Chord Energy Corporation Q1 2023 Earnings Call
First quarter 2023 financial and operational results. We're delighted to have you on our call I.
Im joined today by Danny Brown Chip Rimer, 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 will.
Reference to non-GAAP measures.
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, Michael Good morning, everyone and thanks for joining our call last evening <unk> reported our first quarter 2023 results and updated full year outlook. As you know last year was a pivotal year for the organization as we announced a merger of equals transaction between Whiting and Oasis petroleum laid the groundwork for the integration and established how we would operate.
As a new organization and.
In 2023, we are focused on operational execution and driving the synergies from the merger and as you read in our press release last night, we had a strong start to the year.
In the first quarter oil volumes were significantly above expectations due to continued strong well performance and a modest acceleration of activity.
As we discussed last call January performance was negatively impacted by severe weather in late December . However, the team did a fantastic job restoring production and ramping up our drilling and completions activity quickly.
We turned in line 15 wells in the quarter, which was at the upper end of our 11% to 15 range with about half of those wells being three mile laterals with the additional activity capital was towards the high end of our range, but overall free cash generation exceeded expectations.
Turning to return of capital for the quarter, we declared a variable dividend of $1 97 per share with a base dividend, which remains unchanged at $1 25 per share.
The aggregate variable payment of approximately $82 million is the difference between 75% of the $199 million of adjusted free cash flow generated in the first quarter minus the base dividend of about $52 million minus $15 million of share repurchases as.
As a reminder, the variable dividend is intended to make up any difference between our targeted free cash flow payout and the amount distributed through base dividends and share repurchases.
Our capital return program, its peer leading and demonstrates our commitment to capital discipline and shareholder returns since we closed the merger last year and underpinned through strong operational performance. CT has returned a significant amount of capital to shareholders through a mix of dividends and share repurchases. However, as with all aspects of our business. We are constantly seeking to improve as we.
We reflect on our shareholder return over the past two quarters, we recognize that the amount of share repurchases is lighter than we might desire, particularly considering our view on the intrinsic value of our equity when compared to market value. Accordingly, as we look forward, we will continue to be opportunistic with share repurchases, but intend to be more balanced between dividends and buybacks in the future.
Now turning to operations, we continue to be pleased with our underlying well performance and as can be seen on slide 10 of our updated investor presentation. Our development program continues to deliver above expectations. This was partially attributed to our practice of wider well spacing, which we believe improves per well recoveries and reduces variability of performance across the asset.
And to our move to more three mile laterals core began to bring on its first three mile laterals toward the end of 2022 and these are expected to comprise about 50% of the 2023 program.
Three mile laterals will be a key part of the go forward program and are expected to deliver 50, 40% to 50% more EUR for about 20% more D&C costs just.
Just a quick note on the production profile of these wells part of the capital savings reflect similarly sized facilities versus the standard two mile pad. The result is three mile wells typically have similar Ips to two miles, but stay flat longer with shallower declines set another way as three mile laterals become a larger share of wedge wells very early.
<unk> well production per lateral foot becomes less relevant and longer dated cumulative production versus capital cost is a more appropriate performance metrics.
After the first quarter <unk> announced the sale of certain noncore properties outside the Williston basin from the legacy Whiting Trust assets for proceeds of approximately $35 million.
The specific divested assets consisted of multiple packages in various parts of the U S. With total volumes of approximately 1100 barrels of oil equivalent per day and oil volumes of roughly 900 barrels per day, we expect all divestitures to close during the second quarter and our guidance has been updated to reflect the sales.
The divestitures decreased oil volumes by about 600 barrels of oil per day for the full year, but core expects to replace all 600 barrels of oil per day, given strong well performance and a modest acceleration of activity in the first quarter.
Said another way court is keeping its February full year oil guidance unchanged at 96 5000 barrels of oil per day, despite selling these noncore volumes gasoline.
Gas and NGL volumes and realizations were also adjusted to reflect higher levels of ethane rejection and recent benchmark pricing.
Finally, an update on ESG quarter is still on track to resume publishing a full sustainability report in 2023, which will include robust disclosure on performance through 2022 Court continues to work towards improving disclosure and performance for its ESG initiatives to sum things up we are off to a very strong start and most material integration.
Projects are complete 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 with that I'll turn it over to Michael for some additional updates.
