Civitas Resources(CIVI) - 2025 Q2 - Quarterly Results

Civitas Resources Second Quarter 2025 Financial Results Performance and Strategic Highlights 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] - The company is on track with its cost optimization efforts, aiming for $40 million in savings in 2025 and $100 million in 2026[4] - Agreements were signed to divest non-core DJ Basin assets for $435 million, with proceeds designated for debt reduction[4][10] - A capital return program has been reinstated, allocating 50% of free cash flow (post-dividend) to share buybacks and 50% to debt reduction[1][4] - Management emphasized that decisive steps in operations, cost savings, hedging, and divestments have resulted in a stronger company[3] Second Quarter 2025 Financial & Operational Results 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 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] - Realized hedging gains for the quarter amounted to $69 million, primarily from crude oil and natural gas swaps[8] - 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] - Financial liquidity at quarter-end was $2 billion, consisting of cash on hand and available borrowings under the revolving credit facility[15] Operational Performance 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] - Capital expenditures were at the low end of expectations, benefiting from well cost optimization and efficiency gains[8] 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] Capital Allocation and Strategic Updates The company reinstated its capital return program and announced significant non-core asset sales to accelerate debt reduction Capital Return Program 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] - The Board increased the share repurchase authorization to $750 million, and Civitas plans a $250 million accelerated share repurchase program[1][4] - 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] Non-Core Asset Divestments 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] - The divested assets are estimated to produce approximately 10 MBoe/d (about 50% oil) in 2026[10] - All proceeds from the transactions, expected to close around the end of Q3 2025, will be used for debt reduction[11] - The divestments are expected to reduce production by 2 MBoe/d in Q3 2025 and 12 MBoe/d in Q4 2025[11] Updated 2025 Outlook 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 $40 million in savings in 2025[12] - For Q3, Civitas anticipates more than 5% oil volume growth, with capital expenditures expected to be lower than Q2[13] Third Quarter 2025 Guidance | | 3Q25 Guidance | | :--- | :--- | | Sales Volumes (MBoe/d) | 327 - 338 | | Oil Volumes (MBbl/d) | 154 - 160 | | Capital Expenditures ($MM) | $460 - $500 | | Cash Operating Expenses ($ per BOE) | $9.80 - $10.30 | Financial Statements and Schedules This section presents unaudited consolidated financial statements and reconciliations of non-GAAP financial measures Condensed Consolidated Statements of Operations 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 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 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 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 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 |