Civitas Resources Focuses On Debt Paydown, Asset Sales For FY25 Growth: Analyst

J.P. Morgan analyst Zach Parham retained a Neutral rating on Civitas Resources, Inc. CIVI with a price forecast of $49.

The analyst writes that CIVI’s goal remains consistent with its fourth-quarter update, maintaining its focus on debt reduction over share buybacks.

The analyst notes that the company aims to generate FCF and reduce debt by $800 million in FY25, which he sees as achievable at current strip pricing.

Parham says asset sales remain a focus for the company, with a goal of over $300 million for FY25. Media reports suggest CIVI is considering selling its DJ Basin position for over $4 billion.

The analyst notes that a larger DJ transaction is possible, though the company is unlikely to sell at a steep discount and he awaits further clarity from management on the earnings call.

The analyst estimates cash flow per share of $7.39 for the first quarter of FY25, a touch below the street estimates of $7.47 after marking to market for commodity prices.

Also, Parham sees first-quarter oil production of 143.2 MBo/d, in line with the consensus estimates of 143.1 MBo/d and EBITDA estimate of $799 million, broadly at par with the consensus of $797 million.

For FY25, the analyst estimates oil production of 152.8 MBo/d on $1.85 billion of capex, in-line with the street estimates and CIVI’s guidance.

Investors can gain exposure to the stock via First Trust Energy AlphaDEX Fund FXN and VictoryShares Small Cap Free Cash Flow ETF SFLO.

Price Action: CIVI shares are down 0.52% at $36.24 at the last check Tuesday.

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