Thanks, Danny I'll highlight a handful of key operating and financial items for the first quarter and discuss our updated 2023 guidance as Danny mentioned oil volumes were strong in the first quarter about two 3% over midpoint guidance.
Total volumes also exceeded expectations with natural gas volumes above guidance and Ngls.
Below during the first quarter cohort experienced higher levels of ethane rejection, which lowered NGL volumes, but increased natural gas volumes and realizations.
Natural gas realizations also benefited by colder weather in January and February .
Importantly, the net impact to revenue was favorable <unk>.
Combined natural gas and NGL revenue totaled $115 $2 million, which exceeded revenue implied by midpoint volume in differential guidance using actual first quarter 'twenty three benchmark pricing.
Our 2023 guidance has been updated to assume ethane rejection continues through the remainder of the year.
Additionally, we lowered our Henry hub assumption from $3 <unk> to $2 75 per M. M Btu.
Bakken crude pricing closely tracked <unk> over the quarter and we expect to realize slight premiums to <unk> through the remainder of the year.
Our 2023 activity remains schedule remains essentially unchanged from February <unk>.
Completion activity remains concentrated in May and June and throughout third quarter of 2003.
And oil production after adjusting for divestitures is expected to increase sequentially each quarter with the fourth quarter of 'twenty three volumes the highest of the year.
Fourth quarter volumes stand to benefit from third quarter tills as fourth quarter sales will drop off considerably.
As Danny mentioned earlier, our full year oil production guidance has increased when adjusted for asset sales due to the strong performance of the asset base and the strong performance of our team.
Turning to cash costs, low and GPT on a per unit basis were slightly above midpoint guidance driven by lower NGL volumes and certain midstream processors began rejecting ethane and left it in the residue stream otherwise.
Otherwise the total dollar spent was in line with expectations.
We made some adjustments to the outlook to reflect the volume impact of the ethane rejection of that and the divestitures.
On an aggregate dollar basis guidance is essentially unchanged for the Williston business.
Production taxes were approximately seven 9% of oil and gas revenue in line with guidance. We now expect this to increase slightly over the course of 2023, which reflects lower natural gas prices.
Said another way oil is becoming a larger percentage of the revenue mix and is taxed at a higher rate than gas.
Cord cash G&A expense was $18 2 million in the first quarter, which was in line with guidance and excludes $2 8 million of merger related costs or.
Our 2023 cash G&A guidance remains unchanged at 63% to $73 million.
Core paid no cash taxes during the first quarter and does not expect to make a payment in the second quarter either.
In the second half of the year quarter expect cash taxes to approximate it.
Approximate 2% to 10% of second half EBITDA at oil prices between 70% and $90 per barrel.
Our full year capital budget guidance remains unchanged at $825 million to $865 million.
As a reminder, we set our 2023 budget assuming year end 'twenty, two pricing levels holding flat through 2023.
While equipment Utilizations remain high pricing has generally plateaued and remains around year end 'twenty two levels.
All of this has led to a great quarter and significant free cash flow of $199 million.
This paired with a return of capital framework results in another quarter of significant return to shareholders.
Turning to liquidity cord recently re determined its borrowing base, which is reduced from $2 75 billion to $2 5 billion due to lower bank commodity pricing assumptions.
Elected commitments remain at $1 billion with nothing drawn as of March 31.
Cash was approximately $592 million as of March 31, as well.
In closing the core team continues to execute well and drive strong returns, which supports our sustainable free cash flow profile as well as our peer leading return of capital program. We are incredibly proud to be a safe and responsible low cost provider of energy, which fuels a better world.
We're also proud of the entire <unk> team, which continues to show care for each other and for our communities and the courage to always do what is right.
With that I'll hand, the call over to Danielle for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
You are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
The first question comes from Phillips Johnston of capital one. Please go ahead.
Hey, guys. Thanks.
Maybe just.
Just a generic question on what Youre seeing in the M&A Arena. These days.
What kind of appetite the company has for acquisitions in the near to intermediate term.
Yeah. Thanks, Philip this is Danny.
I think the M&A market. It's interesting we've got clearly there's been some volatility in the commodity and my general thought is volatility in the commodity typically makes M&A a little bit more difficult because it can create some some bid ask dynamics between buyers and sellers, but.
