Q2 2024 Chord Energy Corp Earnings Call

August 8, 2024

Good morning, ladies and gentlemen, and welcome to the Chord Energy Second Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode.

Operator: Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode.

Operator: 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 Thursday, August 8, 2028. I would now like to turn the conference over to Bob Bakanauskas, Managing Director of Investor Relations. Please go ahead.

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 Thursday, August 8, 2028.

I would now like to turn the conference over to Bob Bacchanalkas, Managing Director of Investor Relations. Please go ahead.

Bob Bakanauskas: Thanks, Matthew, and good morning, everyone. This is Bob Bakanauskas, and today we're reporting our second quarter of 2024 financial and operating results. We're delighted to have you on the call.

Bob Bacanowskis: Thanks, Matthew, and good morning, everyone. This is Bob Bacanowskis, and today we're reporting our second quarter of 2024 financial and operating results. We're delighted to have you on the call. I am joined today by Danny Brown, our CEO , Michael Lou, our Chief Strategy and Commercial Officer, Darrin Henke, our COO, and Richard Robuck, our CFO , as well as other members of the team. Thank you, everyone, for joining us today. We're delighted to have you on the call.

Bob Bakanauskas: I'm joined today by Danny Brown, our CEO, Michael Lou, our Chief Strategy and Commercial Officer, Darrin Henke, our COO, and Richard Robuck, our CFO, as well as other members of the team. Please be advised that our remarks, including the answers to your questions, may 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.

Bob Bakanauskas: Those risks include, among others, 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 call, we will make reference to non-GAAP measures, and reconciliations to the applicable GAAP measures can be found in our earnings release and on our website. We may also reference our current investor presentation, which you can find on our website. And with that, we'll turn the call over to our CEO, Danny Brown.

Bob Bacanowskis: 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.

Bob Bacanowskis: These forward-looking statements are subject to the risks and uncertainties that could cause actual results to be materially different from those currently disclosed in our earnings releases and conference calls.

Bob Bacanowskis: Those risks include, among others, 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 .

Bob Bacanowskis: We disclaim any obligation to update these forward-looking statements.

Bob Bacanowskis: During this call, we will make reference to non-GAAP measures and reconciliations to the applicable GAAP measures can be found in our earnings release and on our website.

Bob Bacanowskis: We may also reference our current investor presentation, which you can find on our website. And with that, we'll turn the call over to our CEO , Danny Brown.

Danny Brown: Thanks, Bob. Good morning, everyone, and thank you for joining us on our call. I recognize it's a very busy morning, so I plan to provide a brief overview of our second quarter performance and our return of capital, as well as updates on our full-year outlook. Additionally, I'll give some color on our integration with Interplus before passing it to Darrin. Darrin will give details on operations and synergies before passing it to Richard for a little more on our financial results. We'll then open it up to Q&A.

Danny Brown: Thanks, Bob. Good morning, everyone, and thank you for joining our call. I recognize it's a very busy morning, so I plan to provide a brief overview of our second quarter performance and our return of capital, as well as updates on our full-year outlook.

Speaker Change: Additionally, I'll give some color on our integration with Interplus before passing it to Darrin. Darrin will give details on operations and synergies before passing it to Richard for a little more on our financial results. We'll then open it up to Q&A.

Danny Brown: So, in summary, Chord delivered another great quarter, which resulted in a strong shareholder return. So, diving in, second quarter oil volumes were toward the top end of guidance, driven by strong well performance and less downtime. Capital was below expectations, reflecting some timing adjustments to the program, and lease operating expense also came in favorable versus our expectations, reflecting less downtime and lower maintenance costs. Many thanks to our operating team for delivering favorable results really across the board. Well done!

Danny Brown: So, in summary, Chord delivered another great quarter, which resulted in strong shareholder returns.

Darrin: so diving in second quarter oil volumes were toward the top end of guides driven by strong well performance and the less downtime

Darrin: Capital was below expectations, reflecting some timing adjustments to the program. And lease operating expense also came in favorable versus our expectations, reflecting less downtime and lower maintenance costs. Many thanks to our operating team for delivering favorable results really across the board. Well done.

Danny Brown: Given this strong quarterly performance, free cash flow was above expectations, and on a pro forma basis, adjusted free cash flow was approximately $263 million. This includes a full quarter of Interplus's results and excludes approximately $16 million of non-operated capital, which was not contemplated in original guidance and will be reimbursed through asset divestiture. In accordance with our return of capital framework, Chord will return 75% of this adjusted free cash flow to shareholders. To that end, given our base dividend of $1.25 per share and our normal course share repurchases in the second quarter of $41 million, we declared a variable dividend of $1.27 per share.

Bob Bacanowskis: Given this strong quarterly performance, free cash flow was above expectations, and on a pro forma basis, adjusted free cash flow was approximately $263 million.

Danny Brown: This includes a full quarter of Interplus' results and excludes approximately $16 million of non-operated capital which was not contemplated in original guidance and will be reimbursed through asset divestitures.

Danny Brown: In accordance with our return of capital framework, CORD will return 75% of this adjusted free cash flow to shareholders.

Danny Brown: To that end, given our base dividend of $1.25 per share and our normal course share repurchases in the second quarter of $41 million, we declared a variable dividend of $1.27 per share.

Danny Brown: I would note that the timing of our share repurchases was somewhat impacted by the possession of material non-public information associated with the Interplus acquisition and various filings made during the course of the process. Additionally, last night, we issued third quarter and updated full year guidance. As we discussed in May, the development program went faster than expected in the first half of the year due to strong performance and a fairly mild winter. This resulted in volumes of capital above our original expectations early in the year.

Bob Bacanowskis: Additionally, last night we issued third quarter and updated full year guidance.

Speaker Change: as we discussed in may the development program went faster than expected in the first half of the year due to strong performance and a fairly mild wner

Speaker Change: This resulted in volumes and capital above our original expectations early in the year. And as I've mentioned before, Chord is focused on efficient and sustainable free cash generation, which results in us executing a Maintenance Plus program.

Danny Brown: And as I've mentioned before, Chord is focused on efficient and sustainable free cash generation, which results in us executing a maintenance plus program. We do not plan to increase capital this year, even as we raise our full-year oil guide by 500 barrels per day.

Bob Bacanowskis: we did not plant it increase capital this year even as we raise our full year oil guide by five hundred barrels per day

Danny Brown: With that in mind, Chord slowed frack activity and is currently down to one frack crew versus three pro forma earlier in the year. This crew count will increase as we move into late summer and fall and results in Chord being toward the lower end of its full year operated new well turn in line range. Concurrently, Chord is increasing non-operated spending in the second half of the year as the team is investing in a number of attractive non-operated opportunities that we acquired in our transaction with the XTO and our combination with Interplus.

Bob Bacanowskis: With that in mind, Chord slowed frack activity and is currently down to one frack crew versus three pro forma earlier in the year. This crew count will increase as we move into late summer and fall and results in Chord being toward the lower end of its full year operated new weld turn in line range.

Bob Bacanowskis: Concurrently, Chord is increasing non-op spending in the second half of the year as the team is investing in a number of attractive non-operated opportunities that we acquired in our transaction with the XTO and our combination with Interplus.

Danny Brown: None of these offsetting impacts for your capital guidance is uncharacterized. I should note that when looking at capital, you'll likely notice that capital and LOE guidance reflect some accounting changes as a result of the Interplus combination that Richard will discuss in more detail. But in a nutshell, on an apples-to-apples basis, pro forma capital is unchanged versus our May outlook, while LOE is running favorable versus our initial expectation. And, as I mentioned a few moments ago, we will be increasing our expected full-year oil volumes by 500 barrels per day to account for the good performance we've seen to date. Turning to Interplus, the combination closed as expected on May 31st.

Bob Bacanowskis: None of these offsetting impacts for your capital guidance is unchanged.

Speaker Change: i should note that wewhen're looking at capital you'll likely notice that capital and loe guidance reflects some accounting changes

Bob Bacanowskis: as a result of the Interplus combination that Richard will discuss in more detail. But in a nutshell, on an apples-to-apples basis, Proforma Capital is unchanged versus our May outlook, while LOE is running favorable versus our initial expectations.

Speaker Change: And as I mentioned a few moments ago, we will be increasing our expected full year oil volumes by 500 barrels per day to account for the good performance we've seen to date.

Richard: Turning to Interplus, the combination closed as expected on May 31st.

Danny Brown: We remain extremely confident in the strategic and financial benefits of the transaction, and as we move through integration, our conviction level continues to grow. Interplus brings top-tier assets in the core of the basin, and we expect Chord can enhance returns on these assets by applying techniques it has developed over the past several years, including longer laterals, optimized spacings, and reducing downtime. The combined asset base supports efficient operations, strong returns, sustainable free cash flow, and a peer-leading return on capital program.

Richard: We remain extremely confident in the strategic and financial benefits of the transaction. As we move through integration, our conviction level continues to grow.

Richard: Interplus brings top-tier assets in the core of the basin, and we expect Chord can enhance returns on these assets by applying techniques it has developed over the past several years, including longer laterals, optimized spacings, and reducing downtime.

Richard: The combined asset base supports efficient operations, strong returns, sustainable free cash flow, and a peer-leading return of capital program.

Danny Brown: Our integration efforts are going well, and by utilizing combined best practices and enhanced scale, we are very confident in achieving the greater than $200 million Synergies target, which is up from our original estimate of $150 million. Slide 11 in our deck highlights some of our recent operations, some of our recent operational progress, and opportunities to improve the combined company going forward. I want to let the organization know how grateful I am for their continued positive attitudes and dedication in driving an effective integration and pushing to realize incremental value from the transaction.

Speaker Change: Our integration efforts are going well, and by utilizing combined best practices and enhanced scale, we are very confident in achieving the greater than $200 million Synergies target, which is up from our original estimate of $150 million. Slide 11 in our deck highlights some of our recent operational...

Speaker Change: Some of our recent operational progress and opportunities to improve the combined company going forward.

Speaker Change: I want to let the organization know how grateful I am for their continued positive attitudes and dedication in driving an effective integration and pushing to realize incremental value from the transaction. And importantly, no one has taken their eye off the ball and Chord is currently putting up great operating results.

Danny Brown: And importantly, no one has taken their eye off the ball, and Chord is currently putting up great operating results. Also, in our updated presentation, you will see some new material focused on helping investors better understand how attractive the Williston Basin is. And I believe our technical, operational, and marketing teams have been instrumental in driving what we think is a resurgence in the basin. The Williston Basin continues to evolve, and the current state of play is worth revisiting.

Richard: Also, in our updated presentation, you will see some new material focused on helping investors better understand how attractive the Williston Basin is, and I believe our technical, operational, and marketing teams have been instrumental in driving what we think is the resurgence of the basin.

Richard: The Williston Basin continues to evolve, and the current state of play is worth revisiting. Number one, it has the highest oil cut of any major onshore lower 48 basin, which supports strong margins and impressive returns.

Danny Brown: Number one, it has the highest oil cut of any major onshore lower 48 basin, which supports strong margins and impressive returns. Second, with our footprint basically extending across the entirety of the play, our subsurface understanding is both differential and full circle. With our learnings, we generally target only the Bakken, which means parent-child interference can be more accurately modeled.

Richard: Second, with our footprint basically extending across the entirety of the play, our subsurface understanding is both differential and fulsome.

Speaker Change: with our learnings we generally target only the buken which means parent child interference can be more accurately modeled this isn't well understood in my opinion but it is an important competitive advantage

Danny Brown: This isn't well understood, in my opinion, but it is an important competitive advantage. The upper right-hand chart on slide 10 shows well productivity adjusted for volatility across basins, a bit of a pseudo-sharp ratio, if you will. The Bakken screens very well on a risk-adjusted basis, as the wells are prolific with lower relative variance.

Speaker Change: The upper right-hand chart on slide 10 shows well productivity adjusted for volatility across basins, a bit of a pseudo-sharp ratio, if you will. The Bakken screens very well on a risk-adjusted basis, as the wells are prolific with lower relative variance.

Darrin Henke: Third, the land and regulatory environment is excellent, and, as an added benefit, Chord has been the leader in longer lateral development compared to other lower 48 piers. Longer laterals are a more efficient way to develop the resource and support strong returns as well as Chord's low reinvestment ratio. Lastly, oil takeaway has really improved differentials over the past decade or so, and Bakken Crude has traded consistently close to WTI for many years running.

Speaker Change: Third, the land and regulatory environment is excellent and as an added benefit, Chord has been the leader in longer lateral development compared to other lower 48 piers. Longer laterals are a more efficient way to develop the resource and support strong returns as well as Chord's low reinvestment ratio.

Speaker Change: Lastly, Oil Takeaway has really improved differentials over the past decade or so, and Bakken Crude has traded consistently close to WTI for many years running.

Darrin Henke: To sum up, Williston is a phenomenal place to do business, and the Chord team is focused on making every aspect of the business better and continuing to improve our returns. And, finally, we remain committed to delivering affordable and reliable energy in a sustainable and responsible manner. Chord's culture revolves around continuous improvement and is focused on driving performance across a number of key areas, including emissions and safety. Chord expects to publish a sustainability report later this year on a legacy basis and also provide a summary of key ESG and sustainability metrics for Interflux.

Speaker Change: To sum it up, the Williston is a phenomenal place to do business and the Chord team is focused on making every aspect of the business better and continuing to improve our returns.

Speaker Change: And finally, we remain committed to delivering affordable and reliable energy in a sustainable and responsible manner. Chord's culture revolves around continuous improvement and is focused on driving performance across a number of key areas, including emissions and safety.

Speaker Change: Chord expects to publish a sustainability report later this year on a legacy Chord-only basis and also provide a summary of key ESG and sustainability metrics for Interplus. In 2025, we expect to publish a full sustainability report reflecting the combined company.

Darrin Henke: In 2025, we expect to publish a full sustainability report reflecting the combined company. So to summarize, Chord delivered a great start to the year, which essentially accelerated the production profile into the first half and should result in high free cash flow and shareholder returns in the second half of the year. We remain as excited as ever about the Interplus transaction and look forward to executing it in 2024 and beyond. And with that, I'll turn it to Darrin.

Speaker Change: So to summarize, Chord delivered a great start to the year, which essentially accelerated the production profile into the first half and should result in high free cash flow and shareholder returns in the second half of the year.

Speaker Change: We remain as excited as ever on the Interplus transaction and look forward to executing in 2024 and beyond. And with that, I'll turn it to Darrin.

Darrin Henke: Thanks Danny. We had a solid quarter on the operations front as the team continues to execute with excellence. Our wedge production benefited from robust well performance, while our base production benefited from lower levels of downtime. I thought we'd spend a little time talking about Chord's asset base and the kind of things we're doing to make great assets even better. First, most of you know that Chord is the leader in three-mile lateral development. Slide 6 on the bottom left shows Chord's longer lateral wells as a percent of the program last year. And as you can see, we're at the top of our peer group.

Darrin: Thanks Danny. We had a solid quarter on the operations front as the team continues to execute with excellence. Our wedge production benefited from robust well performance while our base production benefited from lower levels of downtime.

Darrin Henke: The upper right chart shows Chord's longer lateral well productivity in the Wilson Basin compared to Pierce since the second half of last year, which is when we started to consistently reach total depth on post-frack cleanouts. Again, Chord is at the top of the pack. It was the early days of Interplus relative to three-mile laterals, and we see an opportunity to high-grade our new asset by applying Chord's technical expertise. ProFoamer, Chord's inventory consists of approximately 40% longer laterals. And we believe we can increase that percentage materially over the next few years.

Darrin: i thought we'd spend a little time talking about cour's asset base and the kind of things we're doing to make great assets even better

Speaker Change: First, most of you know that Chord is the leader in three-mile lateral development.

Darrin: Slide six on the bottom left shows Chord's longer lateral wells as a percent of the program last year. And as you can see, we're at the top of the peer group.

Darrin: The upper right chart shows Chord's longer lateral well productivity in the Wilson Basin compared to Piers since the second half of last year, which is when we started to consistently reach total depth on post-frac cleanouts. Again, Chord is at the top of the pack.

Darrin: It was early days of Interplus relative to three-mile laterals, and we see an opportunity to high-grade our new asset by applying Chord's technical expertise.

Speaker Change: ProFoamer, Chord's inventory consists of approximately 40% longer laterals and we believe we can increase that percentage materially over the next few years.

Darrin Henke: While some outperformance is already being captured in our PDP-based forecast, we currently model three-mile wedge wells delivering approximately 40% more EUR for 20 to 25% more capital. It's likely that we're getting more than the 40% uplift, especially since the team has improved the coil tubing clean-out process, whereby Chord routinely reaches TD on most wells. We expect to formally update the market on our third mile productivity assumptions in November as part of our third quarter results.

