Chord Energy Corporation Price & Performance (CHRD)

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. 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. 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, then turn the discussion to our 2025 outlook. 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 and and A. So starting with 2024, last year was a transformational year for our organization we solidified our leading position in the Williston Basin entering into a combination with another leader in the basin, Enerplus.

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. And notably, we executed this transaction while maintaining our commitment to balance sheet 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. And to that point, I believe this is the best position the company has been in since I arrived years ago, 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. We have enhanced our economics by adopting leading edge practices such as long laterals and conservative spacing, which have lowered our breakevens in 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 attractive return of capital.

In short, we've demonstrated consistent delivery for shareholders and have additional catalyst for future upside. 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. 2024, on a pro form a basis, Corp returned $944,000,000 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. Outstanding and we expect a continued focus on share repurchases in the current environment which should yield per share growth across all key metrics. One example of this can be seen on Slide six 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 $2,000,000,000 in dividends, our strong inventory and lower reinvestment rate, and what we see as a compelling valuation on both an absolute and relative basis, which we highlight on Slide four, we see no reason why strong per share growth won't continue. Turning to fourth quarter results.

Core delivered another great quarter with solid operating results yielding free cash flow above expectations which supported robust shareholder returns.

Specifically, fourth quarter oil volumes were above the midpoint of guidance reflecting strong [indiscernible] While capital was below expectations, reflecting fluctuations in program timing. My thanks to our field, development and execution teams Chord delivering favorable results across the board in the fourth quarter. And really all of 2024. Fantastic job by all. This strong performance led to adjusted free cash flow for the fourth quarter of approximately and Core stepped up shareholder returns to 100% of free cash flow to take advantage of the discount we see in our shares. Share repurchases comprise all of our return of capital which was increased by 4% to $1.3 per share. Turning our attention to 2025.

As you'll recall, this past November, Cord released its first multiyear outlook and our 2025 guidance released last night demonstrates we're off to a strong start. 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.

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 Additionally, we are currently running one full time frac 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. Remainder of 2025 TILs are expected to be spread out across the year. Average working interest in 2025 is expected to be approximately 80% 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. In addition to the operated program, we expect to invest between $2.00 $5,000,000 and $225,000,000 on non operated opportunities approximately 80% of that the Williston, with a balance in Marcellus. The 2025 program is expected to deliver production similar to pro form a 2024, or between 152,000 to 153,000 barrels of oil per day with $1,400,000,000 of capital investment. This is approximately $90,000,000 less than last year on a same same basis and does include around $10,000,000 which slipped from the fourth quarter of last year into the first quarter of this year.

At benchmark prices of $70 per barrel of oil, and $3.5 per MMBtu of natural gas, expect to generate approximately $860,000,000 of free cash flow in 2025 with a reinvestment rate of around 60% for the year. [indiscernible] 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. In Slide seven of our investor presentation, you can find a third party research firm's assessment Of Chord, capital efficiency versus peers in 2024 and 2025, where you'll see that we're on the better end of capital productivity one of the few companies improving efficiency year on year. This reflects improving productivity, partially driven by our pivot towards longer laterals which Darren will discuss a bit more. Speaking of turning this over to Darren, the last thing I wanted to cover before doing so is our commitment [indiscernible] Chord is proud of our work providing reliable and affordable sources of energy so critical to every aspect of modern living. 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 with a focus on putting safety first, minimizing our environmental impact [indiscernible] and being a good partner in our communities.

So to summarize, Gord 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 substantial return of capital to shareholders. And with that, I'll turn it over to Darren.

Thanks, Danny. Operationally, Cord continues to hit our stride and we're off to a great start on our three year plan issued in November. We view this three year outlook as conservative as it assumes no further improvements in capital efficiency relative to our year end 2024 capabilities. 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. Currently, the three year plan projects over 50% to be three mile laterals. And Cord's total inventory is over 60% pre mile laterals on a lateral adjusted foot basis. 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. Just a quick update. On Fourmile laterals. Chord successfully drilled and completed our first four mile lateral and we just reached a TD exceeding 30,400 feet while cleaning out the frac plugs.

