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)

[Civitas Resources Second Quarter 2025 Financial Results](index=1&type=section&id=Civitas%20Resources%20Second%20Quarter%202025%20Financial%20Results) [Performance and Strategic Highlights](index=1&type=section&id=Performance%20and%20Strategic%20Highlights) The company reported strong Q2 2025 results, announced asset divestitures, and reinstated its capital return program - Second quarter 2025 results surpassed expectations with strong oil production and reduced capital and operating costs[4](index=4&type=chunk) - The company is on track with its cost optimization efforts, aiming for **$40 million in savings in 2025** and **$100 million in 2026**[4](index=4&type=chunk) - Agreements were signed to divest non-core DJ Basin assets for **$435 million**, with proceeds designated for debt reduction[4](index=4&type=chunk)[10](index=10&type=chunk) - A capital return program has been reinstated, allocating **50% of free cash flow** (post-dividend) to share buybacks and **50% to debt reduction**[1](index=1&type=chunk)[4](index=4&type=chunk) - Management emphasized that decisive steps in operations, cost savings, hedging, and divestments have resulted in a stronger company[3](index=3&type=chunk) [Second Quarter 2025 Financial & Operational Results](index=2&type=section&id=Second%20Quarter%202025%20Financial%20%26%20Operational%20Results) The company generated nearly $1.1 billion in revenue and achieved a 6% sequential increase in oil production Key Second Quarter 2025 Financial Results | | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | **Net Income ($MM)** | $124 | $310 | | **Adjusted Net Income ($MM)** | $92 | $258 | | **Operating Cash Flow ($MM)** | $298 | $1,017 | | **Adjusted EBITDAX ($MM)** | $749 | $1,535 | | **Sales Volumes (MBoe/d)** | 317 | 314 | | **Oil Volumes (MBbl/d)** | 149 | 145 | | **Capital Expenditures ($MM)** | $506 | $1,001 | | **Adjusted Free Cash Flow ($MM)** | $123 | $294 | [Financial Results](index=2&type=section&id=Financial%20Results) Q2 2025 revenue reached nearly $1.1 billion, supported by hedging gains and a 10% reduction in cash operating expenses - Crude oil, natural gas, and NGL revenues totaled nearly **$1.1 billion**, supported by strong crude oil volumes[8](index=8&type=chunk) - Realized hedging gains for the quarter amounted to **$69 million**, primarily from crude oil and natural gas swaps[8](index=8&type=chunk) - Cash operating expenses decreased by more than **10%** from Q1 to **$10.19 per BOE**, with Permian Basin LOE per BOE falling by over 15%[15](index=15&type=chunk) - Financial liquidity at quarter-end was **$2 billion**, consisting of cash on hand and available borrowings under the revolving credit facility[15](index=15&type=chunk) [Operational Performance](index=2&type=section&id=Operational%20Performance) Average daily oil volumes grew 6% sequentially, driven by new Permian wells and optimized capital expenditures - Average daily oil volumes increased by **6%** from Q1, driven almost entirely by new wells commencing production in the Permian Basin[8](index=8&type=chunk) - Capital expenditures were at the low end of expectations, benefiting from well cost optimization and efficiency gains[8](index=8&type=chunk) Drilling & Completion Cost Reductions (Year-to-Date) | Basin | Cost per Lateral Foot | % Reduction | | :--- | :--- | :--- | | **Delaware** | $880 | 7% | | **Midland** | $685 | 5% | | **DJ** | $650 | 3% | - In the DJ Basin, the company turned **46 net operated wells** to sales and drilled a multi-well pad of four-mile wells, demonstrating expertise in long-reach laterals[8](index=8&type=chunk) [Capital Allocation and Strategic Updates](index=1&type=section&id=Capital%20Allocation%20and%20Strategic%20Updates) The company reinstated its capital return program and announced significant non-core asset sales to accelerate debt reduction [Capital Return Program](index=1&type=section&id=Capital%20Return%20Program) The reinstated program allocates 50% of post-dividend free cash flow to buybacks and 50% to debt reduction - The reinstated capital return strategy allocates **50% of free cash flow** (after base dividend) to share buybacks and **50% to debt reduction**[4](index=4&type=chunk) - The Board