Q4 2024 Chord Energy Corp Earnings Call
Good morning ladies and gentlemen, and welcome to the Corda Energy fourth quarter 2024 earnings call.
Speaker Change: I would now like to turn the conference over to Bob Bakanauskas. Please go ahead.
Speaker Change: Thanks, Andrew. Good morning, everyone. This is Bob Bakanauskas, and today we are reporting fourth quarter 2024 financial and operational results.
Speaker Change: We are delighted to have you on the call. I am joined today by Danny Brown, our CEO, Michael Liu, our Chief Strategy and Commercial Officer, Darren Henke, our COO, Richard Robuck, our CFO, as well as other members of the team.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Those risks include, among others, matters that we have described in our earnings releases as well as in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements.
Speaker Change: During this conference call, we will make reference to non-GAAP measures and reconciliations to the applicable GAAP measures can be found in our earnings releases and on our website. We may also reference our current investor presentation, which you can find on our website. And with that, I'll turn the call over to our CEO, Danny Brown.
Danny Brown: Thanks Bob. Good morning everyone and thanks for joining our call. Over the next few minutes I plan to reflect on CORD's 2024 accomplishments, provide a brief overview on fourth quarter performance and resulting return of capital, and then turn the discussion to our 2025 outlook.
Speaker Change: From there, I'll turn it to Darren who will comment on CORD's operations. Darren will then pass it to Richard for more details on our financial results before we open it up for Q&A.
Danny Brown: So, starting with 2024, last year was a transformational year for our organization as we solidified our leading position in the Williston Basin by entering into a combination with another leader in the basin, Interplus.
Danny Brown: The combination closed in May of last year, and we successfully extracted significant value from the integration by focusing on incorporating best practices from both organizations, which allowed us to capture substantial operational and corporate synergies.
Danny Brown: And notably, we executed this transaction while maintaining our commitment to balance sheet strength, capital discipline, and peer-leading return of capital. My sincere thank you to all the employees who, through their commitment and dedication, have placed us in a great position to succeed.
Danny Brown: And to that point, I believe this is the best position the company has been in since I arrived four years ago. Cord has become a basin leader, and our improved scale has driven a highly efficient program capable of generating flat to slight volume growth with low maintenance capital, resulting in high amounts of sustainable free cash flow.
Danny Brown: We have enhanced our economics by adopting leading-edge practices such as long laterals and conservative spacing, which have lowered our break-evens and extended inventory life.
Danny Brown: As we look to the future, CORD's substantial, low-cost inventory generates attractive economics and allows for continued low reinvestment rates, robust free cash flow, and attractive return of capital. In short, we've demonstrated consistent delivery for shareholders and have additional catalysts for future upside.
Danny Brown: Our capital efficient development and solid operational performance resulted in strong free cash generation last year and a significant portion of this was returned to shareholders.
Danny Brown: In 2024, on a pro forma basis, Cord returned $944 million to shareholders, and in recent quarters, you've likely noted that we've leaned harder into share repurchases to take advantage of what we view as a value disconnect in our share price.
Danny Brown: Since closing the Interplus transaction, Cord has repurchased greater than 5% of its shares outstanding, and we expect a continued focus on share repurchases in the current environment, which should yield per-share growth across all key metrics.
Danny Brown: One example of this can be seen on slide 6 of our presentation, where we show that CORD has grown oil production per share at a 12% compounded annual growth rate over the last three years. And importantly, we did this while simultaneously preserving our balance sheet and paying out approximately two billion dollars in dividends.
Danny Brown: Given our strong inventory and low reinvestment rate, and what we see as a compelling valuation on both an absolute and relative basis, which we highlight on slide 4, we see no reason why Strong's per share growth won't continue.
Danny Brown: Turning to fourth quarter results, CORD delivered another great quarter with solid operating results yielding free cash flow above expectations which supported robust shareholder returns.
Danny Brown: Specifically, fourth quarter oil volumes were above the midpoint of guidance reflecting strong execution and well performance, while capital was below expectations, largely reflecting fluctuations in program timing.
Danny Brown: Operating expenses also came in below expectations as the team continues to focus on improving cash margins. My thanks to our field, development, and execution teams for delivering favorable results across the board in the fourth quarter, and really all of 2024. Fantastic job by all.
Danny Brown: This strong performance led to adjusted free cash flow for the fourth quarter of approximately $282 million, and Cord stepped up shareholder returns to 100% of free cash flow to take advantage of the discount we see in our shares.
Danny Brown: Share repurchases comprise all of our return of capital for the quarter after accounting for the base dividend, which was increased by 4% to $1.30 per share.
Danny Brown: Turning our attention to 2025. As you'll recall, this past November, CORD released its first multi-year outlook and our 2025 guidance released last night demonstrates we're off to a strong start.
