Chord Energy Corporation

Good morning, ladies and gentlemen, and welcome to the Cord Energy first quarter 2024 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 8, 2024, and I would now like to turn the conference over to Mr. Richard Robach, Chief Financial Officer, thank you. Please go ahead.

Thanks, Ina. Good morning, everyone. This is Richard Roebuck. Today we're reporting our first quarter 2024 financial and operating results. We're delighted to have you on our call. I'm joined today by Danny Brown, our CEO, Michael Liu, our Chief Strategy Officer and Chief Commercial Officer, Darren Henke, our COO, and other members of the team. Please be advised that our remarks, including the answers to your questions and 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 other things, matters that we have described in our earnings releases as well as 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 references 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.

Thanks, Richard. Good morning, everyone. Thank you for joining our call. I know this is a very busy morning, so I'll get right to my comments. I plan to review our first quarter performance and return of capital, our full year standalone outlook, and provide some updates on our pending combination with Interplus before passing it over to Darren Henke. Darren will give some color on operations before passing it back to Richard for a little more detail on our financial results. We'll then open it up to Q&A. So, in summary, what a great quarter. We announced a very important and impactful combination with Interplus. and delivered another quarter of strong operational performance. First quarter 2024 resulted in oil volumes above expectations, driven by strong well performance and accelerated activity due to cycle time improvements. And I want to take a moment to thank the CORD team for demonstrating tremendous resiliency during the unusually cold weather that swept through North Dakota in January. While we experienced significant downtime, the CORD team responded quickly and got production back online fast, and most importantly, safely. In fact, I believe we had some of the best performance in the basin on these items, and I just want to extend my personal gratitude to all those that made it happen. The strong production we saw in the first quarter has underpinned Cord's financial performance and led to robust free cash flow generation, which was above expectations. We generated $204 million of adjusted free cash flow during the quarter and, in accordance with our return of capital framework, will return 75% of this free cash flow to shareholders. To that end, Given our base dividend of $1.25 per share and our share repurchases in the quarter of $30 million, which were limited given the possession of material nonpublic information associated with the pending combination with Interplus, we declared a variable dividend of $1.69 per share. Additionally, last night we had issued second quarter and full year guidance, which reflects CORD on a standalone basis. Given the operational improvements I mentioned earlier, The development program is proceeding faster than originally anticipated, and second quarter oil volumes and capital are expected to be a little higher than what we were projecting at the beginning of the year. While we are running ahead of schedule, you'll notice we didn't change our full year oil volume or capital guidance from the February outlook. This reflects CORD's commitment to managing the business to maximize sustainable free cash flow with a flat plus program. Given our strong performance to date, including the 16% free cash flow beat in the first quarter, Our plan has capital peaking in the second quarter, with reduced activity relative to our original expectations in the second half of the year as we window out a frack crew and drilling rig. In addition to yielding a more stable production profile, this should help de-risk the delivery of our previously announced annual program, allow us to assign more resources to integration and synergy capture, and position us well for a strong 2025. Speaking of integration, we were pleased to announce yesterday that we expect to close the Interplus combination later this month, on May 31st. As a reminder, our review period under the Hart-Scott-Rodino Act expired on April 5th, and since that time, the teams of both companies have been working to prepare for integration while still working as separate organizations. Upon close, we expect to issue abbreviated combined guidance for the second quarter, which will include one month of InterPlus, as well as second half guidance for the pro forma enterprise, and we'll also work to fully integrate the development plans of the two companies. We intend to provide a more fulsome update on expectations for the combined asset base when we report second quarter results in August. As a reminder, Cord's shareholder vote is scheduled for May 14th, and Interplus's shareholder vote is scheduled for May 24th. Cord has integrated multiple transactions over the past few years, including the XDO acquisition and the OASIS and Whiting merger. The team keeps getting better, and applying the learnings from these integration efforts is expected to help ensure we realize and even exceed our announced synergies while maintaining strong operational performance of the underlying business. Before moving on, I'd like to spend a few moments reviewing the merits of the deal. The core team has long believed in the industrial logic of a combination of these two organizations. We remain extremely confident in the strategic and financial benefits of the transaction, and as we move through integration planning, our conviction level continues to grow. First, Interplus brings top-tier assets in the core of the basin, which improves the quality of our long-lived inventory, and where CORE expects to enhance returns by combining the best development and operating practices of the two companies. To put it plainly, we believe Interplus has some of the best inventory and acreage in the basin. Second, by utilizing combined best practices at enhanced scale, we are very confident in achieving the $150 million in synergies previously noted and see potential for upside to this number. Integration efforts are going very well with both organizations working together to drive incremental value from the transaction. Through the process of building roadmaps for the future organization, we've learned that our cultures are very similar, and I want to let both organizations know how grateful I am for their positive attitudes and eagerness and excitement around the deal. To all the core employees involved in the integration efforts, you've done a great job driving the process forward while also putting up great results in our standalone business. Third, the combination drives accretion across all key per share metrics, including EBITDA, cash flow, and free cash flow. In addition, the structure of the deal allows us to maintain a peer-leading return of capital program and preserves a fortress balance sheet, giving the proforma organization tremendous optionality as we move forward. To sum it up, the combination with Interplus significantly accelerates CORD's beneficial rate of change as it relates to improving economic returns and value creation, and it is a very exciting time for our organization. And finally, because we remain committed to delivering affordable and reliable energy in a sustainable and responsible manner, just a few words on our sustainability progress before turning it over to Darren. In 2023, CORD lowered its emissions intensity and officially endorsed the World Bank's Zero Routine Flaring by 2030 initiative. We also saw dramatic improvement in our safety performance. I'd like to thank the team for their efforts on these important topics and encourage everyone to review our sustainability report on our website. After closing the Interplus transaction, our preliminary plans for 2024 involve publishing a sustainability report for Cord on a standalone basis and providing a summary of key ESG and sustainability metrics for Interplus. In 2025, we expect to publish a full sustainability report reflecting the combined company. To sum things up, Cord had a great start to the year. We remain excited to close the pending transaction with Interplus and look forward to driving forward progress through 2024 and beyond. And with that, I'll turn it over to Darren. Thanks, Danny.