10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

 Commission File Number:  001-35371

Civitas Resources, Inc.

(Exact name of registrant as specified in its charter) 

Delaware	61-1630631
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

555 17th Street,		Suite 3700
Denver,	Colorado		80202
(Address of principal executive offices)			(Zip Code)

(303) 293-9100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.01 per share	CIVI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒  No

As of August 2, 2023, the registrant had 93,760,666 shares of common stock outstanding.

1

CIVITAS RESOURCES, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS

			PAGE
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	6
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022	7
		Condensed Consolidated Statements of Stockholders’ Equity Continuous Quarterly Presentation Ended June 30, 2023 and 2022	8
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	9
		Notes to the Condensed Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
	Item 4.	Controls and Procedures	42
Part II.	Other Information
	Item 1.	Legal Proceedings	43
	Item 1A.	Risk Factors	43
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 3.	Defaults Upon Senior Securities	43
	Item 4.	Mine Safety Disclosures	43
	Item 5.	Other Information	43
	Item 6.	Exhibits	44

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Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains various statements, including those that express belief, expectation or intention, as well as those that are not statements of historic fact, that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Quarterly Report on Form 10-Q, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” “plan,” “will,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

Forward-looking statements include statements related to, among other things:

•the Company’s business strategies;

•reserves estimates;

•estimated sales volumes;

•the amount and allocation of forecasted capital expenditures and plans for funding capital expenditures and operating expenses;

•our ability to modify future capital expenditures;

•anticipated costs;

•compliance with debt covenants;

•our ability to fund and satisfy obligations related to ongoing operations;

•compliance with government regulations, including those related to climate change as well as environmental, health, and safety regulations and liabilities thereunder;

•our ability to achieve, reach, or otherwise meet initiatives, plans, or ambitions with respect to environmental, social and governance matters;

•the adequacy of gathering systems and continuous improvement of such gathering systems;

•the impact from the lack of available gathering systems and processing facilities in certain areas;

•oil, natural gas, and natural gas liquid prices and factors affecting the volatility of such prices;

•the impact of commodity prices;

•sufficiency of impairments;

•the ability to use derivative instruments to manage commodity price risk and ability to use such instruments in the future;

•our drilling inventory and drilling intentions;

•the impact of potentially disruptive technologies;

•our estimated revenue gains and losses;

•the timing and success of specific projects;

•our implementation of standard and long reach laterals;

•our intention to continue to optimize enhanced completion techniques and well design changes;

•stated working interest percentages;

3

•our management and technical team;

•outcomes and effects of litigation, claims, and disputes;

•our ability to replace oil and natural gas reserves;

•our ability to convert proved undeveloped reserves to producing properties within five years of their initial proved booking;

•our ability to pay future cash dividends on or repurchase shares of our common stock;

•the impact of the loss of a single customer or any purchaser of our products;

•the timing and ability to meet certain volume commitments related to purchase and transportation agreements;

•the impact of any pandemic or other public health epidemic, including the COVID-19 pandemic;

•the impact of customary royalty interests, overriding royalty interests, obligations incident to operating agreements, liens for current taxes, and other industry-related constraints;

•our anticipated financial position, including our cash flow and liquidity;

•the adequacy of our insurance;

•plans and expectations with respect to the Acquisitions (as defined herein) and the anticipated impact of the Acquisitions on the Company’s results of operations, financial position, future growth opportunities, reserve estimates, and competitive position;

•the results, effects, benefits, and synergies of other mergers and acquisitions; and

•other statements concerning our anticipated operations, economic performance, and financial condition.

We have based these forward-looking statements on certain assumptions and analyses we have made in light of our experience and our perception of historical trends, current conditions, and expected future developments as well as other factors we believe are appropriate under the circumstances. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining actual future results. The actual results or developments anticipated by these forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, and may not be realized or, even if substantially realized, may not have the expected consequences. Actual results could differ materially from those expressed or implied in the forward-looking statements.

Factors that could cause actual results to differ materially include, but are not limited to, the following:

•the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”), Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on June 20, 2023, and in subsequent reports we file with the SEC (including Part II, Item 1A of this report);

•declines or volatility in the prices we receive for our oil, natural gas, and natural gas liquids;

•general economic conditions, whether internationally, nationally, or in the regional and local market areas in which we do business, including any future economic downturn, the impact of continued or further inflation, disruption in the financial markets, and the availability of credit on acceptable terms;

•the effects of disruption of our operations or excess supply of oil and natural gas and other effects of world health events, including the COVID-19 pandemic (including any worsening thereof), and the actions by certain oil and natural gas producing countries, including Russia;

•the ability of our customers to meet their obligations to us;

•our access to capital on acceptable terms;

•our ability to generate sufficient cash flow from operations, borrowings, or other sources to enable us to fully develop our undeveloped acreage positions;

4

•the presence or recoverability of estimated oil and natural gas reserves and the actual future sales volume rates and associated costs;

•uncertainties associated with estimates of proved oil and gas reserves;

•the possibility that the industry may be subject to future local, state, and federal regulatory or legislative actions (including additional taxes and changes in environmental regulation and regulations addressing climate change);

•environmental risks;

•seasonal weather conditions as well as severe weather and other natural events caused by climate change;

•lease stipulations;

•drilling and operating risks, including the risks associated with the employment of horizontal drilling and completion techniques;

•our ability to acquire adequate supplies of water for drilling and completion operations;

•availability of oilfield equipment, services, and personnel;

•exploration and development risks;

•operational interruption of centralized oil and natural gas processing facilities;

•competition in the oil and natural gas industry;

•management’s ability to execute our plans to meet our goals;

•our ability to attract and retain key members of our senior management and key technical employees;

•our ability to maintain effective internal controls;

•access to adequate gathering systems and pipeline take-away capacity;

•our ability to secure adequate processing capacity for natural gas we produce, to secure adequate transportation for oil, natural gas, and natural gas liquids we produce, and to sell the oil, natural gas, and natural gas liquids at market prices;

•costs and other risks associated with perfecting title for mineral rights in some of our properties;

•political conditions in or affecting other producing countries, including conflicts in or relating to the Middle East, South America, and Russia (including the current events involving Russia and Ukraine), and other sustained military campaigns or acts of terrorism or sabotage;

•the continuing effects of the COVID-19 pandemic, including any recurrence or the worsening thereof; and

•other economic, competitive, governmental, legislative, regulatory, geopolitical, and technological factors that may negatively impact our businesses, operations, or pricing.

All forward-looking statements speak only as of the date of this report. We disclaim any obligation to update or revise these statements unless required by law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions, or expectations will be achieved. We disclose other important factors that could cause our actual results to differ materially from our expectations under “Part I, Item 1A. Risk Factors” and other sections of our 2022 Form 10-K, Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on June 20, 2023 and in subsequent reports we file with the SEC (including Part II, Item 1A of this report). These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

5

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

CIVITAS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share amounts)

	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	2,702,897	$	768,032
Accounts receivable, net:
Oil and natural gas sales	201,248		343,500
Joint interest and other	100,664		135,816
Derivative assets	4,335		2,490
Prepaid income taxes	2,266		29,604
Deposits for acquisitions	352,500		—
Prepaid expenses and other	49,297		48,988
Total current assets	3,413,207		1,328,430
Property and equipment (successful efforts method):
Proved properties	7,390,897		6,774,635
Less: accumulated depreciation, depletion, and amortization	(1,628,303)		(1,214,484)
Total proved properties, net	5,762,594		5,560,151
Unproved properties	578,508		593,971
Wells in progress	316,119		407,351
Other property and equipment, net of accumulated depreciation of $8,498 in 2023 and $7,329 in 2022	49,619		49,632
Total property and equipment, net	6,706,840		6,611,105
Long-term derivative assets	1,800		794
Right-of-use assets	41,572		24,125
Other noncurrent assets	7,567		6,945
Total assets	$	10,170,986	$	7,971,399
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	240,555	$	295,297
Production taxes payable	389,392		258,932
Oil and natural gas revenue distribution payable	522,308		538,343
Derivative liability	21,438		46,334
Asset retirement obligations	25,557		25,557
Lease liability	21,841		13,464
Total current liabilities	1,221,091		1,177,927
Long-term liabilities:
Senior notes	3,048,511		393,293
Ad valorem taxes	153,371		412,650
Derivative liability	2,973		17,199
Deferred income tax liabilities	409,593		319,618
Asset retirement obligations	268,366		265,469
Lease liability	20,394		11,324
Total liabilities	5,124,299		2,597,480
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none outstanding	—		—
Common stock, $.01 par value, 225,000,000 shares authorized, 80,220,613 and 85,120,287 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	4,869		4,918
Additional paid-in capital	3,957,513		4,211,197
Retained earnings	1,084,305		1,157,804
Total stockholders’ equity	5,046,687		5,373,919
Total liabilities and stockholders’ equity	$	10,170,986	$	7,971,399

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

CIVITAS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating net revenues:
Oil and natural gas sales	$	660,526	$	1,151,364	$	1,316,548	$	1,969,174
Operating expenses:
Lease operating expense	51,230		41,877		97,068		77,896
Midstream operating expense	13,319		7,469		23,380		13,181
Gathering, transportation, and processing	64,873		79,519		132,225		129,922
Severance and ad valorem taxes	52,443		85,870		104,805		149,174
Exploration	546		1,553		1,117		2,081
Depreciation, depletion, and amortization	232,786		204,519		434,089		389,379
Abandonment and impairment of unproved properties	—		—		—		17,975
Unused commitments	363		1,731		754		2,507
Bad debt expense	836		4		583		4
Merger transaction costs	31,145		1,418		31,627		21,952
General and administrative expense, including $9,895, $6,135, $17,275, and $14,225, respectively, of stock-based compensation	33,541		29,666		70,399		65,386
Total operating expenses	481,082		453,626		896,047		869,457
Other income (expense):
Derivative gain (loss)	4,927		(72,650)		30,087		(368,143)
Interest expense	(8,753)		(8,116)		(16,202)		(17,182)
Gain (loss) on property transactions, net	(13)		—		(254)		16,797
Other income	8,045		4,313		17,068		5,096
Total other income (expense)	4,206		(76,453)		30,699		(363,432)
Income from operations before income taxes	183,650		621,285		451,200		736,285
Income tax expense	(44,363)		(152,464)		(109,452)		(175,825)
Net income	$	139,287	$	468,821	$	341,748	$	560,460
Net income per common share:
Basic	$	1.73	$	5.52	$	4.22	$	6.60
Diluted	$	1.72	$	5.48	$	4.18	$	6.56
Weighted-average common shares outstanding:
Basic	80,393		84,993		81,052		84,917
Diluted	81,144		85,554		81,824		85,453

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

CIVITAS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except per share amounts)

				Additional
	Common Stock			Paid-In		Retained
	Shares	Amount		Capital		Earnings		Total
Balances, December 31, 2022	85,120,287	$	4,918	$	4,211,197	$	1,157,804	$	5,373,919
Restricted common stock issued	112,052	—		—		—		—
Stock used for tax withholdings	(30,111)	—		(2,118)		—		(2,118)
Exercise of stock options	13,352	—		440		—		440
Common stock repurchased and retired	(4,918,032)	(49)		(243,312)		(60,094)		(303,455)
Stock-based compensation	—	—		7,380		—		7,380
Dividends declared, $2.1500 per share	—	—		—		(176,878)		(176,878)
Net income	—	—		—		202,461		202,461
Balances, March 31, 2023	80,297,548	4,869		3,973,587		1,123,293		5,101,749
Restricted common stock issued	375,615	4		—		—		4
Stock used for tax withholdings	(139,895)	(1)		(10,495)		—		(10,496)
Exercise of stock options	111	—		4		—		4
Common stock repurchased and retired	(312,766)	(3)		(15,478)		(4,917)		(20,398)
Stock-based compensation	—	—		9,895		—		9,895
Dividends declared, $2.1200 per share	—	—		—		(173,358)		(173,358)
Net income	—	—		—		139,287		139,287
Balances, June 30, 2023	80,220,613	$	4,869	$	3,957,513	$	1,084,305	$	5,046,687

Balances, December 31, 2021	84,572,846	$	4,912	$	4,199,108	$	450,978	$	4,654,998
Restricted common stock issued	579,229	6		—		—		6
Stock used for tax withholdings	(215,811)	(2)		(12,932)		—		(12,934)
Exercise of stock options	5,294	—		178		—		178
Stock-based compensation	—	—		8,090		—		8,090
Dividends declared, $1.2125 per share	—	—		—		(104,444)		(104,444)
Net income	—	—		—		91,639		91,639
Balances, March 31, 2022	84,941,558	4,916		4,194,444		438,173		4,637,533
Restricted common stock issued	130,309	1		—		—		1
Stock used for tax withholdings	(40,646)	—		(2,813)		—		(2,813)
Exercise of stock options	742	—		24		—		24
Stock-based compensation	—	—		6,135		—		6,135
Dividends declared, $1.3625 per share	—	—		—		(117,151)		(117,151)
Net income	—	—		—		468,821		468,821
Balances, June 30, 2022	85,031,963	$	4,917	$	4,197,790	$	789,843	$	4,992,550

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

CIVITAS RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	341,748	$	560,460
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization	434,089		389,379
Deferred income tax expense	89,975		125,440
Abandonment and impairment of unproved properties	—		17,975
Stock-based compensation	17,275		14,225
Amortization of deferred financing costs	2,305		2,180
Derivative (gain) loss	(30,087)		368,143
Derivative cash settlement loss	(11,885)		(348,209)
(Gain) loss on property transactions, net	254		(16,797)
Other	292		155
Changes in current assets and liabilities:
Accounts receivable, net	176,984		(32,776)
Prepaid expenses and other assets	26,338		(6,579)
Accounts payable and accrued liabilities	(157,973)		192,839
Settlement of asset retirement obligations	(13,285)		(11,667)
Net cash provided by operating activities	876,030		1,254,768
Cash flows from investing activities:
Acquisitions of oil and natural gas properties	(51,247)		(303,602)
Cash acquired	—		44,310
Proceeds from sale of oil and natural gas properties	5,764		—
Exploration and development of oil and natural gas properties	(518,949)		(467,186)
Proceeds from (additions to) other property and equipment	(1,157)		66
Purchases of carbon offsets	(5,651)		(7,196)
Deposits for acquisitions	(352,500)		—
Other	536		117
Net cash used in investing activities	(923,204)		(733,491)
Cash flows from financing activities:
Proceeds from credit facility	—		100,000
Payments to credit facility	—		(100,000)
Proceeds from issuance of senior notes	2,666,250		—
Redemption of senior notes	—		(100,000)
Dividends paid	(347,524)		(219,768)
Common stock repurchased and retired	(320,305)		—
Proceeds from exercise of stock options	444		202
Payment of employee tax withholdings in exchange for the return of common stock	(12,610)		(15,740)
Payment of deferred financing costs	(4,215)		(1,174)
Net cash provided by (used in) financing activities	1,982,040		(336,480)
Net change in cash, cash equivalents, and restricted cash	1,934,866		184,797
Cash, cash equivalents, and restricted cash:
Beginning of period(1)	768,134		254,556
End of period(1)	$	2,703,000	$	439,353
(1) Includes $0.1 million of restricted cash and consists of funds for road maintenance and repairs that is presented in other noncurrent assets within the accompanying unaudited condensed consolidated balance sheets (“balance sheets”).
Please refer to Note 14 for Supplemental Disclosures of Cash Flow Information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CIVITAS RESOURCES, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Description of Operations

When we use the terms “Civitas,” the “Company,” “we,” “us,” or “our,” we are referring to Civitas Resources, Inc. and its consolidated subsidiaries unless the context otherwise requires. Civitas is an independent exploration and production company focused on the acquisition, development, and production of oil and associated liquids-rich natural gas primarily in the Denver-Julesburg Basin in Colorado (the “DJ Basin”) and Permian Basin in Texas and New Mexico.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Regulation S-X. Accordingly, pursuant to such rules and regulations, certain notes and other financial information included in audited financial statements have been condensed or omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. All significant intercompany balances and transactions have been eliminated in consolidation.

The December 31, 2022 unaudited condensed consolidated balance sheet data has been derived from the audited consolidated financial statements contained in our 2022 Form 10-K, but does not include all disclosures, including notes required by GAAP. As such, this quarterly report should be read in conjunction with the audited consolidated financial statements and related notes included in our 2022 Form 10-K. In connection with the preparation of the unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2023, through the filing date of this report. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year or any other future period.

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 1 - Summary of Significant Accounting Policies in the 2022 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report.

Recently Issued and Adopted Accounting Standards

There are no accounting standards applicable to the Company that would have a material effect on the Company’s financial statements and disclosures that have been issued but not yet adopted by the Company as of June 30, 2023, and through the filing date of this report.

NOTE 2 - ACQUISITIONS AND DIVESTITURES

All mergers and acquisitions disclosed are accounted for under the acquisition method of accounting for business combinations. Accordingly, we conduct assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition are expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of oil and natural gas properties and asset retirement obligations are measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital. These inputs require significant judgments and estimates by management at the time of the valuation.

Hibernia Acquisition

On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Hibernia Acquisition Agreement”) with Hibernia Energy III Holdings, LLC and Hibernia Energy III-B Holdings, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity ownership interests of Hibernia Energy III, LLC and Hibernia Energy III-B, LLC. In connection with and upon execution of the Hibernia Acquisition Agreement, the Company deposited with an escrow agent a cash deposit equal to 7.5% of the unadjusted Hibernia Purchase Price (as defined below).

10

On August 2, 2023, the Company completed the transactions contemplated by the Hibernia Acquisition Agreement (the “Hibernia Acquisition”) for aggregate consideration of $2.25 billion in cash, subject to certain customary purchase price adjustments set forth in the Hibernia Acquisition Agreement (as adjusted, the “Hibernia Purchase Price”). All amounts deposited were applied towards the aggregate cash consideration due at the closing of the Hibernia Acquisition.

The preliminary purchase price allocation for the Hibernia Acquisition is not complete as of the date of this report. The Company expects to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period.

Tap Rock Acquisition

On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Tap Rock Acquisition Agreement”) with Tap Rock Resources Legacy, LLC (“Tap Rock I Legacy”), Tap Rock Resources Intermediate, LLC (“Tap Rock I Intermediate” and, together with Tap Rock I Legacy, the “Tap Rock I Sellers”), Tap Rock Resources II Legacy, LLC (“Tap Rock II Legacy”), Tap Rock Resources II Intermediate, LLC (“Tap Rock II Intermediate” and, together with Tap Rock II Legacy, the “Tap Rock II Sellers”), Tap Rock NM10 Legacy Holdings, LLC (“NM10 Legacy”), and Tap Rock NM10 Holdings Intermediate, LLC (“NM10 Intermediate” and together with NM10 Legacy, the “NM10 Sellers”, and the NM10 Sellers, together with the Tap Rock I Sellers and Tap Rock II Sellers, the “Tap Rock Sellers”), solely in its capacity as “Sellers’ Representative” (as defined therein), Tap Rock I Legacy (the “Tap Rock Sellers’ Representative”), and solely for the limited purposes set forth therein, Tap Rock Resources, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity ownership interests of a Delaware limited liability company to be formed by the Tap Rock I Sellers, Tap Rock Resources II, LLC, and Tap Rock NM10 Holdings, LLC from the Tap Rock I Sellers, the Tap Rock II Sellers and the NM10 Sellers, respectively. In connection with and upon execution of the Tap Rock Acquisition Agreement, the Company deposited with an escrow agent a cash deposit equal to 7.5% of the unadjusted Tap Rock Purchase Price (as defined below).

On August 2, 2023, the Company completed the transactions contemplated by the Tap Rock Acquisition Agreement (the “Tap Rock Acquisition” and, together with the Hibernia Acquisition, the “Acquisitions”) for aggregate consideration of approximately $2.45 billion, which was comprised of (i) $1.50 billion in cash, subject to certain customary purchase price adjustments set forth in the Tap Rock Acquisition Agreement and (ii) 13,538,472 shares of common stock, par value $0.01 per share, of the Company valued at approximately $950.0 million, subject to certain customary anti-dilution and purchase price adjustments (as adjusted, the “Tap Rock Purchase Price”). All amounts deposited were applied towards the aggregate cash consideration due at the closing of the Tap Rock Acquisition.

The preliminary purchase price allocation for the Tap Rock Acquisition is not complete as of the date of this report. The Company expects to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period.

Bison Acquisition

On March 1, 2022, the Company completed the acquisition of privately held DJ Basin operator Bison Oil & Gas II, LLC for merger consideration of approximately $280.4 million (the “Bison Acquisition”). Net assets acquired under the purchase price allocation were $294.0 million and consequently resulted in a bargain purchase gain of $13.6 million. Because of the immateriality of the Bison Acquisition, the related revenue and earnings, supplemental pro forma financial information, and detailed purchase price allocation are not disclosed.

Merger transaction costs

Merger transaction costs related to the aforementioned mergers and acquisitions are accounted for separately from the assets acquired and liabilities assumed and are included in merger transaction costs in the accompanying unaudited condensed consolidated statements of operations (“statements of operations”). The Company incurred merger transaction costs of $31.1 million and $1.4 million during the three months ended June 30, 2023 and 2022, respectively, and $31.6 million and $22.0 million during the six months ended June 30, 2023 and 2022, respectively.

Acquisition of additional working interests in Company-operated wells

On July 5, 2022, the Company acquired additional working interests in certain Company-operated wells for cash consideration of $80.7 million, after customary purchase price adjustments.

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NOTE 3 - REVENUE RECOGNITION

Oil and natural gas sales revenue presented within the accompanying statements of operations is reflective of the revenue generated from contracts with customers. Revenue attributable to each identified revenue stream is disaggregated below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating net revenues:
Oil sales	$	541,043	$	778,258	$	1,001,417	$	1,327,760
Natural gas sales	45,364		205,840		148,919		319,001
Natural gas liquid (“NGL”) sales	74,119		167,266		166,212		322,413
Oil and natural gas sales	$	660,526	$	1,151,364	$	1,316,548	$	1,969,174

The Company recognizes revenue from the sale of produced oil, natural gas, and NGL at the point in time when control of produced oil, natural gas, or NGL volumes transfer to the purchaser, which may differ depending on the applicable contractual terms. The Company considers the transfer of control to have occurred when the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the oil, natural gas, or NGL production. Transfer of control dictates the presentation of gathering, transportation, and processing expenses within the accompanying statements of operations. Gathering, transportation, and processing expenses incurred by the Company prior to the transfer of control are recorded gross within the gathering, transportation, and processing line item on the accompanying statements of operations. Conversely, gathering, transportation, and processing expenses incurred by the Company subsequent to the transfer of control are recorded net within the oil and natural gas sales line item on the accompanying statements of operations. Please refer to Note 1 - Summary of Significant Accounting Policies in the 2022 Form 10-K for more information regarding the types of contracts under which oil, natural gas, and NGL sales revenue is generated.

The Company records revenue in the month production is delivered and control is transferred to the purchaser. However, settlement statements and payment may not be received for 30 to 60 days after the date production is delivered and control is transferred. Until such time settlement statements and payment are received, the Company records a revenue accrual based on, amongst other factors, an estimate of the volumes delivered at estimated prices as determined by the applicable contractual terms. The Company records the differences between its estimates and the actual amounts received for product sales in the month in which payment is received from the purchaser. For the three and six months ended June 30, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was insignificant. As of June 30, 2023 and December 31, 2022, the Company’s receivables from contracts with customers were $201.2 million and $343.5 million, respectively.

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses contain the following (in thousands):

	June 30, 2023		December 31, 2022
Accounts payable trade	$	27,811	$	31,783
Accrued drilling and completion costs	80,826		137,171
Accrued lease operating expense	18,715		18,109
Accrued gathering, transportation, and processing	56,913		59,398
Accrued general and administrative expense	24,761		20,054
Accrued merger transaction costs	6,252		—
Accrued commodity derivative settlements	844		12,514
Accrued interest expense	6,778		5,509
Accrued settlement	5,727		1,497
Other accrued expenses	11,928		9,262
Total accounts payable and accrued expenses	$	240,555	$	295,297

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NOTE 5 - LONG-TERM DEBT

Senior Notes

Senior Notes are recorded net of unamortized discount and unamortized deferred financing costs within senior notes on the accompanying balance sheets, with no associated premiums. The tables below present the related carrying values as of June 30, 2023 and December 31, 2022 (in thousands):

	As of June 30, 2023
	Principal Amount		Unamortized Discount		Unamortized Deferred Financing Costs		Principal Amount, Net
2026 Senior Notes	$	400,000	$	—	$	5,901	$	394,099
2028 Senior Notes	1,350,000		16,875		5,919		1,327,206
2031 Senior Notes	1,350,000		16,875		5,919		1,327,206
Total	$	3,100,000	$	33,750	$	17,739	$	3,048,511

	As of December 31, 2022
	Principal Amount		Unamortized Discount		Unamortized Deferred Financing Costs		Principal Amount, Net
2026 Senior Notes	$	400,000	$	—	$	6,707	$	393,293

8.375% Senior Notes due 2028 and 8.750% Senior Notes due 2031. On June 29, 2023, the Company issued $1.35 billion aggregate principal amount of 8.375% Senior Notes due 2028 (the “2028 Senior Notes”), at par, pursuant to an indenture (the “2028 Indenture”) among the Company, Computershare Trust Company, N.A., as trustee, and the guarantors party thereto, and $1.35 billion aggregate principal amount of 8.750% Senior Notes due 2031 (the “2031 Senior Notes” and, together with the 2028 Senior Notes, the “Acquisition Senior Notes”), at par, pursuant to an indenture (the “2031 Indenture”) among the Company, Computershare Trust Company, N.A., as trustee. Upon issuance of the Acquisition Senior Notes, the Company received net proceeds of $2.67 billion after deducting fees of $33.8 million. The Company used the net proceeds from the Acquisition Senior Notes, together with cash on hand and borrowings under the Credit Facility, to fund a portion of the consideration for the Acquisitions. Interest on the 2028 Senior Notes and the 2031 Senior Notes will accrue at the rate of 8.375% per annum and 8.750% per annum, respectively, and will be payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2024.

The 2028 Indenture and 2031 Indenture each contain covenants that limit, among other things, the Company’s ability and the ability of its subsidiaries to: incur or guarantee additional indebtedness; create liens securing indebtedness; pay dividends on or redeem or repurchase stock or subordinated debt; make specified types of investments and acquisitions; enter into or permit to exist contractual limits on the ability of the Company’s subsidiaries to pay dividends to the Company; enter into transactions with affiliates; and sell assets or merge with other companies. These covenants will not, however, restrict the activities of the entities that will be acquired in connection with the Acquisitions prior to the consummation of the Acquisitions. These covenants are subject to a number of important limitations and exceptions. The Company was in compliance with all covenants under the 2028 Indenture and 2031 Indenture as of June 30, 2023, and through the filing of this report. Each of the 2028 Indenture and 2031 Indenture also contain customary events of default.

At any time prior to July 1, 2025, the Company may redeem all or part of the 2028 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after July 1, 2025, the Company may redeem all or part of the 2028 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 104.188% for the twelve-month period beginning on July 1, 2025; (ii) 102.094% for the twelve-month period beginning on July 1, 2026; and (iii) 100.000% for the period beginning July 1, 2027 and at any time thereafter, plus accrued and unpaid interest, if any to, but excluding the redemption date (subject to the right of the noteholders on the relevant record date to receive interest on the relevant interest payment date).

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At any time prior to July 1, 2026, the Company may redeem all or part of the 2031 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after July 1, 2026, the Company may redeem all or part of the 2031 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 104.375% for the twelve-month period beginning on July 1, 2026; (ii) 102.188% for the twelve-month period beginning on July 1, 2027; and (iii) 100.000% for the period beginning July 1, 2028 and at any time thereafter, plus accrued and unpaid interest, if any to, but excluding the redemption date (subject to the right of the noteholders on the relevant record date to receive interest on the relevant interest payment date).

The Company may redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes or 2031 Senior Notes at any time prior to July 1, 2025 or 2026, respectively, with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 108.375%, with respect to the 2028 Senior Notes, and 108.750%, with respect to the 2031 Senior Notes, of the principal amount of such series of Acquisition Senior Notes redeemed, plus accrued and unpaid interest, if any, provided, however, that (i) at least 65.0% of the aggregate principal amount of Acquisition Senior Notes of such series originally issued on the issue date (but excluding Acquisition Senior Notes of such series held by the Company and its subsidiaries) remains outstanding immediately after the occurrence of such redemption (unless all such Acquisition Senior Notes are redeemed substantially concurrently) and (ii) the redemption occurs within 180 days after the date of the closing of such equity offering.

The Acquisition Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company’s subsidiaries, including the entities that became subsidiaries of the Company upon the consummation of the Acquisitions, as well as by certain other future subsidiaries that may be required to guarantee the Acquisition Senior Notes.

5.000% Senior Notes due 2026. On October 13, 2021, the Company issued $400.0 million aggregate principal amount of 5.000% Senior Notes due 2026 (the “2026 Senior Notes”) pursuant to an indenture (the “2026 Indenture”), among Civitas Resources, Wells Fargo Bank, National Association, as trustee, and the guarantors party thereto. Interest accrues at the rate of 5.000% per annum and is payable semiannually in arrears on April 15 and October 15 of each year. Payments commenced on April 15, 2022.

The 2026 Indenture contains covenants that limit, among other things, the Company’s ability to: (i) incur or guarantee additional indebtedness; (ii) create liens securing indebtedness; (iii) pay dividends on or redeem or repurchase stock or subordinated debt; (iv) make specified types of investments and acquisitions; (v) enter into or permit to exist contractual limits on the ability of the Company’s subsidiaries to pay dividends to Civitas Resources; (vi) enter into transactions with affiliates; and (vii) sell assets or merge with other companies. These covenants are subject to a number of important limitations and exceptions. The Company was in compliance with all covenants under the 2026 Indenture as of June 30, 2023, and through the filing of this report. In addition, certain of these covenants will be terminated before the 2026 Senior Notes mature if at any time no default or event of default exists under the 2026 Indenture and the 2026 Senior Notes receive an investment-grade rating from at least two ratings agencies. The 2026 Indenture also contains customary events of default.

At any time prior to October 15, 2023, the Company may redeem the 2026 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after October 15, 2023, the Company may redeem all or part of the 2026 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 102.500% for the twelve-month period beginning on October 15, 2023; (ii) 101.250% for the twelve-month period beginning on October 15, 2024; and (iii) 100.000% for the twelve-month period beginning October 15, 2025 and at any time thereafter, plus accrued and unpaid interest, if any.

The Company may redeem up to 35% of the aggregate principal amount of the 2026 Senior Notes at any time prior to October 15, 2023 with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 105.000% of the principal amount of the 2026 Senior Notes redeemed, plus accrued and unpaid interest, if any, provided, however, that (i) at least 65.0% of the aggregate principal amount of the 2026 Senior Notes originally issued on the issue date (but excluding 2026 Senior Notes held by the Company) remains outstanding immediately after the occurrence of such redemption (unless all such 2026 Senior Notes are redeemed substantially concurrently) and (ii) the redemption occurs within 180 days after the date of the closing of such equity offering.

The 2026 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of Civitas’ existing subsidiaries.

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7.500% Senior Notes due 2026. In April 2021, the Company issued $100.0 million aggregate principal amount of 7.500% Senior Notes due 2026 pursuant to an indenture by and among Civitas Resources, U.S. Bank National Association, as trustee, and the guarantors party thereto. Interest accrued at the rate of 7.500% per annum and was payable semiannually in arrears on April 30 and October 31 of each year. On May 1, 2022, the Company redeemed all of the issued and outstanding 7.500% Senior Notes at 100.0% of their aggregate principal amount, plus accrued and unpaid interest thereon to the redemption date.

Credit Facility

The Company is party to a reserve-based revolving facility, as the borrower, with JPMorgan Chase Bank, N.A. (“JPMorgan”), as the administrative agent, and a syndicate of financial institutions, as lenders, that had an aggregate maximum commitment amount of $2.0 billion and was set to mature on November 1, 2025 (with all subsequent amendments, the “Credit Facility” or the “Credit Agreement”).

The Credit Facility is guaranteed by all restricted domestic subsidiaries of the Company, including the entities that became subsidiaries of the Company upon the consummation of the Acquisitions, and is secured by first priority security interests on substantially all assets, including a mortgage on at least 90% of the total value of the proved properties evaluated in the most recently delivered reserve reports prior to the amendment effective date, including any engineering reports relating to the oil and natural gas properties of the restricted domestic subsidiaries of the Company, subject to customary exceptions.

