Business Overview: Building a Powerhouse through Prudent Moves

Chord Energy's origins trace back to 2007 when it was founded as Oasis Petroleum Inc., focused on the acquisition, exploration, development, and production of crude oil, natural gas liquids, and natural gas in the Williston Basin. The company faced significant challenges in 2020, leading to a strategic bankruptcy filing. However, Oasis successfully emerged from this process with a significantly reduced debt load and a strengthened balance sheet, positioning it for future growth opportunities.

In 2021, Oasis completed a strategic acquisition of oil and gas properties in the Williston Basin, expanding its footprint and enhancing its inventory of high-quality, low-cost drilling locations. This move set the stage for the transformative merger with Whiting Petroleum Corporation in 2022, which led to the creation of Chord Energy Corporation. This merger of equals established Chord as one of the largest producers in the Williston Basin, with significant scale and operational synergies.

The integration of Whiting's assets and operations presented a key challenge for Chord in 2023 and 2024. However, the company successfully navigated this process by incorporating best practices from both organizations, resulting in substantial operational and corporate synergies. This integration solidified Chord's position as a basin leader and set the stage for its continued success.

Building on its strengthened position, Chord made another strategic move in 2024 with the acquisition of Enerplus Corporation, further expanding its Williston Basin acreage to 1.25 million net acres and cementing its status as the largest operator in the basin. This expanded scale, combined with Chord's focus on operational efficiency and capital discipline, has enabled the company to generate robust free cash flow and support its compelling shareholder returns program.

Financial Strength: Striking the Right Balance

Chord's financial performance has been equally impressive. For the full year 2024, the company reported revenue of $5.25 billion, a 34.6% increase from the prior year. Net income stood at $848.63 million, translating to diluted earnings per share of $16.02. The company's operating cash flow reached $2.10 billion, allowing it to fund its capital expenditures of $1.18 billion while still generating substantial free cash flow of $918.15 million.

The fourth quarter of 2024 showcased Chord's continued momentum, with revenue of $1.45 billion, representing a 50.8% year-over-year growth compared to Q4 2023. Net income for the quarter reached $210.60 million. The company's adjusted free cash flow for Q4 2024 was approximately $282 million, exceeding expectations due to strong operational performance.

Liquidity

Chord's balance sheet also reflects its financial prudence. As of December 31, 2024, the company had $36.95 million in cash and cash equivalents and $842.60 million in long-term debt, resulting in a net debt position of $805.65 million. This conservative leverage profile provides Chord with ample flexibility to navigate market volatility and pursue value-accretive opportunities.

The company's debt-to-equity ratio stood at 0.10 as of December 31, 2024, indicating a conservative capital structure. Chord maintained strong liquidity with $1.10 billion available, including $37 million in cash and cash equivalents and $1.0 billion of unused borrowing base capacity under its $3.0 billion revolving credit facility. The current ratio of 0.94 and quick ratio of 0.88 as of December 31, 2024, demonstrate the company's ability to meet its short-term obligations.

Operational Excellence: Driving Efficiency through Innovation

Chord's operational prowess is a key driver of its success. The company has been at the forefront of innovative drilling and completion techniques, with a focus on longer lateral wells. In 2024, Chord successfully drilled and completed its first four-mile lateral well, a significant achievement that showcases the team's technical capabilities.

The company's efforts to improve cycle times and maximize capital efficiency have paid dividends. In 2024, Chord reduced drilling cycle times on three-mile wells by approximately 1.5 days compared to 2023, while also increasing lateral feet completed per day by around 40% through the use of simul-frac operations. These operational enhancements have translated into superior capital productivity, as evidenced by Chord's position as one of the most efficient operators in the Williston Basin, according to a third-party research firm's assessment.

For the year ended December 31, 2024, Chord's average daily production reached 232,740 barrels of oil equivalent per day (Boepd), comprised of 57% crude oil, 19% NGLs, and 24% natural gas. The company's average realized prices, including the effect of derivative settlements, were $73.69 per barrel of crude oil, $9.92 per barrel of NGLs, and $0.84 per Mcf of natural gas.

