.XX and per during repurchased recently authorization buyback share $XXX of

today's me key takeaways. let closing, In reiterate

our First, DJ is exceptionally business performing legacy well.

to continue results. innovative strong to deliver teams Our address ways challenges find and safely business and our advance

recent Civitas. stronger, more balanced and a our have created better Second, acquisitions

We have those the to Rock many options and and of portfolio We're the great of onboarding once in TSAs. Hibernia across on from a invest safely employees high-return past capital integrating get assets Permian. assets our DJ focused and we Tap

combined, sales Xx ratio outlook advancing premier for of balance free flow. we return XXXX. the than leverage When know expect asset of optimal noncore sizable We're importance our have strong to to and less we in a a sheet. cash Lastly,

happy take you to questions. Thank your for we're Operator, interest now in Civitas.

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

right? me hear you Can all

Neal. got we you, Yes,

the the on first you plus the Really, after much the that assets specifically, to My a to new And last secondly, oil assume DJ, Permian change quarter quarter the then assume can wondering oily on had there? question you you're the cut, how just in commodity also more guide level oil that assets goes the your thinking speak it going mix. on I'm and that all both of normalized new DJ. cut forward? does back

question, Yes, start. start I'll Thanks I'll DJ. for the with the Neal.

a One, is we're couple I the an in things area, oilier what the our pads love of of came that development. on going As We is seeing. here. this mentioned, which Watkins area on,

Two, X-mile also were tests. initial our these

performance quarter, execution, last What that we the degradation seen also so capital on both of into year, operational quarter mile. we third going risk What And quarter, the overly and full we the flowback they that conservative. and we've of first a had the these is we the came risked but look seen prudently was in the early the we've modeled them. pads on had at so to month of through

increase so the them beat early they flowback, continue as we pads. see And gas-oil those and wells those on the in expectations it's up as to ratio up, we'll well oilier open clean

we've got that the back And modeled the so half year. of into

about what we of including here the caps. well. extremely the rig about X-mile But seeing not about in extending next X by I'll first capital where this just DJ, our tell excited released years, of and also our continued area But recently we're excited performance we're the our half allocated over is you, few laterals we're just off

So good news on board the the across DJ.

the in quarter, I around somewhere Permian, cut the indicates XX%; you XX%. would just to second first that about range point about be quarter we'll XX%. was in And Guidance

come a little lumpiness that and comfortable see as You'll off, bit of on we're with as guidance well forward. but going

answer, able plan, you just, free to Once to this the will you 'XX. given once that I double I that showed, the kind you're cash you shareholder Or plan? get paid get be I just then I it. do stay this plan. rolling then Chris, -- return down know of change even to somewhat of intent debt going the want have XX-month know on that you intention of And in check think to but sort certainly my this initially, that repaid, do early flow on Great. second, The changing any is debt it

maybe miss. Yes. kick I I'll kick this anything Nella and to it for off

Permian place framework prices here us like formulation. It were dividend would been from us where strength put Civitas. that as plan, like the but assets when Basin's continuing commodity we calculation. as dividend with last as the real not plan. was year. really from some framework that the also to trailing that without I extending see And we they I guided we bolstering XX-month we've maintain integrated, the changed our in announced, in I get peer-leading allowed We've where see assets. the we have moderated at it

want opportunistic about and anywhere the dividends, the turn, we're right? are we divestments. buyback in how be just between we we of where We you cycle. that to on to X.X come in same even as think that to think cycle and way those on much to dose, well commodity an X the pick quarter, and can between And inside as our We leverage path second We're terms debt down, get we committed and opportunity turn it the the as in in see At time, us. then getting to equity. you small up our turn inside getting committed we'll of a depending that. deal to And are allocating with of opportunities potentially paydown, accelerate saw terms leverage an

second so quarter. did that And in we the

You operation us that see the now could -- of do our XXXX, authorization ends. where between end and

would Neal, echo and Chris' I comments.

do. hit you balance the And the sales. resiliency look to dividend shareholder sheet is sheet with after truly mid-cycle some oil to asset complement that to the going everything the months targets. is XX or there program. this going at return excess further it we're at because the governor be When to look at So and gives it's really free our of cash last really, to plenty plan, the $XX flow prices, like we the at dividend We dividend the balance

reach goals anticipate forward. the the really balance sooner. plan going like going only But it. So sales to changes allow those to don't we us any to asset We are sheet