The Credit Facility contains customary representations and affirmative covenants. The Credit Facility also contains customary negative covenants, which, among other things, and subject to certain exceptions, include restrictions on (i) liens, (ii) indebtedness, guarantees and other obligations, (iii) restrictions in agreements on liens and distributions, (iv) mergers or consolidations, (v) asset sales, (vi) restricted payments, (vii) investments, (viii) affiliate transactions, (ix) change of business, (x) foreign operations or subsidiaries, (xi) name changes, (xii) use of proceeds, letters of credit, (xiii) gas imbalances, (xiv) hedging transactions, (xv) additional subsidiaries, (xvi) changes in fiscal year or fiscal quarter, (xvii) operating leases, (xviii) prepayments of certain debt and other obligations, (xix) sales or discounts of receivables, (xx) dividend payment thresholds, and (xxi) cash balances. 

In addition, the Company is subject to certain financial covenants under the Credit Facility, as tested on the last day of each fiscal quarter, including, without limitation, (a) permitted net leverage ratio of 3.00 to 1 and (b) a current ratio, inclusive of the unused commitments then available to be borrowed, to not be less than 1.00 to 1. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2023 and through the filing of this report.

On April 20, 2022, the Company entered into an amendment to the Credit Agreement that increased the Company’s borrowing base from $1.0 billion to $1.7 billion and increased the aggregate elected commitments from $800.0 million to $1.0 billion.

In addition, this amendment resulted in the removal and replacement of LIBOR with the Secured Overnight Financing Rate (“SOFR”) as a mechanism to determine interest for borrowings made under the Credit Facility using a term-specific SOFR. As a result, borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, either (i) the Alternate Base Rate (“ABR”, for ABR Revolving Credit Loans) plus the applicable margin, or (ii) the term-specific SOFR plus the applicable margin. ABR is established as a rate per annum equal to the greatest of (a) the rate of interest publicly announced by JPMorgan as its prime rate, (b) the applicable rate of interest published by the Federal Reserve Bank of New York plus 0.5%, or (c) the term-specific SOFR plus 1.0%, subject to a 1.5% floor plus the applicable margin of 1.0% to 2.0%, based on the utilization of the Credit Facility. Term-specific SOFR is based on one-, three-, or six-month terms as selected by the Company and is subject to a 0.5% floor plus the applicable margin of 2.0% to 3.0%, based on the utilization of the Credit Facility. Interest on borrowings that bear interest at the SOFR are payable on the last day of the applicable interest period selected by the Company, and interest on borrowings that bear interest at the ABR are payable quarterly in arrears. 

As part of the regularly scheduled, semi-annual borrowing base redeterminations under the Credit Facility, on October 27, 2022, the Company’s aggregate elected commitments of $1.0 billion were reaffirmed and borrowing base was increased from $1.7 billion to $1.85 billion.

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In connection with the Company’s entry into the Hibernia Acquisition Agreement and the Tap Rock Acquisition Agreement, on June 23, 2023, the Company entered into an amendment to the Credit Agreement. Pursuant to the amendment, the Company was authorized to, among other things, (i) offer and issue the Acquisition Senior Notes, (ii) incur indebtedness pursuant to those certain debt commitment letters by and among the Company, Bank of America N.A., BofA Securities, Inc., and JPMorgan Chase Bank, N.A. providing for two separate 364-day bridge loan facilities in an aggregate principal amount of up to $2.7 billion (such facilities, the “Bridge Facilities” and the loans made thereunder, the “Bridge Loans”), the proceeds of which would have, if drawn, be used to partially fund the Acquisitions, (iii) incur the debt described in the immediately preceding clauses (i) and (ii) without any corresponding reduction in the borrowing base of the Credit Facility, and (iv) incur pari passu term loan indebtedness subject to a total secured leverage test of 2.00 to 1.00 and certain other customary terms and conditions. Because the Acquisition Senior Notes successfully closed and were issued on June 29, 2023, the Company did not draw on the Bridge Loans and has terminated the commitments under the Bridge Facilities. Consequently, approximately $22.6 million of fees associated with the Bridge Facilities and backstop fees associated with the Credit Facility amendment were incurred and expensed to merger transaction costs in the accompanying statements of operations for the three and six months ended June 30, 2023.

Finally, in connection with the Company’s closing of the Acquisitions, on August 2, 2023, the Company entered in an amendment to the Credit Agreement whereby aggregate elected commitments increased from $1.0 billion to $1.85 billion, the borrowing base increased from $1.85 billion to $3.0 billion, and the aggregate maximum credit commitment increased from $2.0 billion to $4.0 billion. In addition, the maturity of the Credit Facility was extended to August 2028. The next scheduled borrowing base redetermination date is set to occur in May 2024.

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Facility as of the dates indicated (in thousands):

	August 2, 2023		June 30, 2023		December 31, 2022
Revolving credit facility	$	750,000	$	—	$	—
Letters of credit	12,100		12,100		12,100
Available borrowing capacity	1,087,900		987,900		987,900
Total aggregate elected commitments	$	1,850,000	$	1,000,000	$	1,000,000

In connection with the amendments to the Credit Facility, the Company capitalized a total of approximately $13.0 million in deferred financing costs as of June 30, 2023. Of the total post-amortization net capitalized amounts, (i) $4.6 million and $5.5 million are presented within other noncurrent assets on the accompanying balance sheets as of June 30, 2023 and December 31, 2022, respectively, and (ii) $3.5 million and $3.0 million are presented within prepaid expenses and other on the accompanying balance sheets as of June 30, 2023 and December 31, 2022, respectively.

Interest Expense

For the three months ended June 30, 2023 and 2022, the Company incurred interest expense of $8.8 million and $8.1 million, respectively. For the six months ended June 30, 2023 and 2022, the Company incurred interest expense of $16.2 million and $17.2 million, respectively. No interest was capitalized during the three and six months ended June 30, 2023 and 2022.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Legal Proceedings 

From time to time, the Company is involved in various commercial and regulatory claims, litigation, and other legal proceedings that arise in the ordinary course of its business. The Company assesses these claims in an effort to determine the degree of probability and range of possible loss for potential accrual in its consolidated financial statements. In accordance with authoritative accounting guidance, an accrual is recorded for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the most likely anticipated outcome or the minimum amount within a range of possible outcomes. Because legal proceedings are inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about uncertain future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. The Company regularly reviews contingencies to determine the adequacy of its accruals and related disclosures.

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As of the filing date of this report, there were no probable, material pending, or overtly threatened legal actions against the Company of which it was aware, other than the following:

Boulder County. In prior periods, there was ongoing litigation between Boulder County and Extraction which has been previously disclosed as having the potential to prevent oil and gas operations for the development of minerals contained within Boulder County, Colorado. Boulder County had initiated suit in District Court for Boulder County that was primarily a contract case, where the relevant contracts were the conservation easement over the Blue Paintbrush location, Extraction’s Surface Use Agreement for the Blue Paintbrush location, and the leases that Boulder owns within the Blue Paintbrush drilling and spacing unit. Boulder sought invalidation of these leases in the litigation. This litigation has been resolved as to all substantive issues.

In May 2022, Boulder County alleged new legal theories and requested termination of the leases previously at issue in the Blue Paintbrush litigation. Boulder raised these same claims in opposition to the Company’s pooling application before the Colorado Energy & Carbon Management Commission (“ECMC”) (formerly the Colorado Oil & Gas Conservation Commission), which did not proceed to hearing after the Company withdrew the pooling application. If an action is brought by Boulder County, an adverse outcome in any such litigation could result in the Company failing to meet its development objectives in Blue Paintbrush.

Enforcement. Disclosure of certain environmental matters is required when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that the Company believes could exceed $0.3 million. The Company has received Notices of Alleged Violations (“NOAV”) from the ECMC alleging violations of various Colorado statutes and ECMC regulations governing oil and gas operations. The Company has further received notices from the Colorado Air Pollution Control Division. The Company continues to engage in discussions regarding resolution of the alleged violations. As of June 30, 2023 and December 31, 2022, the Company has accrued approximately $1.0 million and $0.7 million, respectively, associated with the NOAVs and Colorado Air Pollution Control Division notices.

Commitments

Firm Transportation Agreements. The Company is party to a firm pipeline transportation contract to provide a guaranteed outlet for production on an oil pipeline system. The contract requires the Company to pay minimum volume transportation charges on 12,500 barrels (“Bbl”) per day through April 2025, regardless of the amount of pipeline capacity utilized by the Company. The aggregate financial commitment fee over the remaining term was $26.8 million as of June 30, 2023. The Company expects to utilize most, if not all, of the firm capacity on the oil pipeline system.

Minimum Volume Agreement - Oil. The Company is party to a purchase agreement to deliver fixed and determinable quantities of crude oil. Under the terms of the agreement, the Company is required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitment of 20,000 gross Bbls per day over a term ending in December 2023. The aggregate financial commitment fee over the remaining term is $22.6 million as of June 30, 2023. The Company has not and does not expect to incur any deficiency payments.

Minimum Volume Agreement - Gas and Other. The Company is party to a gas gathering and processing agreement (the “Gathering Agreement”) with a third-party midstream provider over a term ending in 2029 with an annual minimum volume commitment of 13.0 billion cubic feet of natural gas. The Gathering Agreement also includes a commitment to sell take-in-kind NGLs from other processing agreements of 7,500 Bbls a day through 2026 with the ability to roll forward up to a 10% shortfall in a given month to the subsequent month. The aggregate financial commitment fee over the remaining term is $107.6 million as of June 30, 2023, which fluctuates with commodity prices as this is a value-based percentage of proceeds sales contract. Based on current projections, the Company may incur approximately $31.0 million of shortfall payments under the Gathering Agreement during the remaining term of approximately seven years; however, the Company is actively engaging alternative strategies to reduce any potential contract deficiencies incurred in future periods.

Additionally, the Company is also party to a gas gathering and processing agreement with several third-party producers and a third-party midstream provider to deliver to two different plants over terms that end in August 2025 and July 2026. The Company’s share of these commitments requires an incremental 51.5 and 20.6 million cubic feet of natural gas (“MMcf”) per day, respectively, over a baseline volume of 65 MMcf per day for a period of seven years following the in-service dates of the plants. The Company may be required to pay a shortfall fee for any incremental volume deficiencies under these commitments. These contractual obligations can be reduced by the Company’s proportionate share of the collective volumes delivered to the plants by other incremental third-party volumes available to the midstream provider that are in excess of the total commitments. Because of the third-party producer reduction provision, we believe that the aggregate financial commitment fee over the remaining term is zero as of June 30, 2023. The Company has not and does not expect to incur any deficiency payments.

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The Company is also party to additional individually immaterial agreements that require the Company to pay a fee associated with the minimum volumes over various terms ending in December 2025, regardless of the amount delivered. The aggregate financial commitment fee over the remaining term for these contracts was $8.5 million as of June 30, 2023.

The minimum annual payments under these agreements for the next five years as of June 30, 2023 are presented below (in thousands):

	Firm Transportation		Minimum Volume(1)
Remainder of 2023	$	7,360	$	34,182
2024	14,640		19,596
2025	4,800		20,434
2026	—		16,816
2027	—		16,250
2028 and thereafter	—		31,460
Total	$	26,800	$	138,738

___________________________

(1)The above calculation is based on the minimum volume commitment schedule (as defined in the relevant agreement) and applicable differential fees.

Other commitments. The Company is party to a drilling commitment agreement with a third-party midstream provider such that the Company is required to drill and complete a total of 106 qualifying wells, whereby a minimum number of wells out of the total must be drilled by a deadline occurring every two years over a period ending December 31, 2026. The drilling commitment agreement provides for, among other things, a number of specifications such as minimum consecutive days of production, well performance, and lateral length. Wells operated by others can satisfy this commitment, subject to limitations. If the Company were to fail to complete the wells by the applicable deadline, it would be in breach of the agreement and the third-party midstream provider could attempt to assert damages against Civitas and its affiliates. As of the date of filing, the Company cannot reasonably estimate how much, if any, damages will be paid.

Refer to Note 13 - Leases for lease commitments.

NOTE 7 - STOCK-BASED COMPENSATION

Long Term Incentive Plans

In April 2017, the Company adopted the 2017 Long Term Incentive Plan (“2017 LTIP”), which provides for the issuance of restricted stock units, performance stock units, and stock options, and reserved 2,467,430 shares of common stock. In June 2021, the Company adopted the 2021 Long Term Incentive Plan (“2021 LTIP”), which reserved an incremental 700,000 shares of common stock to those previously reserved under the 2017 LTIP. Finally, in conjunction with the Company’s merger with Extraction Oil & Gas, Inc. (“Extraction”) in November 2021, Civitas assumed Extraction’s 2021 Long Term Incentive Plan (the “Extraction Equity Plan”), which reserved 3,305,080 shares of common stock now issuable by Civitas. The 2017 LTIP, 2021 LTIP, and Extraction Equity Plan are collectively referred to herein as the “LTIP”.

The Company records compensation expense associated with the issuance of awards under the LTIP on a straight-line basis over the vesting period based on the fair value of the awards as of the date of grant within general and administrative expense. The following table outlines the compensation expense recorded by type of award (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Restricted and deferred stock units	$	4,769	$	3,917	$	9,194	$	9,182
Performance stock units	5,126		2,218		8,081		5,043
Total stock-based compensation	$	9,895	$	6,135	$	17,275	$	14,225

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As of June 30, 2023, unrecognized compensation expense related to the awards granted under the LTIP will be amortized through the relevant periods as follows (in thousands):

	Unrecognized Compensation Expense		Final Year of Recognition
Restricted and deferred stock units	$	27,578	2026
Performance stock units	26,364		2025
Total unrecognized stock-based compensation	$	53,942

Restricted Stock Units and Deferred Stock Units

The Company grants time-based Restricted Stock Units (“RSUs”) to its officers, executives, and employees and time-based Deferred Stock Units (“DSUs”) to its non-employee directors as part of its LTIP. Each RSU and DSU represents a right to receive one share of the Company’s common stock at the end of the specified vesting period. RSUs generally vest and settle either over a (i) one-year vesting period, with the entire grant vesting and settling on the anniversary date or (ii) three-year vesting period, with one-third of the total grant vesting and settling on each anniversary date. Each RSU is entitled to a dividend equivalent right to receive, upon settlement, a cash payment based on the regular cash dividends that would have been paid on a share of the Company’s common stock during the period between the grant date and the date the RSUs vest and are settled. Accrued but unpaid dividend equivalents are recognized as a liability on the accompanying balance sheets, until the recipients receive the dividend equivalents upon vesting and settlement. DSUs generally vest over a one-year period following the grant date. DSUs are settled in shares of the Company’s common stock upon the non-employee director’s separation of service from the Board of Directors (the “Board”). Each DSU is entitled to a dividend equivalent right to receive, upon vesting, a cash payment based on the regular cash dividends that would have been paid on a share of the Company’s common stock. The grant-date fair value of RSUs and DSUs is equal to the closing price of the Company’s common stock on the date of the grant.

A summary of the status and activity of non-vested RSUs and DSUs for the six months ended June 30, 2023 is presented below:

	RSUs and DSUs	Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year	675,898	$	50.27
Granted	309,500	71.12
Vested	(342,563)	46.67
Forfeited	(34,072)	57.36
Non-vested, end of period	608,763	$	62.50

The aggregate grant-date fair value of the RSUs and DSUs granted under the LTIP during the six months ended June 30, 2023 was $22.0 million.

Performance Stock Units

The Company grants market-based performance stock units (“PSUs”) to its officers and certain executives as part of its LTIP. The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%) of the number of PSUs granted and is determined based on performance achievement against certain market-based criteria over a three-year performance period. PSUs generally vest and settle on December 31 of the year preceding the third anniversary of the date of grant. Each PSU is entitled to a dividend equivalent right to receive, upon settlement, a cash payment based on the regular cash dividends that would have been paid on a share of the Company’s common stock during the period between the grant date and the date the PSUs vest and are settled. Accrued but unpaid dividend equivalents are recognized as a liability on the accompanying balance sheets, until the recipients receive the dividend equivalents upon vesting and settlement.

Performance achievement is determined based on either, or a combination of, (1) the Company’s annualized absolute total shareholder return (“TSR”) or (2) for certain PSUs granted prior to fiscal year 2023, the Company’s absolute TSR relative to that of a defined peer group. Absolute TSR is determined based upon the performance of the Company’s common stock over the performance period relative to the price of the Company’s common stock at the grant date. For awards with a relative TSR component, the Company’s absolute TSR is compared with the absolute TSRs of a group of peer companies over the performance period. The absolute TSR for the Company and each of the peer companies is determined by dividing (A) (i) the volume-weighted average share price for the last 30 trading days of the performance period, minus (ii) the volume-weighted average share price for the 30 trading days preceding the beginning of the performance period, plus (iii) dividends paid by (B)

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the volume-weighted average share price for the 30 trading days preceding the beginning of the performance period. The resultant amount is then annualized based on the length of the performance period.

The grant-date fair value of the PSUs was estimated using a Monte Carlo valuation model. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Significant assumptions used in this valuation include the Company’s expected volatility as well as the volatilities for each of the Company’s peers and an interpolated risk-free interest rate based on U.S. Treasury yields with maturities consistent with the performance period.

A summary of the status and activity of non-vested PSUs for the six months ended June 30, 2023 is presented below:

	PSUs (1)	Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year	345,999	$	77.42
Granted	233,861	103.39
Vested	(89,901)	78.49
Forfeited	(59,726)	87.80
Expired	(242)	18.26
Non-vested, end of period	429,991	$	89.92

___________________________

(1)The number of awards assumes that the associated performance condition is met at the target amount (multiplier of one). The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%), depending on the level of satisfaction of the performance condition.

The aggregate grant-date fair value of the PSUs granted under the LTIP during the six months ended June 30, 2023 was $24.2 million.

Stock Options

The LTIP allows for the issuance of stock options to the Company’s employees at the sole discretion of the Board. Options expire ten years from the grant date unless otherwise determined by the Board.

Stock options are valued using a Black-Scholes Model where expected volatility is based on an average historical volatility of a peer group selected by management over a period consistent with the expected life assumption on the grant date, the risk-free rate of return is based on the U.S. Treasury constant maturity yield on the grant date with a remaining term equal to the expected term of the awards, and the Company’s expected life of stock option awards is derived from the midpoint of the average vesting time and contractual term of the awards.

A summary of the status and activity of stock options for the six months ended June 30, 2023 is presented below:

	Stock Options	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding, beginning of year	15,170	$	34.36
Exercised	(13,463)	34.36
Expired	(111)	34.36
Outstanding, end of period	1,596	$	34.36	3.8	$	56
Options outstanding and exercisable	1,596	$	34.36	3.8	$	56

The aggregate intrinsic value of options exercised during the six months ended June 30, 2023 was $0.5 million.

NOTE 8 - FAIR VALUE MEASUREMENTS

The Company follows authoritative accounting guidance for measuring the fair value of assets and liabilities in its financial statements. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Further, this guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

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The fair value hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities 

Level 2: Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable

Level 3: Significant inputs to the valuation model are unobservable

Financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy.

Derivatives

The Company uses Level 2 inputs to measure the fair value of oil and natural gas commodity price derivatives. The fair value of the Company’s commodity price derivatives is estimated using industry-standard models that contemplate various inputs including, but not limited to, the contractual price of the underlying position, current market prices, forward commodity price curves, volatility factors, time value of money, and the credit risk of both the Company and its counterparties. We validate our fair value estimate by corroborating the original source of inputs, monitoring changes in valuation methods and assumptions, and reviewing counterparty mark-to-market statements and other supporting documentation. Refer to Note 9 - Derivatives for more information regarding the Company’s derivative instruments.

The following tables present the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and their classification within the fair value hierarchy (in thousands):

	As of June 30, 2023
	Level 1		Level 2		Level 3
Derivative assets	$	—	$	6,135	$	—
Derivative liabilities	$	—	$	24,411	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3
Derivative assets	$	—	$	3,284	$	—
Derivative liabilities	$	—	$	63,533	$	—

Long-Term Debt

The 2026 Senior Notes, 2028 Senior Notes, and 2031 Senior Notes are recorded at cost, net of any unamortized discount or deferred financing costs. As of June 30, 2023, the fair value of the 2026 Senior Notes, 2028 Senior Notes, and 2031 Senior Notes were $377.3 million, $1.37 billion, and $1.37 billion, respectively. These fair values are based on quoted market prices, and as such, are designated as Level 1 within the fair value hierarchy. The recorded value of the Credit Facility, if any, approximates its fair value as it bears interest at a floating rate that approximates a current market rate. Please refer to Note 5 - Long-Term Debt for additional information.

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Warrants

Warrants issued are indexed to the Company’s common stock and required to be net share settled via a cashless exercise. Accordingly, they are classified as equity instruments. The Company’s share price traded below the exercise price of the warrants and therefore were not exercisable during the three and six months ended June 30, 2023 and 2022.

The fair value of the warrants on the issuance date was determined using Level 3 inputs including, but not limited to, volatility, risk-free rate, and dividend yield under the Cox-Ross-Rubinstein binomial option pricing model. The warrants are recorded within additional paid-in capital on the accompanying balance sheets at a fair value of $77.5 million, with no recurring fair value measurement required. There have been no changes to the initial carrying amount of the warrants since issuance.

Acquisitions and Impairments of Proved and Unproved Properties

We measure acquired assets or businesses at fair value on a nonrecurring basis and review our proved and unproved oil and natural gas properties for impairment using inputs that are not observable in the market, and are therefore designated as Level 3 within the valuation hierarchy. There were no impairments of proved properties recorded during the three and six months ended June 30, 2023 and 2022, and no abandonment and impairment of unproved properties expense was incurred during the three months ended June 30, 2023 and 2022. During the six months ended June 30, 2023 and 2022, the Company incurred abandonment and impairment of unproved properties expense of zero and $18.0 million, respectively. Please refer to Note 1 – Summary of Significant Accounting Policies for information on the Company’s policies for determining fair value of its proved and unproved properties and related impairment expense.

NOTE 9 - DERIVATIVES

The Company periodically enters into commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices for its expected future oil and natural gas production and the associated impact on cash flows. The Company’s commodity derivative contracts consist of swaps, collars, basis protection swaps, and puts. As of June 30, 2023, all derivative counterparties were members of the Credit Facility lender group and all commodity derivative contracts are entered into for other-than-trading purposes. The Company does not designate its commodity derivative contracts as hedging instruments.

A typical swap arrangement guarantees a fixed price on contracted volumes. If the agreed upon published third-party index price (“index price”) is lower than the fixed contract price at the time of settlement, the Company receives the difference between the index price and the fixed contract price. If the index price is higher than the fixed contact price at the time of settlement, the Company pays the difference between the index price and the fixed contract price.

A typical collar arrangement establishes a floor and ceiling price on contracted volumes through the use of a short call and a long put (“two-way collar”). When the index price is above the ceiling price at the time of settlement, the Company pays the difference between the index price and the ceiling price. When the index price is below the floor price at the time of settlement, the Company receives the difference between the index price and floor price. When the index price is between the floor price and ceiling price, no payment or receipt occurs. A minority of our collar arrangements combine a two-way collar with a short put that holds an exercise price below the floor price (“three-way collar”). In these arrangements, when the index price is below the floor price at the time of settlement, the Company receives the difference between the index price and the floor price, capped at the difference between the floor price and the exercise price of the short put.

Basis protection swaps are arrangements that guarantee a price differential for natural gas from a specified delivery point. For basis protection swaps, the Company receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract.

A put arrangement gives the Company the right to sell the underlying commodity at a strike price over the term of the contract. If the index price is higher than the strike price, no payment or receipt occurs. If the index price is lower than the strike price, the Company receives the difference between the index price and the strike price.

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As of June 30, 2023, the Company had entered into the following commodity price derivative contracts:

	Contract Period
	Q3 2023		Q4 2023		Q1 2024		Q2 2024		Q3 - Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes	5,695		7,984		4,814		5,562		4,852
Weighted-Average Contract Price	$	70.44	$	70.36	$	69.13	$	66.47	$	68.28
Two-Way Collars
NYMEX WTI Volumes	663		1,000		—				—
Weighted-Average Ceiling Price	$	82.15	$	82.15	$	—			$	—
Weighted-Average Floor Price	$	60.00	$	60.00	$	—			$	—
Three-Way Collars
NYMEX WTI Volumes	1,302		1,172		573		—		—
Weighted-Average Ceiling Price	$	57.48	$	56.49	$	56.25	$	—	$	—
Weighted-Average Floor Price	$	47.91	$	49.04	$	45.00	$	—	$	—
Weighted-Average Sold Put Price	$	37.41	$	39.04	$	35.00	$	—	$	—
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”))
Swaps
NYMEX HH Volumes	46,120		45,947		31,790		31,686		16,639
Weighted-Average Contract Price	$	2.61	$	2.60	$	2.69	$	2.68	$	2.74
Two-Way Collars
NYMEX HH Volumes	1,887		1,756		736		1,732		834
Weighted-Average Ceiling Price	$	2.96	$	2.96	$	3.16	$	2.89	$	3.16
Weighted-Average Floor Price	$	2.34	$	2.38	$	2.50	$	2.20	$	2.50
Three-Way Collars
NYMEX HH Volumes	—		—		1,166		55		—
Weighted-Average Ceiling Price	$	—	$	—	$	3.50	$	3.42	$	—
Weighted-Average Floor Price	$	—	$	—	$	2.50	$	2.50	$	—
Weighted-Average Sold Put Price	$	—	$	—	$	2.00	$	2.00	$	—
Basis Protection Swaps
CIG-NYMEX HH Volumes	48,008		47,703		33,691		33,473		16,623
Weighted-Average Contract Price	$	(0.46)	$	(0.46)	$	(0.27)	$	(0.27)	$	(0.27)

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As of the filing date of this report, the Company had entered into the following commodity price derivative contracts:

	Contract Period
	Q3 2023		Q4 2023		Q1 2024		Q2 2024		Q3 - Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes	23,055		29,161		12,727		11,991		9,767
Weighted-Average Contract Price	$	72.30	$	71.83	$	70.39	$	68.75	$	69.15
Two-Way Collars
NYMEX WTI Volumes	7,334		9,392		11,913		10,430		8,914
Weighted-Average Ceiling Price	$	82.63	$	82.28	$	81.51	$	80.83	$	80.07
Weighted-Average Floor Price	$	60.00	$	60.00	$	58.00	$	58.00	$	58.00
Three-Way Collars
NYMEX WTI Volumes	1,302		1,172		573		—		—
Weighted-Average Ceiling Price	$	57.48	$	56.49	$	56.25	$	—	$	—
Weighted-Average Floor Price	$	47.91	$	49.04	$	45.00	$	—	$	—
Weighted-Average Sold Put Price	$	37.41	$	39.04	$	35.00	$	—	$	—
Puts
NYMEX WTI Volumes	—		—		7,942		6,953		5,943
Weighted-Average Strike Price	$	—	$	—	$	55.00	$	55.00	$	55.00
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/MMBtu)
Swaps
NYMEX HH Volumes	46,120		45,947		31,790		31,686		16,639
Weighted-Average Contract Price	$	2.61	$	2.60	$	2.69	$	2.68	$	2.74
Two-Way Collars
NYMEX HH Volumes	1,887		1,756		736		1,732		834
Weighted-Average Ceiling Price	$	2.96	$	2.96	$	3.16	$	2.89	$	3.16
Weighted-Average Floor Price	$	2.34	$	2.38	$	2.50	$	2.20	$	2.50
Three-Way Collars
NYMEX HH Volumes	—		—		1,166		55		—
Weighted-Average Ceiling Price	$	—	$	—	$	3.50	$	3.42	$	—
Weighted-Average Floor Price	$	—	$	—	$	2.50	$	2.50	$	—
Weighted-Average Sold Put Price	$	—	$	—	$	2.00	$	2.00	$	—
Basis Protection Swaps
CIG-NYMEX HH Volumes	48,008		47,703		33,691		33,473		16,623
Weighted-Average Contract Price	$	(0.46)	$	(0.46)	$	(0.27)	$	(0.27)	$	(0.27)

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Derivative Assets and Liabilities Fair Value 

The Company’s commodity price derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities. The following table contains a summary of all the Company’s derivative positions reported on the accompanying balance sheets as well as a reconciliation between the gross assets and liabilities and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Derivative Assets:
Commodity contracts - current	$	4,335	$	2,490
Commodity contracts - noncurrent	1,800		794
Total derivative assets	6,135		3,284
Amounts not offset in the accompanying balance sheets	(3,258)		—
Total derivative assets, net	$	2,877	$	3,284
Derivative Liabilities:
Commodity contracts - current	$	(21,438)	$	(46,334)
Commodity contracts - long-term	(2,973)		(17,199)
Total derivative liabilities	(24,411)		(63,533)
Amounts not offset in the accompanying balance sheets	3,258		—
Total derivative liabilities, net	$	(21,153)	$	(63,533)

The following table summarizes the components of the derivative gain (loss) presented on the accompanying statements of operations for the periods below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Derivative cash settlement loss:
Oil contracts	$	(2,164)	$	(114,778)	$	(5,613)	$	(239,940)
Natural gas contracts	829		(54,091)		(6,272)		(82,875)
NGL contracts	—		(12,762)		—		(25,394)
Total derivative cash settlement loss	(1,335)		(181,631)		(11,885)		(348,209)
Change in fair value gain (loss)	6,262		108,981		41,972		(19,934)
Total derivative gain (loss)	$	4,927	$	(72,650)	$	30,087	$	(368,143)

NOTE 10 - ASSET RETIREMENT OBLIGATIONS

The Company recognizes an estimated liability for future costs associated with the abandonment of its oil and gas properties, including facilities requiring decommissioning. A liability for the fair value of an asset retirement obligation and corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired, or a facility is constructed. The increase in carrying value is included in proved properties in the accompanying balance sheets. The Company depletes the amount added to proved properties and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective long-lived assets. Cash paid to settle asset retirement obligations is included in the cash flows from operating activities section of the accompanying unaudited condensed consolidated statements of cash flows.

The Company’s estimated asset retirement obligation liability is based on historical experience plugging and abandoning wells, estimated economic lives, estimated plugging and abandonment cost, and regulatory requirements. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised.

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A roll-forward of the Company’s asset retirement obligation is as follows (in thousands):

	Amount
Balance as of December 31, 2022	$	291,026
Additional liabilities incurred	1,480
Accretion expense	7,648
Liabilities settled	(6,231)
Balance as of June 30, 2023	$	293,923
Current portion	25,557
Long-term portion	$	268,366

NOTE 11 - EARNINGS PER SHARE

Earnings per basic and diluted share are calculated under the treasury stock method. Basic net income per common share is calculated by dividing net income by the basic weighted-average common shares outstanding for the respective period. Diluted net income per common share is calculated by dividing net income by the diluted weighted-average common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities consist of unvested RSUs, DSUs, and PSUs, as well as outstanding in-the-money stock options and warrants. When the Company recognizes a loss from continuing operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted earnings per share.

As discussed in Note 7 - Stock-Based Compensation, PSUs represent the right to receive a number of shares of the Company’s common stock ranging from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%) of PSUs granted based on the performance achievement over the applicable performance period. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, that would be issuable at the end of the respective reporting period, assuming that date was the end of the performance period applicable to such awards.

The Company has also issued stock options and warrants, which both represent the right to purchase the Company’s common stock at a specified exercise price. The number of potentially dilutive shares related to the stock options and warrants is based on the number of shares, if any, that would be exercisable at the end of the respective reporting period, assuming that date was the end of such stock options’ or warrants’ term. Stock options and warrants are only dilutive when the average price of the common stock during the period exceeds the exercise price.

The following table sets forth the calculations of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	139,287	$	468,821	$	341,748	$	560,460
Basic net income per common share	$	1.73	$	5.52	$	4.22	$	6.60
Diluted net income per common share	$	1.72	$	5.48	$	4.18	$	6.56
Weighted-average shares outstanding - basic	80,393		84,993		81,052		84,917
Add: dilutive effect of stock awards	751		561		772		536
Weighted-average shares outstanding - diluted	81,144		85,554		81,824		85,453

There were 3,846 and 59,161 shares that were anti-dilutive for the three months ended June 30, 2023 and 2022, respectively. There were 111,251 and 30,822 shares that were anti-dilutive for the six months ended June 30, 2023 and 2022, respectively.

The exercise price of the Company’s warrants was in excess of the Company’s stock price during the three and six months ended June 30, 2023 and 2022; therefore, they were excluded from the earnings per share calculation.

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NOTE 12 - INCOME TAXES

Deferred tax assets and liabilities are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years related to cumulative temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying balance sheets. The tax effect of the net change in the cumulative temporary differences during each period in the deferred tax assets and liabilities determines the periodic provision for deferred taxes.

The Company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will be realized. In making such determination, the Company considers all available (both positive and negative) evidence, including future reversals of temporary differences, tax-planning strategies, projected future taxable income, and results of operations. As a result of merger activity in 2021, the Company had a valuation allowance of $25.4 million as of both June 30, 2023 and December 31, 2022 against certain acquired net operating losses and other tax attributes due to the limitation on realizability caused by the change of ownership provisions of Section 382 of the Internal Revenue Code. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that the deferred tax assets will be realized.

