Chord Energy (CHRD)2025-05-07 16:00Financial Data and Key Metrics Changes - Chord Energy reported adjusted free cash flow for Q1 2025 of approximately $291 million, maintaining shareholder returns at 100% of free cash flow for the second consecutive quarter [6][28] - The company repurchased $216.5 million worth of shares during the quarter, reducing its share count by approximately 9% since the Enerplus transaction [6][28] - Leverage remained unchanged at about 0.3 times, indicating strong balance sheet strength [7][9] Business Line Data and Key Metrics Changes - First quarter oil volumes exceeded guidance, reflecting strong execution and well performance [5] - Operating expenses were lower than expected, contributing to improved cost structure [5] - The company plans to reduce its frac crew count from two to one by early June, allowing for a more flexible operational approach [10][11] Market Data and Key Metrics Changes - Oil differentials averaged $2.3 below WTI in Q1, slightly weakening from the previous quarter but within guidance [29] - Natural gas realizations were 63%, above the top end of guidance, benefiting from strong regional prices [29] - Production taxes averaged 6.8% of commodity sales in Q1, below expectations, primarily due to a non-recurring refund for stripper wells [30] Company Strategy and Development Direction - The company is focused on increasing free cash flow through cost control and operational efficiencies, targeting approximately $3 billion in controllable costs [12] - Chord Energy aims to convert over 80% of its inventory to long laterals, which are expected to enhance economic returns and lower breakeven pricing [14][15] - The company is committed to sustainability initiatives, planning to publish an updated sustainability report later in the year [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a deteriorating pricing outlook and increased volatility but expressed confidence in the company's operational and financial flexibility [7][8] - The company has a strong foundation and significant flexibility to adjust operations as needed, built around modest mid-cycle oil price expectations [17] - Management emphasized the importance of continuous improvement and innovation to enhance capital productivity and margins [15][16] Other Important Information - The company successfully drilled and completed its first four-mile lateral well, achieving lower costs and encouraging initial production results [20][21] - A $30 million reduction in full-year capital guidance was announced, reflecting program efficiencies without impacting production targets [19][30] Q&A Session Summary Question: Activity levels and frac crew decisions for 2026 - Management indicated that the decision to bring back a second frac crew will depend on various factors, including oil prices and capital allocation opportunities [36][37] Question: Transition to four-mile laterals - Management expressed confidence in moving to a four-mile lateral program quickly, contingent on operational success and permitting processes [40][41] Question: Oil production cadence for Q3 and Q4 - Management anticipates a decline in oil production as the company reduces activity, with a potential recovery in 2026 if conditions improve [44][45] Question: Confidence in increasing four-mile lateral wells - Positive operational results from initial four-mile wells have led to increased confidence in expanding the program [48][50] Question: Maintenance capital and growth sustainability - Management indicated that maintaining production levels would require a specific crew count, with capital implications for future growth [55][56] Question: Marketing contracts and cost reduction opportunities - Management highlighted opportunities to renegotiate marketing contracts and improve operational efficiencies to lower cash costs [60][62] Question: Addressable market for four-mile laterals - Management discussed the potential for expanding inventory and improving breakeven costs through the adoption of longer laterals [66][68] Question: M&A activity and market conditions - Management noted that rapid price movements create challenges for M&A transactions, emphasizing the need for price stability [77][78]