Danny Brown: Despite some stretches of brutally cold weather, the asset is performing well and our latest projections, including the impacts of this weather, are reflected in our first quarter guidance.
Danny Brown: As for the details surrounding our 2025 plan, this year we intend to run a maintenance capital program and are currently running five rigs, which we expect to decrease to four by mid-year.
Danny Brown: Additionally, we are currently running one full-time prac crew and one spot crew. We expect to turn in line between 130 to 150 gross operated wells in 2025, including 22 to 32 in the first quarter.
Danny Brown: The remainder of 2025 tills are expected to be spread out across the year.
Danny Brown: Average working interest in 2025 is expected to be approximately 80% and a little over 40% of the 2025 turn in lines are expected to be three mile laterals, which should increase to over 50% in 2026 and 2027.
Danny Brown: In addition to the Operated Program, we expect to invest between $205 and $225 million on non-operated opportunities, with approximately 80% of that in the Williston, with a balance in Marcellus.
Danny Brown: The 2025 program is expected to deliver production similar to Proforma 2024, or between 152,000 to 153,000 barrels of oil per day, with $1.4 billion of capital investment.
Danny Brown: This is approximately $90 million less than last year on a same-same basis and does include around $10 million which slipped from the fourth quarter of last year into the first quarter of this year.
Danny Brown: At benchmark prices of $70 per barrel of oil and $3.50 per MMBTU of natural gas, we expect to generate approximately $860 million of free cash flow in 2025, with a reinvestment rate of around 60% for the year.
Danny Brown: As we progress through the year, CORD will continue to have a laser focus on improving our already strong capital efficiency and delivering strong investment returns.
Danny Brown: In slide 7 of our investor presentation, you can find a third-party research firm's assessment of CORD's capital efficiency versus peers in 2024 and 2025, where you'll see that we're on the better end of capital productivity and one of the few companies improving efficiency year on year.
Danny Brown: This reflects improving productivity partially driven by our pivot towards longer laterals, which Darren will discuss a bit more.
Danny Brown: And speaking of turning this over to Darren, the last thing I wanted to cover before doing so is our commitment to sustainability.
Danny Brown: CORD is proud of our work providing reliable and affordable sources of energy so critical to every aspect of modern living.
Danny Brown: And we do this while maintaining a commitment to operating in a sustainable and responsible manner. On this front, CORD continues to make progress on our already strong sustainability initiatives with a focus on putting safety first, minimizing our environmental impact, and being a good partner in our communities.
Danny Brown: So, to summarize, CORD had a great 2024, we're off to a strong start in 2025, and we believe we offer a unique value proposition to investors with a compelling opportunity to invest in quality assets with proven execution, strong investment returns, and substantial return of capital to shareholders.
And with that, I'll turn it over to Darren.
Darren Henke: Thanks, Danny. Operation Lee Cord continues to hit our stride, and we're off to a great start on our three-year plan issued in November.
Darren Henke: We view this three-year outlook as conservative, as it assumes no further improvements in capital efficiency relative to our year-end 2024 capabilities.
Darren Henke: Thus, the Outlook includes no incremental benefits from faster cycle times, additional three-mile laterals, or four-mile laterals, all of which are focal points for the organization.
Darren Henke: Currently, the 3-year plan projects over 50% to be 3-mile laterals, and CORD's total inventory is over 60% 3-mile laterals on a lateral adjusted foot basis.
Darren Henke: We believe we can increase this percentage materially over the next few years, improving the economics associated with both our three-year plan and our overall inventory.
Darren Henke: Just a quick update on four-mile laterals. CORT successfully drilled and completed our first four-mile lateral, and we just reached a TD exceeding 30,400 feet while cleaning out the frack plugs.
Darren Henke: We're planning several more four-mile laterals in 2025 and, with success, are likely to implement many more in 2026 and beyond.
Darren Henke: As a reminder, our initial approach to four-mile wells will be converting two two-mile DSUs to one four-mile DSU.
Darren Henke: However, similar to CORD's evolution on a 3-mile program, as we make progress on execution and drive the risk-adjusted returns higher, we ultimately could look to convert some of our existing 3-mile inventory into 4-mile wells.
Darren Henke: Since we're on the topic of longer laterals, I'd like to discuss some nuances of these longer wells given how unique they are to Cord's story.
Darren Henke: Slide 9 highlights the economic benefits of 3-mile laterals, which deliver 50% more EUR than 2-mile wells for only 20% more capital. This relationship is consistent when comparing wells with analogous geology and well spacing.
Darren Henke: Over the past several years, CORD has drilled fewer two-mile wells in the core and shifted towards more three-mile wells on its western acreage.
Darren Henke: On the lower right-hand side of slide 9, you can see a contrast between a 2-mile core well and a 3-mile well on our western acreage.
Darren Henke: The F&D cost for the Western 3-mile well is actually better than the core 2-mile well, as lower DNC cost per foot more than offset the lower EUR per foot.