increased the share repurchase authorization to **$750 million**, and Civitas plans a **$250 million** accelerated share repurchase program[1](index=1&type=chunk)[4](index=4&type=chunk) - A quarterly dividend of **$0.50 per share** was approved, payable on September 25, 2025, to shareholders of record as of September 11, 2025[9](index=9&type=chunk) [Non-Core Asset Divestments](index=3&type=section&id=Non-Core%20Asset%20Divestments) Civitas agreed to sell non-core DJ Basin assets for $435 million, with all proceeds dedicated to debt reduction - Executed two agreements to divest non-core DJ Basin assets for a total of **$435 million**[10](index=10&type=chunk) - The divested assets are estimated to produce approximately **10 MBoe/d** (about 50% oil) in 2026[10](index=10&type=chunk) - All proceeds from the transactions, expected to close around the end of Q3 2025, will be used for debt reduction[11](index=11&type=chunk) - The divestments are expected to reduce production by **2 MBoe/d in Q3 2025** and **12 MBoe/d in Q4 2025**[11](index=11&type=chunk) [Updated 2025 Outlook](index=3&type=section&id=Updated%202025%20Outlook) The company is on track for its 2025 cost savings target and anticipates over 5% oil volume growth in Q3 - The company is on track with its cost optimization initiative to deliver **$40 million in savings in 2025**[12](index=12&type=chunk) - For Q3, Civitas anticipates more than **5% oil volume growth**, with capital expenditures expected to be lower than Q2[13](index=13&type=chunk) Third Quarter 2025 Guidance | | 3Q25 Guidance | | :--- | :--- | | **Sales Volumes (MBoe/d)** | 327 - 338 | | **Oil Volumes (MBbl/d)** | 154 - 160 | | **Capital Expenditures ($MM)** | $460 - $500 | | **Cash Operating Expenses ($ per BOE)** | $9.80 - $10.30 | [Financial Statements and Schedules](index=6&type=section&id=Financial%20Statements%20and%20Schedules) This section presents unaudited consolidated financial statements and reconciliations of non-GAAP financial measures [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported Q2 2025 net income of $124 million on total operating net revenues of $1.057 billion Q2 2025 Statement of Operations Highlights (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Total operating net revenues** | $1,057 | $1,313 | | **Total operating expenses** | $887 | $926 | | **Income from operations before income taxes** | $162 | $283 | | **Net income** | $124 | $216 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was $298 million, while investing activities used $489 million in Q2 2025 Q2 2025 Statement of Cash Flows Highlights (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $298 | $359 | | **Net cash used in investing activities** | $(489) | $(490) | | **Net cash provided by financing activities** | $240 | $171 | | **Net change in cash** | $49 | $40 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $15.403 billion, with total stockholders' equity at $6.794 billion Balance Sheet Highlights (in millions) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $1,050 | $988 | | **Total assets** | $15,403 | $14,944 | | **Total current liabilities** | $1,683 | $2,205 | | **Debt, net** | $5,388 | $4,494 | | **Total liabilities** | $8,609 | $8,315 | | **Total stockholders' equity** | $6,794 | $6,629 | [Sales Volumes and Prices](index=9&type=section&id=Sales%20Volumes%20and%20Prices) Total average daily sales volumes were 317 MBoe/d, with an average realized crude oil price of $66.55 per barrel Q2 2025 Average Daily Sales Volumes | Commodity | Permian Basin | DJ Basin | Total | | :--- | :--- | :--- | :--- | | **Crude oil (MBbl/d)** | 83 | 66 | 149 | | **Natural gas (MMcf/d)** | 255 | 269 | 524 | | **NGLs (MBbl/d)** | 45 | 35 | 80 | | **Total (MBoe/d)** | 171 | 146 | 317 | [Non-GAAP Reconciliations](index=10&type=section&id=Non-GAAP%20Reconciliations) This section reconciles key non-GAAP metrics, including Adjusted EBITDAX of $749 million for Q2 2025 Key Non-GAAP Metrics (Q2 2025, in millions) | Metric | Value | | :--- | :--- | | **Adjusted Net Income** | $92 | | **Adjusted EBITDAX** | $749 | | **Adjusted Free Cash Flow** | $123 | | **Cash General and Administrative** | $40 |

