With higher oil and gas prices, the energy sector has shown strong performance. Today's IBD 50 Stocks to Watch focus is on Civitas Resouces, which could provide an interesting opportunity for investors looking to get long-term exposure to a sustainable energy name.
Civitas is an oil and natural gas company headquartered in Denver, Colo. The company was formed last May with the merger of Bonanza Creek Energy and Extraction Oil and Gas.
Civitas has since further expanded via the acquisition of Creston Peak Resources and most recently DJ Basin. This consolidation has made Civitas one of the leading producers of oil and natural gas in Colorado's Julesburg Basin.
One Of The Best Energy Stocks; Sustainable, Too
Civitas is unique in that it is the first carbon-neutral energy producer in Colorado. The firm has been able to achieve this by running operations off of the electrical power grid instead of using fossil fuels, as well as buying carbon credits to offset the remaining emissions.
Civitas has furthered its sustainability ambitions by pledging to help clean up orphaned wells in Colorado and is eying possible solar projects.
In the short term, sustainability does have an added cost. Nevertheless, high natural gas and oil prices have led to very strong results. Furthermore, Civitas is well-positioned in a longer-term game, especially if federal environmental regulations increase to keep pace with climate-change targets.
Harsher environmental regulations in the oil and gas sector could be particularly felt in Texas, which already has a strained electrical grid. This could hamper many competitors from electrifying like Civitas has, which is the quickest way of reducing emissions from production.
Profit Growth Makes It One Of Best Energy Stocks
Civitas reports its fourth-quarter earnings on Feb. 28. Analysts estimate EPS of $2.07 with revenue of $407 million. Investors will be watching not just company results, but also any update on future guidance.
Amid higher energy prices and higher operational efficiencies, EPS is expected to jump to $10.79 in 2022 from the $6.30 estimated in 2021.
Another area of interest is company management. Civitas is without a permanent CEO since former CEO Eric Greager — responsible for managing the integration of Civitas — stepped down last week.
Civitas stock is forming a seesaw pattern and has a relative strength line near all-time highs. The pattern has a 59.75 buy point, per MarketSmith.
