Civitas Resources (CIVI) this week is seeing unusual call accumulation out in the July expiration with 2500 of the $65 calls and 700 of the $60 calls bought, OTM action. CIVI shares have risen 14% over the last month with the Energy resurgence and a potential 38.2% Fibonacci retracement target at $59 followed by a 50% retracement at $64.25. Civitas is an independent exploration and production company focused on the acquisition, development, and production of crude oil and associated liquids-rich natural gas primarily in the Denver-Julesburg Basin in Colorado (the “DJ Basin”) and the Permian Basin in Texas and New Mexico. Since rebranding from Bonanza Creek Energy in 2021, the company has grown inorganically to become one of the largest producers in the DJ basin. Civitas acquired private Permian-based Hibernia Energy III and Tap Rock Resources in August 2023, followed by the purchase of Midland assets from Vencer Energy in January 2024. These transactions have more than doubled CIVI’s 2024 oil production to 159 kb/d at midpoint and added ~1,120 of gross remaining locations in the prolific Permian basin.

CIVI has a market cap of $5.28B and trades 2.9X EBITDA and 11.1X FCF with a 5.5% dividend yield. Short interest has been rising to 6% of the float.  CIVI trades at a ~1.3X discount to its peers on 2025 EV/EBITDAX (at $70/bbl WTI) and offers one of the highest FCF yields. While regulatory risk in Colorado has been an overhang on the stock in the past, a recent agreement with the government and environmental groups now removes this uncertainty for the next few years. In addition, CIVI’s entry into the Permian has created a more balanced portfolio with greater operational flexibility. With a near-term focus on debt reduction, expect CIVI’s M&A strategy to focus on small-scale bolt-ons, asset trades and acreage swaps to optimize its land position. Civitas has emerged as one of the top operators in the DJ and is now controlling ~15% of the basin’s 2024 volumes. When compared to other DJ basin producers, CIVI’s 24YTD wells have yielded the highest average nine-month cumulative oil production per 1,000 lateral foot, outpacing CVX and OXY’s wells by 22% and 11%.