Financial Data and Key Metrics Changes - Civitas reported free cash flow of approximately $190 million in Q2 2023, exceeding consensus expectations driven by strong production and lower expenses [27] - Production averaged about 173,000 BOE per day in Q2 2023, with a first half average of about 166,000 BOE per day, aligning with annual guidance [27][29] - Capital expenditures for the full year 2023 are expected to be around $1.3 billion at the midpoint, unchanged since the announcement of recent acquisitions [24][30] Business Line Data and Key Metrics Changes - The new Permian assets contributed to production averaging about 107,000 BOE per day in Q2, with expectations to maintain around 100,000 BOE per day in Q3 and exit the year at approximately 110,000 BOE per day [23][24] - The company plans to allocate about half of its capital to the southern area, including the Box Elder CAP and Lowry CAP, with two rigs expected to operate in this region [13][22] Market Data and Key Metrics Changes - The company noted a softening in certain service costs, including drilling and consumables, which may lead to potential savings in capital expenditures [25] - The oil mix in the Permian decreased from 54% in Q1 to 50% in Q2, with guidance indicating a range of 53% to 58% for the remainder of the year [55] Company Strategy and Development Direction - Civitas is focused on maintaining a strong balance sheet while executing a dividend plan and opportunistic share buybacks, with a target leverage ratio of less than 1x by 2024 [20][31] - The company is committed to divesting $300 million in non-core assets by mid-2024 to enhance its portfolio and reduce debt [20][37] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the integration of recent acquisitions and the performance of the DJ business, highlighting the importance of a premier balance sheet [56] - The company anticipates that the divestment of non-core assets will strengthen its foundation and support future growth, even if commodity prices strengthen [48] Other Important Information - Civitas has returned over $800 million to shareholders year-to-date, maintaining one of the highest dividend yields in the industry alongside an active stock repurchase program [19] - The company has repurchased approximately $320 million in stock year-to-date, with $480 million remaining under the buyback authorization through year-end 2024 [31] Q&A Session Summary Question: Can you provide more details on the inventory in the Watkins area? - Management indicated there are a few hundred locations in total, with significant capital allocated to the southern area, including the Watkins area [35] Question: What is the status of the $300 million divestment target? - The divestment will include both production and inventory assets that do not compete for capital against higher-priority projects [36][37] Question: How is the credit facility being managed post-acquisition? - The company plans to prioritize paying down the credit facility quickly, leveraging excess free cash flow and proceeds from asset sales [42][44] Question: Will the shareholder return plan change after debt repayment? - Management confirmed that the current plan will remain in place, focusing on maintaining balance sheet strength while executing share repurchases [63]

[Cover Page and General Information](index=1&type=section&id=Cover%20Page%20and%20General%20Information) Provides foundational details and forward-looking statement disclaimers for the Form 10-Q [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) Presents essential company and filing information for Civitas Resources, Inc.'s Form 10-Q Form 10-Q Details | Metric | Detail | | :--- | :--- | | Registrant Name | Civitas Resources, Inc. | | State of Incorporation | Delaware | | SEC File Number | 001-35371 | | Trading Symbol | CIVI | | Registered Exchange | New York Stock Exchange | | Common Stock Outstanding (as of August 2, 2023) | 93,760,666 shares | [Information Regarding Forward-Looking Statements](index=3&type=section&id=Information%20Regarding%20Forward-Looking%20Statements) Discusses forward-looking statements and associated risks, emphasizing no obligation for updates - Forward-looking statements cover company business strategies, reserve estimates, sales volumes, capital expenditures, debt covenant compliance, government regulations (including climate change and ESG), oil and gas price fluctuations, derivative use, drilling plans, and M&A synergies[26](index=26&type=chunk)[27](index=27&type=chunk)[41](index=41&type=chunk) - Factors that could cause actual results to differ materially include: oil and gas price declines or volatility, operational disruptions, capital access, customer performance, reserve estimate uncertainties, environmental risks, regulatory or legislative actions, weather conditions, drilling and operating risks, availability of oilfield equipment and services, management's ability to execute plans, internal control effectiveness, market access, political conditions, and the ongoing impact of the COVID-19 pandemic[21](index=21&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[69](index=69&type=chunk) - The company assumes no obligation to update or revise these forward-looking statements unless required by law, and advises investors not to place undue reliance on them[30](index=30&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) Contains the unaudited condensed consolidated financial statements and their detailed notes [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Presents the company's unaudited condensed consolidated financial statements and comprehensive notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's financial position at specific quarter-end dates Condensed Consolidated Balance Sheets (as of June 30, 2023 and December 31, 2022) | Item | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 2,702,897 | 768,032 | | Total current assets | 3,413,207 | 1,328,430 | | Property and equipment, net | 6,706,840 | 6,611,105 | | Total assets | 10,170,986 | 7,971,399 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | 1,221,091 | 1,177,927 | | Total long-term liabilities | 3,903,208 | 1,419,553 | | Total stockholders' equity | 5,046,687 | 5,373,919 | | Total liabilities and stockholders' equity | 10,170,986 | 7,971,399 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income over specific periods Condensed Consolidated Statements of Operations (for the Three and Six Months Ended June 30, 2023 and 2022) | Item (in thousands) | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Oil and gas sales revenue | 660,526 | 1,151,364 | 1,316,548 | 1,969,174 | | Total operating expenses | 481,082 | 453,626 | 896,047 | 869,457 | | Derivative gain (loss) | 4,927 | (72,650) | 30,087 | (368,143) | | Interest expense | (8,753) | (8,116) | (16,202) | (17,182) | | Net income | 139,287 | 468,821 | 341,748 | 560,460 | | Basic net income per share | 1.73 | 5.52 | 4.22 | 6.60 | | Diluted net income per share | 1.72 | 5.48 | 4.18 | 6.56 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Outlines changes in the company's equity accounts over the reported periods Condensed Consolidated Statements of Stockholders' Equity (as of June 30, 2023 and June 30, 2022) | Item (in thousands) | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Balance December 31, 2022 | 5,373,919 | - | | Balance December 31, 2021 | - | 4,654,998 | | Common stock repurchased and retired | (303,455) (Q1 2023) / (20,398) (Q2 2023) | - | | Dividends declared | (176,878) (Q1 2023) / (173,358) (Q2 2023) | (104,444) (Q1 2022) / (117,151) (Q2 2022) | | Net income | 202,461 (Q1 2023) / 139,287 (Q2 2023) | 91,639 (Q1 2022) / 468,821 (Q2 2022) | | Balance June 30, 2023 | 5,046,687 | - | | Balance June 30, 2022 | - | 4,992,550 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (for the Six Months Ended June 30, 2023 and 2022) | Item (in thousands) | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | | Net cash provided by operating activities | 876,030 | 1,254,768 | | Net cash used in investing activities | (923,204) | (733,491) | | Net cash provided by (used in) financing activities | 1,982,040 | (336,480) | | Cash and cash equivalents, end of period | 2,703,000 | 439,353 | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements [NOTE 1 - Summary of Significant Accounting Policies](index=10&type=section&id=NOTE%201%20-%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the company's core accounting principles and business operations - The company is an independent exploration and production company focused on acquiring, developing, and producing oil and associated liquids-rich natural gas in the Denver-Julesburg Basin in Colorado and the Permian Basin in Texas and New Mexico[51](index=51&type=chunk) - The condensed consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and Form 10-Q instructions, including all normal recurring adjustments deemed necessary by management[52](index=52&type=chunk) - As of June 30, 2023, and the date of this report, there are no recently issued but not yet adopted accounting pronouncements that are expected to have a material impact on the company's financial statements and disclosures[79](index=79&type=chunk) [NOTE 2 - Acquisitions and Divestitures](index=10&type=section&id=NOTE%202%20-%20Acquisitions%20and%20Divestitures) Details recent acquisition activities and their accounting treatment - On August 2, 2023, the company completed the Hibernia acquisition for a total cash