Darren Henke: Said another way, longer laterals outside the core actually have similar or better returns than two-mile wells inside the core, as core wells generally have higher costs given the depth, pressure, and other complexities that need to be managed.
Darren Henke: Well productivity and EUR are certainly key factors for generating attractive returns, but the cost side is equally important.
Darren Henke: The production profile of longer laterals also differs from shorter laterals. All else equal, a 3-mile well will deliver a slightly higher IP, stay flat longer, and exhibit shallower declines than a 2-mile well.
Darren Henke: When comparing analog well performance per foot of lateral, initially, 3-mile wells will typically be lower than 2-mile wells, as the higher IP is more than offset by the 50% longer lateral.
Darren Henke: However, over time, the longer flat period and shallower declines will lead the three-mile well to catch up to the two-mile well on an EUR per foot basis.
Darren Henke: As Danny alluded to last quarter, CORD's choke methodology is more restrictive than most peers, which prevents sand flow back and ultimately lengthens the life of our ESPs, saving costs.
Darren Henke: We have been implementing this more restrictive choke program on the Interplus wells, which will impact the optics of initial IP rates per foot on a year-over-year basis.
Darren Henke: Again, perfect performance is the appropriate way to judge well productivity over the long term, but early data is often misleading.
Darren Henke: On slide 10, you can see Cords 2023 and 2024 Lateral Length Adjusted Average Well Productivity Relative to Drilling End Completion Costs.
Darren Henke: By dividing well productivity per foot by drilling and completion cost per foot, it gives a sense as to the overall capital efficiency of the program.
Darren Henke: As you can see, the 2024 program is superior to 2023, and we expect the 2025, 26, and 27 programs, at a minimum, to deliver similar capital efficiency as 2024.
Darren Henke: Turning to inventory, slide 5 shows cords, inventory depth, and break-even pricing versus peers as assembled by an independent research firm, which strives to use similar modeling methods across each company represented.
Darren Henke: The key takeaway is CORD's inventory is very competitive with peers. While we evaluate our inventory differently than the third party, we believe their analysis is objective and consistent.
Darren Henke: Additionally, we overlaid valuation multiples into the analysis to illustrate CORD's attractive valuation, particularly in light of our relative inventory depth and quality.
and Bob Bakanauskas.
Speaker Change: Lastly, I wanted to comment on CORD's operational efficiency. Our teams continue to execute with excellence and aim to drive cycle times lower for both drilling and completions.
Speaker Change: On the drilling side, we reduced cycle times on three-mile wells by about one and a half days in 2024 versus 2023, and regularly set new records on the Interplus acreage.
Speaker Change: On the completion side, our full-time frack crew is using sample frack operations on most pads, which has driven down non-productive time.
Speaker Change: Lateral feet completed per day has increased by about 40 percent as compared to zipper fracks, generating well cost savings and reaching first production quicker.
Speaker Change: Finally, downtime continues to be minimized as the Corps team successfully navigated very frigid weather in January and February, keeping outages brief and getting volumes back online quickly.
Speaker Change: To sum it up, CORD is driving continuous improvement and innovation on our asset base, and it's really showing in our execution and our delivery.
I'll now turn it over to Richard.
Richard Robuck: Thanks Darren. I'll discuss fourth quarter performance in more detail and give some color on 2025 guidance as well.
Richard Robuck: In the fourth quarter, CORD generated adjusted free cash flow of $282 million, which was above expectations due to strong volumes, better gas and NGL realizations, lower capital, and good cost control.
Richard Robuck: Oil volumes were above midpoint guidance, while total volumes were above the top end, reflecting strong well performance.
Richard Robuck: Oil realizations in the fourth quarter averaged about $1.50 below WTI.
Richard Robuck: NGL realizations were 14% of WTI in the fourth quarter, near the top end of our guidance range. Natural gas realizations were stronger than expected at 43% of Henry Hub.
realized gas prices in the Bakken benefited.
Richard Robuck: due to improving differentials for the regional benchmarks, such as Ventura and AECO, which narrowed the gap against Henry Hubb in the fourth quarter.
Richard Robuck: This typically happens when winter weather hits, and in fact, the benchmarks can exceed Henry Hove at times.
Richard Robuck: This strength, driven largely by cold weather, persisted in the first quarter, which is reflected in our guidance.
Richard Robuck: As a reminder, certain marketing fixed fees are deducted from our NGL and natural gas prices.
Richard Robuck: This drives higher operating leverage, which hurts realizations for both NGLs and natural gas in times of weaker prices, but realizations improve rapidly with higher prices, as we saw in the fourth quarter and continue to see in the first quarter.
Richard Robuck: Given gas prices exhibit seasonal volatility, we expect our realizations to follow a similar pattern and to be weaker in the second and third quarters and stronger in the first and fourth.
