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1. Company Snapshot

1.a. Company Description

Civitas Resources, Inc., an exploration and production company, focuses on the acquisition, development, and production of oil and natural gas in the Rocky Mountain region, primarily in the Wattenberg Field of the Denver-Julesburg Basin of Colorado.As of December 31,2021, it had proved reserves 397.7 MMBoe comprising 143.6 MMbbls of crude oil, 106.0 MMbbls of natural gas liquids, and 888.5 Bcf of natural gas.The company was formerly known as Bonanza Creek Energy, Inc.


Civitas Resources, Inc.was founded in 1999 and is based in Denver, Colorado.

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1.b. Last Insights on CIVI

Civitas Resources' recent performance was negatively impacted by weaker-than-expected Q2 earnings, with EPS of $0.99 per share missing the Zacks Consensus Estimate of $1.12 per share. The company's high leverage, variable production guidance, and uncertain cost savings have raised concerns. Additionally, a shareholder litigation law firm is investigating whether certain officers and directors breached their fiduciary duties to shareholders. However, the company is actively reducing debt, optimizing operations, and returning capital through dividends and buybacks, including a $750M buyback plan.

1.c. Company Highlights

2. Civitas Resources: A Stock Buyback Story

Civitas Resources delivered a solid second quarter, exceeding expectations with $750 million in adjusted EBITDA and $120 million in adjusted free cash flow. Notably, revenue came in at $1.4 billion, marking a 12% increase year-over-year. While this impressive performance contributed to a higher earnings per share (EPS) of $0.99, it fell short of analyst estimates of $1.12. This slight miss might be attributed to slightly higher-than-expected operating costs, which ultimately impacted profit margins.

Publication Date: Aug -08

📋 Highlights
  • Significant Stock Repurchase:: $750M buyback program, representing 28% of market cap.
  • Strong Q2 Performance:: $750M adjusted EBITDA and $120M adjusted free cash flow, exceeding expectations.
  • Operational Efficiency Gains:: 10%+ reduction in unit operating costs, 6% production growth QoQ in Midland Basin.
  • Capital Allocation Strategy:: 50-50 split between debt reduction and buybacks, starting with $250M accelerated share repurchase.
  • Cost Savings Progress:: 80% of $100M annual savings target captured by 2026, with $40M additional savings expected in 2025.

Capital Allocation Shift Drives Shareholder Value

The company's strategic shift towards returning value to shareholders through a $750 million stock buyback program, representing 28% of its market cap, is a clear signal of confidence in the current market conditions and its future prospects. This move follows the divestment of $435 million in non-core DJ Basin assets, bringing them closer to their target of $4.5 billion net debt by year-end.

Operational Efficiency Fuels Growth

Civitas demonstrated strong operational efficiency gains, with notable achievements in the Delaware Basin, where their first operated pad commenced production, averaging over 1,200 barrels of oil per day per well. In the Midland Basin, continued efficiency gains saw average daily footage drilled per well exceed 1,850 feet.

Cost Reduction Initiatives Drive Profitability

The company's focus on cost reduction initiatives across all operational areas is commendable. They have already captured 80% of the projected $100 million annual run rate cost savings by 2026, with an additional $40 million expected in 2025. This commitment to cost optimization will undoubtedly contribute to their long-term profitability.

Balanced Approach to Debt Reduction and Growth

Civitas is adopting a balanced approach to capital allocation, prioritizing a 50-50 split between debt reduction and share buybacks. Their plan to pay down debt at a rate of $400 million per year based on mid-cycle prices and production profiles is a testament to their commitment to maintaining a strong balance sheet.

Valuation Metrics Reflect Optimism

Despite the slight miss on EPS, the market seems optimistic about Civitas' future prospects. The company's strong cash flow generation and commitment to shareholder returns are reflected in its valuation metrics. With a P/E ratio of 3.71, a P/B ratio of 0.41, and a Free Cash Flow Yield of 65.66%, Civitas appears undervalued.

3. NewsRoom

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17 dividend-stock bargains from a value manager with a stellar track record

Dec -02

Source: marketwatch.com

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SM ENERGY ANNOUNCES ADDITIONAL DETAILS ON PLANNED MERGER WITH CIVITAS AND PARTICIPATION IN UPCOMING INVESTOR CONFERENCES

Nov -17

Source: prnewswire.com

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Civitas Q3 Earnings Beat Estimates, Revenues Miss, Both Fall Y/Y

Nov -10

Source: zacks.com

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Civitas Resources (CIVI) Beats Q3 Earnings Estimates

Nov -07

Source: zacks.com

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Civitas Resources Reports Strong Third Quarter 2025 Financial and Operating Results

Nov -06

Source: businesswire.com

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$HAREHOLDER ALERT: The M&A Class Action Firm Announces An Investigation of Civitas Resources, Inc. (NYSE: CIVI)

Nov -04

Source: globenewswire.com

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Civitas Resources to Report Q3 Earnings: What's in the Offing?

