Good morning, ladies and gentlemen, and welcome to the Chord Energy First Quarter 2024 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, May 8, 2024. And I would now like to turn the conference over to Mr. Richard Robuck, Chief Financial Officer. Thank you. Please go ahead.

Thanks, Ina. Good morning, everyone. This is Richard Robuck. Today, we're reporting our first quarter 2024 financial and operating results. We're delighted to have you on our call. I'm joined today by Danny Brown, our CEO; Michael Lou, our Chief Strategy Officer and Chief Commercial Officer; Darrin Henke, our COO; and other members of the team. Please be advised that our remarks, including the answers to your questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently disclosed in our earnings releases and conference calls. Those risks include, among other things, matters that we have described in our earnings releases as well as our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During this conference call, we will make references to non-GAAP measures, and reconciliations to the applicable GAAP measures can be found in our earnings releases and on our website. We may also reference our current investor presentation, which you can find on our website. With that, I'll turn the call over to our CEO, Danny Brown.

Thanks, Richard. Good morning, everyone. Thank you for joining our call. I know this is a very busy morning, so I'll get right to my comments. I plan to review our first quarter performance and return of capital, our full year stand-alone outlook and provide some updates on our pending combination with Enerplus before passing it over to Darrin Henke. Darrin will give some color on operations before passing it back to Richard for a little more detail on our financial results. We'll then open it up to Q&A. So in summary, what a great quarter. We announced a very important and impactful combination with Enerplus and delivered another quarter of strong operational performance. First quarter 2024 resulted in oil volumes above expectations, driven by strong well performance and accelerated activity due to cycle time improvements. And I want to take a moment to thank the Chord team for demonstrating tremendous resiliency during the unusually cold weather that swept through North Dakota in January. While we experienced significant downtime, the Chord team responded quickly and got production back online fast, and most importantly, safely. In fact, I believe we had some of the best performance in the basin on these items, and I just want to extend my personal gratitude to all those that made it happen. The strong production we saw in the first quarter has underpinned Chord's financial performance and led to robust free cash flow generation, which was above expectations. We generated $204 million of adjusted free cash flow during the quarter, and in accordance with our return of capital framework, we'll return 75% of this free cash flow to shareholders. To that end, given our base dividend of $1.25 per share and our share repurchases in the quarter of $30 million, which were limited given the…

Thanks, Danny. We had a solid quarter as the team continues to execute with excellence. Our wedge production benefited from strong well performance and improving cycle times, while our base production rebounded quickly from the January weather disruptions. The Chord team has enhanced our facility design in recent years and has the equipment and processes in place to mitigate downtime and rebound quickly when there are outages. Operationally, we continue to be encouraged by the progress we're making on 3-mile laterals, of which, we executed about 80 to date. While it's still early days, on average, performance is meeting or exceeding our expectations and one can clearly observe contribution from the furthest portions of the lateral. We're also seeing an uplift compared to the 2-mile analog wells in each prospect area, which is increasing over time. You can find additional details on Slide 9 of our updated investor presentation, where we've provided performance data on 3-mile wells in Painted Woods that were [ TILd ] in the third quarter of last year. Additionally, we provided incremental details on the anticipated 3-mile production forecast over time and also the expected 40% uplift. It's important to understand that all else equal, production per lateral foot from 3-mile wells will initially be below the 2-mile analogs. This mostly reflects facility constraints and managed flowback, which generally keep volumes in a certain band for the initial productivity period. However, over time, the 3-mile well production per lateral foot catches up with the 2-mile wells given shallower declines, which ultimately leads to higher recovery. We expect 3-mile wells to deliver approximately 40% more EUR for about 20% more capital. This capital efficiency primarily comes from leveraging the vertical section of the wellbore as well as locations, roads and infrastructure while using similar-sized facilities. Chord has…

