Civitas Resources (CIVI) holds quality assets that support its valuation, but upside is constrained by oil market uncertainty and elevated leverage, RBC Capital Markets said.

Civitas shares have the highest beta to oil prices among RBC's coverage, making them particularly sensitive to ongoing market volatility, the firm said in a note Thursday.

RBC expects the company to maintain its current activity pace in 2025, assuming oil prices remain around $60 per barrel. However, a decline into the mid-$50s would likely prompt another cutback in drilling and development, especially in the DJ Basin, reducing production capacity to the lower end of the 150,000 to 155,000 barrels per day range.

To meet its year-end 2025 debt reduction goal of $4.5 billion at current price levels, Civitas will likely need to pursue asset sales, reduce activity further, or enhance capital efficiency, the firm said. RBC models $500 million in excess free cash flow over the remainder of 2025 at $60 per barrel WTI, putting debt at $4.6 billion without additional action.

RBC downgraded Civitas to sector perform from outperform and lowered its price target to $40 from $47.,

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