We're planning several more four mile laterals in 2025 and with success are likely to implement many more in 2026 and beyond. As a reminder, our initial approach to Fourmile wells will be converting to two mile DSUs to one four mile DSU. However, similar to Chord's evolution on the three 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 three mile inventory into four mile wells. 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.

Slide nine highlights the economic benefits of three mile laterals. Which deliver 50% more EUR than two mile wells for only 20% more capital. This relationship is consistent when comparing wells with analogous geology and well spacing. 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. On the lower right hand side of Slide nine, you can see a contrast between the two mile Chord well The F and D costs for the Western three mile well is actually better than the core two mile well. As lower D and C cost per foot more than offset the lower EUR per foot. Said another way, longer laterals outside the core actually actually have similar or better returns than two mile wells inside the Chord. As core wells generally have higher costs given the depth pressure other complexities that need to be managed.

Well productivity and EUR are certainly key factors generating attractive returns but the cost side is equally important.

The production profile of longer laterals also differs from shorter laterals. All else equal, a three mile well will deliver a slightly higher IP stay flat longer and exhibit shallower declines than a two mile well. When comparing NLOG well performance per foot of lateral Initially, three mile wells typically will typically be lower than two mile wells. As the higher IP is more than offset by the 50% longer lateral 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. CORE's choke methodology is more restrictive than most peers. Which prevents sand flow back and ultimately lengthens the life of our ESPs. Saving costs. We have been implementing this more restrictive choke program on the Interplus wells which will impact the optics of initial IP rates per foot Again, perfect performance is the appropriate way to judge well product But early data is often misleading. On Slide 10, you can see Cord's 2023 and twenty twenty four lateral length adjusted average well productivity relative to drilling and completion costs. 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.

As you can see, the twenty twenty four program is superior to 2023. We expect the 2025 'twenty six and 'twenty seven programs at a minimum to deliver similar capital efficiency as 2024. Turning to inventory, Slide five shows Chord's inventory depth and breakeven pricing versus peers as assembled by an independent research firm which strives to use similar modeling methods across each company represented. 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.

Additionally, we overlaid valuation mold analysis to illustrate Kord's attractive valuation.

Particularly in light of our relative inventory depth Lastly, I wanted to comment on Cord's Chord operational efficiency. Our teams continue to execute with excellence and aim to drive cycle times lower for both drilling and completions. On the drilling side, we reduced cycle times on three mile wells by about one point five days in 2024 and regularly set new records on the Inner Plus acreage.

On the completion side, our full time frac crews use Ensemble frac operations on most pads. Has driven down non productive [indiscernible] Lateral feet completed per day has increased by about 40% as compared to zipper fracs. Generating well cost savings and reaching first production quicker. Finally, downtime continues to be minimized as the core team successfully navigated very frigid weather in January and February. Keeping outages brief and getting volumes back online quickly. To sum it up, Court 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. Thanks, Darren.

I'll discuss fourth quarter performance, in more detail and give some color on 2025 guidance as well. In the fourth quarter, Core generated adjusted free cash flow of $82,000,000 which was above expectations due to strong volumes, better gas and NGL realizations lower capital and good cost control Oil volumes were above midpoint guidance, while total volumes Oil realizations in the fourth quarter averaged about $1.5 below WTI which was flat to prior quarters. We expect coil differentials to widen some in the first quarter of twenty twenty five following an increase in basin production [indiscernible] the fourth quarter it will improve gradually over the course of the year. NGL realizations were 14% from WTI the fourth quarter near the top end of our guidance range, natural gas realizations were stronger than expected at 43% of Henry Hub, benefited due to improving differentials for the regional benchmarks such as Ventura and AECO, which narrow the gap against Henry Hub in the fourth quarter. This typically happens when winter weather hits and in fact the benchmarks can exceed Henry Hub at times. This strength driven largely by cold weather, persisted in the first quarter, which is reflected in our guidance. As a reminder, certain marketing fixed fees are deducted from our NGL and natural gas prices.

