Civitas Resources(CIVI) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $910 million for Q3 2024, driven by strong sales volumes, oil differentials, and cost control [9][10] - A total of$ 227 million was returned to shareholders during the quarter, with $104 million allocated as a variable return of capital, all directed towards share buybacks instead of dividends [9][10] - Free cash flow is expected to increase significantly in Q4, with oil production projected to rise by 3% quarter-over-quarter [12] Business Line Data and Key Metrics Changes - In the Permian, well costs are trending lower due to improved cycle times and lower oil field service costs, with a more than 30% uplift in daily fluid throughput observed in early results [14][15] - The DJ Basin continues to perform well, with the Blue 4AH well achieving a Colorado record for 90-day cumulative production of 165,000 barrels of oil [18][20] Market Data and Key Metrics Changes - The company has established a diversified portfolio in the lowest break-even basins in the U.S., enhancing its operational execution and capital efficiencies [8][24] - Recent regulatory developments in Colorado have positively impacted operations, allowing for continued strong performance in the DJ Basin [20] Company Strategy and Development Direction - The company aims to generate significant free cash flow, enhance the balance sheet, and return capital to shareholders while leading in ESG initiatives [21][24] - Plans for 2025 include leveling capital investments throughout the year to support sustainable capital efficiencies [22][23] Management's Comments on Operating Environment and Future Outlook - Management noted significant volatility in commodity prices and emphasized the importance of maintaining flexibility in planning for 2025 [7][23] - The focus remains on maximizing free cash flow rather than growing production, with a commitment to maintaining a balanced approach across both the DJ and Permian basins [27][30] Other Important Information - The company has identified approximately 120 Wolfcamp D locations with mid$ 40 oil break-evens, indicating competitive returns compared to other core zones [15][68] - The management team is aligned with shareholder interests, focusing on cost control and capital efficiency [35] Q&A Session Summary Question: Future activities and production growth strategy - Management plans to keep production broadly flat while maximizing free cash flow, with a focus on capital efficiency [27][30] Question: Shareholder return strategy and potential changes - The current framework prioritizes balance between strategic pillars, with a focus on buybacks over variable dividends at this time [33][39] Question: Buybacks versus variable dividends - The company will continue to utilize 100% of the variable return for buybacks, with expectations for increased buyback pace in Q4 [39][40] Question: Maintenance activity levels and capital allocation - Maintenance activity is expected to be around two rigs in the DJ and four in the Permian, with flexibility to adjust based on market conditions [63][92] Question: M&A strategy and inventory management - The company remains cautious about acquisitions, focusing on enhancing existing inventory and optimizing operations rather than pursuing aggressive M&A [55][98]