Civitas Resources, Inc.

Thank you for standing by. My name is Cheryl and I will be your conference operator today. At this time, I would like to welcome everyone to the Civitas Resources first quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. 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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. John Wren, you may begin your conference.

Thank you, Operator. Good morning and welcome to Civitas' first quarter 2022 earnings conference call. I'm joined today by Ben Dell, Chairman, Chris Doyle, President and CEO, Marian Elifoski, CFO, Matt Owens, COO, and Brian Kane, Chief Sustainability Officer. Yesterday, we issued our earnings press release, filed our 10-Q, and posted a new investor presentation, which is available on the investor relations section of our website. Please be aware that on today's call, we may make forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections. Please read our full disclosures regarding forward-looking statements in our 10-K and other SEC filings. On today's call, we may also refer to certain non-GAAP financial metrics. Reconciliations to certain non-GAAP metrics can be found in our earnings release and SEC filings. I'll now turn the call over to Ben Dell.

Thanks, John, and good morning, everyone. I'd like to start out the call today by introducing our new CEO, Chris Doyle. Chris has over 25 years of domestic and international experience in the EMP and midstream businesses. having set the foundation for his career by spending over two decades at Chesapeake and Anadarko. Chris has a strong track record of leading diversified teams and platforms across the EMP and midstream businesses. His experience, judgment, perspective, and leadership qualities will be instrumental as we continue to thoughtfully grow the Civitas platform with a clear objective of becoming a national leader among our peers. while advancing the principles of the new EMP business model. The Civitas board of directors and executive management team is thrilled to have Chris join us, and we feel confident that Chris is exactly the right person with the right mix of experience and leadership skills to take Civitas to the next level as an organization. He has already made a tremendous start this week, and we look forward to all of you getting to meet with him and hearing directly from him in the coming weeks. Thank you for joining us, Chris. Moving on to the operating results. The first quarter of 2022 was another stellar quarter for the company execution-wise with production of 159,000 barrels of oil equivalent per day and 68,000 barrels of oil per day and total capex of roughly 235 million. Civitas met or beat our budget on oil and total production, as well as on all operating and capital expenditures, including differentials. On the G&A front, we had significant activity in 1Q related to the termination of legacy employees, our CEO transition, a move to our permanent headquarters, among other non-recurring expenses. We are working tirelessly to continue extracting synergies of excess overhead as quickly as possible. On the financial side, the company's balance sheet continues to be a core strength and strategic advantage that we are focused on maintaining. As of March 31st, Civi's balance sheet consisted of $500 million of total debt and roughly $150 million in cash. We have since paid off $100 million in outstanding notes with cash on hand and sit here today with only $400 million of debt on the balance sheet. and we expect to be unlevered on a net basis by mid-year. I'd note that we also recently upsized our credit facility borrowing base to $1.7 billion and increased our elected commitment on the facility to $1 billion, which provide us with significant amount of liquidity. We are excited to continue to follow through on our industry-leading shareholder return policy with the announcement of a $1.3625 per share total quarterly dividend to be payable on June 29th to shareholders on record on June 15th. This is composed of our 0.4625 per share base dividend and our variable dividend of $0.9 per share this quarter. This represents one of the highest payout ratios in the industry and at our current share price implies a top tier yield of roughly 10%. On the permitting and regulatory front, we have two more new OTDP locations with hearing dates set in the near future that we expect to be approved unanimously. Our 2022 plan is almost 100% permitted at this point, with the only remaining unpermitted pad scheduled to be SPUD and 4Q, and 2023 will largely be permitted once we receive approval on our cap. which we expect to occur in the third quarter. We believe the state of Colorado considers us to be the operator with the best understanding of permitting under the new rules and the best capacity to utilize best management practices to minimize surface impact. And we're seeing that evidenced in the number of permits we've been getting approved lately. Our goal to become the clear ESG leader within our peer group is also very much aligned with our state's environmental and community-focused culture. And we've provided details about our expanded ESG platform in Civitas' inaugural Corporate Sustainability Report, which was published earlier this week. We encourage everyone to take a look at the report, which outlines the company's recent achievements and future goals around climate leadership, delivering value to our communities, and best-in-class corporate governance provisions. As Colorado's largest pure play EMP and first carbon neutral EMP company on a scope one and scope two basis, we are very excited about the company's future. Civitas is leading the industry in executing on the new EMP business model. We have a simple business model focused on optimizing the development of our high quality assets, a relentless focus on cost, expanding our cash margins, protecting our balance sheet, and returning excess cash flow generation to shareholders. This is also being done with an acute awareness of our environmental footprint, which we continue to minimize. I'd like to thank you all again for joining the call this morning and for your interest in Civitas. And with that, I'll turn the call back to the operator for Q&A.