CIVI - Earnings call 3 2023 | Civitas Resources, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. My name is Bhavish, and I will be your conference operator today. At this time, I would like to welcome everyone to the Civitas Resources' Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I will now hand the call over to John Wren, Director of Investor Relations.

You may begin your conference.

John Wren

morning, thanks good joining and operator, everyone, for and us. Thanks, release, Chris today hope Marianella earnings website. deck, by on joined are Doyle; of you've and which all our our Walker. I I'm our Hodge CEO, CFO, available slide COO, Foschi; reviewed XX-Q and

SEC filings. We certain that be from to in SEC regarding make may to will other our XX-Q to read certain full disclosures uncertainties questions. non-GAAP projections. statements which actual in results and to remarks, risks yesterday's are Please our take Reconciliations also financial metrics. available We prepared refer cause subject non-GAAP and all to forward-looking brief our metrics found filings. After statements, and be your forward-looking we'll can Chris's could differ release materially our

time please of to get to question us and this morning. more always, as limit one one allows follow-up As to this your questions your

over Now Chris. the turn call I'll to

M. Doyle

and results well Permian expectations. good are once performing quarter against team and morning, legacy businesses and this The John, Thanks, everyone. DJ delivered our our again strong new

with Our company that scale disciplined transactions. to assets can to prove while an through accretive E&P significant building results shareholders return continue cash high-quality

per recently market $X durable an delivered today. We further and us Simply buybacks number to an current enterprise we more that for our been which a which nearly strengthens as In XX% in scale and shareholders. and million free as should company, Vencer accomplished diversifying in additional of our portfolio. transform in January, is more X expected high-quality we part to to further XXXX, of and shareholders XXXX to share deal This our will announced recently our That's cap year. adding and $X.XX return our add return put, we're have X-year billion Our alone. steps completed $XXX already recent opportunity our competitive acquisition, generate will $X.XX, grow to in In gave shareholders. that dividends. to ability celebrated close we've cash it of we've several what XXXX, paid what on reflect company anniversary,

grow furthering X return Our expect XX% commitment significant strong record will strong XXXX. of our roughly the maintaining continue industry. We've At the we while track will dividends unwavering dividend in most reliable our increase an accomplished delivering shareholder of strip, our of in all to balance sheet. and this program to

progressing our debt our Proceeds plan to Our sell in portfolio. well, high-grading about track target. to non-core is while we're also mid-XXXX $XXX reduce us help meet on million assets and will

leverage end We quarters target sustainable mid-cycle a XXXX, return continue and returns. can turn We oil. maintaining capital X shareholder of building is firmly strong a to believe key that of of to $XX structure to by that deliver X below the prices longer top plan assuming business term be at

team talk We've Let's development and the on Permian integrating experience proven new across has leadership Permian a team. integration. new built basin. of Civitas Since about this programs into up been a summer, standing with capital-efficient focus the leading assets decades our

Delaware, into many fully impressed in continuous months January operations to be operational efficient come has operations line, are Hibernia the of and integrated to maintaining dedication a by to continue the us I month. Tap members than handover plan. Similarly operational and will safe, we're Rock the Midland That's track over of to addition, In teams, talented earlier our X Tap Rock by over end accelerate accelerate original this Civitas. allowed Civitas. handover Basin the Their be to of and on month. X, the in joining Hibernia Bottom whom the

integration plans program. development for finalizing and is team optimizing XXXX Our the now Vencer our

returns. free maximizing will proven which model, improving business by cash guided we on always, cash-on-cash focuses a flow be As and

our per summarize XXX,XXX Total In XXX,XXX original with BOE quickly of company production upper day half per the per expectations oil quarter third me and third averaging barrels in range. our day. let guidance XXX,XXX of was in quarter the in results. DJ, the line Now were day BOE volumes

DJ, of We an limits spud continue laterals operational to to efficiency of days. the here push X, in drilling recently company new a X It's the spud average X-mile and record.

closed produced came per BOE which only volumes predrill X. I the XX% the note on quarter, Importantly, below wells estimates. In the approximately for after XX,XXX the in cost day Permian, transaction reflects August we

August the day oil Focusing per and We of Permian per closed September, per production day. in barrels day. averaged XXX,XXX XX,XXX approximately strong, and BOE on quarter XXX,XXX BOE averaging

rigs during X DJ, quarter. X-month on XXX,XXX within exit the in about activity the fourth BOE the approximately by midpoint this quarter ran track Importantly, to per the we've continue we we raised completion and maintain to our guidance year were investments rigs target quarter as X closing the before $XXX exit drop the guidance. have million, X our Permian In and rate full day in Capital production DJ, dropped program in Vencer. of Permian the October X-rig remain range. Company-wide, reduced planned, And year-end X have our We rigs to with the in year-end as year original expectations. will we'll of Permian planned. in third a in consistent and

increased additional pads our toward high-return Basin. we few successfully the in in to the DJ elected activity working of we non-op core look and the a participate interest the As year, remainder of in

