Civitas Resources(US:CIVI)2023-11-08 20:06Financial Data and Key Metrics Changes - In 2023, the company increased its dividend to $7.60 per share from $6.29 in 2022, alongside $320 million in completed buybacks, totaling nearly $1 billion returned to shareholders, representing 15% of the current market cap [5][6] - Total company production averaged 235,000 BOE per day in Q3 2023, with oil production at 114,000 barrels per day, and a year-end exit rate target of about 280,000 BOE per day [28][29] - Capital investments in Q3 were approximately $430 million, consistent with expectations, with a planned increase in capital investments by about $60 million for 2024 [9][29] Business Line Data and Key Metrics Changes - In the Permian, production averaged 67,000 BOE per day for the quarter, with August and September averages at 101,000 BOE per day, and a strong quarter close at approximately 111,000 BOE per day [8] - In the DJ Basin, production volumes were 168,000 BOE per day, achieving operational efficiency with new records in drilling times and costs [28] Market Data and Key Metrics Changes - The company is on track to sell about $300 million in non-core assets to strengthen its balance sheet and reduce debt, targeting a leverage ratio of below 1 turn by the end of 2024, assuming $80 oil [6][10] Company Strategy and Development Direction - The company aims to maintain a strong capital structure while focusing on maximizing free cash flow and improving cash-on-cash returns [7][10] - The recent Vencer acquisition is expected to close in January 2024, enhancing the company's ability to generate free cash and diversify its portfolio [25][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational handover and integration of new assets, with a focus on high-return investments and disciplined capital allocation [7][30] - The company remains cautious yet optimistic about 2024, with expectations of continued outperformance in the Watkins area of the DJ Basin [33][43] Other Important Information - The company is progressing well with its non-core asset sales and anticipates a strong outlook for free cash flow at current prices [10] - The management team emphasized the importance of asset quality and operational excellence in sustaining shareholder returns [10][30] Q&A Session All Questions and Answers Question: What is the assumed 2024 step-up on the Permian D&C? - The midpoint for 2024 is $2.1 billion, with a split of roughly 55-45 between the Permian and DJ, allocating slightly more than half to the Permian [12] Question: How is the performance of the Watkins area affecting future expectations? - The Watkins area has significantly outperformed expectations, attributed to effective execution and full development, leading to a reassessment of future expectations [33] Question: What is the strategy for M&A going forward? - The company maintains a high hurdle for acquisitions, focusing on improving shareholder returns and extending the duration of those returns, with recent acquisitions aligning with this strategy [35][45] Question: How does the Vencer deal affect cash tax positions in 2024? - Cash taxes for 2024 are expected to be in the sub-$100 million range, with minimal impact until potentially hitting AMT in 2025, depending on oil prices [47]