consideration of **$2.25 billion**[56](index=56&type=chunk) - On August 2, 2023, the company completed the Tap Rock acquisition for approximately **$2.45 billion**, comprising **$1.5 billion** in cash and **13,538,472 shares** of common stock (valued at approximately **$950 million**)[58](index=58&type=chunk) - On March 1, 2022, the company completed the acquisition of Bison Oil & Gas II, LLC for approximately **$280.4 million**, resulting in a **$13.6 million** bargain purchase gain[85](index=85&type=chunk) Consolidated Transaction Costs (in thousands) | Period | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Consolidated transaction costs | 31,145 | 1,418 | 31,627 | 22,000 | [NOTE 3 - Revenue Recognition](index=13&type=section&id=NOTE%203%20-%20Revenue%20Recognition) Explains the company's revenue recognition policies and product sales breakdown - The company recognizes revenue from the sale of produced oil, natural gas, and NGLs when control transfers to the buyer, depending on applicable contract terms[61](index=61&type=chunk) Net Operating Revenue (in thousands) | Product | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Oil sales | 541,043 | 778,258 | 1,001,417 | 1,327,760 | | Natural gas sales | 45,364 | 205,840 | 148,919 | 319,001 | | NGL sales | 74,119 | 167,266 | 166,212 | 322,413 | | Total oil and gas sales | 660,526 | 1,151,364 | 1,316,548 | 1,969,174 | - As of June 30, 2023, and December 31, 2022, the company's accounts receivable from customers were **$201.2 million** and **$343.5 million**, respectively[89](index=89&type=chunk) [NOTE 4 - Accounts Payable and Accrued Expenses](index=13&type=section&id=NOTE%204%20-%20Accounts%20Payable%20and%20Accrued%20Expenses) Presents the composition of accounts payable and accrued expenses Accounts Payable and Accrued Expenses (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade accounts payable | 27,811 | 31,783 | | Accrued drilling and completion costs | 80,826 | 137,171 | | Accrued consolidation transaction costs | 6,252 | — | | Total accounts payable and accrued expenses | 240,555 | 295,297 | [NOTE 5 - Long-Term Debt](index=14&type=section&id=NOTE%205%20-%20Long-Term%20Debt) Details the company's long-term debt, including senior notes and credit facilities [Senior Notes](index=14&type=section&id=Senior%20Notes) Describes the issuance and terms of the company's senior notes - On June 29, 2023, the company issued **$1.35 billion** of 8.375% Senior Notes due 2028 and **$1.35 billion** of 8.750% Senior Notes due 2031, with net proceeds of **$2.67 billion**, to fund acquisitions[64](index=64&type=chunk) Senior Notes (as of June 30, 2023, in thousands) | Note Type | Principal Amount | Unamortized Discount | Unamortized Deferred Financing Costs | Net Principal Amount | | :--- | :--- | :--- | :--- | :--- | | 2026 Senior Notes | 400,000 | — | 5,901 | 394,099 | | 2028 Senior Notes | 1,350,000 | 16,875 | 5,919 | 1,327,206 | | 2031 Senior Notes | 1,350,000 | 16,875 | 5,919 | 1,327,206 | | Total | 3,100,000 | 33,750 | 17,739 | 3,048,511 | - The company may redeem portions of the Senior Notes under specific conditions and complies with covenants restricting additional debt, liens, dividend payments, investments, and M&A activities[66](index=66&type=chunk)[67](index=67&type=chunk)[116](index=116&type=chunk) [Credit Facility](index=16&type=section&id=Credit%20Facility) Outlines the company's revolving credit facility and its key terms - On April 20, 2022, the credit agreement was amended, increasing the borrowing base from **$1 billion** to **$1.7 billion** and the total commitments from **$800 million** to **$1 billion**[97](index=97&type=chunk) - On August 2, 2023, in conjunction with the acquisition completion, the credit agreement was further amended, increasing total commitments from **$1 billion** to **$1.85 billion**, the borrowing base from **$1.85 billion** to **$3 billion**, the maximum credit commitment from **$2 billion** to **$4 billion**, and extending the maturity date to August 2028[100](index=100&type=chunk) Credit Facility Available Borrowing Capacity (in thousands) | Item | August 2, 2023 | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Revolving credit line | 750,000 | — | — | | Letters of credit | 12,100 | 12,100 | 12,100 | | Available borrowing capacity | 1,087,900 | 987,900 | 987,900 | | Total commitments | 1,850,000 | 1,000,000 | 1,000,000 | - The credit facility includes financial covenants such as a net leverage ratio (not exceeding **3.00 to 1**) and a current ratio (not less than **1.00 to 1**), all of which the company complied with as of June 30, 2023[123](index=123&type=chunk) [NOTE 6 - Commitments and Contingencies](index=17&type=section&id=NOTE%206%20-%20Commitments%20and%20Contingencies) Discloses legal proceedings, regulatory actions, and contractual commitments - The company regularly evaluates legal proceedings, claims, and other legal matters to determine the probability and range of potential losses, accruing provisions in accordance with authoritative accounting guidance[102](index=102&type=chunk) - As of June 30, 2023, and December 31, 2022, the company accrued approximately **$1 million** and **$0.7 million**, respectively, for alleged violations related to Colorado oil and gas operating regulations and air pollution control division notices[104](index=104&type=chunk) Minimum Annual Payment Commitments (in thousands) | Period | Fixed Transportation Commitments | Minimum Production Commitments | | :--- | :--- | :--- | | Remainder of 2023 | 7,360 | 34,182 | | 2024 | 14,640 | 19,596 | | 2025 | 4,800 | 20,434 | | 2026 | — | 16,816 | | 2027 | — | 16,250 | | 2028 and thereafter | — | 31,460 | | Total | 26,800 | 138,738 | - The company has drilling commitment agreements with third-party midstream providers, requiring the drilling and completion of **106 qualifying wells** by December 31, 2026, with potential damages for non-completion[158](index=158&type=chunk) [NOTE 7 - Stock-Based Compensation](index=19&type=section&id=NOTE%207%20-%20Stock-Based%20Compensation) Details the company's long-term incentive plans and related compensation expenses - The company grants Restricted Stock Units (RSUs), Deferred Stock Units (DSUs), Performance Stock Units (PSUs), and stock options to executives and employees through its 2017 and 2021 Long-Term Incentive Plans (LTIPs) and the Extraction Equity Plan[136](index=136&type=chunk) Stock-Based Compensation Expense (in thousands) | Incentive Type | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Restricted and Deferred Stock Units | 4,769 | 3,917 | 9,194 | 9,182 | | Performance Stock Units | 5,126 | 2,218 | 8,081 | 5,043 | | Total Stock-Based Compensation Expense | 9,895 | 6,135 | 17,275 | 14,225 | - As of June 30, 2023, total unrecognized stock-based compensation expense was **$53.942 million**, expected to be recognized between 2025 and 2026[161](index=161&type=chunk) - As of June 30, 2023, unvested RSUs and DSUs totaled **608,763 shares** with a weighted-average grant date fair value of **$62.50** per share; unvested PSUs totaled **429,991 shares** with a weighted-average grant date fair value of **$89.92** per share[139](index=139&type=chunk)[164](index=164&type=chunk) [NOTE 8 - Fair Value Measurements](index=21&type=section&id=NOTE%208%20-%20Fair%20Value%20Measurements) Explains fair value measurement methodologies and disclosures for assets and liabilities - The company follows accounting standards that categorize fair value measurements into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[145](index=145&type=chunk)[168](index=168&type=chunk) Fair Value of Derivative Assets and Liabilities (in thousands) | Item | June 30, 2023 Level 2 | December 31, 2022 Level 2 | | :--- | :--- | :--- | | Derivative assets | 6,135 | 3,284 | | Derivative liabilities | 24,411 | 63,533 | - As of June 30, 2023, the fair values of the 2026, 2028, and 2031 Senior Notes were **$377.3 million**, **$1.37 billion**, and **$1.37 billion**, respectively, all classified as Level 1 fair value based on market quotes[147](index=147&type=chunk) - Warrants had a fair value of **$77.5 million** at issuance, determined using the Cox-Ross-Rubinstein binomial option pricing model with Level 3 inputs, and recorded in additional paid-in capital[171](index=171&type=chunk) [NOTE 9 - Derivatives](index=23&type=section&id=NOTE%209%20-%20Derivatives) Describes the company's commodity derivative contracts and their financial impact - The company uses commodity derivative contracts, including swaps, call options, basis protection swaps, and put options, to hedge commodity price risk for future oil and gas production, but does not designate them as hedging instruments[173](index=173&type=chunk)[174](index=174&type=chunk)[202](index=202&type=chunk) Derivative Cash Settlements Gain (Loss) (in thousands) | Item | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Oil contracts | (2,164) | (114,778) | (5,613) | (239,940) | | Natural gas contracts | 829 | (54,091) | (6,272) | (82,875) | | NGL contracts | — | (12,762) | — | (25,394) | | Total derivative cash settlements gain (loss) | (1,335) | (181,631) | (11,885) | (348,209) | | Gain (loss) on fair value changes | 6,262 | 108,981 | 41,972 | (19,934) | | Total derivative gain (loss) | 4,927 | (72,650) | 30,087 | (368,143) | Oil Derivative Contracts (as of June 30, 2023) | Contract Type | 2023 Q3 (Bbls/Day) | 2023 Q4 (Bbls/Day) | 2024 Q1 (Bbls/Day) | 2024 Q2 (Bbls/Day) | 2024 Q3-Q4 (Bbls/Day) | | :--- | :--- | :--- | :--- | :--- | :--- | | NYMEX