Speaker Change: While some outperformance is already being captured in our PDP-based forecast, we currently model 3-mile wedge wells delivering approximately 40% more EUR for 20-25% more capital.

Speaker Change: It's likely that we're getting more than the 40% uplift, especially since the team has improved the coil tubing clean-out process, whereby Chord routinely reaches TD on most wells.

Speaker Change: We expect to formally update the market on our 3rd mile productivity assumption in November as part of our 3rd quarter results.

Darrin Henke: Across the portfolio, we certainly like what we see relative to productivity, decline rates, and flowing pressure. Referring to slide seven, the chart on the upper right shows Chord's average spacing across the basin is wider than other operators. This upspacing has helped keep declines shallow, production flat, and reinvestment rates low.

Speaker Change: Across the portfolio, we certainly like what we see relative to productivity, decline rates, and flowing pressures.

Speaker Change: Referring to slide 7, the chart on the upper right shows Chord's average spacing across the basin is wider than other operators.

Speaker Change: This upspacing has helped keep declines shallow, production flat, and reinvestment rates low. As we integrate the Interplus assets, we think an opportunity exists to optimize spacing and enhance the economic returns of the overall development program.

Darrin Henke: As we integrate the Interplus assets, we think an opportunity exists to optimize spacing and enhance the economic returns of the overall development program. Wider spacing has been a key driver to improve Chord's capital efficiency in recent years. The lower half of the chart shows a case study from Inveris which assesses Chord's widely-spaced well performance versus those in a neighboring DSU with tighter spaces. The result is similar DSU recovery in aggregate, with Chord deploying substantially less wells and capital.

Speaker Change: Wider spacing has been a key driver to improve chords capital efficiency in recent years. The lower half of the chart shows a case study from Inveris which assesses chords widely spaced well performance versus those in a neighboring DSU with tighter spacing.

Speaker Change: The result is similar DSU recovery, in aggregate, with Chord deploying substantially less wells and capital.

Darrin Henke: Continuing with well spacing, slide 8 shows Chord's success with wider spacing across the entire basin. However, again, Chord is draining most, if not all, of the DSU with fewer wells and materially less capital than our peers. Chord continues to evaluate opportunities to maximize capital efficiency and continually analyzes the merits of removing or adding wells across our position. Just a couple quick thoughts on Synergies before passing it to Richard. Like Danny mentioned, as the teams get deeper into the integration, we continue to like what we see. On slide 11, we highlighted some key items where we see considerable opportunity.

Speaker Change: Continuing with well spacing, slide 8 shows Chord's success with wider spacing across the entire basin. Again, Chord is draining most, if not all, of the DSU with fewer wells and materially less capital than our peers.

Speaker Change: Chord continues to evaluate opportunities to maximize capital efficiency and continually analyzes the merits of removing or adding wells across our position.

Richard: Just a couple quick thoughts on Synergies before passing it to Richard. Like Danny mentioned, as the teams get deeper into the integration, we continue to like what we see. On slide 11, we highlighted some key items where we see considerable opportunity.

Darrin Henke: Chord is the leader in drilling times in the Williston Basin, and by applying Chord's drilling techniques, we've already seen improvements in drilling performance on the Interplus asset since closing just a couple months ago. Additionally, Chord has increased completion efficiencies over the past year with its legacy zipper frac, and we expect to achieve further efficiency improvements with the SimulFract completions that Interplus used extensively.

Speaker Change: Chord is the leader in drilling times in the Wilson Basin. And by applying Chord's drilling techniques, we've already seen improvements in drilling performance on the Interplus asset since closing just a couple months ago.

Speaker Change: additionally cot has increased completion efficient efficiencies over the past year with its legacy zipperfracs we expect to achieve further efficiency improvements with the seml frac completions that interplus use extensively

Richard Robuck: Finally, I wanted to highlight our progress in reducing downtime over the past 12 to 18 months. As you can see on the right-hand side of the slide, the Chord team has made significant improvements on this front, and we see a meaningful opportunity to lower downtime in the new areas of our expanded portfolio. To sum it up, Chord continues to execute quite proficiently, and I want to give credit to a team that pushes innovation and relentlessly strives for continuous improvement. It's a really exciting time for the company, and Chord will further advance these top-notch assets, jumping the S-curve, by applying its technical and operational expertise. I'll now turn it over to Richard. Thanks, Darrin.

Speaker Change: Finally, I wanted to highlight our progress in reducing downtime over the past 12 to 18 months.

Richard: As you can see on the right-hand side of the slide, the Chord team has made significant improvements on this front, and we see a meaningful opportunity to lower downtime on the new areas of our expanded portfolio.

Richard: To sum it up, Chord continues to execute quite proficiently, and I want to give credit to a team that pushes innovation and relentlessly strives for continuous improvement.

Speaker Change: It's a really exciting time for the company, and Chord will further advance these top-notch assets, jumping the S-curve by applying its technical and operational expertise.

Richard Robuck: I'll walk you through the second quarter results, which include contributions from Interplus after the combination closed on May 31st. Guidance for the remainder of the year reflects a contribution from both companies. You'll notice a handful of key guidance items look different than what you might have expected by looking at Chord and Interplus standalone financial statements. Certain reclassifications have been made in the historical presentation of Interplus's financial statements to conform to Chord's accounting policies and presentation.

Speaker Change: I'll now turn it over to Richard.

Richard: Thanks, Darrin. I'll walk you through the second quarter results, which include contributions from Interplus after the combination closed on May 31st.

Richard: Guidance for the remainder of the year reflects a contribution from both companies.

Richard Robuck: Thanks, Darren. I'll walk you through the second quarter results, which include contributions from Interplus after the combination closed on May 31st. Guidance for the remainder of the year reflects a contribution from both companies. You'll notice a handful of key guidance items look different than what you might have expected by looking at Chord and Interplus' stand-alone financials. Certain reclassifications have been made in the historical presentation of Interplus's financial statements to conform to Chord's accounting policies and presentation.

Richard: You'll notice a handful of key guidance items look different than what you might have expected by looking at Chord and Interplus standalone financials. Certain reclassifications have been made in the historical presentation of Interplus's financial statements to conform to Chord's accounting policies and presentations.

Richard Robuck: Interplus expends certain items through LOE that Chord will deduct through gas and NGL revenue or charge through capital. Additionally, Interplus capitalized certain G&A charges that Chord will expense. The net impact of these changes relative to Interplus' standalone reporting is lower LOE, lower gas and NGL revenues, and slightly higher capital and G&A expense. The impact of the accounting changes is neutral to adjusted free cash flow. Slide 18 in the investor presentation bridges the impact of the accounting and policy alignment differences.

Richard: interplus expense certain items through llo that court will duct

Richard: through GAF and NGL Revenue.

Richard: or charge through capital. Additionally, Interplus capitalized certain G&A charges that Chord will expense. The net impact of these changes relative to Interplus' stand-alone reporting is lower LOE.

Richard: Lower gas and NGL revenues and slightly higher capital and G&A expense. The impact of the accounting changes is neutral to adjusted free cash flow.

Richard: Slide 18 in the investor presentation bridges the impact between the accounting policy alignment differences.

Richard Robuck: In the second quarter, Chord generated adjusted free cash flow of $263 million on a pro forma basis. Strong volumes, as well as lower operating costs and lower capital, offset weaker than expected pricing, especially for natural gas and NGLs. Oil volumes were strong in the second quarter, about 1% over midpoint guidance, and total

Richard: In the second quarter, Chord generated adjusted free cash flow of $263 million on a pro forma basis. Strong volumes as well as lower operating costs and lower capital offset weaker than expected pricing, especially for natural gas and NGLs.

Richard: Oil volumes were strong in the second quarter, about 1% over midpoint guidance, and total

Operator: Ladies and gentlemen, please stand by. We are experiencing technical difficulties, and the presentation will resume shortly. Thank you.

Speaker Change: Ladies and gentlemen, please stand by. We are experiencing technical difficulty, and the presentation will resume shortly. Thank you.

Richard Robuck: Hi, this is Richard Robuck again. I apologize for the interruption.

Richard Robuck: A little technical difficulty on our end, but I'm going to pick up where I think we lost you. So we were talking about WTI realizations, and we were noting where we were versus WTI for our differentials at $1.71 in the second quarter, and we expect that to improve in the second half of the year. NGL realizations as a percent of WTI were approximately 11% in the second quarter, and natural gas was 27% of Henry Hub.

Speaker Change: and a little technical difficulty on our end, but I'm gonna kick back up where I think where we lost you.

Speaker Change: So, we were talking...

Speaker Change: about wtii realizations of

Speaker Change: And we were noting where we were versus WTI for our differentials at $1.71 in the second quarter.

Speaker Change: And we expect that to improve in the second half of the year.

Speaker Change: ngll realizations as percent a wtii were approximately eleven percent in the second quarter and natural gas was twenty-seven percent of henry hub

Richard Robuck: Looking forward, our guidance reflects market expectations placed on top of our cost structure. As a reminder, certain marketing fixed fees are deducted from our gas and NGL prices. This drives higher operating leverage, which hurts realizations for both NGLs and gas in times of weaker prices. For gas prices trading at low levels, the fees deducted from our price result in lower realizations as a percent of the benchmark price. However, realizations should also improve quickly in environments where gas prices are rising.

Unknown Executive: At this time, all lines are in listen only mode.

Speaker Change: Looking forward, our guidance reflects market expectations placed on top of our cost structure. As a reminder, certain marketing fixed fees are deducted from our gas and NGL prices.

Unknown Executive: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press R0 for the operator.

Speaker Change: this drives higher operating leverage which hurts realizations for both ngll and gas in the times of weaker prices with gas prices tring at low levels the fees deducted from our price results and lower realizations as a percent of the benchmark price however realization should also improve quickly in environments where gas prices rise

Unknown Executive: This call is being recorded on Thursday, August 8, 2028.

Bob Bakanauskas: I would not like to turn the conference over to Bob Bakanauskas, managing director of investor relations. Please go ahead. Thanks Matthew and good morning everyone.

Richard Robuck: Turning to cost, LOE was $9.37 per BOE in the second quarter, which on a comparable basis was below our expectations, reflecting better downtime and lower maintenance costs. Looking forward, we expect this to increase some in the back half of the year, which modestly reflects work overtiming. Cash GPT was $3.18 per BOE in the second quarter, which we expect to come down a bit in the second half of the year. Cash G&A, excluding merger-related costs, was $21,000.

Bob Bakanauskas: This is Bob Bakanauskas and today we're reporting our second quarter, 2024 financial operating results. We're delighted to have you on the call. I'm joined today by Danny Brown or CEO, Michael Lou, our chief strategy and commercial officer, Darren Henke, or COO, and Richard Robuck or COO, as well as other members of the team.

Speaker Change: Turning to cost, LOE was $9.37 per BOE in the second quarter, which on a comparable basis was below our expectations, reflecting better downtime and lower maintenance costs. Looking forward, we expect this to increase some in the back half of the year, which modestly reflects work overtiming.

Bob Bakanauskas: Please be advised at our remarks, including the answers to your questions, include statements that we believe to be forward-looking statements within the meeting of the Private Security's litigation reform act. These forward-looking statements are subject to the risks and uncertainties that could cause actual results to be materially different from those currently disclosing our earnings releases and conference calls. Those risks include, among others, 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 10K and our quarterly reports on Form 10K.

Speaker Change: Cash GPT was $3.18 per BOE in the second quarter, which we expect to come down a bit in the second half of the year. Cash G&A, excluding merger-related costs, was $21.99.

Richard Robuck: $2.8 million in the second quarter. Merger costs were $54.7 million in the second quarter. We expect this to step down materially in the back half of the year. Our cash G&A guidance excludes the impact of merger-related items. Production taxes averaged 8.8% of commodity sales in the second quarter, and we expect this to come down in the second half. North Dakota recently lowered its production tax on natural gas to approximately 6.5 cents per MCF from $14.23 previously, which is related to trailing gas prices.

Speaker Change: $2.8 million in the second quarter. Merger costs were $54.7 million during the second quarter. We expect this to step down materially in the back half of the year.

Speaker Change: Our cash G&A guidance excludes the impact of merger-related items. Production taxes averaged 8.8% of commodity sales in the second quarter, and we expect this to come down in the second half. North Dakota recently lowered the production tax on natural gas to approximately 6.5 cents per MCF.

Bob Bakanauskas: We just claim any obligation to update these forward-looking statements. During this call, we will make reference to non-GAAT measures and reconciliation to the applicable GAAT measures can be found in our earnings release and on our website. We may also reference our current investor presentation, which you can find on our website.

Speaker Change: from $14.23 previously, which is related to trailing gas prices.

Richard Robuck: The second half cash taxes are expected to be 6% to 12% of adjusted EBITDA, which is down from our original expectations for the second half cash taxes of 8% to 14% that we discussed in May. Chord's full year cash tax expectations are slightly lower than our original guidance as well. As of June 30th, Chord had $575 million drawn on its $1.5 billion credit facility. As of June 30th, it was about $1.1 billion, including $197 million of cash and $895 million available on the credit facility net of letters of credit.

Bob Bakanauskas: And with that, I'll return the call over to our CEO, Danny Brown. Thanks, Bob.

Speaker Change: Second half, cash taxes are expected.

Speaker Change: to be 6% to 12% of adjusted EBITDA, which is down from our original expectations for the second half cash taxes of 8% to 14% that we discussed in May.

Danny Brown: Good morning, everyone, and thank you for joining our call. I recognize it's a very busy morning, so I plan to provide a brief overview of our second quarter performance and our return of capital, as well as updates on our full-year outlook. Additionally, I'll give some color on our integration with Interplus before passing it to Darren. Darren will give details on operations and synergies before passing it to Richard for a little more on our financial results. We'll then open it up to Q&A.

Speaker Change: Chord's full year cash tax expectations are slightly lower than our original guidance as well.

Speaker Change: As of June 30th, Chord had $575 million drawn on its $1.5 billion credit facility. Liquidity, as of June 30th, was about $1.1 billion, including $197 million of cash.

Danny Brown: So, in summary, Core delivered another great quarter, which resulted in strong shareholder returns. So, diving in, second quarter oil volumes were toward the top end of guidance driven by strong well performance and less downtime. Capital was below expectations, reflecting some timing adjustments to the program. And lease operating expense also came in favorable versus our expectations, reflecting less downtime and lower maintenance costs. Many thanks to our operating team for delivering favorable results really across the board.

Speaker Change: eight hundred and ninety five million available on the credit facility net of letters of credits not leverage wasa

Richard Robuck: Net leverage was about $1.5 billion, point three times at June 30th, consistent with expectations that we set out in May when we announced the transaction closing. Subsequent to the quarter, the company paid approximately 63 million of Interplus senior notes. Additionally, Chord put on some hedges since our last update. Our derivative position as of August 6th can be found in our latest investor presentation. In closing, it's been an exciting time for Chord. I'd like to sincerely thank the entire team for their hard work and dedication to the company. Your efforts have put the company in a strong position to succeed going forward. With that, I'll hand the call back over to Matthew for questions. Thank you.

Speaker Change: point three times at June 30th, consistent with expectations that we set out in May when we announced the transaction closing. Subsequent to the quarter, Chord repaid approximately 63 million of Interplus senior notes.

Speaker Change: Additionally, Chord put on some hedges

Danny Brown: Well done. Given this strong quarterly performance, free cash flow was above expectations, and on a pro form of basis, adjusted free cash flow was approximately $263 million. This includes a full quarter of Interplus's results and excludes approximately $16 million of non-operated capital, which was not contemplated in original guidance and will be reimbursed through asset investors. In accordance with our return of capital framework, Core will return 75% of the adjusted free cash flow to shareholders.

Danny Brown: To that end, given our base dividend of $1.25 per share and our normal core share repurchases in the second quarter of $41 million, we declared a variable dividend of $1.27 per share. I would note that the timing of our share repurchases was somewhat impacted by the possession of material non-public information associated with the Interplus acquisition and various filings made during the course. Director. Additionally, last night, we issued third quarter and updated full-year guidance.

Speaker Change: Our derivative position as of August 6th can be found in our latest investor presentation. In closing, it's been an exciting time for Chord.

Speaker Change: I'd like to sincerely thank the entire team for their hard work and dedication to the company. Your efforts have put the company in a strong position to succeed going forward. With that, I'll hand the call back over to Matthew for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys.

Matthew: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.

Matthew: Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question.

Operator: One moment, please, for your first question. And your first question comes from Scott Hanold of RBC. Please go ahead. Your line is open. Hey, thanks.

Speaker Change: And your first question comes from Scott Hanold of RBC. Please go ahead, your line is open.

