Civitas Resources(CIVI) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full year production for 2024 was above plan, exceeding original guidance for capital and operating costs [9] - Free cash flow for the year was approximately $1.3 billion, with over 70% returned to shareholders through dividends and share repurchases [15] - The company targets a net debt of$ 4.5 billion by the end of 2025, representing an $800 million reduction from year-end 2024 [26] Business Line Data and Key Metrics Changes - Midland Basin well costs decreased by 15%, daily drilling footage increased nearly 20%, and daily completion throughput rose by 50% [10] - The company achieved record-setting four-mile laterals in the DJ Basin, representing the highest 180-day cumulative oil producers in Colorado [13] Market Data and Key Metrics Changes - The company plans to invest$ 1.8 billion to $1.9 billion in 2025, approximately 5% lower than the previous year, reflecting well cost savings [19] - The first quarter of 2025 is expected to be the low point for production, primarily due to natural declines in the DJ Basin [20] Company Strategy and Development Direction - The strategic priorities for 2025 include maximizing free cash flow, prioritizing debt reduction, returning cash to shareholders, and leading in ESG initiatives [16] - The company aims to maintain a level loading of capital investments in 2025, which is expected to deliver full-year oil production of 150,000 barrels per day [18] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of a low-cost structure as the first line of defense against oil price volatility [112] - The company is focused on achieving a sustainable free cash flow and meeting its leverage reduction goals while returning capital to shareholders [31] Other Important Information - The company announced a$ 300 million asset sales target for 2025, likely from the DJ Basin, to offset the purchase price of a recent acquisition [12] - A 10% reduction in workforce was implemented to streamline operations and enhance margins [24] Q&A Session Summary Question: Shift in capital allocation strategy - Management explained that the decision to prioritize debt reduction over stock buybacks was made to build a long-term sustainable business amid market volatility [37] Question: Production ramp-up and divestiture impact - Management indicated that the first quarter would see a drop in production, but an active plan is in place to ramp up production in subsequent quarters [40] Question: Details on the bolt-on deal in the Midland - The acquired locations are expected to be developed starting later in 2025 and into 2026, with good returns anticipated [46] Question: Future M&A versus cash return - Management stated that the top priority is achieving the net debt target, with any additional capital returns being opportunistic [49] Question: Inventory status in the Wolfcamp D - The Wolfcamp D is included in the 1,200 location count, with plans to allocate more capital towards its development in 2025 [60] Question: Delaware Basin opportunities - Management expressed optimism about the Delaware Basin, with plans to increase capital allocation to this area [68] Question: Infrastructure and midstream issues - Management confirmed that they have managed to minimize impacts from third-party processing issues and feel confident about infrastructure going forward [72] Question: Future cash taxes and AMT - Cash tax guidance for the year is set at $10 million to$ 30 million, with no anticipated impact from the alternative minimum tax until oil prices reach around $80 per barrel [101] Question: Growth potential with improved commodity prices - Management indicated a willingness to increase activity if the macro environment becomes more favorable, while still focusing on balance sheet targets [106] Question: Oil price volatility outlook - Management acknowledged significant volatility in oil prices and emphasized maintaining a low-cost structure as a defense strategy [112]