Q4 2023 Civitas Resources Inc Earnings Call
Operator: Good morning, my name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Civitas Resources 4th Quarter 2023 Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.
Good morning, My name is Audrey and I will be your conference operator today.
At this time I would like to welcome everyone to the Civitas resources fourth quarter 2023 earnings conference call.
Today's conference is being recorded.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 0. At this time, I'd like to turn the conference over to Brad Whitmarsh, Vice President of Investor Relations. Please go ahead.
At this time I'd like to turn the conference over to Brad Whitmarsh, Vice President of Investor Relations. Please go ahead.
Brad Whitmarsh: Thank you, Audra. Good morning, everyone, and let me say that I'm thrilled to be a part of Civitas, a great team with great assets and a forward-thinking vision. I'm joined today by our CEO, Chris Doyle, CFO, Marian Elafosky, and COO, Hodge Walker. Today's webcast and conference call coincide with our fourth quarter 2023 and 2024 Outlook release, our published supplemental slides, and the 10-K, all of which were published on our website yesterday. In addition, we announced a large share repurchase transaction yesterday afternoon. So hopefully, you've had a chance to get through all of the materials that we have provided.
Thank you Andre and good morning, everyone and let me say that I'm thrilled to be a part of civitas a great team with great assets and a forward thinking vision.
I'm joined today by our CEO, Chris Doyle CFO.
CFO, Marianne <unk> and CLO Hodge Walker.
Today's webcast and conference call coincides with our fourth quarter 2023, and 'twenty 'twenty four outlook released our.
Our published supplemental slides and the 10-K all of which were published on our website yesterday. In addition, we've announced the large share repurchase transaction yesterday afternoon. So.
So hopefully you've had a chance to get through all of the materials that we have provided.
Brad Whitmarsh: During this call, we will make certain forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from our projections. Please read our full disclosures regarding forward-looking statements and other disclaimers in our earnings materials and most recent SEC filings. We may also refer to certain non-GAAP financial metrics.
During this call we will make certain forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from our projections. Please read our full disclosures regarding forward looking statements and other disclaimers in our earnings materials and most recent SEC filings.
We may also refer to certain non-GAAP financial metrics reconciliations of these items can be found in our earnings release, and our SEC filings as well.
Brad Whitmarsh: Reconciliations of these items can be found in our earnings release and our SEC filings as well. After prepared remarks, we look forward to a question and answer session. As always, please limit your time to one question and one follow-up so we can work through the list efficiently. I'll now turn the call over to Chris for opening comments. Good morning, everyone, and thanks for joining us today.
After prepared remarks, we look forward to a question and answer session.
As always please limit your time to one question and one follow up so we can work through the list efficiently I'll now turn the call over to Chris for opening comments.
Good morning, everyone and thanks for joining US today, let me also welcome Brad to the Civitas team.
Chris Doyle: Let me also welcome Brad to Civitas. There are three primary things I want to cover today before we take your questions. First, a quick recap of the significant progress we've made over the last year. Civitas is a remarkably different and stronger company today.
Our three primary things I want to cover today before we take your questions first a quick recap of the significant progress we've made over the last year.
<unk> is a remarkably different and stronger company today.
Chris Doyle: Next, I'll share a few highlights from our fourth quarter and 2023 financial and operating results. Finally, we'll discuss our 2024 outlook and how we're extremely well positioned to create substantial shareholder value moving forward. Our 2024 plan has been optimized compared to our previous outlook, as we've reduced our capital expenditures by $150 million while maintaining our expected full-year production. So let's get started.
I'll share a few highlights from our fourth quarter, and 2023 financial and operating results.
Finally, we'll discuss our 2020 for outlook and how we're extremely well positioned to create substantial shareholder value moving forward.
24 plan has been optimized compared to our previous outlook as we've reduced our capital expenditures by $150 million, while maintaining our expected full year production.
So let's get started.
Chris Doyle: A year ago, Civitas was a small-cap, single-basin company focused solely on the DG. Production was approximately 170,000 barrels of oil equivalent per day. And while our D.J.
A year ago <unk> was a small cap single basin company focused solely on the DJ.
Production was approximately 170000 barrels of oil equivalent per day.
Chris Doyle: Although Basin assets were and continue to perform exceptionally well, we have limited flexibility in how we allocate our capital, using our strategic pillars as our North Star. We've been working to enhance the Civitas Investment Thesis and Portfolio for nearly two years. Being on the forefront of this consolidation wave, we looked at a significant number of opportunities to diversify, scale, and strengthen our business.
While our DJ basin assets were and continue to perform exceptionally well we had limited flexibility in how we allocated our capital.
Using our strategic pillars is our north star.
We've been working to enhance the civitas investment thesis and portfolio for nearly two years now being on the forefront of this consolidation wave we looked at a significant number of opportunities to diversify and scale and strengthen our business.
Chris Doyle: During 2023, our team successfully entered a second world-class base in the Permian through three separate large-scale transactions, all at a compelling valuation. These transactions added scale and diversified our operations across two of the lowest break-even oil basins in the U.S. As we more than doubled our production, doubled our reserves, and doubled our inventory of high-return development. We have all of the key ingredients to deliver long-term value for our shareholders, an exceptional team, high-quality assets, inventory depth, a strong balance sheet, significant free cash flow, and a track record of return of that cash to owners through the cycle.
During 2023, our teams successfully entered a second world class base in the Permian through three separate large scale transactions all at compelling valuations the transactions added scale and diversify their operations across two of the lowest breakeven oil basins in the U S. As we more than doubled our production doubled our reserves and doubled.
Our inventory of high return development wells.
We have all of the key ingredients to deliver long term value for our shareholders and exceptional team.
High quality assets inventory depth, a strong balance sheet significant free cash flow and a track record of returning that cash to owners through cycle, we've significantly transformed civitas over the last year and our future has never been brighter.
Chris Doyle: We've significantly transformed Civitas over the last year, and our future has never been brighter. Shifting now to 2023 results, I'm very pleased with our performance last year, as our full-year results were in line with guidance. What our teams were able to accomplish operationally and financially amidst the ongoing transformation at Civitas is remarkable. While our equity valuation is yet to catch up to our new asset base, we're confident we'll close this gap and deliver for our shareholders for years to come. Shareholder returns are one of our four strategic pillars, and last year, we returned nearly a billion dollars to our shareholders. Two-thirds of this was in the form of dividends, and a third in the form of a share buyback. Now, over the last two years, we've given back more than $1.5 billion to our owners, and that represents nearly 25% of our market. Fourth quarter production was 279,000 barrels of oil equivalent per day. D.J.
Shifting now to 2023 results I'm very pleased with our performance last year as our full year results were in line with guidance, but our teams were able to accomplish operationally and financially amidst the ongoing transformation of <unk> is remarkable.
While our equity valuation has yet to catch up to our new asset base. We're confident we'll close this gap and deliver for our shareholders for years to come.
Shareholder returns are one of our four strategic pillars and last year, we returned nearly $1 billion to our shareholders. Two thirds of this was in the form of dividends and a third in the form of share buybacks.
Now over the last two years, we've given back more than one $5 billion to our owners and that represents nearly 25% of our market cap.
