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spk03: results. We are delighted to have you on our call. I'm joined today by Danny Brown, Chip Reimer, Richard Roebuck, 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 may make reference to non-GAAP measures and reconciliations to the applicable GAAP measures can be found in our earnings releases and on our website. You may also reference our current investor presentation, which you can find also on our website. With that, I'll turn the call over to our CEO, Danny Brown.
spk02: Thanks, Michael. Good morning, everyone, and thanks for joining our call. I know this is a very busy morning, and in that vein, I plan to briefly recap our third quarter performance and touch on some of our key organizational initiatives before passing the call on to Michael Liu. He'll give a little more detail on the financials, some additional color on a few other topics, and a small preview of our thoughts for 2024. We'll then open it up to Q&A. So with that, yesterday evening, CORD reported third quarter 2023 results and raised our full year production outlook. I'm pleased to announce that third quarter volume significantly exceeded original expectations driven by both schedule acceleration and continued strong well performance. The entire CORD team worked together to bring 45 wells online in the third quarter, which was ahead of our original expectations and higher than the 37 wells brought online in the entire first half of the year. This accomplishment is even more impressive when evaluated on a two-mile equivalent basis, which amounts to a 42% increase in well delivery in half the time. So to our team, I'd like to say thank you, and I'm very proud of all the hard work that went into executing the program. Underpinned by this strong production, CORD's quarterly financial performance supported robust free cash flow and high shareholder returns. We generated $207 million of adjusted free cash flow during the quarter, and in accordance with our return of capital framework, we returned 75% of this free cash flow to shareholders. To that end, given our base dividend of $1.25 per share and our share repurchases of $52 million as part of our recurring return of capital program, we declared a variable dividend of $1.25 per share. As a reminder, The variable dividend is designed to make up any difference between our targeted free cash flow payout and the amount distributed through base dividends and share repurchases. Finally, with respect to share repurchases, you may note that the aggregate value of share repurchases associated with our return of capital program is up nearly 70% as compared to the second quarter. In addition, we saw incremental repurchases occurring in the quarter sourced from proceeds received through warrant exercises, and I've asked Michael to discuss that topic more in a few moments. As I've said before, we believe our capital return program is peer-leading and demonstrates our commitment to both capital discipline and shareholder returns and to the investment opportunity that CORD represents. Accordingly, we have announced a new $750 million share repurchase authorization, which replaces the old $300 million program and gives CORD additional flexibility to take advantage of our discount to peers and to intrinsic value. Rotating from the quarter to the full year, we've increased production guidance, reflecting the strong third quarter volume performance and modest schedule acceleration I previously discussed. Full year capital is expected to be at the high end of our $850 million to $880 million guidance range, reflecting the acceleration of activity and also higher working interest we're seeing from some of the wells in our program. Operationally, we continue to be encouraged by the progress we're making on three-mile laterals. Over half the wells we brought online in the third quarter were three-milers. In total, we've executed about 50 to date, and the performance is meeting our expectations. You can clearly see contribution from the furthest portions of the lateral, and we're observing an uplift over time versus two-mile analog wells in each development area. You can find additional details on Slides 9 and 10 of our updated investor presentation, where we've provided performance data on core wells in Fort Berthold and Foreman Butte. In both of these areas, you can see a meaningful uplift in three-mile cumulative production versus the two-mile analogs. In Foreman Butte specifically, early-time production from three-mile wells was affected by the tracer study we discuss on slide 10. Once the tow portion of the lateral was cleaned out in the three-mile wells, they began to outperform the two-mile wells, and we expected that degree of outperformance to increase as the wells continued to produce. CORD also continues to make good progress with respect to our operational performance, drilling, completing, and cleaning out these wells. As slide 9 of our presentation shows, we have materially reduced drilling times for three-mile wells over the past year to approximately 11 days per well, representing an improvement of over 35% in drilling times as compared to the third quarter of 2022. On the clean-out side, we've also made steady improvement and have generally been able to stimulate and accessed the vast majority of the third mile in our most recent wells. During the third quarter, we achieved full TD on substantially all of the three-mile wells we brought online. As a reminder, for three-mile wells, we are assuming a 40% EUR uplift for 50% longer lateral and about 20% more drilling and completion cost. Said another way, we're assuming the third mile is only 80% as productive as the first two miles. However, with effective completion and cleanup practices, We believe the volume response could be nearly proportional to the percentage of the third mile that's cleaned out. And finally, CORD published its first full sustainability report as a combined company in September, which reflects our commitment to delivering affordable and reliable energy in a sustainable and responsible manner. Thank you to the team for putting this together, as it does a great job providing transparency onto our business and highlighting our efforts on emissions reduction, workforce health and safety, and corporate governance, among other things. We welcome feedback from our stakeholders on our progress and look forward to building upon our ESG efforts to shape an even stronger future for CORD and the communities we serve. To sum things up, we executed well in the third quarter, which sets us up nicely to deliver strong free cash flow and high shareholder returns for the remainder of the year. Our asset base is meeting or exceeding expectations, and we will work to drive further improvements going forward. I'll now turn the call over to Michael.
