Civitas Resources(US:CIVI)2024-08-02 19:09Financial Data and Key Metrics Changes - The company reported total production volumes above plan, with Permian production up approximately 12% and oil production up 5% compared to the previous quarter [7][10] - Cash operating expenses decreased by 2.5% from the first quarter, remaining below $9 per BOE [7] - Free cash flow for the quarter was in line with expectations, offsetting the impact of weak natural gas pricing [7][12] Business Line Data and Key Metrics Changes - The Permian assets are producing more than 185,000 BOE per day, with production ahead of plan and well costs below expectations [5][6] - In the DJ Basin, the company completed non-core asset sales at an accretive valuation, which impacted production by approximately 5,000 BOEs per day [20][21] Market Data and Key Metrics Changes - The company anticipates total volumes and oil production to grow quarter-over-quarter through the end of the year, despite some temporary impacts from extreme weather in Colorado [10][21] - The company has raised sales volume expectations by 3% from original guidance, adjusting for asset sales [10] Company Strategy and Development Direction - The company has transformed its business by entering the Permian Basin, enhancing its portfolio and providing capital allocation flexibility [5][6] - The management emphasized a commitment to returning 50% of free cash flow to shareholders after the base dividend, with a new $500 million share repurchase plan approved [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in operational execution and the strength of the asset base, expecting a strong second half of 2024 [10][11] - The company is focused on maximizing free cash flow while maintaining production levels, with plans to level-load capital allocation in 2025 [41][58] Other Important Information - The company has returned nearly $1.5 billion to shareholders since the beginning of last year, representing over 20% of its current market cap [12] - Management highlighted the importance of maintaining a strong balance sheet while pursuing shareholder returns [46][47] Q&A Session Summary Question: Execution of the newly increased buyback - Management views capital return decisions similarly to other capital allocation decisions, focusing on valuation and quality of assets [14][15] Question: Well costs and CapEx in the Midland Basin - Current forecasts assume a well cost of $765 per foot, with ongoing efforts to drive down costs through efficiency gains [16][18] Question: Anticipated oil production growth - Management expects production to trend higher in both the Permian and DJ Basins, despite temporary impacts from asset sales [20][21] Question: OFS cost pressures - Management noted some softness in the market, allowing for efficiency gains and cost reductions [22][23] Question: Performance of new Civitas wells - Management is optimistic about the performance of newly designed wells, expecting significant improvements [24][25] Question: Future capital allocation - Management indicated that capital allocation decisions will be influenced by operational improvements and regulatory clarity [39][40] Question: Production guidance and hedging strategy - Management is focused on maintaining a strong hedging program to support balance sheet initiatives and free cash flow [59][60]