Chord Energy (CHRD) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2024, the company generated $204 million of adjusted free cash flow, exceeding expectations, and plans to return 75% of this to shareholders through a base dividend of$ 1.25 per share and a variable dividend of $1.69 per share [22][21] - The first quarter adjusted CapEx was$ 254 million, with no changes to full-year oil volume or capital guidance from previous outlooks [35][36] - Oil realizations averaged $1.71 below WTI in the first quarter, with lower gas prices impacting overall realizations [35][36] Business Line Data and Key Metrics Changes - The company reported strong well performance and improved cycle times, leading to higher oil volumes than expected [21][29] - Production from 3-mile wells is expected to deliver approximately 40% more estimated ultimate recovery (EUR) for about 20% more capital compared to 2-mile wells [31][30] - The company has executed about 80 3-mile laterals to date, with performance meeting or exceeding expectations [59][60] Market Data and Key Metrics Changes - The company anticipates a wider oil differential for the remainder of the year, with expectations for improved pricing as the TMX pipeline begins operating [65] - Natural gas realizations fell below guidance due to fixed fees deducted from realized prices, impacting overall operating leverage [65][66] Company Strategy and Development Direction - The company is focused on maximizing sustainable free cash flow with a flat plus program, indicating a commitment to operational efficiency rather than chasing higher production [21][39] - The pending combination with Enerplus is expected to enhance returns and create synergies, with a target of achieving$ 150 million in synergies [25][26] - The company aims to maintain a peer-leading return of capital program while preserving a strong balance sheet post-combination [55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic and financial benefits of the Enerplus transaction, emphasizing the quality of Enerplus's assets [54][55] - The company is committed to continuous improvement and operational excellence, with a focus on reducing costs and enhancing production efficiency [11][12] - Management noted that the integration planning is progressing well, with expectations for synergy realization in 2025 [43][44] Other Important Information - The company has made significant progress in drilling, with completion times declining by roughly 25% over 2023 [61] - Sustainability efforts include lowering emissions intensity and endorsing the World Bank's zero routine flaring initiative by 2030 [27] Q&A Session Summary Question: What are the post-Enerplus D&C plans? - Management indicated that guidance would remain relatively flat, focusing on operational efficiencies rather than increasing production [68] Question: What are the expectations for future LOEs? - The company has reduced workover costs by about 15% and anticipates further efficiencies post-Enerplus integration [70] Question: Why is production guidance unchanged despite historical trends? - Management explained that production is expected to be more cyclical, with a stable profile quarter on quarter, rather than a significant increase in the back half of the year [71] Question: What are the anticipated cost savings from simul-frac development? - Management noted potential savings of approximately $100,000 per well from implementing simul-frac and water recycling practices [73] Question: What are the expectations for four-mile laterals? - The company anticipates some degradation in delivery but sees significant advantages in leveraging existing infrastructure for four-mile development [75]