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Civitas Resources Announces Second Quarter 2022 Results; Declares Fixed-plus-Variable Dividend to be Paid in September

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DENVER, August 03, 2022--(BUSINESS WIRE)--Civitas Resources, Inc. (NYSE: CIVI) (the "Company" or "Civitas") today announced its second quarter 2022 financial results, and has posted an updated investor presentation to its website.

Operational and Financial Highlights for the Second Quarter 2022

  • Average daily sales volumes of 175.2 thousand barrels of oil equivalent per day ("MBoe/d"), with oil representing 46% of total volumes, and total capital expenditures of $238.6 million

  • LOE plus recurring cash G&A(1) of $3.89 per Boe for the second quarter 2022, down sequentially from $4.25 per Boe in the first quarter of 2022, positions Civitas as a cost leader in the industry

  • GAAP net income of $468.8 million and Adjusted EBITDAX(1) of $739.2 million for the second quarter 2022

  • Net cash provided by operating activities of $722.2 million and free cash flow(1) of $436.6 million for the second quarter 2022

  • Fixed-plus-variable dividend, to be paid in September, increased to $1.7625 per share, up nearly 30% sequentially from $1.3625 per share last quarter

  • Retired $100 million of senior notes and exited the second quarter 2022 with $400.0 million in debt

  • Total liquidity was $1.4 billion as of June 30, 2022, which consisted of $439.3 million of cash plus funds available under our credit facility

(1)

Non-GAAP financial measure; see attached reconciliation schedules at the end of this release.

Combined Base and Variable Dividend to be Paid in September

The Company's board of directors has elected to pay a dividend of $1.7625 per share in the third quarter, which reflects the combination of a variable dividend of $1.3000 per share and a base fixed dividend of $0.4625 per share. This dividend will be paid on September 29, 2022 to shareholders of record as of September 15, 2022. Additional detail regarding the calculation of the variable dividend can be found in the Company's new investor presentation.

Chris Doyle, the Company's President and Chief Executive Officer, commented, "I'm very pleased with our performance during the second quarter. We are seeing the benefits of 18 months of large-scale DJ Basin-focused M&A allowing us to deliver better-than-expected volumes, manage industry-wide cost inflation, and generate significant free cash flow which we are aggressively returning to shareholders, all while preserving the strength of our balance sheet."

Second Quarter 2022 Results

During the second quarter of 2022, the Company reported average daily sales of 175.2 MBoe/d. Product mix for the second quarter was 46% crude oil, 30% natural gas, and 24% natural gas liquids. The table below provides sales volumes, product mix, and average sales prices for the second quarter 2022 and 2021.

Three Months Ended June 30,

2022

2021

% Change

Avg. Daily Sales Volumes:

Crude oil (Bbls/d)

80,312

20,936

284

%

Natural gas (Mcf/d)

317,621

70,391

351

%

Natural gas liquids (Bbls/d)

41,974

9,655

335

%

Crude oil equivalent (Boe/d)

175,223

42,323

314

%

Product Mix

Crude oil

46

%

49

%

Natural gas

30

%

28

%

Natural gas liquids

24

%

23

%

Average Sales Prices (before derivatives):

Crude oil (per Bbl)

$

106.48

$

60.85

75

%

Natural gas (per Mcf)

$

7.10

$

2.31

207

%

Natural gas liquids (per Bbl)

$

43.79

$

28.20

55

%

Crude oil equivalent (per Boe)

$

72.17

$

40.37

79

%

Capital expenditures were $238.6 million for the second quarter of 2022, which included $23.9 million of land and midstream capital expenditures. The Company drilled 40 gross (36.6 net) operated wells, completed 27 gross (20.3 net) operated wells, and turned to sales 27 gross (21.5 net) operated wells during the second quarter.

Net crude oil, natural gas, and natural gas liquids revenue for the second quarter of 2022 increased to $1.2 billion compared to $817.8 million for the first quarter of 2022. The increase was a result of higher crude oil, natural gas, and natural gas liquids realized prices and an increase in sales volumes. Crude oil accounted for approximately 68% of total revenue for the quarter. Differentials for the Company's crude oil production, relative to WTI, averaged approximately negative $2.35 per barrel in the quarter. Civitas has recently began to market more of its oil sales volumes in order to achieve the most optimal sales prices; consequently, the Company's oil price differentials have improved and gathering, transportation and processing expenses have increased due to the transportation fees associated with this strategy.

