Civitas Resources, Inc. Announces Share Repurchase From NGP

Rhea-AI Summary

Civitas Resources, Inc. (NYSE: CIVI) announced the repurchase of approximately 876 thousand shares of its common stock at $64.54 per share from NGP Tap Rock Holdings, LLC. The transaction aims to return cash to shareholders and enhance the company's financial position. CEO Chris Doyle highlighted the company's commitment to shareholder value through share repurchases and dividends.

Insights

Financial Analyst

The repurchase of approximately 876 thousand shares by Civitas Resources, Inc. from NGP Tap Rock Holdings, LLC is a significant financial maneuver, reflecting the company's confidence in its intrinsic value. The transaction, sized at $64.54 per share, indicates management's belief that the stock is undervalued. Share repurchases can often lead to an appreciation in a company's stock price by reducing the number of shares outstanding, thus potentially increasing earnings per share (EPS) and return on equity (ROE). The company's commitment to return $1.5 billion to shareholders, equating to roughly a quarter of its market capitalization, is a strong signal to the market of its financial health and shareholder-friendly policies.

Moreover, the remaining authorization of $425 million for share repurchases through the end of 2024 provides Civitas with continued flexibility to enhance shareholder value. However, investors should monitor the company's leverage and liquidity ratios post-transaction to ensure that the balance sheet remains robust, especially in a capital-intensive industry such as energy.

Market Research Analyst

From a market perspective, Civitas' strategic decision to repurchase shares and the subsequent exit of NGP from its shareholder base could be interpreted as a move to consolidate ownership and reduce potential market overhang. This overhang can occur when a large shareholder is known to be exiting its position, potentially pressuring the stock price. By repurchasing the shares directly, Civitas removes this overhang and may create a more stable trading environment for its shares.

Additionally, the emphasis on paying a 'peer-leading dividend' suggests that Civitas aims to position itself as an attractive investment for income-focused shareholders. The company's approach to capital allocation - balancing share repurchases, dividends and balance sheet enhancement - will be closely watched by investors as an indicator of management's confidence in long-term operational performance and financial stability.

Energy Sector Analyst

In the context of the energy sector, Civitas Resources, Inc.'s share repurchase aligns with a broader industry trend where energy companies are focusing on returning capital to shareholders in a period of relative commodity price stability. The strategic pillar of returning significant cash to shareholders is particularly relevant in the energy sector, which has been historically volatile. Companies like Civitas that generate substantial free cash flow are well-positioned to deliver on these initiatives.

It's important to note that Civitas' acquisition of Tap Rock Resources, LLC in mid-2023, which led to NGP's original ownership, reflects ongoing consolidation in the industry. Such consolidation efforts can lead to operational synergies and cost efficiencies, which are critical in maintaining competitiveness and profitability amid fluctuating energy prices.

DENVER--(BUSINESS WIRE)-- Civitas Resources, Inc. (NYSE: CIVI) (“Civitas” or the “Company”), today announced the execution of a definitive agreement to repurchase approximately 876 thousand shares of its common stock at a price of $64.54 per share from NGP Tap Rock Holdings, LLC and certain of its affiliates (“NGP”). The transaction was approved by the Company’s Board of Directors, and the repurchase is expected to close in early March 2024. Following the transaction, NGP will no longer own any shares of Civitas. NGP’s original ownership in Civitas was established through Civitas’ mid-2023 acquisition of Tap Rock Resources, LLC.

Civitas CEO Chris Doyle said, “Returning significant cash to shareholders is one of our strategic pillars as a Company. Over the past two years, we have returned over $1.5 billion to our owners, representing approximately a quarter of our current market cap, through share repurchases and dividends. Our current share price represents a compelling valuation, and this transaction efficiently facilitates NGP’s exit from the stock. Utilizing our generated free cash flow, we will continue to be opportunistic in buying back our shares going forward, while also enhancing our balance sheet and paying a peer-leading dividend.”

Civitas’ remaining share repurchase authorization will be approximately $425 million through the end of 2024, following the completion of the transaction.

About Civitas

Civitas Resources, Inc. is an independent, domestic oil and gas producer focused on development of its premier assets in the Denver-Julesburg (“DJ”) and Permian Basins. Civitas has a proven business model combining capital discipline, a strong balance sheet, cash flow generation and sustainable cash returns to shareholders. Civitas employs leading ESG practices and is Colorado’s first carbon neutral oil and gas producer. For more information about Civitas, please visit www.civitasresources.com.

