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CIVITAS RESOURCES, INC. (CIVI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered disciplined execution in a volatile commodity tape: revenue $1.19B, diluted EPS $1.99, adjusted EBITDAX $786M, and adjusted free cash flow $171M, while management launched a $100M cost optimization plan aimed at structurally lowering costs and boosting free cash flow .
  • Versus Wall Street consensus, results were broadly in line to modestly better: EPS beat by ~$0.09*, revenue was essentially in line*, and EBITDA was modestly above consensus*, aided by solid realizations and hedges; cash opex per BOE was temporarily elevated due to Permian water takeaway issues but expected to decline in 2H .
  • FY25 outlook reiterated (capex $1.8–$1.9B; oil 150–155 Mbbl/d; YE net debt ≤$4.5B), with 2Q25 guidance calling for volume growth and slightly higher capex, supported by strong Permian TIL cadence .
  • Portfolio moves and risk management: ~50% of remaining 2025 oil hedged ($68 WTI floors) and ~40% of gas hedged ($3.74 floors); hedge book valued at ~$290M at April-end (press release) while management referenced ~$200M “today” on the call (timing/methodology difference) .
  • Near-term stock catalysts: execution on $100M cost plan and 2H cost/LOE normalization, Permian-driven oil growth in Q2/Q3, progress on $300M divestment target, and deleveraging toward $4.5B net debt .

What Went Well and What Went Wrong

What Went Well

  • “We announced a comprehensive cost optimization and efficiency plan to generate an incremental $100 million of annual free cash flow,” including commercial/midstream optimizations such as a new DJ oil gathering agreement adding ~$15M per year .
  • Realizations were healthy: oil price $70.90/bbl, NGL at 34% of WTI, and strong Colorado Interstate Gas pricing for natural gas, supporting revenue resiliency despite lower volumes .
  • Operational efficiency: Delaware drilling 10% faster than plan; Midland simulfrac throughput +5% q/q; DJ increased local sand utilization from ~50% to >90%—all contributing to sustainable cost savings .

What Went Wrong

  • Cash opex/LOE above plan due to a third‑party’s failure to meet Permian water takeaway obligations and weather-related repairs; management expects cost recovery and LOE declines in 2H as water peaks subside .
  • Sequential volume declines (311 Mboe/d vs 352 Mboe/d in Q4) driven by DJ low TILs late 2024/early 2025 and weather; ~80% of q/q oil volume decline occurred in the DJ .
  • Hedge valuation disclosure inconsistency: press release cites ~$290M at April-end (including April settlements) while the call referenced “nearly $200M” currently—indicative of timing/mark-to-market differences (investors should anchor to formal release disclosure) .

Financial Results

Core P&L and Cash Metrics (older → newer)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.272 $1.293 $1.194
Net Income ($USD Millions)$295.8 $151.1 $186.0
Diluted EPS ($USD)$3.01 $1.57 $1.99
Adjusted Net Income ($USD Millions)$195.8 $171.2 $166.0
Adjusted EBITDAX ($USD Millions)$910.1 $895.2 $786.0
Cash from Operations ($USD Millions)$835.0 $858.1 $719.0
Capital Expenditures ($USD Millions)$438.4 $278.2 $495.0
Adjusted Free Cash Flow ($USD Millions)$366.3 $518.8 $171.0
Sales Volumes (Mboe/d)348.1 352.0 311.0
Oil Volumes (Mbbl/d)159.0 164.0 141.0

Year-over-Year Comparison

MetricQ1 2024Q1 2025
Revenue ($USD Billions)$1.329 $1.194
Net Income ($USD Millions)$176 $186
Diluted EPS ($USD)$1.74 $1.99

Margins (derived from reported figures)

MarginQ3 2024Q4 2024Q1 2025
Net Income Margin (%)23.3% (295.8/1,272.0) 11.7% (151.1/1,292.9) 15.6% (186.0/1,194.0)
Adjusted EBITDAX / Revenue (%)71.5% (910.1/1,272.0) 69.2% (895.2/1,292.9) 65.8% (786.0/1,194.0)

Segment/Region Breakdown

MetricPermian Q4 2024DJ Q4 2024Permian Q1 2025DJ Q1 2025
Oil (Mbbl/d)80 84 75 66
Gas (MMcf/d)286 309 273 288
NGL (Mbbl/d)49 41 43 33
Total (Mboe/d)176 176 164 147
Capex ($MM)$200 $78 $271 $223