The net deferred tax liability as of June 30, 2023 and December 31, 2022 was $409.6 million and $319.6 million, respectively. Additionally, prepaid income taxes under current assets as of June 30, 2023 and December 31, 2022 were $2.3 million and $29.6 million, respectively.

Federal income tax expense differs from the amount that would be provided by applying the statutory United States federal income tax rate of 21% to income before income taxes primarily due to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, and other permanent differences including bargain purchase gain. During the three months ended June 30, 2023 and 2022, the Company recorded income tax expense of $44.4 million and $152.5 million, respectively. During the six months ended June 30, 2023 and 2022, the Company recorded income tax expense of $109.5 million and $175.8 million, respectively.

The Company had no unrecognized tax benefits as of June 30, 2023 and December 31, 2022. The Company’s management does not believe that there are any new items or changes in facts or judgments that would impact the Company’s tax position taken thus far in 2023.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law. Among other provisions, the IRA imposes a 15% corporate alternative minimum tax (“Corporate AMT”) for tax years beginning after December 31, 2022. The Company is evaluating the potential impact of the Corporate AMT on our current income tax expense and income taxes payable; however, we currently do not believe this will materially affect our income taxes paid for the 2023 tax year.

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NOTE 13 - LEASES

The Company’s right-of-use assets and lease liabilities are recognized on the accompanying balance sheets based on the present value of the expected lease payments over the lease term. As of June 30, 2023 and December 31, 2022, the Company did not have any agreements in place that were classified as finance leases. The following table summarizes the asset classes of the Company’s operating leases (in thousands):

	June 30, 2023		December 31, 2022
Operating Leases
Field equipment(1)	$	30,829	$	15,131
Corporate leases	6,326		8,235
Vehicles	4,417		759
Total right-of-use asset	$	41,572	$	24,125
Field equipment(1)	$	30,857	$	15,131
Corporate leases	6,961		8,898
Vehicles	4,417		759
Total lease liability	$	42,235	$	24,788

____________________________

(1)Includes compressors, certain natural gas processing equipment, and other field equipment.

Future commitments by year for the Company’s leases with a lease term of one year or more as of June 30, 2023 are presented in the table below. Such commitments are reflected at undiscounted values and are reconciled to the discounted present value recognized on the accompanying balance sheets as follows (in thousands):

	Operating Leases
Remainder of 2023	$	12,419
2024	18,964
2025	7,416
2026	3,449
2027	2,106
Thereafter	649
Total lease payments	45,003
Less: imputed interest	(2,768)
Total lease liability	$	42,235

NOTE 14 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental cash flow disclosures are presented below (in thousands):

	Six Months Ended June 30,
	2023		2022
Supplemental cash flow information:
Cash (paid) refunded for income taxes	$	7,861	$	(6,300)
Cash paid for interest	$	(12,627)	(15,821)
Supplemental non-cash investing activities:
Changes in working capital related to capital expenditures	$	56,345	(2,666)

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NOTE 15 - STOCKHOLDERS’ EQUITY

Share Repurchases

On January 24, 2023, we entered into a privately-negotiated share purchase agreement with CPPIB Crestone Peak Resources Canada Inc. for the purchase of approximately 4.9 million shares of the Company’s common stock at a price of $61.00 per share for a total purchase price of approximately $300.0 million. The purchase closed on January 27, 2023 and was funded from the Company’s cash on hand. The shares repurchased were immediately retired.

In February 2023, we announced that the Board provided authorization for a stock repurchase program (the “stock repurchase program”) pursuant to which we may, from time to time and through December 31, 2024, acquire shares of our common stock in the open market, in privately negotiated transactions, or through block trades, derivative transactions, or purchases made in accordance with the Rule 10b5-1 of the Exchange Act in an amount not to exceed $1.0 billion, exclusive of any fees, commissions, or other expenses related to such repurchases. In June 2023, commensurate with the announcement of the Acquisitions, the Board reduced the amount of stock authorized for repurchase by the Company under the stock repurchase program from $1.0 billion to $500.0 million. The stock repurchase program does not require any specific number of shares to be acquired and can be modified or discontinued by the Board at any time.As of June 30, 2023, the Company has repurchased approximately 312,800 shares under the program at a weighted average price of $64.55 per share for a total cost of $20.2 million.

We record share repurchases at cost, which includes incremental direct transaction costs, as a reduction to stockholder’s equity. As part of the incremental direct transaction costs, we recorded a 1% excise tax, as imposed by the IRA, with the corresponding liability recorded within accounts payable and accrued expenses on the accompanying balance sheets. Any excess of cost over the par value is charged to additional paid-in-capital on a pro-rata basis, with any remaining cost charged to retained earnings.

Dividends

In May 2021, we announced the initiation of a quarterly base cash dividend on our common stock. In March 2022, the Board approved the initiation of a quarterly variable cash dividend in addition to the aforementioned base dividend, equal to 50% of free cash flow after the base cash dividend for the preceding twelve-month period and pro forma for all acquisition and divestiture activity, assuming pro forma compliance with certain leverage targets.

The following table summarizes the dividends declared for the six months ended June 30, 2023 and 2022:

	Base		Variable		Total		Total
	(per share)		(per share)		(per share)		(in thousands)
2023:
First quarter	$	0.50	$	1.65	$	2.15	176,878
Second quarter	$	0.50	$	1.62	$	2.12	173,358
2022:
First quarter	$	0.46	$	0.75	$	1.21	104,444
Second quarter	$	0.46	$	0.90	$	1.36	117,151

The decision to pay any future dividends is solely within the discretion of, and subject to approval by, the Board. The Board’s determination with respect to any such dividends, including the record date, the payment date, and the actual amount of the dividend, will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors that the Board deems relevant at the time of such determination.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our 2022 Form 10-K, as well as the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Executive Summary

We are an independent exploration and production company focused on the acquisition, development, and production of oil and associated liquids-rich natural gas primarily in the DJ Basin in Colorado and Permian Basin in Texas and New Mexico. The Company’s primary objective is to maximize shareholder returns by responsibly developing our oil and natural gas resources. To achieve this, Civitas is guided by four foundational pillars that we believe add long-term, sustainable value. These pillars are: generate free cash flow, maintain a premier balance sheet, return free cash flow to shareholders, and demonstrate ESG leadership.

Financial and Operating Results

Our financial and operational results include:

•Crude oil equivalent sales volumes remained broadly flat for the three months ended June 30, 2023 when compared to the same period during 2022;

•Lease operating expense per barrel of oil equivalent (“Boe”) increased by 23% for the three months ended June 30, 2023 when compared to the same period during 2022 due to inflationary impacts and extreme weather;

•Midstream operating expense per Boe increased 79% for the three months ended June 30, 2023 when compared to the same period during 2022 due to increases in labor and compression costs;

•General and administrative expense per Boe increased by 14% for the three months ended June 30, 2023 when compared to the same period during 2022 due to an increase in headcount and certain executive cash severance costs, partially offset by a decrease in professional services;

•Acquisition Senior Notes issued on June 29, 2023, resulting in net proceeds to the Company of $2.67 billion after deducting fees of $33.8 million;

•Cash dividends of $174.1 million, or $2.12 per share, declared and paid during the three months ended June 30, 2023;

•Share repurchases of 5.2 million shares of the Company’s common stock at a weighted average of $61.21 per share during the six months ended June 30, 2023;

•Cash flows provided by operating activities for the six months ended June 30, 2023 were $876.0 million, as compared to $1.3 billion during the six months ended June 30, 2022. Please refer to Liquidity and Capital Resources below for additional discussion; and

•Capital expenditures, inclusive of accruals, were $463.7 million during the six months ended June 30, 2023, of which $24.0 million represents land and midstream capital expenditures.

Midstream Assets

The Company’s midstream assets provide reliable gathering, treating, and storage for the Company’s operated production while reducing facility site footprints, leading to more cost-efficient operations and reduced emissions and surface disturbance per Boe produced. Additionally, this infrastructure helps ensure that the Company’s production is not constrained by any single midstream service provider. The net book value of the Company’s midstream assets was $332.6 million as of June 30, 2023.

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Current Events and Outlook

Commodity prices continue to be impacted by various macro-economic factors influencing the balance of supply and demand. In 2022 and continuing into 2023, commodity prices have remained relatively strong, which has improved our earnings and ability to generate free cash flow. The strength in commodity prices has been primarily driven by increased demand resulting from the global recovery from the COVID-19 pandemic. Additionally, Russia’s invasion of Ukraine and related economic sanctions imposed on Russia, as well as OPEC+ restraining production growth, further augmented supply shortages, causing upward pressure on oil prices.

These drivers of upward price pressure are tempered by economic uncertainty surrounding inflation and increased interest rates. These inflationary pressures could also result in increases to our capital and operating expenses and could impact the cost of oilfield services, equipment, and personnel retention, among other things. Increases in interest rates as a result of inflation and a potentially recessionary economic environment in the United States could also have a negative effect on the demand for oil and natural gas. The foregoing destabilizing factors have caused dramatic fluctuations in global financial markets and uncertainty about world-wide oil and natural gas supply and demand, which in turn has increased the volatility of oil and natural gas prices.

The below graph depicts monthly average NYMEX WTI oil and NYMEX natural gas HH spot price over the periods ended June 30, 2023 and 2022.

In light of uncertainty associated with oil and natural gas demand, future monetary policy relating to inflationary pressures, and governmental policies aimed at transitioning toward lower carbon energy, we cannot predict any future volatility in or levels of commodity prices or demand for oil and natural gas.

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Results of Operations

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the notes thereto contained in Part I, Item 1 of this report. Comparative results of operations for the period indicated are discussed below.

The following table summarizes our product revenues, sales volumes, and average sales prices for the periods indicated:

	Three Months Ended June 30,
	2023		2022		Change		Percent Change
Revenues (in thousands):
Crude oil sales(1)	$	540,736	$	778,218	$	(237,482)	(31)	%
Natural gas sales(2)	43,985		205,298		(161,313)		(79)	%
NGL sales	74,119		167,266		(93,147)		(56)	%
Product revenue	$	658,840	$	1,150,782	$	(491,942)	(43)	%
Sales Volumes:
Crude oil (MBbls)	7,677.6		7,308.4		369.2		5	%
Natural gas (MMcf)	26,348.8		28,903.5		(2,554.7)		(9)	%
NGL (MBbls)	3,718.7		3,819.6		(100.9)		(3)	%
Crude oil equivalent (MBoe)(3)	15,787.8		15,945.3		(157.5)		(1)	%
Average Sales Prices (before derivatives)(4):
Crude oil (per Bbl)	$	70.43	$	106.48	$	(36.05)	(34)	%
Natural gas (per Mcf)	$	1.67	$	7.10	$	(5.43)	(76)	%
NGL (per Bbl)	$	19.93	$	43.79	$	(23.86)	(54)	%
Crude oil equivalent (per Boe)(3)	$	41.73	$	72.17	$	(30.44)	(42)	%
Average Sales Prices (after derivatives)(4):
Crude oil (per Bbl)	$	70.15	$	90.78	$	(20.63)	(23)	%
Natural gas (per Mcf)	$	1.70	$	5.23	$	(3.53)	(67)	%
NGL (per Bbl)	$	19.93	$	40.45	$	(20.52)	(51)	%
Crude oil equivalent (per Boe)(3)	$	41.65	$	60.78	$	(19.13)	(31)	%

_____________________________

(1)Crude oil sales excludes $0.3 million and $0.1 million of oil transportation revenues from third parties, which do not have associated sales volumes, for the three months ended June 30, 2023 and 2022, respectively.

(2)Natural gas sales excludes $1.4 million and $0.5 million of gas gathering revenues from third parties, which do not have associated sales volumes, for the three months ended June 30, 2023 and 2022, respectively.

(3)Determined using the ratio of 6 thousand cubic feet (“Mcf”) of natural gas to 1 Bbl of crude oil.

(4)Derivatives economically hedge the price we receive for oil, natural gas, and NGL. For the three months ended June 30, 2023, the derivative cash settlement loss for oil was $2.2 million, and the derivative cash settlement gain for natural gas was $0.8 million. For the three months ended June 30, 2022, the derivative cash settlement loss for oil, natural gas, and NGLs was $114.8 million, $54.1 million, and $12.8 million, respectively. Please refer to Note 9 - Derivatives under Part I, Item 1 of this report for additional disclosures.

Product revenues decreased by 43% to $658.8 million for the three months ended June 30, 2023 compared to $1.2 billion for the three months ended June 30, 2022. The decrease was primarily due to a $30.44, or 42%, decrease in oil equivalent pricing, excluding the impact of derivatives.

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The following table summarizes our operating expenses for the periods indicated (in thousands, except per Boe amounts):

	Three Months Ended June 30,
	2023		2022		Change		Percent Change
Operating Expenses:
Lease operating expense	$	51,230	$	41,877	$	9,353	22	%
Midstream operating expense	13,319		7,469		5,850		78	%
Gathering, transportation, and processing	64,873		79,519		(14,646)		(18)	%
Severance and ad valorem taxes	52,443		85,870		(33,427)		(39)	%
Exploration	546		1,553		(1,007)		(65)	%
Depreciation, depletion, and amortization	232,786		204,519		28,267		14	%
Unused commitments	363		1,731		(1,368)		(79)	%
Bad debt expense	836		4		832		20,800	%
Merger transaction costs	31,145		1,418		29,727		2,096	%
General and administrative expense	33,541		29,666		3,875		13	%
Operating expenses	$	481,082	$	453,626	$	27,456	6	%
Selected Costs ($ per Boe):
Lease operating expense	$	3.24	$	2.63	$	0.61	23	%
Midstream operating expense	0.84		0.47		0.37		79	%
Gathering, transportation, and processing	4.11		4.99		(0.88)		(18)	%
Severance and ad valorem taxes	3.32		5.39		(2.07)		(38)	%
Exploration	0.03		0.10		(0.07)		(70)	%
Depreciation, depletion, and amortization	14.74		12.83		1.91		15	%
Unused commitments	0.02		0.11		(0.09)		(82)	%
Bad debt expense	0.05		—		0.05		100	%
Merger transaction costs	1.97		0.09		1.88		2,089	%
General and administrative expense	2.12		1.86		0.26		14	%
Operating expenses	$	30.44	$	28.47	$	1.97	7	%

Lease operating expense.  Our lease operating expense increased $9.3 million, or 22%, to $51.2 million for the three months ended June 30, 2023 from $41.9 million for the three months ended June 30, 2022, and increased 23% on an equivalent basis per Boe. The overall increase in lease operating expense is the result of (i) the impact of inflation in areas such as labor, power, and rentals and (ii) extreme seasonal weather that created prolonged downtime and meaningfully higher costs to bring wells back online.

Midstream operating expense. Our midstream operating expense increased $5.8 million, or 78%, to $13.3 million for the three months ended June 30, 2023 from $7.5 million for the three months ended June 30, 2022, and increased 79% on an equivalent basis per Boe. Midstream operating expense increased due to increases in labor and compression costs.

Gathering, transportation, and processing. Gathering, transportation, and processing expense decreased $14.6 million, or 18%, to $64.9 million for the three months ended June 30, 2023 from $79.5 million for the three months ended June 30, 2022, and decreased 18% on an equivalent basis per Boe. We are party to a number of value-based percentage of proceeds sales contracts, which track solely with natural gas and NGL pricing and thereby have contributed to a decrease in gathering, transportation, and processing expense. Conversely, the Company continually monitors for the best sales volumes outlet and thereby incurred partially offsetting increased gathering, transportation, and processing expense during the three months ended June 30, 2023 associated with crude oil sales volumes, which increased by 5% when compared to the same period in 2022.

Severance and ad valorem taxes.  Our severance and ad valorem taxes decreased $33.5 million, or 39%, to $52.4 million for the three months ended June 30, 2023 from $85.9 million for the three months ended June 30, 2022, and decreased 38% on an equivalent basis per Boe. Severance and ad valorem taxes primarily correlate to revenues, which decreased by 43% for the three months ended June 30, 2023 when compared to the same period in 2022.

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Depreciation, depletion, and amortization.  Our depreciation, depletion, and amortization expense increased $28.3 million, or 14%, to $232.8 million for the three months ended June 30, 2023 from $204.5 million for the three months ended June 30, 2022, and increased 15% on an equivalent basis per Boe. The increase in depreciation, depletion, and amortization expense is due to an increase in the depletion rate driven by an increase in the depletable property base in proportion to proved reserves.

Unused commitments. During the three months ended June 30, 2023 and 2022, we incurred $0.4 million and $1.7 million, respectively, in unused commitments primarily due to certain deficiency payments incurred under minimum volume crude oil and water commitments.

Merger transaction costs. During the three months ended June 30, 2023, we incurred $31.1 million in short-term financing fees as well as legal, advisor, and other costs associated with the Acquisitions. Please refer to Note 2 - Acquisitions and Divestitures and Note 5 - Long-term Debt under Part I, Item 1 of this report for additional discussion. During the three months ended June 30, 2022, we incurred $1.4 million in legal, advisor, and other costs associated with the Bison Acquisition and other mergers that closed in the fourth quarter of 2021.

General and administrative expense. Our general and administrative expense increased $3.8 million, or 13%, to $33.5 million for the three months ended June 30, 2023 from $29.7 million for the three months ended June 30, 2022, and increased 14% on an equivalent basis per Boe. The increase in general and administrative expense is primarily due to an increase in headcount and certain executive cash severance costs, partially offset by a decrease in professional services.

Derivative gain (loss).  Our derivative gain for the three months ended June 30, 2023 was $4.9 million as compared to a loss of $72.7 million for the three months ended June 30, 2022. Our derivative gain for the three months ended June 30, 2023 is due to fair market value adjustments caused by expected future market prices being lower relative to our future contracted hedge prices, partially offset by settlement losses caused by market prices being higher than our current contracted hedge prices at the time of settlement. Our derivative loss for the three months ended June 30, 2022 is due to settlement losses caused by market prices being higher than our current contracted hedge prices at the time of settlement, partially offset by fair market value adjustments caused by expected future market prices being lower relative to our future contracted hedge prices. Please refer to Note 9 - Derivatives under Part I, Item 1 of this report for additional discussion.

Interest expense.  Our interest expense for the three months ended June 30, 2023 and 2022 was $8.8 million and $8.1 million, respectively. Average debt outstanding for the three months ended June 30, 2023 and 2022 was $459.3 million and $443.4 million, respectively. The components of interest expense for the periods presented are as follows (in thousands):

	Three Months Ended June 30,
	2023		2022
Senior Notes	$	6,284	$	5,646
Credit Facility	—		116
Commitment and letter of credit fees under the Credit Facility	1,314		1,252
Amortization of deferred financing costs	1,155		1,102
Total interest expense	$	8,753	$	8,116

Income tax expense. Our income tax expense for the three months ended June 30, 2023 and 2022 was $44.4 million and $152.5 million, resulting in an effective tax rate of 24.2% and 24.5% on pre-tax income, respectively. Our effective tax rate differs from the statutory United States federal income tax rate of 21% due to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, and other permanent differences, including bargain purchase gain. Please refer to Note 12 - Income Taxes under Part I, Item 1 of this report for additional discussion.

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The following table summarizes our product revenues, sales volumes, and average sales prices for the periods indicated:

	Six Months Ended June 30,
	2023		2022		Change		Percent Change
Revenues (in thousands):
Crude oil sales(1)	$	1,000,807	$	1,327,184	$	(326,377)	(25)	%
Natural gas sales(2)	146,662		317,728		(171,066)		(54)	%
NGL sales	166,212		322,413		(156,201)		(48)	%
Product revenue	$	1,313,681	$	1,967,325	$	(653,644)	(33)	%
Sales Volumes:
Crude oil (MBbls)	14,138.7		13,431.9		706.8		5	%
Natural gas (MMcf)	53,254.9		55,689.9		(2,435.0)		(4)	%
NGL (MBbls)	7,121.8		7,542.3		(420.5)		(6)	%
Crude oil equivalent (MBoe)(3)	30,136.3		30,255.9		(119.6)		—	%
Average Sales Prices (before derivatives)(4):
Crude oil (per Bbl)	$	70.78	$	98.81	$	(28.03)	(28)	%
Natural gas (per Mcf)	$	2.75	$	5.71	$	(2.96)	(52)	%
NGL (per Bbl)	$	23.34	$	42.75	$	(19.41)	(45)	%
Crude oil equivalent (per Boe)(3)	$	43.59	$	65.02	$	(21.43)	(33)	%
Average Sales Prices (after derivatives)(4):
Crude oil (per Bbl)	$	70.39	$	80.94	$	(10.55)	(13)	%
Natural gas (per Mcf)	$	2.64	$	4.22	$	(1.58)	(37)	%
NGL (per Bbl)	$	23.34	$	39.38	$	(16.04)	(41)	%
Crude oil equivalent (per Boe)(3)	$	43.20	$	53.51	$	(10.31)	(19)	%

_____________________________

(1)Crude oil sales excludes $0.6 million of oil transportation revenues from third parties, which do not have associated sales volumes, for both the six months ended June 30, 2023 and 2022.

(2)Natural gas sales excludes $2.3 million and $1.3 million of gas gathering revenues from third parties, which do not have associated sales volumes, for the six months ended June 30, 2023 and 2022, respectively.

(3)Determined using the ratio of 6 Mcf of natural gas to 1 Bbl of crude oil.

(4)Derivatives economically hedge the price we receive for oil, natural gas, and NGL. For the six months ended June 30, 2023, the derivative cash settlement loss for oil and natural gas was $5.6 million and $6.3 million, respectively. For the six months ended June 30, 2022, the derivative cash settlement loss for oil, natural gas, and NGLs was $239.9 million, $82.9 million, and $25.4 million, respectively. Please refer to Note 9 - Derivatives under Part I, Item 1 of this report for additional disclosures.

Product revenues decreased by 33% to $1.3 billion for the six months ended June 30, 2023 compared to $2.0 billion for the six months ended June 30, 2022. The decrease was primarily due to a $21.43, or 33%, decrease in oil equivalent pricing, excluding the impact of derivatives.

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The following table summarizes our operating expenses for the periods indicated (in thousands, except per Boe amounts):

	Six Months Ended June 30,
	2023		2022		Change		Percent Change
Operating Expenses:
Lease operating expense	$	97,068	$	77,896	$	19,172	25	%
Midstream operating expense	23,380		13,181		10,199		77	%
Gathering, transportation, and processing	132,225		129,922		2,303		2	%
Severance and ad valorem taxes	104,805		149,174		(44,369)		(30)	%
Exploration	1,117		2,081		(964)		(46)	%
Depreciation, depletion, and amortization	434,089		389,379		44,710		11	%
Abandonment and impairment of unproved properties	—		17,975		(17,975)		(100)	%
Unused commitments	754		2,507		(1,753)		(70)	%
Bad debt expense	583		4		579		14,475	%
Merger transaction costs	31,627		21,952		9,675		44	%
General and administrative expense	70,399		65,386		5,013		8	%
Operating expenses	$	896,047	$	869,457	$	26,590	3	%
Selected Costs ($ per Boe):
Lease operating expense	$	3.22	$	2.57	$	0.65	25	%
Midstream operating expense	0.78		0.44		0.34		77	%
Gathering, transportation, and processing	4.39		4.29		0.10		2	%
Severance and ad valorem taxes	3.48		4.93		(1.45)		(29)	%
Exploration	0.04		0.07		(0.03)		(43)	%
Depreciation, depletion, and amortization	14.40		12.87		1.53		12	%
Abandonment and impairment of unproved properties	—		0.59		(0.59)		(100)	%
Unused commitments	0.03		0.08		(0.05)		(63)	%
Bad debt expense	0.02		—		0.02		100	%
Merger transaction costs	1.05		0.73		0.32		44	%
General and administrative expense	2.34		2.16		0.18		8	%
Operating expenses	$	29.75	$	28.73	$	1.02	4	%

Lease operating expense.  Our lease operating expense increased $19.2 million, or 25%, to $97.1 million for the six months ended June 30, 2023 from $77.9 million for the six months ended June 30, 2022, and increased 25% on an equivalent basis per Boe. The overall increase in lease operating expense is the result of the following: (i) the Bison Acquisition that closed on March 1, 2022, (ii) the impact of inflation in areas such as labor, power, and rentals, and (iii) extreme seasonal weather that created prolonged downtime and meaningfully higher costs to bring wells back online.

Midstream operating expense. Our midstream operating expense increased $10.2 million, or 77%, to $23.4 million for the six months ended June 30, 2023 from $13.2 million for the six months ended June 30, 2022, and increased 77% on an equivalent basis per Boe. Midstream operating expense increased due to increases in labor and compression costs.

Gathering, transportation, and processing. Gathering, transportation, and processing expense increased $2.3 million, or 2%, to $132.2 million for the six months ended June 30, 2023 from $129.9 million for the six months ended June 30, 2022, and increased 2% on an equivalent basis per Boe. The Company continually monitors for the best sales volumes outlet and thereby incurred increased gathering, transportation, and processing expense during the six months ended June 30, 2023 associated with crude oil sales volumes, which also increased by 5% when compared to the same period in 2022. Additionally, we are party to a number of value-based percentage of proceeds sales contracts, which track solely with natural gas and NGL pricing and thereby have partially offset the overall increase in gathering, transportation, and processing expense.

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Severance and ad valorem taxes.  Our severance and ad valorem taxes decreased $44.4 million, or 30%, to $104.8 million for the six months ended June 30, 2023 from $149.2 million for the six months ended June 30, 2022, and decreased 29% on an equivalent basis per Boe. Severance and ad valorem taxes primarily correlate to revenues, which decreased by 33% for the six months ended June 30, 2023 when compared to the same period in 2022.

Depreciation, depletion, and amortization.  Our depreciation, depletion, and amortization expense increased $44.7 million, or 11%, to $434.1 million for the six months ended June 30, 2023 from $389.4 million for the six months ended June 30, 2022, and increased 12% on an equivalent basis per Boe. The increase in depreciation, depletion, and amortization expense is due to an increase in the depletion rate driven by an increase in the depletable property base in proportion to proved reserves.

Abandonment and impairment of unproved properties. During the six months ended June 30, 2022, we incurred $18.0 million in abandonment and impairment of unproved properties due to the Company’s assessment of its locations and replacement of non-core legacy locations with newly acquired locations. No abandonment and impairment of unproved properties was incurred during the six months ended June 30, 2023.

Unused commitments. During the six months ended June 30, 2023 and 2022, we incurred $0.8 million and $2.5 million, respectively, in unused commitments primarily due to certain deficiency payments incurred under minimum volume crude oil and water commitments.

Merger transaction costs. During the six months ended June 30, 2023, we incurred $31.6 million in short-term financing fees as well as legal, advisor, and other costs associated with the Acquisitions. Please refer to Note 2 - Acquisitions and Divestitures and Note 5 - Long-term Debt under Part I, Item 1 of this report for additional discussion. During the six months ended June 30, 2022, we incurred $22.0 million in legal, advisor, and other costs associated with the Bison Acquisition and other mergers that closed in the fourth quarter of 2021. Merger transaction costs include zero and $7.6 million of severance payments associated with merger and acquisition activity for the six months ended June 30, 2023 and 2022, respectively.

General and administrative expense. Our general and administrative expense increased $5.0 million, or 8%, to $70.4 million for the six months ended June 30, 2023 from $65.4 million for the six months ended June 30, 2022, and increased 8% on an equivalent basis per Boe. The increase in general and administrative expense is primarily due to an increase in headcount and an increase in professional services.

Derivative gain (loss).  Our derivative gain for the six months ended June 30, 2023 was $30.1 million as compared to a loss of $368.1 million for the six months ended June 30, 2022. Our derivative gain for the six months ended June 30, 2023 is due to fair market value adjustments caused by expected future market prices being lower relative to our future contracted hedge prices, partially offset by settlement losses caused by market prices being higher than our current contracted hedge prices. Our derivative loss for the six months ended June 30, 2022 is due to settlements and fair market value adjustments caused by market prices being higher than our contracted hedge prices. Please refer to Note 9 - Derivatives under Part I, Item 1 of this report for additional discussion.

Interest expense.  Our interest expense for the six months ended June 30, 2023 and 2022 was $16.2 million and $17.2 million, respectively. Average debt outstanding for the six months ended June 30, 2023 and 2022 was $429.8 million and $471.5 million, respectively. The components of interest expense for the periods presented are as follows (in thousands):

	Six Months Ended June 30,
	2023		2022
Senior Notes	$	11,284	$	12,521
Credit Facility	—		116
Commitment and letter of credit fees under the Credit Facility	2,613		2,365
Amortization of deferred financing costs	2,305		2,180
Total interest expense	$	16,202	$	17,182

Income tax expense. Our income tax expense for the six months ended June 30, 2023 and 2022 was $109.5 million and $175.8 million, resulting in an effective tax rate of 24.3% and 23.9% on pre-tax income, respectively. Our effective tax rate differs from the statutory United States federal income tax rate of 21% due to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, and other permanent differences, including bargain purchase gain. Please refer to Note 12 - Income Taxes under Part I, Item 1 of this report for additional discussion.

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Liquidity and Capital Resources

The Company’s primary sources of liquidity include cash flows from operating activities, available borrowing capacity under the Credit Facility, potential proceeds from equity and/or debt capital markets transactions, potential proceeds from sales of assets, and other sources. We may use our available liquidity for operating activities, working capital requirements, capital expenditures, acquisitions, debt reduction, the return of capital to shareholders, and for general corporate purposes.

Our primary source of cash flows from operating activities is the sale of oil, natural gas, and NGLs. As such, our cash flows are subject to significant volatility due to changes in commodity prices, as well as variations in our production volumes. The prices for these commodities are driven by a number of factors beyond our control, including global and regional product supply and demand, the impact of inflation and monetary policy, weather, product distribution, refining and processing capacity, regulatory constraints, and other supply chain dynamics, among other factors.

As of June 30, 2023, our liquidity was $3.7 billion, consisting of cash on hand of $2.7 billion and $987.9 million of available borrowing capacity on our Credit Facility, and our aggregate elected commitments were $1.0 billion and borrowing base was $1.85 billion. Borrowing capacity under the Credit Facility is primarily based on the value assigned to the proved reserves attributable to our oil and natural gas interests. On August 2, 2023, the Company closed the Acquisitions and simultaneously entered into an amendment to the Credit Facility that increased our aggregate elected commitments from $1.0 billion to $1.85 billion and increased the borrowing base from $1.85 billion to $3.0 billion. As of the date of filing of this report, the available borrowing capacity on our Credit Facility was $1.1 billion. The next scheduled borrowing base redetermination date is set to occur in May 2024.

The Credit Facility contains customary representations and various affirmative and negative covenants as well as certain financial covenants, including (a) a maximum ratio of the Company’s consolidated indebtedness to earnings before interest, income taxes, depreciation, depletion, and amortization, exploration expense, and other non-cash charges (“permitted net leverage ratio”) of 3.00 to 1 and (b) a current ratio, inclusive of the unused commitments then available to be borrowed, to not be less than 1.00 to 1. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2023, and through the filing of this report. Please refer to Note 5 - Long-Term Debt under Part I, Item 1 of this report for additional information.

Our material short-term cash requirements include: operating activities, working capital requirements, capital expenditures, commodity derivative liabilities, dividends, debt interest payments, and payments of contractual obligations. Our material long-term cash requirements from various contractual and other obligations include: debt obligations and related interest payments, firm transportation and minimum volume agreements, taxes, asset retirement obligations, and operating leases. Please refer to Part I, Item 1 for additional information. Our future capital requirements, both near-term and long-term, will depend on many factors, including, but not limited to, commodity prices, market conditions, our available liquidity and financing, acquisitions and divestitures of oil and gas properties, the availability of drilling rigs and completion crews, the cost of completion services, success of drilling programs, land and industry partner issues, weather delays, the acquisition of leases with drilling commitments, and other factors. We regularly consider which resources, including debt and equity financings, are available to meet our future financial obligations, planned capital expenditures, and liquidity requirements.

Funding for these requirements may be provided by any combination of the sources of liquidity outlined above. We expect our 2023 capital program to be funded by cash flows from operations. Although we cannot provide any assurance, based on our projected cash flows from operations, our cash on hand, and available borrowing capacity on our Credit Facility, we believe that we will have sufficient capital available to fund these requirements through the 12-month period following the filing of this report.

The following table summarizes our cash flows and other financial measures for the periods indicated (in thousands):

	Six Months Ended June 30,
	2023		2022
Net cash provided by operating activities	$	876,030	$	1,254,768
Net cash used in investing activities	(923,204)		(733,491)
Net cash provided by (used in) financing activities	1,982,040		(336,480)
Cash, cash equivalents, and restricted cash	2,703,000		439,353
Acquisition of oil and natural gas properties	(51,247)		(303,602)
Exploration and development of oil and gas properties	(518,949)		(467,186)

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Cash flows provided by operating activities

Net cash provided by operating activities decreased by $378.7 million to $876.0 million for the six months ended June 30, 2023 as compared to $1.3 billion for the six months ended June 30, 2022, which was attributable to our normal operating cycle. See Results of Operations above for more information on the factors driving these changes.