More broadly for ourselves and how we think about M&A. We've mentioned many times that consolidations dramatically is something that we're very very supportive of we produce a commodity and generally.
Generally speaking in a larger organizations are going to be better positioned to be low cost producers.
Of a commodity and so consolidation is something that we believe in and we're committed to.
And so that will that will entail some M&A for us and we've said many times that that.
We are.
Going to be looking to be part of a larger a larger equity story and that can involve us consolidate and it could also involve us being consolidated but being part of a larger equity story is something that's important to us and so we are constantly on the lookout for for assets that fit us well, we'll be disciplined as we go through that we think.
Bigger only makes sense. If it also makes you better and and so we'll be very disciplined in how we look at it but being a larger being part of a larger organization is something that makes a lot of sense to us.
Okay great.
Thanks for that.
Just a question maybe for Michael.
Gas realizations as a percentage of Nymex, obviously are running stronger than expected and it seems like thats, mostly a function of the increased ethane rejection I think you mentioned the effects of cold weather for Q1, but.
As far as your improved guidance for the rest of the year. Just wondering if ethane rejection is the sole factor or are you just are you seeing better.
Realizations on an apples to apples basis than you originally anticipated.
Yes, we're seeing generally things in line with what we anticipated.
But the ethane rejection, obviously because that stays in the stream improves those realizations overall, so thats, where the change has been we think it's going to be left in the stream.
It may not be but that's how we're guiding going forward. So it's in line with what we saw in the first quarter.
Yes, okay. Thanks.
Thanks, guys. Thanks, Phil Thanks, so much.
The next question comes from Derrick Whitfield of Stifel. Please go ahead.
Thanks, Good morning, all and congrats on a strong start to the year.
Thanks, Eric.
Perhaps for Danny or my dividends have accounted for a heavier allocation of the return of capital program to date as you noted in your prepared remarks.
As you think about prosecuting a program with a heavier buyback focus could you comment on your framework.
For share repurchases and your sense on investor preferences between buybacks and dividends.
Sure. Thanks, Derik I'll start off and then maybe ask Michael to weigh in.
<unk>.
As we've come out one I'd say we are.
We are committed to having a strong return of capital program as an organization, we think thats important to instill capital discipline within the organization and also to provide shareholder returns and so it's a pretty key tenant of our strategy.
Along with that we as.
As we've gone through this program. The overall return of capital has been very very robust and we've continued to engage with investors all along the way about the form of capital return and Thats a subject that we've talked a lot about internally and we certainly saw it out and gotten input from investors as well I think generally speaking the preferences to have.
A bit more of a balanced program than what we've demonstrated certainly over the last two quarters and so as we think about the framework moving forward. We've mentioned previously that the framework is something that looks at intrinsic value and relative trading performance.
As we looked at relative trading performance I think our our view on that has been pretty has been pretty narrow and widening up our view on relative performance will put us in a position to two.
Execute some more buybacks as we move forward. So the discount to intrinsic value is has kind of remained with the with the equity and so we think it's a great. It's a great opportunity for <unk>.
Our return of capital.
The discount from intrinsic value versus versus how our equity trades in the market. So it's a compelling opportunity for us and I think youll see us do a little more as we move forward anything to add Michael Yes. The only thing I would add to that Eric is I think that as we engage shareholders I think that one there.
They're almost all very appreciative of our return on capital framework in and kind of leading on that side and what we're doing on the 75% return.
That current kind of leverage levels and then two as.
As we talk about kind of that mix I think.
Every investor has a slightly different view and we have a pretty good balance of those that prefer variables prefer buybacks and so we're going to match that with being just a little bit more balanced in the program.
Terrific and for my follow up I wanted to focus on the output from your case study on page seven.
Certainly positively surprised by the $40 million increase in your NPV per DSG and your ability to achieve a similar recovery with 50% less wells wells and these former approach so 2015 and before.
Do you have a sense on Wyndham wells began to communicate with one another and separately, where the DNC designs similar from a proppant intensity perspective.
Yes.
This is chip rimer and good morning, Thanks for the question.
Yes.
When they started communicating.
Probably a good question I think what we've identified as we're going through the process of understanding returns.
Getting the best rate of return, we understand we werent getting what we thought out of the <unk>.