LOE for the second quarter of 2022 on a unit basis increased to $2.63 per Boe from $2.52 per Boe in the first quarter of 2022.

Rocky Mountain Infrastructure ("RMI") net effective cost for the second quarter 2022 was $0.43 per Boe, which consists of $0.47 per Boe of midstream operating expense offset by $0.04 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 were $29.7 million for the second quarter of 2022, which included $6.1 million in non-cash stock-based compensation and $3.4 million of other non-recurring G&A. Recurring cash G&A, which excludes non-recurring and non-cash items, was $20.1 million for the second quarter of 2022. On a per unit basis, the Company's recurring cash G&A decreased 27% sequentially from $1.73 per Boe in the first quarter of 2022 to $1.26 per Boe in the second 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.

Acquisition of Interests in Operated Wells

On July 5, 2022, Civitas closed on Purchase and Sale Agreements to acquire non-operating interests in certain of the Company's operated wells for $81.6 million in cash (the "Acquisition"), subject to customary purchase price adjustments. Net volumes acquired in the Acquisition are expected to be approximately 2 Mboe/d over the next 12 months. In conjunction with the Acquisition, the Company also entered into derivative arrangements to hedge the associated net volumes acquired through 2024. The Company's current derivative positions are shown in the latest investor presentation, which was published on the investor relations section of the corporate website today.

2022 Guidance

Civitas is updating its guidance items for 2022 as shown below. This new guidance incorporates roughly 1 Mboe/d of additional production in 2022 from the Acquisition. The Company now expects an average crude oil price differential of roughly negative $4.00-5.00/Bbl relative to WTI during the year and also expects to pay $75-125 million in cash income taxes in 2022 assuming $100/Bbl WTI oil for the remainder of the year.

2022 Updated Guidance

Low

High

D&C Capital Expenditures ($MM)

$890

--

$940

Land, Midstream & Other Capital Expenditures ($MM)

$80

--

$100

Total Production (MBoe/d)

162

--

168

Oil Production (MBbl/d)

73

--

76

% Liquids

68%

--

70%

Lease Operating Expenses ($/Boe)

$2.65

--

$2.80

Gathering, Transportation and Processing Expenses ($/Boe)

$4.25

--

$4.75

Midstream Operating Expenses ($/Boe)

$0.45

--

$0.55

Recurring Cash G&A Expenses ($MM, 2H22)

$42

--

$47

Production Taxes (% of revenue)

8%

--

9%

Note: Guidance is based on $100/Bbl WTI oil and $8.00/MMbtu Henry Hub gas for the remainder of the year. 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.

Conference Call Information

The Company will host a conference call to discuss these results on August 4, 2022 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time). A live webcast and replay will be available on the Investor Relations section of the Company’s website at www.civiresources.com. Dial-in information for the conference call is included below.

Type

Phone Number

Passcode

Live participant

888-510-2535

4872770

Replay

800-770-2030

4872770

About Civitas Resources, Inc.

Civitas Resources, Inc. is Colorado’s first carbon neutral oil and gas producer and is focused on developing and producing crude oil, natural gas, and natural gas liquids in Colorado’s Denver-Julesburg Basin. The Company is committed to pursuing compelling economic returns and cash flow while delivering best-in-class cost leadership and capital efficiency. Civitas is dedicated to safety, environmental responsibility, and implementing industry leading practices to create a positive local impact. For more information about Civitas, please visit www.civiresources.com.