Richard Robuck: The net impact of seasonality is reflected in our full year guidance, with the first quarter realizations exceeding the full year expectations.
Richard Robuck: Turning to operating costs, fourth quarter LOE was below our expectation at nine dollars and sixty cents per BOE, reflecting better downtime and lower workover costs.
Richard Robuck: 2025 LOE guidance reflects modest escalation relative to 2024 but this may prove conservative as it did in 2024 depending on downtime and work overspend levels
Richard Robuck: Fourth quarter cash GPT was $2.86 per BOE in line with our guidance.
Richard Robuck: Fourth quarter cash G&A was $31.2 million excluding $9 million of merger related costs and quarterly G&A is expected to continue to trend downward in 2025 as we realize further synergies.
Richard Robuck: Production taxes averaged 8.4% of commodity sales in the fourth quarter and cash taxes were in line with our expectations.
Richard Robuck: We expect full-year 2025 cash taxes to approximate 3 to 10 percent of EBITDA, and first quarter cash taxes to approximate 1 to 7 percent of EBITDA, each at oil prices of $60 to $80 per barrel.
Richard Robuck: Fourth quarter adjusted CapEx of $325 million excludes $5.2 million of reimbursed non-operated capital and was $10 million below midpoint guidance.
Richard Robuck: largely reflecting minor shifts in timing to 2025. Even with this shift, we are still planning on investing $1.4 billion in 2025, and $365 million of that is in the first quarter.
Richard Robuck: On February 2025, the company completed its annual, semi-annual borrowing base redetermination, setting the borrowing base at $2.75 billion and increasing the aggregate amount of elected commitments to $2 billion.
Richard Robuck: As of December 31st, 2024, CORD had $445 million drawn under its revolver, $400 million of senior unsecured notes, $37 million of cash, and $31 million of letters of credit. That leverage remained at $445 million.
Richard Robuck: 0.3 times at year-end 2024 as we returned 100% of our free cash flow to investors across the quarter.
Richard Robuck: Separately, CORD layered on some hedges since our last update. Our derivative position as of February 24th can be found in our latest investor presentation.
Richard Robuck: In closing, thanks again to the CORD team for all their hard work on the integration front and for the intense focus on improving day-to-day operations.
Andrew: We are pleased with the substantial progress that we've made over 2024, the continued performance of the team, and the position that they've put the organization in to succeed going forward. So with that, I'll hand the call over to Andrew for questions.
Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question, please press the star followed by the number 1 on your touch-tone phone.
Speaker Change: You will hear a prompt that your hand has been raised.
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Speaker Change: If you are using a speakerphone, please lift the handset before pressing any keys.
One moment please for your first question.
Thank you.
Speaker Change: Our first question is from Scott Hanold from RBC. Please go ahead.
Yeah, hey, thanks all.
Speaker Change: Can you give some context around your outlook for capital in 2025 and maybe even going forward? I mean, obviously you have a low and a high end of the range.
Danny Brown: Hey, Scott. It's Danny. Thanks for the question. So, you know, as we look at 2025, we're always going to provide ranges around these things. I do think is, you know, when we put this out in, you know, November of last year, and as we've rolled forward that plan,
Danny Brown: We've taken a somewhat static view and don't include improvements in efficiency, cycle times, that sort of things in this. And so to the degree we see
Danny Brown: If we see better well performance, that's another thing that could drive us lower because we're really not trying to chase capital up. The intent is to drill, to deliver a maintenance.
Danny Brown: relative to November of last year. And so as four-mile laterals may come into the program, as we will continue to get better just on the existing three-mile and two-mile legacy developments.
Danny Brown: All of that will inure to the benefit of the capital program in sort of the out years 2026 and 2027. So when we rolled that out, we said we thought it was a little conservative and we weren't going to put something out there that we didn't have high confidence we could meet or exceed, and I still feel the same way.
Speaker Change: Okay, I appreciate that. And part of that too, and you know, I hate to try to layer another question there, but I guess I missed it if you said it, but is the SimulFrax, you know, your current piece, is it basically doing full SimulFrax for the year? Is that included in the plan as well?
Speaker Change: Well, I mentioned we've got one partial crew and one full crew. We're doing simulfracs with the full crew. We're not necessarily doing simulfracs with that partial crew. And so for that full crew, that is all assuming simulfrac. But as that efficiency improves, clearly you can see some benefits from that. But I think we've got a lot of that baked in.
Speaker Change: Okay, okay, got it. And then for my follow-up question, can we touch on shareholder returns? I mean, obviously, giving 100% of free cash flow was, you know, very robust in all buybacks. Like, you know, look, your stock's
Speaker Change: but it's still quite a bit under where you did your buybacks in fourth quarter. I mean, should we look at that as pretty indicative of what you all might do going forward here, especially with...
Speaker Change: You know, you're very low leveraged, does it make sense to continue to kind of push it towards that 100% and all incrementally being buybacks?
