CIVITAS RESOURCES, INC. SEC 10-K Report
Civitas Resources, Inc., a leading energy company operating primarily in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico, has released its annual 10-K report. The report details the company's robust financial performance, significant operational achievements, strategic initiatives, and the challenges it faces in the current market environment.
Financial Highlights
Total Operating Net Revenues: $5,206.8 million, reflecting a 50% increase from the previous year primarily due to a 63% increase in total sales volumes driven by acquisitions.
Net Income: $838.7 million, compared to $784.3 million in the previous year, with an effective tax rate of 22.5%.
Diluted EPS: $8.46, a slight decrease from $9.02 in the previous year, reflecting changes in net income and share count.
Total Operating Expenses: $3,727.4 million, a 59% increase from the previous year, driven by higher lease operating expenses and depreciation, depletion, and amortization costs.
Income from Operations Before Income Taxes: $1,082.7 million, up from $999.5 million in the previous year, indicating improved operational performance.
Business Highlights
Geographical Performance: Civitas Resources operates primarily in the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico. The DJ Basin assets are located in Weld, Arapahoe, Adams, and Boulder counties, while the Permian Basin assets are in Upton, Reagan, Glasscock, Martin, Midland, Reeves, and Loving counties in Texas, and Eddy and Lea counties in New Mexico.
Sales Units: In 2024, Civitas reported net sales volumes of 126,135 MBoe, with 60,519 MBoe from the DJ Basin and 65,616 MBoe from the Permian Basin. This represents a 63% increase in average daily equivalent sales volumes compared to 2023.
Production Volumes: The company drilled 85 gross (75.1 net) operated wells and completed 94 gross (82.8 net) operated wells in the DJ Basin. In the Permian Basin, 122 gross (114.0 net) operated wells were drilled, and 136 gross (123.3 net) operated wells were completed.
New Production Launches: Civitas completed the acquisition of certain crude oil and natural gas assets from Vencer Energy, LLC, which included approximately 44,000 net acres in the Midland Basin, enhancing their asset base in the Permian Basin.
Operational Performance: The company implemented simulfrac completion techniques in the Permian Basin, reducing drilling and completion cycle times and lowering costs per lateral foot. In the DJ Basin, longer lateral development, including four-mile wells, was pursued to drive capital efficiencies.
Future Outlook: Civitas aims to achieve carbon neutrality on its Permian Basin assets by the end of 2025, continuing its mission to minimize environmental impacts through emissions reductions. The company also set a target to reduce Scope 1 GHG emissions by 40% by 2030 from its 2023 baseline.
Environmental Initiatives: Civitas has integrated Environmental, Social, and Governance (ESG) initiatives throughout its organization, focusing on reducing greenhouse gas emissions and achieving carbon neutrality. The company was Colorado’s first carbon-neutral operator with respect to Scope 1 and Scope 2 GHG emissions.
Human Capital: As of December 31, 2024, Civitas employed 655 full-time employees, emphasizing safety, innovation, and community. The company achieved a Total Recordable Incident Rate (TRIR) of 0.25 in 2024, below the industry average.
Diversity and Inclusion: Civitas is committed to a diverse and inclusive workforce, with 27% of its total workforce being women and 20% being members of a minority group as of December 31, 2024. The board consists of 33% women and 22% minority members.
Strategic Initiatives
Strategic Initiatives: Civitas Resources, Inc. completed the acquisition of crude oil and natural gas assets from Vencer Energy, LLC, which included approximately 44,000 net acres in the Midland Basin. This acquisition was part of a strategic initiative to expand operations in the Permian Basin, enhancing the company's asset base and production capabilities. The company also focused on integrating these new assets to optimize operational efficiencies and maximize returns.
Capital Management: The company engaged in significant capital management activities, including repurchasing approximately 7.3 million shares of common stock totaling $427.2 million. It also paid cash dividends amounting to $493.8 million. To finance the Vencer Acquisition, Civitas issued $1.0 billion in aggregate principal amount of 2030 Senior Notes and utilized cash on hand. The company maintained a strong liquidity position with $1.82 billion available, consisting of cash on hand and borrowing capacity under its Credit Facility. Additionally, Civitas reduced its outstanding debt by making payments to its Credit Facility, reflecting a focus on maintaining a robust balance sheet.
Future Outlook: Looking ahead, Civitas plans to invest between $1.8 billion to $1.9 billion in capital expenditures for 2025, focusing on drilling, completions, and midstream activities in the DJ Basin and Permian Basin. The company aims to sustain capital efficiencies and reduce quarterly volatility by allocating slightly more capital to the Permian Basin. Civitas also intends to continue its debt reduction strategy and explore opportunities for sustainable growth, including emission reduction projects and the purchase of carbon credits. The company expects its 2025 capital program to be funded by cash flows from operations, supported by its strong liquidity position.
Challenges and Risks
Challenges and Risks: The company faces significant risks related to commodity price volatility, particularly in crude oil, natural gas, and NGL markets. Price fluctuations can adversely affect revenue, profitability, and cash flows, impacting the ability to meet capital expenditure obligations and financial commitments. The geopolitical landscape, including conflicts in the Middle East and tensions involving Russia and Ukraine, further exacerbates these risks. Additionally, the company is exposed to operational risks such as drilling uncertainties, equipment malfunctions, and environmental hazards, which could lead to substantial financial losses.
The company also faces regulatory risks, with evolving legislation and regulatory initiatives potentially increasing operational costs and imposing additional restrictions. Notably, climate change regulations and activism against oil and gas exploration, particularly in Colorado, pose significant challenges. The introduction of new environmental regulations and potential ballot initiatives could delay or prevent development activities, impacting the company's operations and financial performance.
Management acknowledges the challenges posed by market volatility and regulatory changes. The company is focusing on strategic responses, including hedging a portion of its production to mitigate price risks and exploring technological advancements to enhance operational efficiency. Additionally, management is actively monitoring regulatory developments and engaging with stakeholders to address environmental concerns and ensure compliance with new regulations.
The company is exposed to market risks, including fluctuations in commodity prices and interest rates. The limitations imposed by the Credit Facility on hedging activities mean that some production will be sold at market prices, exposing the company to price volatility. The company also faces credit risks from counterparties in derivative transactions and customers, which could impact financial stability. Management is implementing risk management strategies to address these challenges, including maintaining a diversified customer base and monitoring credit exposures.
SEC Filing: CIVITAS RESOURCES, INC. [ CIVI ] - 10-K - Feb. 24, 2025