Thanks, Darrin. A quick heads up, my comments regarding guidance will not include pro forma impacts of Enerplus, as we'll be incorporating a combined look post close. In the first quarter, Chord generated adjusted free cash flow of $204 million. Looking at the puts and takes, strong volumes and lower operating costs largely offset capital costs that were at the high end of the range, while natural gas realizations were below our February 4 cash projections. Our volumes were strong in the first quarter, up 2.6% of our midpoint guidance, while total volumes were about 1% above midpoint guidance. First quarter adjusted CapEx of $254 million excluded $4 million of CapEx, which will be reimbursed in conjunction with sales of nonoperated assets. As Danny mentioned, our program has accelerated a bit from what we expected in February, which is reflected in our first quarter results and second quarter guidance. On a full year basis, there were no changes to oil volumes and capital spending guidance that we outlined in February. Oil realizations in the first quarter averaged $1.71, $1.71 below WTI, slightly favorable in midpoint guidance. As we look through the balance of 2024, the first quarter oil differential is expected to be wider than the rest of the year, with Bakken pricing expected to improve as the TMX pipeline begins operating. For the full year, we expect crude realizations to reflect a modest discount to WTI. NGL realizations as a percent of WTI were in line with midpoint guidance, while gas realizations fell below our guidance range. As a reminder, certain marketing fixed fees are deducted from our realized gas and NGL prices. This drives higher operating leverage, which hurts realizations for both NGLs and gas at times of weaker prices. With gas prices trading at low levels, the…

[Operator Instructions] Your first question comes from the line of Neal Dingmann from Truist Securities.

Nice quarter. Danny, my first question is maybe on your post Enerplus D&C plans, I know maybe just what you can talk around this, specifically, I believe Chord has been running around 2 to 3 rigs, and Enerplus, 2. And I'm just wondering, you mentioned some time in your prepared remarks that it seemed like you suggested that guidance would stay relatively the same given, or you didn't want to raise guidance given your commitment to staying relatively flat. And I'm just wondering, with that said, is it fair to assume potential downside to CapEx if these operational efficiencies that you and Darrin's team are continuing to see, if you're able to continue to do that.

I think that's -- thanks for the question, Neal. Yes, I think that's fair. What we -- we've got -- we're doing really well as an organization. The efficiencies are coming through. Cycle times are improving down. And what we're -- we're not interested in chasing production higher and higher. We think sort of a flat+ program that we've talked about many times is kind of the right way to run the organization. And that's -- our thoughts on that hasn't changed. And so as we see these efficiencies move through, as we're able to pull more capital out of the system, instead of plowing that into more activity, we'll probably keep our activity about sort of similar to what it would have been otherwise, and just to let more free cash flow flow through the system.

Love to see that. Okay. And then just secondly, on future LOE specifically. I'm just wondering, you recently cut some workover rigs, but you've done a nice job just on that workover program. I'm just wondering, outside of weather, what I would call something abnormal, what do you all envision is your sort of a typical workover plan, maybe with or without Enverus or Enerplus? What do you assume on a kind of workover plan? I'm trying to get an idea if the plan will be about where it is today, would you ramp it back up? Or how should we think about that workover or rework plan going forward?

Yes. I'll ask Darrin to provide some commentary here in a moment, but maybe just give my thoughts first. I think what you should expect, Neal, is we've got a significant workover rig program. There's probably some seasonality in it. So some quarters, it may be a little higher than others. We've been working really, really hard to try and optimize our cost emits. We recognize it's a big portion of our LOE and that as we can get more efficiencies through the system and do that work better. We should be the beneficiaries of sort of lower cost in that structure. So that's certainly a focus for us, that could include reducing the number of rigs, moving to more tower rigs from more efficient operations and lots of different things. But from an Enerplus perspective, they have, I'd say, their workover program is sort of comparable to ours on a flowing barrel, on a well basis. And so I don't anticipate a huge amount of changes other than our focus on continuous improvement, but I'll ask Darrin to maybe provide his thoughts on it.

Yes, Neal, we've -- since third quarter of last year, we've been able to reduce our workover costs on our [ rod ] repair jobs by about 15%, just really focusing on how we conduct our operations and being the most efficient operator possible. We've also been able to improve our run times so that we actually don't need as many rigs as maybe we did historically. So when you look at Enerplus relative to Chord, the run times at quarter are slightly longer than what Enerplus has been experiencing. And so I think when we put the 2 companies together, we'll be able to glean some additional efficiencies, increase in run times as well as a decrease in the overall workover program.

And your next question comes from the line of David Deckelbaum from TD Cowen.

