We initiate coverage on CIVI with a Strong Buy rating and a $70 PT. CIVI acquires, develops, and produces oil and natural gas in Colorado’s Denver-Julesburg Basin, managing a reserve base of 400mn BOE. Market skepticism overlooks CIVI’s restructured cost base and hedge book: 50% of FY25E crude volumes are hedged at $65 per barrel, insulating downside. We forecast $5.05bn FY26E revenue, 5–9% ahead of consensus on management-driven 150,000 bopd production, disciplined CapEx and sequential Permian growth.
A $150mn cost cut supports modest margin expansion as volumes recover into FY26. The market trades at 0.54x EV/Sales versus a 2.06x long-run avg, yet our 1.30x forward EV/Sales reflects cautious cyclical assumptions and stabilization in global energy demand, with stronger U.S. gas prices underpinning future cash generation [rigzone.com, worldoil.com]. Execution risk remains — unexpected costs or regulatory hurdles could pressure margins — but with valuation at an 80% discount to peers, headwinds are largely priced in. We see a classic mispricing opportunity with asymmetrical R/R.
Disciplined Capital Wins
We believe the market fundamentally underappreciates the magnitude and permanence of CIVI’s productivity curve uplift in the Permian, underpinning our Strong Buy thesis. Bolt-on acquisitions in 2023 and 2024 doubled CIVI’s Permian footprint and created a diversified portfolio across one of the most profitable basins in the US. After adding inventory (~1,200 development locations and ~19,000 Midland acres), these bolt-ons catalyzed operational upgrades that are already driving outsized returns. SimulFrac execution is accelerating throughput, Midland wells are delivering 30% higher production rates at materially lower cost per foot, and management continues to compress