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

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

 Commission File Number:  001-35371

(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.)

(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 May 6, 2025, the registrant had 92,579,894 shares of common stock outstanding.

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:

•our 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;

•crude oil, natural gas, and natural gas liquids (“NGL”) prices and factors affecting the volatility of such prices;

•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;

•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;

•our management and technical team;

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

•our ability to replace crude oil and natural gas reserves;

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

•existing or potential future capital allocation initiatives such as repurchases of our equity or debt securities or repayments of other outstanding debt, paying dividends on our common stock at their current level or at all, or additional mechanisms to return excess capital to our stockholders;

•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 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 our recent acquisitions and the anticipated impact of the recent acquisitions on our 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, 2024 (“2024 Form 10-K”);

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

•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, the imposition of tariffs or trade or other economic sanctions, political instability, and the availability of credit on acceptable terms;

•our ability to identify, select, and consummate possible additional acquisition and disposition opportunities;

•the effects of disruption of our operations or excess supply of crude oil and natural gas and other effects of world events, and actions taken by OPEC+ as it pertains to global supply and demand of, and prices for, crude oil, natural gas, and NGLs;

•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 and to meet our capital allocation initiatives;

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

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

•changes in local, state, and federal laws, regulations or policies that may affect our business or our industry (such as the effects of tax law changes, and changes in environmental, health, and safety regulation and regulations addressing climate change, and trade policy and tariffs);

•environmental, health, and safety 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 crude oil and natural gas processing facilities;

•competition in the crude 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 crude oil, natural gas, and NGL we produce, and to sell the crude oil, natural gas, and NGL at market prices;

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

•pandemics and other public health epidemics;

•political conditions in or affecting other producing countries, including conflicts or hostilities 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 and the effects therefrom; 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q 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 elsewhere in our 2024 Form 10-K, which may be updated in subsequent Quarterly Reports on Form 10-Q and other documents we file with the Securities and Exchange Commission (the “SEC”). These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

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 crude oil and associated liquids-rich natural gas in the Permian Basin in Texas and New Mexico and the DJ Basin in Colorado.

The accompanying unaudited condensed consolidated financial statements include the accounts of Civitas 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 intercompany balances and transactions have been eliminated in consolidation.

The December 31, 2024 unaudited condensed consolidated balance sheet data has been derived from the audited consolidated financial statements contained in our 2024 Form 10-K, but does not include all disclosures, including notes required by GAAP. As such, this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes included in our 2024 Form 10-K. In connection with the preparation of the unaudited condensed consolidated financial statements, we evaluated events subsequent to the balance sheet date of March 31, 2025 through the filing date of this Quarterly Report on Form 10-Q. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year or any other future period. Additionally, certain insignificant prior period amounts have been reclassified to conform to current period presentation in the accompanying unaudited condensed consolidated financial statements. Such reclassifications did not have a material impact on prior period consolidated financial statements.

The significant accounting policies followed by us are set forth in Note 1 - Summary of Significant Accounting Policies in the 2024 Form 10-K and are supplemented by the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance income tax disclosures by requiring disclosure of items such as the disaggregation of the income tax rate reconciliation as well as information regarding income taxes paid. This ASU is effective for annual reporting periods beginning after December 15, 2024, and early adoption is permitted. ASU 2023-09 should be applied on a prospective basis, and retrospective application is permitted. We adopted ASU 2023-09 on January 1, 2025, on a prospective basis, and will present the required new disclosures in the 2025 Form 10-K.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires public entities to disclose disaggregated information about certain costs and expenses. This ASU is effective for annual reporting periods beginning after December 15, 2026, and early adoption is permitted. ASU 2024-03 should be applied on a prospective basis, and retrospective application is permitted. We are evaluating the impact that ASU 2024-03 will have on the consolidated financial statements and our plan for adoption, including the adoption date and transition method.

There are no other accounting standards applicable to us that would have a material effect on our consolidated financial statements and disclosures that have been issued but not yet adopted by us as of March 31, 2025, and through the filing date of this Quarterly Report on Form 10-Q.

