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Civitas Resources Third Quarter 2022 Results

Share Print Bookmark    |    Friday,November 04,2022

Civitas Resources, Inc. announced its third quarter 2022 financial and operating results.

Third Quarter 2022 Highlights:

• Average daily sales volumes of 176.3 thousand barrels of oil equivalent per day ("MBoe/d"), with oil representing 45% of total volumes
• Total capital expenditures of $237.2 million
• GAAP net income of $405.8 million and Adjusted EBITDAX⁽¹⁾ of $631.5 million
• Net cash provided by operating activities of $710.1 million and free cash flow⁽¹⁾ of $352.3 million
• Fixed-plus-variable dividend, to be paid in December, increased to $1.95 per share, up roughly 11% sequentially from $1.7625 per share in the prior quarter
• Total liquidity was $1.7 billion as of September 30, 2022, which consisted of $682.1 million of cash plus funds available under the Company's credit facility

Shareholder Return Framework

The Company's board of directors approved a dividend of $1.95 per share, payable on December 30, 2022 to shareholders of record as of December 15, 2022. The total reflects the combination of a new, higher quarterly base dividend of $0.50 per share and a quarterly variable dividend of $1.45 per share. Additional details regarding the calculation of the variable dividend can be found in the Company's new investor presentation located on its website.

Civitas CEO Chris Doyle said, "Civitas reported outstanding results this quarter, with production and cash flow exceeding expectations at lower-than-expected capital investments. Our business plan is focused on four pillars that are proven to create value and position us for future success: generating significant free cash flow, maintaining a premier balance sheet, returning cash to shareholders, and leading on ESG. This approach has been and will continue to be a winning formula for our shareholders, our employees, and the communities in which we operate."

3Q 2022 Financial and Operating Results

During the third quarter of 2022, the Company reported average daily sales of 176.3 MBoe/d, of which 45% was crude oil, 30% was natural gas, and 25% was natural gas liquids. The table below provides sales volumes, product mix, and average sales prices for the third quarter of 2022 and 2021.

Capital expenditures during the quarter were $237.2 million, which included $16.0 million of land and midstream investments. The Company drilled 47 gross (39.4 net) operated wells, completed 35 gross (28.5 net) operated wells, and turned to sales 52 gross (44.7 net) operated wells during the third quarter.

Net crude oil, natural gas, and natural gas liquids revenue in the third quarter of 2022 was $1.0 billion, compared to $1.2 billion in the second quarter of 2022. The decrease was primarily related to lower crude oil, natural gas, and natural gas liquids realized prices, partly offset by an increase in sales volumes. Crude oil accounted for approximately 65% of total revenue for the quarter. Differentials for the Company's crude oil production, relative to WTI, averaged approximately negative $2.68 per barrel in the quarter.

Lease operating expense for the third quarter of 2022, on a unit basis, increased to $2.78 per Boe from $2.63 per Boe in the second quarter of 2022.

Rocky Mountain Infrastructure ("RMI") net effective cost for the third quarter 2022 was $0.52 per Boe, which consists of $0.57 per Boe of midstream operating expense offset by $0.05 per Boe of RMI operating revenue from working interest partners. RMI operating revenue from working interest partners is based on production volumes, and the fees are not tied to crude oil or natural gas prices.

The Company's general and administrative ("G&A") expenses for the third quarter were $37.3 million, which included $10.2 million in non-cash stock-based compensation and $5.5 million of other non-recurring G&A expenses. Recurring cash G&A, which excludes non-recurring and non-cash items, was $21.6 million for the third quarter of 2022. On a per unit basis, the Company's recurring cash G&A increased 6% sequentially from $1.26 per Boe in the second quarter of 2022 to $1.33 per Boe in the third quarter of 2022.

Recurring cash G&A and RMI net effective cost are non-GAAP financial measures. Please see Schedule 7 and Schedule 8 at the end of this release for a reconciliation to the most comparable GAAP measure.

2022 Outlook

The table below provides updated guidance on production, expenses and realized prices. The Company expects to pay $75-125 million in cash income taxes for 2022 assuming $90.00/Bbl WTI oil for the remainder of the year.

Note: Guidance is forward-looking information that is subject to considerable change and numerous risks and uncertainties, many of which are beyond the Company's control. See "Forward-Looking Statements" below.

Announces Governance Enhancements

Following a careful review by the Company's Board of Directors (the "Board") of the Company's governance profile, Civitas today announced a series of governance enhancements intended to further increase the Board's accountability to shareholders:

The Board adopted and approved, effective immediately, amendments to the Company's bylaws, which provide, among other things:

• for majority voting in uncontested director elections, and
• for "proxy access" that allows a stockholder, or a group of stockholders to nominate and include in our annual meeting proxy materials director nominees, subject to certain conditions.

In addition, the Board approved and recommended for adoption by our stockholders at our 2023 annual meeting amendments to our Certificate of Incorporation that would, among other things:

• allow special meetings to be called at request of stockholders, subject to certain conditions;
• allow stockholders to act by written consent, subject to certain conditions;

Further information on the foregoing governance changes is detailed in the Company's Form 10-Q filed with the Securities and Exchange Commission on October 31, 2022.