Company Overview - Civitas Resources, Inc. (CIVI) is a Denver-based oil and gas exploration and production company with significant exposure to the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico, controlling nearly half a million net acres [1][5]. Stock Performance - Over the past six months, Civitas' stock has declined approximately 7%, underperforming the broader Oil-Energy sector, which increased by 3.2%, and the U.S. E&P sub-industry, which decreased by 2% [1][8]. - The company's adjusted earnings per share for Q2 2025 was 99 cents, missing the Zacks Consensus Estimate of $1.12 and significantly down from $2.06 in the same quarter last year [7][8]. Revenue and Financial Metrics - Revenues for Civitas fell nearly 20% year over year to $1.1 billion, missing estimates by over 5%, primarily due to reduced oil and natural gas sales volumes [9][8]. - The Zacks Consensus Estimate for CIVI's earnings per share has been revised downward by 12.44% for 2025 and 9.57% for 2026 over the past 60 days [12]. Operational Challenges - The company faces high leverage, with a current leverage ratio that remains elevated compared to peers, despite efforts to reduce net debt to $4.5 billion by year-end [13]. - Inconsistent operational guidance and forecasting have been noted, with production guidance affected by asset sales and variability in efficiency gains [14]. - Civitas has identified $100 million in cost savings, but the sustainability of these reductions is uncertain amid potential inflation and rising service costs [15]. Market Position and Risks - The disconnect between operational potential and market performance raises concerns about execution, cost control, and capital allocation [5][6]. - The company is exposed to inherent commodity price and macro volatility risks, which can significantly impact cash flow and valuation [16]. - Future non-core asset sales may not achieve the same premium valuations as past divestments, especially if commodity prices weaken [17]. Conclusion - Civitas Resources is currently facing significant operational and market risks, with high leverage and inconsistent production forecasts complicating its financial outlook [20][21].

Group 1 - iREIT+HOYA Capital focuses on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1] - The investment strategy emphasizes long-term gains through beaten-down cyclical names, provided the companies are fiscally sound and positioned to benefit from economic rebounds [2] Group 2 - The article does not provide specific financial data or performance metrics related to the companies or sectors discussed [3][4][5]

Group 1 - The E&P industry has generally reported positive results for Q2, with producers focusing on cost controls and capital efficiency to maintain margins despite OPEC+ production increases leading to lower commodity prices [1] - The emphasis on cost management and capital efficiency indicates a strategic shift among producers to adapt to changing market conditions [1] Group 2 - The article highlights the importance of evaluating potential equities in the power and energy sectors for long-term investment, emphasizing income-producing equities and rental real estate for cash flow and appreciation [1] - The author's professional background in the Nuclear Power industry provides a foundation for assessing the fundamentals and long-term potential of various equities and businesses [1]

Core Insights - Civitas Resources, Inc. (CIVI) reported second-quarter 2025 adjusted earnings per share of 99 cents, missing the Zacks Consensus Estimate of $1.12 and declining from the year-ago adjusted profit of $2.06 due to lower oil price realizations [1][2] Financial Performance - Revenues for Civitas in the second quarter were $1.1 billion, a 19.5% decrease from $1.3 billion in the previous year, and also missed the Zacks Consensus Estimate by 5.2%, primarily due to a decline in oil and natural gas sales volume [2] - The average sales volume for the second quarter fell 7.5% year over year to 317 thousand barrels of oil equivalent per day (Mboe/d), missing the Zacks Consensus Estimate of 324.4 Mboe/d [5] - The average sales price for oil was $63.87 per barrel, down 20% from $80 in the prior year, while the average realized natural gas price was $1 per thousand cubic feet, compared to 17 cents in the year-earlier period [6] Asset Management - Civitas signed agreements to sell non-core DJ Basin assets for $435 million, exceeding its full-year 2025 asset sale target and achieving a valuation of more than 4x estimated EBITDAX, with proceeds directed toward debt reduction [3] Capital Return Strategy - The company reinstated its capital return strategy, allocating 50% of free cash flow after the base dividend to share buybacks and the remaining 50% to annual debt reduction, with a share repurchase authorization raised to $750 million [4] Cost Management - Total operating expenses decreased to $887 million from $926 million in the previous year, mainly due to lower taxes and depreciation, despite a 24.4% year-over-year increase in lease operating expenses to $158 million [7] Cash Flow and Debt Position - Cash flow from operations totaled $298 million, with capital expenditure at $506 million, leading to adjusted free cash flow of $123 million [8] - As of June 30, the company had $69 million in cash and cash equivalents and long-term debt of $5.4 billion, reflecting a debt-to-capitalization of 44.2% [8] Future Guidance - Civitas maintained its full-year 2025 guidance, targeting an average sales volume of 327-338 Mboe/d for the third quarter, with oil output expected between 154 MBbls/d and 160 MBbls/d [9][10]

