DEFA14A: Chord Energy Exceeds Q1 Expectations, Declares Dividend, and Nears Enerplus Merger Completion

Chord Energy reported strong Q1 2024 results, exceeding oil production guidance and maintaining low operating expenses, while also progressing towards its merger with Enerplus.

Summary

• Chord Energy Corporation announced its first quarter 2024 financial and operating results.
• Oil volumes exceeded the high end of guidance at 99.0 MBopd.
• Lease Operating Expense was below the low end of guidance at $10.39/BOE.
• Total volumes reached 168.4 MBoepd.
• E&P and other CapEx totaled $257.7MM, including $3.9MM of reimbursed non-operated capital.
• Net cash provided by operating activities was $406.7MM, and net income was $199.4MM.
• Adjusted EBITDA was $464.8MM, and Adjusted Free Cash Flow was $199.6MM.
• Chord and Enerplus expect to complete their merger on May 31, 2024.
• Share repurchases totaled $30.0MM at a weighted average price of $155.20 per share.
• A base-plus-variable cash dividend of $2.94 per share was declared.
• The company expects to TIL 103-113 gross operated wells in 2024.
• Chord anticipates generating approximately $1.9B of Adjusted EBITDA and $870MM of Adjusted Free Cash Flow in 2024.
• Chord expects to capture more than $150MM of synergies from the Enerplus merger, excluding upside from stock-based compensation or cost of capital.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong Q1 results, progress on the Enerplus merger, and a commitment to shareholder returns. While there are risks associated with the merger and commodity price volatility, the overall tone is optimistic.

Positives

• Oil production exceeded guidance.
• Lease Operating Expense was below guidance.
• The merger with Enerplus is progressing as planned.
• The company is returning capital to shareholders through dividends and share repurchases.
• Strong well performance and improved cycle times drove results.
• The company expects to generate approximately $1.9B of Adjusted EBITDA and $870MM of Adjusted Free Cash Flow in 2024.

Negatives

• Natural gas volumes were lower than originally guided.
• Natural gas price realizations were adjusted to reflect current market conditions.

Risks

• The merger with Enerplus is subject to customary closing conditions and regulatory approvals.
• The company's performance is subject to commodity price fluctuations.
• Integration of Enerplus may present challenges in realizing expected synergies.
• Changes in governmental regulations or enforcement practices could impact operations.
• The risk of any litigation relating to the proposed Arrangement.

Future Outlook

Chord expects to update its 2024 guidance following the completion of the transaction with Enerplus. On a standalone basis in 2024, Chord continues to expect to TIL 103-113 gross operated wells and generate approximately $1.9B of Adjusted EBITDA and $870MM of Adjusted Free Cash Flow.

Management Comments

• Chord delivered exceptional operational performance in the first quarter.
• The team rebounded quickly from difficult weather conditions in January while improving cycle times in our development program and exhibiting the strongest quarterly safety performance in company history.
• This improved operational performance, coupled with strong well performance, drove first quarter oil production and free cash flow above expectations.
• Shareholder returns remain robust, supported by deep, low-cost inventory and excellent capital efficiency.
• Chord and Enerplus remain on track to combine at the end of the month, creating a premier Williston Basin operator with enhanced scale, significant low-cost inventory, financial strength, and peer-leading shareholder returns.
• The Chord and Enerplus teams are working diligently to identify incremental synergies and expect to see more than $150MM of synergies captured, excluding upside from stock-based compensation or cost of capital.
• We remain focused on our core operating philosophy emphasizing capital discipline, improving operational efficiency and returns, and sustainable practices.
• We remain excited about the oil and gas industry and the value we bring to the world.

Industry Context

The merger between Chord Energy and Enerplus reflects a trend of consolidation in the oil and gas industry, particularly in the Williston Basin. Companies are seeking to increase scale, improve efficiency, and enhance shareholder returns through strategic combinations.

Comparison to Industry Standards

• Chord's focus on capital discipline and free cash flow generation aligns with industry best practices.
• The expected synergies of over $150MM from the Enerplus merger are significant and could provide a competitive advantage.
• Companies like Continental Resources and Devon Energy are also focused on shareholder returns and capital efficiency in the current environment.
• Chord's operational performance, particularly in terms of LOE, compares favorably to peers.
• The company's deep, low-cost inventory positions it well for future growth.

Stakeholder Impact

• Shareholders will benefit from dividends and share repurchases.
• Employees may experience changes as a result of the merger with Enerplus.
• Customers will likely see continued reliable supply of oil and gas.
• Suppliers may see increased opportunities as the combined company grows.
• Creditors should be reassured by the company's strong financial position.

Next Steps

• Complete the merger with Enerplus on May 31, 2024.
• Update 2024 guidance following the completion of the merger.
• Continue to focus on capital discipline and free cash flow generation.
• Realize synergies from the Enerplus merger.
• TIL 103-113 gross operated wells in 2024.

Key Dates

Keywords

Chord Energy, Enerplus, merger, dividends, share repurchase, oil production, financial results, Williston Basin, EBITDA, Free Cash Flow