Executive Summary

Q2 2025 delivered stronger operations but mixed headline metrics: revenue of $1.057B and diluted EPS of $1.34; adjusted EPS of $0.99 and adjusted EBITDAX of $749MM; cash operating costs fell >10% q/q to $10.19/BOE, and oil volumes rose 6% q/q to 149 MBbl/d .
Civitas reinstated a capital return program: 50% of FCF (post base dividend) to buybacks and 50% to debt, lifted buyback authorization to $750MM, and launched a $250MM ASR; declared a $0.50 dividend (Sept 25, 2025) .
Asset sales: signed agreements to divest non-core DJ Basin assets for $435MM (>4x 2026 EBITDAX), proceeds to debt reduction; net debt targeted at ~$4.5B by year-end 2025 .
Guidance raised/introduced for Q3 2025: sales volumes 327–338 MBoe/d, oil 154–160 MBbl/d, capex $460–$500MM, cash OpEx $9.80–$10.30/BOE; Permian to maintain high levels in Q4 while DJ declines due to divestments .
Management transition: Board named Wouter van Kempen Interim CEO, emphasizing execution, cost leadership, and capital returns; CEO change and buyback restart are likely stock catalysts .

What Went Well and What Went Wrong

What Went Well

Oil volumes increased 6% q/q to 149 MBbl/d, driven by new Permian wells; simul-frac efficiencies and longer laterals enhanced productivity and lowered costs .
Unit cash operating costs dropped to $10.19/BOE (>10% q/q reduction), with Permian LOE/BOE down >15% due to lower maintenance/workovers and water disposal/power .
Hedging gains of $69MM and added >9MM bbl of oil hedges through Q3’26; ~60% of 2H’25 production protected at a $67 WTI floor, de-risking cash flow .
Quote: “We’ve improved field-level execution, captured sustainable cost savings… and accelerated value through non-core divestments… we are reinstating an aggressive capital return program” — Interim CEO Wouter van Kempen .

What Went Wrong

Revenue and adjusted EPS missed consensus*, despite operational outperformance: revenue $1.057B vs ~$1.100B*, adjusted EPS $0.99 vs ~$1.08* .
Natural gas realizations were pressured by weak Waha pricing; NGL realizations averaged ~30% of WTI, constraining commodity mix realizations .
Operating cash flow stepped down to $298MM (from $719MM in Q1), reflecting working capital seasonality (Colorado ad valorem payments) and lower price/realization backdrop .

Financial Results

P&L and Cash Flow (GAAP/non-GAAP)

Metric	Q2 2024	Q1 2025	Q2 2025
Total Operating Net Revenues ($USD Billions)	$1.313	$1.194	$1.057
Crude/Nat/NGL Sales ($USD Billions)	$1.311	$1.192	$1.054
Net Income ($USD Millions)	$216	$186	$124
Diluted EPS ($USD)	$2.15	$1.99	$1.34
Operating Cash Flow ($USD Millions)	$359	$719	$298

Non-GAAP Performance and Capital

Metric	Q1 2025	Q2 2025
Adjusted Net Income ($USD Millions)	$166	$92
Adjusted EPS ($USD)	$1.77	$0.99
Adjusted EBITDAX ($USD Millions)	$786	$749
Adjusted Free Cash Flow ($USD Millions)	$171	$123
Capital Expenditures ($USD Millions)	$495	$506

Volumes and Realizations

Metric	Q1 2025	Q2 2025
Sales Volumes (MBoe/d)	311	317
Oil Volumes (MBbl/d)	141	149
Cash Operating Expenses ($/BOE)	$11.39	$10.19
Hedging Cash Settlement Gains ($USD Millions)	$4	$69

Segment/Basin Breakdown (Average daily volumes)

Basin	Q1 2025 Oil (MBbl/d)	Q2 2025 Oil (MBbl/d)	Q1 2025 Gas (MMcf/d)	Q2 2025 Gas (MMcf/d)	Q1 2025 NGL (MBbl/d)	Q2 2025 NGL (MBbl/d)	Q1 2025 MBoe/d	Q2 2025 MBoe/d
Permian	75	83	273	255	43	45	164	171
DJ	66	66	288	269	33	35	147	146
Total	141	149	561	524	76	80	311	317

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales Volumes (MBoe/d)	Q3 2025	N/A	327–338	Introduced
Oil Volumes (MBbl/d)	Q3 2025	N/A	154–160	Introduced
Capital Expenditures ($MM)	Q3 2025	N/A	$460–$500	Introduced; lower vs Q2 actual
Cash Operating Expenses ($/BOE)	Q3 2025	N/A	$9.80–$10.30	Introduced; lower trajectory
Dividend per share	Q3 2025	$0.50 (Q2 declared)	$0.50 (payable 9/25/25)	Maintained
Share Repurchase Authorization	FY 2025	Prior not specified	$750MM; $250MM ASR	Raised/reinstated capital return program
Capital Return Allocation	FY 2025 policy	N/A	50% FCF (post base dividend) to buybacks; 50% to debt	Introduced

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
Cost optimization	Launched $100MM program; ~$40MM to benefit 2025; reiterated 2025 outlook	~80% captured; well costs down 7% Delaware/5% Midland/3% DJ; cash OpEx < $10/BOE expected in 2H	Improving execution and margins
Hedging/cash flow protection	~50% of 2025 oil hedged at ~$68 floor; added gas hedges	~60% of 2H’25 oil hedged at $67 floor; >9MM bbl added through Q3’26; $69MM realized gain	Increased protection; realized benefits
Capital returns & balance sheet	Focus on debt reduction, target ~$4.5B YE net debt	Reinstated buybacks (50/50 FCF split), $750MM authorization, $250MM ASR; still targeting ~$4.5B net debt YE	Return of capital accelerated; deleveraging on track
Permian/Midland/Delaware operations	Level-loaded activity; cycle time gains; simul-frac productivity	First operated Delaware pad with strong initial rates; 20+ Delaware wells TIL in Q3; co-dev success in Martin County	Permian-led growth ramps
DJ Basin optimization & divestiture	Increased local sand usage; timing shifted capex	$435MM non-core DJ divestments; long-reach laterals (4+ miles) with strong IPs; streamlining costs	Portfolio high-grading; lower basin costs

Management Commentary

Interim CEO Wouter van Kempen: “We’ve improved field-level execution, captured sustainable cost savings, reduced risk through hedging… reaching our $4.5 billion debt target… we are reinstating an aggressive capital return program” .
CFO Marianella Foschi: Buybacks sized at ~$375MM for 2025 (incl. ~$70MM YTD), $750MM authorization equals ~28% of market cap; liquidity ~$2B; issued $750MM notes due 2033; expect minimal cash taxes over next five years due to recent Tax Act changes .
COO Clay Carrell: Efficiency gains across basins, strong early Delaware results, Midland co-dev success, DJ long lateral record wells; ~80% of $100MM cost program captured, driving well costs lower .
CEO Transition: “Focus… on execution and performance… cost leadership… and share price” — Wouter van Kempen .

Q&A Highlights

Debt reduction vs buybacks: Management reaffirmed YE 2025 net debt target (~$4.5B) and long-term <1x leverage objective; buybacks balanced against de-risked balance sheet (hedges, term debt, cost structure) .
2026 framework: Post divestitures, maintenance capital program envisioned holding oil production flat ~145–150 MBbl/d, pending optimization and prices .
Dividend policy: Base dividend maintained; ASR reduces dividend outlay by ~$20–25MM annually from repurchased shares .
Working capital seasonality: Q2 ad valorem payments tightened WC by ~$150MM; expected partial reversal in 2H .
Operational efficiency timeline: Catalog of capex/LOE/midstream/marketing initiatives underway; DJ costs competitive (~$650/ft) with continued improvements .

Estimates Context

Q2 2025 versus consensus*: revenue $1.057B vs ~$1.100B (miss), adjusted/normalized EPS $0.99 vs ~$1.08 (miss), EBITDA ~$777MM vs ~$726MM (beat).
Q1 2025 versus consensus*: revenue $1.194B vs ~$1.195B (in line), EPS $1.77 vs ~$1.68 (beat), EBITDA ~$818MM vs ~$804MM (beat).
Q2 2024 versus consensus*: revenue $1.313B vs ~$1.340B (miss), EPS $2.06 vs ~$2.75 (miss), EBITDA ~$925MM vs ~$937MM (slight miss).

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue Consensus Mean ($USD Billions)*	~$1.340	~$1.195	~$1.100
Revenue Actual ($USD Billions)*	$1.313	$1.194	$1.057
Primary EPS Consensus Mean ($USD)*	~$2.75	~$1.68	~$1.08
EPS Actual (Normalized/Adjusted) ($USD)*	$2.06	$1.77	$0.99
EBITDA Consensus Mean ($USD Millions)*	~$937	~$804	~$726
EBITDA Actual ($USD Millions)*	~$925	~$818	~$777

Values retrieved from S&P Global.*

Key Takeaways for Investors

Near-term: Expect Permian-led volume ramp and improving margins in 2H’25; buyback ASR in Q3 provides technical support; however, headline revenue/adjusted EPS misses versus consensus may limit immediate rerating .
Medium-term: Balance sheet path intact to ~~$4.5B net debt YE’25, with ongoing deleveraging funded by 50% FCF; cost program (~~$100MM run-rate by 2026) and hedges underpin cash generation resiliency .
Mix/realizations: Gas/NGL pricing headwinds (Waha, NGLs at ~30% WTI) remain; oil focus and transportation terms in DJ help mitigate .
Operational execution: Delaware first operated pad and Midland co-development successes indicate rising capital efficiency; DJ long-reach lateral capability is a structural advantage .
Corporate actions: CEO transition emphasizes discipline and performance culture; reinstated capital returns (ASR + $750MM authorization) improve shareholder yield and may catalyze sentiment .
Guidance: Q3 2025 volumes and cost guidance signal continued improvements; monitor impact of DJ divestiture on Q4 volumes and 2026 maintenance plan .
Estimate revisions: Street likely trims EPS/revenue for Q3/Q4 on divestiture volume impact and realizations, while lifting EBITDA outlook on cost and efficiency gains.*

References: Earnings press release and 8-K (Q2 2025) ; Earnings call transcript (Q2 2025) ; Additional press releases (capital return and CEO transition) ; Prior quarter 8-K (Q1 2025) .

CIVITAS RESOURCES, INC. (CIVI)·Q2 2025 Earnings Summary