WTI Swaps Volume | 23,055 | 29,161 | 12,727 | 11,991 | 9,767 | | NYMEX WTI Two-Way Collars Volume | 7,334 | 9,392 | 11,913 | 10,430 | 8,914 | | NYMEX WTI Three-Way Collars Volume | 1,302 | 1,172 | 573 | — | — | | NYMEX WTI Put Options Volume | — | — | 7,942 | 6,953 | 5,943 | [NOTE 10 - Asset Retirement Obligations](index=26&type=section&id=NOTE%2010%20-%20Asset%20Retirement%20Obligations) Details the estimated liabilities for asset retirement obligations - The company accrues estimated liabilities for oil and gas asset retirement obligations based on historical experience, estimated economic lives, retirement costs, and regulatory requirements, discounted using a credit-adjusted risk-free rate[180](index=180&type=chunk)[207](index=207&type=chunk) Changes in Asset Retirement Obligations (in thousands) | Item | Amount | | :--- | :--- | | Balance December 31, 2022 | 291,026 | | Liabilities incurred | 1,480 | | Accretion expense | 7,648 | | Liabilities settled | (6,231) | | Balance June 30, 2023 | 293,923 | | Current portion | 25,557 | | Long-term portion | 268,366 | [NOTE 11 - Earnings Per Share](index=27&type=section&id=NOTE%2011%20-%20Earnings%20Per%20Share) Explains the calculation of basic and diluted earnings per share - Basic and diluted earnings per share are calculated using the treasury stock method, with diluted EPS reflecting the dilutive effect of unvested RSUs, DSUs, PSUs, and exercisable stock options and warrants[157](index=157&type=chunk)[182](index=182&type=chunk)[210](index=210&type=chunk) Earnings Per Share (in thousands, except per share amounts) | Item | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Net income | 139,287 | 468,821 | 341,748 | 560,460 | | Basic net income per share | 1.73 | 5.52 | 4.22 | 6.60 | | Diluted net income per share | 1.72 | 5.48 | 4.18 | 6.56 | | Weighted-average basic shares outstanding | 80,393 | 84,993 | 81,052 | 84,917 | | Dilutive effect | 751 | 561 | 772 | 536 | | Weighted-average diluted shares outstanding | 81,144 | 85,554 | 81,824 | 85,453 | [NOTE 12 - Income Taxes](index=28&type=section&id=NOTE%2012%20-%20Income%20Taxes) Discloses deferred tax liabilities, prepaid taxes, and effective tax rate reconciliation - As of June 30, 2023, and December 31, 2022, net deferred tax liabilities were **$409.6 million** and **$319.6 million**, respectively; prepaid income taxes were **$2.3 million** and **$29.6 million**, respectively[185](index=185&type=chunk) - Income tax expense for Q2 2023 and Q2 2022 was **$44.4 million** and **$152.5 million**, respectively, with effective tax rates of **24.2%** and **24.5%**[213](index=213&type=chunk) - The difference between income tax expense and the **21%** statutory federal income tax rate primarily stems from state income taxes, excess tax benefits and deficiencies from stock-based compensation, executive compensation limitations, and other permanent differences[213](index=213&type=chunk) - The company is evaluating the potential impact of the **15%** Corporate Alternative Minimum Tax (AMT) under the Inflation Reduction Act but does not currently expect a material impact on 2023 income tax payments[214](index=214&type=chunk) [NOTE 13 - Leases](index=29&type=section&id=NOTE%2013%20-%20Leases) Outlines the company's operating lease assets, liabilities, and future payment schedules - The company's right-of-use assets and lease liabilities are recognized on the balance sheet based on the present value of estimated lease payments, with no finance lease agreements as of June 30, 2023, and December 31, 2022[187](index=187&type=chunk) Operating Lease Asset Categories (in thousands) | Asset Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Field equipment | 30,829 | 15,131 | | Corporate leases | 6,326 | 8,235 | | Vehicles | 4,417 | 759 | | Total right-of-use assets | 41,572 | 24,125 | Future Lease Payments (in thousands) | Period | Operating Leases | | :--- | :--- | | Remainder of 2023 | 12,419 | | 2024 | 18,964 | | 2025 | 7,416 | | 2026 | 3,449 | | 2027 | 2,106 | | Thereafter | 649 | | Total lease payments | 45,003 | | Less: Imputed interest | (2,768) | | Total lease liabilities | 42,235 | [NOTE 14 - Supplemental Disclosures of Cash Flow Information](index=29&type=section&id=NOTE%2014%20-%20Supplemental%20Disclosures%20of%20Cash%20Flow%20Information) Provides additional details on cash flows for taxes, interest, and capital expenditures Supplemental Cash Flow Information (in thousands) | Item | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | | Cash paid for / received from income taxes | 7,861 | (6,300) | | Cash paid for interest | (12,627) | (15,821) | | Changes in working capital related to capital expenditures | 56,345 | (2,666) | [NOTE 15 - Stockholders' Equity](index=30&type=section&id=NOTE%2015%20-%20Stockholders%27%20Equity) Details stock repurchase programs and dividend policies - In February 2023, the Board approved a stock repurchase program authorizing up to **$1 billion** of common stock, later reduced to **$500 million** in June 2023 due to acquisitions[218](index=218&type=chunk) - As of June 30, 2023, the company repurchased approximately **312,800 shares** under the program at a total cost of **$20.2 million**, with a weighted-average price of **$64.55** per share[218](index=218&type=chunk) - The company declared quarterly base cash dividends since May 2021 and approved quarterly variable cash dividends since March 2022, with the latter equivalent to **50%** of free cash flow from the preceding 12 months after base dividends[191](index=191&type=chunk) Dividends Declared (per share amounts, in thousands) | Period | Base Dividend | Variable Dividend | Total Dividend | Total Amount | | :--- | :--- | :--- | :--- | :--- | | Q1 2023 | 0.50 | 1.65 | 2.15 | 176,878 | | Q2 2023 | 0.50 | 1.62 | 2.12 | 173,358 | | Q1 2022 | 0.46 | 0.75 | 1.21 | 104,444 | | Q2 2022 | 0.46 | 0.90 | 1.36 | 117,151 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial performance, liquidity, and outlook [Executive Summary](index=31&type=section&id=Executive%20Summary) Highlights key financial and operational performance for the quarter and strategic objectives - The company's primary goal is to maximize shareholder returns through responsible development of oil and gas resources, adhering to four pillars: generating free cash flow, maintaining an excellent balance sheet, returning free cash flow to shareholders, and demonstrating ESG leadership[195](index=195&type=chunk) - Crude oil equivalent sales volumes for Q2 2023 were largely consistent with the prior year period[251](index=251&type=chunk) - Acquisition Senior Notes were issued on June 29, 2023, with net proceeds of **$2.67 billion**[251](index=251&type=chunk) - Operating cash flow for the first half of 2023 was **$876 million**, compared to **$1.3 billion** in the same period of 2022[251](index=251&type=chunk) - Capital expenditures (including accrued) for the first half of 2023 totaled **$463.7 million**, with **$24 million** allocated to land and midstream capital expenditures[221](index=221&type=chunk) - In the first half of 2023, **5.2 million shares** of common stock were repurchased at a weighted-average price of **$61.21** per share[196](index=196&type=chunk) [Current Events and Outlook](index=32&type=section&id=Current%20Events%20and%20Outlook) Discusses macroeconomic factors influencing commodity prices and operational costs - Commodity prices continue to be influenced by macroeconomic factors, including global recovery post-COVID-19, Russia's invasion of Ukraine and related sanctions, and OPEC+ production limits, collectively driving oil prices higher[198](index=198&type=chunk) - Inflationary pressures and rising interest rates may lead to increased capital and operating expenses, impacting costs for oilfield services, equipment, and personnel retention[253](index=253&type=chunk) - The company cannot predict future commodity price volatility or oil and gas demand levels, which are subject to demand uncertainty, future monetary policy, and government low-carbon energy transition policies[199](index=199&type=chunk) [Results of Operations - Three Months Ended June 30, 2023 and 2022](index=33&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) Compares the company's operational and financial performance for the second quarter Product Revenue and Sales Volumes (for the Three Months Ended June 30, 2023 and 2022) | Item | 2023 3 Months | 2022 3 Months | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Product revenue (in thousands) | 658,840 | 1,150,782 | (491,942) | (43)% | | Crude oil sales volume (MBbls) | 7,677.6 | 7,308.4 | 369.2 | 5% | | Natural gas sales volume (MMcf) | 26,348.8 | 28,903.5 | (2,554.7) | (9)% | | NGL sales volume (MBbls) | 3,718.7 | 3,819.6 | (100.9) | (3)% | | Crude oil equivalent sales volume (MBoe) | 15,787.8 | 15,945.3 | (157.5) | (1)% | | Average sales price (per Bbl/Mcf/Boe) | | | | | | Crude oil (per Bbl) | 70.43 | 106.48 | (36.05) | (34)% | | Natural gas (per Mcf) | 1.67 | 7.10 | (5.43) | (76)% | | NGL (per Bbl) | 19.93 | 43.79 | (23.86) | (54)% | | Crude oil equivalent (per Boe) | 41.73 | 72.17 | (30.44) | (42)% | - Product revenue decreased by **43%** to **$658.8 million**, primarily due to a **42%** decrease in crude oil equivalent price (excluding derivative impact) of **$30.44** per Boe[256](index=256&type=chunk) Operating Expenses (for the Three Months Ended June 30, 2023 and 2022) | Expense Item (in thousands) | 2023 3 Months | 2022 3 Months | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Lease operating expenses | 51,230 | 41,877 | 9,353 | 22% | | Midstream operating expenses | 13,319 | 7,469 | 5,850 | 78% | | Gathering, transportation, and processing | 64,873 | 79,519 | (14,646) | (18)% | | Production and ad valorem taxes | 52,443 | 85,870 | (33,427) | (39)% | | Depreciation, depletion, and amortization | 232,786 | 204,519 | 28,267 | 14% | | Consolidation transaction costs | 31,145 | 1,418 | 29,727 | 2,096% | | General and administrative expenses | 33,541 | 29,666 | 3,875 | 13% | | Total operating expenses | 481,082 | 453,626 | 27,456 | 6% | - Derivative gain for Q2 2023 was **$4.9 million**, compared to a **$72.7 million** loss in Q2 2022, primarily influenced by fair value adjustments where future market prices were expected to be lower than future hedged contract prices[261](index=261&type=chunk) - Income tax expense for Q2 2023 was **$44.4 million**, with an effective tax rate of **24.2%**, differing from the **21%** statutory federal income tax rate mainly due to state income taxes and the tax impact of stock-based compensation[262](index=262&type=chunk) [Results of Operations - Six Months Ended June 30, 2023 and 2022](index=36&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Compares the company's operational and financial performance for the first half of the year Product Revenue and Sales Volumes (for the Six Months Ended June 30, 2023 and 2022) | Item | 2023 6 Months | 2022 6 Months | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Product revenue (in thousands) | 1,313,681 | 1,967,325 | (653,644) | (33)% | | Crude oil sales volume (MBbls) | 14,138.7 | 13,431.9 | 706.8 | 5% | | Natural gas sales volume (MMcf) | 53,254.9 | 55,689.9 | (2,435.0) | (4)% | | NGL sales volume (MBbls) | 7,121.8 | 7,542.3 | (420.5) | (6)% | | Crude oil equivalent sales volume (MBoe) | 30,136.3 | 30,255.9 | (119.6) | 0% | | Average sales price (per Bbl/Mcf/Boe) | | | | | | Crude oil (per Bbl) | 70.78 | 98.81 | (28.03) | (28)% | | Natural gas (per Mcf) | 2.75 | 5.71 | (2.96) | (52)% | | NGL (per Bbl) | 23.34 | 42.75 | (19.41) | (45)% | | Crude oil equivalent (per Boe) | 43.59 | 65.02 | (21.43) | (33)% | - Product revenue decreased by **33%** to **$1.3 billion**, primarily due to a **33%** decrease in crude oil equivalent price (excluding derivative impact) of **$21.43** per Boe[264](index=264&type=chunk) Operating Expenses (for the Six Months Ended June 30, 2023 and 2022) | Expense Item (in thousands) | 2023 6 Months | 2022 6 Months | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Lease operating expenses | 97,068 | 77,896 | 19,172 | 25% | | Midstream operating expenses | 23,380 | 13,181 | 10,199 | 77% | | Gathering, transportation, and processing | 132,225 | 129,922 | 2,303 | 2% | | Production and ad valorem taxes | 104,805 | 149,174 | (44,369) | (30)% | | Depreciation, depletion, and amortization | 434,089 | 389,379 | 44,710 | 11% | | Consolidation transaction costs | 31,627 | 21,952 | 9,675 | 44% | | General and administrative expenses | 70,399 | 65,386 | 5,013 | 8% | | Total operating expenses | 896,047 | 869,457 | 26,590 | 3% | - Derivative gain for the first half of 2023 was **$30.1 million**, compared to a **$368.1 million** loss in the same period of 2022, primarily influenced by fair value adjustments where future market prices were expected to be lower than future hedged contract prices[335](index=335&type=chunk) - Income tax expense for the first half of 2023 was **$109.5 million**, with an effective tax rate of **24.3%**, differing from the **21%** statutory federal income tax rate mainly due to state income taxes and the tax impact of stock-based compensation[269](index=269&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Analyzes the company's liquidity sources, capital needs, and funding strategies - As of June 30, 2023, the company's liquidity was **$3.7 billion**, including **$2.7 billion** in cash and **$987.9 million** in available borrowing capacity under its credit facility[271](index=271&type=chunk) - On August 2, 2023, the company completed acquisitions and amended its credit facility, increasing total commitments to **$1.85 billion**, the borrowing base to **$3 billion**, and available borrowing capacity to **$1.1 billion**[271](index=271&type=chunk) - The company expects its 2023 capital program to be funded by cash flow from operating activities, cash on hand, and available borrowing capacity under its credit facility[244](index=244&type=chunk) Cash Flows (for the Six Months Ended June 30, 2023 and 2022) | Item (in thousands) | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | | Net cash provided by operating activities | 876,030 | 1,254,768 | | Net cash used in investing activities | (923,204) | (733,491) | | Net cash provided by (used in) financing activities | 1,982,040 | (336,480) | Adjusted EBITDAX (in thousands) | Item | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Net income | 139,287 | 468,821 | 341,748 | 560,460 | | Depreciation, depletion, and amortization | 232,786 | 204,519 | 434,089 | 389,379 | | Interest expense | 8,753 | 8,116 | 16,202 | 17,182 | | Income tax expense | 44,363 | 152,464 | 109,452 | 175,825 | | Adjusted EBITDAX | 454,301 | 739,225 | 897,739 | 1,211,058 | Free Cash Flow (in thousands) | Item | 2023 3 Months | 2022 3 Months | 2023 6 Months | 2022 6 Months | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 337,181 | 722,227 | 876,030 | 1,254,768 | | Free cash flow | 189,231 | 429,366 | 375,711 | 635,903 | [Critical Accounting Estimates](index=42&type=section&id=Critical%20Accounting%20Estimates) States no significant changes to critical accounting policies during the quarter - During Q2 2023, there were no significant changes in the company's application of critical accounting policies[278](index=278&type=chunk) [Material Commitments](index=42&type=section&id=Material%20Commitments) Confirms no significant changes to material commitments beyond specified notes - Except for disclosures in Note 6 (Commitments and Contingencies) and Note 13 (Leases), there have been no material changes to the company's obligations and commitments compared to the 2022 Form 10-K[279](index=279&type=chunk) [New Accounting Pronouncements](index=41&type=section&id=New%20Accounting%20Pronouncements) Refers to Note 1 for information on new accounting standards - Information regarding newly issued or adopted accounting pronouncements can be found in Note 1 (Summary of Significant Accounting Policies) in Part I, Item 1 of this report[277](index=277&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Identifies and discusses key market risks impacting the company's financial performance [Oil and Natural Gas Price Risk](index=42&type=section&id=Oil%20and%20Natural%20Gas%20Price%20Risk) Explains the company's exposure to volatile oil and gas market prices and hedging strategies - The company's financial condition, results of operations, and capital resources are highly dependent on volatile oil and gas market prices, which are influenced by global supply and demand, inflation, monetary policy, weather, and geopolitical factors[302](index=302&type=chunk) - The company uses commodity derivative contracts (such as swaps, call options, basis protection swaps, and put options) to hedge a portion of its future oil and gas production price risk to protect its balance sheet[281](index=281&type=chunk)[338](index=338&type=chunk) [Interest Rates](index=42&type=section&id=Interest%20Rates) Discusses the impact of floating interest rates on the company's borrowings - Borrowings under the company's credit facility bear floating interest rates tied to the Alternative Base Rate (ABR) or Secured Overnight Financing Rate (SOFR), and rising interest rates could adversely affect the company's operating results and cash flows[282](index=282&type=chunk) - As of June 30, 2023, there were no outstanding borrowings under the company's credit facility, but **$750 million** was outstanding as of the date of this report[282](index=282&type=chunk) [Counterparty and Customer Credit Risk](index=42&type=section&id=Counterparty%20and%20Customer%20Credit%20Risk) Addresses credit risks associated with derivative counterparties and major customers - The company faces credit risk from financial institutions in its derivative transactions; as of June 30, 2023, all derivative counterparties were members of the credit facility lending group and had investment-grade credit ratings[13](index=13&type=chunk) - The company also faces credit risk from oil and gas accounts receivable concentrated with specific significant customers, where failure to perform or bankruptcy could adversely affect financial results; the company reviews customer credit but generally does not require collateral[324](index=324&type=chunk) [Marketability of Our Production](index=43&type=section&id=Marketability%20of%20Our%20Production) Describes the reliance on third-party infrastructure for production marketability - The marketability of the company's production depends in part on the availability, proximity, and capacity of third-party refineries, trucking, pipeline, and rail infrastructure, natural gas gathering systems, and processing facilities[304](index=304&type=chunk) - A lack of or inadequate capacity in these systems and facilities could result in lower prices for the company's production or cause production wells to be shut-in or development plans to be delayed or curtailed[304](index=304&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Assesses the effectiveness of disclosure controls and internal controls over financial reporting - As of June 30, 2023, the company's management, including the Chief Executive Officer and Chief Financial Officer, evaluated and concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[285](index=285&type=chunk)[339](index=339&type=chunk) - During Q2 2023, no changes in internal control over financial reporting were identified that materially affected, or are reasonably likely to materially affect, the company's internal control[307](index=307&type=chunk) [Part II. Other Information](index=44&type=section&id=Part%20II.