Group 1 - Civitas Resources, Inc. (NYSE: CIVI) has shown a significant stock advancement with a total return of 15.72% since the last analysis during the Trump administration tariffs [1] - The focus is on analyzing undervalued and disliked companies or industries with strong fundamentals and good cash flows, particularly in sectors like Oil & Gas and consumer goods [1] - Energy Transfer is highlighted as a company that was previously overlooked but is now considered valuable, indicating a shift in investor sentiment [1] Group 2 - The analysis emphasizes long-term value investing while also exploring potential deal arbitrage opportunities in various sectors [1] - There is a clear preference for businesses that are understandable, avoiding high-tech and certain consumer goods sectors like fashion [1] - The article aims to connect with like-minded investors through Seeking Alpha, fostering a community focused on superior returns and informed decision-making [1]

Financial Data and Key Metrics Changes - The company announced nearly $750 million in adjusted EBITDA and over $120 million in adjusted free cash flow for the quarter, with oil volumes growing 6% quarter over quarter [15][16] - Cash operating expenses on a unit basis were more than 10% lower, and capital investments were at the low end of the plan due to lower well costs and improved cycle times [15][16] - The company anticipates achieving a net debt target of $4.5 billion by the end of the year [9][25] Business Line Data and Key Metrics Changes - The company reported significant operational efficiencies in the Permian Basin, with 50% of wells drilled and 30% of completions occurring in the Delaware [18] - In the Midland Basin, the average daily footage drilled per well exceeded 1,850 feet, and production commenced on several new pads [19] - The DJ Basin also showed efficiency gains, with drill times for four-mile laterals averaging about six days [20] Market Data and Key Metrics Changes - The company is approximately 60% hedged on oil for the remainder of the year, which is about twice the normal levels [11] - The divestment of $435 million in non-core DJ Basin assets is expected to close around the end of the third quarter, with production from these assets estimated at around 10,000 barrels equivalent per day for next year [13] Company Strategy and Development Direction - The company has four clear priorities for 2025: maximizing free cash flow, strengthening the balance sheet, returning cash to shareholders, and leading in ESG initiatives [8][10] - An aggressive capital returns plan has been reinstated, with a buyback authorization exceeding 25% of the market cap [10][14] - The company aims to allocate 50% of free cash flow after the base dividend to share buybacks annually, with a target of $375 million in repurchases for the current year [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the $4.5 billion net debt goal and emphasized the importance of a strong balance sheet for executing the company's strategy [30][56] - The recent Tax Act is expected to provide over $200 million in savings over the next five years, ensuring minimal cash taxes for the foreseeable future [16] - Management highlighted the need for continued operational improvements and cost leadership to enhance shareholder value [46][56] Other Important Information - The company has optimized investment levels to focus on higher free cash flow and returns, and has proactively issued $750 million in new senior notes to enhance liquidity [11][12] - The company is on track with a $100 million cost optimization initiative, with approximately 80% of the savings captured to date [21][66] - The annual sustainability report was published, detailing the company's performance and sustainability initiatives [16] Q&A Session Summary Question: Strategy shift and balance sheet comfort - Management indicated that recent steps, including incremental hedges and divestments, have positioned the company advantageously for capital returns [29][30] Question: 2026 plans post-strategy shift - The company plans to hold production flat at a lower level of CapEx following asset sales, with a focus on optimization [32][33] Question: Initial impressions of operations - Management noted good asset quality and operational execution, with ongoing efforts to improve efficiency and reduce costs [38][39] Question: CEO search attributes - The company seeks a CEO who can set strategy, allocate capital effectively, and enhance performance without a complete strategic overhaul [45][46] Question: Dividend levels and stock buybacks - Management reaffirmed commitment to the base dividend while also implementing an accelerated repurchase program [61] Question: Cycle time reductions and efficiency - Management highlighted a mix of proprietary methods and vendor solutions to improve cycle times and reduce costs [96][97]

