Civitas still ‘laser-focused’ on cutting costs

Civitas Resources Inc., Denver, increased its total production to about 343,000 boe/d in the second quarter, up from 336,000 early this year and driven by a 12% rise in Permian basin volumes. Management lifted full-year production guidance by 1.5% and also the trimmed capital spending forecast for 2024 by 2.5% due mainly to greater efficiencies.

Civitas last year moved into the Permian basin via three acquisitions with a combined value of about $6.7 billion (OGJ Online, Oct. 4, 2023). In second-quarter 2024, its operations there produced nearly 186,000 boe/d while Denver-Julesburg (DJ basin) operations produced 157,000 boe/d—the latter being down from nearly 169,000 in first-quarter 2024. The two basins’ oil production averaged 87,495 boe/d and 67,846 boe/d, respectively.

Speaking to analysts on an Aug. 2 conference call, president and chief executive officer Chris Doyle said Civitas teams—who are running four rigs in the Permian basin and one in DJ basin—have seen solid progress on well performance and trimming cash operating expenses. From this year's first quarter, those costs fell 2.5% to below $9/boe. 

“Our teams remain laser-focused on driving down our cost structure across all basins,” Doyle said.

The goal, Doyle said, is to take out another 15% of the $765/ft Civitas spent in the second quarter to run a 2-mile well in Midland basin. That figure is already 10% lower than Civitas’ cost at end-2023.

“Savings are coming from all areas whether it’s optimizing drilling, completion designs, high-grading our service providers and utilizing more efficient equipment, standardizing facilities or capturing the benefits of having scale positions in multiple basins,” Doyle said. 

The comapny is targeting completion of 130 wells in the Permian basin this year, as well as about 100 in DJ basin. Nearly two-thirds of the capital spending needed was booked in first-half 2024 and productivity gains booked so far have allowed for a full-year spending target cut of $50 million to $1.85-1.95 billion. Executives started the year with a spending forecast of $1.8-2.1 billion but trimmed the number by $150 million in May. The move is similar to what peers at EOG Resources Inc. made last week after a stronger-than-expected second quarter  (OGJ Online, Aug. 2, 2024).

Civitas booked net income of $216 million in the 3 months ended June 30, up from $139 million in the prior-year quarter. Total operating net revenues nearly doubled to $1.31 billion.

Shares of Civitas (Ticker: CIVI) fell 10% to $60.51 Aug. 2. The drop left shares in roughly the same spot they were 6 months ago and trimmed Civitas’ market capitalization to about $6.1 billion.