On August 1, 2024, Civitas Resources Inc (CIVI, Financial) released its 8-K filing detailing its financial and operational performance for the second quarter of 2024. Civitas Resources Inc is an independent exploration and production company focused on the acquisition, development, and production of oil and associated liquids-rich natural gas in the Rocky Mountain region, particularly in the Denver-Julesburg Basin of Colorado (DJ Basin).
Financial Performance and Key Metrics
For the second quarter of 2024, Civitas Resources Inc reported a net income of $216 million and an adjusted net income of $207 million. Operating cash flow stood at $359.6 million, while adjusted EBITDAX was $918.1 million. The company achieved total sales volumes of 342.9 MBoe/d, with oil volumes at 155.3 MBbl/d. Capital expenditures for the quarter were $566.5 million, and adjusted free cash flow was $235.4 million.
| Metric | Q2 2024 | H1 2024 |
|---|---|---|
| Net Income ($MM) | $216.0 | $391.8 |
| Adjusted Net Income ($MM) | $207.0 | $478.7 |
| Operating Cash Flow ($MM) | $359.6 | $1,172.1 |
| Adjusted EBITDAX ($MM) | $918.1 | $1,846.3 |
| Total Sales Volumes (MBoe/d) | 342.9 | 339.2 |
| Oil Volumes (MBbl/d) | 155.3 | 155.7 |
| Capital Expenditures ($MM) | $566.5 | $1,216.0 |
| Adjusted Free Cash Flow ($MM) | $235.4 | $381.0 |
Operational Highlights and Challenges
During the second quarter, Civitas Resources Inc saw a nearly 12% increase in Permian Basin sales volumes, driven by strong production from recent Delaware and Midland Basin wells. The company also achieved a 10% reduction in well costs in the Midland Basin, enhancing well-level average rates of return by more than 10% at $70 per barrel WTI. Total cash operating expense per BOE was $8.97, below expectations and the first quarter of 2024.
However, DJ Basin volumes were lower than the first quarter due to non-core asset divestments and temporary third-party facility downtime. These challenges highlight the importance of operational efficiency and strategic asset management in maintaining production levels.
Capital Return Framework and Shareholder Value
Civitas Resources Inc has enhanced its capital return framework to provide greater flexibility for share repurchases. The Board of Directors authorized a new share repurchase program of up to $500 million, replacing the prior program and representing a 75% increase in authorization. The company aims to return at least 50% of its free cash flow, after the base dividend, through a combination of stock repurchases and dividends.
“Civitas’ team and assets continue to perform very well, as demonstrated by our strong second quarter results,” said CEO Chris Doyle. “At this time last year, we transformed our Company through multiple Permian Basin acquisitions, which significantly expanded our scale, depth and quality of inventory. Since then, we've driven production ahead of plan, lowered drilling and completion costs, and enhanced margins through reduced operating costs, evidencing that assets are better in Civitas' hands.”
Financial Statements and Metrics
Crude oil, natural gas, and NGL sales for Q2 2024 were $1.3 billion, consistent with Q1 2024. Crude oil accounted for 87% of total revenue. The company reported realized hedging losses of $13 million for the quarter. Total cash operating expense per BOE was $8.97, benefiting from labor optimization and divestment of higher-cost assets. Depreciation, depletion, and amortization were $16.70 per BOE.
Interest expense was $115 million, in line with expectations. As of the end of Q2 2024, Civitas' financial liquidity was $1.4 billion, consisting of cash on hand and available borrowing capacity. The company's borrowings on its revolving credit facility totaled $850 million.
Outlook and Future Guidance
Civitas Resources Inc has reduced its full-year 2024 capital investment plans by $50 million, with new guidance set at $1.85 - $1.95 billion. Full-year 2024 expected sales volumes have been increased to the upper half of the original range, now expected between 335 and 345 MBoe/d. The company anticipates higher third-quarter volumes in both the Permian Basin and DJ Basin.
For more detailed information, readers are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Civitas Resources Inc for further details.
