Chord Energy Corporation reported financial and operating results for the second quarter 2024. The results for the three and six months ended June 30, 2024 include the results of Enerplus Corporation ("Enerplus") for the period subsequent to May 31, 2024, unless otherwise noted.
2Q24 Operational and Financial Highlights:
Oil volumes of 118.1 MBopd were at the high-end of guidance reflecting strong well performance and lower downtime;
Total volumes of 207.2 MBoepd were above the high-end of guidance;
E&P and other CapEx was $314.3MM ($298.2MM, excluding $16.1MM of capital incurred related to divested non-operated assets that will be reimbursed and was not in guidance), below the low-end of guidance reflecting program timing;
Lease Operating Expense ("LOE") was $9.37 per Boe. LOE performance was favorable to expectations and benefited from lower maintenance associated with improved downtime;
Net cash provided by operating activities was $460.9MM and net income was $213.4MM;
Adjusted EBITDA(1) was $567.9MM and Adjusted Free Cash Flow(1) was $216.1MM;
Enerplus combination closed May 31, 2024, creating a premier Williston Basin operator; and
ESG and sustainability initiatives progressing with a focus on continually improving safety and emissions.
2Q24 Shareholder Return Highlights:
Return of capital set at $197MM(2), or 75% of Adjusted Free Cash Flow on a pro forma basis of $262.8MM(1,2);
Share repurchases totaled $61.7MM (weighted average price of $169.01 per share), of which $21.1MM was repurchased with cash proceeds from warrants exercised during 1H24; and
Declared a base-plus-variable cash dividend of $2.52 per share of common stock. See "Return of Capital" below for additional information.
"Chord's strong second quarter performance benefited from both solid well performance and lower levels of downtime," said Danny Brown, Chord Energy's President and Chief Executive Officer. "Production levels and cost control drove free cash flow above expectations. In addition, the combination with Enerplus closed during the quarter, creating a premier Williston Basin operator with enhanced scale, significant low-cost inventory, financial strength, and peer-leading shareholder returns. I'm grateful for the dedication and hard work of both the Chord and Enerplus teams, as we have made substantial progress on the integration and continue to see over $200MM of annual synergies, which is well above original expectations."
Mr. Brown continued, "Chord's outlook is compelling as the combination with Enerplus significantly accelerates our rate of change as it relates to improving economic returns and value creation. Chord has been a leader in wider spacing and extending lateral length, which has improved both the predictability and economic returns of its inventory. By maintaining capital discipline and an attractive reinvestment rate, the Company has improved the capital efficiency of its program, reduced its corporate decline rate, and been a leader in returning cash to shareholders while operating in a safe and sustainable manner."
On a pro forma basis Chord had 58 gross (42.9 net) operated turn-in-line ("TIL") wells in 2Q24.
During the three months ended June 30, 2024, net cash provided by operating activities was $460.9MM and net income was $213.4MM ($4.25/diluted share). Adjusted EBITDA was $567.9MM, Adjusted Free Cash Flow was $216.1MM and Adjusted Net Income was $234.9MM ($4.69/diluted share). Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted Net Income are non-GAAP financial measures. See "Non-GAAP Financial Measures" below for a reconciliation to the most directly comparable financial measures under GAAP.
Enerplus Integration Update:
On May 31, 2024, Chord and Enerplus completed their previously announced combination, establishing Chord as a premier operator in the Williston Basin with enhanced size and scale. Chord has a proven track record of successfully integrating assets in the Williston Basin and anticipates implementation of best practices and operating efficiencies from the combination with Enerplus to further enhance Chord's positive rate of change. Chord continues to make substantial progress integrating the Enerplus assets and remains on pace to achieve its target of over $200MM in annual synergies, which was increased in May from the original target of up to $150MM.
Updated Outlook:
Chord is updating its FY24 guidance to reflect the completion of the combination with Enerplus and remains on target with its 2024 plan. Chord expects to generate approximately $2.9B of Adjusted EBITDA and $1.2B of Adjusted Free Cash Flow on a pro forma basis in FY24, with a reinvestment rate of approximately 55% (actual prices for 1H24 and $80/Bbl WTI and $2.50/MMBtu Henry Hub for 2H24).
Certain reclassifications have been made to the historical presentation of Enerplus' financial statements to conform to Chord's accounting policies and presentation. Enerplus expensed certain items through LOE that Chord will deduct through gas and NGL revenues or charge through capital. Additionally, Enerplus capitalized certain G&A charges that Chord will expense. The net impact of these changes relative to Enerplus' standalone reporting is lower LOE, lower gas and NGL revenues and slightly higher capital. The impact of these changes is expected to be neutral to Adjusted Free Cash Flow before factoring in synergies. For more information, please reference Chord's August 7, 2024 presentation at https://ir.chordenergy.com/presentations.
Full year volume projections updated to account for strong 1H24 performance and the latest development schedule. 2H24 oil volumes are unchanged from the May outlook. Pro forma FY24 midpoint oil volumes increased 0.5 MBopd;
FY24 capital expenditures are unchanged from the May outlook (other than the impact of aligning Enerplus' accounting policies to Chord), while 2H24 capital reflects program timing and some spending deferred from 2Q24;
LOE reflects the benefits of effective cost control and lower downtime;
Overall combined cost structure favorable to expectations of each company entering the year; and
Adjusting oil differentials, gas realizations, and Cash GPT to reflect current market prices, the alignment of Enerplus' accounting policies to Chord's accounting policies and the incorporation of Enerplus' cost structure.
Cash taxes in 2H24 are expected to be 6% – 12% of Adjusted EBITDA at WTI prices of $70/Bbl – $90/Bbl, below the range of 8% – 14% referenced in May. Full-year cash taxes are trending slightly below original expectations.
For the three months ended June 30, 2024, Marcellus natural gas volumes were 117.4 MMcfpd, and the realized natural gas price was $1.56/Mcf.
Return of Capital:
Chord declared a base-plus-variable cash dividend of $2.52 per share of common stock, including a base dividend of $1.25 per share of common stock and a variable dividend of $1.27 per share of common stock. The dividends will be payable on September 5, 2024 to shareholders of record as of August 21, 2024. Details regarding the calculation of the variable dividend can be found in the Company's most recent investor presentation located on its website at https://ir.chordenergy.com/presentations.
During 2Q24, the Company repurchased 365,310 shares of common stock at a weighted average price of $169.01 per share totaling $61.7MM, of which $21.1MM was repurchased with cash proceeds from warrants exercised during 1H24. In addition, the Company repurchased $11.3MM of shares associated with tax withholding on vested equity awards during 2Q24.