All mergers and acquisitions disclosed below are accounted for under the acquisition method of accounting for business combinations under ASC Topic 805, Business Combinations. Accordingly, we conducted 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 were expensed as incurred. The fair value measurements of assets acquired and liabilities assumed were based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties were measured using valuation techniques that converted future cash flows to a single discounted amount. Significant inputs to the valuation of the crude oil and natural gas properties included estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, reserve adjustment factors, and a market-based weighted-average cost of capital. These inputs required significant judgments and estimates by management at the time of the valuation.

On January 2, 2024, we completed the acquisition of certain crude oil and natural gas assets from Vencer Energy, LLC (“Vencer”) for adjusted aggregate consideration of approximately $2.0 billion, inclusive of customary post-closing adjustments and $550 million in cash to be paid on or before January 3, 2025 (the “Vencer Acquisition”). The following tables present the consideration transferred and the final purchase price allocation of the assets acquired and the liabilities assumed in the Vencer Acquisition:

Consideration ($ in millions, except per share amounts)
Cash consideration			$	997
Deferred acquisition consideration(1)(3)			$	532
Shares of common stock issued			7,181,527
Closing price per share(2)			$	68.08
Equity consideration(4)			$	489
Total consideration			$	2,018

_______________________

(1)Based on discounted fixed and determinable future payments of cash.

(2)Based on the closing stock price of Civitas common stock on January 2, 2024.

(3)Amounts represent non-cash investing activities until such time payments are made, as applicable. Refer to Note 5 - Debt for additional information.

(4)Amounts represent non-cash financing activities.

The purchase price allocation for the Vencer Acquisition was finalized as of the fourth quarter of 2024 with immaterial adjustments made to the preliminary allocation initially presented in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 2, 2024.

The results of operations for the Vencer Acquisition since the closing date have been included in our unaudited condensed consolidated financial statements during the three months ended March 31, 2024. The amount of revenue of Vencer included in our accompanying unaudited condensed consolidated statements of operations (“statements of operations”) was approximately $198 million during the three months ended March 31, 2024. We determined that disclosing the amount of Vencer-related net income included in the accompanying statements of operations is impracticable as the operations from the acquisition were integrated into our operations from the date of the acquisition.

The results of operations for the Vencer Acquisition since the closing date have been included in our unaudited condensed consolidated financial statements and therefore do not require pro forma disclosure for the three months ended March 31, 2024.

Transaction costs related to insignificant acquisitions in the Permian Basin in 2025 and the Vencer Acquisition in 2024 are accounted for separately from the assets acquired and liabilities assumed and are included in transaction costs in the accompanying statements of operations. We incurred transaction costs of $6 million and $23 million during the three months ended March 31, 2025 and 2024, respectively.

Crude oil, natural gas, and NGL 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 and operating region is disaggregated below (in millions):

			Three Months Ended March 31,
Sales by Commodity and Operating Region			2025						2024
Crude oil
Permian Basin			$	487					$	585
DJ Basin			414						491
Total			901						1,076
Natural gas
Permian Basin			25						13
DJ Basin			100						74
Total			125						87
NGL
Permian Basin			78						83
DJ Basin			88						82
Total			166						165
Crude oil, natural gas, and NGL
Permian Basin			590						681
DJ Basin			602						647
Total			$	1,192					$	1,328

We record revenue in the month production is delivered to the purchaser. However, purchaser statements may not be received for one to two months after the date production is delivered, and as a result, we estimate the volume of production delivered to the purchaser and the price that will be received for the sale of the product. Generally, we record the differences between our estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. Any identified differences between our revenue estimates and actual revenue received historically have not been significant. For the three months ended March 31, 2025 and 2024, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

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

			March 31, 2025						December 31, 2024
Accounts payable trade			$	104					$	35
Accrued drilling and completion costs			178						158
Accrued crude oil and natural gas operating expense			149						160
Accrued general and administrative expense			19						37
Accrued interest expense			104						136
Other accrued expenses			43						35
Total accounts payable and accrued expenses			$	597					$	561

Debt, net of unamortized discounts and deferred financing costs, consists of the following (in millions):

The table below summarizes the face values, interest rates, maturity dates, and semi-annual interest payment dates related to our outstanding senior note obligations as of March 31, 2025 ($ in millions):

The 2026 Senior Notes, 2028 Senior Notes, 2030 Senior Notes, and 2031 Senior Notes (collectively, the “Senior Notes”) are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt. The Company may redeem some or all of its Senior Notes prior to their maturity at redemption prices that may include a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Notes. The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of our existing subsidiaries and are expected to be guaranteed by certain other future subsidiaries that may be required to guarantee the Senior Notes.