Danny Brown: As we discussed in May, the development program went faster than expected in the first half of the year due to strong performance and a fairly mild winner. This resulted in volumes in capital above our original expectations early in the year. And as I've mentioned before, Chord is focused on efficient and sustainable free cast generation, which results in us executing a maintenance plus program. We did not plan to increase capital this year, even as we raised our full-year oil guide by 500 barrels per day.

Scott Hanold: Hey, thanks all. I have a question about your three-mile EURs, you know, across your basin, with your latest update, and also the strategy of wider spacing seems like it's working out really nicely. Now, as you start to think about your 2025 development strategy, can you remind us how much of that is being contemplated on, you know, Chord Legacy Assets versus Interplus, and are you going to be able to quickly reorient the lateral length and the spacing on some of the ERF acreage so we'll, you know, see some of that hit the ground running as you get into 2025?

Scott Hanold: Hey, thanks all. I have a question. It seems like you remain pretty confident in your three-mile EURs, you know, across your base and with your latest update, and also...

Scott Hanold: The strategy of wider spacing seems like it's working out really nicely. Now, as you start to think about your 2025 development strategy, can you remind us...

Danny Brown: With that in mind, Chord slowed frack activity and is currently down to one frack crew versus three pro-former earlier in the year. This crew count will increase as we move into late summer and fall, and results in Chord being toward the lower end of its full-year, operated new, well-turn-in-line range. Concurrently, Chord is increasing non-opspending in the second half of the year as the team is investing in a number of attractive, non-operated opportunities that we acquired in our transaction with the XTO and our combination within a plus.

Speaker Change: You know how much of that is being contemplated on

Speaker Change: You know, say Chord Legacy Assets versus Interplus, and are you going to be able to quickly, you know, reorient the lateral length and the spacing on some of the ERF acreage, so we'll, you know, see some of that hit the ground running as you get into 2025?

Danny Brown: Thanks, Scott. This is Danny.

Speaker Change: Thanks, Scott. This is Danny. You know, as we know, as you know, we're putting together the 2025 full development plan currently, so I think we'll talk probably more about that at the end of the year. The intent would be, you know, as we've mentioned on a couple of previous occasions, we've seen tremendous benefit from having

Danny Brown: You know, as we know, as you know, we're currently putting together the full 2025 development plan currently. So I think we'll probably talk more about that at the end of the year. The intent would be, you know, as we've mentioned on a couple of previous occasions, we've seen tremendous benefit from having some diversity in the geographic location of our various development programs, rigs, and crews. And the reason is that if we concentrate in any one area too much, we end up overwhelming the system in that area.

Danny Brown: Net of these offsetting impacts full-year capital guidance is unchanged. I should note that when looking at capital, you'll likely notice that capital and Eloy guidance reflect some accounting changes as a result of the inter-plus combination that Richard will discuss in more detail. But in a nutshell, on an apples-to-apples basis, pro-former capital is unchanged versus our May outlook, while Eloy is running favorable versus our initial expectations. And as I mentioned a few moments ago, we will be increasing our expected full-year oil volumes by 500 barrels per day to account for the good performance we've seen to date.

Speaker Change: Some diversity in, let's call it the geographic location of our various development programs, rigs, and crews.

Speaker Change: And the reason is, if we concentrate in any one area too much, we end up overwhelming the system in that area. We overload our midstream providers, we overload, candidly, we overload sometimes the people that are in that spot. So there's just a bit of a portfolio effect that we benefit from if we spread the program out a little bit. We do recognize the core nature of the acquired Interplus acreage position.

Danny Brown: We overload our midstream providers. We overload, candidly, we sometimes overload the people that are in that spot. So there's just a bit of a portfolio effect that we benefit from if we spread the program out a little bit. We do recognize the core nature of the acquired Interplus acreage position.

Danny Brown: Turning to inter-plus, the combination closed as expected on May 31st. We remain extremely confident in the strategic and financial benefits of the transaction, and as we move through integration, our conviction level continues to grow. Inter-plus brings top-tier assets in the core of the basin, and we expect Chord can enhance returns on these assets by applying techniques. It has developed over the past several years, including longer laterals, optimized basings, and reducing downtime.

Danny Brown: And as we can look at it, particularly as we can look at maybe drilling those wells a little longer or spacing those wells a little wider than they were historically, we think we're going to see some really positive incremental benefit from well delivery in those areas. And so I think we'll look to drill those a little longer, a little wider. But you know, it is going to require some respacing on that program.

Speaker Change: and as we can look at it particularly as we can look at maybe drilling those wells a little longer are spacing those wills wells a little wider than they were historically we think we're going to seesome really positive incremental benefit

Speaker Change: from Well Delivery in those areas and so I think we'll look to we'll look to drill those a little longer a little wider you know it is going to require some some re-spacing on that on that program I suspect you'll see some benefit from that in 25 but how it works out for the full year program you know we're just putting that plan together now as we're looking at developing that a little bit differently than it has been has been done historically but the great news is we think we see a lot of opportunity there

Danny Brown: The combined asset-based supports efficient operations, strong returns, sustainable free cash flow, and a peer-leading return of capital program. Our integration efforts are going well, and by utilizing combined best practices and enhanced scale, we are very confident in achieving the greater than $200 million synergies target, which is up from our original estimate of $150 million. Slide 11 in our deck highlights some of our recent operational progress and opportunities to improve the combined company going forward.

Danny Brown: I suspect you'll see some benefit from that in 2025, but how it works out for the full year program, you know, we're just putting that plan together now as we're looking at developing that a little bit differently than it has been done historically. But the great news is we see a lot of opportunity there and feel really good about where we're at and how the asset's delivering.

Danny Brown: Okay, and do you still feel pretty good about your 1.4 to 1.5 kind of proforma and for 1.50 to 1.55 oil? Does that still make sense?

Speaker Change: and feel really good about that we're at how the assets delivering ok ay and you still pret you feel pretty good about your one four to one five kind of pro for on for one hundredand fifty one and fifty five oil is that' still maybe sen

Danny Brown: So, you know, we've talked for a long time about how we thought we were getting about a hundred and, you know, at least 140 percent of a two-mile well with a three-mile well, so 80 percent of that third-mile lateral, of the last lateral contributing. You know, we intend to come out with this.

Danny Brown: I want to let the organization know how grateful I am for their continued positive attitudes and dedication and driving and effective integration and pushing to realize incremental value from the transaction. And importantly, no one has taken their eye off the ball, and Chord is currently putting up great operating results.

Speaker Change: So, you know, we've talked for a long time about we thought we were getting about a hundred and, you know, at least 140 percent of a two-mile well with a three-mile well, so 80 percent of that third-mile lateral, of the last lateral contributing.

Danny Brown: We're still getting some final data in now. I think on our next call, you'll probably hear us talk a little bit more definitively about what we're seeing. What I'll say is that, you know, we're really pleased with that contribution of the third mile. We came in anticipating that we were being, you know, slightly conservative on the recovery we were getting in that third mile because we wanted to be, to ensure that we were underwriting the program appropriately.

Danny Brown: Also, in our updated presentation, you will see some new material focused on helping investors better understand how attracted the Williston Basin is, and I believe our technical, operational, and marketing teams have been instrumental in driving what we think is the resurgence of the basin. The Williston Basin continues to evolve, and the current state of play is worth revisiting. Number one, it has the highest oil cut if any major onto or lower 48 basin, which supports strong margins and impressive returns.

Speaker Change: we intend to come out with this we're stillgetting some final data and now i think in our next call you'll probably arus talk a little bit more deffinively whatwe're see ill say is that

Speaker Change: You know, we're really pleased on that contribution of the third mile. We went in anticipating that we were being, you know, slightly conservative on the recovery we were getting in that third mile because we wanted to ensure that we were underwriting the program appropriately.

Danny Brown: And, you know, as we've been able to observe now for, you know, in some cases, a couple of years' performance across those areas, we're feeling really good about what we're seeing. But we're going to talk more definitively about that on our next call.

Speaker Change: And, you know, as we've been able to observe now for, you know, in some cases, a couple of years' performance across those areas, we're feeling really good about what we're seeing. But we're going to talk more definitively about that on our next call.

Danny Brown: Second, with our footprint basically extending across the entirety of the play, our subsurface understanding is both differential and fulsome. With our learnings, we generally target only the bottom, which means parent-child interference can be more accurately modeled. This isn't well understood in my opinion, but it is an important competitive advantage. The upper right hand chart on slide 10 shows well productivity adjusted for volatility across basins, a bit of a pseudo sharp ratio if you will.

Danny Brown: Okay, and as my follow-up question, you know, obviously, you've had the Interplus asset for, you know, a month or so now, and I think you've already gone to some of those, you know, locations and drilled the pads. Can you talk about, like, what you're seeing in terms of improvement that you're able to so far see on the combined assets and, you know, both relative to the prior Interplus performance and also, you know, are there things, you know, what specific things have you adopted on the core assets? So far, at least what you're seeing could improve what you all are doing as well.

Speaker Change: Okay, and as my follow-up question, you know, obviously you've had the, you know, Interplus asset for...

Speaker Change: You know, a month or so now, and I think you've already gotten on some of those, you know, locations and drilled the pads.

Speaker Change: Can you talk about what you're seeing in terms of improvement that you're able to so far see on the combined assets?

Danny Brown: The bockin screens very well on a risk-adjusted basis as the wells are prolific with lower relative variance. Third, the land and regulatory environment, excellent, and as an added benefit, Chord has been the leader and longer lateral development compared to other lower 48 peers. Longer laterals are a more efficient way to develop the resource and support strong returns as well as Chord's low reinvestment ratio. Lastly, oil takeaway has really improved differentials over the past decade or so, and bockin crude has traded consistently close to WTI for many years running.

Speaker Change: you know both on the you know relative to the prior innerplus performance but also you know there's things you know what specific things of you adopted on the cortid asset so for at least what you're seeing that could improve what you all are doing as well

Danny Brown: Yeah, I'm going to ask Darrin to weigh in on that, but I'll just maybe team up and, hopefully, not steal a thunder by saying we have, you know, we really have gone into this with the approach of, "Let's ensure we're getting the full leverage out of this transaction, and so let's take the best practices that we're seeing regardless of the legacy organization." So we are seeing some Interplus practices move forward as well as a lot of good legacy core practices move forward, and we're already seeing some benefits of that on both the drilling and completion side. So I'll turn it over to Darrin. Thank you.

Speaker Change: Yeah, I'm going to ask Darrin to weigh in on that, but I'll just maybe team up and hopefully not steal the thunder by saying we have, you know, we really have gone into this with an approach of...

Darrin: Let's ensure we're getting the full leverage out of this transaction, and so let's take the best practice that we're seeing regardless of legacy organization. So we are seeing some interplus practices move forward as well as a lot of good legacy core practices move forward, and we're already seeing some benefits on that on both the drilling and completion side. So I'll turn it over to Darrin.

Danny Brown: To sum it up, the Williston is a phenomenal place to do business, and the core team is focused on making every aspect of the business better and continuing to improve our returns. And finally, we remain committed to delivering affordable and reliable energy in a sustainable and responsible manner. Chord's culture revolves around continuous improvement and is focused on driving performance across a number of key areas including emissions and safety. Chord expects to publish a sustainability report later this year on a legacy Chord's only basis and also provide a summary of key ESG and sustainability metrics for interplus. In 2025, we expect to publish a full sustainability report reflecting the combined company.

Darrin Henke: Yeah, Scott, if you look at slide 11, on the left-hand side, what we're showing here is we've seen a 16% improvement in cycle times on drilling since we closed the acquisition just a couple months ago on the Interplus assets. And so we picked up two rigs as part of the combination, and those rigs continue to drill on that legacy Interplus acreage. So just immediately overnight, we've been able to drive down those cycle times.

Darrin: yes gogot if you look at slide eleven

Speaker Change: left hand side

Darrin: What we're showing here is we've seen a 16%...

Darrin: improvement and cycle times on drilling since we've closed the acquisition.

Darrin: just a couple of months ago on the Interplus assets. And so we picked up two rigs as part of the combination, and those rigs continue to drill on that legacy Interplus acreage.

Speaker Change: So just immediately overnight we've been able to drive down those cycle times.

Darrin Henke: Then in the middle panel there, we're showing you how we're adopting Interplus' SimulFRAC innovation, the way they implement their FRAC program. We'll be going from our legacy zipper program to more of a SimulFRAC program, and we're expecting to be able to put 40% more barrels on the ground every day that our FRAC crews are pumping. So those are a couple items we're looking at Another one on the facility front. Chord uses a prefab design that we'll use across all of our acreage going forward, and there'll be significant cost savings there as well. So those are three items that come to mind immediately.

Danny Brown: So to summarize, Chord delivered a great start to the year, which essentially accelerated the production profile into the first half and should result in high free cash flow and shareholder returns in the second half of the year. We remain as excited as ever on the interplus transaction and look forward to executing in 2024 and beyond.

Speaker Change: Then in the middle panel there, we're showing you as we're adopting Interplus' SimulFrac

Speaker Change: Innovation, the way they implement their FRAC program.

Speaker Change: will be going from our legacy zipper program to more of a asssimment frac program and we're expecting to de to put forty percent more barrels on the ground every day that that our frat creuz or pumping so those are a couple of items we're looking at another one on on the facility front

Darren Henke: And with that, I'll turn it to Darren. Thanks, Danny. We had a solid quarter on the operations front as the team continues to execute with excellence. Our wage production benefited from robust well performance, while our base production benefited from lower levels of downtime.

Speaker Change: Chord uses a prefab design that we'll use across all of our acreage going forward, and there'll be significant cost savings there as well. So those are three items that come to mind immediately.

Darren Henke: I thought we'd spend a little time talking about Chord's asset base and the kind of things we're doing to make great assets even better. First, most of you know that Chord is a leader in three mile lateral development. Slide six on the bottom left shows Chord's longer lateral wells as a percent of the program last year. And as you can see, we're at the top of the peer group. The upper right chart shows Chord's longer lateral well productivity in the Wilson basin compared to peers.

Darrin Henke: Yeah, and just the relative improvement you're seeing there, is that what's contemplated in the $200 million in Synergies, or, you know, are some of those data points that you're showing us there, are those already incremental to the $200 million in Synergies?

Speaker Change: Yeah, and just the relative improvement you're seeing there, is that's what's contemplated in the $200 million of synergies or, you know, are you, do some of those data points that you're showing us there, are those already incremental to the $200 million in synergies?

Darrin Henke: They're all part of that 200 million basket. They're giving us confidence, so obviously, we'll be able to exceed that $200 million number.

Speaker Change: They're all part of that $200 million basket.

Darren Henke: Since the second half of last year, which is when we started to consistently reach total depth on post-sprat clean-outs. Again, Chord is at the top of the pack. It was early days that interplus reltip to three mile laterals, and we see an opportunity to high grade our new asset by applying Chord's technical expertise. ProFOMER, Chord's inventory consists of approximately 40% longer laterals, and we believe we can increase that percentage materially over the next few years.

Speaker Change: They're giving us confidence, so obviously we'll be able to exceed that $200 million number.

Speaker Change: Thank you.

Speaker Change: i feel

Operator: And your next question comes from Neal Dingmann. Please go ahead. Your line is open. Good morning, guys. Thanks for joining us.

Scott Hanold: Oh, thanks, Scott.

Scott Hanold: to

Neal Dingmann: And your next question comes from Neal Dingmann. Please go ahead. Your line is open.

Neal Dingmann: Morning guys, thanks for the time. Danny, Mike McCurdy, you were there, and the guys, some things you were just hitting on. I'm just wondering what type of changes, I guess, when it comes to the DNC, you definitely continue to see some really notable improvements. I'm just wondering, besides the extended laterals that you were just talking about, what other type of changes are resulting in these improvements? Is it just spacing, or maybe if you could all just highlight some of these, and what do you think the results could be, even for further return upsides?

Neal Dingmann: Morning guys, thanks for the time. Danny, my question for you or Darrin and the guys, something you were just hitting on, I'm just wondering on what type of changes, I guess when it comes to the DMC, you definitely continue to see some really notable improvements. I'm just wondering besides the extended laterals that you were just talking about,

Darren Henke: While some outperformance is already being captured in our PDP-based forecast, we currently model three mile wedge wells, delivering approximately 40% more EUR for 20 to 25% more capital. It's likely that we're getting more than the 40% uplift, especially since the team has improved the cold tubing clean-out process whereby Chord routinely reaches TD on most wells.