Cash flows used in investing activities

Net cash used in investing activities of $923.2 million for the six months ended June 30, 2023 was primarily the result of the exploration and development of oil and natural gas properties of $518.9 million, deposits for the Acquisitions of $352.5 million, and the acquisitions of oil and natural gas properties of $51.2 million.

Net cash used in investing activities of $733.5 million for the six months ended June 30, 2022 was primarily the result of the exploration and development of oil and natural gas properties of $467.2 million and the acquisitions of oil and natural gas properties of $303.6 million, partially offset by cash acquired of $44.3 million.

Cash flows provided by (used in) financing activities

Net cash provided by financing activities of $2.0 billion for the six months ended June 30, 2023 was primarily due to proceeds from the issuance of the Acquisition Senior Notes of $2.7 billion, partially offset by dividends paid of $347.5 million, the repurchase and retirement of common stock of $320.3 million, and the payment of employee tax withholdings in exchange for the return of common stock of $12.6 million.

Net cash used in financing activities of $336.5 million for the six months ended June 30, 2022 was primarily the result of dividends paid of $219.8 million, the optional redemption of the 7.5% Senior Notes due 2026 principal of $100.0 million, and the payment of employee tax withholdings in exchange for the return of common stock of $15.7 million.

Non-GAAP Financial Measures

Reconciliation of EBITDAX to Net Income

Adjusted EBITDAX represents earnings before interest, income taxes, depreciation, depletion, and amortization, exploration expense, and other non-cash and non-recurring charges. Adjusted EBITDAX excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that we present because we believe it provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to financial covenants under our Credit Facility based on adjusted EBITDAX ratios. See Note 5 - Long-Term Debt under Part I, Item 1 of this report for more information about financial covenants under our Credit Facility. In addition, adjusted EBITDAX is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and natural gas exploration and production industry. Adjusted EBITDAX should not be considered in isolation or as a substitute for net income, net cash provided by operating activities, or other profitability or liquidity measures prepared under GAAP. Because adjusted EBITDAX excludes some, but not all items that affect net income and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies.

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The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of adjusted EBITDAX (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	139,287	$	468,821	$	341,748	$	560,460
Exploration	546		1,553		1,117		2,081
Depreciation, depletion, and amortization	232,786		204,519		434,089		389,379
Abandonment and impairment of unproved properties	—		—		—		17,975
Stock-based compensation(1)	9,895		6,135		17,275		14,225
Non-recurring general and administrative expense(1)	—		3,449		—		6,335
Merger transaction costs	31,145		1,418		31,627		21,952
Unused commitments	363		1,731		754		2,507
(Gain) loss on property transactions, net	13		—		254		(16,797)
Interest expense	8,753		8,116		16,202		17,182
Interest income(2)	(6,588)		—		(12,807)		—
Derivative (gain) loss	(4,927)		72,650		(30,087)		368,143
Derivative cash settlements loss	(1,335)		(181,631)		(11,885)		(348,209)
Income tax expense	44,363		152,464		109,452		175,825
Adjusted EBITDAX	$	454,301	$	739,225	$	897,739	$	1,211,058

_________________________

(1)Included as a portion of general and administrative expense in the accompanying statements of operations.

(2)Included as a portion of other income in the accompanying statements of operations.

Reconciliation of Free Cash Flow to Cash Provided by Operating Activities

Free cash flow is a supplemental non-GAAP financial measure that is calculated as net cash provided by operating activities before changes in current assets and liabilities and less exploration and development of oil and natural gas properties, changes in working capital related to capital expenditures, and purchases of carbon offsets. We believe that free cash flow provides additional information that may be useful to investors in evaluating our ability to generate cash from our existing oil and natural gas assets to fund future exploration and development activities and to return cash to shareholders. Free cash flow is a supplemental measure of liquidity and should not be viewed as a substitute for cash flows from operations because it excludes certain required cash expenditures.

The following table presents a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP financial measure of free cash flow (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net cash provided by operating activities	$	337,181	$	722,227	$	876,030	$	1,254,768
Add back: changes in current assets and liabilities	84,015		(48,465)		(32,064)		(141,817)
Cash flow from operations before changes in operating assets and liabilities	421,196		673,762		843,966		1,112,951
Less: exploration and development of oil and natural gas properties	(268,560)		(206,519)		(518,949)		(467,186)
Less: changes in working capital related to capital expenditures	42,246		(30,681)		56,345		(2,666)
Less: purchases of carbon offsets	(5,651)		(7,196)		(5,651)		(7,196)
Free cash flow	$	189,231	$	429,366	$	375,711	$	635,903

New Accounting Pronouncements 

Please refer to Note 1 - Summary of Significant Accounting Policies, Basis of Presentation under Part I, Item 1 of this report and Note 2 - Basis of Presentation in the 2022 Form 10-K for any recently issued or adopted accounting standards.

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Critical Accounting Estimates

Information regarding our critical accounting estimates is contained in Part II, Item 7 of our 2022 Form 10-K. During the three months ended June 30, 2023, there were no significant changes in the application of critical accounting policies.

Material Commitments

There have been no significant changes from our 2022 Form 10-K in our obligations and commitments, other than what is disclosed within Note 6 - Commitments and Contingencies and Note 13 - Leases under Part I, Item 1 of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Oil and Natural Gas Price Risk

Our financial condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of oil and natural gas. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond our control. Factors influencing oil and natural gas prices include the level of global demand for oil and natural gas, the global supply of oil and natural gas, the establishment of and compliance with production quotas by oil exporting countries, weather conditions which determine the demand for natural gas, the price and availability of alternative fuels, local and global politics, and overall economic conditions. It is impossible to predict future oil and natural gas prices with any degree of certainty. Sustained weakness in oil and natural gas prices may adversely affect our financial condition and results of operations and may also reduce the amount of oil and natural gas reserves that we can produce economically. Any reduction in our oil and natural gas reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. Similarly, any improvements in oil and natural gas prices can have a favorable impact on our financial condition, results of operations, and capital resources.

Commodity Price Derivative Contracts

Our primary commodity risk management objective is to protect the Company’s balance sheet. We periodically enter into derivative contracts for oil, natural gas, and NGL using NYMEX futures or over-the-counter derivative financial instruments. The types of derivative instruments that we use include swaps, collars, basis protection swaps, and puts. Upon settlement of the contract(s), if the relevant market commodity price exceeds our contracted swap price, or the collar’s ceiling strike price, we are required to pay our counterparty the difference for the volume of production associated with the contract. Generally, this payment is made up to 15 business days prior to the receipt of cash payments from our customers. This could have an adverse impact on our cash flows for the period between derivative settlements and payments for revenue earned. While we may reduce the potential negative impact of lower commodity prices, we may also be prevented from realizing the benefits of favorable price changes in the physical market. Please refer to the Note 9 - Derivatives under Part I, Item 1 of this report for summary derivative activity tables.

Interest Rates

As of June 30, 2023 and on the filing date of this report, we had zero and $750.0 million, respectively, outstanding on our Credit Facility. Borrowings under our Credit Facility bear interest at a fluctuating rate that is tied to an Alternate Base Rate or Secured Overnight Financing Rate, at our option. Any increases in these interest rates can have an adverse impact on our results of operations and cash flows. As of June 30, 2023 and through the filing date of this report, the Company was in compliance with all financial and non-financial covenants under the Credit Facility.

Counterparty and Customer Credit Risk

In connection with our derivatives activity, we have exposure to financial institutions in the form of derivative transactions. As of June 30, 2023 and on the filing date of this report, our derivative contracts have been executed with 10 and 15 counterparties, respectively, all of which are members of the Credit Facility lender group and have investment grade credit ratings. However, if our counterparties fail to perform their obligations under the contracts, we could suffer financial loss.

We are also subject to credit risk due to concentration of our oil and natural gas receivables with certain significant customers. The inability or failure of our significant customers to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. We review the credit rating, payment history, and financial resources of our customers, but we do not require our customers to post collateral.

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Marketability of Our Production

The marketability of our production depends in part upon the availability, proximity, and capacity of third-party refineries, access to regional trucking, pipeline and rail infrastructure, natural gas gathering systems, and processing facilities. We deliver crude oil and natural gas produced through trucking services, pipelines, and rail facilities that we do not own. The lack of availability or capacity on these systems and facilities could reduce the price offered for our production or result in the shut-in of producing wells or the delay or discontinuance of development plans for properties.

A portion of our production may also be interrupted, or shut in, from time to time for numerous other reasons, including as a result of accidents, weather, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions. If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flow.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers and internal audit function, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. 

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. To assist management, we have established an internal audit function to verify and monitor our internal controls and procedures. The Company’s internal control system is supported by written policies and procedures, contains self-monitoring mechanisms, and is audited by the internal audit function. Appropriate actions are taken by management to correct deficiencies as they are identified.

Changes in Internal Control over Financial Reporting 

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended June 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information regarding our legal proceedings can be found in Note 6 - Commitments and Contingencies under Part I, Item 1 of this report.

Item 1A. Risk Factors.

Our business faces many risks. Any of the risk factors discussed in this report or our other SEC filings could have a material impact on our business, financial position, or results of operations. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operation. For a discussion of our potential risks and uncertainties, see the risk factors in Part I, Item 1A in our 2022 Form 10-K and Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on June 20, 2023, together with other information in this report and other reports and materials we may subsequently file with the SEC. We have identified these risk factors as important factors that could cause our actual results to differ materially from those contained in any written or oral forward-looking statements made by us or on our behalf.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information about our purchases of our common stock during the three months ended June 30, 2023:

	Total Number of Shares Purchased(1)(2)	Average Price Paid per Share(3)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Maximum Dollar value that May Yet be Purchased Plans or Programs (in thousands)(1)
April 1, 2023 - April 30, 2023	11,661	$	69.57	—	$	1,000,000
May 1, 2023 - May 31, 2023	126,430	68.79		—	1,000,000
June 1, 2023 - June 30, 2023	314,570	64.56		312,766	479,810
Total	452,661	$	65.87	312,766	$	479,810

_________________________

(1)In February 2023, we announced that the Board provided authorization for the stock repurchase program pursuant to which we may, from time to time and through December 31, 2024, acquire shares of our common stock in the open market, in privately negotiated transactions, or through block trades, derivative transactions, or purchases made in accordance with the Rule 10b5-1 of the Exchange Act in an amount not to exceed $1.0 billion, exclusive of any fees, commissions, or other expenses related to such repurchases. In June 2023, commensurate with the announcement of the Acquisitions, the Board reduced the amount of stock authorized for repurchase by the Company under the stock repurchase program from $1.0 billion to $500.0 million. The stock repurchase program does not require any specific number of shares to be acquired and can be modified or discontinued by the Board at any time.

(2)Purchases outside of the stock repurchase program represent shares received by the Company from officers, former officers, executives, and employees for the payment of personal income tax withholding obligations upon the vesting of restricted stock awards.

(3)Excludes commissions paid and excise taxes accrued related to stock repurchases.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

43

Item 6. Exhibits.

Exhibit Number	Description
3.1†	Fourth Amended and Restated Certificate of Incorporation of Civitas Resources, Inc.
3.2	Certificate of Elimination of Series A Junior Participating Preferred Stock of Civitas Resources, Inc. (incorporated by reference to Exhibit 3.3 to Civitas Resources, Inc.’s Current Report on Form 8-K filed on November 3, 2021)
3.3	Seventh Amended and Restated Bylaws of Civitas Resources, Inc. (incorporated by reference to Exhibit 3.1 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 5, 2023)
4.1	Indenture, dated June 29, 2023, by and among Civitas Resources, Inc., as issuer, the guarantors party thereto and Computershare Trust Company, N.A., as trustee, pursuant to which the 2028 Senior Notes were issued (incorporated by reference to Exhibit 4.1 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 29, 2023)
4.2	Indenture, dated June 29, 2023, by and among Civitas Resources, Inc., as issuer, the guarantors party thereto and Computershare Trust Company, N.A., as trustee, pursuant to which the 2031 Senior Notes were issued (incorporated by reference to Exhibit 4.3 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 29, 2023)
10.1*	Membership Interest Purchase Agreement, dated as of June 19, 2023, by and among Hibernia Energy III Holdings, LLC and Hibernia Energy III-B Holdings, LLC, as sellers, and Civitas Resources, Inc., as purchaser (incorporated by reference to Exhibit 10.1 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 20, 2023)
10.2*	Membership Interest Purchase Agreement, dated as of June 19, 2023, by and among Tap Rock Resources Legacy, LLC, Tap Rock Resources Intermediate, LLC, Tap Rock Resources II Legacy, LLC, Tap Rock Resources II Intermediate, LLC, Tap Rock NM10 Legacy Holdings, LLC and Tap Rock NM10 Holdings Intermediate, LLC, as sellers, solely in its capacity as Sellers’ Representative, Tap Rock Resources Legacy, LLC, solely for the limited purposes set forth therein, Tap Rock Resources, LLC, and Civitas Resources, Inc., as purchaser (incorporated by reference to Exhibit 10.2 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 20, 2023)
10.3	Third Amendment to Amended and Restated Credit Agreement, dated June 23, 2023, among Civitas Resources, Inc., the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as the administrative agent (incorporated by reference to Exhibit 10.1 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 26, 2023)
10.4**	Employment Letter, dated as of April 5, 2023, by and between Civitas Resources, Inc. and T. Hodge Walker (incorporated by reference to Exhibit 10.1 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on April 6, 2023)
10.5**	Form of Indemnity Agreement between Civitas Resources, Inc. and the directors and executive officers of Civitas Resources, Inc. (incorporated by reference to Exhibit 10.9 to the Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on November 3, 2021)
10.6**	Severance and Release Agreement, dated as of May 31, 2023, by and between Civitas Resources, Inc. and Matthew R. Owens (incorporated by reference to Exhibit 10.1 to Civitas Resources, Inc.’s Current Report on Form 8-K, File No. 001-35371, filed on June 5, 2023)
31.1†	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
31.2†	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)
32.1†	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2†	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS†	XBRL Instance Document
101.SCH†	XBRL Taxonomy Extension Schema
101.CAL†	XBRL Taxonomy Extension Calculation Linkbase
101.DEF†	XBRL Taxonomy Extension Definition Linkbase
101.LAB†	XBRL Taxonomy Extension Label Linkbase
101.PRE†	XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_________________________

*             Certain of the schedules and exhibits to the agreement have been omitted pursuant to Item 601(a)(5) of Regulation

S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request.

**            Management Contract or Compensatory Plan or Arrangement

†             Filed or furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CIVITAS RESOURCES, INC.
Date:	August 2, 2023	By:	/s/ Chris Doyle
			Chris Doyle
			President and Chief Executive Officer (principal executive officer)
		By:	/s/ Marianella Foschi
			Marianella Foschi
			Chief Financial Officer (principal financial officer)
		By:	/s/ Sandi K. Garbiso
			Sandi K. Garbiso
			Chief Accounting Officer and Treasurer (chief accounting officer)

45

EX-3.1

Exhibit 3.1

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

CIVITAS RESOURCES, INC.

Civitas Resources, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:

ONE: The Corporation was originally incorporated and the original certificate of incorporation was filed with the Secretary of State of Delaware on December 2, 2010, which certificate of incorporation was amended and restated (i) on December 23, 2010, (ii) on December 16, 2011 and (iii) on April 28, 2017 (as so amended and restated, the “Third Amended and Restated Certificate of Incorporation”), and further amended by the Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation duly executed and filed with the Secretary of State of Delaware on November 1, 2021 to change the name of the corporation from “Bonanza Creek Energy, Inc.” to “Civitas Resources, Inc.”

TWO: This Fourth Amended and Restated Certificate of Incorporation, which amends and restates the Third Amended and Restated Certificate of Incorporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law (“DGCL”).

THREE: The text of the Fourth Amended and Restated Certificate of Incorporation shall read as follows:

Article 1.     NAME

The name of this corporation is Civitas Resources, Inc. (the “Corporation”).

Article 2.     REGISTERED OFFICE AND AGENT

The registered office of the Corporation shall be located at 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The registered agent of the Corporation at such address shall be The Corporation Trust Company.

Article 3.     PURPOSE AND POWERS

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. The Corporation shall have all power necessary or convenient to the conduct, promotion or attainment of such acts and activities.

Article 4.     CAPITAL STOCK

4.1     Authorized Shares

The total number of shares of all classes of stock that the Corporation shall have the authority to issue is 250,000,000, of which 225,000,000 of such shares shall be Common Stock, all of one class, having a par value of $.01 per share (“Common Stock”), and 25,000,000 of such shares shall be Preferred Stock, having a par value of $.01 per share (“Preferred Stock”).

4.2     Common Stock

4.2.1     Relative Rights

The Common Stock shall be subject to all of the rights, privileges, preferences and priorities of the Preferred Stock as set forth in the certificate of designations filed to establish the respective series of Preferred Stock. Each share of Common Stock shall have the same relative rights as and be identical in all respects to all the other shares of Common Stock. Except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Fourth Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such

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series, to vote thereon pursuant to this Fourth Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL.

4.2.2     Dividends

Subject to the prior rights and preferences, if any, applicable to the Preferred Stock or any series thereof, the holders of the Common Stock shall be entitled to receive such dividends (payable in cash, stock or otherwise) as may be declared thereon by the board of directors of the Corporation (the “Board of Directors”) at any time and from time to time out of any funds of the Corporation legally available therefor.

4.2.3     Dissolution, Liquidation, Winding Up

In the event of any dissolution, liquidation, or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock, and holders of any class or series of stock entitled to participate therewith, in whole or in part, as to the distribution of assets in such event, shall become entitled to participate in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or provided for payment of, all debts and liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Common Stock in the event of dissolution, liquidation or winding up the full preferential amounts (if any) to which they are entitled. A dissolution, liquidation or winding up of the Corporation, as such terms are used in this paragraph, shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or corporations or other entity or a sale, lease, exchange or conveyance of all or part of the assets of the Corporation.

4.2.4     Voting Rights

Each holder of shares of Common Stock shall be entitled to attend all special and annual meetings of the stockholders of the Corporation and, share for share and without regard to class, together with the holders of all other classes of stock entitled to attend such meetings and to vote (except any class or series of stock having special voting rights), to cast one vote for each outstanding share of Common Stock so held upon any matter or thing (including, without limitation, the election of one or more directors) properly considered and acted upon by the stockholders.

4.3     Preferred Stock

4.3.1 The Board of Directors is authorized, subject to limitations prescribed by the DGCL and the provisions of this Fourth Amended and Restated Certificate of Incorporation, to provide, by resolution or resolutions from time to time and by filing a certificate of designations pursuant to the DGCL, for the issuance of the shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each such series, to fix the powers, designations, preferences and relative, participating, optional or other special rights of the shares of each such series and to fix the qualifications, limitations or restrictions thereof.

4.3.2 The Board of Directors may increase the number of shares of Preferred Stock designated for any existing class or series by a resolution adding to such class or series authorized and unissued shares of Preferred Stock not designated from any other class or series. The Board of Directors may decrease the number of shares of Preferred Stock designated for any existing class or series by a resolution subtracting from such class or series authorized and unissued shares of Preferred Stock designated for such existing class or series, and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock.

4.4     General

4.4.1 Subject to the provisions of this Fourth Amended and Restated Certificate of Incorporation and any then-existing Preferred Stock certificate of designation, the Corporation may issue shares of Preferred Stock and Common Stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors, which is expressly authorized to fix the same in its absolute and uncontrolled discretion subject to the foregoing conditions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid stock and

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shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares.

4.4.2 The Corporation shall have authority to create and issue rights and options entitling their holders to purchase shares of the Corporation’s capital stock of any class or series or other securities of the Corporation, and such rights and options shall be evidenced by instrument(s) approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, times for exercise, and other termsof such options or rights; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof.

4.4.3 Ownership of shares of any class of the capital stock of the Corporation shall not entitle the holders thereof to any preemptive right to subscribe for or purchase or to have offered to them for subscription or purchase any additional shares of capital stock of any class of the Corporation or any securities convertible into any class of capital stock of the Corporation, whether now or hereafter authorized, however acquired, issued or sold by the Corporation, it being the purpose and intent hereof that the Board of Directors shall have the full right, power and authority to offer for subscription or sell or to make any disposal of any or all unissued shares of the capital stock of the Corporation or any securities convertible into stock or any or all shares of stock or convertible securities issued and thereafter acquired by the Corporation, for such consideration, in money or property, as the Board of Directors in its sole discretion shall determine.

4.4.4 The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.

4.4.5 The Corporation shall not issue nonvoting equity securities; provided, however, that the foregoing restriction shall (i) have no further force and effect beyond that required under Section 1123(a)(6) of the Bankruptcy Code, (ii) only have such force and effect for so long as Section 1123(a)(6) of the Bankruptcy Code is in effect and applicable to the Corporation and (iii) in all events may be amended or eliminated in accordance with applicable law as from time to time may be in effect.

Article 5.     BOARD OF DIRECTORS

5.1     Number; Election

The number of directors of the Corporation shall be such number as from time to time shall be fixed by, or in the manner provided in, the Bylaws of the Corporation (as they may be amended and restated from time to time, the “Bylaws”). Unless and except to the extent that the Bylaws shall otherwise require, the election of directors of the Corporation need not be by written ballot. Except as otherwise provided in this Fourth Amended and Restated Certificate of Incorporation, each director of the Corporation shall be entitled to one vote per director on all matters voted or acted upon by the Board of Directors.

5.2     Vacancies

Subject to the terms of any one or more classes or series of Preferred Stock, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled only by the affirmative vote of a majority of the directors then in office, although fewer than a quorum, or by a sole remaining director; provided that a vacancy resulting from the removal of a director by the stockholders may be filled by the stockholders. A director shall hold office for the remainder of the term of director to which the vacancy occurred or the new directorship was created. If one or more directors resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power tofill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election of directors for such class or series, and until such director’s successor is elected and qualified, or until the director’s earlier death, resignation or removal.

5.3     Management of Business and Affairs of the Corporation

The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

5.4     Limitation of Liability

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5.4.1 No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of a director (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) under Section 174 of the DGCL; or (d) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended hereafter to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended.

5.4.2 No officer of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as an officer; provided that this provision shall not eliminate or limit the liability of an officer (a) for any breach of the officer’s duty of loyalty to the Corporation or its stockholders, (b) for any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law, (c) for any transaction from which the officer derived an improper personal benefit or (d) for any action by or in the right of the Corporation. If the DGCL is amended hereafter to authorize the further elimination or limitation of the liability of officers, then the liability of an officer of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended.

5.4.3 Any repeal or modification of this Article 5.4 shall be prospective only and shall not adversely affect any right or protection of, or any limitation of the liability of, a director or officer of the Corporation existing at, or arising out of facts or incidents occurring prior to, the effective date of such repeal or modification.

5.5     Indemnification

The Corporation shall have the power to indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer, employee or agent of the Corporation, any predecessor of the Corporation or any subsidiary or affiliate of the Corporation, or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation. The Corporation shall indemnify any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation, any predecessor to the Corporation or any subsidiary or affiliate of the Corporation as and to the extent (and on the terms and subject to the conditions) set forth in the Bylaws or in any contract of indemnification entered into by the Corporation and any such person.

Neither any amendment nor repeal of this Article 5.5, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article 5.5, shall eliminate or reduce the effect of this Article 5.5 in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article 5.5, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

Article 6.     SPECIAL MEETINGS OF THE STOCKHOLDERS; ACTION BY WRITTEN CONSENT

6.1 Special Meetings of the Stockholders

6.1.1 Called by the Corporation. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called by: (i) the Chairperson of the Board of Directors, (ii) the Chief Executive Officer, (iii) the President, (iv) the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies or (v) the Secretary of the Corporation at the written request of one or more stockholders of record pursuant to Article 6.1.2.

6.1.2 At the Request of Stockholders. Except as otherwise required by law and subject to the rights of the holders of any class or series of Preferred Stock or any series thereof, this Article 6.1.2 is the exclusive means by which one or more stockholders of the Corporation may request the calling of a special meeting of stockholders of the Corporation. Special meetings of stockholders of the Corporation shall be called by the Secretary of the Corporation at the written request of one or more stockholders of record that collectively (x) Own (as defined below) shares representing at least 15% (the “Requisite Percentage”) of the outstanding shares of the capital stock of the Corporation entitled to vote on the matter or matters proposed to be brought before the proposed special meeting and (y) have Owned the Requisite Percentage of such shares for at least 365 consecutive days prior to the date of such request (the “Requisite Holding Period”), provided that a special meeting called at the request of one or more stockholders (a “Stockholder

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Requested Special Meeting”) shall be called by the Secretary of the Corporation only if the stockholder(s) requesting such meeting provide the information required by this Article 6.1.2 regarding such stockholder(s) and the proposed special meeting and otherwise comply with this Article 6.1.2. In order for a Stockholder Requested Special Meeting to be required to be called by the Secretary of the Corporation, one or more valid written requests for a special meeting (individually or collectively, a “Special Meeting Request”) signed and dated by stockholders of record that have collectively Owned the Requisite Percentage of the outstanding shares of the capital stock of the Corporation entitled to vote on the matter or matters proposed to be brought before the proposed special meeting for the Requisite Holding Period (or their duly authorized agents), must be delivered to and received by the Secretary at the principal executive offices of the Corporation (the date of such receipt, the “Request Receipt Date”) and must be accompanied by:

6.1.2.1 with respect to any nomination of director(s) to the Board of Directors or any other business proposed to be presented at any Stockholder Requested Special Meeting, the same information described in Section 2.6 of the Bylaws, including certain identifying information, representations and agreements and, with respect to any nomination of director(s) to the Board of Directors, any completed and signed questionnaire, representation and agreement that would be required by Section 2.6 of the Bylaws; and

6.1.2.2 (a) as to each stockholder of record signing such Special Meeting Request, or if such stockholder of record is a nominee or custodian, the beneficial owner(s) on whose behalf such Special Meeting Request is signed, an affidavit by each such person (x) stating the number of shares of capital stock of the Corporation that it has Owned for the Requisite Holding Period as of the date such Special Meeting Request was signed and (y) agreeing to (I) continue to Own such number of shares of capital stock of the Corporation through the date of the Stockholder Requested Special Meeting and (II) update and supplement such affidavit as of the record date for the Stockholder Requested Special Meeting (such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for such Stockholder Requested Special Meeting) and as of the date that is no more than ten business days prior to the date of the Stockholder Requested Special Meeting (such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days prior to the date of such Stockholder Requested Special Meeting); provided that in the event of any decrease in the number of shares of capital stock of the Corporation entitled to vote on the matter or matters proposed to be brought before the Stockholder Requested Special Meeting that has been Owned for the Requisite Holding Period by such person at any time before the Stockholder Requested Special Meeting, such person’s Special Meeting Request shall be deemed to have been revoked with respect to such shares of capital stock of the Corporation comprising such reduction and shall not be counted towards the calculation of the Requisite Percentage, and (b) as to any stockholder or beneficial owner who has solicited other stockholders to request the special meeting, the information described in Section 2.6 of the Bylaws as to such stockholder or beneficial owner.

6.1.3 One or more written requests for a special meeting delivered to the Secretary of the Corporation shall constitute a valid Special Meeting Request only if each such written request satisfies the requirements of this Article 6.1 and has been dated and delivered to the Secretary of the Corporation at the principal executive offices of the Corporation within 60 days of the earliest dated of such requests. If the stockholder of record signing the Special Meeting Request is a nominee or custodian on behalf of a beneficial owner, such Special Meeting Request shall not be valid unless documentary evidence is supplied to the Secretary of the Corporation at the time of delivery of such Special Meeting Request of such signatory’s authority to execute the Special Meeting Request on behalf of such beneficial owner. The determination of the validity of a Special Meeting Request shall be made by the Board of Directors, which determination shall be conclusive and binding on the Corporation and the stockholders. Notwithstanding anything to the contrary herein, a Special Meeting Request shall not be valid if: (1) the Special Meeting Request does not comply with this Article 6.1 or the Bylaws, (2) such Special Meeting Request relates to an item of business that is not a matter on which stockholders are authorized to act under, or that involves a violation of, applicable law, (3) the Request Receipt Date occurs during the period commencing 150 days prior to the first anniversary of the date of the Corporation’s proxy statement released to stockholders for the preceding year’s annual meeting of stockholders and ending on the date of the next annual meeting of stockholders, (4) the purpose(s) specified in the Special Meeting Request relates to an item of business that is the same or substantially similar (as determined by the Board of Directors, which determination shall be conclusive and binding on the Corporation and the stockholders, a “Similar Item”) to an item of business that was presented at any meeting of stockholders held within the 120 days prior to the Request Receipt Date, or (5) a Similar Item is included in the Corporation’s notice as an item of business to be brought before a stockholder meeting that has been called or that is called for a date within 120 days of the Request

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Receipt Date. For the avoidance of doubt, the nomination, election or removal of Directors will be deemed to be a Similar Item with respect to all items of business involving the nomination, election or removal of directors, changing the size of the Board of Directors and filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors. Except as otherwise provided by law, in the case of a Stockholder Requested Special Meeting, the Chairperson of the Board of Directors shall have the power and duty (i) to determine whether any business proposed to be brought before the meeting was proposed in accordance with the procedures set forth in this Article 6.1 and (ii) if any proposed business was not proposed in compliance with this Article 6.1 or the stated business to be brought before the special meeting is not a proper subject for stockholder action under applicable law, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted.

6.1.4 Any special meeting of stockholders shall be held at such date and time as may be fixed by the Board of Directors in accordance with the Bylaws and in compliance with the DGCL as the same exists or may hereafter be amended; provided, however, that a Stockholder Requested Special Meeting shall be called for a date not more than 120 days after the Request Receipt Date with respect to the last Special Meeting Request related to such Stockholder Requested Special Meeting (or, in the case of any litigation related to the validity of the requests for a Stockholder Requested Special Meeting, 120 days after the resolution of such litigation).

6.1.5 Business transacted at any Stockholder Requested Special Meeting shall be limited to (i) the purpose(s) stated in the valid Special Meeting Request(s) related to such meeting and (ii) any additional matters that the Board of Directors determines to include in the Corporation’s notice of the meeting. If none of the stockholders who submitted the Special Meeting Request, or their Qualified Representatives (as defined below), appears at the Stockholder Requested Special Meeting to present the matters to be presented for consideration that were specified in the Special Meeting Request(s), the Corporation need not present such matters for a vote at such meeting, notwithstanding that proxies in respect of such matter may have been received by the Corporation.

6.1.6 For purposes of this Fourth Amended and Restated Certificate of Incorporation, to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) delivered to the Corporation prior to the presentation of such matters at the meeting stating that such person is authorized to act for such stockholder as proxy at the meeting of stockholders. For the purposes of this Article 6.1, a stockholder or beneficial owner shall be deemed to “Own” only those shares of outstanding capital stock of the Corporation as to which such person possesses both (i) the full voting and investment rights pertaining to such shares and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (A) sold by such person or any of its Affiliates (as defined below) in any transaction that has not been settled or closed, (B) borrowed by such person or any of its Affiliates for any purposes or purchased by such person or any of its Affiliates pursuant to an agreement to resell or (C) subject to any option, warrant, forward contract, swap, contract of sale, or other derivative or similar agreement entered into by such person or any of its Affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding capital stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, or if exercised would have the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such person’s or Affiliates’ full right to vote or direct the voting of any such shares, and/or (2) hedging, offsetting or altering to any degree any gain or loss arising from the full economic ownership of such shares by such person or Affiliate. A stockholder or beneficial owner shall “Own” shares held in the name of a nominee or other intermediary so long as the person retains the right to instruct how the shares are voted with respect to the election of Directors and possesses the full economic interest in the shares. A person shall be deemed to continue to Own shares during any period in which the person has loaned such shares provided that the person has the power to recall such loaned shares on five business days’ (or less) notice, and has delegated any voting power only by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the person. The determination of the extent to which a stockholder or beneficial owner “Owns” any shares of capital stock for these purposes shall be made by the Board of Directors, which determination shall be conclusive and binding on the Corporation and the stockholders. The terms “Owned,” “Ownership” and other variations of the word “Own” shall have a corresponding meaning. As used in this Fourth Amended and Restated Certificate of Incorporation, the term “Affiliate(s)” shall have the meaning attributed to such term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

6.2 Action by Written Consent. All actions required or permitted to be taken by stockholders at an annual or special meeting of stockholders of the Corporation may be effected without a meeting by written consent of the

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holders of capital stock of the Corporation entitled to vote as of the record date of the written consent; provided, that no such action may be effected except in accordance with the provisions of this Article 6.2.