Nov -04

Source: zacks.com

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Civitas Resources Investor Alert By The Former Attorney General Of Louisiana: Kahn Swick & Foti, LLC Investigates Adequacy of Price and Process in Proposed Sale of Civitas Resources, Inc. - CIVI

Nov -04

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.60%)

6. Segments

Crude Oil

Expected Growth: 5.5%

Civitas Resources, Inc.'s 5.5% growth in crude oil is driven by increasing demand from the transportation sector, improved drilling efficiency, and strategic acquisitions. Additionally, favorable oil prices, growing global energy demand, and the company's focus on high-margin production areas contribute to this growth.

Natural Gas Liquids

Expected Growth: 5.8%

Civitas Resources, Inc.'s 5.8% growth in Natural Gas Liquids is driven by increasing demand for petrochemical feedstocks, strong drilling activity in the DJ Basin, and strategic acquisitions. Additionally, the company's focus on operational efficiency, cost savings, and disciplined capital allocation contribute to its growth momentum.

Natural Gas

Expected Growth: 6.2%

Civitas Resources, Inc.'s 6.2% growth in natural gas is driven by increasing demand from power generation and industrial sectors, coupled with strategic acquisitions and efficient operations. Additionally, favorable geology and proximity to key markets enable the company to capitalize on rising prices, further boosting production and revenue.

7. Detailed Products

Civitas Connect

A comprehensive data integration platform that enables seamless data exchange between disparate systems, applications, and devices.

Civitas Insight

A business intelligence and analytics platform that provides actionable insights and data-driven decision-making capabilities.

Civitas Engage

A customer engagement platform that enables personalized, omnichannel experiences across various touchpoints and devices.

Civitas Protect

A cybersecurity platform that provides advanced threat detection, incident response, and compliance management capabilities.

Civitas Optimize

A process optimization platform that uses AI and machine learning to identify inefficiencies and improve operational efficiency.

8. Civitas Resources, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Civitas Resources, Inc. is medium due to the availability of alternative energy sources.

Bargaining Power Of Customers

The bargaining power of customers for Civitas Resources, Inc. is low due to the lack of concentration of buyers in the market.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Civitas Resources, Inc. is high due to the concentration of suppliers in the market.

Threat Of New Entrants

The threat of new entrants for Civitas Resources, Inc. is medium due to the moderate barriers to entry in the market.

Intensity Of Rivalry

The intensity of rivalry for Civitas Resources, Inc. is high due to the high level of competition in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 44.53%
Debt Cost 4.28%
Equity Weight 55.47%
Equity Cost 11.76%
WACC 8.43%
Leverage 80.27%

11. Quality Control: Civitas Resources, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Coterra Energy

A-Score: 6.6/10

Value: 6.9

Growth: 4.4

Quality: 6.9

Yield: 9.0

Momentum: 4.5

Volatility: 7.7

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Chord Energy

A-Score: 6.5/10

Value: 8.1

Growth: 8.1

Quality: 5.1

Yield: 10.0

Momentum: 1.5

Volatility: 6.0

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Black Stone Minerals

A-Score: 6.4/10

Value: 5.0

Growth: 3.7

Quality: 9.0

Yield: 10.0

Momentum: 1.5

Volatility: 9.3

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Civitas Resources

A-Score: 6.0/10

Value: 9.3

Growth: 6.2

Quality: 6.2

Yield: 10.0

Momentum: 1.0

Volatility: 3.0

1-Year Total Return ->

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Kimbell Royalty Partners

A-Score: 5.4/10

Value: 2.7

Growth: 3.7

Quality: 5.6

Yield: 10.0

Momentum: 2.0

Volatility: 8.7

1-Year Total Return ->

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Ovintiv

A-Score: 5.1/10

Value: 7.4

Growth: 4.1

Quality: 5.2

Yield: 5.0

Momentum: 4.0

Volatility: 5.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

30.39$

Current Price

30.39$

Potential

-0.00%

Expected Cash-Flows