Fourth quarter production was 279000 barrels of oil equivalent per day DJ basin volumes outperformed expectations. Once again with strong productivity in our Watkins area, which is in the southern part of our DJ acreage.
Chris Doyle: Basin volumes outperformed expectations once again, with strong productivity in our Watkins area, which is in the southern part of our D.J.A. Fourth quarter Permian production was impacted by facility upgrades to some of our higher oil cut production in the Delaware. These upgrades were completed in November, and we exited this year strong. December 2023 Permian production averaging 120,000 BOE per day, 50% of which was oil. We took over operatorship of the Midland Basin assets late in the fourth quarter, and our early performance is encouraging as we're already seeing efficiencies through reduced drilling days and improved cycle time. Earlier this month, we took over complete control of the Delaware operations, and I'm confident we'll achieve similar operational improvements throughout the year. With our Permian leadership team now fully in place, we have the right people working with the right assets, and we're primed and ready to deliver. Needless to say, I'm very excited about the opportunity ahead of us in the Permian. Year-end 2023 approved reserves totaled nearly 700 million barrels of oil equivalent, up about 70% from last year. This was largely driven by the Taprock and Hibernia acquisitions. None of the reserve numbers include Venter, which closed on January 2nd and will add significant reserves in 2024.
Fourth quarter Permian production was impacted by facility upgrades to some of our higher oil cut production in the Delaware. These upgrades were completed in November and we exited this year strong with December 2023, Permian production, averaging 120000 Boe per day, 50% of which was oil.
We took over operator ship of the Midland Basin assets late in the fourth quarter and our early performance is encouraging as we're already seeing efficiencies through reduced drilling days and improved cycle times.
Earlier this month, we took our over complete control of the Delaware operations.
Confident we'll achieve similar operational improvements throughout the year with our Permian leadership team now fully in place we have the right people working the right assets and we're primed and ready to deliver needless to say I'm very excited about the opportunity ahead of us in the Permian.
Year end 2023 proved reserves totaled nearly 700 million barrels of oil equivalent up about 70% from last year.
This was largely driven by the tap rock and Hibernia acquisitions.
None of the reserve numbers include venture, which closed closed January <unk>.
It will add significant reserves in 2024.
Chris Doyle: Finishing up 2023, Civitas continued building a sustainable business, enhancing our environmental, health, and safety performance. Last year, we further reduced our total recordable incident rate and our spill count, and through a pneumatic device retrofit program, we reduced CO2 emissions in the DJ by 420,000 metric tons, another amazing accomplishment by the Civitas team. We'll continue these efforts in the new year, and we're bringing our expertise and our approach to the Permian. Shifting now to our 2024 outlook, our optimized plan focuses on three primary objectives. First, for continuing our momentum in the DJ and successfully integrating our new Permian assets. Second, for maximizing free cash flow through discipline and returns-focused investment.
Finishing up 2023, <unk> continued building a sustainable business enhancing our environmental health and safety performance last year, we further reduced our total recordable incident rate and our spill count and through nomadic device retrofit program, we reduced <unk> in the DJ by 420000 metric tons another amazing accomplishment by.
The civitas team.
We will continue these efforts in the new year, and we're bringing our expertise and bringing our approach to the Permian.
Shifting now to our 2020 for outlook our optimized plan focuses on three primary objectives.
First continuing our momentum in the DJ and successfully integrating our new Permian assets.
Second maximizing free cash flow through disciplined and returns focused investments.
Chris Doyle: And third, maintaining our industry-leading shareholder returns while also improving our balance sheet. As I mentioned earlier, we enhanced our 20-4 plan by reducing CapEx by 7%, or $150 million, while maintaining our production output. These plan improvements were achieved through optimized activity levels and reduced cycle times across the business along with productivity enhancements in the DG. Our CapEx will be more weighted to the first half of the year, primarily as we're coming off higher legacy activity levels in the Permian. Production volumes are anticipated to increase modestly through the year.
And third maintaining our industry, leading shareholder returns, while also improving our balance sheet as.
As I mentioned earlier, we enhanced our 24 planned by reducing capex, 7% or $150 million, while maintaining our production outlook.
These planned improvements were achieved through optimized activity levels and reduced cycle times across the business along with productivity enhancements in the DJ.
Our capex will be more weighted to the first half of the year, primarily as we're coming off higher legacy activity levels in the Permian.
Production volumes are anticipated to increase modestly through the year.
First quarter oil volumes will reflect the new takeaway agreement in the Rockies, where we have some line fill inventory to build this agreement represents over $100 million in incremental value to civitas over the next five years, where we're excited about it.
Chris Doyle: First quarter oil volumes will reflect a new takeaway agreement in the Rockies, where we have some line fill inventory to build. This agreement represents over $100 million in incremental value to Civitas over the next five years. We're excited. Net of line fill, net of weather impacts, January production still came in at 325,000 BOE per day. About 60% of our 2024 CapEx will be allocated to the Permian, where we're targeting 130 to 150 gross wells this year. Additionally, approximately 70% of our Permian turning lines will be in the Midland, with the remaining 30% in the Delaware.
Net of the line fill net of weather impacts January production still came in at 325000 Boe per day.
About 60% of our 2024 Capex will be allocated to the Permian, where we're targeting 130 to 150 gross wells. This year approximately 70% of our Permian turn in lines will be in the Midland with the remaining 30% in the Delaware.
Because we've only recently taken over operator ship of the Permian assets, we've kept our drilling completion and facility costs per foot.
<unk> versus our acquisition assumptions as such the opportunity to drive capital efficiencies in the Permian are significant and I expect we will have meaningful updates later this year as we establish our performance track record in the Permian.
The remaining 40% of our anticipated capex will be allocated to the DJ where our core Watkins development area continues to impress.
Chris Doyle: Because we've only recently taken over operatorship of the Permian assets, we've kept our drilling completion and facility costs per foot flat versus our acquisitions. As such, the opportunity to drive capital efficiencies in the Permian is significant, and I expect we'll have meaningful updates later this year as we establish our performance track record in the Permian. The remaining 40% of our anticipated CapEx will be allocated to the DJ, where our core Watkins Development Area continues to impress. Based on recent production performance in Watkins, we raised our expected recovery in our near-term development area by 10% versus prior estimates. The majority of our 2024 D.J. Basin activity will be in the Watkins area. In January, we filed our third comprehensive area plan in Watkins. We expect the previously submitted Lowry cap to be approved in mid-2024 and the latest Arapacap to be approved late this year or early 2025. Including the initial Box Elder cap, these three caps represent nearly 80% of the remaining 300 or so locations in Watkins.
Based on recent production performance and Watkins, we raised our expected recovery in our near term development area by 10% versus prior estimates.
The majority of our 2024 D. J basin activity will be in the Watkins area in January we filed our third comprehensive area plan and Watkins we expect the previously submitted Lowry cap to be approved in mid 2024, and the latest a rapid cap to be approved late this year or early 2025.
Including the initial box elder cap. These three caps represent nearly 80% of the remaining 300 or so locations in Watkins and most of the non cap locations are covered by an existing Oh GDP. So we feel very confident in our plans and outlook in the DJ for the next several years.