Financial Data and Key Metrics Changes - The company reported nearly $750 million in adjusted EBITDA and over $120 million in adjusted free cash flow for the quarter, with oil volumes growing 6% quarter over quarter [14][15] - Cash operating expenses on a unit basis were more than 10% lower, and capital investments were on the low end of the plan due to lower well costs and improved cycle times [14][15] - The company anticipates a significant increase in volumes and lower capital and operating costs, expecting a meaningful ramp in both EBITDA and free cash flow in the second half of the year [15] Business Line Data and Key Metrics Changes - The company optimized investment levels focusing on higher free cash flow and returns, with approximately 60% of oil hedged for the remainder of the year, which is about twice the normal levels [10][11] - The divestment of $435 million in non-core DJ Basin assets is expected to close around the end of the third quarter, with production from these assets estimated at around 10,000 barrels equivalent per day for next year [12][13] - The company plans to allocate 50% of free cash flow after the base dividend to share buybacks annually, amounting to about $375 million in repurchases for the current year [13] Market Data and Key Metrics Changes - The company has around $2 billion in financial liquidity and anticipates no borrowings outstanding on its credit facility by the end of the year [11] - The recent Tax Act is expected to provide over $200 million in savings over the next five years, ensuring minimal cash taxes for the foreseeable future [15] Company Strategy and Development Direction - The company has four clear priorities for 2025: maximizing free cash flow, strengthening the balance sheet, returning cash to shareholders, and leading in ESG initiatives [7][8] - The company aims to achieve a net debt target of $4.5 billion by the end of the year, with a focus on operational execution and cost leadership [7][25] - The company is committed to a strong base dividend while also implementing an aggressive capital returns plan, including a buyback authorization that is over 25% of its market cap [8][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving debt reduction targets and emphasized the importance of a strong and sustainable capital return to shareholders [25] - The company is focused on optimizing its resource base and driving costs out of the system, with a commitment to continuous improvement in operational execution [25] - Management acknowledged the macro volatility but remains optimistic about the company's ability to navigate challenges and enhance shareholder value [7][25] Other Important Information - The company has appointed Wouter van Kempen as Interim CEO following the departure of Chris Doyle, with a focus on enhancing execution and performance [5][6] - The company has exceeded its full-year target for non-core asset sales, achieving a 4x multiple on 2026 cash flow for the divested assets [12] Q&A Session Summary Question: Strategy shift and comfort with balance sheet - Management highlighted that recent steps, including incremental hedges and divestments, have positioned the company advantageously for capital returns [30][31] Question: 2026 plans post-strategy shift - The company plans to hold production flat at a lower level of CapEx following asset sales, with ongoing optimization efforts [33][34] Question: Initial impressions of Civitas operations - Management noted strong asset quality and operational performance, with ongoing efforts to improve efficiencies and reduce costs [39][40] Question: CEO search attributes and timeline - The company is looking for a CEO who can set strategy, allocate capital effectively, and build a strong culture, with a timeline of around six months for the search [46][48] Question: Dividend levels and stock buybacks - Management reaffirmed commitment to the base dividend while also implementing an accelerated repurchase program, which will save on future dividends [64][65] Question: Cost reduction opportunities in the DJ Basin - Management indicated ongoing efforts to lower costs and improve performance, with significant progress already made [68][69] Question: Inventory assessment across basins - The company has a total of 2,000 locations, with better returns currently seen in the Permian Basin, but ongoing improvements are expected across all areas [74][75]

