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Chord Energy (CHRD) - 2024 Q2 - Earnings Call Transcript
CHRDChord Energy (CHRD)2024-08-08 16:09
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Financial Data and Key Metrics Changes - Chord Energy reported adjusted free cash flow of approximately 263millionforQ22024,whichwasaboveexpectationsandincludedafullquarterofEnerplus′results[7][22]−Thecompanydeclaredavariabledividendof263 million for Q2 2024, which was above expectations and included a full quarter of Enerplus' results [7][22] - The company declared a variable dividend of 1.27 per share, in addition to a base dividend of 1.25pershare,reflectingareturnof751.25 per share, reflecting a return of 75% of adjusted free cash flow to shareholders [7][8] - Capital expenditures were below expectations due to timing adjustments, and lease operating expenses (LOE) came in favorable, reflecting lower maintenance costs [6][10] Business Line Data and Key Metrics Changes - Oil volumes for Q2 2024 were at the top end of guidance, driven by strong well performance and reduced downtime [6] - The company plans to maintain its capital guidance for the year despite increasing its full-year oil production guidance by 500 barrels per day [10][11] - Chord is focusing on non-operated spending in the second half of the year, investing in attractive non-operated opportunities acquired through the Enerplus transaction [9] Market Data and Key Metrics Changes - The Williston Basin is highlighted as having the highest oil cut among major onshore basins, supporting strong margins and returns [13][14] - Chord's average spacing across the basin is wider than other operators, which has contributed to improved capital efficiency [18][19] Company Strategy and Development Direction - Chord is committed to efficient and sustainable free cash generation, focusing on a maintenance plus program without increasing capital expenditures for the year [8][10] - The integration with Enerplus is progressing well, with expectations of achieving over 200 million in synergies, up from an initial estimate of 150million[11][20]−Thecompanyisexploringopportunitiestooptimizewellspacingandenhanceeconomicreturnsfromthecombinedassetbase[19]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementexpressedconfidenceinthestrategicandfinancialbenefitsoftheEnerplusacquisition,notingthatintegrationeffortsareyieldingpositiveresults[11][12]−Thecompanyanticipatesimprovementsinoilrealizationsinthesecondhalfoftheyear,despiteweakerpricingfornaturalgasandNGLsinQ2[24][25]−Managementemphasizedacommitmenttocontinuousimprovementinoperations,includingemissionsandsafety,withplanstopublishasustainabilityreportlaterthisyear[15]OtherImportantInformation−Chord′sliquidityasofJune30wasapproximately150 million [11][20] - The company is exploring opportunities to optimize well spacing and enhance economic returns from the combined asset base [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic and financial benefits of the Enerplus acquisition, noting that integration efforts are yielding positive results [11][12] - The company anticipates improvements in oil realizations in the second half of the year, despite weaker pricing for natural gas and NGLs in Q2 [24][25] - Management emphasized a commitment to continuous improvement in operations, including emissions and safety, with plans to publish a sustainability report later this year [15] Other Important Information - Chord's liquidity as of June 30 was approximately 1.1 billion, with 575milliondrawnonits575 million drawn on its 1.5 billion credit facility [27] - The company has implemented hedges since the last update, with details available in the latest investor presentation [27] Q&A Session Summary Question: Confidence in 3-mile EURs and 2025 development strategy - Management is currently developing the 2025 full development plan and expects to see positive incremental benefits from longer laterals and wider spacing in Enerplus acreage [29][30][31] Question: Improvements from Enerplus assets - Management noted a 16% improvement in drilling cycle times since the acquisition and expects to achieve further efficiencies through the adoption of Enerplus' completion techniques [36][37] Question: Synergies and downtime improvements - Management confirmed that improvements in downtime have been factored into synergy expectations, with confidence in exceeding the 200milliontarget[47]Question:Maintenancecapitalandcrewcount−Managementindicatedthatthecurrentmaintenancecapitalisaround200 million target [47] Question: Maintenance capital and crew count - Management indicated that the current maintenance capital is around 1.5 billion, with plans to adjust crew counts based on operational needs [58][46] Question: Extended laterals and decline rates - Management stated that longer laterals are expected to moderate the overall corporate decline rate, with a small single-digit percentage impact anticipated [60] Question: Variability in spacing and ongoing optimization - Management acknowledged that while current practices are yielding positive results, they are continuously evaluating and optimizing well spacing across the field [62][64]