We're maintaining our peer leading shareholder return framework at $75 oil and $2 75 gas, we estimate free cash flow to be approximately $1 $3 billion in 2024.
Dividends, including base and variable are estimated at approximately $600 million this year of $6 per share or nearly 10% yield based on our current stock price.
In addition to our targeted divestment proceeds the remaining $700 million in free cash flow will be prioritized for the balance sheet and opportunistic share buybacks like the one we announced yesterday fully exiting from our shareholder base.
Chris Doyle: And most of the non-cap locations are covered by an existing OGDP, so we feel very confident in our plans and outlook for the DJ for the next several years. We're maintaining our peer-leading shareholder return framework at $75 oil and 275 gas. We estimate free cash flow to be approximately $1.3 billion in 2024. Dividends, including base and variable, are estimated at approximately $600 million this year, or $6 per share, a nearly 10% yield based on our current stock price. In addition to our targeted investment proceeds, the remaining $700 million in pre-cash flow will be prioritized for the balance sheet and opportunistic share buybacks like the one we announced yesterday, fully exiting NGP from our shareholder base. We now have approximately $425 million remaining on our share repurchase authorization.
We now have approximately $425 million remaining on our share repurchase authorization, our current trading level equates to a free cash flow yield in excess of 20% and believe this is a tremendous investment opportunity considering the quality of our asset base and our low cost structure.
Our commitment to a strong balance sheet is unwavering our long term target for leverage is unchanged at three quarters of a turn.
Our divestment program remains on track during the fourth quarter of last year, we sold our non operated acreage position in the DJ with essentially no production at a compelling valuation. It's represented about 100 gross or 40 net non operated locations are low working interest assets, where we had no control over development timing in the area was <unk>.
And the operators near term development plan.
Completed divestments to date total about a third of our $300 million target are on track and confident that we'll complete the remainder by the middle part of this year.
Chris Doyle: Our current trading level equates to a free cash flow yield in excess of 20%. We believe this is a tremendous investment opportunity considering the quality of our asset base and our low cost structure. Our commitment to a strong balance sheet is unwavering.
Wrapping up let me go back to where I started my comments today <unk> is a significantly transformed company with all the key ingredients to deliver long term shareholder value.
We are differentiated from our peers through scale asset durability cash returns to shareholders in an employee base that consistently delivers.
Chris Doyle: Our long-term target for leverage is unchanged at three-quarters of a turn. Our divestment program remains on track. During the fourth quarter of last year, we sold a non-operated acreage position, the DJ, with essentially no production at a compelling valuation. It represented about 100 gross or 40 net non-operated locations.
Before we move to Q&A I want to give a quick shout out to our field teams have managed through some incredibly challenging weather over the last couple of months.
Companies, often talk about employees being their greatest asset our civitas employees approving it highlighted by our team recently limiting downtime in the DJ to an extreme weather event, where temperatures reached 30 below zero.
I want to personally thank the men and women, who work hard to deliver some of the lowest carbon barrels in North America. They do this every day no matter, what the weather looks like outside.
Chris Doyle: They're low-working interest assets where we had no control over development timing, and the area was not in the operator's near-term development plan. Completed divestments to date total about a third of our $300 million target. We're on track and confident that we'll complete the remainder by the middle part of this year.
Operator, we're now happy to take questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Again, we ask that you limit yourself to one question and one follow up to allow everyone an opportunity to ask a question.
We'll go to our first question from Neal Dingmann at Truth Securities.
Chris Doyle: Civitas is a significantly transformed company with all the key ingredients to deliver long-term shareholder value. We're differentiated from our peers through scale, asset durability, cash returns to shareholders, and an employee base that consistently delivers. Before we move to Q&A, I want to give a quick shout out to our field teams who have managed through some incredibly challenging weather over the last couple of months. Companies often talk about employees being their greatest asset, and our Civitas employees agree. Highlighted by our team, recently limiting downtime in the DJ during an extreme weather event where temperatures reached 30 below zero. I want to personally thank the men and women who work hard to deliver some of the lowest carbon barrels in North America. They do this every day, no matter what the weather looks like outside.
Good morning, guys Nice quarter. My first question is on the 24 Permian production guide. Thank you talked about 170000 daily per day around 140 wells that now include will include that so I'm just wondering Chris could you and the team give some color on the regional focus and maybe more importantly, what type of cycle times are operational efficiencies.
You believe are achievable now that you've got all of the assets combined.
Sure. Thanks for the question Neil I'll kick it off and then kick it over to Hodge.
In terms of the 2024 guide as we mentioned we expect to.
To see production growth throughout the throughout the year in terms of the split for the year were about 70 30.
<unk>, 70% of the <unk> will be from Midland, 30% from from the Delaware.
Operator: Operator, we're now happy to take your order. Thank you. At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad. Again, we ask that you limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We'll go to our first question from Neil Dingman at Truist. Morning guys, next quarter. My first question is about the 24 Permian production guide.
We like the production growth profile growing a little bit through the year has started out the year very strong coming off of a really strong exit in terms of capital efficiencies and how we've constructed. This this program and we're early on it's early days certainly.
Love seeing the team already delivering 20%, 30% reduction in drilling days.
We're also.
Accelerating till times.
And I am excited what this team that we've built we'll do we've not reflected any additional significant.
Neil Dingman: I think you talked about 170,000 barrels of oil per day, around 140 wells that now will include vents. I'm just wondering, Chris, could you or the team give some color on the regional focus, and maybe more importantly, what type of cycle times or operational efficiencies you believe are achievable now that you've got all the assets? Sure, thanks for the question, Neil. I'll kick it off and then kick it over to Haught.
Efficiency gains in either side of the Permian. So we think it's the right way to set up 2024, and we think there's there's room to to enhance as we go through the year <unk> jump in and some of the specifics yes. Thanks, Chris Neil as you know we're real early days with taking over operator ship, we just took over operations.
Later ship on the Hibernia assets here at the end of November and and on the tap assets here just earlier this month, but to the point that Chris mentioned the team's already get some some early quick wins, we've high graded some some rigs out in the Midland Basin <unk> seen some improvements on drilling times by by 20%.
Chris Doyle: In terms of the 2024 guide, as we mentioned, we expect to see production grow throughout the year. In terms of a split for the year, we're about 70-30 on tills. 70% of the tills will be from Midland, 30% from Delaware. We like the production profile growing a little bit through the year, and we have started out the year very strong, coming off a really strong exit. In terms of capital efficiencies and how we've constructed this program, we're early on. It's early days, certainly.
We're doing more modular builds versus steak builds which help us to accelerate.
Facilities until timing.
If you look at the broader efficiencies. It really is all about drilling completions and till timing we are returns focused.
Part of that returns is really shortening that time from capital deployment to til. If we can consolidate some of that completion and bring revenue forward, we're going to do that.
Chris Doyle: I love seeing the team already delivering 20-30% reduction in drilling days. We're also accelerating till times, and I'm excited about what this team that we've built will do. We have not reflected any additional significant efficiency gains on either side of the Permian.