Neal Dingmann: what are the type of changes are resulting in these these improvements is it is a just facing in or maybe you can just highlight some of these and what do you think the results couldcan be even for further return upside

Darren Henke: We expect to formally update the market on our third mile productivity assumption in November as part of our third quarter result. Cross-Support Folio, we certainly like what we see relative to productivity, decline rates, and flowing pressures. Referring to Slide 7, the chart on the upper right shows Chord's average spacing across the basin is wider than other operators. This upspacing has helped keep declines, shallow, production, flat, and reinvestment rates low. As we integrate the interplus assets, we think an opportunity exists to optimize spacing and enhance the economic returns of the overall development program, wider spacing has been a key driver to improve Chord's capital efficiency in recent years.

Danny Brown: So, you know, I think that if we're talking about the things that are driving improvement here, the two biggest things that are driving the improvement we've seen relative to call it historical programs would be the wider spacing and the longer laterals. And we've got a lot of material on that.

Speaker Change: So, you know, I think that if we're talking about

Speaker Change: The things that are driving improvement here, I mean, the two biggest things that are driving the improvement we've seen relative to call it historical programs would be the wider spacing and the longer laterals, and we've got a lot of material in the deck about that. You know, I would say there's always going to be, in addition to that, continuous improvement just within your drilling and completions organization. We learned what completion practices work better, how we're able to better get all our profit down without...

Darren Henke: The lower half of the chart shows a case study from inverse which assesses Chord's widely spaced well performance versus those in the neighboring DSU with tighter spacing. The result is similar DSU recovery in aggregate with Chord deploying substantially less wells and capital. Continuing with well spacing, Slide 8 shows Chord's success with water spacing across the entire basin. Again, Chord is draining most, if not all, the DSU with fewer wells and materially less capital than our peers. Chord continues to evaluate opportunities to maximize capital efficiency and continually analyzes the merits of removing or adding wells across our position.

Danny Brown: You know, I would say there's always going to be, in addition to that continuous improvement, just within your drilling and completions organization. We learned what completion practices work better, how we're able to better get all our profit down without screening out, how we can better stay in formation from drilling, how we can improve cycle times. And so you've got this continuous improvement aspect that overlays all of that. But this move to wider spacing and longer laterals really is sort of, you know, we've used this phrase jumping S-curves before.

Neal Dingmann: You know, screening out how we can better stay in formation from drilling, how we can improve cycle times. And so you've got this continuous improvement aspect.

Neal Dingmann: that overlays all of that but this move to wider spacing and longer laterals really are sort of we've vieused this phrase jumping as curs before as a really the two big jump the s curve sorts sort of opportunities for us

Danny Brown: Those are really the two big jumps, the S-curves sort of opportunities for us. As we look forward, I think folks are aware that we're planning to spud some four-mile laterals as well as we get toward the latter part of this year and into next year. And so that's really a great opportunity for us to continue to advance our practice of drilling longer laterals, which we just think is a far more efficient way to drain the resource.

Neal Dingmann: As we look forward, I think folks are aware that we're planning to spud some four-mile laterals as well as we get toward the latter part of this year and into next year. And so that's really a great opportunity for us to continue to advance our practice of drilling longer laterals, which we just think is great.

Danny Brown: If you think about it, that incremental foot that you drill theoretically is the most efficient foot you drill because you're able to leverage all of the fixed costs of the vertical portion of the weld, all of the roads, all of the facility infrastructure, all of your midstream connections. And so it's just a great way to improve the capital efficiency of the program. So I think that's the next biggest sort of big thing for us to come. But maybe I'll ask Darren to opine a little as well. Thank you.

Neal Dingmann: far more efficient way to drain the resource if you think about it that incremental foot that you drill theoretically is the most efficient foot you drill because you're able to leverage

Darrin: All of the fixed costs of the vertical portion of the well, all of the roads, all of the facility infrastructure, all of your midstream connections. And so it's just a great way to improve capital efficiency of the program. So I think that's the next biggest sort of big thing for us to come. But maybe I'll ask Darrin to opine a little as well.

Darren Henke: Just a couple quick thoughts on synergies before passing it to Richard. Like Danny mentioned, as the teams get deeper into the integration, we continue to like what we see. On Slide 11, we highlighted some key items where we see considerable opportunity. Chord is the leader in drilling times in the Wilson Basin and by applying Chord's drilling techniques, we've already seen improvements in drilling performance on the interplus asset since closing just a couple months ago.

Darrin Henke: Yeah, I think the way we think about the four-mile laterals, Neal, you know, we're not really thinking today that we'll convert all of our three-mile DSUs to four-mile DSUs. We're more thinking about those two-mile DSUs that have higher supply costs. How can we convert two two-mile DSUs into a four-mile DSU and really drive down the supply costs and then hopefully see comparable economics to the three-mile weld? And over time, as we get efficient at that, you know our team's going to get really good at drilling and executing four-mile welds at some point in the future. It may make sense if their economics are better than three-mile welds, then we'll really go back to the portfolio and inventory and see how we can really expand four-mile laterals across the entire portfolio.

Darrin: Yeah, I think the way we think about the four-mile laterals, Neal, you know, we're...

Darrin: We're not really thinking today that we'll convert all of our three-mile DSUs to four-mile DSUs. We're more thinking about those two-mile DSUs.

Darren Henke: Additionally, Chord has increased completion efficiencies over the past year with its legacy zipper fracks. We expect to achieve further efficiency improvements with the cymo frack completions that interplus use extensively. Finally, I wanted to highlight our progress in reducing downtime over the past 12 to 18 months. As you can see on the right hand side of the slide, the Chord team has made significant improvements on this front, and we see a meaningful opportunity at lower downtime on the new areas of our expanded portfolio.

Darrin: that have higher supply costs.

Darrin: how can we convert two-mile DSUs into a four-mile DSU and really drive down the supply costs and then hopefully see comparable economics to the three-mile wells. And over time, as we get efficient at that, you know our team is going to get really good at drilling and executing four-mile wells at some point in the future. It may make sense if their economics are better than three-mile wells, then we'll really go back to the portfolio and inventory and see how do we really expand four-mile laterals across the entire...

Darren Henke: To sum it up, Chord continues to execute quite proficiently, and I want to give credit to a team that pushes innovation and relentlessly strives for continuous improvement. It's a really exciting time for the company, and Chord will further advance these top-notch assets, jumping the S-curve by applying a technical and operational expertise.

Danny Brown: Great, great details guys. And then just a second question on maintenance capital. No question, you all continue to do a great job of doing more with less, and I'm just wondering if you mentioned dropping damage to the one spread. Is that, is that going to go forward, or I guess, you know, maybe ask another way that, you know, how do you think about the maintenance plan going forward on a DNC because you guys have really taken some nice efficiencies there? I think if you look at the sort of pro forma early in the process

Neal Dingmann: Portfolio.

Neal Dingmann: Great details guys and then just a

Speaker Change: second question on maintenance capital that no question you'll conced greatate job

Speaker Change: I'm doing more with less, and I'm just wondering, you mentioned dropping damage to the one spread. Is that going to go forward, or I guess, you know, maybe ask another way, you know, how do you think about the maintenance plan going forward on a DNC? Because you guys have really taken some nice efficiencies there.

Richard Robuck: I'll now turn it over to Richard. Thanks, Darum. I'll walk you through the second quarter results, which include contributions from Interplus after the combination closed on May 31st. Guidance for the remainder of the year reflects a contribution from both companies. You'll notice a handful of key guidance items look different than what you might have expected by looking at Chord and Interplus stand-alone financials. Certain reclassifications have been made in historical presentation of Interplus's financial statements to conform to Chord's accounting policies and presentations.

Danny Brown: I think if you look at the sort of pro forma early in the year, the combined rig count was around six, and the combined crew count was around three. What we saw is that at the beginning of the year, we had some really good performance, really at both legacy organizations, and we had a fairly mild winner, and we got a lot more done early in the year than we had originally modeled. And so, you know, we've said many times that we're about generating strong and sustainable free cash flow. We're not about chasing production growth.

Speaker Change: i think if you look at the sort of pro forer early in the year the combined rig count was around six in the combined crew count was around three

Danny Brown: And so had we stayed at the sort of three crew count, we would have driven some production growth through the system but also overspent our capital, and that's not the type of plan that we're trying to execute here. So we dialed the program back. We brought it down to one crew to really pull back on some of those capital expenditures. Obviously, that has sort of a near-term and a longer-term impact on production, but we still feel very good about our volumes, obviously, with increasing our oil volumes and our total volumes for the year. So we thought we were in a good spot. We pulled back on capital by dropping that crew.

Speaker Change: what we saw in the beginning of the year we had some really good performance really both legacy organizations and we had a fairly mild wininter and we got a lot more done earliin the year then butwhat we had what we had originally modeled and so and you know we've said many times we're aboutwe're about generating strong and sustainable free cashflow we're not about chasing production growth

Richard Robuck: Interplus expense certain items through LOE that Chord will deduct through gas and NGL revenue, or charge through capital. Additionally, Interplus capitalized certain G&A charges that Chord will expense. The net impact of these changes relative to Interplus's standalone reporting is lower LOE, lower gas and NGL revenues, and slightly higher capital in G&A expense. The impact of the accounting changes is neutral to adjust the pre-cash flow.

Speaker Change: and so we stateay at sort three we regoing to going to dve some production growth through the system but also sp our capital andthats notwhat that's not the typeofplanthat we'retrying to execute here sowe dial the program backwe brought it down to one crew to really pull back on some of those capital expenditures obviously that has has sort of a near term and long term impact on production but we feel very good about our volesobviously with raisingour oil vol and our total for the year so we thought we a good spot we pulled back on capital by drop in that crew will pick a crew up as we get you know go march that back upas we move forward so you'll see that crew count increase

Richard Robuck: Slide 18 and the investor presentation bridges the impact between the accounting and policy alignment differences. In the second quarter, the quarter generated adjusted free cash flow of $263 million on a pro form of basis, strong volumes as well as lower operating cost, and lower capital, offset weaker than expected pricing, especially for natural gas and NGLs. 12 volumes were strong in the second quarter, about 1% over midpoint guidance, and total volumes were about 2% above.

Danny Brown: We'll pick up a crew as we get, you know, we'll go, we'll march that back up as we move forward. So you'll see that crew count increase and re-increase as we get back toward the end of the year. And as I mentioned in my prepared remarks, you know, sort of late summer, late fall, we'll pick that back up. On an ongoing basis, I would say that six and three is probably a good base level to have.

Speaker Change: re-increase as we as we get back toward the end of the year. And as I mentioned in my in my prepared remarks, you know, sort of late summer, late fall, we'll we'll pick that back up.

Speaker Change: on an ongoing basis.

Speaker Change: i would say that that six and three is probably a good base level to to have you know it's going to be our intent to try and drive below those numbers to get to call it five with two crews and a swing crew at any one given point in time you may see that fluctuateight a little bit just given the

Danny Brown: You know, it's going to be our intent to try and drive below those numbers to get to, call it, five with two crews and a swing crew at any one given point in time. You may see that fluctuate a little bit just given the sort of vagaries of the program as winter weather goes on. Do we have a good sort of, you know, good weather opportunities where we can make good production?

Speaker Change: sort of vagaries of the program. Is winter weather going on? Do we have good sort of, you know, good weather opportunities where we can make, we can make good production? But, you know, six and three would have been the pro forma. We're going to try to, with synergies and with efficiency gains, we, you know, it's going to be our goal to push it lower than that amount on a sort of, call it an average basis.

Danny Brown: But, you know, six and three would have been the pro forma. We're going to try to, with synergies and with efficiency gains, we, you know, it's going to be our goal to push it lower than that amount on a sort of, call it an average basis as we move forward.

Speaker Change: as we move forward

Operator: And your next question comes from David Deckelbaum of TD Cullen. Please go ahead. Your line is open.

Speaker Change: Thank you.

Speaker Change: And your next question comes from David Deckelbaum of TD Cullen. Please go ahead, your line is open.

David Deckelbaum: Hey, Danny, Michael, and Richard, thanks for taking my questions today. I was curious, just again, going back to the Synergy slide, particularly around downtime. If that's something, obviously, you've already seen a huge progression with Chord's legacy operations, as you use some of your own practices on the Enerplus production or assets. Is that something that's already baked into the synergies in terms of capital costs? Or could that be something that's a tailwind for some sort of base decline moderation?

David Deckelbaum: Hey, Danny, Michael, Richard, thanks for taking my questions today.

David Deckelbaum: I was curious, just again going back to the Synergy slide, particularly around downtime. If that's something, obviously you've already seen a huge progression with Chord legacy operations.

Speaker Change: As you use some of your own practices on the Enerplus production or assets, is that something that's already baked into the synergies in terms of capital costs or could that be something that's a tailwind for sort of base decline moderation?

Danny Brown: Yeah, we've baked it into our general expectations for synergy going forward. We like what we see, and again, giving us confidence that we say 200 plus for a reason. Every day we dig into it with the new teams, we're excited about what we see and the opportunities ahead of us.

Richard Robuck: Ladies and gentlemen, please stand by. We are experiencing technical difficulty and the presentation will resume shortly. Thank you. You You[inaudible] You This drives higher operating leverage which hurts realizations for both NGLs and gas in the times of weaker prices. With gas prices trading at low levels, the fees deducted from our price results in lower realizations as a percent of the benchmark price. However, realizations should also improve quickly in environments where gas prices rise.

Speaker Change: Yeah, we've baked it into our, generally we've baked it into our Synergy expectations going forward.

Speaker Change: We like what we see, and again, giving us confidence that we say 200 plus for a reason. Every day we dig into it with the new teams, we're excited with what we see and the opportunities ahead of us.

Richard Robuck: I think you heard us, David, on the OASIS winding combination talk a lot about tailing in with resin-coated sand. That's just something that's super helpful for helping the ESP run time go longer.

Speaker Change: I think you heard us.

David Deckelbaum: David, on the Oasis winding combination, you talk a lot about tailing in with resin-coated sand. That's just something that's super helpful for helping the ESP run time go longer, and that's been something that you saw play out in the performance.

Richard Robuck: And that's something that you saw play out in the performance over the past couple of years before this new transaction. So we think that same playbook is applicable to this, and we'll see that flow through once we start getting the completions done on those wells, which will flow through to run time and LOE and management on that front. So it's that type of thing that's going to be part and parcel with the work that we're going to do to drive better performance during downtime.

David Deckelbaum: Over the past couple of years, before this new transaction, so we think that same playbook is applicable to this and we'll see that we'll see that flow through once we start, you know, getting the completions done on those, those wells that will flow through to run time.

Speaker Change: loe the management on that front so it's that type of thing that's going to going to be part and parcel with the the work we're going to do to drive better performance on downtime

Danny Brown: Thanks, Richard. My follow-up really is just on the extended laterals. I think, you know, you all highlighted now that that pro forma, like 40% of the acreage is amenable to extended laterals. I know Enerplus came in with about 10% extended laterals in the inventory. As you think about extending laterals on Enterplus' acreage, should we think of it as next year, do you foresee incremental land spend, or should this just all be with repermitting and sort of redesigning how you're treating the leases and development?

Richard: Thanks, Richard.

Speaker Change: My follow-up really is just on the extended laterals. I think, you know, you all highlighted now that Proforma, like 40% of the acreage is amenable to extended laterals. I know EnerPlus came in with about 10% extended laterals in the inventory.

Speaker Change: As you think about extending laterals on Enterplus' acreage, should we think of it as next year do you foresee incremental land spend or should this just all be with repermitting and sort of redesigning how you're treating the leases and development?

Danny Brown: Yeah, I think, generally speaking, it's going to be more the latter than the former. There's always a blocking and tackling program that's out in front of the rigs looking for us to pick up incremental acreage in front of the bid if we can extend longer laterals. We like to do that. You know, trades are a big thing that we do as well, and so we look to trade acreage and let offset operators core their acreage up and provide for longer laterals for their opportunities as we do the same for ours.

Speaker Change: Yeah, I think, generally speaking, it's going to be more the latter than the former. There's always a blocking and tackling program that's out in front of the rigs looking for us to...

Speaker Change: Pick up incremental acreage in front of the bid if we can extend longer laterals. We like to do that. You know, trades are a big thing that we do as well, and so we look to trade acreage and let offset operators core their acreage up and provide for longer laterals for their opportunities as we do the same for ours. And so, you know, there's always some level of land spending out in front of your rig programs. I think we don't see that really changing appreciably associated with this. It's going to be more sort of that normal course spend that we would have anticipated and modeled, as well as the just, you know, working through the geometry with the existing units that we've got and replatting that differently and developing differently than would have

Danny Brown: So, you know, there's always some level of land spending out in front of your rig programs. I think we don't see that really changing appreciably associated with this. It's going to be more sort of that normal course spend that we would have anticipated and modeled as well as just, you know, working through the geometry with the existing units that we've got and replatting that differently and developing differently than would have been done otherwise.

