Civitas Resources(CIVI) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements 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 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] Condensed Consolidated Statements of Operations 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] Condensed Consolidated Statements of Stockholders' Equity - 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] Condensed Consolidated Statements of Cash Flows 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] Notes to the Condensed Consolidated Financial Statements - 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] - 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][39] - 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] - In July 2025, the company executed agreements to divest certain non-core DJ Basin assets for an aggregate of $435 million in cash[112] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 - 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] - 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] - 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] Results of Operations 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] 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] Liquidity and Capital Resources - 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] - 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] - 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] - 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] Non-GAAP Financial Measures 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 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] - Civitas uses commodity derivative contracts (swaps, collars, basis protection swaps) to mitigate a portion of its exposure to commodity price changes[184] - 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] Item 4. Controls and Procedures 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] - 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] Part II. Other Information Item 1. Legal Proceedings 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] - 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 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][200] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[201] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[202] Item 5. Other Information 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] Item 6. Exhibits 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][205]