Civitas Resources(CIVI) - 2021 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements Unaudited Q1 2021 financials show a $0.1 million net loss from derivative losses, with $1.21 billion total assets and $43.0 million operating cash flow Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $104,903 | $92,405 | | Total property and equipment, net | $1,011,712 | $997,311 | | Total assets | $1,208,286 | $1,182,812 | | Total current liabilities | $94,276 | $74,484 | | Total liabilities | $161,526 | $137,560 | | Total stockholders' equity | $1,046,760 | $1,045,252 | | Total liabilities and stockholders' equity | $1,208,286 | $1,182,812 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Oil and gas sales | $74,159 | $60,405 | | Total operating expenses | $50,672 | $80,386 | | Derivative gain (loss) | $(23,419) | $100,419 | | Net income (loss) | $(119) | $78,551 | | Diluted EPS | $(0.01) | $3.80 | - The significant swing from net income to a net loss was primarily driven by a derivative loss of $23.4 million in Q1 2021, compared to a derivative gain of $100.4 million in Q1 2020[12] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,964 | $47,994 | | Net cash used in investing activities | $(28,948) | $(26,871) | | Net cash used in financing activities | $(64) | $(21,071) | | Net change in cash | $13,952 | $52 | | Cash at end of period | $38,797 | $11,147 | Notes to the Condensed Consolidated Financial Statements - On April 1, 2021, the company completed its acquisition of HighPoint Resources Corporation. As part of the transaction, the company issued approximately 9.8 million shares of common stock and $100 million in 7.5% Senior Notes due 2026[106][108][109] - In conjunction with the HighPoint acquisition, the company amended its Credit Facility, increasing the borrowing base from $260 million to $500 million and the total commitment amount to $1 billion[110] - As of March 31, 2021, the company had zero outstanding borrowings on its Credit Facility[58] Derivative Assets and Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total derivative assets | $92 | $7,482 | | Total derivative liabilities | $(19,970) | $(7,732) | | Total net derivative assets (liabilities) | $(19,878) | $(250) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 performance, highlighting 24% product revenue growth from higher prices, a 37% decrease in operating expenses, and $298.7 million liquidity Q1 2021 vs Q1 2020 Operational Highlights | Metric | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Product Revenue (in thousands) | $73,049 | $58,792 | 24% | | Crude Oil Equivalent (MBoe) | 1,876.5 | 2,260.1 | (17)% | | Avg. Sales Price per Boe | $38.93 | $26.01 | 50% | - Total operating expenses decreased by 37% YoY, primarily due to a $30.1 million impairment of unproved properties in Q1 2020 that did not recur in Q1 2021[130][136] - The company's liquidity as of March 31, 2021, was $298.7 million, comprising $38.7 million in cash and $260.0 million available under its Credit Facility[141] Reconciliation of Net Income to Adjusted EBITDAX (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net income (loss) | $(119) | $78,551 | | Adjustments | $43,829 | $(35,282) | | Adjusted EBITDAX | $43,710 | $43,269 | Quantitative and Qualitative Disclosures About Market Risk Primary market risk is commodity price volatility, mitigated by derivative contracts, with minimal interest rate risk from no Credit Facility borrowings - The company's financial condition is highly dependent on the prevailing market prices of oil and natural gas, which are subject to wide fluctuations beyond its control[165] - To manage commodity price risk and reduce cash flow volatility, the company enters into derivative contracts such as swaps, collars, and puts[166] - As of March 31, 2021, the company had no outstanding debt under its Credit Facility, limiting its exposure to interest rate fluctuations for the period[172] Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[179] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[181] Part II. OTHER INFORMATION Legal Proceedings No material legal proceedings beyond HighPoint acquisition, including a breach of contract lawsuit and COGCC NOAVs with a $1.3 million recognized liability - The company assumed a breach of contract complaint from HighPoint, filed by Sterling Energy Investments LLC, related to a Gas Purchase Agreement. The company denies the claims and is seeking its own damages[183] - The company recognized a liability of approximately $1.3 million associated with Notices of Alleged Violations (NOAVs) from the COGCC that were issued to HighPoint[184] Risk Factors Risks from HighPoint acquisition include integration challenges, failure to achieve benefits, and increased exposure to Colorado regulatory and operational risks - A key risk is the inability to successfully integrate HighPoint's business and realize the anticipated benefits and cost savings from the acquisition[188] - The acquisition significantly increases the company's asset concentration in Colorado, heightening its exposure to unfavorable state regulatory developments and other regional operational risks[191][192] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity security sales in Q1 2021, with only a minor repurchase of 38 shares for employee tax withholding on vested awards - There were no sales of unregistered equity securities during the three-month period ended March 31, 2021[196] - The company repurchased 38 shares of common stock from employees to cover tax withholding obligations related to vested equity awards[197][198] Defaults Upon Senior Securities There were no defaults upon senior securities reported during the period Mine Safety Disclosures This section is not applicable to the company's operations Other Information No other material information is reported in this section Exhibits This section lists all exhibits filed, including the HighPoint merger agreement, credit agreement amendments, and corporate governance documents