Danny Brown: If I could just follow on to that, would that imply just given the focus on efficiencies and extended laterals that at least the 25 program would be more heavily weighted to the chord acreage, all else equal as you sort of move forward relative to 26, 27, and beyond? I think it's really an issue around timing, and so as we

Speaker Change: otherwise.

Speaker Change: If I could just follow on to that, would that imply just given the focus on efficiencies and extended laterals that at least a 25 program would be more heavily weighted to the chord acreage all else equal as you as you sort of move forward relative to 26, 27 and beyond?

Danny Brown: I think it's an issue of really an issue around timing and so as we look at the opportunity within the Interplus assets to really change the development program it takes some amount of time to replat all that get get that re-permitted you need those out in front of your rigs you know by some period of time and so we recognize you know where we we do like to maximize NPV and and and get into the best areas first we recognize that's a great area we want to get in there as quickly as possible what we want to make sure that we develop it in the right manner as possible to to make sure that we do that as capital efficient as possible and so it will take us some time to get that to get that replatted we're working towards that is you know as quick as we can and again we're going to put we'll put more development more information out about our specific development plans for 2025 as we get later into the year thank you

Speaker Change: I think it's an issue of really an issue around timing and so as we look at the opportunity within the Interplus assets

Speaker Change: to really change the development program. It takes some amount of time to replat all that and get that re-permitted. You need those out in front of your rigs by some period of time.

Speaker Change: we recognize you know where we do like to maximize tv and get into the best areas first werecognizethats a great area we want to get in there as quicklyas possible but we want to make sure that we develop it and the right manner as possible to to make sure that we do that as capital efficient as possible and so it will take us some time to get that

Speaker Change: to get that replatted. We're working towards that as quick as we can. And again, we're going to put more development, more information out about our specific development plans for 2025 as we get later into the year.

Speaker Change: Thanks for the color, guys.

David Deckelbaum: nextdode

Operator: And your next question comes from Dan Abbott of Wolf Research. Please go ahead. Your line is open.

David Deckelbaum: And your next question comes from Dan Abbott of Wolf Research. Please go ahead, your line is open.

Richard Robuck: Turning to cost, LOE was $9.37 per BOE in the second quarter, which on a comparable basis was a below our expectations, reflecting better downtime and lower maintenance costs. Looking forward, we expect this to increase some in the back half of the year, which modestly reflects work over timing. Cash GPT was $3.18 per BOE in the second quarter, which we expect to come down a bit in the second half of the year.

Operator: I'm sorry. Did they say John Abbott?

Operator: Yes, John.

Speaker Change: I'm sorry, did they say John Abbott?

John Abbott: All right, I appreciate it. Yeah, one quick question. A couple of quick questions here.

Dan Abbott: A couple of quick questions here, so Danny, there's been a lot of discussion about where you could see the synergies possibly improve.

Danny Brown: So Danny, there's been a lot of discussion about, you know, where you could see the synergies possibly improve. I guess when you look at the assets, the Enterplus assets that you now have in-house... When you are contemplating the deal, what has been the biggest surprise and what did you not expect? Consider once you've had the assets in-house now, what has been the biggest surprise.

Dan Abbott: I guess when you look at the assets, the Enterplus assets that you now have in-house...

Richard Robuck: Cash GNA, excluding merger-related costs, was $21.8 million in the second quarter. Merger costs were $54.7 million during the second quarter. We expect this to step down materially in the back half of the year. Our cash GNA guidance excludes the impact of merger-related items. Production tax is averaged 8.8% of commodity sales in the second quarter. We expect this to come down in the second half. North Dakota recently lowered the production tax on natural gas to approximately $0.6.5 per MCF from $14.23 previously, which is related to trailing gas prices.

Speaker Change: When you were contemplating the deal, what has been the biggest surprise and what did you not?

Speaker Change: Contemplate, once you've had the assets in-house now, what has been the biggest surprise?

Danny Brown: You know, I would say, John, because we know the Basin so well, I don't think there's been... The great thing is, we've got offsetting acreage across the entire Basin. We know the subsurface. We knew this asset would be a great asset. From an asset-level perspective, I don't think we've seen anything from a subsurface perspective that is markedly surprising to us. I have been thrilled with how the teams have been working together to work through integration to make sure that this is... You know, we're able to fully recognize the full value of this transaction as we move forward.

Danny Brown: You know, I would say, John, because we know the Basin so well, I don't think there's been... The great thing is we've got offsetting acreage across the entire Basin. We know the subsurface. We knew this asset was a great asset.

David Deckelbaum: The, you know, from an asset level perspective, I don't think we've seen anything from a subsurface perspective that is markedly surprising to us.

Richard Robuck: Second half, cash taxes are expected to be 6% to 12% of adjusted evital, which is down from our original expectations for the second half, cash taxes of 8% to 14% that we discussed in May. Court's full-year cash tax expectations are slightly lower than our original guidance as well. As of June 30th, Court had $575 million drawn on its $1.5 billion credit facility. Equity as of June 30th was about $1.1 billion, including $197 million of cash and $895 million available on the credit facility net of letters of credit.

Speaker Change: I have been thrilled with how the teams have been working together to work through integration to make sure that this is, you know, we're able to fully recognize the full value of this transaction as we move forward. And so I don't know that there's been a big surprise to us. We knew this was great acreage. We understood, you know, we understood that just because of our legacy position within the basin. And it's, the great thing is, is, you know, I think we've seen modest upside in almost everything we've looked at, whether that be from a synergies perspective or how we think about the subsurface, what we think the wells are going to do. And so it's just been a, you know, we're really pleased with what we've seen.

Danny Brown: And so I don't know that there was a big surprise to us. We knew this was great acreage. We understood that just because of our legacy position within the Basin. And it's... The great thing is, you know, I think we've seen modest upside in almost everything we've looked at, whether that be from a synergies perspective or how we think about the subsurface, what we think the wells are going to do. And so it's just been a... We're really pleased with what we've seen.

Richard Robuck: Net leverage was 0.3 times at June 30th consistent with expectations that we set out in May when we announced the transaction closing. Subsequent to the quarter, Court repaid approximately $63 million of interplus senior notes. Additionally, Court put on some hedges since our last update. Our derivative position as of August 6th can be found in our latest investor presentation.

Danny Brown: And then with respect to the synergies, the $700 million of synergies that you're contemplating starting at the end of 2025, what is your thoughts about the risk of that potentially moving forward? Could you walk us through that?

Speaker Change: Appreciate it. And then with respect to the Synergies, the 700 million dollars of Synergies that you're contemplating starting at the end of 2025.

Speaker Change: What is, how do you think about the risk of that potentially moving forward? Could you walk us through that?

Danny Brown: Well, I think we've got to, you know, we've really looked at synergies in three different categories, and we've talked about that a bit. One is just sort of the more administrative and G&A synergies, and I think that's sort of understandable and well understood. The capital synergies, really, we've looked at starting to capture those in 2025. But the reality is we're probably getting some of those toward the latter part of this year.

David Deckelbaum: Well, I think we've got, you know, we've really looked at synergies in three different categories and we've talked about that a bit. One is just sort of the more administrative and G&A synergies and I think that's sort of understandable and well understood. The capital synergies, really we've looked at starting to capture those in 2025. The reality is we're probably getting some of those toward the latter part of this year, but in 2025 we think we'll get those in bulk because we'll be running a full combined program instead of really the two legacy programs.

Richard Robuck: In closing, it's been an exciting time for Court. I'd like to sincerely thank the entire team for their hard work and dedication to the company. Your efforts have put the company in a strong position to succeed going forward.

Unknown Executive: With that, I'll turn hand the call back over to Matthew for questions. Thank you.

Danny Brown: But in 2025, we think we'll get those in bulk because we'll be running a full combined program instead of just the two legacy programs, just as a result of having historic contracts in place and historic permits in place, et cetera. And so in 2025, we'll start seeing those capital synergies pull through. From an operating expense standpoint, we have some of that that we capture pretty early, but a lot of that we capture somewhat later.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.

David Deckelbaum: as a result of having historic contracts in place and historic permits in place, etc. And so in 2025, we'll start seeing really those capital synergies pull through. We have...

Unknown Executive: Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speaker phone, please leave the hands up before pressing any keys.

David Deckelbaum: from an operating expense.

Unknown Executive: One moment, please for your first question.

David Deckelbaum: standpoint, you know, we have some of that that, some of that that we capture pretty early.

Danny Brown: And that's why, as we've talked about this, the operating synergies are the ones that show up last. It's not because we're not interested in getting to those and we're not working on them first. But Richard gave a great example, and I'll give an additional one on top of that.

David Deckelbaum: But a lot of that we capture somewhat later and that's why, as we've talked about this, the operating synergies are the ones that show up last. It's not because we're not interested in getting to those and we're not working on them first, but

Scott Hanold: And your first question comes from Stutthoud of RBC. Please go ahead. Your line is open. Hey, thanks all. I have a question on. It seems like you remain pretty confident in your three mile URs, you know, with your across your basin with your latest update and also the strategy of wider spacing seems like it's working out really nicely now. As you start to think about your 2025 development strategy, can you remind us, you know, how much of that is being contemplated on.

Danny Brown: So we typically tail in with our wells with resin-coated sand in the completions. This is a capital disk synergy that's been modeled. And so all the capital synergies you see actually include this disk synergy associated with tailing in with resin coat because it's a little more expensive. But what we found over time is having that resin coat in the well prevents a significant amount of sand flow back into your well bore, up into your facilities, and importantly, into your ESPs.

David Deckelbaum: Richard gave a great example. I'll give an additional one on top of that. We typically tail end with our wells with resin coated sand in the completions.

Richard: This is a capital disk synergy that's been modeled, and so all the capital synergies you see actually include this disk synergy associated with tailing them with resin coat because it's a little more expensive. What we found over time is having that resin coat in the well prevents

Scott Hanold: You know, say cord legacy assets versus inner plus and are you going to be able to quickly reoriented the lateral length and the spacing on some of the ERF acreage. So we'll, you know, see some of that hit the ground running as you get into 2025. Thanks, Scott. This is Danny. As we know, as you know, we're putting together the 2025 full development plan currently.

David Deckelbaum: significant amount of sand flow back into your wellbore, up into your facilities, and importantly into your ESPs.

Danny Brown: So tailing in ESP and fixing it down ESP is tremendously expensive and tremendously disruptive to your operation. And so if you can prevent doing that, it's great, and it results in real operating synergies. And so we've taken a capital disk synergy that yields operating synergies, and we've seen this happen within the legacy OASIS program. We saw this happen when the OASIS whiting combination occurred, and we fully expect to see this again because we've proven it on multiple different occasions.

David Deckelbaum: Replacing an ESP and fixing a downed ESP is tremendously expensive and tremendously disruptive to your operation. And so if you can prevent doing that, it's great, and it results in real operating synergies. And so we've taken a capital dissynergy that yields operating synergies, and we've seen this happen within the legacy OASIS program. We saw this happen when the OASIS lighting combination occurred. We saw this happen, and we fully expect to see this again because we've proven it on multiple different occasions. Thank you.

Danny Brown: So I think we'll talk probably more about that at the end of the year. The intent would be, as we've mentioned on a couple of previous occasions, we've seen tremendous benefit from having some diversity in, let's call it the geographic location of various development programs, rigs and crews. And the reason is if we concentrate in any one area too much, we end up over overwhelming the system in that area, we overload our midstream providers, we overload, I can't really overload sometimes the people that are in that spot.

Danny Brown: But it takes a while for that ESP not to fail, so first you've got to tail in with the resin, and then the ESP doesn't fail, and then you don't have to do that work again. And so that's one example. Another example is the strings we put in for our work over operations. There's a different metallurgy that's been used historically that really results in a different installation practice and operating practice that results in a lower failure rate moving forward.

Speaker Change: that operate but it takesa while for that pnot failso 'vegot atailing with res and the doesn't il and ' to do that over

Speaker Change: You know, that's one example. Another example is the strings we put in for our work over operations. You know, there's a different metallurgy that's been used historically that really results in lower, in a different installation practice and operating practice, that results in lower failure rate moving forward. And again, this is something we've proven out through the Oasis widening transaction. We're going to be implementing that on the Interplus. But that takes...

Danny Brown: So there's just a bit of a portfolio effect that we benefit from if we spread the program out a little bit. We do recognize the core nature of the, of the inner plus, the acquired inner plus acreage position. And as we can look at it, particularly as we can look at maybe drilling those wells a little longer or spacing those wells a little wider than they were historically. We think we're going to see some really positive incremental benefit from well delivery in those areas.

Danny Brown: And again, this is something we've proven through the OASIS whiting transaction. We're going to be implementing it on the Interplus. But that takes time to take effect. And so we'll have the obvious operating synergies, consolidating some routes, running some more efficiently, that'll yield some operating benefits to us. But a lot of it comes from new practices, and then those new practices have to take hold and yield benefits. And so that's why we don't model this really until the end of 25 and then into 26.

Danny Brown: And so I think we'll look to drill those a little longer, a little wider. You know, it is going to require some some re spacing on that on that program. I suspect you'll see some benefit from that in 25, but how it works out for the full year program. You know, we're just putting that plan together now as we're looking at developing that a little bit differently than it has been has been done historically.

Speaker Change: time to take effect and so

Speaker Change: You know, we'll have the obvious operating synergies, consolidating some routes, running some more efficiently. That'll yield some operating benefits to us, but a lot of it comes.

Speaker Change: from new practices, and then those new practices have to take hold and yield the benefit. And so that's why we don't model this really until the end of 25 and then to 26. Hopefully that color's helpful.

Danny Brown: Hopefully, that color's helpful. That is very helpful, Denny. Thank you.

Danny Brown: That is very helpful, Danny. Thank you very much.

dnic: that is very helpful dnic thank you very much

Operator: Your next question comes from Phillips Johnston of Capital One. Please go ahead; your line is open.

John: thanks john

Danny Brown: But the great news is we think we see a lot of opportunity there and feel really good about where we're at and how the assets deliver. Okay, and you still feel pretty good about your one four to one five kind of pro forma and for one fifty to one fifty five oil. Is that still make sense? So, you know, we've talked for a long time about we thought we were getting about a hundred and you know, at least a hundred and forty percent of a two mile well with a three mile well.

John: Your next question comes from Phillips Johnston of Capital One. Please go ahead, your line is open.

Phillips Johnston: Hey, thanks for the time. You've highlighted what a maintenance program looks like in terms of the six rigs and three crews, but can you give us a rough sense of what your annual maintenance capital is these days at sort of the current low cost?

Phillips Johnston: Hey, thanks for the time. You've highlighted what a maintenance program looks like in terms of the, you know, six rigs and three crews, but can you give us a rough sense of what your annual maintenance capital is these days at sort of current low cost?

Danny Brown: Yeah, I'd say, you know, if we look at it from a pro forma standpoint, the pro forma is probably around 1.5 billion for sort of the delivery that you know, call it 150, 152, 153,000 barrels of oil equivalent per day. And so that's, that's kind of where we're at currently.

Speaker Change: Yeah, I'd say, you know, if we look at from a pro-forma standpoint, the pro-forma is probably around 1.5 billion for sort of the delivery that, you know, call it 150, 152, 153 thousand barrels of oil equivalent per day, and so that's that's kind of where we're at currently.

Danny Brown: So 80% 80% of that third mile lateral of the last lateral contributing. You know, we intend to come out with this. We're still getting some final data. And now I think in our next call, you'll probably hear us talk a little bit more definitively about what we're seeing. What I'll say is that, you know, we're really pleased on that contribution of the third mile. We went in anticipating that we were being, you know, slightly conservative on the recovery.

Danny Brown: Okay, thanks for that. And then you talked about the longer laterals supporting shallower declines. Can you give us an update on what your corporate next 12-month PDP decline rate is just on the pro forma asset base? I think I have in my notes, you know, kind of a low to mid 30% range, if I'm not mistaken. And then, I guess just as a follow-up, as the mix of longer laterals kind of increases over time, what kind of impact on the rate could we see? I mean, are we talking just a few hundred basis points or what sort of magnitude?

Phillips Johnston: Okay, thanks for that. And then Hugh.

Hugh: Talked about the longer lateral supporting shallower declines. Can you give us an update on what your corporate next 12-month PDP decline rate is, just on the pro forma asset base? I think...

Danny Brown: We were getting in that third mile because we wanted to be to ensure that we were underwriting the program appropriately. And, you know, as we've, as we've been able to observe now for, you know, in some cases a couple of years performance across those areas. We're, we're feeling really good about what we're seeing. But we're going to talk more definitively open. About that on our next call.

Speaker Change: I think I have in my notes, you know, kind of low to mid 30% range, if I'm not mistaken.