spk03: Thanks, Danny. I'll highlight a handful of key operating and financial items for the third quarter and discuss our updated 2023 guidance. As Danny mentioned, oil volumes were strong in the third quarter, about 4.5% over midpoint guidance. Total volumes were about 3.8% above midpoint guidance. Our fourth quarter midpoint oil guidance of 103.5 thousand barrels per day is in line with our August expectations And on a full year basis, we increased oil production guidance by over 1,000 barrels per day. I want to echo Danny's comments on the extraordinary achievement by the core team in the third quarter. This was an exceptional amount of effort, and I'm really proud of everyone involved. Oil realizations remained strong at a modest premium to WTI and were slightly better than our midpoint guidance. Looking to the fourth quarter, we expect Bakken oil pricing to weaken slightly due to higher basin production. and an unexpected refinery turnaround. The pricing is still expected to remain a slight premium to WTI. NGL realizations as a percent of WTI were in line with our midpoint guidance, while residue gas pricing as a percent of Henry Hub was a touch below midpoint. We expect pricing for both NGLs and residue gas to improve modestly in the fourth quarter. Turning to operating costs. LOE was $10.94 per BOE in the third quarter, and GPT was $3.16 per BOE. Both were within our guidance expectations, but LOE trended towards the high end, mostly due to higher workover expense. We view workover expense as an important investment to reduce downtime and enhance revenue. We've seen a meaningful improvement in that downtime over the course of 2023, and we remain focused on lowering the cost side to improve the efficiency of the program. Production tax as a percent of revenue was 8.6% in the third quarter, and we expect a similar rate in the fourth quarter. Cord cash G&A expense was 13.7 million in the third quarter, and we lowered our full year guidance slightly to reflect our latest forecasts. At this point, the merger integration is substantially complete, and we don't expect significant merger-related costs going forward. DD&A averaged $9.90 per BOE in the third quarter, an increase of almost a dollar sequentially. The increase to DD&A reflects the July 1st closing of the XTO bolt-on acquisition, as well as mid-year reserve changes, mostly due to lower SEC pricing. Court paid no cash taxes during the third quarter, and in the fourth quarter, court expects cash taxes to be approximately 0% to 10% of the fourth quarter EBITDA at oil prices between $70 and $90 per barrel. Danny mentioned that we expect capital to be towards the high end of the full year guidance of $850 million to $880 million, given a couple items. First, improved cycle times have led to incremental lateral feet drilled during the year versus original expectations. Second, working interest is slightly above expectations. and these working interest increases accounts for approximately $10 million of incremental capital. Danny discussed our return of capital for the quarter and wanted to give you a few more details on our share repurchases. During the third quarter, Cord repurchased $112 million of stock, including $52 million related to third quarter return of capital, with the remainder funded by cash proceeds from warrant exercises. We received approximately $73 million of cash from warrant exercises in the third quarter, and we're able to use roughly $60 million of this for incremental third quarter repurchases. And with the remaining $13 million of repurchases that were at the beginning of the fourth quarter. This $60 million and $13 million in the third and fourth quarters respectively are not included in the calculations for return of capital. Going forward in a similar fashion, we generally expect to use cash received from warrants to offset delusion. Turning to liquidity, CORD recently completed its fall borrowing base redetermination. The borrowing base and elected commitment remains unchanged at $2.5 billion and $1 billion, respectively. As of September 30th, there was nothing drawn, and cash was approximately $265 million. Finally, turning our attention briefly to 2024. Given a strong growth in oil production in the second half of 2023, as we look into 2024, our corporate annual decline rate increases slightly. As we start to see the benefits of the shallower declines associated with our growing proportion of producing three-mile wells, we expect this increase in decline to reverse towards the end of 2024 and into 2025. Overall, for 2024, we're expecting a maintenance capital program with full year volumes flat to 2023. On a pro forma basis, this is around 99,000 barrels of oil per day with expected capital a little over $900 million. Additionally, activity is expected to remain concentrated in the spring and summer months next year. This means that tills will be focused towards the second half of the year and that 2024 volumes should follow a similar pattern to 2023 with the second half of the year higher than the first half. In closing, the core team continues to drive to strong performance with a focus on returns. This directly leads to sustainable free cash flow profile and our peer-leading return of capital program. With that, I'll hand the call back over to Laura for questions.