The indentures governing the Senior Notes contain covenants that limit, among other things, our ability and the ability of our subsidiaries 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 our subsidiaries to pay dividends to us; (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. We were in compliance with all covenants and all restricted payment provisions related to our Senior Notes as of March 31, 2025 and through the filing of this Quarterly Report on Form 10-Q. The indentures governing the Senior Notes also contain customary events of default.

For additional details on our Senior Notes, refer to Note 5 - Long-Term Debt in Item 8. Financial Statements and Supplementary Data included in our 2024 Form 10-K.

We are party to a reserve-based revolving credit facility, as the borrower, with JPMorgan Chase Bank, N.A. (“JPMorgan”), as the administrative agent, and a syndicate of financial institutions, as lenders, that has an aggregate maximum commitment amount of $4.0 billion and is set to mature on August 2, 2028 (together with all amendments thereto, the “Credit Facility” or the “Credit Agreement”). On February 21, 2025, we amended our Credit Facility to increase our aggregate elected commitments from $2.2 billion to $2.5 billion. As of March 31, 2025, the borrowing base and aggregate elected commitments under the Credit Agreement were $3.4 billion and $2.5 billion, respectively. The next scheduled borrowing base redetermination date is set to occur in May 2025.

Interest and commitment fees associated with the Credit Facility are accrued based on a revolving loan commitment utilization grid set forth in the Credit Agreement. Borrowings under the Credit Facility bear interest at a per annum rate equal to, at our option, either (i) the Alternate Base Rate (“ABR”) plus the applicable margin, or (ii) the term-specific Secured Overnight Financing Rate (“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 for an interest period of one month plus 1.0%, in each case, subject to a 1.5% floor, plus an applicable margin of 0.75% to 1.75% based on the utilization of the Credit Facility. Term-specific SOFR is based on one-, three-, or six-month terms as selected by us and is subject to a 0.5% floor, plus an applicable margin of 1.75% to 2.75%, 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 us, and interest on borrowings that bear interest at the ABR are payable quarterly in arrears.

The Credit Facility is guaranteed by all our restricted domestic subsidiaries 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 reserve reports most recently delivered to the lenders under the Credit Facility, including any engineering reports relating to the crude oil and natural gas properties of our restricted domestic subsidiaries, 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, including the suspension and/or modification of certain covenants in the event that we receive investment grade credit ratings, 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) changes to organizational documents, (xii) use of proceeds from loans and letters of credit, (xiii) hedging transactions, (xiv) additional subsidiaries, (xv) changes in fiscal year or fiscal quarter, (xvi) prepayments of certain debt and other obligations, (xvii) sales or discounts of receivables, and (xviii) dividend payment thresholds. 

In addition, we are subject to certain financial covenants under the Credit Facility, as tested on the last day of each fiscal quarter, including, without limitation, (a) a maximum ratio of our consolidated net 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 1.00, (b) a current ratio, inclusive of the unused commitments under the Credit Facility then available to be borrowed, to not be less than 1.00 to 1.00, and (c) upon the achievement of investment grade credit ratings, a PV-9 coverage ratio of the net present value, discounted at 9% per annum, of the estimated future net revenues expected in the proved reserves to our total net indebtedness of not less than 1.50 to 1.00 (“PV-9 coverage ratio”). We were in compliance with all covenants under the Credit Facility as of March 31, 2025 and through the filing of this Quarterly Report on Form 10-Q.

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

As of both March 31, 2025 and December 31, 2024, the unamortized deferred financing costs associated with amendments to the Credit Facility were $29 million. Of the unamortized deferred financing costs, (i) $20 million and $21 million are presented within other noncurrent assets on the accompanying unaudited condensed consolidated balance sheets (“balance sheets”) as of March 31, 2025 and December 31, 2024, respectively, and (ii) $9 million and $8 million are presented within prepaid expenses and other on the accompanying balance sheets as of March 31, 2025 and December 31, 2024, respectively.