Financial Performance & Capital Allocation - The company reported Adjusted EBITDAX of $749 million in 2Q25[30] - Adjusted Free Cash Flow (FCF) was $123 million in 2Q25[30] - A $750 million buyback authorization was reinstated, with a $250 million Accelerated Share Repurchase (ASR) planned for 2025[13] - The company is targeting $4.5 billion net debt around YE25[15] Operational Efficiency & Cost Reduction - A cost optimization and capital efficiency initiative is on track, projecting $40 million savings impact in 2025 and a $100 million run-rate in 2026[11] - Well costs have been reduced in all basins: Delaware (-7%), Midland (-5%), and DJ (-3%) since the beginning of 2025[30] Asset Divestment & Portfolio Optimization - Non-core DJ Basin asset sales of $435 million have been completed, exceeding the year-to-date divestment goal at an EBITDAX multiple >4x[12] - Divestments are expected to streamline DJ Basin operations, focusing on core near-term development areas[19] - 2026 production from divested assets is estimated at 10 thousand barrels of oil equivalent per day (MBoe/d), with a 4Q25 impact of approximately 12 MBoe/d[19] Production & Guidance - Oil production grew by 6% to 149 thousand barrels per day (MBbl/d) in 2Q25[30] - Total volumes are expected to increase by 5.5% from 2Q25 to 3Q25E[62]

Financial Performance - For the quarter ended June 2025, Civitas Resources reported revenue of $1.06 billion, a decrease of 19.5% compared to the same period last year [1] - Earnings per share (EPS) was $0.99, down from $2.06 in the year-ago quarter [1] - The reported revenue was below the Zacks Consensus Estimate of $1.11 billion, resulting in a surprise of -5.19% [1] - The company experienced an EPS surprise of -11.61%, with the consensus EPS estimate being $1.12 [1] Key Metrics - Average sales volumes per day for crude oil were 149 million barrels, slightly below the six-analyst average estimate of 149.63 million barrels [4] - Average sales volumes per day for crude oil equivalent were 317,000 million barrels, compared to the average estimate of 324,369.3 million barrels [4] - Average sales volumes per day for natural gas were 524 million cubic feet, below the six-analyst average estimate of 562.27 million cubic feet [4] - Average sales prices for natural gas were $1.00 per Mcf, significantly lower than the five-analyst average estimate of $1.53 [4] - Product revenue from natural gas was $48 million, compared to the $99.18 million average estimate, representing a year-over-year change of +411.4% [4] Stock Performance - Shares of Civitas have returned -10.4% over the past month, while the Zacks S&P 500 composite increased by +0.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Part I. Financial Information [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Civitas Resources, Inc. as of June 30, 2025, show total assets of **$15.4 billion** and total liabilities of **$8.6 billion**, with net income of **$310 million** for the six months ended June 30, 2025, a decrease from **$392 million** in 2024, primarily due to lower commodity prices and sales volumes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$15,403** | **$14,944** | | Total current assets | $1,050 | $988 | | Total property and equipment, net | $14,178 | $13,794 | | **Total Liabilities** | **$8,609** | **$8,315** | | Total current liabilities | $1,683 | $2,205 | | Debt, net (long-term) | $5,388 | $4,494 | | **Total Stockholders' Equity** | **$6,794** | **$6,629** | - Total assets increased to **$15.4 billion** from **$14.9 billion**, driven by a rise in net property and equipment. Total liabilities also increased, primarily due to a rise in long-term debt from **$4.5 billion** to **$5.4 billion**, while current liabilities decreased significantly from **$2.2 billion** to **$1.7 billion**, mainly because of the settlement of deferred acquisition consideration[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total operating net revenues | $1,057 | $1,313 | $2,251 | $2,642 | | Total operating expenses | $887 | $926 | $1,766 | $1,828 | | Derivative gain (loss), net | $104 | $8 | $156 | ($102) | | **Net income** | **$124** | **$216** | **$310** | **$392** | | **Diluted EPS** | **$1.34** | **$2.15** | **$3.33** | **$3.88** | - Net income for Q2 2025 was **$124 million**, a decrease from **$216 million** in Q2 2024. For the six months ended June 30, net income also decreased to **$310 million** in 2025 from **$392 million** in 2024. The decline was primarily driven by lower crude oil, natural gas, and NGL sales revenue[19](index=19&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total stockholders' equity increased from **$6.63 billion** at the end of 2024 to **$6.79 billion** as of June 30, 2025. This change was driven by net income of **$310 million**, partially offset by dividends declared (**$91 million**) and common stock repurchases (**$75 million**)[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$1,017** | **$1,172** | | Net cash used in investing activities | ($1,734) | ($1,803) | | Net cash provided by (used in) financing activities | $710 | ($404) | | **Net change in cash** | **($7)** | **($1,035)** | - For the first six months of 2025, cash from operations decreased to **$1.02 billion** from **$1.17 billion** YoY. Major uses of cash included **$756 million** for acquisitions and **$961 million** for capital expenditures. Financing activities provided **$710 million**, primarily from net proceeds from debt issuance, which contrasts with a **$404 million** use of cash in the prior year period[24](index=24&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) - The company's operations are focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas in the Permian Basin and the DJ Basin[27](index=27&type=chunk) - On January 2, 2024, the company completed the acquisition of assets from Vencer Energy, LLC for approximately **$2.0 billion**. The purchase price allocation was finalized in Q4 2024[35](index=35&type=chunk)[39](index=39&type=chunk) - On June 3, 2025, the company issued **$750 million** of 9.625% Senior Notes due 2033, using the net proceeds of **$743 million** to repay borrowings under its Credit Facility[47](index=47&type=chunk) - In July 2025, the company executed agreements to divest certain non-core DJ Basin assets for an aggregate of **$435 million** in cash[112](index=112&type=chunk) - In August 2025, the Board reinstated a capital return strategy allocating **50%** of Adjusted Free Cash Flow (after base dividend) to share buybacks and increased the repurchase authorization to **$750 million**[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In the first six months of 2025, Civitas reported net income of **$310 million** and Adjusted EBITDAX of **$1.5 billion** on sales volumes of **314 MBoe/d**. Revenues decreased **15% year-over-year** to **$2.2 billion**, primarily due to an **8% drop** in both average sales price and total sales volumes. The company maintained liquidity of **$2.0 billion** as of June 30, 2025, and prioritized debt reduction with free cash flow. Commodity price volatility, driven by geopolitical events and economic concerns, remains a key factor impacting performance [Financial and Operating Results](index=28&type=section&id=Financial%20and%20Operating%20Results) Key Financial & Operating Results for Six Months Ended June 30, 2025 | Metric | Value | | :--- | :--- | | Total sales volumes | 57 MMBoe | | Average sales volumes | 314 MBoe per day | | Net income | $310 million | | Diluted EPS | $3.33 per share | | Adjusted EBITDAX | $1.5 billion | | Cash flows from operating activities | $1.0 billion | | Adjusted Free Cash Flow | $294 million | | Capital expenditures | $1.0 billion | | Common stock repurchases | $72 million (1.6M shares) | | Cash dividends paid | $97 million | [Commodity Prices and Market Conditions](index=29&type=section&id=Commodity%20Prices%20and%20Market%20Conditions) - Crude oil prices experienced significant volatility in the first half of 2025 due to geopolitical conflicts, inflation concerns, and OPEC+ output decisions, with NYMEX WTI closing at a low of $57.13 on May 5, 2025[122](index=122&type=chunk) - The average NYMEX WTI crude oil price for the six months ended June 30, 2025, was $67.58, down from $78.77 in the same period of 2024[127](index=127&type=chunk) - Permian Basin natural gas pricing at the Waha Hub experienced periods of negative pricing due to oversupply and limited pipeline capacity, though this occurred less often in 2025 compared to 2024[130](index=130&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Product Revenues and Sales Volumes Comparison | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | **Product revenue (in millions)** | **$2,246** | **$2,639** | **(15)%** | | Crude oil sales (in millions) | $1,769 | $2,210 | (20)% | | **Total sales volumes (MBoe)** | **56,811** | **61,731** | **(8)%** | | **Average Sales Price (per Boe)** | **$39.53** | **$42.75** | **(8)%** | - Product revenues for the first six months of 2025 decreased by **15% year-over-year**, driven by an **8% decrease** in total sales volumes and an **8% decrease** in average sales prices (per Boe)[140](index=140&type=chunk) Selected Operating Expenses (per Boe) | Expense Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Lease operating expense | $5.85 | $4.18 | 40% | | Gathering, transportation, and processing | $2.99 | $2.97 | 1% | | Severance and ad valorem taxes | $2.88 | $3.30 | (13)% | | Depreciation, depletion, and amortization | $16.65 | $16.00 | 4% | | General and administrative expense | $1.94 | $1.90 | 2% | | **Total selected operating expenses** | **$30.77** | **$28.76** | **7%** | - Lease operating expense per Boe increased by **40% year-over-year**, primarily due to higher saltwater disposal costs in the Permian Basin and increased plugging and abandonment program costs in the DJ Basin[142](index=142&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company's total liquidity was **$2.0 billion**, comprising **$69 million** in cash and **$1.9 billion** available under its Credit Facility[161](index=161&type=chunk) - The company was in compliance with all financial covenants under its Credit Facility as of June 30, 2025, including a permitted net leverage ratio not to exceed **3.00 to 1.00**[162](index=162&type=chunk) - Beginning in February 2025, the Board prioritized using free cash flow for debt reduction after paying the base dividend. This led to a **$200 million** year-over-year decrease