%20Other%20Information) Contains additional disclosures not covered in the financial information section [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 6 for details on the company's legal proceedings - Information regarding the company's legal proceedings is disclosed in Note 6 (Commitments and Contingencies) in Part I, Item 1 of this report[309](index=309&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Highlights various risks that could materially affect the company's operations and financial results - The company's business faces numerous risks, and any risk factor could materially affect its business, financial condition, or results of operations[310](index=310&type=chunk) - Detailed risk factors can be found in Part I, Item 1A of the 2022 Form 10-K and Exhibit 99.2 to the Form 8-K filed on June 20, 2023[310](index=310&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Provides details on common stock repurchases during the quarter Common Stock Repurchase Information for Q2 2023 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :--- | :--- | :--- | :--- | :--- | | April 1 - April 30, 2023 | 11,661 | 69.57 | — | 1,000,000 | | May 1 - May 31, 2023 | 126,430 | 68.79 | — | 1,000,000 | | June 1 - June 30, 2023 | 314,570 | 64.56 | 312,766 | 479,810 | | Total | 452,661 | 65.87 | 312,766 | 479,810 | - In June 2023, the Board reduced the authorized amount for the stock repurchase program from **$1 billion** to **$500 million**[288](index=288&type=chunk) - Purchases not part of the repurchase plan represent shares received by the company from executives and employees to cover personal income tax withholding obligations upon RSU vesting[288](index=288&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States that this item is not applicable, indicating no senior securities defaults - Not applicable[289](index=289&type=chunk)[326](index=326&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that this item is not applicable, indicating no mine safety disclosures - Not applicable[312](index=312&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) Discloses no Rule 10b5-1 trading arrangement adoptions or terminations by officers or directors - During Q2 2023, no directors or officers adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[290](index=290&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q report - Exhibits include the company's certificate of incorporation, senior notes indentures, acquisition agreements, credit agreement amendments, employment agreements, executive compensation agreements, CEO and CFO certifications, and XBRL data files[1](index=1&type=chunk) [Signatures](index=46&type=section&id=Signatures) Confirms the official signing of the report by authorized company representatives - The report was signed by Chris Doyle, President and Chief Executive Officer, Marianella Foschi, Chief Financial Officer, and Sandi K. Garbiso, Chief Accounting Officer and Treasurer of Civitas Resources, Inc. on August 2, 2023[2](index=2&type=chunk)[292](index=292&type=chunk)[316](index=316&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)

Financial Data and Key Metrics Changes - The company generated approximately $186 million in free cash flow during the first quarter, starting the year with $768 million in cash on the balance sheet [30] - The total dividend of $2.12 per share will be paid on June 29, with a variable dividend of $1.62 per share approved for the second quarter, in addition to a $0.50 fixed dividend [10][24] - The company reported production of 159,000 barrels of oil equivalent (BOE) per day, at the high end of guidance, with April production averaging approximately 165,000 BOE per day [54] Business Line Data and Key Metrics Changes - The company achieved a 17% improvement in spud-to-spud cycle times and a 7% increase in throughput from the completions team in the first quarter [23] - Capital investments in the first quarter were approximately $237 million, with a focus on maintaining a two-rig and two-frac crew operational plan [55] Market Data and Key Metrics Changes - The company maintains one of the strongest balance sheets in the industry, with about $560 million in cash against $400 million in total debt [10] - Operating costs decreased by 7% quarter-over-quarter, despite slightly higher operational costs due to cold weather [31] Company Strategy and Development Direction - The company is focused on free cash flow generation, maintaining a strong balance sheet, and returning significant cash to shareholders while leading on ESG initiatives [52] - The 2023 development plan is fully permitted, with significant progress expected on the 2024 plan [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute and deliver on its business plan, emphasizing continuous improvement and efficiency gains [29] - The company is committed to maintaining a disciplined approach to capital allocation, especially in light of the disconnect between service costs and commodity prices [5][91] Other Important Information - The company has made a small acquisition in-basin for a little over $30 million, enhancing its DJ position [16] - The company is actively working on a comprehensive pneumatic retrofit project aimed at reducing total scope one emissions by approximately 40% by the end of the year [32] Q&A Session All Questions and Answers Question: Can you talk about any discussions you've had with the state about potential changes to the permitting process? - Management discussed ongoing relationships with the COGCC and the administration, expressing confidence in the permitting process and the company's ability to meet new environmental targets [12][37] Question: What are your thoughts on the disconnect between commodity prices and service costs? - Management acknowledged the disconnect but indicated it would not materially impact capital allocation decisions, maintaining a strong balance sheet [58] Question: Can you provide insights on the recent acquisition and the current landscape for potential deals in the DJ Basin? - The company is focused on low-risk integration acquisitions and is actively looking for opportunities within the basin, emphasizing asset quality and returns [46][81]

Part I. Financial Information [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Civitas Resources, Inc. as of March 31, 2023, and for the three months then ended, with comparative data for prior periods. It includes the balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, followed by detailed notes explaining the accounting policies and financial details [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from **$7.97 billion** at year-end 2022 to **$7.68 billion** as of March 31, 2023, primarily due to a reduction in cash and cash equivalents. Total liabilities remained relatively stable at approximately **$2.57 billion**, while stockholders' equity decreased from **$5.37 billion** to **$5.10 billion**, reflecting share repurchases and dividends paid Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $956,241 | $1,328,430 | | **Total Assets** | **$7,675,048** | **$7,971,399** | | **Total Current Liabilities** | $1,058,031 | $1,177,927 | | **Total Liabilities** | **$2,573,299** | **$2,597,480** | | **Total Stockholders' Equity** | **$5,101,749** | **$5,373,919** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2023, the company reported net income of **$202.5 million**, a significant increase from **$91.6 million** in the same period of 2022. This was driven by a large derivative gain of **$25.2 million** in Q1 2023 compared to a **$295.5 million** loss in Q1 2022, which offset a decline in oil and gas sales revenue from **$817.8 million** to **$656.0 million** Statement of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Oil and natural gas sales | $656,022 | $817,810 | | Total operating expenses | $414,965 | $415,831 | | Derivative gain (loss) | $25,160 | $(295,493) | | **Net income** | **$202,461** | **$91,639** | | **Diluted net income per share** | **$2.46** | **$1.07** | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from **$5.37 billion** to **$5.10 billion** during the first quarter of 2023. The decrease was primarily driven by **$303.5 million** in common stock repurchases and **$176.9 million** in dividends declared, which were partially offset by **$202.5 million** in net income Changes in Stockholders' Equity - Q1 2023 (in thousands) | Item | Amount | | :--- | :--- | | Balance, December 31, 2022 | $5,373,919 | | Net income | $202,461 | | Dividends declared | $(176,878) | | Common stock repurchased and retired | $(303,455) | | Stock-based compensation | $7,380 | | **Balance, March 31, 2023** | **$5,101,749** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was **$538.8 million** for Q1 2023, comparable to **$532.5 million** in Q1 2022. Investing activities used **$275.6 