This drives higher operating leverage which hurts realizations for both NGL and natural gas in times of weaker prices But realizations improve rapidly with higher prices, we saw in the fourth quarter, we continue to see the first quarter, 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. The net impact of seasonality is reflected in our full year guidance, with the first quarter realizations exceeding the full year expectations, [indiscernible] Turning to operating costs, fourth quarter LOE was below our expectation $9.6 per BOE, reflecting better downtime and lower workover costs. 2025 LOE guidance reflects modest escalation but this may prove conservative as it did in 2024 depending on downtime and workover spend levels. Fourth quarter cash GPT was $2.86 per BOE in line with our guidance. Fourth quarter cash G and A was $31,200,000 excluding $9,000,000 of merger related costs and quarterly G and A is expected to continue to trend downward in 2025 as we realize further synergies. Production taxes averaged 8.4% commodity sales in the fourth quarter and cash taxes were in line with our expectations.

We expect full year 2025 cash taxes to approximate 3% to 10% of EBITDA and first quarter cash taxes to approximate 1% to 7% of EBITDA each at oil prices of $60 to $80 Fourth quarter adjusted CapEx of $325,000,000 excludes $5,200,000 of reimbursed non operated capital and was $10,000,000 below midpoint guidance largely reflecting minor shifts in timing to 2025. Even with this shift, we are still planning on investing $1,400,000,000 in 2025 and $365,000,000 of that is in the first quarter. February 2025, the company completed its annual semi annual borrowing base redetermination setting the borrowing base at $2,750,000,000 and increasing the aggregate amount of elected commitments to $2,000,000,000 As of 12/31/2024, Cord had $45,000,000 drawn under its revolver $400,000,000 of senior unsecured notes, $37,000,000 of cash and $31,000,000 of letters of credit. Net leverage remained at 0.3x at year end 2024 as we returned 100% of our free cash flow to investors across the quarter. Separately, since our last update.

Derivative position as of February 24 can be found in our latest investor presentation.

In closing, thanks again to the Chord team for all their hard work on the integration front and for the intense focus on improving day to day operations. Are pleased with the substantial progress that we've made over 2024, the continued performance of the team and the position that they put the organization and to succeed going forward. So with that, I'll hand the call over to Andrew Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Our first question is from Scott Hanold from RBC. Please go ahead. Yes. Hey, thanks all. Can you give just some context around your outlook in Chord capital in 2025 and maybe even going forward? I mean, there's obviously you have a low and a high end of the range But can you just give us some sense of what drive you to lower end of the range this year? Is it like increasing to a simulcracker, just more experience with that? And what is the potential to see downside pressure on that $1,400,000,000 kind of three year outlook?

Hey, Scott, it's Danny. Thanks for the question. So we look at 2025, we're always going to provide ranges around these things. I do think [indiscernible] when we put this out in in November of last year and as we rolled forward that plan, We've taken a somewhat static view and don't don't include improvements in efficiency, cycle times, that sort of things in this. And so to the degree we see incremental improvements on that and candidly we see that year on year, Industry does and we certainly do too. That will roll through to the benefit of the overall program. So again, we like this be slightly conservative on these things and my expectation is, as we've got probably more downward pressure than upward pressure on that number. Certainly, we'll work through the year. I've mentioned before, we do like to have From a service standpoint, we do like to always be in the market a bit. And so we've always got contracts rolling off and on. And those things can move either direction I'll tell you where I sit now. Relative to commodity and activity levels, I I think we're probably flat maybe maybe some looseness in that along certain line items.

So a number of things could drive us lower. I think importantly, 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. We're The intent is to drill to deliver a maintenance production level. And if we see our wells performing stronger and hanging in, and we certainly have seen in the past encouraging things along those lines. We'd probably let capital float down a little bit to maintain that production level. So I think we've got several things that could push it down. Over a three year timeframe to the second part of your question, as Darren mentioned, this was all a static look. Improving no efficiencies relative to November of last year. And so as four mile laterals may come into the program, as we've as we will continue to get better just on the existing three mile and two mile legacy developments, All of that will Chord to the benefit of the capital program in 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.

Okay. That's appreciate that. And part of that too, and I hate to try to layer another question there, but I guess I missed it if you said it, but is the SAML frac your current pace of is it basically doing full Simul fracs for the year? Is that included in the plan as well?