6.2.1.     Request for Record Date. The record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be as fixed by the Board of Directors or as otherwise established under this Article 6.2. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice addressed to the Secretary of the Corporation and delivered to the Corporation at its principal executive offices and signed by stockholders of record at the time of the request who have collectively Owned at least the Requisite Percentage of the outstanding shares of the capital stock of the Corporation entitled to vote on the matter or matters proposed to be brought before the proposed special meeting forat least the Requisite Holding Period,request that a record date be fixed for such purpose. Such request must contain the information set forth in Article 6.2.2. Following receipt of such request, the Board of Directors shall, by the later of (i) 20 days after the Corporation’s receipt of such request and (ii) five days after delivery of any information requested by the Corporation to determine the validity of any such request or whether the action to which such request relates may be effected by written consent of stockholders in lieu of a meeting, determine the validity of such request and whether such request relates to an action that may be taken by written consent of stockholders in lieu of a meeting pursuant to this Article 6.2 and applicable law and, if appropriate, adopt a resolution fixing the record date for such purpose. The record date for such purpose shall be no more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date upon which such resolution is adopted. If (x) the request required by this Article 6.2.1 has been determined to be valid and to relate to an action that may be effected by written consent pursuant to this Article 6.2 and applicable law or (y) no such determination shall have been made by the date required by this Article 6.2.1, and in either event no record date has been fixed by the Board of Directors, the record date shall be the first date on which a signed written consent relating to the action taken or proposed to be taken by written consent is delivered to the Corporation in the manner described in Article 6.2.4; provided that if prior action by the Board of Directors is required under the provisions of the DGCL, the record date shall be at the close of business on the day on which the Board of Directors adopt the resolution taking such prior action.

6.2.2     Notice Requirements. The request required by Article 6.2.1 must be delivered by stockholders of record with a combined Ownership at least the Requisite Percentage of the outstanding shares of the capital stock of the Corporation entitled to vote on the matter or matters as of the date of such delivery (with written evidence of such Ownership included with the written notice making such request) and such stockholders must have held a combined Ownership of at least the Requisite Percentage for at least the Requisite Holding Period, must describe the action proposed to be taken by written consent of stockholders in lieu of a meeting and must contain such information and representations, to the extent applicable, required by Section 2.6 of the Bylaws (relating to advance notice of stockholder nominations or business proposals to be submitted at a meeting of stockholders) as though such stockholder or stockholders were intending to make a nomination or to bring a business proposal before a meeting of stockholders (other than a proposal permitted to be included in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act), including, without limitation, all such information regarding the stockholder or stockholder(s) making the request required by Article 6.2.1, the beneficial owner or beneficial owners, if any, on whose behalf the request is made, and the text of the proposal(s) (including the text of any resolutions to be adopted by written consent of stockholders and the language of any proposed amendment to the Bylaws). The Corporation may require the stockholder(s) submitting such notice to furnish such other information as may be requested by the Corporation, including such information as may be requested to determine the validity of the request and to determine whether such request relates to an action that may be effected by written consent of stockholders in lieu of a meeting under this Article 6.2 and applicable law. In connection with an action or actions proposed to be taken by written consent in accordance with this Article 6.2 and applicable law, the stockholder(s) seeking such action or actions shall further update and supplement the information previously provided to the Corporation in connection therewith, if necessary, in the same manner required by the Bylaws.

6.2.3     Actions Which May Be Taken by Written Consent. Stockholders are not entitled to act by written consent if (i) the request to act by written consent made pursuant to Article 6.2.1 (x) does not comply with this Article 6.2, (y) was made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law or (z) relates to an item of business that is not a matter on which stockholders are authorized to act under, or that involves a violation of, applicable law; (ii) any such request is received by the Corporation during the period commencing 150 days prior to the first anniversary of the date of the Corporation’s proxy statement released to stockholders for the preceding year’s annual meeting of stockholders and ending on the date of the next annual meeting of stockholders; (iii) a Similar Item was presented at any meeting of stockholders held within the 120 days prior to the request to act by written consent; or (iv) a Similar Item is included in the Corporation’s notice as an item of business to be brought

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before a stockholder meeting that has been called or that is called for a date within 120 days of the request to act by written consent.

6.2.4     Manner of Consent Solicitation. Stockholders may take action by written consent only if consents are solicited by the stockholder(s) seeking to take action by written consent of stockholders in accordance with this Article 6.2 and applicable law from all holders of capital stock of the Corporation entitled to vote on the matter.

6.2.5     Date of Consent. Every written consent purporting to take or authorize the taking of corporate action (a “Consent”) must bear the date of signature of each stockholder who signs the Consent, and no Consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated Consent delivered in the manner required by Article 6.2.6 and applicable law, Consents signed by a sufficient number of stockholders to take such action are so delivered to the Corporation.

6.2.6     Delivery of Consents. Consents must be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery must be made by hand or by certified or registered mail, return receipt requested. In the event of the delivery to the Corporation of Consents, the Secretary or such other officer of the Corporation as the Board of Directors may designate shall provide for the safe-keeping of such Consents and any related revocations and shall promptly conduct such ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the action to be taken by written consent as the Secretary or such other officer, as the case may be, deems necessary or appropriate, including, without limitation, whether the stockholders of a number of shares having the requisite voting power to authorize or take the action specified in Consents have given consent. If after such investigation the Secretary or such other officer of the Corporation as the Board of Directors may designate shall determine that the action purported to have been taken is duly authorized by the Consents, that fact shall be certified on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders and the Consents shall be filed in such records. ln conducting the investigation required by this Article 6.2.6, the Secretary or such other officer of the Corporation as the Board of Directors may designate may, at the expense of the Corporation, retain special legal counsel and any other necessary or appropriate professional advisors as such person or persons may deem necessary or appropriate and, to the fullest extent permitted by law, shall be fully protected in relying in good faith upon the opinion of such counsel or advisors.

6.2.7     Effectiveness of Consent. Notwithstanding anything in this Fourth Amended and Restated Certificate of Incorporation to the contrary, no action may be taken by the stockholders by written consent except in accordance with this Article 6.2 and applicable law. If the Board of Directors shall determine that any request to fix a record date or to take stockholder action by written consent was not properly made in accordance with, or relates to an action that may not be effected by written consent pursuant to, this Article 6.2 or applicable law, or the stockholder or stockholders seeking to take such action do not otherwise comply with this Article 6.2 or applicable law, then the Board of Directors shall not be required to fix a record date in respect of such proposed action, and any such purported action by written consent shall be null and void. No action by written consent without a meeting shall be effective until such date as the Secretary or such other officer of the Corporation as the Board of Directors may designate certifies to the Corporation that the Consents delivered to the Corporation in accordance with Article 6.2.6 represent at least the minimum number of votes that would be necessary to take the corporate action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with the DGCL and this Fourth Amended and Restated Certificate of Incorporation.

6.2.8     Board-Solicited Stockholder Action by Written Consent. Notwithstanding anything to the contrary set forth above, (i) none of the foregoing provisions of this Article 6.2 shall apply to any solicitation of stockholder action by written consent in lieu of a meeting by or at the direction of the Board of Directors and (ii) the Board of Directors shall be entitled to solicit stockholder action by written consent in accordance with applicable law.

6.2.9     Challenge to Validity of Consent. Nothing contained in this Article 6.2 shall in any way be construed to suggest or imply that the Board of Directors of the Corporation or any stockholder shall not be entitled to contest the validity of any Consent or related revocations, whether before or after such certification by the Secretary of the Corporation or such other officer of the Corporation as the Board of Directors may designate or to prosecute or defend any litigation with respect thereto.

Article 7.     COMPROMISE OR ARRANGEMENTS

8

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

Article 8.     FORUM

8.1     Exclusive Forum for Adjudication of Disputes.

Unless the Board of Directors or one of its committees otherwise approves, in accordance with Section 141 of the DGCL, this Fourth Amended and Restated Certificate of Incorporation and the Bylaws, to the selection of an alternate forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware also does not have jurisdiction, the United States District Court for the District of Delaware) shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or this Fourth Amended and Restated Certificate of Incorporation or the Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of this Fourth Amended and Restated Certificate of Incorporation or the Bylaws or (v) any action asserting a claim against the Corporation governed by the internal affairs doctrine (each, a “Covered Proceeding”).

Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, against the Corporation or any director or officer of the Corporation.

8.2     Personal Jurisdiction.

If any action the subject matter of which is a Covered Proceeding is filed in a court other than the Court of Chancery of the State of Delaware, or, where permitted in accordance with Article 8.1 above, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware, (each, a “Foreign Action”) in the name of any person or entity (a “Claiming Party”) without the prior approval of the Board of Directors or one of its committees in the manner described in Article 8.1 above, such Claiming Party shall be deemed to have consented to (i) the personal jurisdiction of the Court of Chancery of the State of Delaware, or, where applicable, the Superior Court of the State of Delaware and the United States District Court for the District of Delaware, in connection with any action brought in any such courts to enforce Article 8.1 above (an “Enforcement Action”) and (ii) having service of process made upon such Claiming Party in any such Enforcement Action by service upon such Claiming Party’s counsel in the Foreign Action as agent for such Claiming Party.

8.3     Notice and Consent.

Any person or entity purchasing or otherwise acquiring any interest in the shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article 8 and waived any argument relating to the inconvenience of the forums referenced above in connection with any Covered Proceeding.

Article 9.     AMENDMENT OF BYLAWS

In furtherance and not in limitation of the powers conferred by the DGCL, the Board of Directors is expressly authorized and empowered to adopt, amend and repeal the Bylaws by an affirmative vote of at least a majority of the directors then in office. The Bylaws may also be adopted, amended or repealed upon the affirmative

9

vote of the holders of at least a majority of the outstanding stock entitled to vote thereon, voting together as a single class; provided, however, that no bylaws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such bylaws had not been adopted.

Article 10.     RESERVATION OF RIGHT TO AMEND CERTIFICATE OF INCORPORATION

The Corporation reserves the right at any time, and from time to time, to amend, alter, change, or repeal any provision contained in this Fourth Amended and Restated Certificate of Incorporation (including any Preferred Stock certificate of designation), and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences, and privileges of any nature conferred upon stockholders, directors, or any other persons by and pursuant to this Fourth Amended and Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article 10.

Article 11.     SEVERABILITY

If any provision or provisions of this Fourth Amended and Restated Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Fourth Amended and Restated Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Fourth Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Fourth Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Fourth Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.

* * * * *

10

IN WITNESS WHEREOF, Civitas Resources, Inc. has caused this Fourth Amended and Restated Certificate of Incorporation to be executed by its Chief Legal Officer and Secretary who hereby certifies that the facts hereinabove stated are truly set forth, this Date: June 3, 2023.

CIVITAS RESOURCES, INC.
By:	/s/ Travis L. Counts
Name:	Travis L. Counts
Title:	Chief Legal Officer and Secretary

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a‑ 14(a)

I, Chris Doyle, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2023 of Civitas Resources, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 2, 2023

/s/ Chris Doyle

Chris Doyle

President and Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a‑ 14(a)

I, Marianella Foschi, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2023 of Civitas Resources, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 2, 2023

/s/ Marianella Foschi

Marianella Foschi

Chief Financial Officer (principal financial officer)

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Civitas Resources, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chris Doyle, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 2, 2023

/s/ Chris Doyle

Chris Doyle

President and Chief Executive Officer

(principal executive officer)

EX-32.2

Exhibit 32.2

Certification of the Principle Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Civitas Resources, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marianella Foschi, Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2023

/s/ Marianella Foschi

Marianella Foschi

Chief Financial Officer (principal financial officer)

XML

COVER PAGE - shares	6 Months Ended
	Jun. 30, 2023	Aug. 02, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	001-35371
Entity Registrant Name	Civitas Resources, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	61-1630631
Entity Address, Address Line One	555 17th Street,
Entity Address, Address Line Two	Suite 3700
Entity Address, City or Town	Denver,
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80202
City Area Code	303
Local Phone Number	293-9100
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	CIVI
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		93,760,666
Entity Central Index Key	0001509589
Amendment Flag	false
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 2,702,897	$ 768,032
Accounts receivable, net:
Oil and natural gas sales	201,248	343,500
Joint interest and other	100,664	135,816
Derivative assets	4,335	2,490
Prepaid income taxes	2,266	29,604
Deposits for acquisitions	352,500	0
Prepaid expenses and other	49,297	48,988
Total current assets	3,413,207	1,328,430
Property and equipment (successful efforts method):
Proved properties	7,390,897	6,774,635
Less: accumulated depreciation, depletion, and amortization	(1,628,303)	(1,214,484)
Total proved properties, net	5,762,594	5,560,151
Unproved properties	578,508	593,971
Wells in progress	316,119	407,351
Other property and equipment, net of accumulated depreciation of $8,498 in 2023 and $7,329 in 2022	49,619	49,632
Total property and equipment, net	6,706,840	6,611,105
Long-term derivative assets	1,800	794
Right-of-use assets	41,572	24,125
Other noncurrent assets	7,567	6,945
Total assets	10,170,986	7,971,399
Current liabilities:
Accounts payable and accrued expenses	240,555	295,297
Production taxes payable	389,392	258,932
Oil and natural gas revenue distribution payable	522,308	538,343
Derivative liability	21,438	46,334
Asset retirement obligations	25,557	25,557
Lease liability	21,841	13,464
Total current liabilities	1,221,091	1,177,927
Long-term liabilities:
Senior notes	3,048,511	393,293
Ad valorem taxes	153,371	412,650
Derivative liability	2,973	17,199
Deferred income tax liabilities	409,593	319,618
Asset retirement obligations	268,366	265,469
Lease liability	20,394	11,324
Total liabilities	5,124,299	2,597,480
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $.01 par value, 25,000,000 shares authorized, none outstanding	0	0
Common stock, $.01 par value, 225,000,000 shares authorized, 80,220,613 and 85,120,287 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	4,869	4,918
Additional paid-in capital	3,957,513	4,211,197
Retained earnings	1,084,305	1,157,804
Total stockholders’ equity	5,046,687	5,373,919
Total liabilities and stockholders’ equity	$ 10,170,986	$ 7,971,399

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Other property and equipment, accumulated depreciation	$ 8,498	$ 7,329
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	25,000,000	25,000,000
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	225,000,000	225,000,000
Common stock, shares issued (in shares)	80,220,613	85,120,287
Common stock, shares outstanding (in shares)	80,220,613	85,120,287

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating net revenues:
Oil and natural gas sales	$ 660,526,000	$ 1,151,364,000	$ 1,316,548,000	$ 1,969,174,000
Operating expenses:
Lease operating expense	51,230,000	41,877,000	97,068,000	77,896,000
Severance and ad valorem taxes	52,443,000	85,870,000	104,805,000	149,174,000
Exploration	546,000	1,553,000	1,117,000	2,081,000
Depreciation, depletion, and amortization	232,786,000	204,519,000	434,089,000	389,379,000
Abandonment and impairment of unproved properties	0	0	0	17,975,000
Unused commitments	363,000	1,731,000	754,000	2,507,000
Bad debt expense	836,000	4,000	583,000	4,000
Merger transaction costs	31,145,000	1,418,000	31,627,000	21,952,000
General and administrative expense, including $9,895, $6,135, $17,275, and $14,225, respectively, of stock-based compensation	33,541,000	29,666,000	70,399,000	65,386,000
Total operating expenses	481,082,000	453,626,000	896,047,000	869,457,000
Other income (expense):
Derivative gain (loss)	4,927,000	(72,650,000)	30,087,000	(368,143,000)
Interest expense	(8,753,000)	(8,116,000)	(16,202,000)	(17,182,000)
Gain (loss) on property transactions, net	(13,000)	0	(254,000)	16,797,000
Other income	8,045,000	4,313,000	17,068,000	5,096,000
Total other income (expense)	4,206,000	(76,453,000)	30,699,000	(363,432,000)
Income from operations before income taxes	183,650,000	621,285,000	451,200,000	736,285,000
Income tax expense	(44,363,000)	(152,464,000)	(109,452,000)	(175,825,000)
Net income, basic	139,287,000	468,821,000	341,748,000	560,460,000
Net income, diluted	$ 139,287,000	$ 468,821,000	$ 341,748,000	$ 560,460,000
Net income per common share:
Basic (in dollars per share)	$ 1.73	$ 5.52	$ 4.22	$ 6.60
Diluted (in dollars per share)	$ 1.72	$ 5.48	$ 4.18	$ 6.56
Weighted-average common shares outstanding:
Basic (in shares)	80,393	84,993	81,052	84,917
Diluted (in shares)	81,144	85,554	81,824	85,453
Midstream operating expense
Operating expenses:
Operating expense	$ 13,319,000	$ 7,469,000	$ 23,380,000	$ 13,181,000
Gathering, transportation, and processing
Operating expenses:
Operating expense	$ 64,873,000	$ 79,519,000	$ 132,225,000	$ 129,922,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
General and administrative expense, stock-based compensation	$ 9,895	$ 6,135	$ 17,275	$ 14,225

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings
Balance at beginning of period (in shares) at Dec. 31, 2021		84,572,846
Balance at beginning of period at Dec. 31, 2021	$ 4,654,998	$ 4,912	$ 4,199,108	$ 450,978
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Restricted common stock issued (in shares)		579,229
Restricted common stock issued	6	$ 6
Stock used for tax withholdings (in shares)		(215,811)
Stock used for tax withholdings	(12,934)	$ (2)	(12,932)
Exercise of stock options (in shares)		5,294
Exercise of stock options	178		178
Stock-based compensation	8,090		8,090
Dividends declared	(104,444)			(104,444)
Net income	91,639			91,639
Balance at end of period (in shares) at Mar. 31, 2022		84,941,558
Balance at end of period at Mar. 31, 2022	4,637,533	$ 4,916	4,194,444	438,173
Balance at beginning of period (in shares) at Dec. 31, 2021		84,572,846
Balance at beginning of period at Dec. 31, 2021	4,654,998	$ 4,912	4,199,108	450,978
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	560,460
Balance at end of period (in shares) at Jun. 30, 2022		85,031,963
Balance at end of period at Jun. 30, 2022	4,992,550	$ 4,917	4,197,790	789,843
Balance at beginning of period (in shares) at Mar. 31, 2022		84,941,558
Balance at beginning of period at Mar. 31, 2022	4,637,533	$ 4,916	4,194,444	438,173
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Restricted common stock issued (in shares)		130,309
Restricted common stock issued	1	$ 1
Stock used for tax withholdings (in shares)		(40,646)
Stock used for tax withholdings	(2,813)		(2,813)
Exercise of stock options (in shares)		742
Exercise of stock options	24		24
Stock-based compensation	6,135		6,135
Dividends declared	(117,151)			(117,151)
Net income	468,821			468,821
Balance at end of period (in shares) at Jun. 30, 2022		85,031,963
Balance at end of period at Jun. 30, 2022	4,992,550	$ 4,917	4,197,790	789,843
Balance at beginning of period (in shares) at Dec. 31, 2022		85,120,287
Balance at beginning of period at Dec. 31, 2022	5,373,919	$ 4,918	4,211,197	1,157,804
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Restricted common stock issued (in shares)		112,052
Stock used for tax withholdings (in shares)		(30,111)
Stock used for tax withholdings	(2,118)		(2,118)
Exercise of stock options (in shares)		13,352
Exercise of stock options	440		440
Common stock repurchased and retired (in shares)		(4,918,032)
Common stock repurchased and retired	(303,455)	$ (49)	(243,312)	(60,094)
Stock-based compensation	7,380		7,380
Dividends declared	(176,878)			(176,878)
Net income	202,461			202,461
Balance at end of period (in shares) at Mar. 31, 2023		80,297,548
Balance at end of period at Mar. 31, 2023	5,101,749	$ 4,869	3,973,587	1,123,293
Balance at beginning of period (in shares) at Dec. 31, 2022		85,120,287
Balance at beginning of period at Dec. 31, 2022	5,373,919	$ 4,918	4,211,197	1,157,804
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	341,748
Balance at end of period (in shares) at Jun. 30, 2023		80,220,613
Balance at end of period at Jun. 30, 2023	5,046,687	$ 4,869	3,957,513	1,084,305
Balance at beginning of period (in shares) at Mar. 31, 2023		80,297,548
Balance at beginning of period at Mar. 31, 2023	5,101,749	$ 4,869	3,973,587	1,123,293
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Restricted common stock issued (in shares)		375,615
Restricted common stock issued	4	$ 4
Stock used for tax withholdings (in shares)		(139,895)
Stock used for tax withholdings	(10,496)	$ (1)	(10,495)
Exercise of stock options (in shares)		111
Exercise of stock options	4		4
Common stock repurchased and retired (in shares)		(312,766)
Common stock repurchased and retired	(20,398)	$ (3)	(15,478)	(4,917)
Stock-based compensation	9,895		9,895
Dividends declared	(173,358)			(173,358)
Net income	139,287			139,287
Balance at end of period (in shares) at Jun. 30, 2023		80,220,613
Balance at end of period at Jun. 30, 2023	$ 5,046,687	$ 4,869	$ 3,957,513	$ 1,084,305

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 2.1200	$ 2.1500	$ 1.3625	$ 1.2125

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)		6 Months Ended
		Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net income		$ 341,748,000	$ 560,460,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization		434,089,000	389,379,000
Deferred income tax expense		89,975,000	125,440,000
Abandonment and impairment of unproved properties		0	17,975,000
Stock-based compensation		17,275,000	14,225,000
Amortization of deferred financing costs		2,305,000	2,180,000
Derivative (gain) loss		(30,087,000)	368,143,000
Derivative cash settlement loss		(11,885,000)	(348,209,000)
(Gain) loss on property transactions, net		254,000	(16,797,000)
Other		292,000	155,000
Changes in current assets and liabilities:
Accounts receivable, net		176,984,000	(32,776,000)
Prepaid expenses and other assets		26,338,000	(6,579,000)
Accounts payable and accrued liabilities		(157,973,000)	192,839,000
Settlement of asset retirement obligations		(13,285,000)	(11,667,000)
Net cash provided by operating activities		876,030,000	1,254,768,000
Cash flows from investing activities:
Acquisitions of oil and natural gas properties		(51,247,000)	(303,602,000)
Cash acquired		0	44,310,000
Proceeds from sale of oil and natural gas properties		5,764,000	0
Exploration and development of oil and natural gas properties		(518,949,000)	(467,186,000)
Proceeds from (additions to) other property and equipment		(1,157,000)
Proceeds from (additions to) other property and equipment			66,000
Purchases of carbon offsets		(5,651,000)	(7,196,000)
Deposits for acquisitions		(352,500,000)	0
Other		536,000	117,000
Net cash used in investing activities		(923,204,000)	(733,491,000)
Cash flows from financing activities:
Proceeds from credit facility		0	100,000,000
Payments to credit facility		0	(100,000,000)
Proceeds from issuance of senior notes		2,666,250,000	0
Redemption of senior notes		0	(100,000,000)
Dividends paid		(347,524,000)	(219,768,000)
Common stock repurchased and retired		(320,305,000)	0
Proceeds from exercise of stock options		444,000	202,000
Payment of employee tax withholdings in exchange for the return of common stock		(12,610,000)	(15,740,000)
Payment of deferred financing costs		(4,215,000)	(1,174,000)
Net cash provided by (used in) financing activities		1,982,040,000	(336,480,000)
Net change in cash, cash equivalents, and restricted cash		1,934,866,000	184,797,000
Cash, cash equivalents, and restricted cash:
Beginning of period	[1]	768,134,000	254,556,000
End of period	[1]	$ 2,703,000,000	$ 439,353,000

[1] (1) Includes $0.1 million of restricted cash and consists of funds for road maintenance and repairs that is presented in other noncurrent assets within the accompanying unaudited condensed consolidated balance sheets (“balance sheets”).

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2023	Jun. 30, 2022
Statement of Cash Flows [Abstract]
Restricted cash included in other noncurrent assets	$ 0.1	$ 0.1

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Description of Operations

When we use the terms “Civitas,” the “Company,” “we,” “us,” or “our,” we are referring to Civitas Resources, Inc. and its consolidated subsidiaries unless the context otherwise requires. Civitas is an independent exploration and production company focused on the acquisition, development, and production of oil and associated liquids-rich natural gas primarily in the Denver-Julesburg Basin in Colorado (the “DJ Basin”) and Permian Basin in Texas and New Mexico.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Regulation S-X. Accordingly, pursuant to such rules and regulations, certain notes and other financial information included in audited financial statements have been condensed or omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. All significant intercompany balances and transactions have been eliminated in consolidation.

The December 31, 2022 unaudited condensed consolidated balance sheet data has been derived from the audited consolidated financial statements contained in our 2022 Form 10-K, but does not include all disclosures, including notes required by GAAP. As such, this quarterly report should be read in conjunction with the audited consolidated financial statements and related notes included in our 2022 Form 10-K. In connection with the preparation of the unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2023, through the filing date of this report. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year or any other future period.

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 1 - Summary of Significant Accounting Policies in the 2022 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report.

Recently Issued and Adopted Accounting Standards

There are no accounting standards applicable to the Company that would have a material effect on the Company’s financial statements and disclosures that have been issued but not yet adopted by the Company as of June 30, 2023, and through the filing date of this report.

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ACQUISITIONS AND DIVESTITURES

6 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS AND DIVESTITURES

ACQUISITIONS AND DIVESTITURES

All mergers and acquisitions disclosed are accounted for under the acquisition method of accounting for business combinations. Accordingly, we conduct assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition are expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of oil and natural gas properties and asset retirement obligations are measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital. These inputs require significant judgments and estimates by management at the time of the valuation.

Hibernia Acquisition

On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Hibernia Acquisition Agreement”) with Hibernia Energy III Holdings, LLC and Hibernia Energy III-B Holdings, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity ownership interests of Hibernia Energy III, LLC and Hibernia Energy III-B, LLC. In connection with and upon execution of the Hibernia Acquisition Agreement, the Company deposited with an escrow agent a cash deposit equal to 7.5% of the unadjusted Hibernia Purchase Price (as defined below).

On August 2, 2023, the Company completed the transactions contemplated by the Hibernia Acquisition Agreement (the “Hibernia Acquisition”) for aggregate consideration of $2.25 billion in cash, subject to certain customary purchase price adjustments set forth in the Hibernia Acquisition Agreement (as adjusted, the “Hibernia Purchase Price”). All amounts deposited were applied towards the aggregate cash consideration due at the closing of the Hibernia Acquisition.

The preliminary purchase price allocation for the Hibernia Acquisition is not complete as of the date of this report. The Company expects to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period.

Tap Rock Acquisition

On June 19, 2023, the Company entered into a membership interest purchase agreement (the “Tap Rock Acquisition Agreement”) with Tap Rock Resources Legacy, LLC (“Tap Rock I Legacy”), Tap Rock Resources Intermediate, LLC (“Tap Rock I Intermediate” and, together with Tap Rock I Legacy, the “Tap Rock I Sellers”), Tap Rock Resources II Legacy, LLC (“Tap Rock II Legacy”), Tap Rock Resources II Intermediate, LLC (“Tap Rock II Intermediate” and, together with Tap Rock II Legacy, the “Tap Rock II Sellers”), Tap Rock NM10 Legacy Holdings, LLC (“NM10 Legacy”), and Tap Rock NM10 Holdings Intermediate, LLC (“NM10 Intermediate” and together with NM10 Legacy, the “NM10 Sellers”, and the NM10 Sellers, together with the Tap Rock I Sellers and Tap Rock II Sellers, the “Tap Rock Sellers”), solely in its capacity as “Sellers’ Representative” (as defined therein), Tap Rock I Legacy (the “Tap Rock Sellers’ Representative”), and solely for the limited purposes set forth therein, Tap Rock Resources, LLC, pursuant to which the Company agreed to purchase all of the issued and outstanding equity ownership interests of a Delaware limited liability company to be formed by the Tap Rock I Sellers, Tap Rock Resources II, LLC, and Tap Rock NM10 Holdings, LLC from the Tap Rock I Sellers, the Tap Rock II Sellers and the NM10 Sellers, respectively. In connection with and upon execution of the Tap Rock Acquisition Agreement, the Company deposited with an escrow agent a cash deposit equal to 7.5% of the unadjusted Tap Rock Purchase Price (as defined below).

On August 2, 2023, the Company completed the transactions contemplated by the Tap Rock Acquisition Agreement (the “Tap Rock Acquisition” and, together with the Hibernia Acquisition, the “Acquisitions”) for aggregate consideration of approximately $2.45 billion, which was comprised of (i) $1.50 billion in cash, subject to certain customary purchase price adjustments set forth in the Tap Rock Acquisition Agreement and (ii) 13,538,472 shares of common stock, par value $0.01 per share, of the Company valued at approximately $950.0 million, subject to certain customary anti-dilution and purchase price adjustments (as adjusted, the “Tap Rock Purchase Price”). All amounts deposited were applied towards the aggregate cash consideration due at the closing of the Tap Rock Acquisition.

The preliminary purchase price allocation for the Tap Rock Acquisition is not complete as of the date of this report. The Company expects to finalize the purchase price allocation as soon as practicable, which will not extend beyond the one-year measurement period.

Bison Acquisition

On March 1, 2022, the Company completed the acquisition of privately held DJ Basin operator Bison Oil & Gas II, LLC for merger consideration of approximately $280.4 million (the “Bison Acquisition”). Net assets acquired under the purchase price allocation were $294.0 million and consequently resulted in a bargain purchase gain of $13.6 million. Because of the immateriality of the Bison Acquisition, the related revenue and earnings, supplemental pro forma financial information, and detailed purchase price allocation are not disclosed.

Merger transaction costs

Merger transaction costs related to the aforementioned mergers and acquisitions are accounted for separately from the assets acquired and liabilities assumed and are included in merger transaction costs in the accompanying unaudited condensed consolidated statements of operations (“statements of operations”). The Company incurred merger transaction costs of $31.1 million and $1.4 million during the three months ended June 30, 2023 and 2022, respectively, and $31.6 million and $22.0 million during the six months ended June 30, 2023 and 2022, respectively.

Acquisition of additional working interests in Company-operated wells

On July 5, 2022, the Company acquired additional working interests in certain Company-operated wells for cash consideration of $80.7 million, after customary purchase price adjustments.

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REVENUE RECOGNITION

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION

Oil and natural gas sales revenue presented within the accompanying statements of operations is reflective of the revenue generated from contracts with customers. Revenue attributable to each identified revenue stream is disaggregated below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating net revenues:
Oil sales	$	541,043	$	778,258	$	1,001,417	$	1,327,760
Natural gas sales	45,364		205,840		148,919		319,001
Natural gas liquid (“NGL”) sales	74,119		167,266		166,212		322,413
Oil and natural gas sales	$	660,526	$	1,151,364	$	1,316,548	$	1,969,174

The Company recognizes revenue from the sale of produced oil, natural gas, and NGL at the point in time when control of produced oil, natural gas, or NGL volumes transfer to the purchaser, which may differ depending on the applicable contractual terms. The Company considers the transfer of control to have occurred when the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the oil, natural gas, or NGL production. Transfer of control dictates the presentation of gathering, transportation, and processing expenses within the accompanying statements of operations. Gathering, transportation, and processing expenses incurred by the Company prior to the transfer of control are recorded gross within the gathering, transportation, and processing line item on the accompanying statements of operations. Conversely, gathering, transportation, and processing expenses incurred by the Company subsequent to the transfer of control are recorded net within the oil and natural gas sales line item on the accompanying statements of operations. Please refer to Note 1 - Summary of Significant Accounting Policies in the 2022 Form 10-K for more information regarding the types of contracts under which oil, natural gas, and NGL sales revenue is generated.

The Company records revenue in the month production is delivered and control is transferred to the purchaser. However, settlement statements and payment may not be received for 30 to 60 days after the date production is delivered and control is transferred. Until such time settlement statements and payment are received, the Company records a revenue accrual based on, amongst other factors, an estimate of the volumes delivered at estimated prices as determined by the applicable contractual terms. The Company records the differences between its estimates and the actual amounts received for product sales in the month in which payment is received from the purchaser. For the three and six months ended June 30, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was insignificant. As of June 30, 2023 and December 31, 2022, the Company’s receivables from contracts with customers were $201.2 million and $343.5 million, respectively.