Well, that's great upside guys and then maybe my second one for you just on shareholder return and capital allocation you all continue to have among the best payouts.
Even notable that with obviously this great <unk> buyback and the leading dividend yield I'm. Just wondering we all continue with the same sort of systematic several return plan and just what the 50% plus and what and how flexible you are on buybacks versus Dave's going forward. Thank you.
Hodge Walker: So we think it's the right way to set up 2024, and we think there's room to improve as we go through the year. Hodge, why don't you jump in on some of the specifics? Yeah, thanks, Chris. Neil, as you know, we're in the real early days with taking over operatorship. We just took over operatorship on the Hibernia assets here at the end of November and on the TAP assets here just earlier this month. But to the point that Chris mentioned, the team's already got some early quick wins.
Sure I'll kick us off and then kick it over to Mary Ellen I think the first thing I'd say is we've built this track record of and all of the above approach. When you look at what we've delivered through last year and even as we started 2020 for a good mix between.
Dividends and buybacks and that really comes down to the strength of the assets.
Hodge Walker: We've upgraded some rigs out in the Midland Basin, seen some improvements in drilling times by 20%. We're doing more modular builds versus stick builds, which help us accelerate facilities and till timing. If you look at the broader efficiencies, it really is all about drilling completions and till timing.
And the teams that are managing those assets.
It's important to.
Understand the company was formed with very clear mandate and that was to return cash to our shareholders.
We've done that we've chosen to do that we'll continue to do that with a mix of the variable the fixed variable and in buybacks.
Chris Doyle: We are returns focused. Part of that returns is really shortening that time from capital deployment to till. If we can consolidate some of that completion and bring revenue forward, we're gonna do that. That's a great upside, guys. And then, Chris, maybe my second question for you and Elle, just on shareholder return and capital allocation, you all continue to have among the best payouts, you know, even notable that there's obviously this great MGP buyback and the leading dividend yield. I'm just wondering whether we all continue with the same sort of systematic shareholder return plan and, you know, just with the 50% plus and what and how flexible you are on buybacks versus dividends going forward Thank you. Sure, I'll kick us off and then kick it over to Marinella.
What would you yes, absolutely Neal if you look at what we've done to date, we have an extremely strong track record of doing cell and returning cash to shareholders released that as anybody.
We completed nearly $400 million in stock repurchases at a weighted average price of 61 unchanged, obviously very attractive levels. We also paid $670 million in dividends. During the course of 2023 and like we said in the prepared remarks, we've returned 25% of our market cap to shareholders just in the last two years alone.
And I think it's <unk>.
I want to note that we did all of that while taking a meaningful step to diversify our asset base and our <unk>.
Forward ourselves just more capital allocation flexibility by entering into the Permian at very accretive multiples. Even if you look at it on a debt adjusted basis. So going forward you can continue to expect us to do just that just expect us to continue this strong track record of returning cash to shareholders through cycles and.
Chris Doyle: You know, I think the first thing I'd say is we've built this track record of an all of the above approach. You look at what we delivered through last year and even as we started 2024, a good mix between dividends and buybacks. And that really comes down to the strength of the assets and the teams that are managing those assets. I think it's important to understand that the company was formed with a very clear mandate, and that was to return cash to our shareholders. We've done that before.
Chris that in this all of the above philosophy. We believe the sloppy has really served us well to date and I would say.
If you look at our equity prices, they don't really reflect the value.
Our high quality asset base, which is why you saw us capitalize on that yesterday.
Chris Doyle: We've chosen to do that, and we'll continue to do that with a mix of the fix, the variable, and buybacks. Mary Noah, what would you add?
If you look at our free cash flow during 2023 at $75 oil $1 3 billion, which is over a 20% yield.
Marian Elafosky: Yeah, absolutely. Neil, if you look at what we've done to date, we have an extremely strong track record of doing so and returning cash to shareholders, really as good as anybody. We completed nearly $400 million in stock repurchases at a weighted average price of $61 million and change, so obviously very attractive levels. We also paid $670 million in dividends during the course of the year.
Said differently, we pay our entire market cap in under five years.
I'll also note that we remain extremely committed to the balance sheet and achieving that 75 times leverage target I mean look we don't we don't need to get there tomorrow, but for us it's more sell about taking meaningful steps in making money, making meaningful progress towards stock every single day.
Marian Elafosky: 2023, and like we said in the prepared remarks, we've returned 25% of our market cap to shareholders just in the last two years alone. And I think it's important to note that we did all that while taking a meaningful step to diversify our asset base and afford ourselves more capital allocation flexibility by entering into the Permian at very accretive multiples, even if you look at it on a debt-adjusted basis. So going forward, you can continue to expect us to do just that. Just expect us to continue our strong track record of returning cash to shareholders through cycles, and, like Rick said in this all-above philosophy, we believe this philosophy has really served us well to date.
Why you saw us come out with the asset sale program last year to accelerate that delevering target and.
And between our asset sale program.
Our free cash flow. This year, we'll have about $1 billion to be allocated to balance sheet as well as the buyback program I mean look.
It's all a balance right.
This team create shareholder value the opportunity to do that and so it's really just a question on balancing.
Making progress towards that leverage target and along with capitalizing on very cheap opportunities to buy our stock and sell I know I said a lot there, but just wanted to give you a flavor as far as our decision matrix Donaldson.
All of those reasons I mean, we think our equity right now represents a very compelling entry point and <unk> is well positioned that if anybody to capitalize on that.
Marian Elafosky: And I would say, I mean, look, if you look at our equity prices, they don't really reflect the value of our high-quality asset base, which is why you saw us capitalize on that yesterday. If you look at our free cash flow during 2023, at $75 oil, it is $1.3 billion, which is over a 20% yielder. Said differently, we pay off our entire market cap in under five years. And I will also note that we remain extremely committed to the balance sheet and achieving that 0.75 times leverage target. I mean, look, we don't need to get there tomorrow.
That's very helpful. I would agree thank you all.
Thanks Neil.
We will go next to Tim <unk> at Keybanc capital markets.
Hey, good morning folks.
To dig into the Permian a little more given your position just got bigger at the start of the year with venture.
Do you plan any similar sort of facilities work as you integrate the new assets and trying to think how we should think about items slightly low going forward do you see some short term increases to get longer term decreases there.
Any big picture comments, you have on sort of what's what you plan to do in the field. This year. Following what you did in the fourth quarter would be helpful. Thanks.
Marian Elafosky: But for us, it's more about taking meaningful steps and making meaningful progress towards that every single day. That's why you saw us come out with the asset sale program last year to accelerate that de-levering target. And then between our asset sale program and our free cash flow this year, we'll have about a billion dollars to be allocated to the balance sheet as well as a buyback program. I mean, look, it's all about balance, right?
Sure the fourth quarter facility upgrades that we that we saw was really about short term pain for long term gain.
And enhancing flow assurance in the Delaware.
We've done similar facility upgrades and tweaks already this quarter with with minimal downtime and so we think thats a one off.
Marian Elafosky: I mean, our focus is to create shareholder value. There's the opportunity to do that, so it's really just a question of balancing.
Importantly, as we think about denser and the integration efforts.