Speaker Change: and then i guess just as a follow up as the mix of wlongber laterals kind of increases over time

Danny Brown: Okay. And my follow up question, you know, obviously you've had the, you know, interplus asset for, you know, month or so now. And I think you've already gotten on some of those, you know, locations and drilled the paths. Can you, can you talk about like what you're seeing in terms of improvement that you're going, you're able to so far see on the combined assets. And, you know, both on the, you know, relative to the prior interplus performance.

Speaker Change: What kind of impact to the rate could we see? I mean, are we talking just a Are we talking a few hundred a few hundred basis points or what what what sort of magnitude?

Danny Brown: So from an overall corporate decline standpoint, I'd say we're in the very low 30s if you're looking at total BOE, maybe slightly higher than that historically from an oil perspective, but still in the low 30s there. The longer laterals, the neat thing about them is they come online about the same, well, not exactly the same; they come on slightly higher, not 50% higher, but they come on slightly higher than what a two-mile well comes on.

Speaker Change: Yeah, so from an overall corporate decline standpoint, I'd say we're in the very low 30s if you're looking at total BOE, maybe slightly higher than that historically from an oil perspective, but still in the low 30s there.

Danny Brown: But also, you know, are there things, you know, what specific things have you adopted? And the quarter assets. So far, at least what you're seeing that could improve what you all are doing as well. Yeah, I'm going to ask Darren to weigh in on that. But I'll just maybe team up and hopefully not steal a stunder by saying we have, you know, we really have gone into this with an, with an approach of, let's, let's ensure we're getting the full leverage out of this transaction.

Speaker Change: The longer laterals, the neat thing about them is, you know, they come online about the same, well not the same, they come on slightly higher, not 50%, not 50% higher, but they come on slightly higher than

Danny Brown: They stay flat for longer, and so from that just decline perspective, that's obviously beneficial. And then they do decline more shallowly than a two-mile well does, and so as we get a bigger and bigger critical mass of those three-mile wells, we should see some moderation in our overall corporate decline rate, but I would expect that to be, call it, small single-digit percentages in decline or restoration.

Speaker Change: what a two-mile well comes on. They stay flat for longer. And so from that just decline perspective, that's obviously beneficial. And then they do decline more shallowly.

Danny Brown: And so let's take the best practice we're seeing regardless of legacy organizations. So we are seeing some, some interplus practices move forward, as well as a lot of good quarters. We're, you know, legacy court practices move forward. And we're already seeing some benefits on that on both the drilling and completion sites. I'll turn it over Darren. Yeah, Scott, if you look at slide 11 left hand side, what we're showing here is we've seen a 16% improvement in cycle times on drilling.

John H.: and John H. I'm going to go over a couple of things. One is that there is a lot of potential for a two-mile well to be able to hold a lot more than a two-mile well does. As we get a bigger and bigger critical mass of those three-mile wells, we should see some moderation in our overall corporate decline rate. I would expect that to be small single-digit percentages in decline or restment.

Danny Brown: Yeah, okay. Thanks very much, Danny.

Danny Brown: Yeah, okay. Thanks very much.

John H.: Yeah, okay. Thanks very much, Danny.

Speaker Change: Thanks, folks.

Operator: Your next question comes from Paul Diamond of Citi. Please go ahead; your line is open.

Danny Brown: Since we've closed the acquisition just a couple of months ago on the interplus assets. And so we picked up two rigs as part of the combination. And those rigs continued to drill on that. That legacy interplus acreage. So just immediately overnight, we've been able to drive down, drive down those cycle times. Then, then in the middle panel there, we're showing you as we're adopting interplus assignment, frag, innovation, the way they, the way they implement their, frag program will be going from our legacy zipper program to more of a silent frag program.

Paul Diamond: Thank you all and good morning. Thanks for taking the call.

Speaker Change: Your next question comes from Paul Diamond of Citi. Please go ahead, your line is open.

Danny Brown: I just want to touch on slides 7 and 8 a little bit. You guys talked about the kind of cumulative output you've seen from your spacing on the existing DSUs. I just want to talk about how much variability do you see in those numbers and do you think you're at the right number, or is there more tweaking to kind of ongoing?

Paul Diamond: Thank you all and good morning. Thanks for taking the call. I want to touch on slide 7 and 8 a little bit. You guys talked about the kind of cumulative uplift you've seen from your spacing on the existing DSUs.

Paul Diamond: I just want to talk about how much variability do you see in those numbers, and do you think you're at the right number, or is there more tweaking to have ongoing?

Danny Brown: You know, maybe ask Darrin to weigh in on this a little bit as well. You know, the neat thing is, what we tried to demonstrate on that slide is that in, you know, pretty different areas of the field, we're just seeing consistently improved performance through this upspacing. And it's almost, you know, fairly proportional to the increased spacing that we're seeing there. Obviously, our completion practices change as we move forward, as we move to these wider spacings. The ability to leverage and get more oil out of the ground for less upfront capital investment is obviously a great thing, and it's working across the board, and it's working in a fairly predictable manner.

Paul Diamond: You know, maybe ask Darrin to weigh in on this a little bit as well. You know, the neat thing is, is what we tried to demonstrate on that slide is...

Speaker Change: and, you know, pretty...

Danny Brown: And we're expecting to be able to put 40% more barrels on the ground every day that with that. That our frag crews are pumping. So those are a couple of items we're looking at another one on the on the facility front. Court uses a prefab design that will use across all of our acreage going forward and there will be significant cost savings there as well. So those are three items that come to mind immediately.

Darrin: So in all of these different areas of the field we're just seeing consistently improved performance through this upspacing. And it's almost, you know, it's fairly proportional to the increased spacing that we're seeing there. Obviously our completion practices change as we move forward, as we move to these wider spacings.

Paul Diamond: Just the ability to leverage and get more oil out of the ground for less upfront capital investment obviously is a great thing. And it's working across the field and it's working in a fairly predictable manner. We are currently... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

Danny Brown: Yeah, and just the role of improvement you're seeing there is that's what's contemplated in the $200 million of synergies or, you know, or you do some of those data points that you're showing us there. Are those already incremental to the 200 million synergies? They're all they're all part of that 200 million basket. They're given a confidence. So obviously that will will be able to exceed that that $200 million number.

Danny Brown: We are currently, we recognize that, you know, we are on the more conservative side of this. And so as we talk about our, one of the neat things is, as we talk about our inventory, that's all predicated on this sort of very conservative look. We are looking at, you know, Interplus had slightly tighter spacing across the basin, and we are going back, and we're looking at our practices. We think what we've got is working really well, but we want to be humble about this and recognize that there are other ways to do things.

Speaker Change: We recognize that, you know, we are on the more conservative side of this, and so as we talk about our, one of the neat things is, as we talk about our inventory, that's all predicated on this sort of very conservative.

Speaker Change: look we are looking at interplus had slightly tighter spacing across the basin and we are

Paul Diamond: Going back, and we're looking at our practices, we think what we've got...

Paul Diamond: is working really well but we want to be humble about this and recognize that there's other ways todo things and so we're going back and look at this spacing program it could be that we've been slightly conservative here and in some areas you may see us go from

Scott Hanold: Thank you. Thanks, Neil. Oh, thanks, Scott.

Danny Brown: And so we're going back and looking at this spacing program. It could be that we've been slightly conservative here, and in some areas, you may see us go from, you know, four well spacing to four and a half well spacing, or maybe increase by a well per section. I don't think it'll be much more dramatic than that, but we're looking across the program, and we want to make sure this is optimized.

Neal Dingmann: And your next question comes from Neal Dingmann. Please go ahead. Your line is open. Good morning, guys. Thanks for the time. Danny, let's create your dare in the guy. Something you were just hitting on. I'm just wondering on what type of change is, I guess, when it comes to the DNC. You definitely continue to see some really notable improvements. I'm just wondering, besides the extended ladder that you were just talking about, what other type of changes are resulting in these improvements?

Paul Diamond: for well spacing the fouranda half well spacing or maybe maybe increased by well perp i don't think itll be much more dramatic than that but we're looking were looking across the program and we want to make sure this is optimized and so

Danny Brown: And so, you know, I don't know who said it in the prepared remarks, we're a company that really values continuous improvement, so we're never going to be satisfied with where we are. We're always going to be trying to get better, and we're doing that work right now on the development program. But Darren's really in the thick of it, so I'm going to maybe turn it over to him. Yeah, I think

Paul Diamond: You know, I don't know who said it in the prepared remarks, we're a company that really values continuous improvement, so we're never going to be satisfied with where we're at. We're always going to be trying to get better, and we're doing that work right now on the development program. But Darrin's really in the thick of it, so I'm going to maybe turn it over to him.

Neal Dingmann: Is it just space in there? Maybe people can just highlight some of these and, you know, what do you think the results could be even further, you know, return outside? So, you know, I think that if we're talking about the things that are driving improvement here, I mean the two biggest things that are driving the improvement we've seen relative to call it historical programs would be the wider spacing and the longer laterals.

Darrin Henke: Yeah, I think maybe the only thing that I would add to Danny's remarks is that when we look at inventory, we think about well spacing and what the correct spacing is to drain that DSU most optimally. But when it actually comes time to assemble the AFEs and figure out what we're actually going to drill, when we're putting that drill schedule together, we look at every DSU in detail in really much more real time.

Darrin: yeah think maybe the only thing that i would add to danny's remarks is that when we look at inventory we think about well spacing and what the what the correct spacing is to to drain that dissue most optimally

Darrin: But when it actually comes time to assemble the AFEs and figure out what are we actually going to drill when we're putting that drill schedule together, we look at every DSU in detail at really much more real time. Again, look at the cumulative production from the parent wells.

Neal Dingmann: And we've got a lot of material in the deck about that. You know, I would say there's always going to be an addition to that continuous improvement just within your drilling and completions organization. We learned what completion practices work better, how we're able to better get all our profit down without, you know, screening out how we can better stay in formation from drilling, how we can improve cycle times. And so you've got this continuous improvement aspect that overlays all of that, but this move to wider spacing and longer laterals really are sort of, you know, we've used this phrase jumping S curves before.

Darrin Henke: Again, look at the cumulative production from the parent wells and just make sure that we go in and dot our I's and cross our T's and make sure that we have the optimal spacing with all the data, the latest and greatest data from the most recent wells that were drilled. So it's really an iterative process that gets done initially as part of inventory but then gets re-looked at again when it comes time to put the drill schedule together.

Paul Diamond: And just make sure that, you know, we go in and dot our I's and cross our T's and make sure that we have the optimal spacing with all the data, latest and greatest data from the most recent wells that were drilled. So it's really an iterative process.

Neal Dingmann: That's really the two big jump, the S curves sort of opportunities for us. As we look forward, I think folks are aware that we're planning to to spud some four mile laterals as well as we get toward the latter part of this year and into next year. And so that's really a great opportunity for us to continue to advance our practice of drilling longer drilling longer laterals, which we just think is a far more efficient way to drain the resource.

Paul Diamond: That gets done initially as part of inventory, but then gets re-looked at again when it comes time to put the drill schedule together.

Paul Diamond: No, understood. I appreciate the clarity.

Danny Brown: Just a quick kind of quick follow-up around hedging. What do you guys see is kind of the right number if I were to look forward and kind of modeling out, you know, 12 months ahead? Is it? Are you kind of happy with where you're at now for 25 or potentially adding some more? I guess where do you all see the kind of right number in the current environment?

Speaker Change: No, understood. I appreciate the clarity. Just a quick kind of a quick follow-up around hedging.

Speaker Change: What do you guys see as kind of the right number if I were to look forward and kind of modeling out, you know, 12 months ahead? Is it, are you kind of happy with where you're at now for 25 or potentially adding some more? I guess where do you all see the kind of the right number in the current environment?

Neal Dingmann: If you think about it that that incremental foot that you drill theoretically is the most efficient foot you drilled because you're able to leverage all of the fixed cost of the vertical portion of the well, all the roads, all of the facility infrastructure, all of your midstream connections. And so it's just it's a great, it's a great way to improve capital efficiency of the program.

Danny Brown: Yeah, well, the current environment is interesting just relative to what the oil has done here and some of the volatility we've seen in the underlying commodity over the past few weeks. You know, generally speaking, I'd say we need to have a majority of our production exposed to the commodity. We think, you know, we've got to obviously have a very clean and healthy balance sheet and have a low reinvestment rate.

Speaker Change: Yeah, well, the...

Speaker Change: Current environment is interesting just relative to what the oil has done here, some of the volatility we've seen in the underlying commodity over the past few weeks. You know, generally speaking, I'd say we...

Paul Diamond: We think we need to have a majority of our production exposed to the commodity. We think, you know, we've got to obviously have a very clean and healthy balance sheet and have a low reinvestment rate and, you know, got a dividend and return of capital program that we think is very defendable down to the very low commodity levels. And so we don't need to do a lot of hedging. We think some level of hedging makes sense to put some predictability into the business.

Danny Brown: And, you know, we've got a dividend and return to capital program that we think is very defendable down to very low commodity levels. And so we don't need to do a lot of hedging. We think some level of hedging makes sense to put some predictability within the end of the business. And so generally, we sort of think, you know, call it 20 to 40%. We build a hedge book up over eight quarters, and we try to do it pretty programmatically.

Neal Dingmann: So I think that's the next biggest sort of big thing for us to come, but maybe I'll ask Darin to opine a little as well. Yeah, I think the way we think about the four mile laterals, Neil, you know, we're we're not really thinking today that will convert all of our three mile DSUs to four mile DSUs or more thinking about those two mile DSUs that have higher supply costs. How can we convert to two mile DSUs into a four mile DSU and really drive down the supply costs and then hopefully see comparable economics to the three mile well.

Paul Diamond: Generally we sort of think, you know, call it 20 to 40 percent. We build a hedge book up over...

Danny Brown: To take a little bit of the emotion out of hedging, we'll lean in a little more in areas and times of historically higher pricing, and we'll lean out a little bit in times of historically lower pricing. And so, again, we'll always have a majority of the commodity exposed. We'll build it up over eight quarters, and the prompt quarter would never be over about 40% hedged.

Nick Souwer: and Nick Souwer.

Neal Dingmann: And over time, as we get efficient at that, you know, our team's going to get really good at drilling and executing four mile wells at some point in the future. It may make sense if their economics are better than three mile wells and we'll really go back to the portfolio and inventory and see how do we, how do we really expand four mile laterals across the entire portfolio. Great details, guys.

Nick Souwer: Over 8 quarters and the prompt quarter would never be over about 40% hedged.

Paul Diamond: Understood. Appreciate the clarity out of it there.

Speaker Change: Understood. Appreciate the clarity out of it there.

Operator: And your next question comes from Noah Hungness of Bank of America. Please go ahead. Your line is open.

Speaker Change: And your next question comes from Noah Hummes of Bank of America. Please go ahead, your line is open.

Neal Dingmann: And then just a second question on maintenance capital. No question. You all continue a great job of doing more with less. And I'm just wondering, you mentioned drop some damage to the one spread. Is that, is that on a go forward or, I guess, you know, maybe ask another way that, you know, how do you think about the maintenance plan going forward on a DNC? Because you guys have really taken some nice efficiencies there.

Noah Hungness: Morning everyone. I wanted to start on buybacks here. I know that the buyback window is impacted by the Anner Plus deal, but I was kind of wondering how you guys are thinking about the variable dividend versus the buyback today and maybe how that thinking has changed versus a month ago.

Noah Hummes: everyone column to start on buyback hereor i know that the buyback windows impacted by the or plus deal but i was kind of wonder how you gu just thinking about the variable dividend versus the buyback today and maybe he how that thinking has changed versus a month ga

Danny Brown: Yeah, well, we've always thought that there is a, you know, there is room for both the variable dividend and the share repurchase. I think, you know, just given where our shares are trading currently versus where we see the intrinsic value of our equity at a, you know, call it a conservative mid-cycle pricing, we see now as being a great opportunity to repurchase shares. But we think variable dividends are an effective way to return capital as well, so it's particularly nice to have that as an option as well.

Speaker Change: Yeah, well, we've always thought that there's room for both the variable dividend and the share repurchase. I think, you know, just given where the...

Neal Dingmann: I think if you look at the sort of pro form or early in the year, the combined rig count was around six and the combined crew count was around three. What we saw is in the beginning of the year, we had some really good performance really at both legacy organizations and we had a fairly mild winner and we got a lot more done early in the year than what we had originally modeled.

Paul Diamond: where our shares are trading currently.

Paul Diamond: versus where we see the intrinsic value of our equity at a, you know, call it a conservative mid-cycle pricing, we see now as being a great opportunity to repurchase shares. But we think variable dividends are an effective way to return capital as well. It's particularly nice to have that as an outlet as well. This is a program, the 75% plus of the free cash flow we generate in a quarter, we like to true up every quarter.