million**, mainly for property development. Financing activities used a significant **$475.2 million**, driven by **$300.1 million** in share repurchases and **$173.4 million** in dividend payments, leading to a net decrease in cash of **$211.9 million** Cash Flow Summary - Q1 2023 vs Q1 2022 (in thousands) | Cash Flow Category | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $538,849 | $532,541 | | Net cash used in investing activities | $(275,607) | $(516,300) | | Net cash used in financing activities | $(475,161) | $(116,346) | | **Net change in cash** | **$(211,919)** | **$(100,105)** | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies and figures presented in the financial statements. Key notes cover acquisitions, revenue recognition, long-term debt, commitments and contingencies, stock-based compensation, derivative instruments, fair value measurements, income taxes, and earnings per share calculations - The company is an **independent exploration and production company** focused on the **DJ Basin of Colorado**[61](index=61&type=chunk) - On March 1, 2022, the Company completed the **acquisition of Bison Oil & Gas II, LLC** for approximately **$280.4 million**, resulting in a **bargain purchase gain** of **$13.6 million**[64](index=64&type=chunk) - The company has **$400.0 million** in **5.0% Senior Notes due 2026** and a **$2.0 billion revolving credit facility** with a **$1.85 billion** borrowing base, which was **undrawn as of March 31, 2023**[97](index=97&type=chunk)[101](index=101&type=chunk)[121](index=121&type=chunk) - The company uses **various derivative contracts**, including swaps and collars, to **mitigate commodity price risk** for its oil and natural gas production[9](index=9&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results for Q1 2023. Key themes include the impact of **volatile commodity prices**, a **20% decrease** in product revenues due to lower prices, and a significant increase in net income driven by derivative gains. The discussion also covers operating expense trends, liquidity, capital resources, and reconciles non-GAAP measures like **Adjusted EBITDAX** and **Free Cash Flow** - The company's **primary objective is guided by four pillars**: **generate free cash flow**, **maintain a premier balance sheet**, **return free cash flow to shareholders**, and **demonstrate ESG leadership**[148](index=148&type=chunk) - Key financial and operational results for Q1 2023 include **flat crude oil equivalent sales volumes YoY**, a **27% increase in lease operating expense per Boe**, **payment of $173.4 million in dividends**, and **a $300 million share repurchase**[171](index=171&type=chunk) - **Commodity prices remain volatile**, influenced by global recovery from COVID-19, the Russia-Ukraine conflict, and economic uncertainty from inflation and interest rates[174](index=174&type=chunk)[175](index=175&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Product revenues decreased by **20%** in Q1 2023 compared to Q1 2022, driven by a **20% drop** in average sales price per Boe. Operating expenses saw notable increases in lease operating (**27%**), midstream operating (**76%**), and gathering/transportation (**34%**) on a per-Boe basis, attributed to the Bison acquisition, inflation, and weather. These were offset by a **17% decrease** in severance and ad valorem taxes and a significant reduction in merger-related costs Sales Volumes and Prices (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Crude oil equivalent (MBoe) | 14,348.6 | 14,310.6 | — % | | Avg. Sales Price (per Boe) | $45.64 | $57.06 | (20)% | Operating Expenses per Boe (Q1 2023 vs Q1 2022) | Expense Category | Q1 2023 ($/Boe) | Q1 2022 ($/Boe) | % Change | | :--- | :--- | :--- | :--- | | Lease operating expense | $3.19 | $2.52 | 27% | | Midstream operating expense | $0.70 | $0.40 | 75% | | Gathering, transportation, and processing | $4.69 | $3.52 | 33% | | Severance and ad valorem taxes | $3.65 | $4.42 | (17)% | | **Total Operating Expense** | **$28.91** | **$29.06** | **(1)%** | - A **derivative gain of $25.2 million** was recorded in Q1 2023, compared to a **loss of $295.5 million** in Q1 2022, due to changes in fair market value relative to contracted hedge prices[182](index=182&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had total liquidity of **$1.5 billion**, comprising **$556.1 million** in cash and **$987.9 million** available under its credit facility. The primary source of cash is from operations, which is subject to commodity price volatility. The company expects to fund its 2023 capital program with cash flows from operations and believes it has sufficient capital for the next 12 months - Total liquidity as of March 31, 2023, was **$1.5 billion**, consisting of **$556.1 million** cash and **$987.9 million** available borrowing capacity[205](index=205&type=chunk) - The company was in compliance with all financial covenants under its Credit Facility, including a permitted net leverage ratio of **3.00 to 1** and a current ratio of **1.00 to 1**[186](index=186&type=chunk) Reconciliation of Net Income to Adjusted EBITDAX (in thousands) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net income | $202,461 | $91,639 | | Adjustments (Interest, Taxes, DD&A, etc.) | $240,978 | $380,194 | | **Adjusted EBITDAX** | **$443,439** | **$471,833** | Reconciliation of Operating Cash Flow to Free Cash Flow (in thousands) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $538,849 | $532,541 | | Adjustments | $(116,079) | $(93,352) | | Less: Exploration & development | $(250,389) | $(260,667) | | Less: Changes in working capital for capex | $14,099 | $28,015 | | **Free cash flow** | **$186,480** | **$206,537** | [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's **primary market risk is from volatile oil and natural gas prices**, which it manages through **commodity derivative contracts**. While these contracts reduce downside risk, they may also limit potential gains from price increases. The company also has exposure to **interest rate risk** on its credit facility (which was undrawn) and **counterparty credit risk** from derivative partners and significant customers - The company's financial results are **highly dependent on fluctuating oil and natural gas prices**, which are beyond its control[243](index=243&type=chunk) - **Derivative contracts** (swaps, collars, puts) are used to protect the balance sheet from **commodity price volatility**[244](index=244&type=chunk) - As of March 31, 2023, the company had a **zero balance** on its variable-rate Credit Facility, minimizing immediate **interest rate risk**[245](index=245&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's **disclosure controls and procedures** as of March 31, 2023, and concluded they were **effective as of March 31, 2023** at a reasonable assurance level. There were **no material changes** to the company's internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's **disclosure controls and procedures were effective as of March 31, 2023**[226](index=226&type=chunk) - **No changes in internal control over financial reporting occurred** during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[228](index=228&type=chunk) Part II. Other Information [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to **Note 6** of the financial statements for information regarding legal proceedings. **Note 6** details ongoing litigation with Boulder County and notices of alleged violations from state regulatory bodies - Information regarding legal proceedings is detailed in **Note 6 - Commitments and Contingencies**[231](index=231&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been **no material changes** to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - The company directs investors to the **risk factors section of its 2022 Form 10-K** for a discussion of potential risks and uncertainties[232](index=232&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2023, the company repurchased a **total of 4,948,143 shares** of its common stock. This was dominated by a **privately-negotiated purchase of approximately 4.9 million shares** from CPPIB Crestone Peak Resources Canada Inc. for **$300.0 million** Share Repurchases for Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2023 | 4,923,063 | $61.00 | | Feb 1 - Feb 28, 2023 | 24,545 | $61.99 | | Mar 1 - Mar 31, 2023 | 535 | $66.25 | | **Total** | **4,948,143** | **$61.01** | - On January 24, 2023, the company entered a **privately-negotiated agreement** to purchase **~4.9 million shares** for **$300.0 million** (**$61.00 per share**)[233](index=233&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, material contracts such as the **Share Purchase Agreement**, and **certifications by the CEO and CFO** as required by the Sarbanes-Oxley Act - The exhibits include the **Share Purchase Agreement** for the January 2023 repurchase, forms of stock unit agreements, and **CEO/CFO certifications**[238](index=238&type=chunk)

Civitas Resources, Inc. (NYSE:CIVI) Q4 2022 Earnings Conference Call February 23, 2023 10:00 AM ET Company Participants John Wren - Director, Investor Relations Chris Doyle - Chief Executive Officer Marianella Foschi - Chief Financial Officer Matt Owens - Chief Operating Officer Brian Cain - Chief Sustainability Officer Conference Call Participants Neal Dingmann - Truist Securities Tim Rezvan - KeyBanc Phillips Johnston - Capital One Noel Parks - Tuohy Brothers Nicholas Pope - Seaport Research Bill Dezellem ...