Timothy next Rezvan from of KeyBanc. comes Our question the from line

for Mardini] This Tim. on [John is

this mentioned, and your you the from be area oil well results officially the As will total well you area Elder results Box BOE you How your going the CAP? drilling an drilling much in forward? start be And do replicated in looks before cuts think could strong perspective. recent Southern in both of here

When in our allocation CAP We'll say and look an area to across it's early capital the we're immediate the CAP see. Box step area. with excited Elder and is back you with what important the about or days DJ, this this we Lowry for still So us.

of is look south. to really or like within capital ways in guide, whether which moving allocation, the DJ Assuming of the or around half rigs we're that We'll that's our directed capital forward, going is about going be Delaware. 'XX about that our super the to for the We and to the to underpinning Watkins the to results enhance flexibility the X continue Midland excited having to we see area. capital

from Johnston Phillips of line the One. from Capital comes question next Our

Just a follow-up on Neal's question.

is mix and the I in said XX%. And fell for the the year QX. XX% XX% remainder to QX to you was of Permian the guidance then think oil in obviously XX%

So base. so around just is base. decent a decent wondering there some mix but pretty what's Obviously, moving it It's much. that pretty is a lumpiness,

curious So that. on just

Yes.

quarter. quarter, And mix I range assets Hibernia oilier and on you think to between the come second see assets, those areas wells quarters we different the up clean those to oil X capital in the in the you both continue new open gas up with that deploy first then allocate as and coming you'll Rock. obviously, Hibernia you capital of some and Tap had up, as ratio as have

cash this guys you pay year. Okay. taxes no expect to And you mentioned any that longer

out 'XX Looking I and you think eligible. beyond, AMT be into will

and should 'XX beyond. about how with us help in taxes cash maybe you can we So think

that, Sure. address I can Marianella. it's Phillips,

sale tax initial we $XX. bit commodity price treatment wiped what lower That the have and at For we gave little would given the XXXX, for a expected. of asset was otherwise guidance

forward. prices, price an plan. because forward, you'll very go oil, based on in tax mid-cycle of it's call to X% to it oil going assumption be cash would It's terms Going pricing at be good but so obviously of the all forward that's a at EBITDA incremental, that assumption $XX on X% X%, sensitive that X% looking about

Our next Mariani the Leo ROTH question comes line of MKM. from from

many kind in give color do little area? Obviously, inventory you you Watkins very to drill a strong us have of the more terms Roughly, kind left in how Can here wells of of performance what there? down this quarter. is in bit maybe

Yes.

at look total. Elder talking in Box you're If and Lowry CAP, you our a hundred few CAP our locations about

We have OGDPs caps. in addition to those X

our you a And of plan. you the large which it's at skylines, portion go-forward of sort -- this split look can is -- look previous skyline so see area, look you Watkins southern the in our at if skyline really And area. you

wanted asset then Okay. just to ask the That's just around helpful. And sales.

have some kind You that just guys Is up million maybe kind producing of $XXX of there? can Is Just a then sticking you color midstream bit are what assets? just DJ And is? that Basin guys done all mean, noncore M&A. over obviously, stuff. of talking rolling provide great little kind I of also kind around time. the you a on more job there

But milk focused look I the a X subbasins you employ integrating of to kind did that time? on here. kind to now Permian for flow of the in in and more You're Permian similar over the strategy of Obviously, DJ, hope think you free acquire you're assets. these cash assets did the and in where you

to Sure. the there, for lot but thank question. unpack A you

the selected First bank. our on plan, we've divestment

and for of on the process. that really, Midland side that Delaware are mentioned assets Basins. as Watkins I don't the right launching are my Currently, We wave and against first remarks, areas in the when the up area of skyline and our compete just Western capital

well of as in midstream of would consider terms our some a monetization midstream, we some partial include inventory. will it production or so as then assets. And And

with a us the strength we've target we menu in options I to and our and commodity, position hit out. have laid think of delever as us the

And the be creative can in to so the shown to on but think we good them. not the we be business. has muscle. monetizing our We past are. to targets, only But underlying foot to that hit obviously we anything we certainly consider into and not surpass we cut team side, going on And where feel also protect our if are midstream can I that front were we any our

forward on plan about look more and excited sharing that. progress to current on divestment So to date the I'm the

