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LONG-TERM DEBT | 9 Months Ended
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Sep. 30, 2023
Debt Disclosure [Abstract] |
LONG-TERM DEBT | LONG-TERM DEBT Senior Notes Senior Notes are recorded net of unamortized discount and unamortized deferred financing costs within senior notes on the accompanying balance sheets, with no associated premiums. The tables below present the related carrying values as of September 30, 2023 and December 31, 2022 (in thousands):
| As of September 30, 2023
| Principal Amount |  | Unamortized Discount |  | Unamortized Deferred Financing Costs |  | Principal Amount, Net
2026 Senior Notes | $ | 400,000 |  |  | $ | — |  |  | $ | 5,489 |  |  | $ | 394,511 |
2028 Senior Notes | 1,350,000 |  |  | 16,409 |  |  | 5,773 |  |  | 1,327,818 |
2031 Senior Notes | 1,350,000 |  |  | 16,600 |  |  | 5,841 |  |  | 1,327,559 |
Total | $ | 3,100,000 |  |  | $ | 33,009 |  |  | $ | 17,103 |  |  | $ | 3,049,888 |
| As of December 31, 2022
| Principal Amount |  | Unamortized Discount |  | Unamortized Deferred Financing Costs |  | Principal Amount, Net
2026 Senior Notes | $ | 400,000 |  |  | $ | — |  |  | $ | 6,707 |  |  | $ | 393,293 |
8.375% Senior Notes due 2028 and 8.750% Senior Notes due 2031. On June 29, 2023, the Company issued $1.35 billion aggregate principal amount of 8.375% Senior Notes due 2028 (the “2028 Senior Notes”), at par, pursuant to an indenture (the “2028 Indenture”) among the Company, Computershare Trust Company, N.A., as trustee, and the guarantors party thereto, and $1.35 billion aggregate principal amount of 8.750% Senior Notes due 2031 (the “2031 Senior Notes”), at par, pursuant to an indenture (the “2031 Indenture”) among the Company, Computershare Trust Company, N.A., as trustee. Upon issuance of the 2028 Senior Notes and 2031 Senior Notes, the Company received net proceeds of $2.67 billion after deducting fees of $33.8 million. The Company used the net proceeds from the 2028 Senior Notes and 2031 Senior Notes, together with cash on hand and borrowings under the Credit Facility (as defined below), to fund a portion of the consideration for the Hibernia Acquisition and Tap Rock Acquisition. Interest on the 2028 Senior Notes and 2031 Senior Notes will accrue at the rate of 8.375% per annum and 8.750% per annum, respectively, and will be payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2024. The 2028 Indenture and 2031 Indenture each contain covenants that limit, among other things, the Company’s ability and the ability of its subsidiaries to: incur or guarantee additional indebtedness; create liens securing indebtedness; pay dividends on or redeem or repurchase stock or subordinated debt; make specified types of investments and acquisitions; enter into or permit to exist contractual limits on the ability of the Company’s subsidiaries to pay dividends to the Company; enter into transactions with affiliates; and sell assets or merge with other companies. These covenants are subject to a number of important limitations and exceptions. The Company was in compliance with all covenants under the 2028 Indenture and 2031 Indenture as of September 30, 2023, and through the filing of this report. Each of the 2028 Indenture and 2031 Indenture also contain customary events of default. At any time prior to July 1, 2025, the Company may redeem all or part of the 2028 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after July 1, 2025, the Company may redeem all or part of the 2028 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 104.188% for the twelve-month period beginning on July 1, 2025; (ii) 102.094% for the twelve-month period beginning on July 1, 2026; and (iii) 100.000% for the period beginning July 1, 2027 and at any time thereafter, plus accrued and unpaid interest, if any to, but excluding the redemption date. At any time prior to July 1, 2026, the Company may redeem all or part of the 2031 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after July 1, 2026, the Company may redeem all or part of the 2031 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 104.375% for the twelve-month period beginning on July 1, 2026; (ii) 102.188% for the twelve-month period beginning on July 1, 2027; and (iii) 100.000% for the period beginning July 1, 2028 and at any time thereafter, plus accrued and unpaid interest, if any. The Company may redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes or 2031 Senior Notes at any time prior to July 1, 2025 or 2026, respectively, with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 108.375%, with respect to the 2028 Senior Notes, and 108.750%, with respect to the 2031 Senior Notes, of the principal amount of such series of 2028 Senior Notes and 2031 Senior Notes redeemed, plus accrued and unpaid interest, if any, provided, however, that (i) at least 65.0% of the aggregate principal amount of 2028 Senior Notes and 2031 Senior Notes of such series originally issued on the issue date (but excluding the 2028 Senior Notes and 2031 Senior Notes of such series held by the Company and its subsidiaries) remains outstanding immediately after the occurrence of such redemption (unless all such 2028 Senior Notes and 2031 Senior Notes are redeemed substantially concurrently) and (ii) the redemption occurs within 180 days after the date of the closing of such equity offering. The 2028 Senior Notes and 2031 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company’s subsidiaries, including the entities that became subsidiaries of the Company upon the consummation of the Hibernia Acquisition and Tap Rock Acquisition, as well as by certain other future subsidiaries that may be required to guarantee the 2028 Senior Notes and 2031 Senior Notes. 