PART I [Business](index=12&type=section&id=Item%201.%20Business) Civitas Resources is an independent oil and natural gas exploration and production company focused on the DJ Basin, prioritizing free cash flow and ESG leadership - The company's primary objective is to maximize shareholder returns through generating free cash flow, maintaining a premier balance sheet, returning cash flow to shareholders, and demonstrating ESG leadership[16](index=16&type=chunk)[156](index=156&type=chunk)[126](index=126&type=chunk) - Civitas is Colorado's first carbon-neutral oil and gas operator on a Scope 1 and Scope 2 basis, employing practices like electric drilling rigs and 24/7 air monitoring, with a dedicated Board ESG Committee[5](index=5&type=chunk) 2022 Key Financial and Operational Highlights | Metric | Value | | :--- | :--- | | Net Income | ~$1.2 billion | | Cash Flow from Operating Activities | ~$2.5 billion | | Free Cash Flow | ~$1.2 billion | | Capital Reinvestment Rate | ~39% of operating cash flow | | Cash Returned to Shareholders | >$530 million | | Average Daily Sales Volume | 170.0 MBoe/d | | Gross Operated Wells Turned to Sales | 146 | - As of December 31, 2022, the company held approximately **525,900 net acres** in the Rocky Mountain region, with **89%** in the DJ Basin, operating **3,108 gross producing wells**[92](index=92&type=chunk) [Reserves](index=13&type=section&id=Reserves) Total proved reserves increased 5% to **416.0 MMBoe** as of December 31, 2022, with **83%** proved developed and a **PV-10 value of $9.8 billion** Estimated Proved Reserves as of December 31, 2022 | Reserve Category | Crude Oil (MBbls) | Natural Gas (MMcf) | NGL (MBbls) | Total (MBoe) | | :--- | :--- | :--- | :--- | :--- | | Developed | 117,768 | 750,793 | 102,004 | 344,904 | | Undeveloped | 34,834 | 116,707 | 16,830 | 71,115 | | **Total Proved** | **152,602** | **867,500** | **118,834** | **416,019** | Changes in Total Proved Reserves (MBoe) | Category | Net Reserves (MBoe) | | :--- | :--- | | Beginning of year (2022) | 397,690 | | Production | (62,063) | | Purchases of minerals in place | 27,269 | | Extensions, discoveries, and other additions | 27,904 | | Revisions to previous estimates | 25,447 | | **End of year (2022)** | **416,019** | - As of December 31, 2022, the company had **201 gross proved undeveloped (PUD) drilling locations**, a decrease from **234** at year-end 2021, with an average lateral length of approximately **2.2 miles**[137](index=137&type=chunk) - Reserve estimates were independently prepared by Ryder Scott and reviewed by the Company's Audit Committee and an in-house Senior Manager[141](index=141&type=chunk) [Production, Revenues, and Price History](index=17&type=section&id=Production%2C%20Revenues%2C%20and%20Price%20History) In 2022, total production was **62,063 MBoe** with average daily production of **170,035 Boe/d**, and average crude oil sales price of **$91.70 per barrel** Production and Average Sales Price History | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Production (MBoe)** | 62,063 | 20,445 | 9,239 | | **Average Daily Production (Boe/d)** | 170,035 | 56,015 | 25,242 | | **Avg. Oil Sales Price (per Bbl, excl. derivatives)** | $91.70 | $65.41 | $34.42 | | **Avg. Gas Sales Price (per Mcf, excl. derivatives)** | $6.15 | $3.84 | $1.45 | | **Avg. NGL Sales Price (per Bbl, excl. derivatives)** | $35.76 | $34.68 | $10.39 | | **Avg. Production Costs (per Boe)** | $3.25 | $3.41 | $4.00 | - In 2022, **three customers** accounted for a combined **72% of total revenue** (Customer A: **50%**, Customer B: **12%**, Customer C: **10%**)[144](index=144&type=chunk) [Acreage and Drilling Activity](index=19&type=section&id=Acreage%20and%20Drilling%20Activity) As of December 31, 2022, the company held **525,900 net acres**, primarily in the DJ Basin, and in 2022, drilled **176 gross wells** and turned **146 to sales** Acreage Summary as of December 31, 2022 | Basin | Developed Gross Acres | Developed Net Acres | Undeveloped Gross Acres | Undeveloped Net Acres | Total Gross Acres | Total Net Acres | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | DJ Basin | 526,600 | 396,900 | 172,200 | 73,100 | 698,800 | 470,000 | | Other Rocky Mountain | 107,800 | 42,600 | 19,900 | 13,300 | 127,700 | 55,900 | | **Total** | **634,400** | **439,500** | **192,100** | **86,400** | **826,500** | **525,900** | - In 2022, the company drilled **176 gross (152.0 net) wells**, completed **142 gross (125.2 net) wells**, and turned **146 gross (129.5 net) wells** to sales[210](index=210&type=chunk)[164](index=164&type=chunk) - Approximately **29,200 net acres**, or **5.6%** of total net acres, may expire within the next three years if production is not established or leases are not extended[209](index=209&type=chunk) [Regulation of the Oil and Natural Gas Industry](index=21&type=section&id=Regulation%20of%20the%20Oil%20and%20Natural%20Gas%20Industry) The company's operations are subject to extensive federal, state, and local regulations covering drilling, production, transportation, environmental protection, and safety, with evolving rules impacting costs and operations - Operations are substantially affected by federal, state, and local laws regulating permits, well spacing, production, surface use, water disposal, and well abandonment[216](index=216&type=chunk) - Interstate oil transportation is regulated by FERC under the Interstate Commerce Act, while intrastate transportation is regulated by state commissions[11](index=11&type=chunk) - Interstate natural gas transportation and sales are primarily regulated by FERC under the Natural Gas Act (NGA), including anti-market manipulation provisions[26](index=26&type=chunk)[220](index=220&type=chunk) - The company is subject to numerous environmental regulations, including the Clean Air Act (CAA), Clean Water Act (CWA), and RCRA, which may require significant capital expenditures for compliance[225](index=225&type=chunk)[226](index=226&type=chunk)[939](index=939&type=chunk) - Colorado Senate Bill 19-181 significantly changed state regulation, shifting the COGCC's mission to prioritize public health and the environment and granting local governments greater control over facility siting[936](index=936&type=chunk)[952](index=952&type=chunk) [Human Capital](index=34&type=section&id=Human%20Capital) As of December 31, 2022, Civitas had **353 full-time employees**, prioritizing health, safety, and diversity, achieving a **TRIR of 0.19** and **30% board diversity** - The company had **353 full-time employees** as of December 31, 2022, focused on attracting, retaining, and developing a highly qualified workforce[289](index=289&type=chunk) - Civitas prioritizes employee health and safety, achieving a **Total Recordable Incident Rate (TRIR) of 0.19** in 2022, below its target of **0.25** and the industry average[291](index=291&type=chunk) - The company met its board diversity goal of at least **30% gender and racial diversity**; as of year-end 2022, **22%** of the workforce are women and **15%** are minority group members[307](index=307&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from commodity price volatility, operational uncertainties, evolving regulatory landscape in Colorado, and financial exposures from debt and derivatives - Declines in oil, natural gas, and NGL prices are a primary risk, adversely affecting business, financial condition, and capital expenditure obligations[277](index=277&type=chunk)[326](index=326&type=chunk) - Operational risks include the high-risk nature of drilling, potential inaccuracies in reserve estimates, and challenges with horizontal drilling and completion techniques[280](index=280&type=chunk)[296](index=296&type=chunk) - Regulatory initiatives, especially in Colorado, related to hydraulic fracturing, climate change, and increased local government oversight could result in increased costs, operating restrictions, or delays[281](index=281&type=chunk)[282](index=282&type=chunk) - The concentration of operations in the DJ Basin in Colorado increases exposure to regional events, regulatory changes, and activist opposition[299](index=299&type=chunk)[400](index=400&type=chunk) - Financial risks include restrictive covenants in debt agreements, potential losses from derivative activities, and credit risks associated with counterparties and customers[278](index=278&type=chunk)[284](index=284&type=chunk) [Properties](index=62&type=section&id=Item%202.%20Properties) Information regarding the company's properties, including details on acreage, reserves, and productive wells, is provided in Item 1, Business - The information required by Item 2 is contained in Item 1. Business and is incorporated by reference[511](index=511&type=chunk) [Legal Proceedings](index=63&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, with a previously disclosed litigation with Boulder County, Colorado, resolved on substantive issues, awaiting final dismissal - Previously disclosed litigation with Boulder County regarding oil and gas operations has been resolved on all substantive issues, with final dismissal pending[512](index=512&type=chunk) - In May 2022, Boulder County alleged new legal theories and requested lease termination, with no formal action initiated, but the company intends to vigorously defend its position[537](index=537&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "CIVI", with a dividend policy including a base dividend increased to **$0.50 per share** in Q4 2022 - The company's common stock is listed on the New York Stock Exchange under the symbol **"CIVI"**[935](index=935&type=chunk) - The company initiated a quarterly base dividend in May 2021 and a quarterly variable dividend in March 2022, with the base dividend increased to **$0.50 per share ($2.00 annually)** starting in Q4 2022[515](index=515&type=chunk) - During Q4 2022, the company acquired **7,457 shares** at an average price of **$68.62 per share** from employees to satisfy tax withholding obligations, not part of a public repurchase program[516](index=516&type=chunk)[542](index=542&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=66&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, product revenues increased **309% to $3.8 billion**, driven by volume and pricing, resulting in **$1.25 billion net income** and **$1.8 billion liquidity** - The discussion focuses on **2022 and 2021 results**, with 2020 information available in the prior year's 10-K[519](index=519&type=chunk) 2022 vs 2021 Key Metrics | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Product Revenue | $3.8 billion | $926.0 million | | Crude Oil Equivalent Sales (MBoe) | 62,062.9 | 20,445.4 | | Avg. Sales Price per Boe (before derivatives) | $61.03 | $45.29 | | Net Cash from Operating Activities | $2.5 billion | $274.6 million | | G&A Expense per Boe | $2.31 | $3.19 | - As of December 31, 2022, liquidity was **$1.8 billion**, comprising **$768.0 million in cash** and **$987.9 million** available under the credit facility[562](index=562&type=chunk) - The **2023 capital budget** is **$725 million to $825 million** for drilling and completion, plus **$75 million to $85 million** for land, midstream, and other activities including ESG[525](index=525&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is commodity price volatility; a **10% decline in SEC prices** would decrease **PV-10 value by $1.3 billion** - The company's financial results are highly dependent on oil and natural gas