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Civitas Resources(CIVI) - 2022 Q2 - Earnings Call Transcript
CIVICivitas Resources(CIVI)2022-08-04 20:25
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Financial Data and Key Metrics Changes - The company generated GAAP net income of 468.8million,adjustedEBITDAXof468.8 million, adjusted EBITDAX of 739.2 million, and free cash flow of 436.6millionduringQ22022[12]−Thetotalcapitalexpenditure(CapEx)wasapproximately436.6 million during Q2 2022 [12] - The total capital expenditure (CapEx) was approximately 240 million, with production exceeding internal targets despite inflationary pressures [8][12] - The company redeemed 100millioninseniornotes,resultinginanetdebtpositionof100 million in senior notes, resulting in a net debt position of 400 million and approximately 440millionincash[12][13]−Thequarterlydividendwasannouncedat440 million in cash [12][13] - The quarterly dividend was announced at 1.76 per share, representing a 30% quarter-over-quarter increase [13] Business Line Data and Key Metrics Changes - The company delivered an operational output of 175,000 MBoe per day, including 80,000 barrels of oil per day [8] - The oil marketing group optimized netbacks on oil production, achieving significant scale and geographical diversity [9][10] Market Data and Key Metrics Changes - The company updated its production guidance for 2022, accounting for year-to-date performance and a small acquisition, adding about 1,000 MBoe per day [16] - The oil differential guidance was decreased from 6tobetween6 to between 4 and 5perbarrel[17]CompanyStrategyandDevelopmentDirection−Thecompanyfocusesonmaximizingfreecashflow,maintainingastrongbalancesheet,returningcapitaltoshareholders,andleadinginenvironmental,social,andgovernance(ESG)practices[6][14]−Themanagementemphasizesdisciplinedgrowthandconsolidationthatenhancesbusinessperformanceratherthanmerelyincreasingsize[7][30]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinthecompany′sabilitytooptimizeoperationsandintegratethefiveacquiredcompanies,indicatingthatsignificantimprovementsarestilltocome[18][55]−Thecompanyiscommittedtobeingcarbon−neutralandisinvestinginemissionsreductionprograms[50][51]OtherImportantInformation−Thecompanyhas575wellsinthepermittingpipeline,with205 per barrel [17] Company Strategy and Development Direction - The company focuses on maximizing free cash flow, maintaining a strong balance sheet, returning capital to shareholders, and leading in environmental, social, and governance (ESG) practices [6][14] - The management emphasizes disciplined growth and consolidation that enhances business performance rather than merely increasing size [7][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to optimize operations and integrate the five acquired companies, indicating that significant improvements are still to come [18][55] - The company is committed to being carbon-neutral and is investing in emissions reduction programs [50][51] Other Important Information - The company has 575 wells in the permitting pipeline, with 20% fully approved and 30% submitted and awaiting hearing dates [15] - The company is exploring additional benches and secondary targets within existing plays to optimize production [39] Q&A Session Summary Question: Discussion on capital allocation and share buybacks - Management indicated flexibility in capital allocation, considering share buybacks, special dividends, or acquisitions based on market conditions [20][22] Question: Permitting runway for efficient drilling and completions - Management aims to maintain a 12 to 18-month permit runway to optimize capital allocation [24][25] Question: Update on pending M&A deals - Management is in continuous dialogue regarding potential M&A opportunities but remains disciplined in their approach [28][30] Question: Production performance and future expectations - Management noted that production outperformed expectations due to early well performance and good execution, but guidance suggests moderation moving forward [34] Question: Crude marketing and transportation costs - Management highlighted improved realized prices from in-basin sales and plans to leverage market conditions for better pricing [36][37] Question: Exploration of additional benches and secondary targets - Management is considering opportunities for exploration within existing assets but is not focused on new formations at this time [39][40] Question: Integration of acquired companies and G&A reduction - Management reported an 18% quarter-over-quarter decrease in G&A, with ongoing efforts to optimize operations and reduce costs [42][44] Question: Current tax guidance for the remainder of the year - Management provided guidance of 75 million to 125millionincashincometaxes,assuminganaverageoilpriceof125 million in cash income taxes, assuming an average oil price of 100 per barrel for the rest of the year [61][62]