According to a Reuters report, Civitas Resources (NYSE:CIVI) is on the verge of announcing a deal to expand into the Permian Basin. Civitas could buy the oil and gas operations of the private equity firm NGP Energy Capital Management in the Permian for about $5 billion, including debt.
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The deal, which is likely to expand Civitas’ foothold into the Permian (an area rich in oil and natural gas deposits), could be announced as soon as Tuesday.
Meanwhile, the company will likely fund the acquisition through a mix of newly issued shares and cash.
Shares of this oil and gas producer have been trending higher so far this year. It has gained nearly 28% year-to-date, outperforming the S&P 500 Index (SPX), which is up about 15%.
While lower crude oil and natural gas realized prices continue to weigh on the company’s financials, its focus on improving free cash flow, maintaining a solid balance sheet, and returning significant cash to shareholders have been catalysts. Further, its low operating cost structure is positive.
It generated about $186 million in free cash flow in Q1. Moreover, it returned approximately $500 million through base and variable dividends and share repurchases.
Is CIVI a Good Stock?
CIVI stock has received two Buy and one Sell recommendations for a Moderate Buy consensus rating on TipRanks. Meanwhile, these analysts’ average price target of $85.67 implies 22.53% upside potential from current levels.
Investors should note that Leo Mariani of Roth MKM is the most accurate analyst for CIVI stock, according to TipRanks. Copying Mariani’s trades on CIVI stock and holding each position for one year could result in 94% of your transactions generating a profit, with an average return of 72.68% per trade.
