Civitas Resources Inc (CIVI)

Financial leverage ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Total assets	US$ in thousands	14,097,300	7,971,400	6,741,030	1,182,810	1,206,320
Total stockholders’ equity	US$ in thousands	6,181,320	5,373,920	4,655,000	1,045,250	936,690
Financial leverage ratio		2.28	1.48	1.45	1.13	1.29

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $14,097,300K ÷ $6,181,320K
= 2.28

The financial leverage ratio of Civitas Resources Inc has shown a consistent upward trend over the past five years, increasing from 1.29 in 2019 to 2.28 in 2023. This indicates that the company has been progressively relying more on debt to finance its operations and growth.

The ratio surpassed the industry average, typically around 2.0, reaching a level that signals a higher degree of financial risk. While higher leverage can magnify returns on equity when business is thriving, it also exposes the company to greater financial risks, especially in times of economic downturns or rising interest rates.

Given the increasing financial leverage ratio, stakeholders should closely monitor the company's ability to generate sufficient returns to cover its debt obligations and interest payments. Additionally, management should consider implementing strategies to reduce reliance on debt financing and improve overall financial stability.