prices, which are subject to wide fluctuations beyond its control[634](index=634&type=chunk) - A **10% change in SEC oil and gas prices** would result in a **1% change in proved reserve volumes** and a **13% (or $1.3 billion) change** in the PV-10 value as of December 31, 2022[634](index=634&type=chunk) - The company uses derivative contracts to manage price risk; a hypothetical **10% upward shift** in the forward curve would increase derivative loss by **$20.7 million**, while a **10% downward shift** would decrease it by **$20.4 million**[611](index=611&type=chunk) - The company is exposed to counterparty credit risk from its **7 derivative counterparties** (all members of its credit facility lender group) and from its customers[638](index=638&type=chunk)[612](index=612&type=chunk) [Financial Statements and Supplementary Data](index=78&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2022, 2021, and 2020, along with the independent auditor's report and detailed notes - The report includes audited consolidated financial statements for the three years ended December 31, 2022, presenting fairly the financial position and results of operations in conformity with U.S. GAAP[615](index=615&type=chunk) - Deloitte & Touche LLP identified the estimation of proved oil and gas reserves as a critical audit matter due to significant judgments and assumptions, particularly regarding the five-year conversion plan for proved undeveloped reserves[617](index=617&type=chunk)[618](index=618&type=chunk) [NOTE 2 - ACQUISITIONS AND DIVESTITURES](index=90&type=section&id=NOTE%202%20-%20ACQUISITIONS%20AND%20DIVESTITURES) In 2021, the company completed three major mergers, and in 2022, acquired Bison Oil & Gas II, LLC for **$280.4 million**, resulting in a **$13.6 million bargain purchase gain** - On April 1, 2021, Civitas acquired HighPoint Resources Corporation for a total merger consideration of **$474.9 million**[734](index=734&type=chunk)[735](index=735&type=chunk) - On November 1, 2021, Civitas completed its merger with Extraction Oil & Gas, Inc. for a total merger consideration of **$1.84 billion**[706](index=706&type=chunk)[739](index=739&type=chunk) - On November 1, 2021, Civitas completed its merger with Crestone Peak for a total merger consideration of **$1.26 billion**[1000](index=1000&type=chunk)[710](index=710&type=chunk) - On March 1, 2022, the company acquired Bison Oil & Gas II, LLC for approximately **$280.4 million**, resulting in a **bargain purchase gain of $13.6 million**[770](index=770&type=chunk) [NOTE 5 - LONG-TERM DEBT](index=96&type=section&id=NOTE%205%20-%20LONG-TERM%20DEBT) As of December 31, 2022, long-term debt included **$400.0 million in 5.0% Senior Notes due 2026**, with a **$1.85 billion revolving credit facility** undrawn - The company has **$400.0 million** in aggregate principal of **5.0% Senior Notes due 2026**, with a net carrying amount of **$393.3 million** as of December 31, 2022[975](index=975&type=chunk)[752](index=752&type=chunk) - On May 1, 2022, the company redeemed all **$100.0 million** of its outstanding **7.5% Senior Notes**[750](index=750&type=chunk) - The company's revolving credit facility has a borrowing base of **$1.85 billion** and an elected commitment of **$1.0 billion**, with a zero balance outstanding and **$987.9 million** available capacity as of December 31, 2022[781](index=781&type=chunk)[782](index=782&type=chunk) [NOTE 9 - DERIVATIVES](index=105&type=section&id=NOTE%209%20-%20DERIVATIVES) The company uses commodity derivative contracts to mitigate price risk, recording a total derivative loss of **$335.2 million** in 2022, with **$63.5 million** in derivative liabilities Derivative Gain (Loss) Summary (in thousands) | Component | 2022 | 2021 | | :--- | :--- | :--- | | Derivative cash settlement loss | $(576,802) | $(275,914) | | Change in fair value gain | $241,642 | $215,404 | | **Total derivative loss** | **$(335,160)** | **$(60,510)** | - As of December 31, 2022, the company had oil and natural gas derivative contracts, primarily swaps and three-way collars, with positions extending through 2024[828](index=828&type=chunk)[852](index=852&type=chunk) - Subsequent to year-end, the company entered into natural gas basis protection swaps on all outstanding NYMEX HH positions through Q3 2024 to mitigate pricing differentials between NYMEX HH and CIG[182](index=182&type=chunk)[852](index=852&type=chunk) [NOTE 15 - DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)](index=113&type=section&id=NOTE%2015%20-%20DISCLOSURES%20ABOUT%20OIL%20AND%20GAS%20PRODUCING%20ACTIVITIES%20(UNAUDITED)) Capitalized costs for oil and gas properties totaled **$1.49 billion** in 2022, with the standardized measure of discounted future net cash flows from proved reserves at **$7.93 billion** Standardized Measure of Discounted Future Net Cash Flows (in thousands) | Component | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Future net cash flows | $12,526,994 | $6,773,594 | $1,023,287 | | 10% annual discount | $(4,599,504) | $(2,361,490) | $(586,233) | | **Standardized measure** | **$7,927,490** | **$4,412,104** | **$437,054** | - Total costs incurred for property acquisition, exploration, and development were **$1.49 billion** in 2022, compared to **$5.19 billion** in 2021 (including major acquisitions)[896](index=896&type=chunk) - Positive revisions to proved reserves in 2022 totaled **25.4 MMBoe**, driven by price-related revisions of **11.8 MMBoe** and performance-related revisions of **13.6 MMBoe**[870](index=870&type=chunk) [Controls and Procedures](index=117&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[266](index=266&type=chunk) - Management assessed the company's internal control over financial reporting as effective as of December 31, 2022, with the independent auditor issuing an unqualified opinion on its effectiveness[906](index=906&type=chunk)[908](index=908&type=chunk) - No material changes in internal control over financial reporting occurred during Q4 2022[907](index=907&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=120&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10-14 will be incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of fiscal year-end - The information required by Items 10, 11, 12, 13, and 14 will be incorporated by reference from a future SEC filing within **120 days** after December 31, 2022[274](index=274&type=chunk)[288](index=288&type=chunk)[923](index=923&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=121&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report on Form 10-K, including financial statements and various exhibits, with no financial statement schedules filed - This section includes the financial statements from Item 8 and a list of all exhibits filed with the report[887](index=887&type=chunk) - No financial statement schedules were filed with this report[926](index=926&type=chunk)

Civitas Resources, Inc. (NYSE:CIVI) Q3 2022 Earnings Conference Call November 1, 2022 10:00 AM ET Company Participants John Wren - IR Chris Doyle - President and CEO Marianella Foschi - CFO Matt Owens - COO Brian Cain - Chief Sustainability Officer Conference Call Participants Neal Dingmann - Truist Securities Leo Mariani - MKM Partners Nicholas Pope - Seaport Research Phillip Johnston - Capital One Noel Parks - Tuohy Brothers Bill Dezellem - Tieton Capital Operator Good morning. My name is Julianne and I w ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-35371 Civitas Resources, Inc. (Exact name of registrant as specified in its charter) Delaware 61 ...

Financial Data and Key Metrics Changes - The company generated GAAP net income of $468.8 million, adjusted EBITDAX of $739.2 million, and free cash flow of $436.6 million during Q2 2022 [12] - The total capital expenditure (CapEx) was approximately $240 million, with production exceeding internal targets despite inflationary pressures [8][12] - The company redeemed $100 million in senior notes, resulting in a net debt position of $400 million and approximately $440 million in cash [12][13] - The quarterly dividend was announced at $1.76 per share, representing a 30% quarter-over-quarter increase [13] Business Line Data and Key Metrics Changes - The company delivered an operational output of 175,000 MBoe per day, including 80,000 barrels of oil per day [8] - The oil marketing group optimized netbacks on oil production, achieving significant scale and geographical diversity [9][10] Market Data and Key Metrics Changes - The company updated its production guidance for 2022, accounting for year-to-date performance and a small acquisition, adding about 1,000 MBoe per day [16] - The oil differential guidance was decreased from $6 to between $4 and $5 per barrel [17] Company Strategy and Development Direction - The company focuses on maximizing free cash flow, maintaining a strong balance sheet, returning capital to shareholders, and leading in environmental, social, and governance (ESG) practices [6][14] - The management emphasizes disciplined growth and consolidation that enhances business performance rather than merely increasing size [7][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to optimize operations and integrate the five acquired companies, indicating that significant improvements are still to come [18][55] - The company is committed to being carbon-neutral and is investing in emissions reduction programs [50][51] Other Important Information - The company has 575 wells in the permitting pipeline, with 20% fully approved and 30% submitted and awaiting hearing dates [15] - The company is exploring additional benches and secondary targets within existing plays to optimize production [39] Q&A Session Summary Question: Discussion on capital allocation and share buybacks - Management indicated flexibility in capital allocation, considering share buybacks, special dividends, or acquisitions based on market conditions [20][22] Question: Permitting runway for efficient drilling and completions - Management aims to maintain a 12 to 18-month permit runway to optimize capital allocation [24][25] Question: Update on pending M&A deals - Management is in continuous dialogue regarding potential M&A opportunities but remains disciplined in their approach [28][30] Question: Production performance and future expectations - Management noted that production outperformed expectations due to early well performance and good execution, but guidance suggests moderation moving forward [34] Question: Crude marketing and transportation costs - Management highlighted improved realized prices from in-basin sales and plans to leverage market conditions for better pricing [36][37] Question: Exploration of additional benches and secondary targets - Management is considering opportunities for exploration within existing assets but is not focused on new formations at this time [39][40] Question: Integration of acquired companies and G&A reduction - Management reported an 18% quarter-over-quarter decrease in G&A, with ongoing efforts to optimize operations and reduce costs [42][44] Question: Current tax guidance for the remainder of the year - Management provided guidance of $75 million to $125 million in cash income taxes, assuming an average oil price of $100 per barrel for the rest of the year [61][62]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-35371 Civitas Resources, Inc. (Exact name of registrant as specified in its charter) Delaware 61-1630 ...