Timothy A. Rezvan: You know, making progress towards that leveraged target and, along with capitalizing on very cheap opportunities to buy our stock. And so I know I said a lot there, but I just wanted to give you a flavor as far as our decision matrix goes. And for all those reasons, I mean, we think our equity right now represents a very compelling entry point, and Civitas is well-positioned, as good as anybody, to capitalize on that. Thank you all. We'll go next to Tim Rezvan at KeyBank Capital. Good morning, folks.
If kicked off much different than with tap rock and Hibernia.
We have the we have the platform in place we have the leadership team in place.
Along with all the supporting.
Support staff that will drive a successful integration. These are assets that the team is very familiar with.
The basin that they've worked for a long time.
I think we've shown as we've exited the year and moved into this quarter.
Assets are better in our hands and I'm excited to see what the team can deliver I'm most excited to be able to accelerate the integration with denser and see what the assets can deliver we don't see any similar sort of one off <unk>.
Chris Doyle: I wanted to dig into Permian a little more, given your position, you know, just got bigger at the start of the year with Vensor. Do you plan any similar sort of facilities work as you integrate the new assets? And I'm just trying to think about how we should think about items like LOE going forward. Do you see some, you know, short-term increases to get longer-term decreases or... You know, any big picture comments you have on sort of what you plan to do in the field this year following what you did in the fourth quarter would be helpful. Chair, the fourth quarter facility upgrades that we saw were really about short-term pain for long-term gain and enhancing flow assurance in Delaware.
Facility upgrades like we experienced in October and November.
But this is also team thats going to look for every single way to optimize the business.
Or is there anything you would you would add.
Just adding a bit of color to chris's commentary.
That was done there during the third floor. During the October November timeframe was really all about debottlenecking optimizing flow assurance and minimizing downtime in that work.
Chris Doyle: We've done similar facility upgrades and tweaks already this quarter with minimal downtime, and so we think that's a one-off. I think importantly, as we think about VINSR and the integration efforts that have kicked off, much different than with TAPROC and Hibernia, we have the platform in place. We have a leadership team in place along with all the supporting staff that will drive a successful integration. These are assets that the team is very familiar with, the basin that they've worked in for a long time.
Really really was associated with some specific.
Specific facilities and Thats behind us and that's proven by the way that we exited the year at 120000 barrels a day.
For the month of December and in the strong entrance into this year. The team is always looking for opportunities to optimize things, but at the same time.
We will we will look for <unk>.
Efficiencies everywhere, we can.
Okay and then.
Yes.
In terms of cost structure charges get into the second part of your question here, we exited the year with all in cash.
Chris Doyle: I think we've shown, as we've exited the year and moved into this quarter, assets are better in our hands, and I'm excited to see what the team can deliver. I'm most excited to be able to accelerate the integration with Vincer and see what the assets can deliver. We don't see any similar sort of one-off facility upgrades like we experienced in October and November, but this is also a team that's going to look for every single way to optimize the business. How does anything else you would add?
Cash cost around $9 50, or so.
Just over 950.
That's right at the Middle of our guide for 2024.
Yes, there are likely some synergies that have not been baked into that number with vince or volumes coming over but we feel very confident in how we exited the year and as we lay out very low and competitive cost structure in 2004.
Okay.
Appreciate the color and then as my follow up.
I wanted to ask you out here in Colorado.
There was a proposal that came out recently SB 24 to <unk> five nine.
Hodge Walker: Just adding a bit of color to Chris's commentary. The work that was done there during the October-November time frame was really all about de-bottlenecking, optimizing flow assurance, and minimizing downtime. And that work, really, really was associated with some specific... Specific facilities, and that's behind us, and that's proven by the way that we exited the year at 120,000 barrels a day for the month of December and the strong entrance into this year. The team is always looking for opportunities to optimize things, but at the same time, we will look for efficiencies everywhere we can. In terms of cost structure, sorry, just getting to the second part of your question, you know, we exit the year with all-in cash costs around $950 or so, just over $950.
Where some of the Democrats and the state of proposing a phaseout of drilling towards the end of the decade I know it's early stages, but can you talk about what you are or you collectively at the industry started doing in response to this proposal.
Sure ill kick us off and then kick it over to Hodge similar similar push was.
You heard about a year ago, the governor came out very strongly in opposition.
That measure.
They tried to go through a valid initiative didn't get the signatures and get the financial support.
Here. It comes again this this quarter.
We don't think its going anywhere.
We're actively engaged at all levels.
With within Colorado.
Hodge Walker: That's right in the middle of our guide for 2024. There are likely some synergies that have not been baked into that number with venture volumes coming over, but we feel very confident in how we exit the year. And, as we lay out, you know, a very low and competitive cost structure.
And hardwood any additional.
Color on where that sits today.
Yes.
Building off of that.
Your point on where the industry is we with the industry continuing to work with our with the trades in and work with the legislature I think one of the things to note here is there doesn't appear to be a whole lot of support sitting in the legislature right now as Chris mentioned last year. The Governor came out against this bill early.
Chris Doyle: OK. And then, as my follow-up, I want to ask, you know, out here in Colorado. There was a proposal that came out recently, SB 24-159, where some of the Democrats in the state are proposing a phase-out of drilling, you know, towards the end of the decade. I know it's early stages, but can you talk about, you know, what you or you collectively as the industry are sort of doing in response to this proposal? Sure, I'll kick us off and then kick it over to Hodge. You know, a similar push occurred about a year ago. The governor came out very strongly in opposition to that measure.
Earlier this week he came out with this greenhouse gas roadmap and in that roadmap. He mentioned that a production phase out at the scale large enough to make any meaningful impact would really drive up cost of living for many Colorado owns which really can't afford that kind of an increase to two living call.
So let me get it gives you a sense of his indication of where he stands which is similar to where it was last year.
Okay.
Chris Doyle: They tried to go through a ballot initiative, didn't get the signatures, didn't get the financial support. Here it comes again this quarter. We don't think it's going anywhere. We're actively engaged at all levels within Colorado and Hodge with any additional support from John Burnett. And we're going to have a little bit of color on where that sits today. Yeah.
Okay I appreciate the comments thank you.
Thanks, Ed.
We'll go next to Leo Mariner at Roth MKS.
Okay.
Hi, guys wanted to just follow up a little bit on the Permian here.
Certainly it feels like there could be a lot of low hanging fruit from an operational perspective, I know you haven't really baked in any.
Hodge Walker: I'm kind of building off of that to your point on where the industry is. We in the industry continue to work with the trades and work with the legislature. I think one of the things to note here is there doesn't appear to be a whole lot of support sitting in the legislature right now. As Chris mentioned last year, the governor came out against this bill.
You can see in the 2024 program, but I was hoping maybe if we kind of.
Look out around.
Year or so from now I mean, just trying to get a sense of what type of improvements could materialize and we could could we see something like that.
2% to 10% reduction in like D&C cost per foot and we are also likely to see just improved EUR is out there as well to kind of get.