The Vencer Acquisition included deferred consideration of $550 million to be paid in cash on or before January 3, 2025. We discounted this obligation and recorded $532 million as deferred acquisition consideration upon closing and amortized the discount to interest expense in the accompanying statements of operations. During the year ended December 31, 2024, we paid $75 million of this deferred consideration and on January 3, 2025 we paid the remaining $475 million, which is recorded as a cash outflow within the acquisitions of businesses, net of cash acquired in the accompanying unaudited condensed consolidated statements of cash flows (“statements of cash flows”).

For the three months ended March 31, 2025 and 2024, we incurred interest expense of $107 million and $110 million, respectively. Interest expense for the three months ended March 31, 2025 and 2024 includes zero and $9 million, respectively, related to the amortization of deferred acquisition consideration associated with the Vencer Acquisition.

Commitments. We routinely enter into, extend, or amend operating agreements in the ordinary course of business. We have long-term transportation, sales, processing, and water delivery commitments. There were no significant commitments entered into during the three months ended March 31, 2025. For details of our existing commitments, refer to Note 6 - Commitments and Contingencies in Item 8. Financial Statements and Supplementary Data included in our 2024 Form 10-K.

Litigation and Legal Items. We are involved in various legal proceedings. We review the status of these proceedings on an ongoing basis and, from time to time, may settle or otherwise resolve these matters on terms and conditions that management believes are in our best interests. We have provided the necessary estimated accruals in the accompanying balance sheets where deemed appropriate for litigation and legal related items that are ongoing and not yet concluded. Other than any ordinary routine litigation incidental to the business and except as described below, we are not currently a party to, nor is our property currently subject to, any material legal proceedings, and we are not aware of any such proceedings contemplated by governmental authorities.

On May 2, 2025, Jeremy Lin (the “Plaintiff”), individually and on behalf of all others similarly situated, filed a putative class action complaint for violation of federal securities laws against us, our Chief Executive Officer, and our Chief Financial Officer (collectively, the “Defendants”) in the United States District Court for the District of New Jersey (the “Complaint”). The Complaint purports to bring a federal securities class action on behalf of a class of persons and entities other than the Defendants who acquired our securities between February 27, 2024 and February 24, 2025 and asserts violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The Complaint alleges, among other things, that the Defendants made materially false and misleading statements related to our business, operations and prospects, including our anticipated production volumes and financial condition in 2025. The Plaintiff seeks, among other things, certification of a class, an award of unspecified compensatory damages, interest, costs and expenses, including attorneys’ fees and expert fees. We intend to vigorously defend against the claims brought by the Plaintiff in this matter. We cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.

In June 2024, in connection with our stockholders’ approval at our 2024 annual meeting of stockholders, we adopted the 2024 Long Term Incentive Plan (the “2024 LTIP”), which provides for the issuance of restricted stock units, performance stock units, stock options, and various other forms of awards, and reserved 3,100,000 shares of common stock for issuance under the 2024 LTIP. The 2024 LTIP supersedes and replaces all of our previous long-term incentive plans (the “Prior Plans”), such that awards may not be granted under the Prior Plans subsequent to the adoption of the 2024 LTIP. Awards granted under the Prior Plans will remain subject to the terms and conditions set forth in the applicable Prior Plan. The Prior Plans and 2024 LTIP are collectively referred to herein as the “LTIP.”

We record 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 in the accompanying statements of operations. The following table outlines the compensation expense recorded by type of award (in millions):

			Three Months Ended March 31,
			2025						2024
Restricted and deferred stock units			$	8					$	6
Performance stock units			5						5
Total stock-based compensation			$	13					$	11

As of March 31, 2025, unrecognized compensation expense related to the awards granted under the LTIP will be amortized through the relevant periods as follows (in millions):

			Unrecognized Compensation Expense						Final Year of Recognition
Restricted and deferred stock units			$	48					2028
Performance stock units			32						2027
Total unrecognized stock-based compensation			$	80

We grant time-based restricted stock units (“RSUs”) to our officers, executives, and employees and time-based deferred stock units (“DSUs”) to our non-employee directors under the LTIP. Each RSU and DSU represents a right to receive one share of our common stock after the RSU or DSU vests and is settled. RSUs vest ratably over a one, two, or three-year service period on each anniversary following the grant date. RSUs are settled in shares of our common stock shortly after vesting. DSUs vest over a one-year period following the grant date. DSUs are settled in shares of our common stock upon the non-employee director’s separation of service from our Board of Directors (our “Board”). The grant-date fair value of RSUs and DSUs is equal to the closing price of our common stock on the date of the grant.