During 2024, Chord completed 142 gross (93 net) operated wells and had 98 gross (74.5 net) wells in the process of being drilled or completed as of the end of the year. Looking ahead to 2025, the company plans to run 4 to 5 operated rigs during the majority of the year and expects to turn in-line approximately 130 to 150 gross operated wells with an average working interest of approximately 78%.

Commitment to Sustainability: Balancing Profitability and Responsibility

Chord's focus on operational excellence extends beyond just financial metrics. The company has also demonstrated a strong commitment to sustainability, putting safety first and minimizing its environmental impact. Chord has made progress on its gas capture initiatives, capturing substantially all of its natural gas production in North Dakota as of the end of 2024.

Furthermore, the company has established a Safety and Sustainability Committee at the Board level to oversee its environmental, social, and governance (ESG) strategies, policies, and goals. Chord's efforts to operate responsibly have earned it recognition as a leader in the industry's transition towards a more sustainable future.

Shareholder Returns: Delivering Value through Disciplined Capital Allocation

Chord's capital allocation strategy has been a key differentiator, as the company has consistently prioritized shareholder returns. In 2024, the company returned $944 million to shareholders, representing an impressive 100% of its adjusted free cash flow. This includes a 4% increase in the base dividend to $1.30 per share, as well as aggressive share repurchases that have reduced the company's outstanding shares by more than 5% since the Enerplus acquisition.

Chord's commitment to shareholder returns is further underscored by its three-year outlook, which targets a maintenance capital program and the return of a significant portion of its free cash flow to investors. This disciplined approach, combined with the company's robust free cash flow generation, positions Chord as an attractive investment proposition in the current market environment.

Risks and Challenges: Navigating Commodity Price Volatility

Like any E&P company, Chord is not immune to the inherent risks associated with commodity price fluctuations. Volatile oil, natural gas, and natural gas liquids (NGL) prices can have a significant impact on the company's financial performance and cash flows. To mitigate this risk, Chord actively manages its commodity price exposure through the use of derivative instruments.

Additionally, the company operates in a highly competitive industry, which could impact its ability to acquire new acreage, retain skilled personnel, and market its production. Chord also faces regulatory and environmental risks, as well as potential operational challenges, such as infrastructure constraints and weather-related disruptions.

Nonetheless, Chord's strong balance sheet, operational excellence, and disciplined capital allocation strategy equip the company to navigate these challenges and capitalize on the long-term potential of the Williston Basin.

2025 Outlook: Maintaining Momentum through Disciplined Execution

Chord's guidance for 2025 underscores its commitment to disciplined growth and value creation. The company plans to maintain a maintenance capital program, with plans to run 5 rigs initially, decreasing to 4 by mid-year, along with 1 full-time frac crew plus 1 spot crew. This approach is expected to result in the completion of 130-150 gross wells in 2025, including 22-32 in the first quarter.

The 2025 program is designed to deliver production levels similar to pro forma 2024, with oil production expected to range between 152,000-153,000 barrels per day. Chord anticipates investing approximately $1.4 billion in capital expenditures to support this production level. Notably, over 40% of the 2025 turn-in-line wells are planned to be 3-mile laterals, increasing to over 50% in 2026-2027, showcasing the company's focus on operational efficiency and resource maximization.

From a financial perspective, assuming an oil price of $70 per barrel and natural gas price of $3.50 per MMBtu, Chord projects generating around $860 million in free cash flow for 2025, with a reinvestment rate of approximately 60%. This projection highlights the company's ability to generate substantial cash flow even in a moderate commodity price environment, providing flexibility for continued shareholder returns and potential growth opportunities.

Conclusion: A Compelling Investment Opportunity

Chord Energy Corporation has emerged as a formidable player in the Williston Basin, leveraging its scale, operational prowess, and financial discipline to deliver consistent performance and shareholder value. The company's strategic initiatives, including the transformative Enerplus acquisition, have positioned it for continued success, while its commitment to sustainability underscores its responsible approach to energy production.

With a robust free cash flow profile, a conservative balance sheet, and a shareholder-friendly capital allocation strategy, Chord offers investors a compelling opportunity to participate in the resilience of the Williston Basin and the broader energy transition. As the company continues to execute on its strategic priorities and maintain its operational excellence, Chord Energy stands out as a well-positioned E&P player worthy of close consideration in the dynamic energy landscape.