Hodge Walker: Earlier this week, he came out with his greenhouse gas roadmap, and in that roadmap, he mentioned that a production phase-out at the scale large enough to make any meaningful impact would really drive up the cost of living for many Coloradans, who really can't afford that kind of an increase in living costs. So I think that gives you a sense of his indication of where he stands, which is similar to where he was last year. Okay, I appreciate that comment. Thank you. We'll move next to Leo Marinier at Roth MkA. All right, guys.
The double whammy as it feels like there's kind of some low hanging fruit here and I'm, assuming you guys maybe have some internal targets about what you might do over say the next year.
Yes, Thanks Leah.
I'll kick us off here.
The question I think.
First thing I would say is look how civitas is managed and developed the DJ and those lessons.
Don't necessarily stop at the borders we go south into the Permian. This is a team and a leadership team that is focused on returns. It is focused on continuous improvement and we are super competitive.
Leo Marinier: I wanted to just follow up a little bit on the Permian here. It certainly feels like there could be a lot of low-hanging fruit, you know, from an operational perspective. I know you haven't really baked in any efficiencies in the 2024 program, but I was hoping maybe if we kind of, you know, looked out around a year or so from now, I mean, just trying to get a sense of what type of improvements, you know, could materialize. And could we see something like up to a 10% reduction in D&C costs per foot? And are we also likely to see just improved EURs, you know, out there as well to kind of get the double whammy? It just feels like there's kind of some low-hanging fruit here.
Take that mindset into the Permian and we built this.
Built out the team and they have they are very like minded what we're focused on in our 24 guide is we've got to deliver this there are many companies that have tried to do what we're doing.
<unk> not been able to deliver and so we did take.
Rightfully so a conservative view into 2024, we know that the Permian is a different animal we've got the team to execute I think where you're guiding.
Chris Doyle: And I'm assuming you guys maybe have some internal targets about what you might do over, say, the next year. Yeah, thanks Leo. I'll, I'll uh...
Potential cost savings per foot I think that's very achievable.
A team that doesn't want to be just part of the pack. They wanted to be at the head of the pack and if thats the case and a 10% reduction in cost per foot.
Chris Doyle: I'll kick us off here. I appreciate the question. The first thing I would say is, look how Civitas has managed and developed the DJ, and those lessons don't necessarily stop at the border as we go south into the Permian. This is a team and a leadership team that is focused on returns, it is focused on continuous improvement, and we are super competitive. Take that mindset into the Permian, and we've built out the team, and they're very like-minded. What we were focused on in our 24-hour guide is that we've got to deliver this. There are many companies that have tried to do what we were doing and not been able to deliver. And so we did take, rightfully so, a conservative view into 2024. We know that the Permian is a different animal.
Getting drilling days down into single digits, that's all going to be part of it.
We're just not going to come out with the plan that <unk> success, because we know the pitfalls that could arise from that so I think you are.
Youre thinking about it correctly.
We're excited to get another quarter under our belt and continue to build that track record a track record that we've built in the DJ.
We want to replicate in the Permian.
Okay and that would certainly be an impressive if you guys are very successful there.
And then just maybe jumping over to the <unk>.
Process around buybacks I think obviously.
Very successful buyback that you just announced taking MVP out I know, it's kind of always hard to know, but I know you guys clearly have some some other type of P/e flash insider shareholders. The stock is there a pretty.
Chris Doyle: We've got the team to actually... I think where you're guiding potential cost savings per foot, I think that's very achievable. We've got a team that doesn't want to be just part of the pack; they want to be at the head of the pack. And if that's the case, then a 10% reduction in cost per foot, getting drilling days down into single digits, that's all going to be part of it. We're just not going to come out with a plan that promises success because we know the pitfalls that could arise from that.
Strong appetite within <unk> to continue to maybe clean up some of these legacy shareholders that.
Really came to the company through some of the M&A that you all did over time and how do you kind of think about that in terms of balancing debt reduction as I know you've got the the goal to get to the <unk> 75 times, but it sounds like you guys are going to be a little bit patient. There. So maybe there is more firepower for more buybacks at the right time here in 'twenty.
Chris Doyle: So I think you're thinking about it correctly. We're excited to get another quarter under our belt and continue to build that track record, a track record that we built in the DJ business that we want to replicate in the firm. Okay, that would certainly be impressive if you guys are very successful there. And then maybe jumping over to, you know, the thought process around, you know, buybacks. I think obviously a very successful buyback that you just announced, you know, taking NGP out. I know it's kind of always, you know, hard to know, but I know you guys clearly have some other type of PE slash insider, you know, shareholders, you know, in the stock. Is there a pretty, you know, strong appetite within Civitas to continue to maybe clean up some of these legacy shareholders that, you know, really came to the company through some of the M&A that y'all did, you know, over time? And how do you kind of think about that in terms of balancing debt reduction?
Yes, absolutely Leon dismay.
I mean look we will continue to be opportunistic.
I said earlier, we hold that seven five times target.
Very true to our salt is one of our four pillars.
In our North Star, However is creating shareholder value we have done market open market repurchases. We also have a track record of negotiating direct participate it's a good way of getting a lot in getting at a discount.
So we I will note that we do have a decent amount remaining on our authorization $425 million.
We will continue to do so we'll continue executing at attractive prices again, 61, and changes our weighted average share repurchase price and obviously in meaningful that's kind of where we are which is still a discount level relative to our prs and relative to the quality of our asset base.
Marian Elafosky: As I know, you've got the goal to get to 0.75 times, but it sounds like you guys are going to be a little bit patient there. So maybe there's more firepower for more buybacks at the right time here at 24, www.circlelineartschool.com. Yeah, absolutely. Leo, this is Marianela.
We will continue doing both we will continue to open market repurchases as well as up by blocking just thoughts on where the best opportunities lie.
Thank you.
Sunil.
We will take our next question from Oliver Wang at Tpa Genco.
Company.
Good morning, all and thanks for taking my questions.
Marian Elafosky: I mean, look, we will continue being opportunistic. You know, like I said earlier, we hold that 0.75 times target very true to ourselves. It's one of our four pillars.
$4.
Hey, just wanted to jump over to the DJ as we kind of think about the uplift at EUR is out of the La Quinta area year over year that Youll have kind of seen in your 2023 results just wanted to get a sense of what drives the confidence that the outperformance will continue and was there something that was kind of done differently between the 2022 and 2023 programs that drove that.
Marian Elafosky: You know, our north star, however, is creating shareholder value. I mean, we have done open market repurchases. We also have a track record of negotiating direct purchases. It's a good way of getting a lot and getting it at a discount.
List.
Marian Elafosky: So I will note that we do have a decent amount remaining in our authorization, 425 million. And we will continue to do so. We'll continue executing at attractive prices. You know, again, 61 and change is our weighted average share repurchase price and obviously a meaningful discount where we are, which is still a discounted level relative to our peers and relative to the quality of our asset base. So we will continue doing both. We will continue doing open market repurchases, as well as buying and blocking, and it just depends on where the best opportunities lie. Thank you. See you in a little. www.circlelineartschool.com. We'll take our next question from Oliver Wang at TPH Income. .com
Sure.
<unk> CFO Hodge wants to add anything.
<unk> 23 was different in 'twenty to 'twenty two is different in 'twenty, one 'twenty four 'twenty.
Three we are continually working on how do we enhance returns.
