Civitas Resources(US:CIVI)2024-02-28 18:50Financial Data and Key Metrics Changes - Year-end 2023 proved reserves totaled nearly 700 million barrels of oil equivalent, up about 70% from last year, driven largely by the Tap Rock and Hibernia acquisitions [14] - Full year results for 2023 were in line with guidance, with nearly $1 billion returned to shareholders, consisting of two-thirds in dividends and one-third in share buybacks [26] - The company reduced its capital expenditures by $150 million for 2024 while maintaining expected full year production [12][29] Business Line Data and Key Metrics Changes - Fourth quarter production was 279,000 barrels of oil equivalent per day, with DJ basin volumes outperforming expectations, particularly in the Watkins area [44] - Approximately 70% of the 2024 activity will be focused in the Watkins area, with significant capital allocation planned for this high-return area [5][17] - The company anticipates modest production volume increases throughout 2024, with a strong exit rate from December 2023 [44][49] Market Data and Key Metrics Changes - The company expects free cash flow of approximately $1.3 billion in 2024, with dividends estimated at around $600 million, equating to a nearly 10% yield based on current stock price [46] - The remaining 40% of anticipated capital expenditures will be allocated to the DJ, with a focus on the Watkins area [45] Company Strategy and Development Direction - The 2024 plan focuses on maximizing free cash flow through disciplined investments, maintaining industry-leading shareholder returns, and improving the balance sheet [15] - The company is committed to a strong balance sheet with a long-term leverage target of 0.75x, while also pursuing a divestment program to enhance financial flexibility [30][39] - The integration of new Permian assets is expected to drive operational efficiencies and enhance returns, with a focus on continuous improvement [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver long-term shareholder value, highlighting the transformation into a stronger company with diversified operations [12][31] - The management team noted that the operational improvements seen in the DJ basin are expected to be replicated in the Permian, with a focus on returns and efficiency [58] - There is optimism regarding the regulatory environment in Colorado, with indications that proposed drilling phase-out measures may not gain significant support [55] Other Important Information - The company has completed divestments totaling about one-third of its $300 million target, with plans to complete the remainder by mid-2024 [30] - The company has a remaining $425 million on its share repurchase authorization, indicating a strong commitment to returning capital to shareholders [46][88] Q&A Session Summary Question: What is the 2024 Permian production guide? - The company expects production of around 170,000 BOE per day from approximately 140 wells, with a focus on capital efficiencies and operational improvements [34] Question: How will the company manage operational efficiencies in the Permian? - Management noted early wins in reducing drilling days by 20-30% and emphasized a focus on returns and shortening the time from capital deployment to production [35][36] Question: What is the expected cash tax outlook for 2025 and beyond? - Management indicated that cash taxes are expected to be in the range of $150 million to $175 million per year at $75 oil [6] Question: How does the company plan to balance buybacks and debt reduction? - The company aims to balance shareholder returns with its leverage target, remaining opportunistic in share repurchases while focusing on long-term value creation [87][88]