Chord Energy Corporation

and welcome for energy fourth quarter 2022 earning results call all participants will be in listen only mode if you need assistance please signal conference specialist by pressing the star key followed by zero after today's presentation or the opportunity to ask questions please note that this event is being recorded i'd like to turn the call over mr michael liu chief financial officer please go ahead thank you nick good morning everyone

Today we are reporting our fourth quarter 2022 financial and operational results. We're delighted to have you on our call. I'm joined today by Danny Brown, Chip Reimer, and other members of the team. Please be advised that our remarks, including the answers to your questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently disclosed in our earnings releases and conference calls. Those risks include, among others, matters that we have described in our earnings releases as well as in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During this conference call, we will make reference to non-GAAP measures and reconciliations to the applicable GAAP measures can be found in our earnings releases and on our website. We may also reference our current investor presentation, which you can find on our website. With that, I'll turn the call over to our CEO, Danny Brown.

Good morning, everyone, and thanks for joining our call. I'd like to start off this morning reflecting on an eventful 2022 prior to talking about our fourth quarter results and ultimately our expectations for 2023. 2022 was a transformational year for our organization as we completed a merger of equals transaction to create Cord Energy, a company with substantial scale in the Williston Basin and one with an opportunity to create and extract significant value through operational and corporate synergies. Importantly, we executed this transaction while maintaining our commitment to balance sheet strength, capital discipline, and to our shareholders, as we also announced a compelling and peer-leading return of capital framework. In the months leading up to the merger and through the balance of last year, we laid the groundwork and began the process of integration and establishing how we would operate as a new organization. This integration process is now fully underway, and for 2023, we are focused on delivering value from the best practices and synergies we've identified. As a reminder, through this process, CORD previously announced that we have increased our target annual synergies from the $65 million we originally targeted at the announcement to our current expectation of over $100 million per year. We expect to realize over 70% of these targeted synergies by the second half of 2023, with the remainder in 2024, and have incorporated these numbers into our guidance. Taking the time and effort to establish what we believe are the best practices for the Go Forward organization, regardless of legacy practice, will make us a stronger company, and I want to thank the employees of CORD who, through their commitment and dedication, have placed us on such strong footing. The integration is going well, and I remain excited about our future. Through the merger, we've created a better company with a strong financial outlook, capable of supporting high levels of sustainable free cash flow at prices much lower than current market benchmarks. And Cord's solid outlook allowed us to enact a progressive shareholder returns framework, which resulted in returning over 75% of adjusted free cash flow in the second half of 2022, through a combination of base and variable dividends and opportunistic share repurchases. If you examine our program in more detail, you'll see that our annualized base dividend of $5 per share has a yield of 3.8% and represents a 233% cumulative increase over the past two years. A strong base dividend is a core part of a return of capital strategy and is designed to be resilient at low prices and sustainable through commodity cycles. And importantly, We believe our base dividend is very attractive versus both our peer group and the broader market. More broadly, our focus on strong shareholder returns was evident in 2022. On a pro forma basis for the full year, CORE generated approximately $1.3 billion of adjusted free cash flow and returned over $1.2 billion, or approximately 93%, through dividends, cash merger consideration, and share repurchases. Turning to the fourth quarter, last night we announced our operating and financial results, and as noted in the release and our presentation on slide 7, severe winter weather and elevated downtime related to Fract Protect negatively impacted volume delivery for the company. When combined, these impacts resulted in the delivery of approximately 3,200 barrels of oil per day less than the midpoint of guidance for the quarter, with the lion's share attributable to the severe winter weather in late December. The weather also delayed some of our capital activity and shifted completions into 2023, resulting in us investing about $21 million less in the fourth quarter than originally planned. Correspondingly, this reduced capital investment resulted in delivering higher free cash flow than anticipated for the quarter. Most importantly, we