Some of the big moves from 22 to 'twenty, three where around extended laterals.
We had going into that.
Risks the additional mile and what we saw was the degradation in that third mile just didn't show up.
Or didn't certainly didn't show up today to the to the level that we had risk that was a big driver.
Were always tweaking completion design development.
Development spacing.
Oliver Wang: Good morning all, and thanks for taking my questions for all. I think just wanted to jump over to the DJ as we kind of think about the uplifted EURs out of the Watkins area year over year that you'll kind of see in your 2023 results. Just wanted to get a sense of what drives the confidence that the outperformance will continue, and was there something that was kind of done differently between the 2022 and 2023 programs that drove that uplift? Sure, I'll kick us off and see if Hodge wants to add anything. Yes, 23 was different than 22, 22 was different than 21, and 24 is different than 23.
And how we how we flow back wells, how we bring wells on and.
And the team has done a phenomenal job.
Getting stronger every single quarter, so we rolled some of those.
<unk> and improvements into the 'twenty four plan, but it is a stark.
Performance improvement year over year.
Super proud of what the team was able to deliver this is some of the this is great rock. This is great rock these returns.
We will compete for capital within the Permian and Thats, why Youre seeing us allocate so much capital into into the Watkins and you couple that with the recaps that will cover the vast majority of it.
Chris Doyle: We are continually working on how to enhance returns. Some of the big moves from 22 to 23 were around extended laterals. We had, going into that, risked the additional mile, and what we saw was the degradation in that third mile just didn't show up, or certainly didn't show up to the level that we had risked. That was a big driver.
This is this is an area that is prime to deliver four precipitous for a number of years ago.
Yes.
I would just add to the to a couple of the points that Chris mentioned I mean, if you. If you look at our activity set in the DJ during 2020 for 70% of our activity is going to be down in the Watkins area.
Chris Doyle: We were always tweaking completion design, development, spacing, and how we flow back wells, how we bring wells on, and the team has done a phenomenal job, you know, getting stronger every single quarter. So we've rolled some of those enhancements and improvements into the 24 plan, but it is a stark performance improvement year over year. I'm super proud of what the team was able to deliver.
We've got we've got the box elder cap that's been approved we've got a hearing coming up here mid year on the Lowry cap and that's really a 2025 plus development program. We have recently filed our wrapper cap, which is more of a program that is a long term development, we expect that that cap to be approved towards.
The end of this year beginning of next year.
Awesome that's helpful color and just for a follow up question was hoping that you could provide US a reminder, with how cash taxes might look for that 2025, plus timeframe. There is some sort of rule of thumb.
Chris Doyle: This is some of the, this is great rock, this is great rock, and these returns will compete for capital within the Permian, and that's why you're seeing us allocate so much capital to the Watkins, and you couple that with three caps that will cover the vast majority of it, this is an area that's primed to deliver for Civitas for a number of years to come. Yeah, Leo, I just want to add to a couple of the points that Chris mentioned. I mean, if you look at our activity set in the DJ during twenty twenty four, 70 percent of our activity is going to be down in the Watkins area. We've got We've got the box elder cap that's been approved. We've got a hearing coming up here midyear on the Lowry cap. And that's really a twenty twenty five plus development program.
Sure absolutely.
Obviously for this year, we guided team here at a $50 $75 oil.
Lot of that has been a lot of that is related to the past our transaction.
Closing this year and giving us a slightly favorable tax treatment for the SCR.
For 2025 and beyond I would say once we get out to 2024, what the favorable tax rate and with the application.
As long as LR, along with bonus depreciation coming down over time, you'll probably see something higher choline that maybe in the range of $150 million, a year and thats at $75 oil.
Hodge Walker: We've recently filed our Arapa cap, which is more of a program that is a long-term development. We expect that that cap to be approved towards the end of this year and the beginning of next. Awesome, that's helpful, Culler. And just for a follow-up question, I was hoping that you could provide us with a reminder of how cash taxes might look for that 2025 plus time frame if there's some sort of, Absolutely. You know, obviously, for this year, we got it to zero to 50. That's a $75 oil.
I will say as a reminder, on the A&P front, we at $75 oil flat were not expected to hit that.
Well in the foreseeable future, but going forward I would say 150 175 <unk> per year is probably pretty good ballpark.
Thanks, I appreciate the tongue.
We'll go next to Phillips Johnston of capital.
Hey, guys. Thank you just thinking directionally about first quarter volumes.
Marian Elafosky: You know, a lot of that has been related to the Spencer transaction closing this year and giving us a slightly favorable tax treatment for this year, you know, for 2025 and beyond. I would say, you know, once we get out of, you know, 2024 with the favorable tax treatment with the acquisition. As long as or along with bonus appreciation stepping down over time, you'll probably see something higher, probably in the range of one hundred and fifty million dollars a year. And that's a seventy five dollar oil.
In the Permian.
Obviously, you guys don't give guidance, but presumably the December exit rate.
The 120 day, there was it was pretty flattish I guess if we.
Ignore the effects.
Sensor deal would you expect your first quarter Permian volumes to be.
Actually down versus that exit rate or do you think you can sort of maintain that level.
So if you look at our full year guide of right at about 170000 Boe per day.
We anticipated a little bit of downtime, obviously for weather in the first quarter.
We saw the Permian, specifically, however was above our expectations for the quarter.
Phillips Johnston: I will say as a reminder, on the AMT front, at $75 oil flat, we're not expected to hit that in the foreseeable future, but going forward, I would say $150, $175 cash tax per year is probably a pretty good ballpark. Thanks, www.circlelineartschool.com. We'll go next to Phillips Johnston at Capital One. Hey guys, thank you. Just thinking directionally about first quarter volumes in the Permian, obviously, you guys don't get guidance, but presumably the summer exit rate, of a 120 day, was pretty flush. I guess if we ignore the effects of events or deals, would you expect your first quarter permitting volumes to be directionally down versus that exit rate, or do you think you can sort of maintain that?
We think as we go Q1 through to the end of the year, we will see some some increase fairly modest and thats based on the assets outperforming coming off that strong exit into.
Into January and now February.
Okay. It sounds good and then.
Wondering if you can share the next 12 months PDP decline rate.
Ryder Scott assumed in your year end 'twenty three reserve report and would you expect that decline rate.
Materially lower between now and the end of this year.
Okay.
Yes, absolutely.
So far year end is probably low to mid <unk> on a yearly basis I'll call. It 33, 34%.
Going forward and it's going to depend on.
Phillips Johnston: So if you look at our full-year guide of right at about $170,000 VOE per day, we anticipate a little bit of downtime, obviously, for weather in the first quarter. But what we saw, Permian specifically, was above our expectations for the quarter. We think as we go from Q1 through to the end of the year, we'll see some increase, fairly modest, and that's based on the assets outperforming coming off that strong exit into January and now February. Sounds good.
Nathan cadence of activity right like we have a lot of completions and bring online later in the year of our Sterling and the euro but other than that cadence throughout the year I don't expect a material change in that decline on a go forward basis farhad level loaded formalized document.
Okay. That's helpful. Thank you so much.
We'll move next to Kevin Mccurdy at Pickering Energy partners.
Hey, good morning, and congratulations on the well received capital number.
In regards to that $150 million reduction compared to your prior number can you help us break down that number a little bit more on the savings from well cost reduction faster cycle times and lower well costs.
Chris Doyle: And then I'm wondering if you can share the next 12-month PPP decline rate that Writer Scott assumed in your... 23 Reserve Report and whether you expect that decline rate to move materially lower between now and then. Yeah, absolutely. So for a year-end, it's probably low enough to make 30s on a BOE basis, we'll call it 33, 34%, going forward, and it's going to depend on. We have a lot of completions and bring online later in the year versus earlier in the year. But other than that cadence throughout the year, I don't expect a material change in that decline on a go forward basis for a level loaded normalized activity. Okay, that's helpful. Thank you so much.
And I'm, sorry, lower well count and how much of that savings is coming from the DJ versus the Permian compared to the prior plan.
Sure.
I'll kick us off here three primary drivers to the $150 million.
The first is the early wins in terms of cycle times that we've seen across our business thats, making for a much more efficient capital program in 2024.
The second is the enhanced well productivity that we saw in the D. J.
Chris Doyle: We'll move next to Kevin McCurdy at Pickering Energy Partners. Hey, good morning, and congratulations on the well-received capital number. In regards to that $150 million reduction compared to your prior number, can you help us break down that number a little bit more on the savings from well cost reduction, faster cycle times, and lower well cost, and sorry, lower well count, and how much of that savings is coming from the DJ versus the Permian compared to the prior plan? Sure, I'll kick us off here.
That's making for a much more capital efficient program in 2024, and the combination of those two has allowed us.
To tweak and to pull out a little bit of activity and yet deliver the same amount of production for less capital.
Flip between those three is probably fairly even.
I would say.
There is.
There is likely more upside on the cycle time enhancements, we've not baked in anything.
Two into the Delaware or into the Vince our assets and I'll, let us get us get our hands squarely on the wheel with those assets and we'll see how we progress through the year.
Chris Doyle: Three primary drivers of the $150 million. The first is early wins in terms of cycle times that we've seen across our business. That's making for a much more efficient capital program in 2020. The second is the Enhanced Well Productivity that we saw in DEJ. That's making for a much more capital efficient program in 2024, and the combination of those two has allowed us to tweak and pull out a little bit of activity and yet deliver the same amount of production for less capital. The split between those three is probably fairly even, and I'd say I think there's likely more upside on the cycle time enhancements. We've not baked in anything into the Delaware or into the Vincer assets.
And I think the other thing that Hodge Hodge touched on is we will look for ways to accelerate pills.
And it will cause a little bit of Lumpiness, why you see us 60% of our capital in the first half of the year.
Because we think we can bring wells on a lot faster and that's going to be a better return for our shareholders, but it will create a little bit of lumpiness.
Of the 150, the split between between the Permian and the DJ is likely heavier weighted to the BJ just because it's a known commodity.
And <unk>.
<unk> to be here next quarter or couple of quarters from now, saying, Hey, we're uncovering additional ways to optimize the Permian, we just haven't rolled that into the 24 plan yet.
Chris Doyle: Now, let us get our hands squarely on the wheel with those assets, and we'll see how we progress through the year. And I think the other thing that Hodge touched on is we'll look for ways to accelerate sales, and it will cause a little bit of awkwardness. That's why you see us, you know, 60% of our capital in the first half of the year because we think we can bring wells on a lot faster, and that's gonna be a better return for our shareholders, but it will create a little bit of. I'd say of the 150, the split between the Permian and the DJ is likely heavier-weighted to the DJ, just because it's a known commodity And I'd like to be here next quarter or a couple of quarters from now saying, hey, we're uncovering additional ways to optimize the Permian. We just haven't rolled that into the 24 plan.
Great. Thanks, Thanks for the details on that.
Turning to the DJ.
You've laid out your plan for most of your DJ capital. We spent on the southern acreage. This year it looks like your highest return area.
Do you expect that area to continue to receive the majority of the DJ capital in the coming years and can you talk about how permitting fits into that decision.
Sure.
The short answer is yes, those are some of our best returns in the DJ.
I think it's also setting up because of the permitting situation.
Box elder cap approved the law.
I'll recap.
Chris Doyle: Great, thanks. Thanks for the details on that. And turning to the DJ, you've laid out your plan for most of your DJ capital we spent on the southern acreage this year. That looks like your highest return area. Do you expect that area to continue to receive the majority of your DJ capital in the coming years? And can you talk about how permitting fits into that decision?
Set to get approved this year via rapid cap kv late this year early next year.
You then have really strong confidence in being able to allocate capital in that area.
I would say that.
We're going to be.
As we allocate capital between the DJ and the Permian.
Chris Doyle: Sure. And the short answer is yes. Those are some of our best returns in the DJ. I think it's also setting up, because of the permitting situation, the Box Elder cap approved, the Lowry cap set to get approved this year, and the ArapaCap, maybe late this year or early next, you then have really strong confidence in being able to allocate capital in that area. I would say that we're going to be, you know, as we allocate capital between the DJ and the Permian, this stuff is going to compete. And I'd say we're 70% this year, probably 75% next year of our capital going into the Watkins area. And so we're excited about it. It is a fantastic area, and we've got line of sight, clear line of sight on the permitting with the CAPS working through the system.
This stuff is going to compete and I would I'd say, we're at 70% this year, probably 75% next year of our capital going into the to the Watkins area.
So we're excited about it it is it is a fantastic area and we've got line of sight clear line of sight on on the permitting with the caps.
Working through the system and so yes, you will see us really.
Capital into into this area over the next few years.
Yeah, I'd add if you take a look at what the remaining inventory in that Watkins area looks like it's over 300 wells in about.
About 80% of those are going to be covered by the caps that Chris is referencing.
Yes.
Great. Thank you for the detail.
Chris Doyle: And so, yeah, you'll see us really pull capital into this area over the next few years. Yeah, I'd add if you take a look at what the remaining inventory in that Watkins area looks like, it's over 300 wells, and about 80% of those are going to be covered by the CAHPSA that Chris is referencing, www.circlelineartschool.com. Great, thank you for the detail. And that does conclude our question and answer session. I would like to turn the conference back over to Brad Whitmarsh for closing remarks. Thanks, Audra, and we certainly appreciate all the interest in Civitas today. We look forward to connecting with many of you in the following weeks as we're going to hit the road for roadshows and conferences. I hope you have a great rest of your day. Please be safe. Thanks again for joining us, and that does conclude today's conference call. Again, thank you for your participation. You may now disconnect. www.circlelineartschool.com www.circlelineartschool.com www.circlelineartschool.com
And that does conclude our question and answer session I would like to turn the conference back over to Brad Whitmarsh for closing remarks.
Yeah, Thanks, Andra and certainly appreciate all the interest in Civitas today, we look forward to connecting with many of you in the following weeks says we're going to hit the road for Roadshows and conferences upcoming.
I Hope you have a great rest of your day, please be safe thanks again for joining us.
And that does conclude today's conference call again. Thank you for your participation you may now disconnect.
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