Actually it was costing us more to get where we thought we could get out of it and so as we went in and we started looking at up spacing. We identified that we could literally impact these wells with a similar fracs, we fine tuned the Fracs now we're down into that 1000 to 100 pounds per foot.
'twenty.
25 barrels per foot I think we fine tune the Fracs, we're able to now communicate across.
As stated above.
Between the wells to be able to stimulate all of that rock and get way better production. So over this period of time I think it's fine tuning of completions.
After you realize maybe we over.
Money in some of those issues at.
At this point.
We were running our business is very efficient if you look at capital efficiency and a value saw the $40 million.
And value that we're bringing out the issue just minimize the cost thats going on there, but you are getting the same recovery at or very close to the same recovers.
And chip, maybe just to clarify it seems that the biggest change was really with the three forks and the intensity that you guys are approaching wayside and the perspective was that you would be tracking.
And recovering more within that unit.
But seemingly that's where you were seeing the communication between the middle Bakken and three forks system. When you guys are tracking up.
Yes, yes, we are in the process of majority of our wells in the future here all Bakken to your point.
That's very helpful. Thanks for your time.
The next question comes from Scott Hanold of RBC capital markets. Please go ahead.
Hey, Thanks, you all obviously have a nice cash balance and it does provide you some optionality if something on the M&A side.
Comes in front of you, but can you give us a sense of the strategy with that going forward.
How long or wait if something doesn't come up on the M&A side to hold that cash in.
Optimally then would be the best strategy to kind of return that to shareholders do you would it be.
Kind of a balance.
The type of shareholder returns would be like I was just a big special like what are your thoughts on that.
Sure I'll start off Scott. This is Dan. So I think we don't have a specific timeframe with which we're looking at potential M&A activity or a potential acquisitions as to your point.
One we do have a nice a nice cash balance and one of the reasons. We have that is because we do want to be front footed and opportunistic if we see meaningful and additive and accretive M&A.
In front of Us and I think we will I think we will see that and so we don't have a specific timeline, but clearly.
Negative net debt capital structure over the long term, probably isn't a really sensible capital structure for the organization and so we wouldn't look to have that.
Over the long term, but I don't know that Theres, a specific target on a specific date.
My my anticipation is is that we will be because we are looking to be opportunistic in front footed on on an M&A front that we will we will be successful in finding some opportunities to.
To make some sensible to make some sensible acquisitions and so I think that'll probably be the first the first utilization of that of that capital, but to your point if it doesn't materialize over time, it's not a really sensible capital structure for us long term.
Okay I appreciate it.
Just to clarify when you talk about M&A you all plan still are planning to stay focused in the Williston or have you started to kind of think.
Other opportunities outside of the basin.
I think the Williston, clearly theres, a lower bar for us within the Williston relative to other basins and so never say never say never and other areas, but we bring a lot of synergies a lot of knowledge to bear within within the Williston basin and so I think moving outside the basin for the right opportunity is something that we would look at but.
Clearly.
Sort of industrial logic and synergies, we can bring for in basin acquisitions mix makes a ton of sense.
Got it thank you I appreciate that.
The next question comes from Bertrand <unk> of <unk>. Please go ahead.
Hey, good morning, guys.
On the on the well results.
Youre Indian Hills results were looking pretty encouraging.
Seems even getting a little bit better over time was that what you were expecting internally and then kind of.
Secondly, <unk>.
55% to 60% of your inventory.
Can can be minimal to that three mile lateral program could you maybe breakout what you are seeing this year and next year and maybe if that has any impact on cost savings.
Yes.
Yes.
Appreciate the question.
Bertrand.
Yes.
What we were expecting.
Our teams really fine tune this and tried to understand what those spacing was going back to the prior question and seeing these uplifts are exciting to us I would say, it's probably in the range of what we thought the Avenue, we thought was going to be.
It continues to improve we're seeing additional.
Movement on the base and the wedge and so im really excited about where we're going on the three miles.
Scattered across the basin here.
The expanded.
Historically been in Sanish, although we've done a little FBR.
We are looking at Indian Hills, as Youre aware in some other basins, but on that one page there I think where we're showing across the board we're going to be doing this and expanding this to a west really excited about where that's going on the three miles and the value is going to create when you look at your take on the well cost from 860 $70 a foot down to 676000.
