A New Cause for Concern: Civitas Resources, Inc. Adds a New Debt & Financing Risk

Civitas Resources, Inc. (CIVI) has disclosed a new risk, in the Debt & Financing category.

Civitas Resources, Inc. faces a significant constraint on leveraging its historic Net Operating Losses (NOLs) due to certain past transactions that incited an ownership change as defined by Section 382 of the Internal Revenue Code. This change, which refers to a shift of more than 50% in the ownership of the company’s stock, imposes an annual limit on the utilization of NOLs, tethering it to the fair market value of the company’s equity prior to the change and the prevailing long-term tax-exempt bond yields. Consequently, not only are Civitas Resources’ historic NOLs curtailed, but the NOLs acquired from other entities in these transactions are further restricted, complicating the company’s financial strategy to offset future taxable income. This limitation could potentially affect Civitas Resources’ financial position, as their ability to reduce taxable income through NOLs is now uncertain and dependent on multiple variables, including future profitability.

The average CIVI stock price target is $82.03, implying 21.51% upside potential.

To learn more about Civitas Resources, Inc.’s risk factors, click here.