Well, we've got on I mentioned we've got one one partial crew and one full crew. We're doing simul fracs with the full crew. We're actually doing we're not necessarily doing simul fracs with that partial crew. [indiscernible] And so Chord that full crew, that is all assuming simul frac. But as that efficiency improves, clearly you see some benefits you can see some benefits from that. But I think we've got a lot of that baked in. [indiscernible] Okay, got it. And then Chord my follow-up question, can we touch on shareholder returns? I mean, obviously, giving 100% of free cash flow was very robust in all buybacks. Like, look, your stock's up today, but it's still quite a bit under where you did your buyback in fourth quarter. I mean, does that should we look at that as pretty indicative of what you all might do going forward here, especially with your very low leverage? Does it make sense to continue to kind of push it towards that 100% and all incrementally being buybacks?

Well, what I'll say Scott is that we have at the end of the day, it's really a a capital allocation decision. 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, sort of retiring incremental debt doesn't make a lot of a lot of sense and we see our shares at this level as a really compelling capital investment opportunity.

Thank you. Your next question is from Derek Witt from Texas Capital.

Please go ahead.

Good morning, all and thanks for taking my questions.

Regarding three mile laterals, I want to thank you for your disclosures on the slides.

Nine and ten as it's been quite challenging to compare well productivity per foot between two and three mile laterals when they're over four variables you have to control for in that analysis.

Maybe setting aside costs 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 pre mile laterals given the benefit of additional reps? So I'll start with the latter 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 remodel laterals, not just with the drilling and completion. But I think importantly, getting cleaned out to toe and not just the cycle times the cost associated with getting down to down to the total well to clean that out. With respect to convergence on an EUR per foot basis, I think after about six months, we start to see that converge pretty well. We're getting to sort of till the 95% on an equivalent basis of two on a per foot EUR recovery, after around six months and you're essentially all the way there within a one year timeframe.

So that first three or four months is really where you see the difference. In the QMEURs. And so if you're focusing on that very early well timed 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 lateral Could you speak to what operational challenges you observed, if any, And then what do you see as the cost benefit for transitioning from three mile to four mile laterals after accounting for the cycle times?

I'm going to ask Darren to respond to that because he's been real close to first well as you can imagine.

Yes, Derek, knock on wood, the first four mile well, it's really gone off without a hitch. Spudgery release was fourteen point five days, the fastest well suspended in the basin four mile lateral at this point. And then the frac job went beautifully. Being able to pump the frac stages at the toe, we were somewhat concerned about what kind of rate would we be able to get going through all that pipe. With the friction losses, but all that went really well.

And we just as of this morning, we just reached TD drilling out the frac plugs and we're able to do that in one run. As well. So like I say, knock on wood, operationally, it's gone very well. We see similar to get to the second part of your question, relative to the performance of a four mile well, we think we'll see the same kind of uplift going from three miles to two miles, we'll see similar uplifts going from going from three miles to four mile well. [indiscernible] we're also looking at a lot of alternate shapes. People have different names for them. In the basin, but we're looking at ways to really dramatically change our inventory to three miles and four miles and perhaps down the road even beyond that. So a lot of work going on there and none of that as Danny said is in our three year plan. It's not baked into our long term inventory either at this point.

Great update. Thanks for your time.

Yes, sir.

Your next question is from Neil Dingmann from Truist. Please go ahead. Good morning. Thanks for the time guys. My question is just now with the integration, I guess, really like is on just your operational efficiencies for you or Darren. Continue to see the improvement not only going from the two to three miles and three to four miles. 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, where do you think some of those efficiency gains will be coming from? [indiscernible] question. Again, with incremental reps, you just get better. And so we're starting to get some reps under our belt from a three mile perspective into so we've seen that happen. Certainly, we saw a dramatic improvement last year from an efficiency perspective as we move to the and adopt the simul frac across the fleet. And so I think you'll see us continue to grind out incremental improvements three miles We're at serial number one of a four mile.

And so we've got plans to do a few more of those over course of the year and I think you'll probably see dramatic improvement on those even with strong start that Darren just mentioned. And so I'm sure the program won't be without its hiccups, they all are.