I wanted to ask a follow-up just on guidance for this year. Obviously, you left the full year unchanged. And just given a historical bias to producing more in the back half of the year, I was surprised that the implication is that you'd more or less be flattish from the second quarter. I know that there's obviously pretty even TILs throughout the first half and the back half of the year. But if we think about the summer seasonality and that uptick there, it would seem that you guys should have increased production in the back half of the year, unless I'm thinking about that incorrectly. I know that you guys talked about managing the program to fit within the capital budget. But is there something else that would be impacting the production side that would otherwise keep those volumes flat?

Yes. Thanks for the question, David. I think we'll actually -- we anticipate having maybe fewer TILs in the back half of the year than in the front half of the year as we window out a frac crew and a drilling rig. So our activity, actually, we anticipate will fall as we move into the third quarter. And so as a result of that, that TIL balance is going to be slightly tilted toward the front half of the year, not the back half of the year. And so what that's going to do is provide, instead of sort of a more cyclical production profile, it should provide a more stable production profile quarter-on-quarter. And I think that's the impact you're going to see. So as we continue to see strong performance, again, we're not really looking to chase activity higher as we go faster. We'll just slow the activity down a little bit and let more free cash flow flow through.

I appreciate that. And maybe you can revisit some of the commentary around potentially doing better on some of the synergies with Enerplus. I know it's probably too early to talk about some of those. But I know a lot of us are intrigued about the potential to kind of repermit some of their locations in the 3-mile laterals on a go-forward basis, and you've obviously had some increased success on your own program. Has the timeline -- how you guys think about achieving that changed as you look at integrating some of these assets? Or is that something that's still likely not impactful until 2026?

Well, I think from a development program standpoint, so for new wells that we're doing, we're probably -- we're likely to see really the impact of that in 2025, not in 2026, and so we've been working as separate organizations as is appropriate until close. We won't really get a full new integrated development plan put together until post close. And so internally, we've been -- we used the phrase coiling the spring. So we're coiling the spring here, getting ready to sort of jump on this as soon as we close. We've done as much integration planning as we can up until that point. Once we close, we'll put full integrated development plans together, which I anticipate will go largely into effect in 2025. So I think you'll see really those benefits, at least from a practice standpoint, move through in 2025. So a lot of those synergy captures in 2025. Now with respect to repermitting and replatting, that process obviously takes a little longer. And so we'll need to put the acreage together, play the geometry games of replatting out. And so maybe the impact of moving from currently planned 2-mile laterals to future planned 3-mile laterals may be a little later in the process. But from an activity standpoint, we should see that synergy savings roll through in, I'd say, early 2025 and maybe the opportunity for replatting into 3-mile laterals and moving some of that development plan over maybe later in the year.

And your next question comes from the line of John Annis from Stifel.

For my first one, staying on the synergies, Enerplus has been active on the simul-frac front. And if I'm not mistaken, that's one area Chord hasn't really leaned into yet. Can you provide your thoughts on incorporating the simul-frac development program and the potential cost savings associated with it?

Sure thing. Happy to do that. So you're exactly right. Enerplus has done a great job implementing simul-fracs as well as they recycle more produced water in their frac operations than we do. And so those are some learnings that we intend to implement immediately really midyear this year going forward. And so the savings when you combine the recycling the water along with simul-fracking is probably going to work out plus or minus $100,000 per well in savings. Some other things that Enerplus has done really well is they use more vapor recovery units as far as capturing gas off of their facilities, and that's something that you'll see Chord implement as well to help with our gas capture going forward.

Makes sense. And a quick clarification. Are those savings already included in the $150 million synergy target?

The savings I've talked about are in those numbers.

Makes sense. For my follow-up, with the 4-mile laterals planned for later this year, can you offer any preliminary expectations regarding potential cost savings and ultimate EUR, either from the subsurface work you have done or analogs across the basin?

