Civitas Resources, Inc. (CIVI Quick QuoteCIVI - Free Report) , a Denver-based oil and gas exploration and production company, has seen its stock decline approximately 7%, underperforming both the broader Oil-Energy sector (3.2% up) and the U.S. E&P sub-industry (2% down) over the past six months. This underperformance is notable given the company’s exposure to two of the most prolific shale plays in the country — the DJ Basin in Colorado and the Permian Basin in Texas and New Mexico — where it controls nearly half a million net acres.

Civitas generates revenues primarily through the production of crude oil and liquids-rich natural gas and has emphasized operational efficiency, geographic diversification and environmental responsibility as core strengths. These attributes position the company well in theory, especially in a commodity-driven industry that rewards scale and capital discipline.

6-Month Stock Performance Overview

Image Source: Zacks Investment Research

However, despite these strategic advantages, the market response indicates growing investor concerns. The company’s weaker relative stock performance may point to questions around execution, cost control, capital allocation, or perhaps the pace at which recent acquisitions and asset integrations are translating into meaningful shareholder value. Additionally, while peers in the sector have benefited from rising energy prices and investor rotation into energy stocks, Civitas has struggled to keep pace, raising potential red flags around competitive positioning and long-term growth visibility.

For investors, this disconnect between operational potential and market performance warrants a closer examination of the company’s strategic direction, financial metrics and catalysts for a turnaround.

Profitability Decline and Earnings Miss Amid Weaker Prices in Q2

Civitas posted adjusted earnings per share of 99 cents for the second quarter of 2025, missing the Zacks Consensus Estimate of $1.12. This represents a significant decline from the adjusted earnings of $2.06 reported in the same quarter last year. The primary driver behind this underperformance was lower oil price realizations. Revenues followed suit, declining nearly 20% to $1.1 billion, missing estimates by more than 5%. This drop was largely caused by reduced oil and natural gas sales volumes, reflecting operational and market headwinds.

CIVI Stock’s Earnings Estimates

Image Source: Zacks Investment Research

Over the past 60 days, the Zacks Consensus Estimate for CIVI’s earnings per share has been revised downward by 12.44% for 2025 and 9.57% for 2026.

What’s Behind CIVI’s Underperformance?

Still-Elevated Leverage Despite Improvement: While progressing toward its $4.5 billion year-end net debt target, CIVI’s leverage remains high relative to many peers. CIVI acknowledges that a leverage ratio below 1x is the ideal long-term goal for a company of its size, indicating the current level, though improving, still carries inherent risk, especially for an SMID-cap E&P in a volatile commodity industry.

Inconsistent Operational Guidance and Forecasting: The company's production guidance has been impacted by asset sales and management noted that third-quarter production is expected to be higher than the fourth quarter, primarily due to the timing of these divestments. This variability, coupled with past instances where efficiency gains pulled capital expenditure forward, can make it challenging for investors to model future performance accurately and creates a potential for guidance misses.

Sustaining Cost Reductions Is Not Guaranteed: While the company is rightly celebrating $100 million in identified cost savings, a portion of these is from service cost reductions and efficiency gains that may be difficult to sustain in a potential inflationary environment or if service demand picks up across the industry. Future well cost increases could pressure margins and erode the recently gained improvements in free cash flow.

Inherent Commodity Price and Macro Volatility Risk: Like all E&P companies, CIVI is ultimately tied to the price of oil and gas. Although well-hedged in the near term, its medium and long-term cash flow and valuation are highly susceptible to macro factors outside CIVI’s control, including OPEC+ decisions, global economic demand and geopolitical events that can cause severe price dislocations.

Potential for Further Non-Core Asset Sales at Lower Valuations: The company achieved an excellent valuation for its recent divestments. However, if future asset sales are required to further accelerate debt reduction, they may not achieve the same premium 4x multiple, especially if commodity prices weaken or buyer demand diminishes. This indicates that the company would have to sell more assets to achieve the same financial benefit.

Complexity of Managing a Multi-Basin Portfolio: Operating efficiently in both the Permian (Delaware and Midland) and DJ Basins requires managing different geology, infrastructure, regulatory environments and service crews. This complexity can create operational inefficiencies and make it more challenging to achieve a "level-loaded" and consistent operational program compared with an operator focused on a single premier basin.

Final Verdict: Why You Should Avoid CIVI Stock for Now

Civitas still carries significant leverage, which, despite improvements, remains higher than many of its peers and increases risk in a volatile market. The company’s production forecasts have been inconsistent due to asset sales and timing factors, complicating investors' ability to predict future results. While cost savings have been achieved, there is uncertainty about the sustainability of these reductions amid potential inflation and rising service costs.

Additionally, the company faces risks from commodity price fluctuations and the operational challenges of managing assets across multiple basins. Until the company demonstrates stronger financial performance and operational stability, it is advisable to consider alternative opportunities in the oil and gas sector.

CIVI's Zacks Rank & Key Picks

Currently, CIVI has a Zacks Rank #5 (Strong Sell).

Investors interested in the energy sector might look at some better-ranked stocks like Repsol (REPYY Quick QuoteREPYY - Free Report) , Par Pacific Holdings, Inc. (PARR Quick QuotePARR - Free Report) and Vitesse Energy, Inc. (VTS Quick QuoteVTS - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Repsol is a global energy company known for its integrated operations spanning exploration, production, refining and marketing of oil and gas. It actively pursues innovation and sustainability initiatives to transition toward cleaner energy solutions while maintaining a strong presence in key international markets. Repsol is valued at $20.46 billion.  

Par Pacific is an energy and infrastructure company with operations in the Pacific Northwest, the Rockies and Hawaii. The company's business is organized into three segments: refining, logistics and retail. Par Pacific is valued at $1.8 billion.

Vitesse Energy specializes in providing fluid transfer and control products for the energy sector, offering innovative solutions to optimize performance and reliability. The company serves a diverse customer base across the oil and gas, industrial, and renewable energy markets. Vitesse Energy is valued at $952.21 million.