Speaker Change: Well, what I'll say, Scott, is that we have, at the end of the day, it's really a capital allocation decision.
Speaker Change: And as we look at that sort of incremental free cash flow generated above the 75%, we have to think about what we do with it. And with our leverage position where it is, you know, sort of retiring from it, that doesn't make a lot of sense. And we see our shares at this level as a really compelling capital investment opportunity.
Thank you.
Thank you.
Speaker Change: Your next question is from Derek Whitfield from Texas Capitol. Please go ahead.
Good morning all and thanks for taking my questions.
Thank you.
Speaker Change: Regarding three mile laterals, I want to thank you for your disclosures on slides nine and ten as it's been quite challenging to compare well productivity per foot between two and three mile laterals when there are over four variables you have to control for in that analysis.
Speaker Change: Maybe setting aside cost for a moment, where are you seeing the Kim curves per foot meaningfully start to converge in the life of the well? And then specific to cost, are you seeing better cycle times with three mile laterals given the benefit of additional reps?
Speaker Change: So I'll start with the ladder first. We absolutely are doing these things faster. And I think with, like anything, as you get more practice, you get better and better at them. And we're certainly seeing that with three-mile laterals, not just with the drilling and completion, but I think importantly getting cleaned out to toe and not just the cycle times, but the cost associated with getting down to the toe of the well to clean that out.
Speaker Change: With respect to convergence on an EUR per foot basis, I think it's, you know, after about six months, we start to see that converge pretty well. We're getting to sort of tilde 95% on an equivalent basis of two on a per foot EUR recovery.
Speaker Change: after around six months and you're essentially all the way there within a within a one-year time frame. So you know that first three or four months is really where you see the difference.
Speaker Change: in the QME URs, and so if you're focusing on that very early well time data, it can be misleading, as Darren pointed out, but within about six months you're there and you're all the way there within a year.
Terrific, and then regarding your first four bilateral...
Speaker Change: Could you speak to what operational challenges you observed, if any, and then what do you see as the cost-benefit for transitioning from 3-mile to 4-mile laterals after accounting for the cycle times?
Darren Henke: I'm going to ask Darren to respond to that because he's been real close to this first well as you can imagine.
Darren Henke: The frack job went beautifully. Being able to pump the frack stages at the tow, we were somewhat concerned about what kind of rate we'd be able to get, you know, going through all that pipe.
Darren Henke: with the friction losses, but all that went really well and we just, as of this morning, we just reached TD drilling out the drilling out
Darren Henke: the frack plugs, and we're able to do that in one run as well. So, boy, like I say, knock on wood, operationally it's gone very well. We see similar, to get to the second part of your question, you know, relative to the performance of a four-mile well,
We think we'll see the same kind of uplift.
Darren Henke: Going from 3 miles to 2 miles. We'll see similar uplifts going from 4 miles.
Going from three miles to a four mile well.
Darren Henke: And we're also looking at a lot of alternate shapes. People have different names for them.
Great update. Thanks for your time.
Yes, sir.
Speaker Change: Your next question is from Neil Dingman from Truist. Please go ahead.
Morning, thanks for the time guys.
Speaker Change: Now with the integration, I guess really my question is on just your operational efficiencies for you or Darren, you continue to, you know, see the improvement now going from the two to three miles.
Speaker Change: I'm just wondering when you sort of see things set up this year, can you continue to sort of chip away at that? And if so, you know, where do you think some of those, you know, efficiency gains will be coming from?
and Bob Bakanauskas.
Speaker Change: So Neil, I appreciate the question. You know it's again with with incremental reps you just get better and so you know we're starting to get some reps under our belt from a three-mile perspective and so we've seen that happen. Certainly we saw a dramatic improvement last year from an efficiency perspective as we move to the adopt SimulFract across the across the fleet and so I think you'll see us continue to grind down incremental improvements on three miles. We're at serial number one of a four-mile.
Speaker Change: And so we've got plans to do a few more of those over the course of the year, and I think you'll probably see dramatic improvement on those, even with the strong start that Darren just mentioned.
Speaker Change: As we've talked about, this four-mile program is really contemplated early on to replace two-mile wells. But if we're able to see, you know, sort of consistent delivery and uplift, you could see us start to replat some of these three miles to take advantage of the four-mile uplift as well.
Speaker Change: Question on M&A, you know, is it safe to say, I mean, I think you all have, you know, certainly ample inventory, but with that said...
Speaker Change: Christine Balanchine. I mean, again, I guess my question is what does the M&A landscape sort of look like to you today and, you know, how actively do you think, you know, you all could be out there doing something?
Speaker Change: Well, to your point, Neil, we think we've got a great inventory set here, far better than what we often feel like we get credit for. So I'm happy with the inventory position. And like I've said, we do think there's advantages to scale in this industry, but at the end of the day, the size has to make you better.