So I think from a 4-mile lateral standpoint, obviously, it's sort of early days for us in that. We would anticipate that similar to as we underwrite a 4-mile lateral program, we'll obviously be looking at some incremental degradation on the fourth mile delivery, just like we've looked at incremental degradation of a 3-mile delivery as opposed to 2 mile. And so I think we're encouraged that maybe we've been a little too conservative on that from a 2- to 3-mile standpoint. Again, we'll provide some more clarity on that as we get a little more data in as we get toward the end of the year. But as we increase our learnings through that 3-mile process, we'll plow that into 4 mile. I'd say that the -- from a drilling perspective, we're very confident that the 4 mile shouldn't provide too much of a technical challenge for us from a proppant placement standpoint, we feel confident we can place our proppant appropriately out to 4 miles. I think the cleanout is probably the technical challenge that we have most, just with existing coil, certainly, coiled tubing cleanout will be a big challenge for us. In a lateral that's long, it probably will require some stick pipe. But we do anticipate sort of similar to moving from 2 and 3 miles, you can think about there's still huge advantages in leveraging the vertical section of the well, the facilities that you've got, the roads that bring you to the pad, et cetera. And so if you can imagine going from a 2-mile development program to 1 4-mile development program that provides a real opportunity. And so I'm not sure how much we're envisioning 4 mile is replacing 3 miles. But where we got geometry that doesn't lend itself to 3-mile development, but really is lending itself to 2-mile development. Certainly, a 4-mile well instead of a 2-mile well could be a big uplift for us. And so that's what we're -- that's really what we're excited about.

And John, just to add to that a little bit. The 3 mile, on a Chord stand-alone, we've been talking about 60% of our inventory is in that 3-mile category, which means that 40% is open to being able to continue to extend on a combined basis, we're about 40% in the 3-mile identified category. So the 4-mile lateral will just give us more opportunities, as Danny mentioned, to have more shapes, if you will, to get a larger portion of that inventory into either 3 or 4 mile, thus increasing the capital efficiency across the program. So there's a lot of opportunity left in the program, and we think the 4 mile will just add to that.

[Operator Instructions] And your next question comes from the line of Sean Mitchell from Daniel Energy Partners.

You guys had impressive improvements on drill times -- sorry about that, drill times year-over-year. Is this improvement around more the size of the hammer or well designed in the form of drilling fluids, drilling mud, et cetera?

It's a great question. The team has done a fabulous job driving down our cycle times on the drilling front. And it's a combination of working with our vendors on bit design and advancing our bit design, you hit the nail on the head with respect to the drilling mud that we use and the properties of that mud and how we're able to drill the wellbores really quickly, but also keep the laterals clean while we're doing that. And of course, having good laterals that we can get the pipe to bottom with no problem and cemented in place. So it's not really any one individual area. It's just -- it's Chord's commitment to continuous improvement. We're never going to rest with what we've done historically. We have set the record for the fastest 3-mile well in the basin, but that doesn't mean we're going to sit back and be comfortable with those results. We'll continue to focus and look for additional wins to drive down those cycle times.

Got it. And maybe a follow-up, just several of your competitors or peers are talking about refracs in the Bakken and the Eagle Ford. How do you guys think about the refrac market? Do you think about it? I think Enerplus does some, but any color around that would be helpful.

Yes. I think we're open to refracs. We think we've got some opportunity within our program to do those. We candidly, the greenfield development program we have right now is really compelling. And -- but as we have opportunities to do refracs, particularly in areas where we see development in the area. So we've already got wells shut in, in the area. We've already got wells frac protected in the area. Those areas, doing refracs at that moment is -- it would be difficult for the refrac itself to justify going back into areas like that to shut wells in, to frac protect them because there's expense and costs associated with all of that. And so I think you'll see us focus on refracs in that manner as a stand-alone program for us. We are observing others. We're learning from our own practices and we'll move forward. One of the reasons you go in and do a refrac program is really the original wells were maybe understimulated, at least relative to modern expectations in the first place. And we've got a few areas in the field that are like that. But generally speaking, I think the legacy organizations did a pretty good job upfront. And so maybe there's not as much meat on the bone or maybe for some others, but still an interesting program that we're looking at.

There are no further questions at this time. I will now hand the call back to Mr. Danny Brown, CEO, for closing remarks.

Thanks, Ina. Well, to close out, we appreciate everyone's time today and interest in our company. I also want to thank our employees for their continued commitment and dedication because they really are the backbone to our success. We pride ourselves on being strong capital allocators and doing the right thing for shareholders. We remain more excited than ever about the merits of the combination with Enerplus, which will accelerate Chord's beneficial rate of change as it relates to improving returns and value creation and look forward to updating the market on our progress as we move through that process. And with that, thanks to everyone for joining our call.

This concludes today's call. Thank you for participating. You may all disconnect.