Neal Dingmann: And so, and, you know, we've said many times, we're about, we're about generating strong and sustainable free cash flow. We're not about chasing production growth. And so had we stayed at the sort of free crew count, we were going to really, we were going to drive some production growth through the system, but also outspend our capital. And that's not what, that's not the type of plan that we're trying to execute here.

Danny Brown: This is a program; the 75% plus of the free cash flow we generate in a quarter, we like to true up every quarter. And so, you know, sometimes you end up with a little more incremental free cash flow than you anticipated early in the year or earlier in the quarter, so you weren't able to get all of those share repurchases done. Maybe you get surprised by good LOE or good CapEx; we've certainly seen that in the past. Or you could be in positions where you have material non-public information, and you just can't be in the market.

Paul Diamond: And so, you know, sometimes you end up...

Paul Diamond: You end up with a little incremental free cash flow than what you anticipated earlier in the year or earlier in the quarter, so you weren't able to get all of those share repurchases done. Maybe you get surprised by good LOE or good CapEx. We've certainly seen that in the past.

Neal Dingmann: So we dialed the program back, we brought it down to one crew to really pull back on some of those capital expenditures. Obviously, then has a, has sort of a near-term and a longer-term impact on production, but we still feel very good about our volumes, obviously, with raising our oil volumes and our total volumes for the year. So, we thought we were in a good spot. We pulled back on capital by dropping that crew.

Paul Diamond: or you could be in positions where you have material, non-public information and you just can't be in the market. And so in those instances, having an outlet with a variable dividend to ensure that we're delivering at least 75% plus of free cash flow is a good thing. So, you know, that's kind of how we think about it as we look at their share repurchases.

Danny Brown: And so in those instances, having an outlet with a variable dividend to ensure that we're delivering at least 75% plus of free cash flow is a good thing. So, you know, that's kind of how we think about it. As we look at their share repurchases, you know, we do try and look at that relative to intrinsic value and look at it, you know, from a relative standpoint from our performance versus our peers. So we've got a lot of different lenses that we look at this through, but we think there's a place for both within our program.

Neal Dingmann: We'll pick a crew up as we get, you know, we'll go, we'll, we'll march that back up as we move forward. So you'll see that crew count increase, re-increase as we, as we get back toward the end of the year. And as I mentioned in my, in my prepared remarks, you know, sort of late summer, late fall, we'll, we'll pick that back up. On an ongoing basis, I would say that, that six and three is probably a good base level to, to have, you know, it's going to be our intent to try and drive below those numbers, to get to call it five with two crews and a swing crew.

Paul Diamond: You know, we do try and look at that relative to intrinsic value and look at it in a relative standpoint from our performance versus our peers, so we've got a lot of different lenses that we look at this at, but we think there's a place for both within our program.

Danny Brown: And then going over to slide nine, I noticed that the Clearbook differentials have kind of bounced back later in 24 here. Is that because of TMX as the Canadian barrels have started to flow west? And is that improved differential captured in the guidance?

Speaker Change: Awesome, really appreciate that. And then going over to slide nine, I noticed that the Clearbrook differentials have kind of bounced back later in 24 here. Is that because of TMX as the Canadian barrels have started to flow west, and is that improved differential captured in the guidance?

Neal Dingmann: At any one given point in time, you may see that fluctuate a little bit, just given the sort of varies of the program as winter weather going on. Do we have good, sort of, you know, good weather opportunities where we can make, we can make good production. But, you know, six and three would have been the pro-former. We're going to try to, with synergies and with efficiency gains, we, you know, it's going to be our goal to push it lower than that amount on a sort of call it an average basis as we move forward. Well said, thanks, Dennis. Okay. Thank you.

Danny Brown: Yeah, differentials will start to improve a little bit towards the back half of the year. It's a combination of things. Early in the year, you did have basin production peaking kind of towards 1.3 million barrels a day in the basin. It's come off a little bit with supply kind of coming off a little bit with some of the refinery turnarounds getting through some of that, along with TMX coming online. I think you're seeing differentials improve a little bit towards the back half of the year.

Speaker Change: Yeah, differentials will, I think, start to improve a little bit towards the back half of the year. It's a combination of things. Early in the year, you did have basin production.

Paul Diamond: Peaking kind of towards 1.3 million barrels in the basin. It's come off a little bit With with supply kind of coming off a little bit with some of the refinery turnarounds getting through some of that Along with TMX coming online. I think you're seeing differentials improve a little bit towards the back half of the year

David Deckelbaum: And your next question comes from David Becklebaum of TD Column. Please go ahead. Your line is open. Hey, Danny Michael, Richard, thanks for taking my questions today. I was curious just again, going back to the synergy slide, particularly around downtime. If that's something, obviously, you've already seen a huge progression with cord legacy operations. As you use some of your own practices on the ENER plus production for assets, is that something that's already baked into the synergies in terms of capital costs, so that'd be something that's a tailwind for sort of base decline moderates.

Danny Brown: Awesome! I really appreciate it.

Noah Hungness: Sure thing. Thanks.

Speaker Change: Awesome. Really appreciate it.

Operator: And your last question comes from Oliver Wong of TPH. Please go ahead. Your line is open.

Speaker Change: 're say right ick ben

Paul Diamond: And your last question comes from Oliver Wong of TPH. Please go ahead. Your line is open.

Oliver Wong: Good morning, Danny, Michael, Richard, and team, and thanks for taking the questions. Just wanted to start off on the three monolaterals; was hoping that you might be able to comment around what changes, improvements, technologies, or modifications have been made based on initial learnings that could potentially drive better recovery factors on some of the more recent ones and those in the program going forward.

Speaker Change: Good morning, Danny, Michael, Richard, and team, and thanks for taking the questions.

Oliver Wong: To start off on the three monolaterals, I was hoping that you all might be able to comment around what changes, improvements, technologies, or modifications have been made based on initial learnings that could potentially drive better recovery factors on some of the more recent three monolaterals and those in the program going forward.

David Deckelbaum: Foundation. Yeah, we've baked it into our, generally, we've baked it into our synergy expectations going forward. We like what we see, and again, given us confidence that we see 200 plus for a reason. Every day we dig into it with the new teams, we're excited with what we see and the opportunities ahead of us. Yeah, I think you heard us, David, on the OASIS widening combination talk a lot about telling in with resident coded sand, that's just something super helpful for helping the ESP runtime go longer.

Danny Brown: Well, I'll start off, Oliver, and ask Darrin to weigh in. I think the biggest thing for us is, one, you know, as you go through, anytime you practice something, you get better and better at it. And that's certainly the case in this industry, which has demonstrated that time and time again as we've gone through unconventional development. You know, the single biggest thing I would say is that our clean out practices have really improved.

Oliver Wong: Well, I'll start off, Oliver, and ask Darrin to weigh in. I think the biggest thing for us is, one, you know, as you go through, any time you practice something, you get better and better at it, and certainly this industry has demonstrated that time and time again.

Darrin: as we've gone through unconventional development. You know, the single biggest thing I would say is that our clean-out practices have really improved and we've learned a ton and how to get all the way to the toe consistently.

Danny Brown: And we've learned a ton and how to get all the way to the toe consistently, and importantly, do that generally with coil tubing, which is the most cost-effective option to do that. And so, you know, we've learned a ton in the drilling space on how to get out there. We always thought that this would be nothing as easy as what we do, but relative to all the things that we do with three miles of laterals, that would be one of the easier ones to accomplish.

Darrin: and, importantly, do that generally with coil tubing, which is the most cost-effective option to do that. And so, you know, we've learned a ton in the drilling space on how to get out there. We always thought that this would be nothing as easy in what we do, but relative to all the things that we do with three miles laterals, that would be one of the easier ones to accomplish. Again, not easy, but on a relative basis, maybe easier. You know, we feel pretty confident about our completion practices. We've certainly learned along the way, but our learnings on cleanouts have been pretty significant and have really driven what we think are some fantastic results associated with our recoveries there. But I'll ask Darrin to maybe weigh in with some more.

David Deckelbaum: And that's been something that you saw play out in the performance over the past couple of years before this new transaction. So we think that same playbook is applicable to this, and we'll see that, we'll see that flow through once we start, you know, getting the completions done on those, those, well, that'll flow through to runtime and, and LOE and, you know, in the management on that front. So it's that type of thing that's going to, you know, it's going to be part and parcel with the, you know, the work that we're going to do to drive better performance on downtime. Thanks, Richard.

Danny Brown: Again, not easy, but on a relative basis, maybe easier. You know, we feel pretty confident about our completion practices; we've certainly learned along the way, but our learnings on clean outs have been pretty, pretty significant and have really driven some, what we think are, some fantastic results associated with our recoveries there. But I'll ask Darren to maybe weigh in with some more.

Darrin Henke: Yeah, if you look at slide six, the upper right panel, and look at our first six months of production coming out of our more recent wells versus our peers, I mean, we're definitely leading the pack, and I think Danny hit the nail on the head. It really is a function of... Getting the wells cleaned out post-frack and getting them online, and... End. I don't know if I have much else to add to that, Danny. Oliver, I may add just a few things. I think it's a great question and really just a chance to celebrate the team.

David Deckelbaum: My follow-up really is just on the extended laterals. I think, you know, you all highlighted, now that, that pro forma, like 40% of the acreages of men and then we'll do extended laterals, I know NERPLUS came in with about 10% extended laterals in the inventory. As you think about extending laterals on NERPLUS's acreage, should we think of it as next year, do you foresee incremental land spend, or should this just all be with reprimanding and sort of redesigning how you're treating the leases and development?

Darrin: Yeah, you look at slide six, the upper right panel, and look at our first six months of production coming out of our more recent wells versus our peers. I mean, we're definitely leading the pack and I think Danny hit the nail on the head. It really is a function of

Danny Brown: getting the wells cleaned out post-frack and getting them online.

Speaker Change: I don't know if I have much else to add to that, Danny. Oliver, I may add just a few things. I think it's a great question and really just a chance to celebrate the team. Over the last 18 months, you've seen, I think, us move and really be the basin leader of moving to three-mile laterals.

Michael Lou: Over the last 18 months, you've seen us move and really be the basin leader of moving to three-mile laterals. It's, I think, really changed the trajectory of our inventory in the basin and how we're looking at it. So just a huge rate of change. It's also providing opportunities for us to improve on some of the interplus acreage as that comes about. You're seeing, I think, all facets of that move over the last 18 months.

David Deckelbaum: Yeah, I think generally speaking, it's going to be more the latter than the former. There's always a blocking and tackling program that's out in front of the rigs looking for us to pick up incremental acreage in front of the bid if we can extend longer laterals. We can, we like to do that, you know, trades are a big thing that we do as well. And so we look to trade acreage and let offset operators core their acreage up and, and provide for longer laterals for their opportunities as we do the same for hours.

Oliver Wong: It's, I think, really changed the trajectory of kind of our inventory in the basin and how we're looking at it.

Speaker Change: So just a huge rate of change. I think it's also providing opportunities for us to improve on some of the Enterplus acreage as that comes about.

Speaker Change: You're seeing, I think, all facets of that move over the last 18 months.

Michael Lou: So whether it's the drilling times really getting much faster, our completion practice is getting better, and then all the cleanouts that Danny and Darrin were talking about, it's really taken our productivity up. So super exciting, and we're excited that the team also gets the chance to kind of show that again with these four-mile laterals. I think that's just a massive opportunity. We've been leaning into the three-mile laterals. I would say today that it seems almost more of the norm for us to do three-mile laterals versus where we were 18 months ago, and we're hopeful that the team can continue to show that progress on the four-mile laterals and make that more of a standard going forward.

Speaker Change: So, whether it's the drilling times really getting much faster, our completion practice is getting better, and then all the clean-outs that Danny and Darrin were talking about, it's really taking our productivity up.

Oliver Wong: Perfect. That's super helpful, Culler.

David Deckelbaum: And so, you know, there could be, there, there will always, there's always some level of land spending out in front of your rig programs. I think we don't see that really changing appreciably associated with this. It's going to be more sort of that normal core spin that we would have anticipated and modeled as well as the just, you know, working through the geometry with the existing units that we've got and replating that differently and developing differently than would have been done otherwise.

Paul Diamond: So super exciting, and we're excited that the team also gets to

Paul Diamond: The chance to kind of show that again with these four mile laterals, I think that's just a massive opportunity. We've been leaning into the three mile laterals.

Paul Diamond: I would say today that it seems almost more kind of the norm for us to do three-mile laterals versus where we were 18 months ago, and we're hopeful that, you know, the team can continue to show that progress on the four-mile laterals and make that more of a standard going forward.

David Deckelbaum: Yeah, I think I just follow on to that. Would that imply just given the focus on efficiencies and extended laterals that at least a 25 program would be more heavily weighted to the cord acreage all else equal as you as you sort of move forward relative to 26, 27 beyond? I think it's an issue of really an issue around timing. And so as we look at the opportunity within the interplus assets to really change the development program, it takes some amount of time to replat all that and get get that repirmated.

Darrin Henke: And maybe just a quick follow-up. Just wanted to kind of ask on slide 11, the downtime improvement slide, which does a great job to show the magnitude of potential that should be relatively low-hanging fruit to capture. Assume that a lot of this will get captured closer to that late 25, early 26 timeframe to align with the LOE commentary on synergies. But just wanted to kind of confirm how this potential uplift might be contemplated in your $200 million plus target. Is that already in there, or is that a potential upside?

Speaker Change: Perfect. That's super helpful, Culler. And maybe just a quick follow-up. Just wanted to kind of ask on slide 11, the downtime improvement.

Speaker Change: slide does a great job to show the magnitude.

Speaker Change: potential that should be relatively low-hanging fruit to capture. Assume that a lot of this will get captured closer to that late 25 early 26 time frame to align with the LOE commentary on synergies but just wanted to kind of confirm

David Deckelbaum: You need those out in front of your rigs, you know, by some period of time. And so, we recognize, you know, we're, we do like to maximize NPV and get into the best areas first. We recognize that's a great area. We want to get in there as quickly as possible, but we want to make sure that we develop it in the right manner as possible, too, to make sure that we do that as happily efficient as possible.

Speaker Change: how this potential uplift might be contemplated in your $200 million-plus target. Is that already in there or is that potential upside?

Darrin Henke: Yeah, it's already contemplated in how we're thinking about the Synergies and the $200 million plus. And probably the one comment I would add to Danny's earlier remarks is that. When he hit the nail on the head, many of these, we're going to see the improvements late in the 25, perhaps even in the 26 when it comes to downtime. However, one that we might see sooner is when a well goes down, Chord historically gets on that well very quickly, and relative to what Interplus was doing, we were getting on the wells in about half the time, and so that's something that we should be able to do We've increased our work-over account, and we're getting all the work-overs into the queue, and that is one synergy on the relative to downtime that we should be able to capture quicker.

Speaker Change: Yeah, it's already contemplated in how we're thinking about the

Speaker Change: The Synergies and the $200 million-plus.

David Deckelbaum: And so, it will take us some time to get that to get that replatted. We're working towards that is, you know, as quick as we can. And again, we're going to put, we'll put more development, more information out about our specific development plans for 2025 as we get later in the year. Thanks for the color, guys. Thanks, David.

Speaker Change: And probably the one comment I would add...

Danny Brown: to Danny's earlier remarks is that

Danny Brown: He hit the nail on the head. Many of the many of these we're going to see the improvements late 25 perhaps even in the 26 when it comes to downtime.

Speaker Change: However, one that we might see sooner is when a well goes down, Chord historically gets on that well very quickly, and relative to what Interplus was doing, we were getting on the wells.

John Abbott: And your next question comes from Dan Abbott, off-wall for research. Please go ahead. Your line is open. I'm sorry, did they say John Abbott? Oh, I appreciate it. Yeah, one quick, a couple of quick questions here. So, Danny, there's been a lot of discussion about, you know, where you could see the synergies possibly improve. I guess when you look at the assets, the inner plus assets that you now have in house, when you were contemplating the deal, what has been the biggest surprise?

Speaker Change: and about half the time. And so that's something that we should be able to do right away. We've increased our work-over rate count, and we're getting all the work-overs into the queue, and that is one synergy relative to downtime that we should be able to capture quicker.

Oliver Wong: Okay, perfect. Thanks for the time, guys.

Speaker Change: Okay, perfect. Thanks for the time guys.

John Abbott: And what did you not contemplate once you've had the assets in house now? What has been the biggest surprise? You know, I would say, John, because we know the base and so well, I don't think there's been, the great thing is, is we've, we've got offsetting acreage across the entire base, and we know the subsurface. We knew this asset was a great, was a great asset. The, you know, from an asset level perspective, I don't think we've seen anything from a subsurface perspective that is, that is markedly surprising to us.

