Chord Energy Corporation

Good morning, ladies and gentlemen, and welcome to the Cord Energy first quarter 2025 earnings call. At this time, all lines are in a 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 7, 2025. I would now like to turn the conference over to Bob Bakanowskis. Please go ahead.

Appreciate it, Vincent. Thank you. Good morning, everyone. This is Bob Bakanowskis, and today we are reporting our first quarter 2025 financial and operational results. We are delighted to have you on the call. I am joined today by Danny Brown, our CEO, Michael Liu, our Chief Strategy and Commercial Officer, Darren Hanke, our COO, Richard Roebuck, our CFO, as well as 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. So with that, I'll turn it over to our CEO, Danny Brown.

Thanks, Bob. Good morning, everyone, and thanks for joining our call. Over the next few minutes, I plan to provide a brief overview of our first quarter performance and resulting return of capital, discuss the current macro environment and cords positioning, and then briefly touch upon some of our current initiatives before passing it to Darren, who will provide more color on our operations. Darren will hand it over to Richard for more details on our financial results before we open it up for Q&A. So, turning to first quarter results. Cord delivered another great quarter with solid operating results yielding free cash flow above expectations, which supported robust shareholder returns. Specifically, first quarter oil volumes were above the top end of guidance, reflecting strong execution and well performance, while capital was favorable to guidance, largely reflecting improved program efficiency. Operating expenses also came in lower than our expectations as the team continues to drive improvements to our cost structure. My thanks to our entire organization for delivering favorable results once again, and in particular, to our folks in North Dakota, who did an amazing job navigating extreme winter weather, positioning us to surpass expectations. Fantastic job by all. This strong performance led to adjusted free cash flow for the first quarter of approximately $291 million. We maintained shareholder returns at 100% of free cash flow for the second consecutive quarter. repurchasing $216.5 million or about 2 million shares during the quarter. And since April 1, we have already repurchased another 45 million or about 500,000 shares at approximately $91 per share. We will be paying our base dividend of $1.30 per share on the lower share count, which equates to approximately $75 million. Since closing the Interplus transaction, Cord has reduced its share count by approximately 9% through the end of April. To put that in perspective, Core has repurchased over a quarter of the shares issued to purchase Interplus in less than a year since the transaction closed. And we were able to do this while keeping leverage essentially unchanged at about 0.3 times. Given our view on the intrinsic value of our shares relative to how they currently trade in the market, we expect a continued focus on share repurchases in the current environment. Turning to the macro. We are all keenly aware that the pricing outlook has deteriorated and volatility has increased since we entered the year, and Cord is in the enviable position to navigate this type of environment. In the event conditions remain unfavorable or weakened, Cord has substantial operational and financial flexibility to moderate activity and maintain an efficient, returns-focused program with strong free cash generation. As slide 7 illustrates, Cord has one of the lowest base decline rates amongst its peers, which supports our low reinvestment rate. Additionally, on the land side, CORD has no material drilling obligations as our acreage is essentially all held by production. On the midstream side, CORD is well covered with very limited volume commitments, and we have intentionally laddered and structured our service contracts to provide program optionality. And finally, at a leverage ratio of 0.3 times, our balance sheet strength stands out versus our peer group. Our development plan also provides us with significant optionality. CORD started the year running five drilling rigs and two frac crews. In accordance with our original plan laid out in February, we have already reduced our frac crew count, and by early June we'll be running a program consisting of four rigs and one frac crew. Both our original and current guidance reflect the return of the second frac crew in the fourth quarter of this year. This allows us to monitor the macro environment at a lower activity pace, and gives us the option to either bring back this second frac crew or just keep one frac spread through the end of 2025 and into 2026. Let me be clear that at current strip prices, we are inclined to maintain one frac crew instead of reinstating the second frac crew near year end. However, given the original plan already included a mid-year reduction in activity, we have several months to decide on this second frac spread, with the final decision to be made in the third quarter. If Cord makes the decision to stay with one frat crew and not bring back the second, the production impact at 2025 would be negligible. However, fourth quarter capital would be much lower than current expectations. And I should note that last night, Cord announced a $30 million reduction to its full-year capital guidance. This $30 million reduction largely reflects program efficiencies and does not currently contemplate any reductions to activity, given we have until the third quarter to make the final call. And once again, CORD's full-year volume expectations remain unchanged. Next, I'd like to discuss some of our initiatives to increase free cash flow, given our track record of innovation and continuous improvement. Slide 12 outlines approximately $3 billion of controllable costs across the business between operated D&C capital, lease operating expenses, marketing expenses, and G&A. There is a concerted effort across every part of the organization to improve our cost structure and drive efficiency. We've already made progress this year in reducing our capital investment and LOE guidance with no impact to volumes. Our culture is built around continuous improvement and advancing efficiencies to improve our capital productivity and margins. A good example of this is our recent decision to lean into four-mile laterals, with seven spuds now planned versus our original expectations of two to three. This follows our first four-mile lateral, which was successful on a variety of fronts, including being $1 million below budget and successfully cleaning the well out all the way to the toe. Production over the first couple of months for the well has been encouraging, but we really need to get past the flat period and initial decline to get a better sense of the ultimate productivity and recovery. Darren will provide more details in his section, but it's fair to say we like what we're seeing. In light of the improved capital efficiency and lower break-even cost that long lateral development provides, slide 11 illustrates an example of how CORD is reconfiguring acreage to optimize longer lateral development. You can see as CORD moves from the two-mile scenario to the four-mile scenario, it results in a 24% reduction in capital to develop the same amount of resource. This results in stronger rates of return and lower break-even pricing. Our goal is to convert our inventory to over 80% long laterals in the coming years, which will enhance economic returns. Since I arrived at the company over four years ago, we've had a successful track record of keeping our sub-$60 inventory position strong. We've done this not just through disciplined M&A, but also organically, through wider spacing, longer laterals, and program efficiencies. Going forward, we expect to further improve our inventory strength and returns by extending laterals and driving down costs. This will include straight three and four miles, as well as alternate shape well designs. On the LOE side, we've leveraged our scale to get more efficient, systematized processes, and reduce downtime. Looking forward, we have multiple initiatives to drive further improvement, including artificial lift optimization, faster cycle times, logistics improvements, and potentially leveraging newer technologies, such as predictive maintenance and remote well site monitoring. On the marketing side, we're driving efficiency through consolidating contracts from predecessor companies and negotiating competitive rates when contracts mature. Also, on the gas and MGL side, we are adding more dual and split connections to our facilities, which provides midstream optionality when the gas plants are down. This has the dual benefit of higher gas capture rates and additional revenue. Lastly, a few words on sustainability before handing it to Darren. I want to reemphasize that CORD is proud of our work providing reliable and affordable sources of energy so critical to every aspect of modern living. And we do this while maintaining a commitment to operating in a sustainable and responsible manner. On this front, CORD continues to make progress on our already strong sustainability initiatives with a focus on putting safety first, minimizing our environmental impact, and being a good partner in our communities. We plan to publish an updated sustainability report in the second half of this year which will reflect the full integration of Cord and Interplus. So, to summarize, while markets have taken a turn for the worse in recent months, Cord has a strong foundation and significant flexibility to adjust if needed. Cord was built around modest mid-cycle oil price expectations with the recognition that we operate in a cyclical business and there will inevitably be downturns from time to time. The steps we've taken over the past four years have lowered our cost structure, strengthened our inventory position, and enhanced flexibility in our development program, all while keeping the balance sheet and liquidity in an enviable place, allowing us to better navigate times like these. And with that, I'll turn it to Darren.