But what we know is, as we get more practice on these things and we do more, we see we seem to drive pretty quickly into the programs and far surpassed our original expectations going in. At least that's been my history with this industry and with this organization. So So I think we'll again, you'll see sort of a incremental improvements on the three mile, probably significant improvements on the four mile, which as we've talked about, we've this four mile program is really contemplated early on to replace two mile wells But if we're able to see sort of consistent delivery and uplift, you could see us start to replat some of these three miles to take advantage of I like that upside. And then, Ben, just push on M and A. As it stands today, I think you'll have ample or certainly ample inventory. But with that said, pristine balance sheet, I mean, again, I guess my question is what does the M and A landscape sort of look like to you today? And how actively do you think you all could be out there doing something?

Well, to your point, Neil, I think we are 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, it's not just about we do think there's a advantages to scale in this industry, but at the end of the day, the size has to make you [indiscernible] 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 and A. And I think you'll see us continue to do that. And if we see a way that we think delivers true shareholder value through a an M and A transaction, that's something obviously we'll evaluate because that's what we want to do is deliver value to shareholders but it has to do that at the end of the day. So I think you'll continue to see us be patient. And if we do something, we'll recognize that to be something that delivers [indiscernible] That makes sense. Thank you so much. Thanks, Neil.

Your next question is from Oliver Huang from TPH. Please go ahead.

Good morning all and thanks for taking the questions. Just wanted to kind of start out on gas and NG realizations. I know in the prepared remarks you kind of alluded to a fixed component there. And I see that you all underwritten three fifty in your outlook. Just thinking, if we're seeing some sort of upside to gas prices towards $4 in 2026 or an improvement in the AECO Chord. 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?

Yes.

I mean, I think that's a great question. You're spot on. As the price starts to tick up, you'll continue to see us tick up I think thing to watch for is like what's happening with NGL prices at the same time because you've seen that impact as well because we're allocating both gas and NGL. But you're definitely right, gas prices go up, scaling incrementally to to capture that value.

Okay. Makes sense. And maybe just on the non op side, I know there isn't always great line of sight to when the activity shows up. But just kind of given how it's being flagged with a decent magnet 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 Chord if it's takes a roughly similar mix versus what we've kind of seen from your operated portfolio?

Yes, Oliver, this is Michael. Good question on the non op side. We're seeing a good mix of operators really across the basin. So you can basin activity as a whole and our non op program is probably a proxy for that.

Overall, activity continues to be In the core kind of part of the basin overall, So we're still seeing quite a bit of that activity in very good parts of the basin. I think it's very similar returns to our operated program.

So I don't think you'll see any kind of diminishment of returns or anything like that that we're expecting across the program.

So really good returns on both the operating side and the non operated side.

So we're excited about the program. We're seeing activity from a bunch of other operators. We think we can learn from them. As well. So we'll be continuing to watch data to make sure that There's a lot of people testing different things across the basin. Not as many people talk about them because they're in some bigger companies.

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, Oliver.

Your next question is from John Abbott from Wolfe 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, how do you think the impact would be to your oil and gas NGL realizations?

John, this is Danny. Thanks for the question. I think in general, when you think about tariffs When a tariff is implemented, generally, it's to the benefit of the domestic And I don't think it would probably be much different here, I think, from a refining from a an oil perspective There's probably some level of incremental 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. Now what's what I can't say is what the butterfly effect of tariffs do we may see a slight pull from 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, where and where do prices go from just the supply demand perspective. So lots of moving parts there, but just on its pure if you isolated that one thing, think probably an incremental pull on domestic beer.

On domestic barrels.

Appreciate it. And then for our follow-up question, I mean, we've seen the improvement in natural gas prices What is your latest thoughts on maintaining your non op Marcellus Position?

Well, We Think We've Got A We Have Been Beneficiary In Both Williston and in the non op production we had in Marcellus of the higher natural gas prices here recently. Think Marcellus is a it's a great asset. It is under a very capable and good producer. Portfolio and we're going to look to see how do we maximize value delivery to shareholders from that asset over time.

Thank you very much for taking our questions.

Thanks, John.

Your next question is from Josh Silverstein from UBS.

Please go ahead. Hey, thanks. Good morning, guys. Just wanted to follow-up on the back. I know you were at 100% this quarter, but 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.

Yes. Appreciate it, Josh. As I said, it's really a capital allocation decision for us. And so so you can see you've seen this in the past, use the balance sheet to make compelling capital allocation decisions in sort of leave it at that. Ultimately, we've got away increasing leverage relative to capital investment opportunities etcetera. But it's something clearly we talk about and we do think our shares are pretty compelling where we're at right now.

