Civitas Resources, a significant player in the oil sector, has consolidated its position in the Permian Basin following two major acquisitions in 2023 and 2024. These transactions doubled the size of the company, allowing it to have a diversified portfolio in this strategic region, considered one of the most profitable in the United States.
Since these acquisitions, Civitas has focused its efforts on improving the profitability of its Permian wells by optimizing costs and drilling cycles. According to its managing director, Chris Doyle, well costs in this area continue to decline thanks to reduced cycle times and innovations in drilling design and completions. The company also initiated the use of SimulFrac technology, a completion method that allows two horizontal wells to be completed simultaneously, thereby reducing production lead times.
Increased productivity in the Midland sub-basin
Initial results from this technique in the Midland sub-basin show an increase of more than 30% in daily flow, demonstrating the effectiveness of this method. In addition, Civitas has identified 120 potential sites in the Wolfcamp D subzone, with profitability thresholds estimated around $40 per barrel.
The Permian Basin also saw the addition of 75 new drilling locations for Civitas during the year, as well as several strategic land swaps aimed at extending horizontal well lengths and strengthening the company's production interests in key development projects.
DJ Basin: continued success in Colorado
In Colorado, in the DJ Basin, performances from Civitas installations are also there. In the prolific Watkins play, which represents a significant portion of the company's 2024 production, Civitas has commissioned 13 wells with extreme lengths of 4 miles (approximately 21,000 feet), an industry record. This innovative configuration showed no degradation in yield compared to shorter wells.
One of the most successful wells, the Blue 4AH, even set a production record in the state of Colorado with a cumulative production of 165,000 barrels of oil over 90 days and a peak production of 2,013 barrels per day over 30 days.
Impacts of favorable regulations in Colorado
Recent regulatory decisions in Colorado have also contributed to Civitas' performance. Indeed, the adoption of the Lowry Ranch Comprehensive Development Plan in Arapahoe County, which authorizes more than 150 drilling operations near the Aurora reservoir, schools and residential areas, allowed the company to secure its operations in this area. This plan, however, includes environmental conditions, requiring Civitas to use electricity for its drilling operations and to obtain additional approvals for each site.
Civitas' total production in the third quarter of 2024 was 348,000 equivalent barrels per day, up slightly from the previous quarter and up almost 50% from the previous year. Oil production alone, which reached 159,000 barrels per day, was however slightly impacted by water transport constraints in the Permian and disruptions to third-party infrastructure in the DJ.
Finally, Chris Doyle clarified that maintenance capital expenditures have not been sufficient to ensure a steady increase in production this year, leading to a concentration of operations in the middle of the year. However, it anticipates an increase in production by the end of the year and the start of the first quarter of 2025.
