Civitas Free Cash Flow and High Dividend Yield Powerhouse

Civitas Free Cash Flow and High Dividend Yield Powerhouse

Price $59.33                     Dividend Add                        August 9, 2022

  • Dividend Yield is projected to be 12% for this year, with an Estimated Fair Value of $108 per CIVI share.
  • Accretive acquisitions, all while keeping Debt/EBITDA below 0.5x for E2022.
  • Highest-in-sector base dividend yield, paying out 50% FCF (Free Cash Flow) on top of 3.1% base.
  • First-ever net-zero exploration and production firm in Colorado, using a combination of investment in emissions reduction and carbon offset credits.
  • 175 mboe/d across 500,000 acres of land in the DJ Basin.
  • Big Dividend Increase with stock having corrected from 85 makes this a compelling dividend income and capital appreciation stock.

Investment Thesis

Civitas free cash and dividend jump to $7.04 annualized dividend or 12% yield. Stock is deeply undervalued and could easily double over the next year as investors realize the sustainability of the free cash generation and dividend. With the pullback from a high of $84.76 but deeply undervalued, we believe that Civitas is a strong buy.

The Company’s board of directors has elected to pay a dividend of $1.7625 per share in the third quarter, which reflects the combination of a variable dividend of $1.3000 per share and a base fixed dividend of $0.4625 per share. This dividend will be paid on September 29, 2022 to shareholders of record as of September 15, 2022. Additional detail regarding the calculation of the variable dividend can be found in the Company’s new investor presentation.

Below is the release from August 3rd, highlighting 2Q22 results.

  • Average daily sales volumes of 175.2 thousand barrels of oil equivalent per day (“MBoe/d”), with oil representing 46% of total volumes, and total capital expenditures of $238.6 million
  • LOE plus recurring cash G&A(1) of $3.89 per Boe for the second quarter 2022, down sequentially from $4.25 per Boe in the first quarter of 2022, positions Civitas as a cost leader in the industry
  • GAAP net income of $468.8 million and Adjusted EBITDAX(1) of $739.2 million for the second quarter 2022
  • Net cash provided by operating activities of $722.2 million and free cash flowof $436.6 million for the second quarter 2022
  • Fixed-plus-variable dividend, to be paid in September, increased to $1.7625 per share, up nearly 30% sequentially from $1.3625 per share last quarter
  • Retired $100 million of senior notes and exited the second quarter 2022 with $400.0 million in debt
  • Total liquidity was $1.4 billion as of June 30, 2022, which consisted of $439.3 million of cash plus funds available under our credit facility