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2023

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

ACCOUNTS PAYABLE AND ACCRUED EXPENSESAccounts payable and accrued expenses contain the following (in thousands):

	June 30, 2023		December 31, 2022
Accounts payable trade	$	27,811	$	31,783
Accrued drilling and completion costs	80,826		137,171
Accrued lease operating expense	18,715		18,109
Accrued gathering, transportation, and processing	56,913		59,398
Accrued general and administrative expense	24,761		20,054
Accrued merger transaction costs	6,252		—
Accrued commodity derivative settlements	844		12,514
Accrued interest expense	6,778		5,509
Accrued settlement	5,727		1,497
Other accrued expenses	11,928		9,262
Total accounts payable and accrued expenses	$	240,555	$	295,297

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LONG-TERM DEBT

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

Senior Notes

Senior Notes are recorded net of unamortized discount and unamortized deferred financing costs within senior notes on the accompanying balance sheets, with no associated premiums. The tables below present the related carrying values as of June 30, 2023 and December 31, 2022 (in thousands):

	As of June 30, 2023
	Principal Amount		Unamortized Discount		Unamortized Deferred Financing Costs		Principal Amount, Net
2026 Senior Notes	$	400,000	$	—	$	5,901	$	394,099
2028 Senior Notes	1,350,000		16,875		5,919		1,327,206
2031 Senior Notes	1,350,000		16,875		5,919		1,327,206
Total	$	3,100,000	$	33,750	$	17,739	$	3,048,511

	As of December 31, 2022
	Principal Amount		Unamortized Discount		Unamortized Deferred Financing Costs		Principal Amount, Net
2026 Senior Notes	$	400,000	$	—	$	6,707	$	393,293

8.375% Senior Notes due 2028 and 8.750% Senior Notes due 2031. On June 29, 2023, the Company issued $1.35 billion aggregate principal amount of 8.375% Senior Notes due 2028 (the “2028 Senior Notes”), at par, pursuant to an indenture (the “2028 Indenture”) among the Company, Computershare Trust Company, N.A., as trustee, and the guarantors party thereto, and $1.35 billion aggregate principal amount of 8.750% Senior Notes due 2031 (the “2031 Senior Notes” and, together with the 2028 Senior Notes, the “Acquisition Senior Notes”), at par, pursuant to an indenture (the “2031 Indenture”) among the Company, Computershare Trust Company, N.A., as trustee. Upon issuance of the Acquisition Senior Notes, the Company received net proceeds of $2.67 billion after deducting fees of $33.8 million. The Company used the net proceeds from the Acquisition Senior Notes, together with cash on hand and borrowings under the Credit Facility, to fund a portion of the consideration for the Acquisitions. Interest on the 2028 Senior Notes and the 2031 Senior Notes will accrue at the rate of 8.375% per annum and 8.750% per annum, respectively, and will be payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2024.

The 2028 Indenture and 2031 Indenture each contain covenants that limit, among other things, the Company’s ability and the ability of its subsidiaries to: incur or guarantee additional indebtedness; create liens securing indebtedness; pay dividends on or redeem or repurchase stock or subordinated debt; make specified types of investments and acquisitions; enter into or permit to exist contractual limits on the ability of the Company’s subsidiaries to pay dividends to the Company; enter into transactions with affiliates; and sell assets or merge with other companies. These covenants will not, however, restrict the activities of the entities that will be acquired in connection with the Acquisitions prior to the consummation of the Acquisitions. These covenants are subject to a number of important limitations and exceptions. The Company was in compliance with all covenants under the 2028 Indenture and 2031 Indenture as of June 30, 2023, and through the filing of this report. Each of the 2028 Indenture and 2031 Indenture also contain customary events of default.

At any time prior to July 1, 2025, the Company may redeem all or part of the 2028 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after July 1, 2025, the Company may redeem all or part of the 2028 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 104.188% for the twelve-month period beginning on July 1, 2025; (ii) 102.094% for the twelve-month period beginning on July 1, 2026; and (iii) 100.000% for the period beginning July 1, 2027 and at any time thereafter, plus accrued and unpaid interest, if any to, but excluding the redemption date (subject to the right of the noteholders on the relevant record date to receive interest on the relevant interest payment date).

At any time prior to July 1, 2026, the Company may redeem all or part of the 2031 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after July 1, 2026, the Company may redeem all or part of the 2031 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 104.375% for the twelve-month period beginning on July 1, 2026; (ii) 102.188% for the twelve-month period beginning on July 1, 2027; and (iii) 100.000% for the period beginning July 1, 2028 and at any time thereafter, plus accrued and unpaid interest, if any to, but excluding the redemption date (subject to the right of the noteholders on the relevant record date to receive interest on the relevant interest payment date).

The Company may redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes or 2031 Senior Notes at any time prior to July 1, 2025 or 2026, respectively, with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 108.375%, with respect to the 2028 Senior Notes, and 108.750%, with respect to the 2031 Senior Notes, of the principal amount of such series of Acquisition Senior Notes redeemed, plus accrued and unpaid interest, if any, provided, however, that (i) at least 65.0% of the aggregate principal amount of Acquisition Senior Notes of such series originally issued on the issue date (but excluding Acquisition Senior Notes of such series held by the Company and its subsidiaries) remains outstanding immediately after the occurrence of such redemption (unless all such Acquisition Senior Notes are redeemed substantially concurrently) and (ii) the redemption occurs within 180 days after the date of the closing of such equity offering.

The Acquisition Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company’s subsidiaries, including the entities that became subsidiaries of the Company upon the consummation of the Acquisitions, as well as by certain other future subsidiaries that may be required to guarantee the Acquisition Senior Notes.

5.000% Senior Notes due 2026. On October 13, 2021, the Company issued $400.0 million aggregate principal amount of 5.000% Senior Notes due 2026 (the “2026 Senior Notes”) pursuant to an indenture (the “2026 Indenture”), among Civitas Resources, Wells Fargo Bank, National Association, as trustee, and the guarantors party thereto. Interest accrues at the rate of 5.000% per annum and is payable semiannually in arrears on April 15 and October 15 of each year. Payments commenced on April 15, 2022.

The 2026 Indenture contains covenants that limit, among other things, the Company’s ability to: (i) incur or guarantee additional indebtedness; (ii) create liens securing indebtedness; (iii) pay dividends on or redeem or repurchase stock or subordinated debt; (iv) make specified types of investments and acquisitions; (v) enter into or permit to exist contractual limits on the ability of the Company’s subsidiaries to pay dividends to Civitas Resources; (vi) enter into transactions with affiliates; and (vii) sell assets or merge with other companies. These covenants are subject to a number of important limitations and exceptions. The Company was in compliance with all covenants under the 2026 Indenture as of June 30, 2023, and through the filing of this report. In addition, certain of these covenants will be terminated before the 2026 Senior Notes mature if at any time no default or event of default exists under the 2026 Indenture and the 2026 Senior Notes receive an investment-grade rating from at least two ratings agencies. The 2026 Indenture also contains customary events of default.

At any time prior to October 15, 2023, the Company may redeem the 2026 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after October 15, 2023, the Company may redeem all or part of the 2026 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 102.500% for the twelve-month period beginning on October 15, 2023; (ii) 101.250% for the twelve-month period beginning on October 15, 2024; and (iii) 100.000% for the twelve-month period beginning October 15, 2025 and at any time thereafter, plus accrued and unpaid interest, if any.

The Company may redeem up to 35% of the aggregate principal amount of the 2026 Senior Notes at any time prior to October 15, 2023 with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 105.000% of the principal amount of the 2026 Senior Notes redeemed, plus accrued and unpaid interest, if any, provided, however, that (i) at least 65.0% of the aggregate principal amount of the 2026 Senior Notes originally issued on the issue date (but excluding 2026 Senior Notes held by the Company) remains outstanding immediately after the occurrence of such redemption (unless all such 2026 Senior Notes are redeemed substantially concurrently) and (ii) the redemption occurs within 180 days after the date of the closing of such equity offering.

The 2026 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of Civitas’ existing subsidiaries.

7.500% Senior Notes due 2026. In April 2021, the Company issued $100.0 million aggregate principal amount of 7.500% Senior Notes due 2026 pursuant to an indenture by and among Civitas Resources, U.S. Bank National Association, as trustee, and the guarantors party thereto. Interest accrued at the rate of 7.500% per annum and was payable semiannually in arrears on April 30 and October 31 of each year. On May 1, 2022, the Company redeemed all of the issued and outstanding 7.500% Senior Notes at 100.0% of their aggregate principal amount, plus accrued and unpaid interest thereon to the redemption date.

Credit Facility

The Company is party to a reserve-based revolving facility, as the borrower, with JPMorgan Chase Bank, N.A. (“JPMorgan”), as the administrative agent, and a syndicate of financial institutions, as lenders, that had an aggregate maximum commitment amount of $2.0 billion and was set to mature on November 1, 2025 (with all subsequent amendments, the “Credit Facility” or the “Credit Agreement”).

The Credit Facility is guaranteed by all restricted domestic subsidiaries of the Company, including the entities that became subsidiaries of the Company upon the consummation of the Acquisitions, and is secured by first priority security interests on substantially all assets, including a mortgage on at least 90% of the total value of the proved properties evaluated in the most recently delivered reserve reports prior to the amendment effective date, including any engineering reports relating to the oil and natural gas properties of the restricted domestic subsidiaries of the Company, subject to customary exceptions.

The Credit Facility contains customary representations and affirmative covenants. The Credit Facility also contains customary negative covenants, which, among other things, and subject to certain exceptions, include restrictions on (i) liens, (ii) indebtedness, guarantees and other obligations, (iii) restrictions in agreements on liens and distributions, (iv) mergers or consolidations, (v) asset sales, (vi) restricted payments, (vii) investments, (viii) affiliate transactions, (ix) change of business, (x) foreign operations or subsidiaries, (xi) name changes, (xii) use of proceeds, letters of credit, (xiii) gas imbalances, (xiv) hedging transactions, (xv) additional subsidiaries, (xvi) changes in fiscal year or fiscal quarter, (xvii) operating leases, (xviii) prepayments of certain debt and other obligations, (xix) sales or discounts of receivables, (xx) dividend payment thresholds, and (xxi) cash balances. 

In addition, the Company is subject to certain financial covenants under the Credit Facility, as tested on the last day of each fiscal quarter, including, without limitation, (a) permitted net leverage ratio of 3.00 to 1 and (b) a current ratio, inclusive of the unused commitments then available to be borrowed, to not be less than 1.00 to 1. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2023 and through the filing of this report.

On April 20, 2022, the Company entered into an amendment to the Credit Agreement that increased the Company’s borrowing base from $1.0 billion to $1.7 billion and increased the aggregate elected commitments from $800.0 million to $1.0 billion.

In addition, this amendment resulted in the removal and replacement of LIBOR with the Secured Overnight Financing Rate (“SOFR”) as a mechanism to determine interest for borrowings made under the Credit Facility using a term-specific SOFR. As a result, borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, either (i) the Alternate Base Rate (“ABR”, for ABR Revolving Credit Loans) plus the applicable margin, or (ii) the term-specific SOFR plus the applicable margin. ABR is established as a rate per annum equal to the greatest of (a) the rate of interest publicly announced by JPMorgan as its prime rate, (b) the applicable rate of interest published by the Federal Reserve Bank of New York plus 0.5%, or (c) the term-specific SOFR plus 1.0%, subject to a 1.5% floor plus the applicable margin of 1.0% to 2.0%, based on the utilization of the Credit Facility. Term-specific SOFR is based on one-, three-, or six-month terms as selected by the Company and is subject to a 0.5% floor plus the applicable margin of 2.0% to 3.0%, based on the utilization of the Credit Facility. Interest on borrowings that bear interest at the SOFR are payable on the last day of the applicable interest period selected by the Company, and interest on borrowings that bear interest at the ABR are payable quarterly in arrears. 

As part of the regularly scheduled, semi-annual borrowing base redeterminations under the Credit Facility, on October 27, 2022, the Company’s aggregate elected commitments of $1.0 billion were reaffirmed and borrowing base was increased from $1.7 billion to $1.85 billion.

In connection with the Company’s entry into the Hibernia Acquisition Agreement and the Tap Rock Acquisition Agreement, on June 23, 2023, the Company entered into an amendment to the Credit Agreement. Pursuant to the amendment, the Company was authorized to, among other things, (i) offer and issue the Acquisition Senior Notes, (ii) incur indebtedness pursuant to those certain debt commitment letters by and among the Company, Bank of America N.A., BofA Securities, Inc., and JPMorgan Chase Bank, N.A. providing for two separate 364-day bridge loan facilities in an aggregate principal amount of up to $2.7 billion (such facilities, the “Bridge Facilities” and the loans made thereunder, the “Bridge Loans”), the proceeds of which would have, if drawn, be used to partially fund the Acquisitions, (iii) incur the debt described in the immediately preceding clauses (i) and (ii) without any corresponding reduction in the borrowing base of the Credit Facility, and (iv) incur pari passu term loan indebtedness subject to a total secured leverage test of 2.00 to 1.00 and certain other customary terms and conditions. Because the Acquisition Senior Notes successfully closed and were issued on June 29, 2023, the Company did not draw on the Bridge Loans and has terminated the commitments under the Bridge Facilities. Consequently, approximately $22.6 million of fees associated with the Bridge Facilities and backstop fees associated with the Credit Facility amendment were incurred and expensed to merger transaction costs in the accompanying statements of operations for the three and six months ended June 30, 2023.

Finally, in connection with the Company’s closing of the Acquisitions, on August 2, 2023, the Company entered in an amendment to the Credit Agreement whereby aggregate elected commitments increased from $1.0 billion to $1.85 billion, the borrowing base increased from $1.85 billion to $3.0 billion, and the aggregate maximum credit commitment increased from $2.0 billion to $4.0 billion. In addition, the maturity of the Credit Facility was extended to August 2028. The next scheduled borrowing base redetermination date is set to occur in May 2024.

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Facility as of the dates indicated (in thousands):

	August 2, 2023		June 30, 2023		December 31, 2022
Revolving credit facility	$	750,000	$	—	$	—
Letters of credit	12,100		12,100		12,100
Available borrowing capacity	1,087,900		987,900		987,900
Total aggregate elected commitments	$	1,850,000	$	1,000,000	$	1,000,000

In connection with the amendments to the Credit Facility, the Company capitalized a total of approximately $13.0 million in deferred financing costs as of June 30, 2023. Of the total post-amortization net capitalized amounts, (i) $4.6 million and $5.5 million are presented within other noncurrent assets on the accompanying balance sheets as of June 30, 2023 and December 31, 2022, respectively, and (ii) $3.5 million and $3.0 million are presented within prepaid expenses and other on the accompanying balance sheets as of June 30, 2023 and December 31, 2022, respectively.

Interest Expense

For the three months ended June 30, 2023 and 2022, the Company incurred interest expense of $8.8 million and $8.1 million, respectively. For the six months ended June 30, 2023 and 2022, the Company incurred interest expense of $16.2 million and $17.2 million, respectively. No interest was capitalized during the three and six months ended June 30, 2023 and 2022.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Legal Proceedings 

From time to time, the Company is involved in various commercial and regulatory claims, litigation, and other legal proceedings that arise in the ordinary course of its business. The Company assesses these claims in an effort to determine the degree of probability and range of possible loss for potential accrual in its consolidated financial statements. In accordance with authoritative accounting guidance, an accrual is recorded for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the most likely anticipated outcome or the minimum amount within a range of possible outcomes. Because legal proceedings are inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about uncertain future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. The Company regularly reviews contingencies to determine the adequacy of its accruals and related disclosures.

As of the filing date of this report, there were no probable, material pending, or overtly threatened legal actions against the Company of which it was aware, other than the following:

Boulder County. In prior periods, there was ongoing litigation between Boulder County and Extraction which has been previously disclosed as having the potential to prevent oil and gas operations for the development of minerals contained within Boulder County, Colorado. Boulder County had initiated suit in District Court for Boulder County that was primarily a contract case, where the relevant contracts were the conservation easement over the Blue Paintbrush location, Extraction’s Surface Use Agreement for the Blue Paintbrush location, and the leases that Boulder owns within the Blue Paintbrush drilling and spacing unit. Boulder sought invalidation of these leases in the litigation. This litigation has been resolved as to all substantive issues.

In May 2022, Boulder County alleged new legal theories and requested termination of the leases previously at issue in the Blue Paintbrush litigation. Boulder raised these same claims in opposition to the Company’s pooling application before the Colorado Energy & Carbon Management Commission (“ECMC”) (formerly the Colorado Oil & Gas Conservation Commission), which did not proceed to hearing after the Company withdrew the pooling application. If an action is brought by Boulder County, an adverse outcome in any such litigation could result in the Company failing to meet its development objectives in Blue Paintbrush.

Enforcement. Disclosure of certain environmental matters is required when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that the Company believes could exceed $0.3 million. The Company has received Notices of Alleged Violations (“NOAV”) from the ECMC alleging violations of various Colorado statutes and ECMC regulations governing oil and gas operations. The Company has further received notices from the Colorado Air Pollution Control Division. The Company continues to engage in discussions regarding resolution of the alleged violations. As of June 30, 2023 and December 31, 2022, the Company has accrued approximately $1.0 million and $0.7 million, respectively, associated with the NOAVs and Colorado Air Pollution Control Division notices.

Commitments

Firm Transportation Agreements. The Company is party to a firm pipeline transportation contract to provide a guaranteed outlet for production on an oil pipeline system. The contract requires the Company to pay minimum volume transportation charges on 12,500 barrels (“Bbl”) per day through April 2025, regardless of the amount of pipeline capacity utilized by the Company. The aggregate financial commitment fee over the remaining term was $26.8 million as of June 30, 2023. The Company expects to utilize most, if not all, of the firm capacity on the oil pipeline system.

Minimum Volume Agreement - Oil. The Company is party to a purchase agreement to deliver fixed and determinable quantities of crude oil. Under the terms of the agreement, the Company is required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitment of 20,000 gross Bbls per day over a term ending in December 2023. The aggregate financial commitment fee over the remaining term is $22.6 million as of June 30, 2023. The Company has not and does not expect to incur any deficiency payments.

Minimum Volume Agreement - Gas and Other. The Company is party to a gas gathering and processing agreement (the “Gathering Agreement”) with a third-party midstream provider over a term ending in 2029 with an annual minimum volume commitment of 13.0 billion cubic feet of natural gas. The Gathering Agreement also includes a commitment to sell take-in-kind NGLs from other processing agreements of 7,500 Bbls a day through 2026 with the ability to roll forward up to a 10% shortfall in a given month to the subsequent month. The aggregate financial commitment fee over the remaining term is $107.6 million as of June 30, 2023, which fluctuates with commodity prices as this is a value-based percentage of proceeds sales contract. Based on current projections, the Company may incur approximately $31.0 million of shortfall payments under the Gathering Agreement during the remaining term of approximately seven years; however, the Company is actively engaging alternative strategies to reduce any potential contract deficiencies incurred in future periods.

Additionally, the Company is also party to a gas gathering and processing agreement with several third-party producers and a third-party midstream provider to deliver to two different plants over terms that end in August 2025 and July 2026. The Company’s share of these commitments requires an incremental 51.5 and 20.6 million cubic feet of natural gas (“MMcf”) per day, respectively, over a baseline volume of 65 MMcf per day for a period of seven years following the in-service dates of the plants. The Company may be required to pay a shortfall fee for any incremental volume deficiencies under these commitments. These contractual obligations can be reduced by the Company’s proportionate share of the collective volumes delivered to the plants by other incremental third-party volumes available to the midstream provider that are in excess of the total commitments. Because of the third-party producer reduction provision, we believe that the aggregate financial commitment fee over the remaining term is zero as of June 30, 2023. The Company has not and does not expect to incur any deficiency payments.

The Company is also party to additional individually immaterial agreements that require the Company to pay a fee associated with the minimum volumes over various terms ending in December 2025, regardless of the amount delivered. The aggregate financial commitment fee over the remaining term for these contracts was $8.5 million as of June 30, 2023.

The minimum annual payments under these agreements for the next five years as of June 30, 2023 are presented below (in thousands):

	Firm Transportation		Minimum Volume(1)
Remainder of 2023	$	7,360	$	34,182
2024	14,640		19,596
2025	4,800		20,434
2026	—		16,816
2027	—		16,250
2028 and thereafter	—		31,460
Total	$	26,800	$	138,738

___________________________

(1)The above calculation is based on the minimum volume commitment schedule (as defined in the relevant agreement) and applicable differential fees.

Other commitments. The Company is party to a drilling commitment agreement with a third-party midstream provider such that the Company is required to drill and complete a total of 106 qualifying wells, whereby a minimum number of wells out of the total must be drilled by a deadline occurring every two years over a period ending December 31, 2026. The drilling commitment agreement provides for, among other things, a number of specifications such as minimum consecutive days of production, well performance, and lateral length. Wells operated by others can satisfy this commitment, subject to limitations. If the Company were to fail to complete the wells by the applicable deadline, it would be in breach of the agreement and the third-party midstream provider could attempt to assert damages against Civitas and its affiliates. As of the date of filing, the Company cannot reasonably estimate how much, if any, damages will be paid.

Refer to Note 13 - Leases for lease commitments.

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Long Term Incentive Plans

In April 2017, the Company adopted the 2017 Long Term Incentive Plan (“2017 LTIP”), which provides for the issuance of restricted stock units, performance stock units, and stock options, and reserved 2,467,430 shares of common stock. In June 2021, the Company adopted the 2021 Long Term Incentive Plan (“2021 LTIP”), which reserved an incremental 700,000 shares of common stock to those previously reserved under the 2017 LTIP. Finally, in conjunction with the Company’s merger with Extraction Oil & Gas, Inc. (“Extraction”) in November 2021, Civitas assumed Extraction’s 2021 Long Term Incentive Plan (the “Extraction Equity Plan”), which reserved 3,305,080 shares of common stock now issuable by Civitas. The 2017 LTIP, 2021 LTIP, and Extraction Equity Plan are collectively referred to herein as the “LTIP”.

The Company records compensation expense associated with the issuance of awards under the LTIP on a straight-line basis over the vesting period based on the fair value of the awards as of the date of grant within general and administrative expense. The following table outlines the compensation expense recorded by type of award (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Restricted and deferred stock units	$	4,769	$	3,917	$	9,194	$	9,182
Performance stock units	5,126		2,218		8,081		5,043
Total stock-based compensation	$	9,895	$	6,135	$	17,275	$	14,225

As of June 30, 2023, unrecognized compensation expense related to the awards granted under the LTIP will be amortized through the relevant periods as follows (in thousands):

	Unrecognized Compensation Expense		Final Year of Recognition
Restricted and deferred stock units	$	27,578	2026
Performance stock units	26,364		2025
Total unrecognized stock-based compensation	$	53,942

Restricted Stock Units and Deferred Stock Units

The Company grants time-based Restricted Stock Units (“RSUs”) to its officers, executives, and employees and time-based Deferred Stock Units (“DSUs”) to its non-employee directors as part of its LTIP. Each RSU and DSU represents a right to receive one share of the Company’s common stock at the end of the specified vesting period. RSUs generally vest and settle either over a (i) one-year vesting period, with the entire grant vesting and settling on the anniversary date or (ii) three-year vesting period, with one-third of the total grant vesting and settling on each anniversary date. Each RSU is entitled to a dividend equivalent right to receive, upon settlement, a cash payment based on the regular cash dividends that would have been paid on a share of the Company’s common stock during the period between the grant date and the date the RSUs vest and are settled. Accrued but unpaid dividend equivalents are recognized as a liability on the accompanying balance sheets, until the recipients receive the dividend equivalents upon vesting and settlement. DSUs generally vest over a one-year period following the grant date. DSUs are settled in shares of the Company’s common stock upon the non-employee director’s separation of service from the Board of Directors (the “Board”). Each DSU is entitled to a dividend equivalent right to receive, upon vesting, a cash payment based on the regular cash dividends that would have been paid on a share of the Company’s common stock. The grant-date fair value of RSUs and DSUs is equal to the closing price of the Company’s common stock on the date of the grant.

A summary of the status and activity of non-vested RSUs and DSUs for the six months ended June 30, 2023 is presented below:

	RSUs and DSUs	Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year	675,898	$	50.27
Granted	309,500	71.12
Vested	(342,563)	46.67
Forfeited	(34,072)	57.36
Non-vested, end of period	608,763	$	62.50

The aggregate grant-date fair value of the RSUs and DSUs granted under the LTIP during the six months ended June 30, 2023 was $22.0 million.

Performance Stock Units

The Company grants market-based performance stock units (“PSUs”) to its officers and certain executives as part of its LTIP. The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%) of the number of PSUs granted and is determined based on performance achievement against certain market-based criteria over a three-year performance period. PSUs generally vest and settle on December 31 of the year preceding the third anniversary of the date of grant. Each PSU is entitled to a dividend equivalent right to receive, upon settlement, a cash payment based on the regular cash dividends that would have been paid on a share of the Company’s common stock during the period between the grant date and the date the PSUs vest and are settled. Accrued but unpaid dividend equivalents are recognized as a liability on the accompanying balance sheets, until the recipients receive the dividend equivalents upon vesting and settlement.

Performance achievement is determined based on either, or a combination of, (1) the Company’s annualized absolute total shareholder return (“TSR”) or (2) for certain PSUs granted prior to fiscal year 2023, the Company’s absolute TSR relative to that of a defined peer group. Absolute TSR is determined based upon the performance of the Company’s common stock over the performance period relative to the price of the Company’s common stock at the grant date. For awards with a relative TSR component, the Company’s absolute TSR is compared with the absolute TSRs of a group of peer companies over the performance period. The absolute TSR for the Company and each of the peer companies is determined by dividing (A) (i) the volume-weighted average share price for the last 30 trading days of the performance period, minus (ii) the volume-weighted average share price for the 30 trading days preceding the beginning of the performance period, plus (iii) dividends paid by (B)

the volume-weighted average share price for the 30 trading days preceding the beginning of the performance period. The resultant amount is then annualized based on the length of the performance period.

The grant-date fair value of the PSUs was estimated using a Monte Carlo valuation model. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Significant assumptions used in this valuation include the Company’s expected volatility as well as the volatilities for each of the Company’s peers and an interpolated risk-free interest rate based on U.S. Treasury yields with maturities consistent with the performance period.

A summary of the status and activity of non-vested PSUs for the six months ended June 30, 2023 is presented below:

	PSUs (1)	Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year	345,999	$	77.42
Granted	233,861	103.39
Vested	(89,901)	78.49
Forfeited	(59,726)	87.80
Expired	(242)	18.26
Non-vested, end of period	429,991	$	89.92

___________________________

(1)The number of awards assumes that the associated performance condition is met at the target amount (multiplier of one). The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%), depending on the level of satisfaction of the performance condition.

The aggregate grant-date fair value of the PSUs granted under the LTIP during the six months ended June 30, 2023 was $24.2 million.

Stock Options

The LTIP allows for the issuance of stock options to the Company’s employees at the sole discretion of the Board. Options expire ten years from the grant date unless otherwise determined by the Board.

Stock options are valued using a Black-Scholes Model where expected volatility is based on an average historical volatility of a peer group selected by management over a period consistent with the expected life assumption on the grant date, the risk-free rate of return is based on the U.S. Treasury constant maturity yield on the grant date with a remaining term equal to the expected term of the awards, and the Company’s expected life of stock option awards is derived from the midpoint of the average vesting time and contractual term of the awards.

A summary of the status and activity of stock options for the six months ended June 30, 2023 is presented below:

	Stock Options	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding, beginning of year	15,170	$	34.36
Exercised	(13,463)	34.36
Expired	(111)	34.36
Outstanding, end of period	1,596	$	34.36	3.8	$	56
Options outstanding and exercisable	1,596	$	34.36	3.8	$	56

The aggregate intrinsic value of options exercised during the six months ended June 30, 2023 was $0.5 million.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTSThe Company follows authoritative accounting guidance for measuring the fair value of assets and liabilities in its financial statements. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Further, this guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

The fair value hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities 

Level 2: Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable

Level 3: Significant inputs to the valuation model are unobservable

Financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy.

Derivatives

The Company uses Level 2 inputs to measure the fair value of oil and natural gas commodity price derivatives. The fair value of the Company’s commodity price derivatives is estimated using industry-standard models that contemplate various inputs including, but not limited to, the contractual price of the underlying position, current market prices, forward commodity price curves, volatility factors, time value of money, and the credit risk of both the Company and its counterparties. We validate our fair value estimate by corroborating the original source of inputs, monitoring changes in valuation methods and assumptions, and reviewing counterparty mark-to-market statements and other supporting documentation. Refer to Note 9 - Derivatives for more information regarding the Company’s derivative instruments.

The following tables present the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and their classification within the fair value hierarchy (in thousands):

	As of June 30, 2023
	Level 1		Level 2		Level 3
Derivative assets	$	—	$	6,135	$	—
Derivative liabilities	$	—	$	24,411	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3
Derivative assets	$	—	$	3,284	$	—
Derivative liabilities	$	—	$	63,533	$	—

Long-Term Debt

The 2026 Senior Notes, 2028 Senior Notes, and 2031 Senior Notes are recorded at cost, net of any unamortized discount or deferred financing costs. As of June 30, 2023, the fair value of the 2026 Senior Notes, 2028 Senior Notes, and 2031 Senior Notes were $377.3 million, $1.37 billion, and $1.37 billion, respectively. These fair values are based on quoted market prices, and as such, are designated as Level 1 within the fair value hierarchy. The recorded value of the Credit Facility, if any, approximates its fair value as it bears interest at a floating rate that approximates a current market rate. Please refer to Note 5 - Long-Term Debt for additional information.

Warrants

Warrants issued are indexed to the Company’s common stock and required to be net share settled via a cashless exercise. Accordingly, they are classified as equity instruments. The Company’s share price traded below the exercise price of the warrants and therefore were not exercisable during the three and six months ended June 30, 2023 and 2022.

The fair value of the warrants on the issuance date was determined using Level 3 inputs including, but not limited to, volatility, risk-free rate, and dividend yield under the Cox-Ross-Rubinstein binomial option pricing model. The warrants are recorded within additional paid-in capital on the accompanying balance sheets at a fair value of $77.5 million, with no recurring fair value measurement required. There have been no changes to the initial carrying amount of the warrants since issuance.

Acquisitions and Impairments of Proved and Unproved Properties

We measure acquired assets or businesses at fair value on a nonrecurring basis and review our proved and unproved oil and natural gas properties for impairment using inputs that are not observable in the market, and are therefore designated as Level 3 within the valuation hierarchy. There were no impairments of proved properties recorded during the three and six months ended June 30, 2023 and 2022, and no abandonment and impairment of unproved properties expense was incurred during the three months ended June 30, 2023 and 2022. During the six months ended June 30, 2023 and 2022, the Company incurred abandonment and impairment of unproved properties expense of zero and $18.0 million, respectively. Please refer to Note 1 – Summary of Significant Accounting Policies for information on the Company’s policies for determining fair value of its proved and unproved properties and related impairment expense.

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DERIVATIVES

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

DERIVATIVES

The Company periodically enters into commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices for its expected future oil and natural gas production and the associated impact on cash flows. The Company’s commodity derivative contracts consist of swaps, collars, basis protection swaps, and puts. As of June 30, 2023, all derivative counterparties were members of the Credit Facility lender group and all commodity derivative contracts are entered into for other-than-trading purposes. The Company does not designate its commodity derivative contracts as hedging instruments.

A typical swap arrangement guarantees a fixed price on contracted volumes. If the agreed upon published third-party index price (“index price”) is lower than the fixed contract price at the time of settlement, the Company receives the difference between the index price and the fixed contract price. If the index price is higher than the fixed contact price at the time of settlement, the Company pays the difference between the index price and the fixed contract price.

A typical collar arrangement establishes a floor and ceiling price on contracted volumes through the use of a short call and a long put (“two-way collar”). When the index price is above the ceiling price at the time of settlement, the Company pays the difference between the index price and the ceiling price. When the index price is below the floor price at the time of settlement, the Company receives the difference between the index price and floor price. When the index price is between the floor price and ceiling price, no payment or receipt occurs. A minority of our collar arrangements combine a two-way collar with a short put that holds an exercise price below the floor price (“three-way collar”). In these arrangements, when the index price is below the floor price at the time of settlement, the Company receives the difference between the index price and the floor price, capped at the difference between the floor price and the exercise price of the short put.

Basis protection swaps are arrangements that guarantee a price differential for natural gas from a specified delivery point. For basis protection swaps, the Company receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract.

A put arrangement gives the Company the right to sell the underlying commodity at a strike price over the term of the contract. If the index price is higher than the strike price, no payment or receipt occurs. If the index price is lower than the strike price, the Company receives the difference between the index price and the strike price.

