Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chord Energy Corp (CHRD, Financial) delivered strong shareholder returns with oil volumes at the top end of guidance due to strong well performance and reduced downtime.
- Free cash flow exceeded expectations, with adjusted free cash flow approximately $263 million, including a full quarter of Enerplus' results.
- The integration with Enerplus is progressing well, with expected synergies increased to over $200 million from the original estimate of $150 million.
- Chord Energy Corp (CHRD) is a leader in three-mile lateral development, which has shown improved well productivity and capital efficiency.
- The company is committed to sustainable and responsible energy delivery, with plans to publish a sustainability report reflecting the combined company in 2025.
Negative Points
- The timing of share repurchases was impacted by the possession of material non-public information related to the Enerplus acquisition.
- Certain reclassifications in Enerplus' financial statements to align with Chord Energy Corp (CHRD)'s accounting policies resulted in lower LOE, lower gas and NGL revenues, and slightly higher capital and G&A expenses.
- Weaker-than-expected pricing, especially for natural gas and NGLs, offset some of the financial gains.
- The company had to slow frac activity, reducing from three frac crews to one, which may impact production in the short term.
- There are risks and uncertainties associated with forward-looking statements, which could cause actual results to differ materially from current expectations.
Q & A Highlights
Q: Can you discuss the strategy for 2025 development, particularly regarding the integration of Enerplus assets and the use of longer laterals and wider spacing?
A: Daniel Brown, CEO, explained that Chord Energy is currently developing its 2025 plan, focusing on spreading development geographically to avoid overloading systems. The Enerplus assets are core and will benefit from longer laterals and wider spacing, which are expected to show positive results in 2025. The company is working on respacing and anticipates incremental benefits from these changes.
Q: How confident are you in achieving the $200 million synergies target from the Enerplus acquisition?
A: Darrin Henke, COO, stated that the company is confident in exceeding the $200 million synergies target. Improvements in drilling cycle times and the adoption of Enerplus' simul-frac techniques are already showing benefits. These efficiencies are part of the $200 million synergy target, providing confidence in surpassing it.
Q: What are the expected impacts of longer laterals on corporate decline rates and capital efficiency?
A: Daniel Brown, CEO, noted that longer laterals come online slightly higher and stay flat longer, leading to shallower declines. As the proportion of longer laterals increases, corporate decline rates are expected to moderate by small single-digit percentages, enhancing capital efficiency.
Q: How does Chord Energy view the balance between variable dividends and share repurchases?
A: Michael Lou, CFO, emphasized that both variable dividends and share repurchases are integral to Chord's capital return strategy. Given the current share price relative to intrinsic value, share repurchases are seen as a good opportunity. However, variable dividends provide flexibility to ensure at least 75% of free cash flow is returned to shareholders, especially when share repurchases are constrained by market conditions or non-public information.
Q: What improvements have been made in the 3-mile lateral program, and how do they impact recovery factors?
A: Daniel Brown, CEO, highlighted that significant improvements have been made in cleanout practices, allowing for consistent reach to the toe of wells, which enhances recovery factors. The company has also improved drilling and completion practices, leading to better productivity and efficiency in 3-mile laterals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