Got it. And then just on the inventory duration know you mentioned around ten years before notes, somewhat of a third party estimate, but could you go into what you guys are assuming from an inventory standpoint? Does ten years assume three miles? How many wells in The Middle Bakken? Is there anything left in the 3 Forks just to kind of give them more color around that Yes. I'd say our inventory, I think, is fairly conservative Josh. It's essentially a Middle Bakken only program. We've got very little 3 Forks.

There's a a little bit, we're talking small single digit percentage in our inventory that's associated with with three forks. So it's really a Middle Bakken program pretty conservatively spaced program. And And yes, so as we are able to 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 attractive investment opportunities. We have the potential to see this march higher. And candidly to the degree that we determine 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 it is not I want to I want to effectively drain the resource with as few straws as possible because that's the most carefully efficient way to do it and that's going to be what delivers us the strongest returns. And so we are not into manufacturing inventory [indiscernible] if we determine that we are loose and we're leading resource in the ground that offers strong returns, then we'll look at maybe tightening up our spacing a bit. I don't think that will be dramatic.

But when you consider our 1,300,000 acres position up there, even a small sort of tightening of spacing has a not immaterial impact on overall. On overall inventory. So So I'd say our Chord of in summary, I'd say our inventory, we see it as maybe somewhat conservative and I'll leave it at that. [indiscernible] Your next question is from Paul Diamond from Citi. Please go ahead. Thank you. Good morning, Alex, for taking the call. So you talked about the conversion and general conversion of two two mile DSUs to one four mile, but also that opportunity set to kind of extend the three mile [indiscernible] That's currently 60% of your inventory set.

One is see if you could kind of dial in how much of that 60% is potentially convertible Is it all and just matters on the economics of the well Chord just kind of how to think about that Yes, I'd say generally speaking, Paul, we think we've got sort of I'd call it greater than 50% from a three mile inventory perspective currently. And so then there's a balance that is part of the balance is two mile inventory. We've got some that are actually lower than that. And then we've got some areas where we've we may have some four mile opportunities. And so it's a mix outside that 50 Our goal would be and our objective would be to get up to around 80% into that three mile plus sort of space. And so we actually have a slide in our investor deck where I think we we talk about what our objective is. And maybe our objective is to get it even higher than 80% candidly but we recognize there's going to be some areas where we're pretty we're landlocked. It may be somewhat to do that. So but I think as an aspirational goal for ourselves getting to eighty percent three mile or greater would is something we're certainly shooting for.

As we are able to strong performance from a four mile well, if and when we see that, then I think we'll really go back to the drawing board 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 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, replanting out the whole basin not a trivial thing to do and we need to see some need to see some results first.

Understood. Appreciate the clarity. Just a quick follow-up. You all talked about dropping a rig midyear. You talked about just timing of that, what could cause it to kind of be pulled forward or pushed back and how that really pertains into the the trend of CapEx for the year.

That should be I know we should expect to be front half weighted, but is that more Q1 than the how to think about the timing of all this [indiscernible] The fifth rig we're looking at letting go plus or minus midyear at this point So I don't you'll see a lot of impact to 2025 production associated with that rig with that rig getting laid down. What could change the timing on that rig? [indiscernible] better improvements run time than what we forecasted in our plan. So we need less less production from wedge, then you could maybe see us release that rig earlier. That'd be a positive thing the overall program. And our production team is focused on that every day, working to improve improve our run times minimize downtime. So that's a lever a lot of people don't think about relative to the capital program and maintaining [indiscernible] the color that we can share with you at this time. [indiscernible] Understood. Appreciate the clarity. I'll leave it there.

Your next question is from Noah Hagenis from America. Please go ahead.

Good 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 Chord you all that maybe you guys could renegotiate or have or have lower GP and T costs 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 netback pricing. And so we have we've got a contract in place as those roll off. Clearly, we're going to negotiate hard to get the best deal for ourselves. I'd say even before some of those contracts roll off, we have opportunities as we've grown and scale where we can there may be things that we can do that are win wins for both organizations that even while we're under contract that can make things better for us as we we move forward and we're always looking at those things. I'll ask Michael to add any incremental comments he's got.