in dividends paid and a **$120 million** decrease in stock repurchases for the first six months of 2025[169](index=169&type=chunk) - Capital expenditures for drilling and completion decreased by **$130 million** year-over-year for the first six months of 2025, reflecting a **5% reduction** in the 2025 capital program and efforts to level-load spending[170](index=170&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) Reconciliation of Net Income to Adjusted EBITDAX (in millions) | Line Item | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $124 | $216 | $310 | $392 | | Adjustments... | ... | ... | ... | ... | | **Adjusted EBITDAX** | **$749** | **$919** | **$1,535** | **$1,847** | Reconciliation of Net Cash from Operations to Adjusted Free Cash Flow (in millions) | Line Item | Q2 2025 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $298 | $1,017 | $1,172 | | Adjustments... | ... | ... | ... | | **Adjusted Free Cash Flow** | **$123** | **$294** | **$381** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks stem from volatile crude oil and natural gas prices, which significantly impact financial results. To mitigate this, Civitas periodically uses derivative contracts. It is also exposed to interest rate risk from its **$0.6 billion** in floating-rate debt under the Credit Facility and faces counterparty credit risk from its derivative activities and customer receivables - The company's financial condition is highly dependent on volatile crude oil and natural gas prices, which are influenced by factors beyond its control such as global supply/demand, geopolitics, and economic conditions[183](index=183&type=chunk) - Civitas uses commodity derivative contracts (swaps, collars, basis protection swaps) to mitigate a portion of its exposure to commodity price changes[184](index=184&type=chunk) - As of June 30, 2025, the company had **$0.6 billion** in outstanding borrowings under its Credit Facility, which bears a fluctuating interest rate tied to ABR or SOFR, exposing it to interest rate risk[185](index=185&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level. There were no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[190](index=190&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[192](index=192&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending against a putative class action complaint filed on May 2, 2025, alleging violations of federal securities laws related to statements about business operations and prospects. Additionally, in July 2025, the company received Notices of Alleged Violation from a Colorado commission regarding falsified environmental reports submitted by a third-party contractor, with a potential penalty that may exceed **$1 million** but is not expected to be material - On May 2, 2025, a putative class action complaint was filed against the company, its CEO, and CFO, alleging materially false and misleading statements related to business operations and prospects between February 27, 2024, and February 24, 2025. The company intends to vigorously defend against these claims[65](index=65&type=chunk) - In July 2025, the company received Notices of Alleged Violation (NOAVs) from the Colorado Energy and Carbon Management Commission (ECMC) related to falsified environmental data in reports submitted by a third-party contractor without the company's knowledge[197](index=197&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - The company refers to the risk factors identified in its 2024 Form 10-K for a discussion of potential risks and uncertainties, indicating no material updates in this quarterly report[198](index=198&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) During the three months ended June 30, 2025, the company repurchased a total of 36,421 shares of its common stock. Of this total, 19,965 shares were purchased as part of its publicly announced stock repurchase program. As of the end of the quarter, **$193 million** remained available for future repurchases under the program Issuer Purchases of Equity Securities for Q2 2025 | Period | Total Shares Purchased | Avg. Price Paid per Share | Shares Purchased as Part of Program | Max Value Remaining for Purchase (in millions) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 26,210 | $33.42 | 19,965 | $193 | | May 2025 | 9,061 | $28.70 | — | $193 | | June 2025 | 1,150 | $33.35 | — | $193 | | **Total** | **36,421** | **$32.24** | **19,965** | **$193** | - The Board authorized a stock repurchase program of up to **$500 million**. As of June 30, 2025, **$193 million** remained available under this program[199](index=199&type=chunk)[200](index=200&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[202](index=202&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[203](index=203&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements, corporate governance documents, and officer certifications - This section provides a list of all exhibits filed with the quarterly report, including various agreements and certifications required by the SEC[204](index=204&type=chunk)[205](index=205&type=chunk)