Chord Energy (CHRD) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Chord Energy reported pro-forma volumes of 158,600 barrels of oil equivalent per day, at the high end of the previously provided range [31] - Pro forma free cash flow exceeded $300 million in the second quarter [34] - The company updated its full year 2022 capital budget range to$730 million to $760 million, reflecting increased service pricing and expected completion activity [25] Business Line Data and Key Metrics Changes - The company identified over$100 million per year of merger synergies expected to be realized over time [15] - Cash G&A expense was $32.6 million, with$23.6 million excluding merger-related costs [34] - The average lease operating expense (LOE) was $10.06 per BOE, with expectations for a decrease in the second half of the year [32] Market Data and Key Metrics Changes - Crude and gas realizations were strong in the second quarter, with markets remaining tight around the Williston area [31] - Production taxes were approximately 7.4$1.25 per share per quarter, representing an increase of over 100% [19] - The company remains focused on ESG initiatives, increasing transparency and committing to sustainable operations [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in operational performance despite challenges from severe weather and merger integration [22] - The company anticipates good uptime and outperformance across recent well completions, leading to an updated guidance above initial expectations [24] - Management emphasized the importance of maintaining a strong balance sheet while being open to future consolidation opportunities [50] Other Important Information - The company has a new repurchase authorization for $300 million, in addition to$125 million already repurchased [21] - Chord Energy has $400 million of senior unsecured notes due in June 2026, with recent upgrades in debt ratings from Moody's and S&P [35] Q&A Session Summary Question: Can you elaborate on the primary drivers of the announced increase in PV10 synergies from the merger? - Management indicated that the integration process has allowed for a thorough review of operations, leading to improvements across various categories [41][42] Question: What is the company's appetite for further industry consolidation? - Management remains open to examining further consolidation opportunities while focusing on the integration of the current merger [50] Question: How sustainable is the high payout ratio over time? - Management believes the company has significant inventory depth and is confident in maintaining a strong balance sheet while returning capital to shareholders [53][57] Question: What are the implications of the capital program for 2023? - Management indicated a maintenance to maintenance-plus program for 2023, with low levels of growth expected [64][67] Question: How does the company plan to balance cash flow returns with potential M&A opportunities? - Management emphasized the flexibility afforded by a strong balance sheet, allowing for opportunistic actions without the need to build a large cash balance [74]