As of June 30, 2023, the Company had entered into the following commodity price derivative contracts:

	Contract Period
	Q3 2023		Q4 2023		Q1 2024		Q2 2024		Q3 - Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes	5,695		7,984		4,814		5,562		4,852
Weighted-Average Contract Price	$	70.44	$	70.36	$	69.13	$	66.47	$	68.28
Two-Way Collars
NYMEX WTI Volumes	663		1,000		—				—
Weighted-Average Ceiling Price	$	82.15	$	82.15	$	—			$	—
Weighted-Average Floor Price	$	60.00	$	60.00	$	—			$	—
Three-Way Collars
NYMEX WTI Volumes	1,302		1,172		573		—		—
Weighted-Average Ceiling Price	$	57.48	$	56.49	$	56.25	$	—	$	—
Weighted-Average Floor Price	$	47.91	$	49.04	$	45.00	$	—	$	—
Weighted-Average Sold Put Price	$	37.41	$	39.04	$	35.00	$	—	$	—
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”))
Swaps
NYMEX HH Volumes	46,120		45,947		31,790		31,686		16,639
Weighted-Average Contract Price	$	2.61	$	2.60	$	2.69	$	2.68	$	2.74
Two-Way Collars
NYMEX HH Volumes	1,887		1,756		736		1,732		834
Weighted-Average Ceiling Price	$	2.96	$	2.96	$	3.16	$	2.89	$	3.16
Weighted-Average Floor Price	$	2.34	$	2.38	$	2.50	$	2.20	$	2.50
Three-Way Collars
NYMEX HH Volumes	—		—		1,166		55		—
Weighted-Average Ceiling Price	$	—	$	—	$	3.50	$	3.42	$	—
Weighted-Average Floor Price	$	—	$	—	$	2.50	$	2.50	$	—
Weighted-Average Sold Put Price	$	—	$	—	$	2.00	$	2.00	$	—
Basis Protection Swaps
CIG-NYMEX HH Volumes	48,008		47,703		33,691		33,473		16,623
Weighted-Average Contract Price	$	(0.46)	$	(0.46)	$	(0.27)	$	(0.27)	$	(0.27)

As of the filing date of this report, the Company had entered into the following commodity price derivative contracts:

	Contract Period
	Q3 2023		Q4 2023		Q1 2024		Q2 2024		Q3 - Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes	23,055		29,161		12,727		11,991		9,767
Weighted-Average Contract Price	$	72.30	$	71.83	$	70.39	$	68.75	$	69.15
Two-Way Collars
NYMEX WTI Volumes	7,334		9,392		11,913		10,430		8,914
Weighted-Average Ceiling Price	$	82.63	$	82.28	$	81.51	$	80.83	$	80.07
Weighted-Average Floor Price	$	60.00	$	60.00	$	58.00	$	58.00	$	58.00
Three-Way Collars
NYMEX WTI Volumes	1,302		1,172		573		—		—
Weighted-Average Ceiling Price	$	57.48	$	56.49	$	56.25	$	—	$	—
Weighted-Average Floor Price	$	47.91	$	49.04	$	45.00	$	—	$	—
Weighted-Average Sold Put Price	$	37.41	$	39.04	$	35.00	$	—	$	—
Puts
NYMEX WTI Volumes	—		—		7,942		6,953		5,943
Weighted-Average Strike Price	$	—	$	—	$	55.00	$	55.00	$	55.00
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/MMBtu)
Swaps
NYMEX HH Volumes	46,120		45,947		31,790		31,686		16,639
Weighted-Average Contract Price	$	2.61	$	2.60	$	2.69	$	2.68	$	2.74
Two-Way Collars
NYMEX HH Volumes	1,887		1,756		736		1,732		834
Weighted-Average Ceiling Price	$	2.96	$	2.96	$	3.16	$	2.89	$	3.16
Weighted-Average Floor Price	$	2.34	$	2.38	$	2.50	$	2.20	$	2.50
Three-Way Collars
NYMEX HH Volumes	—		—		1,166		55		—
Weighted-Average Ceiling Price	$	—	$	—	$	3.50	$	3.42	$	—
Weighted-Average Floor Price	$	—	$	—	$	2.50	$	2.50	$	—
Weighted-Average Sold Put Price	$	—	$	—	$	2.00	$	2.00	$	—
Basis Protection Swaps
CIG-NYMEX HH Volumes	48,008		47,703		33,691		33,473		16,623
Weighted-Average Contract Price	$	(0.46)	$	(0.46)	$	(0.27)	$	(0.27)	$	(0.27)

Derivative Assets and Liabilities Fair Value 

The Company’s commodity price derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities. The following table contains a summary of all the Company’s derivative positions reported on the accompanying balance sheets as well as a reconciliation between the gross assets and liabilities and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Derivative Assets:
Commodity contracts - current	$	4,335	$	2,490
Commodity contracts - noncurrent	1,800		794
Total derivative assets	6,135		3,284
Amounts not offset in the accompanying balance sheets	(3,258)		—
Total derivative assets, net	$	2,877	$	3,284
Derivative Liabilities:
Commodity contracts - current	$	(21,438)	$	(46,334)
Commodity contracts - long-term	(2,973)		(17,199)
Total derivative liabilities	(24,411)		(63,533)
Amounts not offset in the accompanying balance sheets	3,258		—
Total derivative liabilities, net	$	(21,153)	$	(63,533)

The following table summarizes the components of the derivative gain (loss) presented on the accompanying statements of operations for the periods below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Derivative cash settlement loss:
Oil contracts	$	(2,164)	$	(114,778)	$	(5,613)	$	(239,940)
Natural gas contracts	829		(54,091)		(6,272)		(82,875)
NGL contracts	—		(12,762)		—		(25,394)
Total derivative cash settlement loss	(1,335)		(181,631)		(11,885)		(348,209)
Change in fair value gain (loss)	6,262		108,981		41,972		(19,934)
Total derivative gain (loss)	$	4,927	$	(72,650)	$	30,087	$	(368,143)

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ASSET RETIREMENT OBLIGATIONS

6 Months Ended

Jun. 30, 2023

Asset Retirement Obligation Disclosure [Abstract]

ASSET RETIREMENT OBLIGATIONS

ASSET RETIREMENT OBLIGATIONS

The Company recognizes an estimated liability for future costs associated with the abandonment of its oil and gas properties, including facilities requiring decommissioning. A liability for the fair value of an asset retirement obligation and corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired, or a facility is constructed. The increase in carrying value is included in proved properties in the accompanying balance sheets. The Company depletes the amount added to proved properties and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective long-lived assets. Cash paid to settle asset retirement obligations is included in the cash flows from operating activities section of the accompanying unaudited condensed consolidated statements of cash flows.

The Company’s estimated asset retirement obligation liability is based on historical experience plugging and abandoning wells, estimated economic lives, estimated plugging and abandonment cost, and regulatory requirements. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised.

A roll-forward of the Company’s asset retirement obligation is as follows (in thousands):

	Amount
Balance as of December 31, 2022	$	291,026
Additional liabilities incurred	1,480
Accretion expense	7,648
Liabilities settled	(6,231)
Balance as of June 30, 2023	$	293,923
Current portion	25,557
Long-term portion	$	268,366

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Earnings per basic and diluted share are calculated under the treasury stock method. Basic net income per common share is calculated by dividing net income by the basic weighted-average common shares outstanding for the respective period. Diluted net income per common share is calculated by dividing net income by the diluted weighted-average common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities consist of unvested RSUs, DSUs, and PSUs, as well as outstanding in-the-money stock options and warrants. When the Company recognizes a loss from continuing operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted earnings per share.

As discussed in Note 7 - Stock-Based Compensation, PSUs represent the right to receive a number of shares of the Company’s common stock ranging from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%) of PSUs granted based on the performance achievement over the applicable performance period. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, that would be issuable at the end of the respective reporting period, assuming that date was the end of the performance period applicable to such awards.

The Company has also issued stock options and warrants, which both represent the right to purchase the Company’s common stock at a specified exercise price. The number of potentially dilutive shares related to the stock options and warrants is based on the number of shares, if any, that would be exercisable at the end of the respective reporting period, assuming that date was the end of such stock options’ or warrants’ term. Stock options and warrants are only dilutive when the average price of the common stock during the period exceeds the exercise price.

The following table sets forth the calculations of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	139,287	$	468,821	$	341,748	$	560,460
Basic net income per common share	$	1.73	$	5.52	$	4.22	$	6.60
Diluted net income per common share	$	1.72	$	5.48	$	4.18	$	6.56
Weighted-average shares outstanding - basic	80,393		84,993		81,052		84,917
Add: dilutive effect of stock awards	751		561		772		536
Weighted-average shares outstanding - diluted	81,144		85,554		81,824		85,453

There were 3,846 and 59,161 shares that were anti-dilutive for the three months ended June 30, 2023 and 2022, respectively. There were 111,251 and 30,822 shares that were anti-dilutive for the six months ended June 30, 2023 and 2022, respectively.

The exercise price of the Company’s warrants was in excess of the Company’s stock price during the three and six months ended June 30, 2023 and 2022; therefore, they were excluded from the earnings per share calculation.

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INCOME TAXES

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Deferred tax assets and liabilities are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years related to cumulative temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying balance sheets. The tax effect of the net change in the cumulative temporary differences during each period in the deferred tax assets and liabilities determines the periodic provision for deferred taxes.

The Company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will be realized. In making such determination, the Company considers all available (both positive and negative) evidence, including future reversals of temporary differences, tax-planning strategies, projected future taxable income, and results of operations. As a result of merger activity in 2021, the Company had a valuation allowance of $25.4 million as of both June 30, 2023 and December 31, 2022 against certain acquired net operating losses and other tax attributes due to the limitation on realizability caused by the change of ownership provisions of Section 382 of the Internal Revenue Code. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that the deferred tax assets will be realized.

The net deferred tax liability as of June 30, 2023 and December 31, 2022 was $409.6 million and $319.6 million, respectively. Additionally, prepaid income taxes under current assets as of June 30, 2023 and December 31, 2022 were $2.3 million and $29.6 million, respectively.

Federal income tax expense differs from the amount that would be provided by applying the statutory United States federal income tax rate of 21% to income before income taxes primarily due to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, and other permanent differences including bargain purchase gain. During the three months ended June 30, 2023 and 2022, the Company recorded income tax expense of $44.4 million and $152.5 million, respectively. During the six months ended June 30, 2023 and 2022, the Company recorded income tax expense of $109.5 million and $175.8 million, respectively.

The Company had no unrecognized tax benefits as of June 30, 2023 and December 31, 2022. The Company’s management does not believe that there are any new items or changes in facts or judgments that would impact the Company’s tax position taken thus far in 2023.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law. Among other provisions, the IRA imposes a 15% corporate alternative minimum tax (“Corporate AMT”) for tax years beginning after December 31, 2022. The Company is evaluating the potential impact of the Corporate AMT on our current income tax expense and income taxes payable; however, we currently do not believe this will materially affect our income taxes paid for the 2023 tax year.

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LEASES

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

LEASES

LEASES

The Company’s right-of-use assets and lease liabilities are recognized on the accompanying balance sheets based on the present value of the expected lease payments over the lease term. As of June 30, 2023 and December 31, 2022, the Company did not have any agreements in place that were classified as finance leases. The following table summarizes the asset classes of the Company’s operating leases (in thousands):

	June 30, 2023		December 31, 2022
Operating Leases
Field equipment(1)	$	30,829	$	15,131
Corporate leases	6,326		8,235
Vehicles	4,417		759
Total right-of-use asset	$	41,572	$	24,125
Field equipment(1)	$	30,857	$	15,131
Corporate leases	6,961		8,898
Vehicles	4,417		759
Total lease liability	$	42,235	$	24,788

____________________________

(1)Includes compressors, certain natural gas processing equipment, and other field equipment.

Future commitments by year for the Company’s leases with a lease term of one year or more as of June 30, 2023 are presented in the table below. Such commitments are reflected at undiscounted values and are reconciled to the discounted present value recognized on the accompanying balance sheets as follows (in thousands):

	Operating Leases
Remainder of 2023	$	12,419
2024	18,964
2025	7,416
2026	3,449
2027	2,106
Thereafter	649
Total lease payments	45,003
Less: imputed interest	(2,768)
Total lease liability	$	42,235

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental cash flow disclosures are presented below (in thousands):

	Six Months Ended June 30,
	2023		2022
Supplemental cash flow information:
Cash (paid) refunded for income taxes	$	7,861	$	(6,300)
Cash paid for interest	$	(12,627)	(15,821)
Supplemental non-cash investing activities:
Changes in working capital related to capital expenditures	$	56,345	(2,666)

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STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Share Repurchases

On January 24, 2023, we entered into a privately-negotiated share purchase agreement with CPPIB Crestone Peak Resources Canada Inc. for the purchase of approximately 4.9 million shares of the Company’s common stock at a price of $61.00 per share for a total purchase price of approximately $300.0 million. The purchase closed on January 27, 2023 and was funded from the Company’s cash on hand. The shares repurchased were immediately retired.

In February 2023, we announced that the Board provided authorization for a stock repurchase program (the “stock repurchase program”) pursuant to which we may, from time to time and through December 31, 2024, acquire shares of our common stock in the open market, in privately negotiated transactions, or through block trades, derivative transactions, or purchases made in accordance with the Rule 10b5-1 of the Exchange Act in an amount not to exceed $1.0 billion, exclusive of any fees, commissions, or other expenses related to such repurchases. In June 2023, commensurate with the announcement of the Acquisitions, the Board reduced the amount of stock authorized for repurchase by the Company under the stock repurchase program from $1.0 billion to $500.0 million. The stock repurchase program does not require any specific number of shares to be acquired and can be modified or discontinued by the Board at any time.As of June 30, 2023, the Company has repurchased approximately 312,800 shares under the program at a weighted average price of $64.55 per share for a total cost of $20.2 million.

We record share repurchases at cost, which includes incremental direct transaction costs, as a reduction to stockholder’s equity. As part of the incremental direct transaction costs, we recorded a 1% excise tax, as imposed by the IRA, with the corresponding liability recorded within accounts payable and accrued expenses on the accompanying balance sheets. Any excess of cost over the par value is charged to additional paid-in-capital on a pro-rata basis, with any remaining cost charged to retained earnings.

Dividends

In May 2021, we announced the initiation of a quarterly base cash dividend on our common stock. In March 2022, the Board approved the initiation of a quarterly variable cash dividend in addition to the aforementioned base dividend, equal to 50% of free cash flow after the base cash dividend for the preceding twelve-month period and pro forma for all acquisition and divestiture activity, assuming pro forma compliance with certain leverage targets.

The following table summarizes the dividends declared for the six months ended June 30, 2023 and 2022:

	Base		Variable		Total		Total
	(per share)		(per share)		(per share)		(in thousands)
2023:
First quarter	$	0.50	$	1.65	$	2.15	176,878
Second quarter	$	0.50	$	1.62	$	2.12	173,358
2022:
First quarter	$	0.46	$	0.75	$	1.21	104,444
Second quarter	$	0.46	$	0.90	$	1.36	117,151

The decision to pay any future dividends is solely within the discretion of, and subject to approval by, the Board. The Board’s determination with respect to any such dividends, including the record date, the payment date, and the actual amount of the dividend, will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors that the Board deems relevant at the time of such determination.

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Insider Trading Arrangements	3 Months Ended
	Jun. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Regulation S-X. Accordingly, pursuant to such rules and regulations, certain notes and other financial information included in audited financial statements have been condensed or omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. All significant intercompany balances and transactions have been eliminated in consolidation.

The December 31, 2022 unaudited condensed consolidated balance sheet data has been derived from the audited consolidated financial statements contained in our 2022 Form 10-K, but does not include all disclosures, including notes required by GAAP. As such, this quarterly report should be read in conjunction with the audited consolidated financial statements and related notes included in our 2022 Form 10-K. In connection with the preparation of the unaudited condensed consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of June 30, 2023, through the filing date of this report. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year or any other future period.

Significant Accounting Policies

The significant accounting policies followed by the Company are set forth in Note 1 - Summary of Significant Accounting Policies in the 2022 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this report.

Recently Issued and Adopted Accounting Standards

Recently Issued and Adopted Accounting StandardsThere are no accounting standards applicable to the Company that would have a material effect on the Company’s financial statements and disclosures that have been issued but not yet adopted by the Company as of June 30, 2023, and through the filing date of this report.

Acquisitions and Divestitures

ACQUISITIONS AND DIVESTITURESAll mergers and acquisitions disclosed are accounted for under the acquisition method of accounting for business combinations. Accordingly, we conduct assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition are expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of oil and natural gas properties and asset retirement obligations are measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, and a market-based weighted-average cost of capital. These inputs require significant judgments and estimates by management at the time of the valuation.

Revenue Recognition

The Company recognizes revenue from the sale of produced oil, natural gas, and NGL at the point in time when control of produced oil, natural gas, or NGL volumes transfer to the purchaser, which may differ depending on the applicable contractual terms. The Company considers the transfer of control to have occurred when the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the oil, natural gas, or NGL production. Transfer of control dictates the presentation of gathering, transportation, and processing expenses within the accompanying statements of operations. Gathering, transportation, and processing expenses incurred by the Company prior to the transfer of control are recorded gross within the gathering, transportation, and processing line item on the accompanying statements of operations. Conversely, gathering, transportation, and processing expenses incurred by the Company subsequent to the transfer of control are recorded net within the oil and natural gas sales line item on the accompanying statements of operations. Please refer to Note 1 - Summary of Significant Accounting Policies in the 2022 Form 10-K for more information regarding the types of contracts under which oil, natural gas, and NGL sales revenue is generated.The Company records revenue in the month production is delivered and control is transferred to the purchaser. However, settlement statements and payment may not be received for 30 to 60 days after the date production is delivered and control is transferred. Until such time settlement statements and payment are received, the Company records a revenue accrual based on, amongst other factors, an estimate of the volumes delivered at estimated prices as determined by the applicable contractual terms. The Company records the differences between its estimates and the actual amounts received for product sales in the month in which payment is received from the purchaser.

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REVENUE RECOGNITION (Tables)

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Revenue by Revenue Stream

Revenue attributable to each identified revenue stream is disaggregated below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating net revenues:
Oil sales	$	541,043	$	778,258	$	1,001,417	$	1,327,760
Natural gas sales	45,364		205,840		148,919		319,001
Natural gas liquid (“NGL”) sales	74,119		167,266		166,212		322,413
Oil and natural gas sales	$	660,526	$	1,151,364	$	1,316,548	$	1,969,174

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2023

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses contain the following (in thousands):

	June 30, 2023		December 31, 2022
Accounts payable trade	$	27,811	$	31,783
Accrued drilling and completion costs	80,826		137,171
Accrued lease operating expense	18,715		18,109
Accrued gathering, transportation, and processing	56,913		59,398
Accrued general and administrative expense	24,761		20,054
Accrued merger transaction costs	6,252		—
Accrued commodity derivative settlements	844		12,514
Accrued interest expense	6,778		5,509
Accrued settlement	5,727		1,497
Other accrued expenses	11,928		9,262
Total accounts payable and accrued expenses	$	240,555	$	295,297

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LONG-TERM DEBT (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The tables below present the related carrying values as of June 30, 2023 and December 31, 2022 (in thousands):

	As of June 30, 2023
	Principal Amount		Unamortized Discount		Unamortized Deferred Financing Costs		Principal Amount, Net
2026 Senior Notes	$	400,000	$	—	$	5,901	$	394,099
2028 Senior Notes	1,350,000		16,875		5,919		1,327,206
2031 Senior Notes	1,350,000		16,875		5,919		1,327,206
Total	$	3,100,000	$	33,750	$	17,739	$	3,048,511

	As of December 31, 2022
	Principal Amount		Unamortized Discount		Unamortized Deferred Financing Costs		Principal Amount, Net
2026 Senior Notes	$	400,000	$	—	$	6,707	$	393,293

The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Facility as of the dates indicated (in thousands):

	August 2, 2023		June 30, 2023		December 31, 2022
Revolving credit facility	$	750,000	$	—	$	—
Letters of credit	12,100		12,100		12,100
Available borrowing capacity	1,087,900		987,900		987,900
Total aggregate elected commitments	$	1,850,000	$	1,000,000	$	1,000,000

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Annual Minimum Commitment Payments

The minimum annual payments under these agreements for the next five years as of June 30, 2023 are presented below (in thousands):

	Firm Transportation		Minimum Volume(1)
Remainder of 2023	$	7,360	$	34,182
2024	14,640		19,596
2025	4,800		20,434
2026	—		16,816
2027	—		16,250
2028 and thereafter	—		31,460
Total	$	26,800	$	138,738

___________________________

(1)The above calculation is based on the minimum volume commitment schedule (as defined in the relevant agreement) and applicable differential fees.

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STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Share-Based Compensation Expense

The following table outlines the compensation expense recorded by type of award (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Restricted and deferred stock units	$	4,769	$	3,917	$	9,194	$	9,182
Performance stock units	5,126		2,218		8,081		5,043
Total stock-based compensation	$	9,895	$	6,135	$	17,275	$	14,225

Summary of Unrecognized Compensation Expense

As of June 30, 2023, unrecognized compensation expense related to the awards granted under the LTIP will be amortized through the relevant periods as follows (in thousands):

	Unrecognized Compensation Expense		Final Year of Recognition
Restricted and deferred stock units	$	27,578	2026
Performance stock units	26,364		2025
Total unrecognized stock-based compensation	$	53,942

Summary of the Status and Activity of Non-Vested RSUs, DSUs, and Options

A summary of the status and activity of non-vested RSUs and DSUs for the six months ended June 30, 2023 is presented below:

	RSUs and DSUs	Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year	675,898	$	50.27
Granted	309,500	71.12
Vested	(342,563)	46.67
Forfeited	(34,072)	57.36
Non-vested, end of period	608,763	$	62.50

A summary of the status and activity of stock options for the six months ended June 30, 2023 is presented below:

	Stock Options	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding, beginning of year	15,170	$	34.36
Exercised	(13,463)	34.36
Expired	(111)	34.36
Outstanding, end of period	1,596	$	34.36	3.8	$	56
Options outstanding and exercisable	1,596	$	34.36	3.8	$	56

Summary of the Status and Activity of PSUs

A summary of the status and activity of non-vested PSUs for the six months ended June 30, 2023 is presented below:

	PSUs (1)	Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year	345,999	$	77.42
Granted	233,861	103.39
Vested	(89,901)	78.49
Forfeited	(59,726)	87.80
Expired	(242)	18.26
Non-vested, end of period	429,991	$	89.92

___________________________

(1)The number of awards assumes that the associated performance condition is met at the target amount (multiplier of one). The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to 225% (or, for PSUs granted prior to fiscal year 2023, 200%), depending on the level of satisfaction of the performance condition.

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities at Fair Value on Recurring Basis

The following tables present the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and their classification within the fair value hierarchy (in thousands):

	As of June 30, 2023
	Level 1		Level 2		Level 3
Derivative assets	$	—	$	6,135	$	—
Derivative liabilities	$	—	$	24,411	$	—

	As of December 31, 2022
	Level 1		Level 2		Level 3
Derivative assets	$	—	$	3,284	$	—
Derivative liabilities	$	—	$	63,533	$	—

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DERIVATIVES (Tables)

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Commodity Derivatives

As of June 30, 2023, the Company had entered into the following commodity price derivative contracts:

	Contract Period
	Q3 2023		Q4 2023		Q1 2024		Q2 2024		Q3 - Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes	5,695		7,984		4,814		5,562		4,852
Weighted-Average Contract Price	$	70.44	$	70.36	$	69.13	$	66.47	$	68.28
Two-Way Collars
NYMEX WTI Volumes	663		1,000		—				—
Weighted-Average Ceiling Price	$	82.15	$	82.15	$	—			$	—
Weighted-Average Floor Price	$	60.00	$	60.00	$	—			$	—
Three-Way Collars
NYMEX WTI Volumes	1,302		1,172		573		—		—
Weighted-Average Ceiling Price	$	57.48	$	56.49	$	56.25	$	—	$	—
Weighted-Average Floor Price	$	47.91	$	49.04	$	45.00	$	—	$	—
Weighted-Average Sold Put Price	$	37.41	$	39.04	$	35.00	$	—	$	—
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”))
Swaps
NYMEX HH Volumes	46,120		45,947		31,790		31,686		16,639
Weighted-Average Contract Price	$	2.61	$	2.60	$	2.69	$	2.68	$	2.74
Two-Way Collars
NYMEX HH Volumes	1,887		1,756		736		1,732		834
Weighted-Average Ceiling Price	$	2.96	$	2.96	$	3.16	$	2.89	$	3.16
Weighted-Average Floor Price	$	2.34	$	2.38	$	2.50	$	2.20	$	2.50
Three-Way Collars
NYMEX HH Volumes	—		—		1,166		55		—
Weighted-Average Ceiling Price	$	—	$	—	$	3.50	$	3.42	$	—
Weighted-Average Floor Price	$	—	$	—	$	2.50	$	2.50	$	—
Weighted-Average Sold Put Price	$	—	$	—	$	2.00	$	2.00	$	—
Basis Protection Swaps
CIG-NYMEX HH Volumes	48,008		47,703		33,691		33,473		16,623
Weighted-Average Contract Price	$	(0.46)	$	(0.46)	$	(0.27)	$	(0.27)	$	(0.27)

As of the filing date of this report, the Company had entered into the following commodity price derivative contracts:

	Contract Period
	Q3 2023		Q4 2023		Q1 2024		Q2 2024		Q3 - Q4 2024
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes	23,055		29,161		12,727		11,991		9,767
Weighted-Average Contract Price	$	72.30	$	71.83	$	70.39	$	68.75	$	69.15
Two-Way Collars
NYMEX WTI Volumes	7,334		9,392		11,913		10,430		8,914
Weighted-Average Ceiling Price	$	82.63	$	82.28	$	81.51	$	80.83	$	80.07
Weighted-Average Floor Price	$	60.00	$	60.00	$	58.00	$	58.00	$	58.00
Three-Way Collars
NYMEX WTI Volumes	1,302		1,172		573		—		—
Weighted-Average Ceiling Price	$	57.48	$	56.49	$	56.25	$	—	$	—
Weighted-Average Floor Price	$	47.91	$	49.04	$	45.00	$	—	$	—
Weighted-Average Sold Put Price	$	37.41	$	39.04	$	35.00	$	—	$	—
Puts
NYMEX WTI Volumes	—		—		7,942		6,953		5,943
Weighted-Average Strike Price	$	—	$	—	$	55.00	$	55.00	$	55.00
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/MMBtu)
Swaps
NYMEX HH Volumes	46,120		45,947		31,790		31,686		16,639
Weighted-Average Contract Price	$	2.61	$	2.60	$	2.69	$	2.68	$	2.74
Two-Way Collars
NYMEX HH Volumes	1,887		1,756		736		1,732		834
Weighted-Average Ceiling Price	$	2.96	$	2.96	$	3.16	$	2.89	$	3.16
Weighted-Average Floor Price	$	2.34	$	2.38	$	2.50	$	2.20	$	2.50
Three-Way Collars
NYMEX HH Volumes	—		—		1,166		55		—
Weighted-Average Ceiling Price	$	—	$	—	$	3.50	$	3.42	$	—
Weighted-Average Floor Price	$	—	$	—	$	2.50	$	2.50	$	—
Weighted-Average Sold Put Price	$	—	$	—	$	2.00	$	2.00	$	—
Basis Protection Swaps
CIG-NYMEX HH Volumes	48,008		47,703		33,691		33,473		16,623
Weighted-Average Contract Price	$	(0.46)	$	(0.46)	$	(0.27)	$	(0.27)	$	(0.27)

Summary of all the Company's Derivative Positions

The following table contains a summary of all the Company’s derivative positions reported on the accompanying balance sheets as well as a reconciliation between the gross assets and liabilities and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Derivative Assets:
Commodity contracts - current	$	4,335	$	2,490
Commodity contracts - noncurrent	1,800		794
Total derivative assets	6,135		3,284
Amounts not offset in the accompanying balance sheets	(3,258)		—
Total derivative assets, net	$	2,877	$	3,284
Derivative Liabilities:
Commodity contracts - current	$	(21,438)	$	(46,334)
Commodity contracts - long-term	(2,973)		(17,199)
Total derivative liabilities	(24,411)		(63,533)
Amounts not offset in the accompanying balance sheets	3,258		—
Total derivative liabilities, net	$	(21,153)	$	(63,533)

Summary of the Components of the Derivative Gain (Loss)

The following table summarizes the components of the derivative gain (loss) presented on the accompanying statements of operations for the periods below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Derivative cash settlement loss:
Oil contracts	$	(2,164)	$	(114,778)	$	(5,613)	$	(239,940)
Natural gas contracts	829		(54,091)		(6,272)		(82,875)
NGL contracts	—		(12,762)		—		(25,394)
Total derivative cash settlement loss	(1,335)		(181,631)		(11,885)		(348,209)
Change in fair value gain (loss)	6,262		108,981		41,972		(19,934)
Total derivative gain (loss)	$	4,927	$	(72,650)	$	30,087	$	(368,143)

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ASSET RETIREMENT OBLIGATIONS (Tables)

6 Months Ended

Jun. 30, 2023

Asset Retirement Obligation Disclosure [Abstract]

Schedule of Asset Retirement Obligation Changes

A roll-forward of the Company’s asset retirement obligation is as follows (in thousands):

	Amount
Balance as of December 31, 2022	$	291,026
Additional liabilities incurred	1,480
Accretion expense	7,648
Liabilities settled	(6,231)
Balance as of June 30, 2023	$	293,923
Current portion	25,557
Long-term portion	$	268,366

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following table sets forth the calculations of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	139,287	$	468,821	$	341,748	$	560,460
Basic net income per common share	$	1.73	$	5.52	$	4.22	$	6.60
Diluted net income per common share	$	1.72	$	5.48	$	4.18	$	6.56
Weighted-average shares outstanding - basic	80,393		84,993		81,052		84,917
Add: dilutive effect of stock awards	751		561		772		536
Weighted-average shares outstanding - diluted	81,144		85,554		81,824		85,453

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LEASES (Tables)

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Schedule of Balance Sheet Activity, Asset Classes

The following table summarizes the asset classes of the Company’s operating leases (in thousands):

	June 30, 2023		December 31, 2022
Operating Leases
Field equipment(1)	$	30,829	$	15,131
Corporate leases	6,326		8,235
Vehicles	4,417		759
Total right-of-use asset	$	41,572	$	24,125
Field equipment(1)	$	30,857	$	15,131
Corporate leases	6,961		8,898
Vehicles	4,417		759
Total lease liability	$	42,235	$	24,788

____________________________

(1)Includes compressors, certain natural gas processing equipment, and other field equipment.