5.000% Senior Notes due 2026. On October 13, 2021, the Company issued $400.0 million aggregate principal amount of 5.000% Senior Notes due 2026 (the “2026 Senior Notes”) pursuant to an indenture (the “2026 Indenture”), among Civitas Resources, Wells Fargo Bank, National Association, as trustee, and the guarantors party thereto. Interest accrues at the rate of 5.000% per annum and is payable semiannually in arrears on April 15 and October 15 of each year. Payments commenced on April 15, 2022. The 2026 Indenture contains covenants that limit, among other things, the Company’s ability to: (i) incur or guarantee additional indebtedness; (ii) create liens securing indebtedness; (iii) pay dividends on or redeem or repurchase stock or subordinated debt; (iv) make specified types of investments and acquisitions; (v) enter into or permit to exist contractual limits on the ability of the Company’s subsidiaries to pay dividends to Civitas Resources; (vi) enter into transactions with affiliates; and (vii) sell assets or merge with other companies. These covenants are subject to a number of important limitations and exceptions. The Company was in compliance with all covenants under the 2026 Indenture as of September 30, 2023, and through the filing of this report. In addition, certain of these covenants will be terminated before the 2026 Senior Notes mature if at any time no default or event of default exists under the 2026 Indenture and the 2026 Senior Notes receive an investment-grade rating from at least two ratings agencies. The 2026 Indenture also contains customary events of default. At any time prior to October 15, 2023, the Company may redeem the 2026 Senior Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any. On or after October 15, 2023, the Company may redeem all or part of the 2026 Senior Notes at redemption prices (expressed as percentages of the principal amount redeemed) equal to (i) 102.500% for the twelve-month period beginning on October 15, 2023; (ii) 101.250% for the twelve-month period beginning on October 15, 2024; and (iii) 100.000% for the twelve-month period beginning October 15, 2025 and at any time thereafter, plus accrued and unpaid interest, if any. The Company may redeem up to 35% of the aggregate principal amount of the 2026 Senior Notes at any time prior to October 15, 2023 with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 105.000% of the principal amount of the 2026 Senior Notes redeemed, plus accrued and unpaid interest, if any, provided, however, that (i) at least 65.0% of the aggregate principal amount of the 2026 Senior Notes originally issued on the issue date (but excluding 2026 Senior Notes held by the Company) remains outstanding immediately after the occurrence of such redemption (unless all such 2026 Senior Notes are redeemed substantially concurrently) and (ii) the redemption occurs within 180 days after the date of the closing of such equity offering. The 2026 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of Civitas’ existing subsidiaries, including the entities that became subsidiaries of the Company upon the consummation of the Hibernia Acquisition and Tap Rock Acquisition. 7.500% Senior Notes due 2026. In April 2021, the Company issued $100.0 million aggregate principal amount of 7.500% Senior Notes due 2026 pursuant to an indenture by and among Civitas Resources, U.S. Bank National Association, as trustee, and the guarantors party thereto. Interest accrued at the rate of 7.500% per annum and was payable semiannually in arrears on April 30 and October 31 of each year. On May 1, 2022, the Company redeemed all of the issued and outstanding 7.500% Senior Notes at 100.0% of their aggregate principal amount, plus accrued and unpaid interest thereon to the redemption date. Credit Facility The Company is party to a reserve-based revolving facility, as the borrower, with JPMorgan Chase Bank, N.A. (“JPMorgan”), as the administrative agent, and a syndicate of financial institutions, as lenders, that has an aggregate maximum commitment amount of $4.0 billion and is set to mature on August 2, 2028 (together with all amendments thereto, the “Credit Facility” or the “Credit Agreement”). The Credit Facility is guaranteed by all restricted domestic subsidiaries of the Company, including the entities that became subsidiaries of the Company upon the consummation of the Hibernia Acquisition and Tap Rock Acquisition, and is secured by first priority security interests on substantially all assets, including a mortgage on at least 90% of the total value of the proved properties evaluated in the most recently delivered reserve reports prior to the amendment effective date, including any engineering reports relating to the oil and natural gas properties of the restricted domestic subsidiaries of the Company, subject to customary exceptions. The Credit Facility contains customary representations and affirmative covenants. The Credit Facility also contains customary negative covenants, which, among other things, and subject to certain exceptions, include restrictions on (i) liens, (ii) indebtedness, guarantees and other obligations, (iii) restrictions in agreements on liens and distributions, (iv) mergers or consolidations, (v) asset sales, (vi) restricted payments, (vii) investments, (viii) affiliate transactions, (ix) change of business, (x) foreign operations or subsidiaries, (xi) name changes, (xii) use of proceeds, letters of credit, (xiii) gas imbalances, (xiv) hedging transactions, (xv) additional subsidiaries, (xvi) changes in fiscal year or fiscal quarter, (xvii) operating leases, (xviii) prepayments of certain debt and other obligations, (xix) sales or discounts of receivables, (xx) dividend payment thresholds, and (xxi) cash balances. In addition, the Company is subject to certain financial covenants under the Credit Facility, as tested on the last day of each fiscal quarter, including, without limitation, (a) permitted net leverage ratio of 3.00 to 1.00 and (b) a current ratio, inclusive of the unused commitments then available to be borrowed, to not be less than 1.00 to 1.00. The Company was in compliance with all covenants under the Credit Facility as of September 30, 2023 and through the filing of this report. Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, either (i) the Alternate Base Rate (“ABR”, for ABR revolving credit loans) plus the applicable margin, or (ii) the term-specific Secured Overnight Financing Rate (“SOFR”) plus the applicable margin. ABR is established as a rate per annum equal to the greatest of (a) the rate of interest publicly announced by JPMorgan as its prime rate, (b) the applicable rate of interest published by the Federal Reserve Bank of New York plus 0.5%, or (c) the term-specific SOFR plus 1.0%, subject to a 1.5% floor plus the applicable margin of 1.0% to 2.0%, based on the utilization of the Credit Facility. Term-specific SOFR is based on one-, three-, or six-month terms as selected by the Company and is subject to a 0.5% floor plus the applicable margin of 2.0% to 3.0%, based on the utilization of the Credit Facility. Interest on borrowings that bear interest at the SOFR are payable on the last day of the applicable interest period selected by the Company, and interest on borrowings that bear interest at the ABR are payable quarterly in arrears. In connection with the Company’s entry into the Hibernia Acquisition Agreement and the Tap Rock Acquisition Agreement, on June 23, 2023, the Company entered into an amendment to the Credit Agreement. Pursuant to the amendment, the Company was authorized to, among other things, (i) offer and issue the 2028 Senior Notes and the 2031 Senior Notes, (ii) incur indebtedness pursuant to those certain debt commitment letters by and among the Company, Bank of America N.A., BofA Securities, Inc., and JPMorgan Chase Bank, N.A. providing for two separate 364-day bridge loan facilities in an aggregate principal amount of up to $2.7 billion (such facilities, the “Bridge Facilities” and the loans made thereunder, the “Bridge Loans”), the proceeds of which would have, if drawn, been used to partially fund the Hibernia Acquisition and the Tap Rock Acquisition, (iii) incur the debt described in the immediately preceding clauses (i) and (ii) without any corresponding reduction in the borrowing base of the Credit Facility, and (iv) incur pari passu term loan indebtedness subject to a total secured leverage test of 2.00 to 1.00 and certain other customary terms and conditions. Because the 2028 Senior Notes and 2031 Senior Notes successfully closed and were issued on June 29, 2023, the Company did not draw on the Bridge Loans and has terminated the commitments under the Bridge Facilities. Consequently, approximately $0.5 million and $21.0 million of fees associated with the Bridge Facilities were incurred and expensed to transaction costs in the accompanying statements of operations for the three and nine months ended September 30, 2023, respectively. Finally, in connection with the Company’s closing of the Hibernia Acquisition and Tap Rock Acquisition, on August 2, 2023, the Company entered in an amendment to the Credit Agreement whereby aggregate elected commitments increased from $1.0 billion to $1.85 billion, the borrowing base increased from $1.85 billion to $3.0 billion, and the aggregate maximum credit commitment increased from $2.0 billion to $4.0 billion. In addition, the maturity of the Credit Facility was extended to August 2028. The next scheduled borrowing base redetermination date is set to occur in May 2024. The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Facility as of the dates indicated (in thousands):
| November 7, 2023 |  | September 30, 2023 |  | December 31, 2022
Revolving credit facility | $ | — |  |  | $ | 650,000 |  |  | $ | — |
Letters of credit | 2,100 |  |  | 2,100 |  |  | 12,100 |
Available borrowing capacity | 1,847,900 |  |  | 1,197,900 |  |  | 987,900 |
Total aggregate elected commitments | $ | 1,850,000 |  |  | $ | 1,850,000 |  |  | $ | 1,000,000 |
As of September 30, 2023 and December 31, 2022, the unamortized deferred financing costs associated with the amendments to the Credit Facility were $36.1 million and $8.5 million, respectively. Of the unamortized deferred financing costs, (i) $28.6 million and $5.5 million are presented within other noncurrent assets on the accompanying balance sheets as of September 30, 2023 and December 31, 2022, respectively, and (ii) $7.5 million and $3.0 million are presented within prepaid expenses and other on the accompanying balance sheets as of September 30, 2023 and December 31, 2022, respectively. Interest Expense For the three months ended September 30, 2023 and 2022, the Company incurred interest expense of $76.5 million and $7.5 million, respectively. For the nine months ended September 30, 2023 and 2022, the Company incurred interest expense of $92.7 million and $24.7 million, respectively. No interest was capitalized during the three and nine months ended September 30, 2023 and 2022.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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