continue to be very pleased with the underlying well performance as our development program continues to deliver above expectations, as can be seen on slide 10 in our investor deck. which is partially attributed to our practice of wider well spacing, which we believe improves per-well recoveries and reduces variability of performance across the asset. From a return of capital perspective, in the fourth quarter, we repurchased $27 million worth of stock at an average price of $133.30 per share. This means that over the course of 2022, we've repurchased about $152 million for an average price of $110.24 per share, and currently have $273 million remaining on our $300 million share repurchase authorization. Given this level of share repurchases and the adjusted free cash flow generating during the quarter, for the fourth quarter of 2022, we have declared a variable dividend of $3.55 per share. When combined with the base dividend of $1.25 per share, this yields a total quarterly dividend of $4.80 per share. Turning to 2023. On a full year basis, we are expecting to deliver slight oil volume growth in line with consensus estimates. At a program level, CORD plans to complete and deliver 90 to 94 gross operated wells in 2023 with an average working interest of approximately 73%. Completions activity is concentrated in the second and third quarter of 2023 with over two-thirds of our turn-in lines, or TILs, expected during these quarters. The first quarter is expected to have only 13 back-end weighted TILs and volumes are affected by this completion timing, as well as the lingering weather downtime we saw in January. But production is expected to increase sequentially each quarter, with fourth quarter of 2023 volumes being the highest of the year. I mentioned downtime due to Fract Protect a little earlier on the call and wanted to spend a moment discussing its impact on 2022 and our expectations for 2023, which is detailed on slide seven of our investor deck. As we previously discussed, Delayed completions activity, whether due to inclement weather conditions or mechanical issues, impacts the volume delivery of not just those wells that are delayed, but also those surrounding wells that are shut in from a precautionary standpoint until nearby completions activities has concluded. In 2022, mechanical issues and weather delays, while developing in densely developed areas like Indian Hills, FBIR, and Sanish, led to very high and extended frack protect downtimes. For the 2023 program, completions are concentrated in relatively less congested areas, which makes FractProtect less of an issue year over year. Additionally, we expect downtime related to artificial lift to improve over the year and into 2024 as we are implementing best practices from the merger. As we look at the capital investment landscape for 2023, there is obviously uncertainty related to service prices, which are dependent on various supply and demand variables that I won't discuss in depth on this call. While there are some signs that pricing has plateaued in certain areas, I would note equipment utilization remains high and pricing remains elevated. Taking our best view, which does incorporate significant year-on-year inflation that we've experienced, we expect to invest approximately $825 million to $865 million of capital in 2023, which is in line with consensus once accounting for the roughly $20 million of capital pushed from the fourth quarter of last year, which I discussed previously. Importantly, CORD's program focuses on operational efficiency and consistency, which we believe not only supports cost-effective operations, but also supports safer operations. This operational efficiency is also supported by synergies derived from the merger and our development strategy. Three-mile laterals are a big part of the 2023 story, as we're expecting three-milers to comprise approximately 50% of tills in 2023. We brought online our first three-mile laterals in the second half of last year in Indian Hills and they are performing nicely. Slide nine illustrates what we are seeing with three mile performance and culminates in an economic uplift of about 25 points when going from two miles to three miles. In total, CORD's 2023 program is expected to result in a reinvestment rate of around 50% at $75 WTI. Finally, I want to spend a moment on ESG and sustainability before passing it over to Michael. Following the closing of the merger, we posted a letter to our shareholders, along with pro forma ESG metrics for the combined company. We provided this information in the interest of transparency, and to remind the market we are dedicated to providing robust disclosure and improving our performance in these areas. And in 2023, we plan to resume publishing a full sustainability report. CORD continues to have strong performance in GHG intensity, and we see opportunities for further improvements. Additionally, CORD has improved freshwater intensity and remains focused on the safety of our employees and contractors and maintaining strong corporate governance. In short, over time, you will continue to see our disclosure grow with a continued focus on improving performance across the board. I'll now turn it over to Michael for some additional updates.