Forward-Looking Statements and Cautionary Statements

Certain statements in this press release concerning the credit facility, the results, effects, benefits and synergies of the Acquisition, future opportunities for Civitas, future financial performance and condition, guidance and any other statements regarding Civitas’ future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are "forward-looking" statements based on assumptions currently believed to be valid. Forward-looking statements are all statements other than statements of historical facts. The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "probable," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "would," "potential," "may," "might," "anticipate," "likely" "plan," "positioned," "strategy," and similar expressions or other words of similar meaning, and the negatives thereof, are intended to identify forward-looking statements. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the ultimate timing, outcome and results of integrating the legacy operations of Civitas; changes in capital markets and the ability of Civitas to finance operations in the manner expected; the effects of commodity prices; the risks of oil and gas activities; and the fact that operating costs and business disruption may be greater than expected. Additionally, risks and uncertainties that could cause actual results to differ materially from those anticipated also include general economic conditions, whether internationally, nationally or in the regional and local market areas in which we do business; the effects of disruption of our operations or excess supply of oil and natural gas due to the COVID-19 pandemic and the actions by certain oil and natural gas producing countries; the scope, duration and severity of the COVID-19 pandemic, including any recurrence, as well as the timing of the economic recovery following the pandemic; ability of our customers to meet their obligations to us; our ability to generate sufficient cash flow from operations, borrowings, or other sources to enable us to fully develop our undeveloped acreage positions; the presence or recoverability of estimated oil and natural gas reserves and the actual future sales volume rates and associated costs; uncertainties associated with estimates of proved oil and gas reserves; the assumptions underlying forecasts, including forecasts of production, well costs, capital expenditures, rates of return, expenses, cash flow and cash flow from purchases and sales of oil and gas; the possibility that the industry may be subject to future local, state, and federal regulatory or legislative actions (including additional taxes and changes in environmental regulation); environmental risks; seasonal weather conditions; drilling and operating risks, including the risks associated with the employment of horizontal drilling and completion techniques; our ability to acquire adequate supplies of water for drilling and completion operations; availability of oilfield equipment, services, and personnel; exploration and development risks; competition in the oil and natural gas industry; our ability to secure adequate processing capacity for natural gas we produce, to secure adequate transportation for oil, natural gas, and natural gas liquids we produce, and to sell the oil, natural gas, and natural gas liquids at market prices; continued hostilities in Ukraine, the Middle East, South America, and other sustained military campaigns or acts of terrorism or sabotage; and other economic, competitive, governmental, legislative, regulatory, geopolitical, and technological factors that may negatively impact our businesses, operations, or pricing. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for our operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.

Additional information concerning other risk factors is also contained in Civitas’ most recently filed Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other Securities and Exchange Commission ("SEC") filings. Civitas undertakes no duty to publicly update these statements except as required by law.

Schedule 1: Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except for per share amounts, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Operating net revenues:

Oil, natural gas, and NGL sales

$

1,151,364

$

156,035

$

1,969,174

$

230,194

Operating expenses:

Lease operating expense

41,877

11,358

77,896

17,089

Midstream operating expense

7,469

4,246

13,181

8,151

Gathering, transportation, and processing

79,519

13,721

129,922

18,688

Severance and ad valorem taxes

85,870

9,813

149,174

14,417

Exploration

1,553

3,547

2,081

3,643

Depreciation, depletion, and amortization

204,519

35,006

389,379

53,829

Abandonment and impairment of unproved properties

2,215

17,975

2,215

Unused commitments

1,731

4,328

2,507

4,328

Bad debt expense

4

4

Merger transaction costs

1,418

18,246

21,952

21,541

General and administrative expense (including $6,135, $2,195, $14,225, and $3,807, respectively, of stock-based compensation)

29,666

12,144

65,386

21,395

Total operating expenses

453,626

114,624

869,457

165,296

Other income (expense):

Derivative loss

(72,650

)

(73,970

)

(368,143

)

(97,389

)

Interest expense

(8,116

)

(3,241

)

(17,182

)

(3,660

)

Gain on property transactions, net

16,797

Other income

4,313

89

5,096

277

Total other expense

(76,453

)

(77,122

)

(363,432

)

(100,772

)

Income (loss) from operations before taxes

621,285

(35,711

)

736,285

(35,874

)

Income tax benefit (expense)

(152,464

)

10,392

(175,825

)

10,436

Net income (loss)

$

468,821

$

(25,319

)

$

560,460

$

(25,438

)

Comprehensive income (loss)

$

468,821

$

(25,319

)

$

560,460

$

(25,438

)

Net income (loss) per common share:

Basic

$

5.52

$

(0.83

)

$

6.60

$

(0.99

)