Operator: Thank you, and I'd love to... There are no further questions at this time. I'd now like to turn the call back over to Jenny Brown, CEO of Clausen Company.

Speaker Change: Thank you.

Speaker Change: Thank you. And I'd like to turn the call back over to Jenny Brown, CEO for Closing Comments.

Danny Brown: Well, thank you, Matthew. So to close out, the Bakken is a world-class resource with strong economics, and as a premier operator in the basin, Chord sees a wide array of opportunities to drive efficiency and accelerate Chord's rate of change as it relates to economic returns and value creation. I want to thank all of our employees for their continued hard work and dedication. And with that, I appreciate everyone's interest and thanks for joining us on our call.

Jenny Brown: Well thank you, Matthew. So to close out, the Bakken is a world-class resource with strong economics and as a premier operator in the basin, Chord sees a wide array of opportunities to drive efficiency and accelerate Chord's rate of change as it relates to economic returns and value creation. I want to thank all of our employees for their continued hard work and dedication.

Speaker Change: And with that, I appreciate everyone's interest, and thanks for joining our call.

Operator: Ladies and gentlemen, this concludes today's conference. We thank you for participating and ask that you please disconnect your line.

Speaker Change: Ladies and gentlemen, this concludes today's conference. We thank you for participating and ask that you please disconnect your lines.

John Abbott: I have been thrilled with how the teams have been working together to work through integration to make sure that this is, you know, we're able to fully recognize the full value of this transaction as, as we move forward. And so, I don't know that there's been a big, a big surprise to us. We knew this was great acreage. We understood, you know, we understood that just because of our, our legacy position within the base.

Speaker Change: https://www.youtube.com or the link in the description below.

John Abbott: And it's, the great thing is, is, you know, I think we've seen modest upside. And almost everything we've looked at, whether that be from a synergies perspective or how we think about the subsurface, what we think the wells are going to do. And so, it's just been a, you know, we're really pleased with what we've seen. Appreciate it. And then with respect to your synergies, the $700 million of synergies that you're contemplating starting at the end of 2025.

John Abbott: What is, how do you think about the risk of that potentially moving forward? Could you walk us through that? Well, I think we've got, you know, we've really looked at synergies in three different categories. And we've talked about that a bit. One is just sort of the more administrative and GNA synergies. And I think that's sort of understandable and well understood. The capital synergies, really, we've looked at starting to capture those in 2025.

John Abbott: The reality is, we're probably getting some of those toward the latter part of this year. But in 2025, we think we'll get those involved because we'll be running a full combined program. Instead of really the two legacy programs, just as a result of having historic contracts in place and historic permits in place, et cetera. And so in 25, we'll start seeing really those capital synergies pull through. We have, from an operating expense standpoint, you know, we have some of that that, some of that that we capture pretty early.

John Abbott: But a lot of that we capture somewhat later. And that's why, as we've talked about this, the operating synergies are the ones that show up last. It's not because we're not interested in getting to those and we're not working on them first, but Richard gave a great example. I'll give an additional one on top of that. So we have, we typically tail in with our wells with resin-coated sand in the completions.

John Abbott: This is a capital disenergy that's been modeled. And so all the capital synergies you see actually include this disenergy associated with tailing in with resin-coat because it's a little more expensive. What we found over time is having that resin-coat in the well prevents a significant amount of sand flow back into your well bore up into your facilities and importantly into your ESPs. Replacing an ESP and fixing it down ESP is tremendously expensive and tremendously disruptive to your operation.

John Abbott: And so if you can prevent doing that, it's great. And it results in real operating synergies. And so we've taken a capital disenergy that relates to that yields operating synergies. And we've seen this happen within the Legacy Oasis program. We saw this happen when the Oasis lighting combination occurred. We saw this happen and we're, we fully expect to see this again because we've proven it on multiple different occasions. So that operate, but it takes a while for that ESP not to fail.

John Abbott: So first you've got to tail in with the resin and then the ESP doesn't fail and then you don't have to do that workover. And so you know this, that is that's one example. Another example is the strings we put in for our workover operations. You know, there's a different metallurgy that's been used historically that that really results in lower in a different installation practice and operating practice that results in lower failure rate moving forward.

John Abbott: And again, this is something we've proven out through the Oasis lighting transaction. We're going to be implementing that on the inner plus, but that takes time to take effect. And so you know, we'll have obviously the obvious operating synergies consolidating some routes, running some more efficiently that'll yield some operating benefits to us. But a lot of it comes from new practices and then those new practices have to take hold and yield the benefit. And so that's why we don't model this really until the end of 25 and then to 26. Hopefully that that colors help. That is very helpful, Danny. Thank you very much. Thank you, John.

John Abbott: Your next question comes from Phillips, Johnston, off Capitol One. Please go ahead. Your line is open. Hey, thanks for the time. You highlighted what a maintenance program looks like in terms of the, you know, six radios and three crores, but when you give us a rough sense of what your annual maintenance capital is these days, that's sort of current low cost. Yeah, I'd say, you know, if you look at from a pro form of standpoint, the pro form is probably around 1.5 billion for sort of the delivery that, you know, call it 150, 152, 153,000 barrels of oil equivalent per day.

Unknown Executive: And so that's kind of where we're at currently. Okay, thanks for that. And then you've talked about the longer lateral supporting shallower declines. Can you give us an update on what your corporate next 12 month PDP decline rate is just on a pro form at asset base? I think, I think I have them. I know it's, you know, kind of low to mid 30% range if I'm not mistaken. And then I guess just as a follow up as the mix of longer lateral kind of increases over time, what kind of impact to the rate could we see?

Unknown Executive: Are we talking just a, are we talking a few hundred, a few hundred basis points or what, what sort of magnitude? Yeah, so from an overall corporate decline standpoint, I'd say we're in the low, very low 30s, if you're looking at total BOE, maybe slightly higher than that historically, from an oil perspective, but still in the low 30s there. The longer laterals, the neat thing about them is, you know, they come online about the same, they come on slightly higher, not 50, not 50% higher, but they come on slightly higher than what a two mile well comes on.

Unknown Executive: They stay flat for longer. And so from that just decline perspective, that's obviously beneficial. And then they do decline more shallowly than a two mile well does. And so, you know, as we get a bigger and bigger critical mass of those three mile wells, we should see some moderation in our overall corporate decline rate.

Unknown Executive: And I, but I would expect that to be call it small, small single visit percentages in decline or restment. Yeah, okay, thanks very much, Danny.

Unknown Executive: Okay, thanks both.

Paul Diamond: So your next question comes from Paul Diamond of City. Please go ahead. Your line is open. Thank you all. I'm good morning. Thanks. Great. Thanks for taking a call. I just want to touch on slide, uh, setting it a little bit. You guys talked about the kind of cumulative output you've seen from your spacing on the existing DSUs. I just want to talk about how how much variability do you see in those numbers?

Paul Diamond: And is do you think you're at the right number? Is there more tweaking to kind of ongoing? You know, maybe ask Darren a way in on this a little bit as well. You know, then the neat thing is is what we try to demonstrate on that slide is in, in, you know, pretty different areas of the field. We're just seeing consistently improved performance through this up spacing and it's almost, you know, it is fairly proportional to the, to the increased spacing that we're seeing.

Paul Diamond: There are obviously our completion practices changes we move for, as we move to these wider spacings, but just the ability to leverage and get more, get more oil out of the ground for less upfront capital investment. Obviously it's a great thing and it's working across the field and it's working in a fairly predictable manner. Uh, we are currently, we recognize that, you know, we are on the more conservative side of this and so as we talk about our, one of the neat things is we talk about our inventory that's all predicated on this sort of very conservative look.

Paul Diamond: We are looking at, you know, Interplus had slightly tighter spacing across the basin and we are going back and we're looking at our practices. We think what we've got is working really well, but we want to be humble about this and recognize that there's other ways to do things and so we're going back and looking at this spacing program. It could be that we've been slightly conservative here and in some areas you may see us go from, you know, four well spacing, the four and a half well spacing or maybe, uh, maybe increased by a well perception.

Paul Diamond: I don't think it'll be much more dramatic than that, but we're looking, uh, we're looking across the program and we want to make sure this is optimized and so, uh, you know, I don't know who said in the prepared remarks, we're a company that really values continuous improvement so we're never going to work right now on the on the development program, but they're actually in the thick of it so I'm going to maybe turn it over to him. Yeah, I think maybe the only thing that I would add to, uh, Danny's remarks is that, you know, when we look at inventory, we think about well spacing and what the what the correct spacing is to to drain that DSU most optimally, but when it actually comes time to assemble the AFEs and figure out what are we actually going to drill when we're putting that drill schedule together, we look at every DSU in detail, you know, at really much more real time.

Paul Diamond: Again, look at the cumulative production from the parent well and just make sure that, uh, you know, we go in and dot our eyes and cross our teeth and make sure that we have the optimal spacing with all the data, the latest and greatest data from the most recent wells that were drilled. So it's, uh, it's really an iterative process that gets done initially as part of inventory, but then gets re-looked at again when it comes time to put the drill schedule together. No, I understand I appreciate the clarity.

Noah Hungness: Just a quick follow-up around hedging. Where do you see these kind of a right number? If I were to look forward and kind of modeling out, you know, 12 months ahead, is it a kind of happy with where you're at now for 25 or potentially adding some more? I guess where do you all see the other right number in the current environment? Yeah, well, the current environment is interesting, just relative to what the oil is done here of some of the volatility we've seen in the underlying commodity over the past few weeks.

Noah Hungness: You know, generally speaking, I'd say we think we need to have a majority of our production exposed to the commodity. We think, you know, we've got to obviously have a very clean and healthy balance sheet and have a low reinvestment rate. And, you know, that dividend and return a capital program that we think is very defendable down to the very low commodity levels. And so we don't need to do a lot of hedging.

Noah Hungness: We think some level of hedging makes sense to put some predictability within the business. And so generally we sort of think, you know, call it 20 to 40%. We build a hedge book up over 8 quarters and we try to do it pretty programmatically. To take a little bit of the emotion out of hedging, we'll lean in a little more in areas and times of historically higher pricing. We'll lean out a little bit in times of historically lower pricing. Again, we'll always have a majority of the commodity exposed. We'll build it up over 8 quarters and the prompt quarter wouldn't never be over about 40% hedged. Understood. Appreciate the clarity over there. Thanks, Paul.

Noah Hungness: And your next question comes from Noah Hummus off Bank of America. Please go ahead. Your line is open. Good morning, everyone. I wanted to start on buybacks here. I know that the buyback windows impacted by the enterprise deal, but I was kind of wondering how you guys are thinking about the variable dividend versus the buyback today and maybe how that thinking has changed versus a month ago. Yeah, well, we've always thought that there's room for both the variable dividend and share repurchase.

Noah Hungness: I think just given where our shares are trading currently versus where we see the intrinsic value of our equity at a call to conservative mid-cycle pricing, we see now as being a great opportunity to repurchase shares. But we think variable dividends are an effective way to return capital as well. It's particularly nice to have that as an outlet as well. This is a program that 75% plus of the free cash flow we generate in the quarter.

Noah Hungness: We like to true up every quarter. And so sometimes you end up with a little incremental free cash flow than what you anticipated early in the year or earlier in the quarter. So you weren't able to get all of those share repurchases done. Maybe you get surprised by good L.O.E, or good capex. We certainly seen that in the past. Or you could be in positions where you have material non-public information and you just can't be in the market.

Noah Hungness: And so in those instances having an outlet with a variable dividend to ensure that we're delivering that at least 75% plus a free cash flow is a good thing. So that's kind of how we think about it as we look at their share repurchases. We do try and look at that relative to intrinsic value and look at a relative standpoint from our performance versus our peers. So we've got a lot of different lenses that we look at this ad.

Noah Hungness: But we think there's a place for both within our program. William. Awesome. I really appreciate that. And then going over to slide nine, I noticed that the clear book, Differentials, has kind of bounced back later in 24 here. Is that because of TMX as the Canadian barrels have started to flow west, and is that improved differential captured in the guidance? Yeah, Differentials, we'll, I think, start to improve a little bit towards the back after the year.

Noah Hungness: It's a combination of things. The early in the year, you did have basin production peaking kind of towards 1.3 million barrels in the basin. It's come off a little bit with supply kind of coming off a little bit with some of the refinery turnarounds getting through some of that, along with TMX coming online. I think you're seeing Differentials improve a little bit towards the back after the year. Awesome.

Noah Hungness: I really appreciate it.

Oliver Wong: And your last question comes from Oliver Wong of TPH. Please go ahead. Your line is open.

Danny Brown: Good morning, Danny, Michael, Richard and team, and thanks for taking the questions. Just one to start off on the three model laterals, was hoping that you all might be able to comment around what changes, improvements, technologies, or modifications have been made based on initial learnings that could potentially drive better recovery factors on some of the more recent three model laterals and those in the program going forward. Well, I'll start off Oliver and ask Darren to weigh in.

Danny Brown: I think the biggest thing for us is one, you know, as you go through any time you practice something, you get better and better at it. And that's certainly this industry has demonstrated that time and time again as we've gone through unconventional development. You know, the single biggest thing I would say is that our clean out practices have really improved and we've learned a ton and how to get all the way to the toe consistently and importantly do that with generally with coil tubing, which is the most cost effective option to do that.

Danny Brown: And so, you know, we've learned a ton in the drilling space on how to get out there. We always thought that this would be, nothing is easy in what we do, but relative to all the things that we do with three models laterals, that would be one of the easier ones to accomplish. Again, not easy, but on a relative basis maybe easier. You know, we feel pretty confident about our completion practices.

Danny Brown: We've certainly learned along the way, but our learnings on clean outs have been pretty significant and have really driven some, but we think are some fantastic results associated with our recoveries there, but I asked Darren to maybe weigh in with some more. Yeah, you look at slide six, the upper right panel and look at our first six months of production coming out of our more recent wells versus our peers. I mean, we're definitely leading the pack and I think Danny hit the nail on the head.

Danny Brown: It really is a function of giving the, getting the wells cleaned out post frack and getting them online. And although if I have much else to add to that, Danny. Oliver, I may add just a few things. I think it's a great question and really just a chance to celebrate the team. Over the last 18 months, you've seen I think us move and really be the basin leader of moving to three mile laterals.

Danny Brown: It's, I think, really changed the trajectory of kind of our inventory and the basin and how we're looking at it. So just a huge rate of change. I think it's also providing opportunities for us to improve what on some of the interplus acreages as that comes about. You're seeing, I think all facets of that move over the last 18 months. So whether it's the drilling times really getting much faster, our completion practice is getting better and then all the clean outs to Danny and Danny and we're talking about.

Danny Brown: It's really taking our productivity up. So super exciting and we're excited that the team also gets the chance to kind of show that again with these four mile laterals. I think that's just a massive opportunity. We've been leaning into three mile laterals. I would say today that it seems almost more kind of the norm for us to do three mile laterals versus where we were 18 months ago. And we're hopeful that the team can continue to show that progress on the four mile laterals and make that more of a standard going forward.

Danny Brown: Perfect, that's super helpful color, and maybe just a quick follow up. Just one to kind of ask on slide 11, the downtime improvement, a slide, does a great job to show the magnitude of potential that should be relatively low hanging fruit to capture, assume that a lot of this will get captured closer to that late 25 early 26 timeframe, the line with the LOE commentary on synergies, but just one into kind of confirm how this potential uplift might be, might be contemplated in your $200 million plus target.

Danny Brown: Is that already in there or is that potential upside? Yeah, it's already contemplated in how we're thinking about the synergies and the $200 million plus, and probably the one comment I would add to Danny's earlier remarks is that he hit the nail in the head, many of the many values we're going to see the improvements late 25, perhaps even in the 26 when it comes to downtime. However, one that we might see sooner is when a well goes down, chord historically gets on that well very quickly and relative to what Interplus was doing, we were getting on the wells in about half the time, and so that's something that we should be able to do right away.

Danny Brown: We've increased our work over account and we're getting all the workovers into the queue, and that's the that is one synergy on the on the relative to downtime that we should be able to capture a quarter. Okay, perfect. Thanks for the time, guys. Thank you.

Danny Brown: Thank you, and I'd love to know for questions at this time. I know like a turn of call back over to Jenny Brown, CEO for closing comments. Well, thank you, Matthew, so to close out the Bakken is a world class resource with strong economics and as a premier operator in the basin, chord sees a wide array of opportunities to drive efficiency and accelerate chords rate of change as it relates to economic returns and value creation. I want to thank all of our employees for the continued hard work and dedication. And with that, I appreciate everyone's interest and thanks for joining our call.

Unknown Executive: Ladies and gentlemen, this includes today's conference. We thank you for participating and ask that you please disconnect your lines. Thank you.

Q2 2024 Chord Energy Corp Earnings Call

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