Rock. mean to hit is It's Tap than we'll you of X I a these is assets. now, it. really enhance In for terms Hibernia This of integrating continue and ways our to Midland year easier Delaware, and answer an integrating it's look the focus day from our -- in question M&A, positions X

that to and we'll you I number our on accretive a to would just for we would It shareholders rock. as Hibernia so metrics did look. And tell Tap of be with continue need

on sidelines, it have onto we're that So I the back but say quite field. us the will to to be wouldn't come have compelling completely

of Seaport question from [Operator next Instructions] Pope line Research. comes Nicholas Our from the

how I Just and understand post I term. of going trying credit credit kind get current utilization could about the on post deal bit you kind was down of that's paid of of how little facility. you're guess, hoping a where near planning the guys this? to close facility the that talk close rates are over kind the to managing of

Marianella. Nick, is Sure. this

you're B We acquisitions, for a A solid. look to we investor a that's transaction. debt, something want -- -- items of and our liquidity looking balance pro and do as is fixed might where as forma like what thinking sheet we, it's $XXX forma we very down the rates today, we we in this of is the have So Slide lot know terms We other mix as are, And these you of because that versus sheet. among our spend balance through million. want sure we at estimate not imagine, be in X/XX where time was But the variable a financing pro in we'll our X/XX want just a quickly, make that to we for to so pay that Again, essentially of outstanding deals. -- presentation.

you $X.XX, that over So pro us forma the billion. look liquidity $X.X of strong commitment if gives at very last

that we after cash asset dividend first where and of the will first -- To be debt the pay. rates are your given with likely will point, capital this free excess sales, the with piece flow their

possible, our already strong very to get as our down And quickly continue goal up as liquidity. that so shoring is

notes, rates this October. of that half -- as repayment X% that, helps priority terms callable well it's But in be the goes, as will prepayable second given a where order reminder, think of hopefully, given down. about the year, pay be that in priorities we senior of on as how far terms debt in to versus As fixed that That will becomes are. our current obviously, lower around rate of debt

about you there down I'm And to variable to that share the about reducing there, with rates, assuming sort over X% considering Is variable plan facility, that component rate? current that of balancing and That that respect the credit speed, some dividend? about with respect about helpful. on repurchase looking about repurchase pay how share is any at thought do the balance think potentially

balance a very From Sure. and leverage with liquidity we're headed. sheet perspective, comfortable we feel strength Nick, and the where

obviously, 'XX, We and at target That's next that we X/X X for out there our have our profile by a under of turn, confident very and the the put we'll get of after Xx. end looking feel the quarters dividend.

prudently. We'll In it's we'll the we dividend, to get to even that of million there, think When need do what we you us after being strong of business continue we you very the terms quarter. get And need generation -- leverage during feel our continue saw about opportunistic. that still and buyback, get executing there. to the we about this think $XX is we what when the can comfortable goals,

up It's facility like just interest the you we certainly But mentioned outstanding. have this the at credit notes higher X% point, than there. -- a lot is that it's

can as on asset paying flow focused cash with be quickly on down So we the as we'll that excess sales.

for Timothy Our Rezvan comes the line of from KeyBanc. question final

I squeeze If another again. just [John] one in. can It's

mid-'XX. oil strength assets You your change that at show figure that $XXX to by were say, goal how noncore of curious doing continue XXX view reiterated and to how prices landed signs Permian here? of the million sell your to of you if, intent would I'm with

well, you inventory to compete on Glad developed term. divestment John. currently want that fully near that in clarify, simply the either Thanks, million target And for $XXX to does are or I have and are very not assets over we these DJ. know they the is that have primarily see Yes. back capital the we that

which whatever necessarily a -- As This really foundation you our good Civitas. and this takes fewer DJ assets. and of just it is which as about prices competitive basins accelerate I folks, that about to see as we number strong a do including by that say But to all strengthen process within lot you so the is delever, more sell North get a the evidenced evidenced let's mean strengthen, is by how day could commodity across of number. and would not base continue It other for assets. that's to is America this business, Watkins, hitting Western to the doesn't That great. think

strong think you'd see And price paring what about is a with the million the so go-forward is up. commodity that company. strength I to really back This go some $XXX for could in foundation

turn our Chris. closing I the was over Chris That call to final remarks. ahead, Doyle question. now for Go will

continued Thanks, please look Erica. rest your in you to Civitas. interest again continued great forward calls. upcoming be day, Thank safe. We on progress our of for your sharing Have and a

that Ladies for Thank concludes call and joining. gentlemen, our today. you

may now You disconnect.