The following table presents the changes in non-vested RSUs and DSUs for the three months ended March 31, 2025:

			RSUs and DSUs						Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year			932,902						$	65.69
Granted			495,315						49.20
Vested			(227,870)						63.26
Forfeited			(43,611)						69.28
Non-vested, end of period			1,156,736						$	58.98

The aggregate grant-date fair value of the RSUs and DSUs granted under the LTIP during the three months ended March 31, 2025 was $24 million.

We grant market-based performance stock units (“PSUs”) to our officers and certain executives under the LTIP. The number of shares of our common stock issued to settle PSUs ranges from zero to 225% of the number of PSUs granted and is determined based on performance achievement against certain market-based criteria over a three-year performance period. Performance achievement is determined based on our annualized absolute total stockholder return (“TSR”). Absolute TSR is determined based upon the change in our stock price over the performance period plus dividends paid. PSUs generally vest on December 31 of the year preceding the third anniversary of the date of grant and settle by March 15 of the following year upon the determination and approval of performance achievement by the Compensation Committee of our Board.

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

The following table presents the change of non-vested PSUs for the three months ended March 31, 2025:

			PSUs						Weighted-Average Grant-Date Fair Value
Non-vested, beginning of year			650,046						$	85.23
Granted(1)			277,684						61.78
Adjusted shares based on performance(2)			(81,547)						73.09
Vested(2)			(76,827)						72.98
Forfeited			(35,752)						85.67
Non-vested, end of period(1)			733,604						$	78.96

___________________________

(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 our common stock issued may vary depending on the performance multiplier, which ranges from zero to 225%, depending on the level of satisfaction of the performance condition.

(2)Upon completion of the performance period for the PSUs granted in 2022, a performance achievement of 46% or 54%, as applicable, was applied to each of the grants, resulting in a number of shares less than the target amount of such PSUs being settled during the three months ended March 31, 2025.

The aggregate grant-date fair value of the PSUs granted under the LTIP during the three months ended March 31, 2025 was $17 million.

NOTE 8 - FAIR VALUE MEASUREMENTS

We follow authoritative accounting guidance for measuring the fair value of assets and liabilities. 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

We classify financial and non-financial assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our 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.

We use Level 2 inputs to measure the fair value of crude oil and natural gas commodity price derivatives. The fair value of our 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 us and our 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 our derivative instruments.

The following table presents our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 and their classification within the fair value hierarchy (in millions):

			As of March 31, 2025						As of December 31, 2024
			Level 2						Level 2
Derivative assets			$	192					$	84
Derivative liabilities			$	97					$	35

The portion of our long-term debt related to our Credit Facility, if any, approximates its fair value as it bears interest at a floating rate that approximates a current market rate. The portion of our long-term debt related to our Senior Notes is recorded at cost, net of any unamortized discount and deferred financing costs. The fair value of our Senior Notes is based on quoted market prices, and as such, is designated as Level 1 within the fair value hierarchy. The following table presents the fair value of our Senior Notes as of the dates indicated ($ in millions):

									As of March 31, 2025												As of December 31, 2024
			Nominal Interest						Fair Value						Percent of Par						Fair Value						Percent of Par
2026 Senior Notes			5.000%						$	395					99%						$	394					99%
2028 Senior Notes			8.375%						1,395						103%						1,405						104%
2030 Senior Notes			8.625%						1,035						104%						1,049						105%
2031 Senior Notes			8.750%						1,389						103%						1,408						104%

Our deferred acquisition consideration was recorded in connection with the Vencer Acquisition using an estimated fair value discount at the time of the transaction based on quoted market prices from our debt as well as other inputs classified as Level 2 within the fair value hierarchy. As of December 31, 2024, the carrying value of the deferred acquisition consideration approximated fair value. Refer to Note 5 - Debt for additional information.

We measure acquired assets or businesses at fair value on a nonrecurring basis and review our proved and unproved crude 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. The most significant fair value determinations for non-financial assets and liabilities are related to crude oil and natural gas properties acquired. Refer to Note 2 - Acquisitions and Divestitures for additional information. During the three months ended March 31, 2025 and 2024, we recorded no impairments of proved or unproved properties. Refer to Note 1 – Summary of Significant Accounting Policies in Item 8. Financial Statements and Supplementary Data included in our 2024 Form 10-K for information on our policies for determining fair value of proved and unproved properties and related impairment expense.