Group 1 - Civitas Resources is identified as a profitable and capital-disciplined oil producer with high-quality acreage in the Lower 48 states [1] - The company has a strong hedge book, which provides financial stability and risk management [1] - There is clear visibility into production growth, indicating a positive outlook for future performance [1]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings and revenues for Civitas Resources in the upcoming earnings report, with actual results being crucial for stock price movement [1][3]. Earnings Expectations - Civitas is expected to report quarterly earnings of $1.17 per share, reflecting a year-over-year decrease of 43.2% [3]. - Revenues are projected to be $1.14 billion, down 13.4% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised 2.84% higher in the last 30 days, indicating a reassessment by analysts [4]. - Civitas has a negative Earnings ESP of -3.99%, suggesting recent bearish sentiment among analysts regarding the company's earnings prospects [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict deviations from consensus estimates, with positive readings being more reliable [9][10]. - Civitas currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat [12]. Historical Performance - In the last reported quarter, Civitas exceeded earnings expectations with a surprise of +5.36% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates twice [14]. Conclusion - Civitas does not appear to be a strong candidate for an earnings beat, and investors should consider other factors when evaluating the stock ahead of the earnings release [17].

Industry Overview - The Zacks Oil and Gas - Exploration and Production - United States industry is facing challenges due to lower crude prices influenced by geopolitical factors and an oversupply of natural gas [1][3][5] - The industry is currently ranked 186 out of 245 Zacks industries, placing it in the bottom 24% [8][10] - The industry's earnings estimates for 2025 have decreased by 41.6% over the past year, indicating a negative outlook [10] Key Trends - Easing geopolitical tensions have led to a reduction in oil prices, with WTI crude trading around $65, impacting companies reliant on higher prices for new investments [3][4] - OPEC forecasts a significant increase in global oil demand to 123 million barrels per day by 2050, necessitating an investment of $18.2 trillion in the oil and gas sector [4] - Natural gas production in the U.S. has reached record levels, with storage exceeding seasonal norms by 6%, which may limit price increases [5] - The International Energy Agency (IEA) predicts a slowdown in global oil demand growth post-2026 due to the rise of electric vehicles and cleaner energy policies [6][7] Company Highlights - **W&T Offshore (WTI)**: A leading oil and natural gas explorer with a market capitalization of nearly $270 million, known for its disciplined operations and positive cash flow for 28 consecutive quarters [18][19] - **EQT Corporation (EQT)**: The largest natural gas producer in the U.S. with a market cap of approximately $35 billion, expected EPS growth rate of 46.3% over the next three to five years [21][22] - **APA Corporation (APA)**: Engaged in exploration and production with a market cap of around $7 billion, known for its successful drilling in Suriname and the Permian Basin [23][24] - **Civitas Resources (CIVI)**: Focused on the DJ Basin and Permian Basin, with a market cap of about $2.8 billion, recognized for strong well returns and shareholder returns [26][27] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 11.28X, significantly lower than the S&P 500's 17.71X, but above the sector's 4.86X [15]

Group 1 - The energy sector is currently the worst performer in the S&P 500, with Civitas Resources Inc. (NYSE: CIVI) down by 33% year-to-date [1] - Despite the poor performance, there is a belief that Civitas Resources Inc. can end the year in positive territory [1] - The focus is on identifying strongly undervalued stocks within various sectors and geographies [1] Group 2 - The author has a background in business studies from France, the U.S., and Russia, and is a professional portfolio manager based in Luxembourg [1] - The author operates as a Popular Investor on the eToro platform, where investment opinions and decisions are publicly displayed [1]