Yes. No, I mean, you kind of mentioned it. There is a lot of competition. There's pretty mature systems out there across water, gas, oil, kind of all the different pipeline pieces, which I just creates competition, which is fantastic for us. We've got a big program that spreads kind of throughout the basin. 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. That's great. To hear. And then for my second question, I wanted to ask on the non op Marcellus As we've seen gas prices ramp up here in 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?

Yes, this is Danny again. So currently we're thinking between 130,000,000 to 140,000,000 cubic feet coming through that coming through our non op position there in Marcellus.

Is there any just as a quick follow-up or clarification, is there any seasonality in that production profile?

For the year?

Yes. In general, it's going to be relatively flat. You are seeing that grow a little bit here, obviously, with the gas price coming up at the end of last year into early part of this year, you're going to see a little additional activity. We'll see where that continues to hold from a gas price scenario that there is a lot of kind of activity in the area And I think that goes as you're seeing across all gas basins, you're seeing activity come up with that gas price.

So there is potentially some upside there if you see gas prices Chord. 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. Thanks, Noah.

The next question is from David Deckelbaum from TD Cowen. Please go ahead. Once again, the next question is from David Deckelbaum from TD Cowen.

Please go ahead.

Thanks for getting me on guys.

And good morning to you all. I wanted to ask just a follow-up on the Marcellus 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 been able to take advantage of attractive share buyback opportunities right now. And 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?

David, this is Danny. So I'll say that 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 Chord 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 out of that asset. And one option obviously that we're thinking about is is 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 if that at that moment.

I appreciate that. And then just curious as we think about capital efficiency improvements, in 2025 versus 2024. I guess that you guys highlighted Are you Chord or less holding productivity flat and just assuming obviously increases in lateral length, but improvements in incremental cycle times? Because I think it was obviously you guys have highlighted the relative improvement in cycle times to peers. In 2024, but I guess like how do you think about just capturing efficiencies with longer laterals as it relates back to just cycle time? Improvements Well, the three year plan we have currently and kind of how we're viewing the 2025 program doesn't incorporate a whole lot of incremental improvements relative to where we were, I would say, Chord the the back half of last year. And so that program, any incremental efficiency gains that we find 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 three year timeframe.

So 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 mile program. Which as Darren said, we've got our first one now drilled out to tow. So So 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, put out both for 2025 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 efficiencies still in front of us, I feel pretty good about that. Thanks, Danny. Appreciate it. Thanks, David.

Your next question is from Nurul Parks from Tuohy Brothers Investment Research. Please go ahead.

Hi, good morning. Just had a couple of things.

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 frac protection issues introduced when you're doing four milers I mean, I guess, specifically being like a horseshoe shape or really just essentially the same as a pad with multiple two milers.

Yes. So no really incremental [indiscernible] really straight four mileers.

And so it's which we think is the most efficient way to do things. We do look at alternate well shapes If we can't go to a straight, we'll look at alternate because we recognize that capital efficiency of that incremental foot of lateral almost always going to be better, but the best incremental foot is going to be a straight incremental foot. And so we're looking at four miles, that's really what we're doing right now. It's straight four miles and and no no difference in FracProtect concerns relative to what you would see if you were doing two, two miles.

Great. Thanks a lot. And one thing, just looking at the reserves, Was there Enerplus from the Enerplus locations, any reduction in industry sorry, inventory that pushed out in the the five year CapEx rule And just curious if as far as Enerplus everything is you're really planning to do as far as high grading is essentially done at this point with the integration?

Yes. So we as we brought the Inner Plus 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 a bit of conservative stance on our our PUD bookings and so we're not fully booked out to the five years and that's been a long standing practice of the organization. And so yes, so the reserves we've released incorporate both those Great. Thanks a lot.

Fantastic. Thanks, Noel.

Ladies and gentlemen, as a reminder, pause a moment for any further questions. 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.

Well, to close out, I want to thank all of our employees for their continued hard work and dedication. Our strategic actions coupled with our fantastic operations team have created what we believe is a valuable and increasingly rare asset. Chord has substantial yet low decline in high oil cut production base, which is paired with a deep 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. That, I appreciate everyone's interest and thanks for joining our call.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.