spk08: At this time, if you would like to ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. And our first question will come from Scott Hanold of RBC Capital Markets.
spk05: Scott Hanold, RBC Capital Markets Yeah, thanks. Good morning, all. You know, Danny, you were talking about, you know, seeing, you know, some good things coming out of that last mile on the three-mile wells. And, you know, can you give us a sense of where your confidence level is seeing to see that you're going to get the full contribution on an EUR basis? Like, how much more information do you need? And is that kind of performance applicable across different parts of your acreage?
spk02: So maybe I'll start with the second part first, Scott, and then I'll flip it over to Chip, who may have any real differences in one area of the field versus another with respect to how much we're expecting to see in that third mile. So we do think it's applicable across the whole position. From a confidence level standpoint, I think we've got growing confidence, but that's obviously going to require production over time. And so like any of these unconventional wells, You know, we produce flat for some period of time as we remain facility constrained. We go on decline and then that decline, we go through our B factor and we turn and we level out at a sort of a terminal decline rate. And so it's just, it's hard to know exactly what you're going to get until you go through that process and get through that B factor and hit that terminal decline rate to know what your ultimate recovery is going to be. What I will say is we are very encouraged with where we're at right now with the wells we have both that we've done and the wells we've seen across the basin that our underwriting at 40% is we feel very confident with that, but we're having growing confidence that we're going to see more than that. But we just need to see the production data over time. The pressures look good. The production looks good. This is all giving us strong. We know we're seeing a contribution from the very furthest part of the lateral because we have tracer data that shows us that we're seeing that. And so I think all of these are, you know, it's all a growing level of confidence that we're going to be something above this sort of 80% efficiency in the last mile. I think... Too soon to know exactly what that's going to be, but we're really pleased with what we're seeing. Chip, I don't know what incremental comments you have.
spk06: Yeah, Scott, thanks for the question, and good morning. Just a couple other things. The team has done a fabulous job of cleaning out these three milers. We were probably in the 25% in the first half, and now we're close to 95%, 90% clean out. And so they're doing a fabulous job cleaning out the well bores. As Danny said, I expect that. that we're going to see the contribution complete to the back half the last mile or so. Also, we're about five or six different areas throughout the basin, so we're testing that right now. So I would assume sometime in the first quarter we'll have a lot more data to be able to tell you. But I'm feeling real strong about where we are, the operations, and the way the team's cleaning out. So really proud of what they've done.
spk05: Great. And, Danny, just to maybe pin you down a little bit here, you talked about waiting to see the – get more into the terminal to climb past the B factor. Like, generally, how would you define that? Is that more of a – you know, kind of post two to three year type timeframe?
spk02: You know, I think two to three years is probably a little long. I don't think we need that long. But, you know, with where we're at right now, call it maybe a year plus of data and you start to really get past that factor and we get a much better idea. Got it.
spk05: Thanks. My follow-up is on M&A. I mean, obviously, a lot going on here over the last several months on the M&A side. And, you know, look, you guys have obviously participated in that over the last number of years. Can you give us your thoughts on, as you look forward, how does M&A fit into the CORD strategy? And if you can give some context around in-basin, out-of-basin, being a consolidator and a consolidatee.
spk02: Yeah, I think maybe I sum it up broadly, Scott, by saying we're believers in consolidation. We're a product of consolidation. That's how CORD was formed. we plan to participate in consolidation as we move forward, and whether that means we are the consolidator or the consolidatee, either way is okay. We believe in being part of a larger equity store, and we'll look for sensible opportunities to do that. I think along those veins, as we think about participating in consolidation, where we're consolidating, I think, in basing consolidation is obviously a very natural thing for us to look at. We have a very significant acreage position in the Bakken We really touch all aspects of the basin with that sort of slightly over a million acre position we've got. So lots of synergies from an operational standpoint and from whether it be sort of our subsurface knowledge, our operational capability, the routes we run, just converting DSUs from two mile to three mile in basin consolidation makes a lot of sense. We are also open and look at out-of-basin consolidation opportunities, but we're also very clear-eyed and recognize that the risk associated with out-of-basin consolidation is higher than the risk associated with in-basin consolidation due to all the factors I talked about a moment ago. And so it's just a higher bar to out-of-basin consolidation versus in-basin. And so, but you know, thematically big believers in consolidation. And when you're in a commodity business, I think that's just an important thing for us to recognize and be focused on.
