Civitas Resources(CIVI) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated approximately $186 million in free cash flow during the first quarter, starting the year with$768 million in cash on the balance sheet [30] - The total dividend of $2.12 per share will be paid on June 29, with a variable dividend of$1.62 per share approved for the second quarter, in addition to a $0.50 fixed dividend [10][24] - The company reported production of 159,000 barrels of oil equivalent (BOE) per day, at the high end of guidance, with April production averaging approximately 165,000 BOE per day [54] Business Line Data and Key Metrics Changes - The company achieved a 17$237 million, with a focus on maintaining a two-rig and two-frac crew operational plan [55] Market Data and Key Metrics Changes - The company maintains one of the strongest balance sheets in the industry, with about $560 million in cash against$400 million in total debt [10] - Operating costs decreased by 7% quarter-over-quarter, despite slightly higher operational costs due to cold weather [31] Company Strategy and Development Direction - The company is focused on free cash flow generation, maintaining a strong balance sheet, and returning significant cash to shareholders while leading on ESG initiatives [52] - The 2023 development plan is fully permitted, with significant progress expected on the 2024 plan [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute and deliver on its business plan, emphasizing continuous improvement and efficiency gains [29] - The company is committed to maintaining a disciplined approach to capital allocation, especially in light of the disconnect between service costs and commodity prices [5][91] Other Important Information - The company has made a small acquisition in-basin for a little over $30 million, enhancing its DJ position [16] - The company is actively working on a comprehensive pneumatic retrofit project aimed at reducing total scope one emissions by approximately 40% by the end of the year [32] Q&A Session All Questions and Answers Question: Can you talk about any discussions you've had with the state about potential changes to the permitting process? - Management discussed ongoing relationships with the COGCC and the administration, expressing confidence in the permitting process and the company's ability to meet new environmental targets [12][37] Question: What are your thoughts on the disconnect between commodity prices and service costs? - Management acknowledged the disconnect but indicated it would not materially impact capital allocation decisions, maintaining a strong balance sheet [58] Question: Can you provide insights on the recent acquisition and the current landscape for potential deals in the DJ Basin? - The company is focused on low-risk integration acquisitions and is actively looking for opportunities within the basin, emphasizing asset quality and returns [46][81]