J.P. Morgan analyst Zach Parham retained a Neutral rating on Civitas Resources, Inc. (NYSE:CIVI) with a price forecast of $49.

The analyst writes that CIVI’s goal remains consistent with its fourth-quarter update, maintaining its focus on debt reduction over share buybacks.

The analyst notes that the company aims to generate FCF and reduce debt by $800 million in FY25, which he sees as achievable at current strip pricing.

Parham says asset sales remain a focus for the company, with a goal of over $300 million for FY25. Media reports suggest CIVI is considering selling its DJ Basin position for over $4 billion.

The analyst notes that a larger DJ transaction is possible, though the company is unlikely to sell at a steep discount and he awaits further clarity from management on the earnings call.

The analyst estimates cash flow per share of $7.39 for the first quarter of FY25, a touch below the street estimates of $7.47 after marking to market for commodity prices.

Also, Parham sees first-quarter oil production of 143.2 MBo/d, in line with the consensus estimates of 143.1 MBo/d and EBITDA estimate of $799 million, broadly at par with the consensus of $797 million.

For FY25, the analyst estimates oil production of 152.8 MBo/d on $1.85 billion of capex, in-line with the street estimates and CIVI’s guidance.

Investors can gain exposure to the stock via First Trust Energy AlphaDEX Fund (NYSE:FXN) and VictoryShares Small Cap Free Cash Flow ETF (NASDAQ:SFLO).

Price Action: CIVI shares are down 0.52% at $36.24 at the last check Tuesday.

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