$X.XX new set we're these with investments investments, are combined midpoint into XXXX. In These today's key up well to us result let electing midpoint about a by increase As times, improved takeaways. heading to to investments closing, bringing $XX million, reiterate capital me our that cycle billion. drilling of high-return midpoint, the

new Permian are businesses First, well. performing DJ legacy and our both

and flexibility portfolio of Our integration in we basins. of very invest multiple is schedule, ahead across capital a high-return to the assets have

have recent created Civitas peer-leading balanced program. significant our stronger, and more a Second, acquisitions a with return shareholder duration

and the ingredients excellence sustaining to of depth so shareholder matters, growing I've and inventory does and returns. quality operational asset but execution. Scale, quality As key said are efficient scale and before,

Lastly, outlook flow strong for have we of sales We're importance current cash balance prices. noncore know sheet. as asset a advancing free a very premier the our planned, at

return to our less $XX we're in assuming turn to you operator, happy XXXX, than take the questions. your X Civitas. of oil. Thank of And to end expect now interest optimal ratio for leverage We by

Operator

[Operator Instructions] Our first of Securities. line Neal comes question Truist from from Dingmann the

Neal Dingmann

part Nice XXXX And on your job reiterated in include D&C on is project step-up My that I'm the you remind does mentioned you of Permian size. the step-up the first any this question in Permian. me solid results. release. the as wondering, assumed guide, just Could on

M. Doyle

Yes. Thanks, Neal.

the and That in when XX-XX the so our more XXXX, is Permian in allocating include roughly split XXXX. slightly Permian So than between the you DJ look at capital billion. our midpoint you Vencer, of be $X.X half to we'll

Your one, project second it's really team the what on interesting is a size. and is currently question just overall and working

case, these all have there's an we them, be allocated then that underwriting and at transactions, case looked of a that indicates capital. had X we As we additional resource could

Wolfcamp X zones may have capital returns, projects is we working size very is overall they're so been the to shallower or most that efficiently the team project but underwriting at strong on case part the not B. of looking have allocate zones and such And the as of zones whether how do

we're that's continue would excited to how still to I with excited but setting and in progress, XXXX say execute. So very up is

Neal Dingmann

DJ the outperform. And my area to continues a then great question, appears, second on runway like just ahead. Watkins looks just It the notably

this is I wondering, just expectations on now it I results seen just a based what And outperformance? was the have think you the understatement. future even reach an few or that's I'm here? you've extended wells drive wondering, to quarters, for continues changed

M. Doyle

Yes.

reach case milers, full stepped really investment type I is a in to think well. When One a rightfully stepped an our bunch and executing, call to core the note has has interested X-mile it'll that on extended in see portfolio to curves see of were say conservative X development the of a fantastic that our and brought X third a continuing and done area. The I'd as It's outperform we it, part you Basin. understatement. wells were is in add expectations, that's conservative we is, And and Watkins I milers, conservative part outperformance Last deliver very I in for, of our in this noted on couple as of core outperformance. likewise how The a they our is be of area, milers area, -- the things. the perform. and mile. attributed in we team we job could But the the see so. quarter, as we X the that degradation I'm, we this outperform even into a that. our area DJ emerged

I'm expectations. say and is that results in would expectations, They of really, positive. not to performing that pads mile. currently think say in started turn to the third our those that's with Some no been over. I line I X-mile have really case. continue have they are don't going degradation the early there to outperform

so to at and we of really $XX this leads as deciding into deploy And -- looked additional capital. million

pads that Watkins area. at high-return these directed high-quality, in the of Some is

cautious there, continue about that are more and the being team as And we so outperformance, share excited performance, while more but in the in we're excited guys. I dial to to about And team execute. we what that you somewhat see about XXXX, will that we would excited we're still reflected seeing we've that continuing with to how think say and we're

Operator

the from Mariani line from Roth comes of next Leo Our question MKM.

Leo Mariani

little aggressive kind wanted I past in to thoughts you've a of on you're up being follow aggressive but bit consolidator been some around the on obviously, an of I of Permian DJ after consolidator working in know M&A. the years. assets, your kind selling

you So kind sorry, the time? are of as and strategy point DJ in looking assets about out this at of I'm consolidate of sort or forward, to kind there you're Permian go going thinking still

M. Doyle

Yes. Thanks, Leo.