spk05: Yeah. And if I could just ask a little tweak to that question too, like when you look at in-base and opportunities, you know, how have like these higher interest rates impacted like some of the PE players, the smaller players to be willing sellers and the price to pay? Does that have an influence? Are you seeing any kind of impact from the higher interest rates?
spk02: Yeah, I think maybe too orderly to say specifically on that topic because you've got to have, you know, a number of transactions to see, you know, what kind of effect you're seeing, et cetera. But, you know, generally speaking, I'd say if you're thinking about cash-based deals or debts on the backside, higher interest rates probably aren't very helpful to that. And I'd say, you know, big swings in commodity price also aren't very helpful to M&A in general. And so, you know, we'll see where that goes. Michael, I'll invite you to make any further comments.
spk03: No, I think that's exactly right. I mean, obviously the capital markets, the lending markets, all of them are much tighter than they have been across history. And so that financing cost obviously is increasing for both the buyers and as well as maybe forcing sellers to think about exiting earlier just because that financing cost is higher. So It puts pressure on both sides. It also makes, obviously, buyers a little bit more disciplined, I would say, with that higher interest cost and how they think about valuations.
spk05: Yeah, no, I appreciate that. And, yeah, that's exactly what I was pointing to is more the latter part of that answer where, you know, a seller is more motivated. And if you have cash, you're in a better position as a potential buyer.
spk03: That's right, yeah.
spk01: Totally agree with that.
spk07: And the next question comes from John Abbott of Bank of America.
spk04: Hey, good morning. Thank you for taking our questions on a – it's a busy morning. Good morning, John. Thanks. Hey, recognize it's still early with the tracer test, and you're looking at three-mile laterals. But what do you think the implications could potentially be for four miles? I mean, are you ever thinking – are you considering actually testing a four-mile lateral with a sort of similar test?
spk02: I think the short answer to that, John, is yes. We've seen four miles in other basins. There's certain lease geometries we've got that would really lend themselves to doing four-mile laterals. You're right, it is early from a three-mile standpoint. I'll tell you, if you sort of rewind the clock and And we would have thought at some point, you know, moving into three-mile laterals was a big step into the unknown, and we would have had lots of concerns about it. But certainly the three-mile program to date we think has been very successful. We're excited about it moving forward. And I think, you know, the opportunity for four-mile laterals is absolutely out there and something we're investigating.
spk04: Thank you, Danny. And then for our follow-up question, you gave some color in 2024. You talked about, you know, your current underlying decline rate is a little bit elevated at this point in time. He suggested that could reverse by the end of next year. He indicated that for 2024, that CapEx could be roughly around in the low $900 million range. So when you think about that potential reversal in the underlying decline rate at the end of 2024, when you think about your spend in 2024, what do you think about the potential implications to 2025 CapEx given the change in the underlying decline rate? versus the 900 mil for 2024?
spk02: Yeah, well, I think with, as you'd expect, with a lower decline rate, it should be helpful from a reinvestment rate perspective. And so if we're running a maintenance program, all else being equal, you know, you'd expect lower capex needed to maintain whatever production you're trying to hold. And so I think it's, you know, it's nothing but beneficial as we see the contribution of these, as these three myelaterals grow in proportion to our existing base, and we see that contribution of the shallower decline, you know, it's going to be helpful to us as we march forward in maintaining a production base for, you know, better capital efficiency, if you want to look at it that way, but certainly a lower capex to maintain or achieve any sort of production level.
spk04: So if I can squeeze a quick one in there. So what do you think long-term maintenance capex is for you at this moment if you think about that sort of – reduction that's changing your underlying decline rate?
spk02: Yeah, I think if you think, you know, we're thinking it's going to be something in the low 900s next year, we should reverse off of that a little bit. Of course, lots of things can change between here and there with service costs, et cetera. And so, you know, we'll have to see when we get to that timeframe. But I think with where we're at right now, what we've seen in 2023 and where we're going in 2024, you would expect to be something something more capably efficient than the anticipated 24 program, and so probably trending back towards what we saw this year.
spk04: All right. Thank you very much.
spk01: Again, if you would like to ask a question, please press star, then 1 at this time.
spk08: And showing no further questions, that will conclude our question and answer session. I would like to turn the conference back over to Danny Brown, Chief Executive Officer, for any closing remarks.
spk02: Thanks, Laura. Well, to close out, I just want to thank the employees of CORD for their commitment and dedication to our company. It was a really strong quarter from an execution standpoint, and the team did a fantastic job. And I also know we all have a relentless drive to improve, so we'll continue to work as a team to make CORD an even stronger company for all of our stakeholders. We're proud of a great third quarter, excited about the setup for the remainder of 2023 and plans for 2024 and beyond. And with that, thanks to everyone for joining our call.
spk08: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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