Speaker Change: not just bigger. And you've seen us be, I'd say, patient. And we've picked our spots on where we have decided to do M&A. And I think you'll see us continue to do that, and if we see a way that we think delivers.
Thank you very much.
That makes sense. Thank you so much.
Thank you.
Speaker Change: Your next question is from Oliver Huang from TPH. Please go ahead.
Thank you. Thank you.
Good morning all and thanks for taking the questions.
Speaker Change: I just wanted to kind of start out on gas and NGL realizations. I know in the prepared remarks she kind of alluded to a fixed component there and I see that y'all have underwritten 350 in your outlook. Just thinking if we're
Speaker Change: Seeing some sort of upside to gas prices towards four bucks in 2026 or an improvement in the ECO market, is there any sort of rule of thumb or sensitivity in terms of what sort of uplift we might see for your cash flow streams?
Speaker Change: Yeah, I think that's a great question. You're spot-on that, you know, as the price starts to tick up, you'll continue to see, you know, us tick up. I think the thing to watch for is, like, what's happening with
Speaker Change: NGL prices at the same time because you've seen that impact as well because we're allocating to both gas and gas and NGL but you're definitely right as gas prices go up we will you know be scaling incrementally to to capture that value
Speaker Change: Okay, makes sense. And maybe just on the non-op side, I know there isn't always great line of sight until when the activity shows up.
Speaker Change: But just kind of given how it's being flagged with the decent magnitude out of the Williston, any sort of color you're able to speak to on who the primary operators that we should be aware of for this year, if there's any specific part of the basin the activity is likely to be concentrated in, or if it takes a roughly similar mix versus what we've kind of seen from your operated portfolio.
in the core kind of part of the basin overall.
So, we're still seeing quite a bit of that activity.
Speaker Change: But we'll be watching it closely and making sure that we continue to improve our operations on that front as well.
Makes sense. Thanks for the time.
Thank you. Thanks y'all.
Speaker Change: Your next question is from John Abbott from Wolf Research. Please go ahead.
Good morning and thank you for taking our questions.
My first question is on tariffs.
It's not on the cost side.
But if tariffs were implemented...
Speaker Change: How do you think the impact would be to your oil and gas NGL realizations?
Danny Brown: John, this is Danny. Thanks for the question. You know, I think, in general, when you think about tariffs, when...
You know when a when a tariff is implemented
Generally, it's to the benefit of the domestic producer.
Danny Brown: And I don't think it would probably be much different here, I think, from an oil perspective.
Thank you.
Danny Brown: pain felt by the refiners and the foreign producers and maybe small incremental benefit to the domestic producer. I don't think it's dramatic but I think that's probably you probably see a small incremental pull from the domestic barrel.
And so that's kind of how we think about it.
Danny Brown: You know, what I can't say is what the butterfly effect of tariffs do. We may see a slight pull from a demand side on our barrels, which should put some upward pressure on pricing there. To what degree, I'm not sure. But then it has a broader effect, too. How does it affect overall demand? And where do prices go from just a supply-demand perspective? So lots of moving parts there, but just on its pure, if you isolated that one thing, I think probably an incremental pull on domestic barrels.
Speaker Change: Appreciate it. And then for our follow-up question, I mean, we've seen the improvement in natural gas prices.
Speaker Change: What is your latest thoughts on maintaining your non-op Marcellus position?
Speaker Change: Well, we think we have been the beneficiary in both Williston and for the non-op production we have in Marcellus of the higher natural gas prices here recently. We think Marcellus is a great asset. It is under a very capable and good producer. But as we've mentioned before, it's not a core portion of the portfolio, and we're going to look to see how we maximize value delivery to shareholders from that asset over time.
Thank you very much for taking our questions.
Thanks, John.
Speaker Change: Your next question is from Josh Silverstein from UBS, please go ahead
Josh Silverstein: Good morning, guys. Just wanted to follow up on the buyback. I know you were at 100% this quarter, but would you guys consider using the balance sheet to go above 100% just given where the stock is trading at? I'm just curious given the valuation of the stock. Thanks.
Josh Silverstein: Got it. And then just on the inventory duration, I know you mentioned around 10 years before. I know it's somewhat of a third-party estimate, but can you go into what you guys are assuming from an inventory standpoint? You know, does 10 years assume three miles? How many, you know, wells in the middle bucket? Is there anything left in the three forks? Just to kind of give a more color around that. Thanks.
Josh Silverstein: potentially see some of these longer laterals convert areas of the field because of the improved economics into into areas that actually become nice and and attractive investment opportunities. We have the potential to see this march higher.
Josh Silverstein: And candidly, to the degree that we determined that maybe we're a little too loose in our spacing in some areas, we could see some more inventory come in as a result of that as well.
I will tell you...