You are making a huge impact as Dan had indicated on some of the values that we are going forward. So excited about where that's going to go to.
Prove some of our well results.
And then if I could try to.
Married to the comments you made so far one was kind of hey, you are in the market Youre happy to look at consolidation.
That's part of your day to day, and then also that it seems like investors are very receptive of more balanced buyback program.
Shareholder returns are still on the forefront.
How do you look about look at your.
Our formula that could maybe dip down into a lower free cash flow payout. If you buy some assets does that does that stop you from looking at certain packages that would require you to dip.
Above the 2.5 leverage or do you think maybe with the right deal the market would accept it.
Well I think with the.
Obviously, the return of impact to our return of capital program is a consideration we would take in as we were looking at any potential acquisition and so it's something that would be sort of worked into the worked into the calculus as we evaluated the deal I would say that if we found an asset that we thought was compelling and made us a better organization. It's one of the.
The reasons, we laid the framework out there to be transparent to investors that if we if we did something in our leverage went above.
Five then we might ratchet back the return of capital is maintaining a strong balance sheet is very very important to us and so we would we would do that if we thought that the.
The deal was was compelling very accretive and we would obviously have a pathway to get back down to lower absolute debt and relative debt levels over time with it with the free cash generation of the asset. So it's something we would take into account could we would we move above five I would say we would move above five if it was the right deal but.
We would think that deal was ultimately delivering the most value to shareholders, but it's one of the reasons why we put the framework out there in the first place to be very transparent about how we're thinking about it.
That's good and then just just for housekeeping, it's not a big deal that you sold but are there any other non williston assets that you have are or just maybe noncore just how much is left in the coffers and that's all I got.
So we've got a small a small amount and we will see that our non core and probably don't probably make more sense and theyre nice assets, but probably make more sense in someone else's hands than in our own and so we'll look at we'll look at that as we move forward and communicated if we're successful on anything here, but small.
Small in nature of small in volume.
That's perfect. Thanks.
Yes.
Thank you.
The next question comes from Oliver.
Right.
Of Tudor Pickering Holt. Please go ahead.
Good morning, everyone and thanks for taking my questions just a couple on the op side of things.
Certainly appreciate the longer dated results shown in your presentation and can certainly understand we're still in the early days, but just kind of get into 'twenty. Three program is a bit more spread out across the wolfson from an aerial perspective was hoping to see if there was any color that you all are able to provide for initial observations for conservative conservatively spaced wells out.
Out of the Indian Hills area really just trying to get a sense for confidence or anything youll seen today to support a similar percentage uplift for less heavily developed areas like Red Bank Foreman Butte in painted woods.
Yes.
Oliver Thanks for the question this is chip rimer.
Yes, it's early stages, if you think about it for cord, where I think were $19 20 wells right now are three milers since our conception in July and so as we expand that and see more.
I am very.
Hopeful and positive that we're going to see similar results, but you have to give us a little time down the road to be able to see those results as we go into some of these other areas that we're planning to go into for this year.
Okay fair enough.
And specific to Sanish, just kind of given the areas a bit more developed and understand and fills do sometimes to make their way into the program wondering if theres any way to speak to how spacing for the 2023 program in Sanish compares to 2022 and if there is any expectation for year over year uplift in well productivity out of that region as a result.
No.
<unk>.
Deal that keeps on giving when it's all said and done and we're focused on some three milers in that area, we've seen some impact on <unk>.
It depends where we're looking for the right spacing and those kind of things. So last year, we were very heavy in that area I think over 50% of our wells were in that area. We're not nearly that percentage this year, but we're going to pick and choose where we want to go and look for the best productivity areas with.
But we think there is still value to be had on <unk>, but it is one field that keeps giving.
Awesome, Thanks for the time.
Thanks Oliver.
As a reminder, if you have a question please press star one.
The next question comes from John Abbott of Bank of America. Please go ahead.
Hey, good morning, and thank you for taking our questions.
Really.
First question. These are more sort of guidance related items. So we said we've seen one operator this morning modestly reduced their full year capex by the Capex budget.
They have potential line of sights on lower steel costs in the second half of the year.
Can you just give us an update on how youre thinking about your Capex guidance range. This year.
How do you sort of look at potential cost improvements.
Yes. This is Danny I think we've got our Capex range that were.