Diluted

$

5.48

$

(0.83

)

$

6.56

$

(0.99

)

Weighted-average common shares outstanding:

Basic

84,993

30,655

84,917

25,774

Diluted

85,554

30,655

85,453

25,774

Schedule 2: Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Cash flows from operating activities:

Net income (loss)

$

468,821

$

(25,319

)

$

560,460

$

(25,438

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion, and amortization

204,519

35,006

389,379

53,829

Deferred income tax expense (benefit)

102,079

(10,184

)

125,440

(10,228

)

Abandonment and impairment of unproved properties

2,215

17,975

2,215

Stock-based compensation

6,135

2,195

14,225

3,807

Amortization of deferred financing costs

1,102

433

2,180

526

Derivative loss

72,650

73,970

368,143

97,389

Derivative cash settlements loss

(181,631

)

(20,199

)

(348,209

)

(23,990

)

Gain on property transactions, net

(16,797

)

Other

87

49

155

(35

)

Changes in current assets and liabilities:

Accounts receivable, net

(44,682

)

(8,968

)

(32,776

)

(14,686

)

Prepaid expenses and other assets

(4,181

)

2,394

(6,579

)

2,500

Accounts payable and accrued liabilities

103,864

(12,501

)

192,839

(3,428

)

Settlement of asset retirement obligations

(6,536

)

(2,496

)

(11,667

)

(2,902

)

Net cash provided by operating activities

722,227

36,595

1,254,768

79,559

Cash flows from investing activities:

Acquisition of oil and natural gas properties

(3,515

)

(369

)

(303,602

)

(549

)

Cash acquired

49,827

44,310

49,827

Exploration and development of oil and natural gas properties

(206,519

)

(28,539

)

(467,186

)

(57,269

)

Purchases of carbon offsets

(7,196

)

(7,196

)

Proceeds from (additions to) other property and equipment

134

66

(38

)

Other

(95

)

117

Net cash provided by (used in) investing activities

(217,191

)

20,919

(733,491

)

(8,029

)

Cash flows from financing activities:

Proceeds from credit facility

100,000

155,000

100,000

155,000

Payments to credit facility

(100,000

)

(210,000

)

(100,000

)

(210,000

)

Redemption of senior notes

(100,000

)

(100,000

)

Proceeds from exercise of stock options

24

394

202

409

Dividends paid

(116,172

)

(10,789

)

(219,768

)

(10,789

)

Payment of employee tax withholdings in exchange for the return of common stock

(2,812

)

(2,816

)

(15,740

)

(2,816

)

Deferred financing costs

(1,174

)

(3,595

)

(1,174

)

(3,653

)

Other

(21

)

Net cash used in financing activities

(220,134

)

(71,806

)

(336,480

)

(71,870

)

Net change in cash, cash equivalents, and restricted cash:

284,902

(14,292

)

184,797

(340

)

Cash, cash equivalents, and restricted cash:

Beginning of period

154,451

38,797

254,556

24,845

End of period (1)

$

439,353

$

24,505

$

439,353

$

24,505

(1) Includes $0.1 million of restricted cash and consists of funds for road maintenance and repairs that is presented in other noncurrent assets within the accompanying unaudited condensed consolidated balance sheets ("balance sheets") as of June 30, 2022 and 2021.

Schedule 3: Condensed Consolidated Balance Sheets
(in thousands, unaudited)

June 30, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

439,251

$

254,454

Accounts receivable, net:

Oil, natural gas, and NGL sales

432,694

362,262

Joint interest and other

95,253

66,390

Prepaid expenses and other

31,064

21,052

Inventory of oilfield equipment

21,195

12,386

Derivative assets

3,393

Total current assets

1,019,457

719,937

Property and equipment (successful efforts method):

Proved properties

6,132,620

5,457,213

Less: accumulated depreciation, depletion, and amortization

(803,774

)

(430,201

)

Total proved properties, net

5,328,846

5,027,012

Unproved properties

666,821

688,895

Wells in progress

303,071

177,296

Other property and equipment, net of accumulated depreciation of $6,072 in 2022 and $4,742 in 2021

50,243

51,639

Total property and equipment, net

6,348,981

5,944,842

Right-of-use assets