Josh Silverstein: It is, it is not, I want to, I want to effectively drain the resource with as few straws as possible because that's the most capitally efficient way to do it and that's going to be what delivers us the strongest returns and so we are, we are not into manufacturing inventory but if it determines that, you know, if we determine that we are too loose and we're leaving resource in the ground that offers.
Richard Robuck, Bob Bakanauskas, Daniel Brown
Josh Silverstein: But when you consider our 1.3 million acre position up there, even a small sort of tightening up spacing has a not immaterial impact on overall inventory. So I'd say our, sort of in summary, I'd say our inventory, we see it as maybe somewhat conservative and I'll leave it at that.
Thanks.
Speaker Change: Your next question is from Paul Diamond from Citi. Please go ahead.
Thank you. Good morning. I'll be taking the call.
Speaker Change: So you talked about the conversion, the general conversion of two two-mile DSUs to one four-mile, but also that opportunity set to kind of extend the three-mile.
Speaker Change: Three Mile Inventory, that's currently 60% of your inventory set. Just wanted to see if you could kind of dial in, you know, how much of that 60% is potentially convertible? Is it all just matters in the economics of the well or just kind of how to think about that?
Speaker Change: Yeah, I'd say, generally speaking, Paul, you know, we think we've got sort of, I'd call it greater than, greater than 50% from a three-mile inventory perspective currently, and so then there's a balance that is part, you know, part of the balance is two-mile inventory. We've got some that are, you know, actually lower than that, and then we've got some areas where we may have some four-mile opportunities, and so it's a mix outside that 50%.
Speaker Change: Our goal would be, and our objective would be, to get up to around 80% and to that three mile plus sort of speed.
Richard Henke, Richard Robuck, Bob Bakanauskas, Daniel Brown
Speaker Change: Three mile or greater would is something we're certainly shooting for
Speaker Change: As we are able to see strong performance from a 4-mile well, if and when we see that, then I think we'll really go back to the drawing board.
Speaker Change: from our overall DSU layout and say where can we re-space some of these three miles to four miles to see the upside. So that, you know, we need to get this first well producing, we need to get a few more wells in the ground before we really undertake that effort because as you can imagine replatting out the whole basin, not a trivial thing to do and we need to see some results first.
Speaker Change: Understood. Appreciate the clarity. Just a quick follow-up. You all talked about dropping a rate mid-year. You're talking about just the timing of that. What could cause it to kind of be pulled forward or pushed back and how that really portends into the trend of CapEx through the year. I know we should expect to be front half weighted, but is that more Q1 and just kind of how to think about the timing of all this?
W. Paul W. Paul W.
Speaker Change: better improvements in run time than what we forecasted in our plan, so we need less.
Speaker Change: less production from the wedge then you could maybe see us release that rig earlier. That'd be a that'd be a positive thing for the overall program and Why our production team is focused on that every day working to improve improve our runtimes and minimize downtime. So that's a
Speaker Change: The lever a lot of people don't think about relative to the capital program and maintaining maintenance levels of production that Danny referenced earlier. So that's a color that we can share with you at this time. Paul?
Understood. Appreciate the clarity. I'll leave it there.
Speaker Change: Your next question is from Noah Hugness from Bank of America. Please go ahead.
Speaker Change: Morning guys. For my first question I wanted to ask we've seen some competition on the midstream side in the Bakken and I was just wondering is there a read-through here for you all that maybe you guys could renegotiate or have or have lower GP&T costs?
Speaker Change: Well, Noah, I'd say that we're always looking at opportunities to make sure that we're getting the best price and the best net back pricing. And so we have, you know, we've got contracts in place as those roll off. Clearly, we're going to negotiate hard to get the best deal for ourselves. And I'd say even before some of those contracts roll off, we have opportunities as we've grown in scale where we can, you know, there may be things that we can do that are win-wins for both organizations that, you know, even while we're under contract, it can make things better for us as we move forward.
Speaker Change: and we're always looking at those things. I'll ask Michael to add any incremental comments he's got. Yeah, no, I mean, you kind of mentioned it. There is a lot of competition. There's pretty mature systems out there across...
Speaker Change: Water, gas, oil, kind of all the different pipeline pieces, which that just creates competition, which is fantastic for us.
Danny Brown: We've got a big program that spreads kind of throughout the basin, so there are a lot of options for us in the basin, and as you mentioned, very competitive. So hopefully all those costs we can continue to work on, as Danny mentioned.
Danny Brown: That's great to hear. And then for my second question, I wanted to ask on the non-op Marcellus.
Danny Brown: As we've seen gas prices ramp up here and the gas macro looks more and more attractive, what kind of gas production are you guys baking into your 25 corporate guidance from that non-op Marcellus position?
Danny Brown: Yeah, this is Danny again. So, you know, currently we're thinking, you know, between 130 and 140 million cubic feet coming through that, coming through our non-op position there in Marcellus.
