Chord Energy (CHRD) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, Chord Energy reported adjusted free cash flow of $175 million, significantly exceeding expectations, with approximately 50% returned to shareholders [9] - Oil volumes in 2025 exceeded original guidance by over 1,000 barrels per day, while capital spending was approximately $60 million lower than anticipated [6][9] - The company achieved a $160 million improvement in free cash flow from controllable items, representing 23% of estimated free cash flow in 2026 [7] Business Line Data and Key Metrics Changes - Chord has successfully lowered its capital spending by nearly $100 million since merging with Enerplus in 2024 while increasing oil production by 6,000 barrels per day [6] - The company achieved its goal of converting 80% of its inventory to long laterals by the end of 2025, which has significantly reduced the cost of supply [10][11] Market Data and Key Metrics Changes - Chord's operational improvements and shift to longer laterals have resulted in a 22% reduction in future finding and development costs over the past few years [12] - The company anticipates generating approximately $700 million in free cash flow in 2026, based on benchmark prices of $64 per barrel of oil and $3.75 per MMBtu of natural gas [13] Company Strategy and Development Direction - Chord is focused on disciplined capital allocation and delivering strong returns on capital, with a commitment to organic well activity, lease acquisition, and selective M&A [8] - The company aims to maintain a low to no oil growth program in 2026, with average volumes projected between 157,000 and 161,000 barrels of oil per day and capital expenditures of $1.4 billion [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience to weather commodity price cycles while generating meaningful free cash flow and shareholder returns [16][17] - The company is optimistic about its ability to continue improving its cost structure and operational efficiency, with a focus on margins and capital efficiency [19][20] Other Important Information - Chord has returned $6.7 billion of capital to shareholders since 2021, which is higher than its current market capitalization [8] - The company has a substantial inventory of low breakeven locations, with over 10 years of low-cost inventory available [11] Q&A Session Summary Question: Long-term plan consistency despite oil price fluctuations - Management indicated that the company has built a resilient organization capable of weathering commodity price cycles while maintaining its long-term plan [16][17] Question: Fixed cost mitigation strategies - Management highlighted an organization-wide effort to drive down costs through capital efficiency improvements and operational expense reductions [19] Question: Organic inventory improvements across the basin - Management noted improvements in inventory across the basin, with a focus on refining and enhancing the break-even costs of previously considered inventory [24][25] Question: Water disposal optimization and midstream spending - Management explained that increased spending on water disposal is due to moving into areas with slightly higher water production, which necessitates investment in water systems [71][73] Question: Impact of lateral length extensions on reserves - Management confirmed that the expectations for lateral length extensions have been captured in the reserves, with ongoing improvements expected [78] Question: Infill drilling implications from longer laterals - Management acknowledged potential benefits for infill drilling as longer laterals improve cost structures and reservoir drainage effectiveness [81][84]