Schedule of Future Minimum Commitments for Operating Leases

Future commitments by year for the Company’s leases with a lease term of one year or more as of June 30, 2023 are presented in the table below. Such commitments are reflected at undiscounted values and are reconciled to the discounted present value recognized on the accompanying balance sheets as follows (in thousands):

	Operating Leases
Remainder of 2023	$	12,419
2024	18,964
2025	7,416
2026	3,449
2027	2,106
Thereafter	649
Total lease payments	45,003
Less: imputed interest	(2,768)
Total lease liability	$	42,235

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Tables)

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Supplemental Cash Flow Information

Supplemental cash flow disclosures are presented below (in thousands):

	Six Months Ended June 30,
	2023		2022
Supplemental cash flow information:
Cash (paid) refunded for income taxes	$	7,861	$	(6,300)
Cash paid for interest	$	(12,627)	(15,821)
Supplemental non-cash investing activities:
Changes in working capital related to capital expenditures	$	56,345	(2,666)

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STOCKHOLDERS' EQUITY (Tables)

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Schedule of Dividends Paid

The following table summarizes the dividends declared for the six months ended June 30, 2023 and 2022:

	Base		Variable		Total		Total
	(per share)		(per share)		(per share)		(in thousands)
2023:
First quarter	$	0.50	$	1.65	$	2.15	176,878
Second quarter	$	0.50	$	1.62	$	2.12	173,358
2022:
First quarter	$	0.46	$	0.75	$	1.21	104,444
Second quarter	$	0.46	$	0.90	$	1.36	117,151

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ACQUISITIONS AND DIVESTITURES - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands				3 Months Ended		6 Months Ended
	Aug. 02, 2023	Jul. 05, 2022	Mar. 01, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Jun. 19, 2023	Dec. 31, 2022
Business Acquisition [Line Items]
Common stock, par value (in dollars per share)				$ 0.01		$ 0.01			$ 0.01
Merger transaction costs				$ 31,145	$ 1,418	$ 31,627	$ 21,952
Payments to acquire non-operated interests in operated wells		$ 80,700
Subsequent Event
Business Acquisition [Line Items]
Common stock, par value (in dollars per share)	$ 0.01
Hibernia Acquisition
Business Acquisition [Line Items]
Cash deposit, percent of purchase price								7.50%
Hibernia Acquisition | Subsequent Event
Business Acquisition [Line Items]
Acquisition, cash consideration	$ 2,250,000
Tap Rock Acquisition
Business Acquisition [Line Items]
Cash deposit, percent of purchase price								7.50%
Tap Rock Acquisition | Subsequent Event
Business Acquisition [Line Items]
Acquisition, cash consideration	1,500,000
Consideration transferred	$ 2,450,000
Acquisition, common stock, shares issued (in shares)	13,538,472
Acquisition, common stock, shares issued, value	$ 950,000
Bison Acquisition
Business Acquisition [Line Items]
Consideration transferred			$ 280,400
Net assets acquired			294,000
Bargain purchase gain			$ 13,600

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REVENUE RECOGNITION - Schedule of Revenue by Revenue Stream (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Oil and natural gas sales	$ 660,526	$ 1,151,364	$ 1,316,548	$ 1,969,174
Oil sales
Disaggregation of Revenue [Line Items]
Oil and natural gas sales	541,043	778,258	1,001,417	1,327,760
Natural gas sales
Disaggregation of Revenue [Line Items]
Oil and natural gas sales	45,364	205,840	148,919	319,001
Natural gas liquid (“NGL”) sales
Disaggregation of Revenue [Line Items]
Oil and natural gas sales	$ 74,119	$ 167,266	$ 166,212	$ 322,413

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REVENUE RECOGNITION - Narrative (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Receivable from contracts with customers	$ 201,248	$ 343,500

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Accounts payable trade	$ 27,811	$ 31,783
Accrued drilling and completion costs	80,826	137,171
Accrued lease operating expense	18,715	18,109
Accrued gathering, transportation, and processing	56,913	59,398
Accrued general and administrative expense	24,761	20,054
Accrued merger transaction costs	6,252	0
Accrued commodity derivative settlements	844	12,514
Accrued interest expense	6,778	5,509
Accrued settlement	5,727	1,497
Other accrued expenses	11,928	9,262
Total accounts payable and accrued expenses	$ 240,555	$ 295,297

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LONG-TERM DEBT - Schedule of Carrying Values (Details) - Senior Notes - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
LONG-TERM DEBT
Principal Amount	$ 3,100,000
Unamortized Discount	33,750
Unamortized Deferred Financing Costs	17,739
Principal Amount, Net	3,048,511
2026 Senior Notes
LONG-TERM DEBT
Principal Amount	400,000	$ 400,000
Unamortized Discount	0	0
Unamortized Deferred Financing Costs	5,901	6,707
Principal Amount, Net	394,099	$ 393,293
2028 Senior Notes
LONG-TERM DEBT
Principal Amount	1,350,000
Unamortized Discount	16,875
Unamortized Deferred Financing Costs	5,919
Principal Amount, Net	1,327,206
2031 Senior Notes
LONG-TERM DEBT
Principal Amount	1,350,000
Unamortized Discount	16,875
Unamortized Deferred Financing Costs	5,919
Principal Amount, Net	$ 1,327,206

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LONG-TERM DEBT - Narrative (Details)						3 Months Ended		6 Months Ended
	Jun. 29, 2023 USD ($)	May 01, 2022	Apr. 20, 2022 USD ($)	Nov. 01, 2021 USD ($)	Oct. 13, 2021 USD ($) agency	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Aug. 02, 2023 USD ($)	Jun. 23, 2023 USD ($) bridge_loan_facility	Dec. 31, 2022 USD ($)	Oct. 27, 2022 USD ($)	Apr. 30, 2021 USD ($)
LONG-TERM DEBT
Proceeds from issuance of senior notes								$ 2,666,250,000	$ 0
Merger transaction costs						$ 31,145,000	$ 1,418,000	31,627,000	21,952,000
Interest expense						8,800,000	8,100,000	16,200,000	17,200,000
Capitalized interest						0	$ 0	0	$ 0
Revolving credit facility
LONG-TERM DEBT
Minimum current ratio covenant				1.00
Amended Credit Agreement | Revolving credit facility
LONG-TERM DEBT
Maximum borrowing capacity				$ 2,000,000,000
Covenant, minimum percentage of mortgage on total value of certain proved oil and gas properties				90.00%
Maximum net leverage ratio				3.00
Borrowing base amount			$ 1,700,000,000	$ 1,000,000,000									$ 1,850,000,000
Elected commitments			$ 1,000,000,000	$ 800,000,000
Amended Credit Agreement | Revolving credit facility | Subsequent Event
LONG-TERM DEBT
Maximum borrowing capacity										$ 4,000,000,000
Borrowing base amount										3,000,000,000
Elected commitments										$ 1,850,000,000
Amended Credit Agreement | Revolving credit facility | Fed Funds Effective Rate Overnight Index Swap Rate
LONG-TERM DEBT
Basis spread on variable rate			0.50%
Amended Credit Agreement | Revolving credit facility | SOFR
LONG-TERM DEBT
Basis spread on variable rate			1.00%
Basis spread on variable rate, floor			0.50%
Amended Credit Agreement | Revolving credit facility | SOFR | Minimum
LONG-TERM DEBT
Basis spread on variable rate			2.00%
Amended Credit Agreement | Revolving credit facility | SOFR | Maximum
LONG-TERM DEBT
Basis spread on variable rate			3.00%
Amended Credit Agreement | Revolving credit facility | SOFR, Plus Basis Spread One
LONG-TERM DEBT
Basis spread on variable rate, floor			1.50%
Amended Credit Agreement | Revolving credit facility | SOFR, Plus Basis Spread One | Minimum
LONG-TERM DEBT
Basis spread on variable rate			1.00%
Amended Credit Agreement | Revolving credit facility | SOFR, Plus Basis Spread One | Maximum
LONG-TERM DEBT
Basis spread on variable rate			2.00%
Amended Credit Agreement | HighPoint Merger | Revolving credit facility
LONG-TERM DEBT
Deferred financing costs, gross						13,000,000		13,000,000
Deferred financing costs, net						4,600,000		4,600,000				$ 5,500,000
Debt issuance costs						3,500,000		3,500,000				3,000,000
Bridge Loans Credit Facilities | Hibernia Acquisition | Bridge Loan
LONG-TERM DEBT
Aggregate principal amount											$ 2,700,000,000
Number of separate 364-day bridge loan facilities | bridge_loan_facility											2
Total secured leverage test											2.00
Merger transaction costs						22,600,000		22,600,000
Senior Notes
LONG-TERM DEBT
Debt issuance costs						17,739,000		17,739,000
Senior Notes | Senior Notes due 2028, 8.375% and Senior Notes due 2031, 8.750%
LONG-TERM DEBT
Proceeds from issuance of senior notes	$ 2,670,000,000
Debt issuance costs	$ 33,800,000
Senior Notes | Senior Notes due 2028, 8.375% and Senior Notes due 2031, 8.750% | Debt Instrument, Redemption, Period Eight
LONG-TERM DEBT
Percentage of principal amount redeemed	65.00%
Redemption period, after date of closing of equity offering	180 days
Senior Notes | Senior Notes due 2028, 8.375%
LONG-TERM DEBT
Interest rate (as a percent)	8.375%
Aggregate principal amount	$ 1,350,000,000
Debt issuance costs						5,919,000		5,919,000
Senior Notes | Senior Notes due 2028, 8.375% | Debt Instrument, Redemption, Period Four
LONG-TERM DEBT
Redemption price, percentage	104.188%
Senior Notes | Senior Notes due 2028, 8.375% | Debt Instrument, Redemption, Period Five
LONG-TERM DEBT
Redemption price, percentage	102.094%
Senior Notes | Senior Notes due 2028, 8.375% | Debt Instrument, Redemption, Period Six
LONG-TERM DEBT
Redemption price, percentage	100.00%
Senior Notes | Senior Notes due 2028, 8.375% | Debt Instrument, Redemption, Period Seven
LONG-TERM DEBT
Redemption price, percentage	108.375%
Percentage of principal amount redeemed	35.00%
Senior Notes | Senior Notes due 2031, 8.750%
LONG-TERM DEBT
Interest rate (as a percent)	8.75%
Aggregate principal amount	$ 1,350,000,000
Debt issuance costs						5,919,000		5,919,000
Senior Notes | Senior Notes due 2031, 8.750% | Debt Instrument, Redemption, Period Four
LONG-TERM DEBT
Redemption price, percentage	104.375%
Senior Notes | Senior Notes due 2031, 8.750% | Debt Instrument, Redemption, Period Five
LONG-TERM DEBT
Redemption price, percentage	102.188%
Senior Notes | Senior Notes due 2031, 8.750% | Debt Instrument, Redemption, Period Six
LONG-TERM DEBT
Redemption price, percentage	100.00%
Senior Notes | Senior Notes due 2031, 8.750% | Debt Instrument, Redemption, Period Seven
LONG-TERM DEBT
Redemption price, percentage	108.75%
Percentage of principal amount redeemed	35.00%
Senior Notes | 2026 Senior Notes
LONG-TERM DEBT
Interest rate (as a percent)					5.00%
Aggregate principal amount					$ 400,000,000
Covenant, investment-grade rating, number of ratings agencies (at least) | agency					2
Debt issuance costs						$ 5,901,000		$ 5,901,000				$ 6,707,000
Senior Notes | 2026 Senior Notes | Debt Instrument, Redemption, Period One
LONG-TERM DEBT
Percentage of principal amount redeemed					35.00%
Redemption period, after date of closing of equity offering					180 days
Senior Notes | 2026 Senior Notes | Debt Instrument, Redemption, Period Two
LONG-TERM DEBT
Redemption price, percentage					102.50%
Percentage of principal amount not redeemed					65.00%
Senior Notes | 2026 Senior Notes | Debt Instrument, Redemption, Period Three
LONG-TERM DEBT
Redemption price, percentage					101.25%
Senior Notes | 2026 Senior Notes | Debt Instrument, Redemption, Period Four
LONG-TERM DEBT
Redemption price, percentage					100.00%
Senior Notes | 2026 Senior Notes | Debt Instrument, Redemption, Period Five
LONG-TERM DEBT
Redemption price, percentage					105.00%
Senior Notes | Senior Notes due 2026, 7.50% | HighPoint Merger
LONG-TERM DEBT
Interest rate (as a percent)														7.50%
Aggregate principal amount														$ 100,000,000
Senior Notes | Senior Notes due 2026, 7.50% | HighPoint Merger | Debt Instrument, Redemption, Period Two
LONG-TERM DEBT
Redemption price, percentage		100.00%

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LONG-TERM DEBT - Schedule of Debt Outstanding and Borrowing Capacity (Details) - Line of Credit - USD ($) $ in Thousands	Aug. 02, 2023	Jun. 30, 2023	Dec. 31, 2022
Revolving credit facility and Letters of credit
LONG-TERM DEBT
Available borrowing capacity		$ 987,900	$ 987,900
Total aggregate elected commitments		1,000,000	1,000,000
Revolving credit facility and Letters of credit | Subsequent Event
LONG-TERM DEBT
Available borrowing capacity	$ 1,087,900
Total aggregate elected commitments	1,850,000
Revolving credit facility
LONG-TERM DEBT
Credit facility outstanding		0	0
Revolving credit facility | Subsequent Event
LONG-TERM DEBT
Credit facility outstanding	750,000
Letters of credit
LONG-TERM DEBT
Credit facility outstanding		$ 12,100	$ 12,100
Letters of credit | Subsequent Event
LONG-TERM DEBT
Credit facility outstanding	$ 12,100

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COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2023 USD ($) horizontal_well plant bbl MMcf Bcf bbl	Dec. 31, 2022 USD ($)
Pipeline Transportation Commitment
Loss Contingencies [Line Items]
Minimum volume transportation charges, gross barrels per day requirement thereafter through April 2025 (in barrels per day) | bbl	12,500
Financial commitment	$ 26.8
Natural Gas and Fresh Water | Natural Gas and Fresh Water Commitment
Loss Contingencies [Line Items]
Financial commitment	0.0
NGL Crude Logistics | Crude Oil | Crude Oil Commitment
Loss Contingencies [Line Items]
Financial commitment	$ 22.6
Maximum volume requirement | bbl	20,000
Third-Party Midstream Provider
Loss Contingencies [Line Items]
Number of qualifying wells required to be drilled | horizontal_well	106
Minimum number of qualifying wells required to be drilled, period ending December 31, 2026	2 years
Third-Party Midstream Provider | Natural gas contracts | Natural Gas Commitment and Take-In-Kind Natural Gas Liquids Commitment
Loss Contingencies [Line Items]
Financial commitment	$ 107.6
Expected shortfall payments	$ 31.0
Remaining term	7 years
Third-Party Midstream Provider | Natural gas contracts | Natural Gas Commitment
Loss Contingencies [Line Items]
Annual minimum volume requirement | Bcf	13.0
Third-Party Midstream Provider | Natural gas contracts | Take-In-Kind Natural Gas Liquids Commitment
Loss Contingencies [Line Items]
Daily sales commitment requirement, through year seven | bbl	7,500
Monthly roll forward shortfall requirement, percent (up to)	10.00%
Third-Party Producers and a Third-Party Midstream Provider | Natural gas contracts | Natural Gas Commitment
Loss Contingencies [Line Items]
Number of different plants | plant	2
Daily baseline volume requirement | MMcf	65
Daily baseline volume requirement, term	7 years
Third-Party Producers and a Third-Party Midstream Provider | Natural gas contracts | Natural Gas Commitment | Minimum
Loss Contingencies [Line Items]
Daily incremental volume requirement | MMcf	51.5
Third-Party Producers and a Third-Party Midstream Provider | Natural gas contracts | Natural Gas Commitment | Maximum
Loss Contingencies [Line Items]
Daily incremental volume requirement | MMcf	20.6
Water Suppliers | Natural Gas and Fresh Water | Natural Gas and Fresh Water Commitment
Loss Contingencies [Line Items]
Financial commitment	$ 8.5
Sterling Energy Investments LLC Versus HighPoint Operating Corporation Litigation | Pending Litigation
Loss Contingencies [Line Items]
Accrued litigation liability	$ 1.0	$ 0.7

XML

COMMITMENTS AND CONTINGENCIES - Schedule of Purchase Obligations (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Firm Transportation
Long-term Purchase Commitment [Line Items]
Remainder of 2023	$ 7,360
2024	14,640
2025	4,800
2026	0
2027	0
2028 and thereafter	0
Total	26,800
Minimum Volume
Long-term Purchase Commitment [Line Items]
Remainder of 2023	34,182
2024	19,596
2025	20,434
2026	16,816
2027	16,250
2028 and thereafter	31,460
Total	$ 138,738

XML

STOCK-BASED COMPENSATION - Narrative (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2023	Nov. 30, 2021	Jun. 30, 2021	Apr. 30, 2017
LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value, options exercised	$ 0.5
LTIP | Restricted Stock Units (RSUs) and Deferred Stock Units (DSUs) | Non-executive Board Members
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of units granted	$ 22.0
LTIP | Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares released upon vesting (in shares)	1
LTIP | Restricted Stock Units (RSUs) | Vesting Period One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
LTIP | Restricted Stock Units (RSUs) | Vesting Period Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
LTIP | Restricted Stock Units (RSUs) | Vesting Period Two, Anniversary One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percent of shares	33.00%
LTIP | Restricted Stock Units (RSUs) | Vesting Period Two, Anniversary Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percent of shares	33.00%
LTIP | Restricted Stock Units (RSUs) | Vesting Period Two, Anniversary Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percent of shares	33.00%
LTIP | Deferred Stock Units (DSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares released upon vesting (in shares)	1
LTIP | Deferred Stock Units (DSUs) | Vesting Period One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
LTIP | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period	10 years
LTIP | Performance Stock Units (PSUs) | Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Fair value of units granted	$ 24.2
Number of trading days	30 days
LTIP | Performance Stock Units (PSUs) | Officers | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ratio at which award holders get common stock of the company	0
LTIP | Performance Stock Units (PSUs) | Officers | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ratio at which award holders get common stock of the company	2.25
LTIP | Performance Stock Units (PSUs), Granted Prior to Fiscal Year 2023 | Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ratio at which award holders get common stock of the company	2
2017 LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)				2,467,430
2021 LTIP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)			700,000
Extraction Equity Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)		3,305,080

XML

STOCK-BASED COMPENSATION - Schedule of Expenses (Details) - LTIP - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 9,895	$ 6,135	$ 17,275	$ 14,225
Restricted and deferred stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	4,769	3,917	9,194	9,182
Performance stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 5,126	$ 2,218	$ 8,081	$ 5,043

XML

STOCK-BASED COMPENSATION - Unrecognized Compensation Expense (Details) - LTIP $ in Thousands	Jun. 30, 2023 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation	$ 53,942
Restricted and deferred stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation	27,578
Performance stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation	$ 26,364

XML

STOCK-BASED COMPENSATION - Activity of Non-Option Awards (Details) - LTIP	6 Months Ended
	Jun. 30, 2023 $ / shares shares
RSUs and DSUs
Stock Units
Non-vested, beginning of year (in shares) | shares	675,898
Granted (in shares) | shares	309,500
Vested (in shares) | shares	(342,563)
Forfeited (in shares) | shares	(34,072)
Non-vested, end of period (in shares) | shares	608,763
Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year (in dollars per share) | $ / shares	$ 50.27
Granted (in dollars per share) | $ / shares	71.12
Vested (in dollars per share) | $ / shares	46.67
Forfeited (in dollars per share) | $ / shares	57.36
Non-vested, end of period (in dollars per share) | $ / shares	$ 62.50
PSUs | Officers
Stock Units
Non-vested, beginning of year (in shares) | shares	345,999
Granted (in shares) | shares	233,861
Vested (in shares) | shares	(89,901)
Forfeited (in shares) | shares	(59,726)
Expired (in shares) | shares	(242)
Non-vested, end of period (in shares) | shares	429,991
Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year (in dollars per share) | $ / shares	$ 77.42
Granted (in dollars per share) | $ / shares	103.39
Vested (in dollars per share) | $ / shares	78.49
Forfeited (in dollars per share) | $ / shares	87.80
Expired (in dollars per share) | $ / shares	18.26
Non-vested, end of period (in dollars per share) | $ / shares	$ 89.92
Target amount multiplier	1
PSUs | Minimum | Officers
Weighted-Average Grant-Date Fair Value
Ratio at which award holders get common stock of the company	0
PSUs | Maximum | Officers
Weighted-Average Grant-Date Fair Value
Ratio at which award holders get common stock of the company	2.25
PSUs, Granted Prior to Fiscal Year 2023 | Officers
Weighted-Average Grant-Date Fair Value
Ratio at which award holders get common stock of the company	2

XML

STOCK-BASED COMPENSATION - Activity of Stock Options (Details) - LTIP - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2023
Stock Options
Outstanding, beginning of year (shares)	15,170
Exercised (shares)	(13,463)
Expired (shares)	(111)
Outstanding, end of period (shares)	1,596
Options outstanding and exercisable (shares)	1,596
Weighted- Average Exercise Price
Outstanding, beginning of year (in dollars per share)	$ 34.36
Exercised (in dollars per share)	34.36
Expired (in dollars per share)	34.36
Outstanding, end of period (in dollars per share)	34.36
Options outstanding and exercisable (in dollars per share)	$ 34.36
Additional Information
Outstanding, Weighted-Average Remaining Contractual Term (in years)	3 years 9 months 18 days
Options outstanding and exercisable, Weighted-Average Remaining Contractual Term (in years)	3 years 9 months 18 days
Outstanding, Aggregate Intrinsic Value (in thousands)	$ 56
Options outstanding and exercisable, Aggregate Intrinsic Value (in thousands)	$ 56

XML

FAIR VALUE MEASUREMENTS - Schedule of Non-financial Assets and Liabilities (Details) - Estimate of Fair Value Measurement - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Level 1
Financial assets and liabilities accounted for at fair value
Derivative assets	$ 0	$ 0
Derivative liabilities	0	0
Level 2
Financial assets and liabilities accounted for at fair value
Derivative assets	6,135	3,284
Derivative liabilities	24,411	63,533
Level 3
Financial assets and liabilities accounted for at fair value
Derivative assets	0	0
Derivative liabilities	$ 0	$ 0

XML

FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($)		3 Months Ended		6 Months Ended
	Nov. 01, 2021	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Financial assets and liabilities accounted for at fair value
Proved oil and gas property impairments		$ 0	$ 0	$ 0	$ 0
Abandonment and impairment of unproved properties		0	$ 0	0	$ 17,975,000
Extraction Merger | Tranche A and Tranche B Warrants
Financial assets and liabilities accounted for at fair value
Fair value allocated to consideration transferred	$ 77,500,000
2026 Senior Notes | Senior Notes | Level 1
Financial assets and liabilities accounted for at fair value
Long-term debt, fair value		377,300,000		377,300,000
2028 Senior Notes | Senior Notes | Level 1
Financial assets and liabilities accounted for at fair value
Long-term debt, fair value		1,370,000,000		1,370,000,000
2031 Senior Notes | Senior Notes | Level 1
Financial assets and liabilities accounted for at fair value
Long-term debt, fair value		$ 1,370,000,000		$ 1,370,000,000

XML

DERIVATIVES - Commodity Derivatives (Details) - Scenario, Forecast	3 Months Ended				6 Months Ended
	Jun. 30, 2024 MMBTU $ / gal $ / MMBTU $ / bbl bbl	Mar. 31, 2024 MMBTU $ / bbl $ / MMBTU $ / gal bbl	Dec. 31, 2023 MMBTU $ / bbl $ / MMBTU bbl	Sep. 30, 2023 MMBTU $ / bbl $ / MMBTU bbl	Dec. 31, 2024 MMBTU $ / MMBTU $ / bbl $ / gal bbl	Jun. 30, 2024 $ / gal $ / MMBTU $ / bbl bbl
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Swaps
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl	5,562	4,814	7,984	5,695	4,852
Weighted-Average Contract Price (in dollars per unit) | $ / bbl	66.47	69.13	70.36	70.44	68.28	66.47
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Swaps | Subsequent Event
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl	11,991	12,727	29,161	23,055	9,767
Weighted-Average Contract Price (in dollars per unit) | $ / bbl	68.75	70.39	71.83	72.30	69.15	68.75
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Two-Way Collars
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl			1,000	663
Weighted-Average Ceiling Price (in dollars per unit) | $ / bbl			82.15	82.15
Weighted-Average Floor Price (in dollars per unit) | $ / bbl			60.00	60.00
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Two-Way Collars | Subsequent Event
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl		11,913	9,392	7,334	8,914	10,430
Weighted-Average Ceiling Price (in dollars per unit) | $ / bbl	80.83	81.51	82.28	82.63	80.07	80.83
Weighted-Average Floor Price (in dollars per unit) | $ / bbl	58.00	58.00	60.00	60.00	58.00	58.00
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Three-Way Collars
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl		573	1,172	1,302
Weighted-Average Ceiling Price (in dollars per unit) | $ / bbl		56.25	56.49	57.48
Weighted-Average Floor Price (in dollars per unit) | $ / bbl		45.00	49.04	47.91
Weighted-Average Sold Put Price (in dollars per unit) | $ / bbl		35.00	39.04	37.41
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Three-Way Collars | Subsequent Event
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl		573	1,172	1,302
Weighted-Average Ceiling Price (in dollars per unit) | $ / bbl		56.25	56.49	57.48
Weighted-Average Floor Price (in dollars per unit) | $ / bbl		45.00	49.04	47.91
Weighted-Average Sold Put Price (in dollars per unit) | $ / bbl		35.00	39.04	37.41
Oil Derivatives (volumes in Bbl/day and prices in $/Bbl) | Puts | Subsequent Event
Derivative [Line Items]
NYMEX WTI Volumes (in unit per day) | bbl	6,953	7,942			5,943
Weighted-Average Strike Price (in dollars per unit) | $ / gal	55.00	55.00			55.00	55.00
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Swaps
Derivative [Line Items]
Weighted-Average Contract Price (in dollars per unit)	2.68	2.69	2.60	2.61	2.74	2.68
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	31,686	31,790	45,947	46,120	16,639
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Swaps | Subsequent Event
Derivative [Line Items]
Weighted-Average Contract Price (in dollars per unit)	2.68	2.69	2.60	2.61	2.74	2.68
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	31,686	31,790	45,947	46,120	16,639
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Two-Way Collars
Derivative [Line Items]
Weighted-Average Ceiling Price (in dollars per unit)	2.89	3.16	2.96	2.96	3.16	2.89
Weighted-Average Floor Price (in dollars per unit)	2.20	2.50	2.38	2.34	2.50	2.20
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	1,732	736	1,756	1,887	834
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Two-Way Collars | Subsequent Event
Derivative [Line Items]
Weighted-Average Ceiling Price (in dollars per unit)	2.89	3.16	2.96	2.96	3.16	2.89
Weighted-Average Floor Price (in dollars per unit)	2.20	2.50	2.38	2.34	2.50	2.20
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	1,732	736	1,756	1,887	834
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Three-Way Collars
Derivative [Line Items]
Weighted-Average Ceiling Price (in dollars per unit)	3.42	3.50				3.42
Weighted-Average Floor Price (in dollars per unit)	2.50	2.50				2.50
Weighted-Average Sold Put Price (in dollars per unit)	2.00	2.00				2.00
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	55	1,166
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Three-Way Collars | Subsequent Event
Derivative [Line Items]
Weighted-Average Ceiling Price (in dollars per unit)	3.42	3.50				3.42
Weighted-Average Floor Price (in dollars per unit)	2.50	2.50				2.50
Weighted-Average Sold Put Price (in dollars per unit)	2.00	2.00				2.00
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	55	1,166
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Basis Protection Swaps
Derivative [Line Items]
Weighted-Average Contract Price (in dollars per unit)	(0.27)	(0.27)	(0.46)	(0.46)	(0.27)	(0.27)
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/million British thermal units (“MMBtu”)) | Basis Protection Swaps | Subsequent Event
Derivative [Line Items]
Weighted-Average Contract Price (in dollars per unit)	(0.27)	(0.27)	(0.46)	(0.46)	(0.27)	(0.27)
Natural Gas (CIG) | Basis Protection Swaps
Derivative [Line Items]
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	33,473	33,691	47,703	48,008	16,623
Natural Gas (CIG) | Basis Protection Swaps | Subsequent Event
Derivative [Line Items]
NYMEX HH Volumes and CIG NYMEX HH Volumes (in unit per day) | MMBTU	33,473	33,691	47,703	48,008	16,623

XML

DERIVATIVES - Derivative Positions (Details) - Commodity - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Derivative Assets:
Total derivative assets	$ 6,135	$ 3,284
Amounts not offset in the accompanying balance sheets	(3,258)	0
Total derivative assets, net	2,877	3,284
Derivative Liabilities:
Total derivative liabilities	(24,411)	(63,533)
Amounts not offset in the accompanying balance sheets	3,258	0
Total derivative liabilities, net	(21,153)	(63,533)
Commodity contracts - current
Derivative Assets:
Total derivative assets	4,335	2,490
Commodity contracts - noncurrent
Derivative Assets:
Total derivative assets	1,800	794
Commodity contracts - current
Derivative Liabilities:
Total derivative liabilities	(21,438)	(46,334)
Commodity contracts - long-term
Derivative Liabilities:
Total derivative liabilities	$ (2,973)	$ (17,199)

XML

DERIVATIVES - Derivative Loss (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Components of the derivative gain (loss)
Total derivative gain (loss)	$ 4,927	$ (72,650)	$ 30,087	$ (368,143)
Commodity derivative
Components of the derivative gain (loss)
Total derivative cash settlement loss	(1,335)	(181,631)	(11,885)	(348,209)
Change in fair value gain (loss)	6,262	108,981	41,972	(19,934)
Total derivative gain (loss)	4,927	(72,650)	30,087	(368,143)
Commodity derivative | Oil contracts
Components of the derivative gain (loss)
Total derivative cash settlement loss	(2,164)	(114,778)	(5,613)	(239,940)
Commodity derivative | Natural gas contracts
Components of the derivative gain (loss)
Total derivative cash settlement loss	829	(54,091)	(6,272)	(82,875)
Commodity derivative | NGL contracts
Components of the derivative gain (loss)
Total derivative cash settlement loss	$ 0	$ (12,762)	$ 0	$ (25,394)

XML

ASSET RETIREMENT OBLIGATIONS - Schedule of Roll-Forward Activity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Change in asset retirement obligations
Balance as of December 31, 2022	$ 291,026
Additional liabilities incurred	1,480
Accretion expense	7,648
Liabilities settled	(6,231)
Balance as of June 30, 2023	293,923
Current portion	25,557	$ 25,557
Long-term portion	$ 268,366	$ 265,469

XML

EARNINGS PER SHARE - Narrative (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2023 shares	Jun. 30, 2022 shares	Jun. 30, 2023 shares	Jun. 30, 2022 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Antidilutive securities excluded from EPS calculation (in shares)	3,846	59,161	111,251	30,822
LTIP | Performance Stock Units (PSUs), Granted Prior to Fiscal Year 2023 | Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ratio at which award holders get common stock of the company			2
LTIP | Minimum | Performance Stock Units (PSUs) | Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ratio at which award holders get common stock of the company			0
LTIP | Maximum | Performance Stock Units (PSUs) | Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Ratio at which award holders get common stock of the company			2.25

XML

EARNINGS PER SHARE - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Net income, basic	$ 139,287	$ 202,461	$ 468,821	$ 91,639	$ 341,748	$ 560,460
Net income, diluted	$ 139,287		$ 468,821		$ 341,748	$ 560,460
Basic net income per common share (in dollars per share)	$ 1.73		$ 5.52		$ 4.22	$ 6.60
Diluted net income per common share (in dollars per share)	$ 1.72		$ 5.48		$ 4.18	$ 6.56
Weighted-average shares outstanding - basic (in shares)	80,393		84,993		81,052	84,917
Add: dilutive effect of contingent stock awards (in shares)	751		561		772	536
Weighted-average shares outstanding - diluted (in shares)	81,144		85,554		81,824	85,453

XML

INCOME TAXES - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Income Tax Disclosure [Abstract]
Deferred tax assets, valuation allowance	$ 25,400,000		$ 25,400,000		$ 25,400,000
Net deferred tax liability	409,593,000		409,593,000		319,618,000
Prepaid income taxes	2,266,000		2,266,000		29,604,000
Income tax expense	44,363,000	$ 152,464,000	109,452,000	$ 175,825,000
Unrecognized tax benefits	$ 0		$ 0		$ 0

XML

LEASES - Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Operating Leases
Total right-of-use asset	$ 41,572	$ 24,125
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Right-of-use assets	Right-of-use assets
Total lease liability	$ 42,235	$ 24,788
Field equipment
Operating Leases
Total right-of-use asset	30,829	15,131
Total lease liability	30,857	15,131
Corporate leases
Operating Leases
Total right-of-use asset	6,326	8,235
Total lease liability	6,961	8,898
Vehicles
Operating Leases
Total right-of-use asset	4,417	759
Total lease liability	$ 4,417	$ 759

XML

LEASES - Lease Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Operating Leases
Remainder of 2023	$ 12,419
2024	18,964
2025	7,416
2026	3,449
2027	2,106
Thereafter	649
Total lease payments	45,003
Less: imputed interest	(2,768)
Total lease liability	$ 42,235	$ 24,788

XML

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Supplemental cash flow information:
Cash (paid) refunded for income taxes	$ 7,861	$ (6,300)
Cash paid for interest	(12,627)	(15,821)
Supplemental non-cash investing activities:
Changes in working capital related to capital expenditures	$ 56,345	$ (2,666)

XML

STOCKHOLDERS' EQUITY - Narrative (Details) - USD ($)		1 Months Ended	6 Months Ended
	Jan. 27, 2023	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Feb. 28, 2023
Equity, Class of Treasury Stock [Line Items]
Stock repurchased, purchase price			$ 320,305,000	$ 0
Quarterly Variable Cash Dividend
Equity, Class of Treasury Stock [Line Items]
Common stock, cash dividends, criteria, free cash flow after base cash dividend preceding twelve-month period, percent		50.00%
2023 Stock Repurchase Program, Through December 2024 | Common Stock
Equity, Class of Treasury Stock [Line Items]
Stock repurchased (in shares)			312,800
Stock repurchased, per share (in dollars per share)			$ 64.55
Stock repurchased, purchase price			$ 20,200,000
Stock repurchase program, authorized amount (not to exceed)			$ 500,000,000		$ 1,000,000,000
CPPIB Crestone Peak Resources Canada Inc. | 2023 Share Repurchase Plan | Common Stock
Equity, Class of Treasury Stock [Line Items]
Stock repurchased (in shares)	4,900,000
Stock repurchased, per share (in dollars per share)	$ 61.00
Stock repurchased, purchase price	$ 300,000,000

XML

STOCKHOLDERS' EQUITY - Summary of Dividends Paid (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022
Dividends Paid [Line Items]
Total (in dollars per share)	$ 2.12	$ 2.15	$ 1.36	$ 1.21
Total	$ 173,358	$ 176,878	$ 117,151	$ 104,444
Base
Dividends Paid [Line Items]
Total (in dollars per share)	$ 0.50	$ 0.50	$ 0.46	$ 0.46
Variable
Dividends Paid [Line Items]
Total (in dollars per share)	$ 1.62	$ 1.65	$ 0.90	$ 0.75