KPIs

KPIQ1 2025
Cash Operating Expenses ($/boe)$11.39
LOE driversPermian water takeaway contractor shortfall; weather repairs
Hedging (2025 remaining)~50% oil hedged at $68 WTI floor; ~40% gas hedged at $3.74 floor; 93,000 MMBtu/d basis swaps added
Hedge valuation~$290M at April-end (incl. April settlements)
Liquidity (end Q1)$1.5B
Long-term Debt (end Q1)$5.1B
Shareholder returns$121M total; $50M dividends; $71M buybacks (1.5M shares)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales Volumes (Mboe/d)2Q25—320–328 New quarterly detail
Oil Volumes (Mbbl/d)2Q25—146–151 New quarterly detail
Capex ($MM)2Q25—505–555 New quarterly detail
Cash Opex ($/boe)2Q25—10.35–10.85 New quarterly detail
FY25 Capex ($B)FY25$1.8–$1.9 Reiterated Maintained
FY25 Oil (Mbbl/d)FY25150–155 Reiterated Maintained
FY25 FCF (at $70 WTI)FY25~$1.1B (non‑GAAP) Reiterated Maintained
YE25 Net DebtFY25≤$4.5B Reiterated Maintained
DivestmentsFY25≥$300M Pursuing $300M Maintained
Base DividendFY25$0.50/qtr $0.50 (June 26 payment) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Cost optimizationEfficiency gains; Midland well costs down; simulfrac introduced Continued efficiency gains; strong 4Q FCF Formal $100M FCF plan; commercial/midstream optimizations Strengthening
Hedging & risk mgmtAdded 2025 oil/gas hedges; realized gas basis gains Reiterated risk management posture ~50% oil, ~40% gas hedged; hedge value disclosed Elevated coverage
Deleveraging priorityReturn mix shifted toward buybacks + debt reduction YE target framework articulated Top priority: YE net debt $4.5B; $60 oil sensitivity Consistent, reaffirmed
DJ Basin operationsWatkins uplift; TIL timing drove q/q changes High TIL count 3Q; few TILs expected in 4Q DJ saw decline; limited TILs late ’24/early ’25; growth restarting 3Q Near‑term trough then recovery
Supply chain/water takeawayTemporary constraints noted Winterization/workover costs elevated Permian water contractor shortfall; pursuing cost recovery Resolution expected in 2H
Tariffs/macroMacro caution Macro monitoring Monitoring tariff uncertainty; offset by vendor cost weakness Balanced risk view
Asset market stanceAccretive inventory adds Inventory adds & selective bolt‑ons Not buyers near‑term; focus on execution; divestments value‑driven Pivot to optimization

Management Commentary

  • “We announced a comprehensive cost optimization and efficiency plan to generate an incremental $100 million of annual free cash flow” with ~40% of benefits in 2H25 and full additive impact in 2026 .
  • “Our top priority is debt and to hit that absolute debt target by the end of the year… we won’t do anything unnatural to hit it,” emphasizing value discipline on asset sales and maintaining the base dividend .
  • “As we think about sustained oil below $55, the first dollar that comes out will likely be completion-related… then drill dollars if sustained,” reflecting flexible activity modulation while preserving productive capacity .
  • “Delaware drilling 10% faster than expected… Midland simulfrac throughput +5% q/q… DJ higher use of local sand,” building durable cost advantages .

Q&A Highlights

  • Production/FCF ramp and debt trajectory: Management confident in executing FY guide unless sustained mid/low‑$50 oil; YE net debt $4.5B achievable at ~$60 oil including divestments .
  • LOE trajectory: Elevated in Q1 due to water takeaway contractor; expecting cost recovery and LOE declines in 2H as water volumes peak and temporary equipment rolls off .
  • Divestments: Confidence in $300M for 2025, with focus on monetizing non‑producing assets (surface, water infrastructure) to avoid upstream price cyclicality; strictly value‑driven, not price takers .
  • Capital flexibility under lower oil: First cuts to completions (build DUCs in DJ), then drilling if weakness persists; maintain dividend protected to ~$40 WTI .
  • Delaware optimization: Extended laterals via ground game; targeting known zones; some of portfolio’s best returns .

Estimates Context

  • Q1 2025 vs Consensus:
    • Revenue: $1.194B actual vs $1.195B estimate* (essentially in line)*.
    • EPS: $1.99 diluted vs primary EPS consensus $1.68* (beat by ~$0.31 on diluted vs ~$0.09 vs normalized EPS $1.77 actual in estimates feed*)*.
    • EBITDA: $818M actual (SPGI) vs $804M estimate* (modest beat)*.
      Values retrieved from S&P Global.
  • Near-term (Q2 2025) actuals vs prior consensus: revenue $1.057B vs $1.100B estimate*, EPS $0.99 vs $1.08 estimate*, EBITDA $777M vs $726M estimate* (topline miss, EBITDA beat)*.
    Values retrieved from S&P Global.
MetricQ1 2025 Estimate*Q1 2025 Actual*Q2 2025 Estimate*Q2 2025 Actual*
Revenue ($USD Billions)$1.195$1.194$1.100$1.057
Primary EPS ($USD)$1.684$1.77$1.081$0.99
EBITDA ($USD Billions)$0.804$0.818$0.726$0.777

Values retrieved from S&P Global.

Note: Company-reported adjusted EBITDAX was $786M for Q1 2025 (non‑GAAP), which differs from SPGI’s EBITDA actual ($818M) due to definitional differences .

Key Takeaways for Investors

  • Execution lever: $100M cost program (commercial/midstream, operations) plus efficiency gains should compress cash costs and support FCF resilience even under softer strips .
  • Near-term setup: Q2 oil growth guided (+5% at midpoint) with high TIL cadence; expect LOE normalization into 2H as temporary water logistics costs abate .
  • Balance sheet: Clear path to ≤$4.5B YE net debt via FCF, hedges, and value‑accretive divestments; additional hedges possible opportunistically .
  • Risk management: Hedge coverage (~50% oil, ~40% gas) and liquidity ($1.5B) provide downside protection while maintaining dividend .
  • Asset quality: Delaware/Midland returns improving via longer laterals and faster cycles; DJ volume recovery expected as TIL cadence resumes in Q3 .
  • Trading lens: Watch for updates on cost recovery from contractor, tariff impacts vs vendor cost relief, and progress on $300M divestments—each can shift estimate revisions and sentiment .
  • Estimate implications: Modest beats on Q1 EPS/EBITDA*, with transient cost headwinds acknowledged; 2H margin/opex trajectory is key to sustaining FCF and deleveraging targets*.
    Values retrieved from S&P Global.