Reaffirming our Capex range right now.
Relative to our guidance, we put out earlier in the year as we as we put the program together I think we've seen.
We kind of anticipated that cost at the end of 2022, what sort of maintained through the course of 2023 and generally speaking that's what we've seen we've seen.
It looks like we could see steel come down in the back half of the year, a little too early to see that fully rolled through but some early evidence that that could happen we'd get some areas.
That are up modestly some areas that are down modestly, but generally speaking the services is has remained.
Cost seemed like they've plateaued.
I would say that generally speaking with the clearly a lot of volatility in the commodity and the commodity and service cost normally following each other although thats not.
There is a lag between the two and so.
We'll have to monitor where the commodity goes over time because of lower commodity could lead to some some downward pressure on service costs as we move forward as people think about their overall activity, but right now I think we feel good about where our capital is and just reaffirming what we put out earlier in the year.
I appreciate that and then.
Yes, I've got a couple of things the other things we're focused on is our synergies and so if you look at the one page, where we're we're showing cost per foot come down and we're doing the.
The $3 versus the two Milers. We are focused you can see the days per drilling.
Wasn't too long ago, we were in that 17 range of everybody else and we say, 20%. So the synergies we're seeing with two combined companies are coming to fruition, we're seeing huge value on the drilling side, we're putting facilities together that was used to take US maybe 16 weeks was down to 10 weeks because they're modular. So these different ideas combined we're able to manage some of that cost because of the synergies.
John .
As I've sat here I'll make one other comment this is Danny again, the cadence of our capital spend is it's one thing to note, though will most of our we picked up.
Second completion crew.
About midway through the first quarter, and we're going to run that up to about the end of the third quarter and as you know the completions were so so much of the capital spend is is associated so really quarters, two and three will be the the big capital spend quarters for the organization and fourth quarter as we drop that that lag that second crew towards the end of the third quarter really well.
The capital spend in Q4 will be pretty significantly below the other quarters, just because of the nature of how we've done the programming and one of the reasons. We've done that is to try and have a.
Yes.
Nice for us to have two crews working to work during the best weather months within within North Dakota. So we'll drop that will drop that second crew as we right before we go into the fourth quarter store capital spend in the fourth quarter will be will probably be our lowest of the year. So anyway, just a little on linear.
A linear extrapolation of.
Capital spending probably probably lead you down a bad pack because thats not how the program is actually setup.
I appreciate that color.
For the second question I have really enjoyed the discussion on longer laterals and wider spacing and again. This is maybe a bit more in the weeds.
You modestly raised oil guidance for the year up post the asset sale.
So when you gave provided that oil guidance.
And when you thought about your move to why what's your movement with wider spacing and also lotto longer laterals have you risked that production guidance in other words.
No.
Is there a possibility we could see higher output than you're currently guiding to this year could you were conservatively.
Modeling the impact of longer laterals.
Okay.
Yes.
One of the things if you think about John we don't up our facility side and so we're limiting that so what youre going to see is maybe longer.
Flatter for longer is what youre going to see so that kind of that may be part of it where you are seeing so there could be some upside, but I think we're pretty fair, where we are right now and how we've got it modeled.
But.
We're not changing the facility side.
Not adding a whole bunch of additional costs and we're keeping it goes three milers flatter for a period of time and.
And John One thing. This is any one thing is as we put our type curves together for the three mile laterals, we generally don't take 100% credit for that last mile and so if you look at the EUR as we generate out of the wells, we only take a fraction of that last mile assuming that there'll be some degradation and what we've seen is maybe we're getting a little more contra.
Abuse in there then then how we put the type curves together and so it's probably attributing some a little bit to the oil outperformance, we've seen and so.
I think from our perspective, we'll probably.
Being slightly conservative is probably not a bad thing on this is we underwrite programs and we'll probably continue that expansion and.
If we see a little more come through so much the better.
Very helpful. Thank you for taking our questions.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Danny Brown, Chief Executive Officer for closing remarks.
Alright, Thanks, Danielle well to close out I just want to thank all of the employees at cord, who through their commitment and dedication that put the company at a great position to succeed and to deliver value for our shareholders through disciplined capital allocation efficient operations and maintaining a strong balance sheet, while remaining committed to responsible operations.
Thank you for joining our call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.