We periodically enter into commodity derivative contracts to mitigate a portion of our exposure to potentially adverse market changes in commodity prices for our expected future crude oil and natural gas production and the associated impact on cash flows. Our commodity derivative contracts consist of swaps, collars, and basis protection swaps. As of March 31, 2025, all derivative counterparties were members of the Credit Facility lender group, and all commodity derivative contracts are entered into for other-than-trading purposes. We do not designate our 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, we receive 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, we pay 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. When the index price is above the ceiling price at the time of settlement, we pay the difference between the index price and the ceiling price. When the index price is below the floor price at the time of settlement, we receive 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.

Basis protection swaps are arrangements that guarantee a price differential from a specified delivery point. For basis protection swaps, we receive a payment from the counterparty if the price differential is greater than the stated terms of the contract and pay the counterparty if the price differential is less than the stated terms of the contract.

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

			Three Months Ended March 31,
			2025						2024
Derivative cash settlement gain (loss), net
Crude oil contracts			$	1					$	(11)
Natural gas contracts			3						—
Total derivative cash settlement gain (loss), net			4						(11)
Change in fair value gain (loss)			48						(99)
Total derivative gain (loss), net			$	52					$	(110)

As of March 31, 2025, we had entered into the following commodity price derivative contracts:

						Contract Period
						Q2 2025						Q3 2025						Q4 2025						Q1 2026						Q2 2026						Q3 2026						Q4 2026
Crude Oil Derivatives (volumes in Bbl/day and prices in $/Bbl)
Swaps
NYMEX WTI Volumes						29,000						37,700						61,700						33,000						—						—						—
Weighted-Average Contract Price						$	70.71					$	71.69					$	66.12					$	68.28					$	—					$	—					$	—
Collars
NYMEX WTI Volumes						42,000						38,000						10,000						10,000						—						—						—
Weighted-Average Ceiling Price						$	76.79					$	76.59					$	73.62					$	77.13					$	—					$	—					$	—
Weighted-Average Floor Price						$	67.52					$	66.86					$	60.00					$	60.00					$	—					$	—					$	—
Natural Gas Derivatives (volumes in MMBtu/day and prices in $/MMBtu)
Swaps
NYMEX HH Volumes						180,000						180,000						180,000						50,000						50,000						50,000						50,000
Weighted-Average Contract Price						$	3.74					$	3.74					$	3.74					$	4.41					$	4.41					$	4.41					$	4.41
Collars
NYMEX HH Volumes						20,000						20,000						20,000						140,000						140,000						140,000						140,000
Weighted-Average Ceiling Price						$	3.76					$	3.76					$	3.76					$	4.09					$	4.09					$	4.09					$	4.09
Weighted-Average Floor Price						$	3.03					$	3.03					$	3.03					$	3.29					$	3.29					$	3.29					$	3.29
Basis Protection Swaps
Waha Basis Volumes						140,000						140,000						140,000						130,000						130,000						130,000						130,000
Weighted-Average Contract Price						$	(1.32)					$	(1.32)					$	(1.32)					$	(1.31)					$	(1.31)					$	(1.31)					$	(1.31)
CIG Basis Volumes						$	46,703					$	50,000					$	50,000					$	60,000					$	60,000					$	60,000					$	60,000
Weighted-Average Contract Price						$	(0.85)					$	(0.87)					$	(0.87)					$	(0.58)					$	(0.58)					$	(0.58)					$	(0.58)

Subsequent to March 31, 2025 and as of May 2, 2025, we had entered into the following commodity price derivative contracts:

Our 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 our 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 our commodity derivative contracts as of March 31, 2025, and December 31, 2024 (in millions):

			March 31, 2025						December 31, 2024
Derivative Assets:
Commodity contracts - current			$	135					$	67
Commodity contracts - noncurrent			57						17
Total derivative assets			192						84
Amounts not offset in the accompanying balance sheets			(37)						(27)
Total derivative assets, net			$	155					$	57
Derivative Liabilities:
Commodity contracts - current			$	(78)					$	(22)
Commodity contracts - long-term			(19)						(13)
Total derivative liabilities			(97)						(35)
Amounts not offset in the accompanying balance sheets			37						27
Total derivative liabilities, net			$	(60)					$	(8)

We recognize an estimated liability for future costs associated with the abandonment of our crude oil and natural 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. We deplete the amount added to proved properties and recognize 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 our accompanying statements of cash flows.