Forward-Looking Statements and Cautionary Statements

Certain statements in this press release concerning future opportunities for Civitas, future financial performance and condition, guidance, and any other statements regarding Civitas’ future expectations, beliefs, plans, objectives, financial conditions, returns to stockholders, 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. Specific forward-looking statements include statements regarding the Company’s plans and expectations with respect to future options to return cash to stockholders. 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, Civitas’ future financial condition, results of operations, strategy, and plans; the ability of Civitas to realize anticipated synergies related to Civitas’ recent acquisitions in the timeframe expected or at all; 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: declines or volatility in the prices we receive for our oil, natural gas, and natural gas liquids; general economic conditions, whether internationally, nationally, or in the regional and local market areas in which we do business, including any future economic downturn, the impact of continued or further inflation, disruption in the financial markets, and the availability of credit on acceptable terms; the Company’s ability to identify and select possible additional acquisition and disposition opportunities; the effects of disruption of our operations or excess supply of oil and natural gas due to world health events, and the actions by certain oil and natural gas producing countries, including Russia; the ability of our customers to meet their obligations to us; our access to capital on acceptable terms; our ability to generate sufficient cash flow from operations, borrowings, or other sources to enable us to fully develop our undeveloped acreage positions; our ability to continue to pay dividends at their current levels or at all; 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 possibility that the industry may be subject to future local, state, and federal regulatory or legislative actions (including additional taxes and changes in environmental, health and safety regulation and regulations addressing climate change); environmental, health and safety risks; seasonal weather conditions, as well as severe weather and other natural events caused by climate change; lease stipulations; 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; the availability of oilfield equipment, services, and personnel; exploration and development risks; operational interruption of centralized oil and natural gas processing facilities; competition in the oil and natural gas industry; management’s ability to execute our plans to meet our goals; unforeseen difficulties encountered in operating in new geographic areas; our ability to attract and retain key members of our senior management and key technical employees; our ability to maintain effective internal controls; access to adequate gathering systems and pipeline take-away capacity; 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; costs and other risks associated with perfecting title for mineral rights in some of our properties; political conditions in or affecting other producing countries, including conflicts in or relating to the Middle East (including the current events related to the Israel-Palestine conflict), South America, and Russia (including the current events involving Russia and Ukraine), and other sustained military campaigns or acts of terrorism or sabotage; the effects of any pandemic or other global health epidemic; other economic, competitive, governmental, legislative, regulatory, geopolitical, and technological factors that may negatively impact our businesses, operations, or pricing; and disruptions to our business due to acquisitions and other significant transactions. 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 factors that could cause results to differ materially from those described above can be found under Item 1A. “Risk Factors” and “Management’s Discussion and Analysis” sections in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, subsequently filed Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings made with the Securities and Exchange Commission.

All forward-looking statements speak only as of the date they are made and are based on information available at the time they were made. The Company assumes no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227037260/en/

Civitas Contacts

Investor Relations:

Brad Whitmarsh, 832.736.8909, bwhitmarsh@civiresources.com

Media:

Rich Coolidge, info@civiresources.com

Source: Civitas Resources, Inc.

FAQ

What is the ticker symbol for Civitas Resources, Inc.?

The ticker symbol for Civitas Resources, Inc. is CIVI.

How many shares of common stock did Civitas repurchase?

Civitas repurchased approximately 876 thousand shares of its common stock.

At what price per share did Civitas repurchase its common stock?

Civitas repurchased its common stock at a price of $64.54 per share.

Who did Civitas repurchase the shares from?

Civitas repurchased the shares from NGP Tap Rock Holdings, LLC and certain affiliates.

What was the motivation behind the share repurchase according to Civitas CEO Chris Doyle?

According to Civitas CEO Chris Doyle, the motivation behind the share repurchase was to return significant cash to shareholders and enhance the company's financial position.

How much cash has Civitas returned to shareholders in the past two years?

Civitas has returned over $1.5 billion to shareholders in the past two years.

What is Civitas' remaining share repurchase authorization after the completion of the transaction?

Civitas' remaining share repurchase authorization will be approximately $425 million through the end of 2024.