say, to high. us The go be flow. have quality. acquisition and free an fairly assets model. have go back which business always to ways pillars cash to looking strategy, hurdle credit our a generate That X after to been would for We is to able extend is very scale, busy, We the of these I our is for asset diversify to

made in We're be think, duration noncore assets pillars. a mentioned, at And extend return able leading sales acquisitions sheet our premier balance asset preserve the framework of all sheet. to balance our Permian, that those X strength. I as the we've shareholder to look those the industry. When these in midst of have we each have to back in progressed the the of, you to the We of, maintain help

for transaction to high. that with opportunity the of would But show this duration mentioned Vencer, those looking fits weren't a necessarily we call, the previous to think when we that our about Permian returns. quality, that see. the that model. position with next us so I to I shareholder And We'll improve disciplined we -- more broadly, we we've extend hurdle existing looking say, saw themselves? It's on we we of transaction. we in. Will take do opportunities just scale, at do aggressively how continue shareholder bigger. interested and the pull how that even in management say and this Basin how is pretty in returns also the Midland we the But and shown team to I'd opportunistic be not getting We're very will be has think the shown extending business did do

Leo Mariani

appreciate I response the Okay. there.

time. spoken about potentially know for capital raising Vencer So have over guys I more you

position Just in updated Vencer around that? just wanted of the to curious And deal tax how get then thoughts also your affects XXXX? your cash kind

M. Doyle

then and Marianella. Yes. it off I'll kick over this kick to

the So the that soon we Tap of Because deferred very finance Hibernia was flexibility the and the Rock, provide was payment. transaction how extreme the it in flexibility we transaction. so to off structured wanted heels coming deliberate of we way Vencer

we so deferred that payment. And negotiated

about the the look in -- huge having that the for a what accelerate then Our as payment like payment. at to market, not and with as plan Marianella hurry flesh me that out But talk tax cash finance to XX% flexibility, that we on to and certainly, equity potential to discount well. let is is, I'll kick in we're it where that transaction ways is is, we our volatility

Marianella Foschi

Sure. Leo, question. thanks for your

and tremendous capital Like XX%. stock now. our the we right So set when value that entered did our offering in payments we the in We said, roughly we a see equity that about structured cost today. structure such XX% of equity down was We flexibility have the Chris capital.

is sitting more are financed for even plan a we now more option Vencer and deferred the So so on fully attractive.

$XX In A XXXX, that look, to the think It's be, we're position. terms we hitting of At could taxes, point. us you taxes a prices are, company which is potentially in an never oil, so is soonest until minimal what about the cash expected oil assume. it XXXX. lot as our AMT be possibly oil, of be pretty you AMT when $XX are cash into to going we

your be range to to oil XXXX, then, assume. said, for that transaction are Vencer sub-$XXX million given on going they Our you otherwise I so in XXXX and it be closing should depends XXXX. the prices like taxes, point, lower then And than kind what the of

flat, at and do If million that stay the we'll $XX AMT should we that point position. we assume you in If taxes will hit never the $XXX $XX, cash at be range. that

Operator

from the from of Seaport line [Operator Pope Instructions] Our Research. next Nicholas question comes

Nicholas Pope

the you of of I balance was have. the hoping talk new a you X sides between little could bit position Permian about kind this

on seeing is acquisitions? X activity kind at As both assets as the comparing Delaware kind of those of between of and incorporating expectation the these you're sides you're that you split versus X Midland, of look what kind returns

M. Doyle

Thanks for the question. Sure.

we So Delaware way XXXX of in out for was couple rolled the in assuming signposts rigs a and rigs the of couple initial Midland a Basin. the

Now add between split and X would Vencer, you that the Midland and X Delaware. be

Rig here there, think a move or both at close can to opportunities both Permian. deploy to the scale returns, sides with capital be got on we've position high of I sides we'll fairly that. but

we're that. So excited about

and size of go X/X where to it have initial to optimize we getting our size able TBD, excited Midland. the on X/X share it could side guidance is question next probably X overall project project is direct February and back in look size, of to the plan really or that because think to year. as that's Delaware, Neal's interesting I just to on final capital sit we're But our the be XXXX But around more other. of initial back further gets

Nicholas Pope

get that -- commodity areas, where think that. the process think NGL. look stand, and the with you move mix things products at able do How all able have those being out gas, I things -- in you now X to are And you you stand to Appreciate get right guess, where areas? being these the do you on between X comfortable as all the

M. Doyle

Yes.

in on with plans both feel we the Delaware the is confident think always I takeaway of very our consideration. Certainly, sides a Permian.

you're be out plow of going it you mindful of getting capital on getting to product have So to your not program to half and that side, market.

have look that's we place to capital feel in into will we that but of to market the on certainly calculus plan. with deploy -- to And part lever so that But capital, sides. the that be have go contracts confident a your point, how we will certainly, that's access in and XXXX both the the

Operator

Chris There to over you. are I'll no turn call Doyle, at questions back time. this further the

M. Doyle

and you, sharing We a progress Thank your and your continued thank Civitas. on calls. operator, interest to Have rest day, you of in upcoming forward our safe. look please for continued be great

Operator

for Thank call. you you. Thank This today's conference concludes participating.

disconnect. may now You

Civitas Resources (CIVI) 8 Nov 232023 Q3 Earnings call transcript