Our estimated asset retirement obligation liability is based on historical experience plugging and abandoning wells, estimated plugging and abandonment cost, estimated economic lives, 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 our asset retirement obligation is as follows (in millions):

			Amount
Balance as of December 31, 2024			$	458
Additional liabilities incurred with development activities and other			1
Additional liabilities incurred with acquisitions			2
Liabilities settled			(16)
Accretion expense			7
Balance as of March 31, 2025			$	452
Current portion(1)			$	59
Long-term portion			$	393

___________________________

(1)The current portion of the asset retirement obligation is included in other liabilities on the accompanying balance sheets.

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, PSUs as well as outstanding in-the-money stock options and warrants. When we recognize 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% 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.

We have also issued warrants, which represent the right to purchase our common stock at a specified exercise price. The number of potentially dilutive shares related to the 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 warrants’ term. Warrants are only dilutive when the average price of the common stock during the period exceeds the exercise price. The exercise price of our warrants was in excess of our stock price during the three months ended March 31, 2025 and 2024; therefore, they were excluded from the earnings per share calculation.

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

			Three Months Ended March 31,
			2025						2024
Net income			$	186					$	176
Basic earnings per common share			$	1.99					$	1.75
Diluted earnings per common share			$	1.99					$	1.74
Weighted-average shares outstanding - basic			93,474,523						100,545,589
Add: dilutive effect of stock awards			145,972						747,599
Weighted-average shares outstanding - diluted			93,620,495						101,293,188

There were 404,566 and 138,448 unvested awards that were anti-dilutive for the three months ended March 31, 2025 and 2024, respectively.

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.

We assess the recoverability of our 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 a determination, we consider all available evidence (both positive and negative), 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, we recorded a valuation allowance of $25 million, which continued to be recorded as of March 31, 2025 and December 31, 2024, 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. We 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 March 31, 2025 and December 31, 2024 was $856 million and $801 million, respectively. Additionally, income tax payable of $6 million and $2 million is included in other liabilities on the accompanying balance sheets as of March 31, 2025 and December 31, 2024, respectively.

During the three months ended March 31, 2025 and 2024, we recorded income tax expense of $61 million and $35 million, respectively. 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 from operations before income taxes 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, tax credits, and other permanent differences. During the three months ended March 31, 2024, income tax expense was additionally impacted by deferred tax benefits from state apportionment changes as a result of the Vencer Acquisition.

We had no unrecognized tax benefits as of March 31, 2025 and December 31, 2024. We do not believe that there are any new items or changes in facts or judgments that would impact our tax position taken thus far in 2025.

In 2022, the Inflation Reduction Act was signed into law. Among other provisions, the Inflation Reduction Act imposes a 15% corporate alternative minimum tax (“CAMT”) for tax years beginning after December 31, 2022. Based on the application of currently available guidance, our income tax expense for the period ended March 31, 2025 was not impacted by the CAMT.

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

			Three Months Ended March 31,
			2025						2024
Supplemental cash flow information:
Cash paid for interest			$	(134)					$	(130)
Supplemental non-cash investing and financing activities:
Changes in working capital related to capital expenditures			(20)						(78)

Our Board authorized a stock repurchase program authorizing repurchases of up to $500 million of our outstanding shares of common stock, in the open market, in privately negotiated transactions, or through block trades, derivative transactions, or purchases made in accordance with Rule 10b-18 and Rule 10b5-1 of the Exchange Act. The stock repurchase program does not have a termination date, does not require any specific number of shares to be acquired, and can be modified or discontinued by our Board at any time.

We record stock repurchases at cost, which includes transaction costs that are direct and incremental to the repurchase, as a reduction to stockholders’ equity. As part of the transaction costs that are direct and incremental to the repurchase and, subject to netting against the fair value of stock issuances, we record a 1% excise tax 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.

The table below summarizes stock repurchases pursuant to the stock repurchase program during the three months ended March 31, 2025 and 2024: