CIVITAS RESOURCES, INC. (CIVI)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered higher volumes, lower unit costs, and strong cash generation: net income $177M, diluted EPS $1.99, operating cash flow $860M, Adjusted EBITDAX $855M, and Adjusted FCF $254M, with oil at 158 MBbl/d and total volumes at 336 MBoe/d .
• Versus Wall Street, EPS was a significant beat, while revenue was slightly below: EPS $1.93 actual vs $1.28 estimate; revenue $1.168B actual vs $1.178B estimate (S&P Global) — strong cost and volume execution drove earnings outperformance despite modest revenue variance *.
• Execution wins included LOE down 7% QoQ, cash operating expenses $9.67/BOE, realized hedging gains $65M, and ~$250M ASR completed (7.4M shares), while net debt fell by $237M and liquidity totaled ~$2.2B .
• Guidance was withdrawn due to the pending SM Energy merger; the scheduled Q3 call was cancelled — merger process and capital return discipline form the near-term stock narrative .

What Went Well and What Went Wrong

What Went Well

• Permian and DJ both grew volumes 6% QoQ; Permian at 181 MBoe/d (86 MBbl/d oil), DJ at 155 MBoe/d (72 MBbl/d oil), supported by high-performing pads (Delaware Double Stamp/Brother Nature, Midland Wolfcamp B) and accelerated D&C cycles .
• Unit cost execution: LOE per BOE down 7% QoQ; cash operating costs at $9.67/BOE; realized oil price premium to WTI of $0.31/bbl via crude quality, forward pricing, and improved DJ long-haul transportation .
• Capital returns and balance sheet: $250M ASR completed (7.4M shares), net debt reduced by $237M QoQ, added >2M bbl of oil hedges for next 12 months, liquidity ~$2.2B .
  • “Third quarter results exceeded expectations, with higher production and lower cash operating expenses…” (press release) .

What Went Wrong

• Year-over-year revenue and EPS were down: total operating net revenues $1.168B (vs $1.272B in Q3’24), diluted EPS $1.99 (vs $3.01), reflecting weaker gas/NGL realizations and higher D&A/interest vs prior year .
• Natural gas realizations remained pressured by weak Waha pricing; NGLs averaged 28% of WTI (seasonal summer trend), tempering top line despite strong oil volumes .
• Guidance visibility reduced: company discontinued quarterly/annual guidance due to pending SM merger; investor reliance shifts to execution metrics and balance sheet/capital returns .

Financial Results

Segment production breakdown

KPIs and cash metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our second quarter results demonstrate the decisive steps we have taken to strengthen Civitas’ operating performance and financial position… reinstating an aggressive capital return program… $4.5 billion debt target around the end of the year.” — Interim CEO Wouter van Kempen .
• CFO on hedging/costs: protected ~60% of 2H 2025 oil with ~$67 WTI floor; cash operating expenses down >10% QoQ; liquidity ~$2.0B post notes issuance .
• COO on operations: Delaware simul-frac >170k bbl/day water pumped per crew; long laterals in DJ (4+ miles); sustained Wolfcamp B performance in Midland; cost optimization $100M run-rate trajectory .

Q&A Highlights

• Capital returns vs deleveraging: rationale for buybacks given debt progress, hedging, cost reductions, and DJ asset divestments; long-term aim to move leverage toward ~1x, while continuing material debt paydown .
• Strategy/CEO transition: focus on execution, performance, and cost leadership; not a wholesale strategy change; target to appoint a new CEO within ~6 months .
• 2026 outlook post divestitures: maintenance-capital program targeting 145–150 Mbbl/d oil; optimization underway .
• Operational improvements: basin-specific cost reductions, local sand utilization, compression optimization, and facility design efficiencies .
• Working capital dynamics: typical Colorado ad valorem tax cash draw in Q2; expected partial reversal in 2H; FCF trajectory viewed as stable annually .

Estimates Context

• Q3 2025 vs consensus (S&P Global): EPS $1.93 actual vs $1.28 estimate — bold beat; revenue $1.168B actual vs $1.178B estimate — slight miss (values retrieved from S&P Global)*.
• Prior quarters: Q2 EPS $0.99 vs $1.08 estimate; Q1 EPS $1.77 vs $1.68 estimate; revenue Q2 $1.054B vs $1.100B estimate; Q1 $1.194B vs $1.195B estimate (values retrieved from S&P Global)*.

Values retrieved from S&P Global.*

Where estimates may need to adjust:

• Raise EPS forecasts on sustained unit cost improvements, higher volumes, and hedging support; revenue forecasts modestly fine-tuned for gas/NGL realizations and basin mix .

Key Takeaways for Investors

• Execution alpha: Lower unit costs ($9.67/BOE), LOE down 7% QoQ, and stronger volumes drove outsized EPS vs consensus — supportive for estimate revisions and multiple resilience .
• Capital return visibility: $250M ASR complete and 50/50 FCF split (buybacks/debt) reaffirms shareholder-friendly posture while continuing deleveraging; net debt down by $237M QoQ .
• Basin performance: High-quality pads and longer laterals in both Permian and DJ underpin near-term volume stability and well productivity, de-risking operational targets .
• Risk management: Hedging gains ($65M) and added oil hedges (>2M bbl) bolster downside protection amid commodity volatility .
• Merger overhang: Guidance withdrawal and cancelled call shift near-term narrative to transaction milestones; monitor regulatory/process timelines and potential synergies post-close .
• FCF trajectory: Sequential improvement in Adjusted FCF ($254M) with capex contained ($491M) suggests durable cash generation into 2026 maintenance program .
• Trading implications: Near term, stock likely reacts to merger updates and capital return cadence; medium term, sustained cost discipline and Permian/DJ execution support earnings power and deleveraging .