Speaker Change: Is there, and just as a quick follow-up or clarification, is there any seasonality in that production profile?
Thank you.
Speaker Change: So there is potentially some upside there if you see gas prices hold at a good level. Great, great returns, so fantastic rock, great returns, so we're really excited from a capital allocation standpoint to put it there if gas prices hold kind of where they're at or better.
Sounds good. Thanks for taking our questions.
Thank you. Thank you, Noel.
Speaker Change: The next question is from David Dekelbaum from TD Cowan. Please go ahead.
Thank you for watching!
Speaker Change: Once again, the next question is from David Dekelbaum from TD Cowan. Please go ahead.
Thanks for getting me on, guys.
Speaker Change: and good morning to you all. I wanted to ask just to follow up on the Marcellus
Speaker Change: How do you think about that position, I guess, strategically now and is this something that you might view as a source of funds over the next couple of years just, again, given the prevailing price there and obviously the non-op position, you've been able to take advantage of attractive share buyback opportunities right now.
Speaker Change: arguably maybe that's an asset that you're not getting credit for. Is that something that's under serious consideration just with the improvement in the gas strip?
Thank you. Thank you.
Speaker Change: Hey David, this is Danny. So I'll say that, you know, Canada, as we said, we think that's a great, it's a great asset. It's got strong returns associated with it. It's under a great operator, but it's not core to our portfolio. And so we've acknowledged that that's not a core position for us and what we want to do is maximize value delivery to shareholders out of that asset. And one option, obviously, that we're thinking about is
Speaker Change: is, you know, a potential monetization there and then what we do with the, again, so any proceeds we would get out of that would be a capital allocation decision for ourselves at that moment.
Speaker Change: I appreciate that and then just curious as we think about capital efficiency improvements
Speaker Change: you know, obviously increases in lateral length, but improvements in incremental cycle times, because I think it was obviously you guys have highlighted.
Speaker Change: the relative improvement in cycle times to peers, you know, in 24. But I guess like, how do you think about just capturing efficiencies with longer laterals as it relates back to just cycle time improvements?
Speaker Change: should roll straight through to sort of improving our overall ability to deliver, ultimately, free cash flow, both this year and over the three-year time frame.
Speaker Change: And I fully expect that we will see those, because we've always seen them, and we've got a whole team that's focused really intently on that. And again, it also doesn't incorporate any significant uplift we would see in capital efficiency from a successful four-model program, which, as Darren said, we've got our first one now drilled out to toe.
Speaker Change: So, you know what, my expectation is as we see those efficiencies roll through, we'll see them roll through either through likely to lower capex spending for ourselves and incremental free cash flow from that lower capex level. But again, we've put out both for 25 and for the three-year plan. We want to make sure we've got something out there that we can achieve or beat, and I feel because we've got these deficiencies still in front of us, I feel pretty good about that.
Thanks, Danny. Appreciate it.
Thank you.
Speaker Change: Your next question is from Noral Parks from Toy Brothers Investment Research. Please go ahead.
Noral Parks: Hi, good morning. I just had a couple things. You know, one thing, just trying to really wrap my head around the whole notion of four-mile laterals, as far as you know at this point, are there any new or unexpected frack protection issues introduced when you're doing four-milers? I mean, I guess specifically if you're like a horseshoe shape, or is it really just essentially the same as, you know, a pad with multiple two-milers?
Thank you very much.
Noral Parks: Great. Thanks a lot. And one thing, just looking at the reserves, was there...
from the Inner Plus.
Noral Parks: And I'm just curious if, as far as Interplus, everything you're really planning to do as far as high-grading is essentially done at this point with integration.
Noral Parks: Yes, so we, as we brought the Interplus reserves over into our system, clearly we had to follow U.S. and SEC rules as opposed to Canadian rules that Interplus followed, so that rolls through. We also like to, we generally take a bit of conservative stance on our PUD bookings, and so we're not fully booked out to the five years, and that has been a long-standing practice of the organization, and so, yeah, so the reserves we've released incorporate both those
effects.
Great. Thanks a lot.
Fantastic. Thanks, Noel.
Thank you.
Speaker Change: Ladies and gentlemen, as a reminder, should you have any questions, please press the star key followed by the number 1.
We'll pause a moment for any further questions.
Speaker Change: There are no further questions at this time. I will now turn the call over to Danny Brown with closing remarks.
All right, thanks Andrew.
Speaker Change: Cord has substantial yet low decline and high oil cut production base, which is paired with a deep
Speaker Change: portfolio of highly economic, lower risk, conservatively spaced, and oil-rich inventory. We feel great about what we've accomplished and have a lot of confidence in our ability to deliver going forward. With that, I appreciate everyone's interest and thanks for joining our call.
Speaker Change: Ladies and gentlemen, this concludes our conference call for today. We thank you for participating and ask that you please disconnect your lines.