Chord Energy (CHRD) Q1 FY26 earnings call: guidance and Q&A

How does Chord think about the appropriate long-term commodity price to support growth, and how would growth impact inventory depth?

Management stated that growth depends on the durability of the macro setup, not just a specific price, due to global excess oil capacity. If a constructive macro environment with durable above mid-cycle pricing emerges, they could achieve mid-single-digit growth. This would also be a tailwind for inventory, potentially expanding it beyond the current 10 years of sub-$60 WTI inventory.

“I think we're -- we are in a great position in that we do have a deep bench of low-cost inventory that we could accelerate into and we could deliver some modest growth into the system and think of it sort of mid -- probably mid-single digits. It's something that we would be comfortable with if the structural setup was conducive to that.”

asked by John Abbott · answered by Daniel Brown

Is the base production enhancement program a structural driver for lower base declines or a one-time addition? What is the upside potential?

Management indicated it's a bit of both. They've seen dramatic increases in productivity from older wells through pump adjustments, AI optimization, and workover rigs. While early success is evident, they are still assessing the long-term sustainability of these changes across the entire portfolio.

“Oliver, we've seen dramatic increase in our productivity on our older wells by -- we've lowered some pumps, some rod pumps lower into the wells. We've adjusted our artificial intelligence to focus on maximizing productivity out of our older rod pump wells and really seeing -- as you see on Slide 12, on the lower right-hand side, you can really see a dramatic impact -- positive impact to base production and really a resting decline on this group of wells.”

asked by Hsu-Lei Huang · answered by Darrin Henke

Will Chord revisit the 80% contribution assumption for the last mile of 4-mile laterals as more data becomes available, similar to how they updated 3-mile lateral assumptions?

Management confirmed they would revisit the 80% assumption if production data supports it, similar to their previous approach with 3-mile laterals. It's currently too early to make that change, but they are monitoring performance.

“I think the answer to that, Oliver, is yes, just like with the 3-mile laterals, after we got enough production history, we came out and said we were no longer underwriting that last mile at 80%. We were moving that up to 100% because we were seeing that through the production data. I think it would be sort of a similar case from a 4-mile lateral standpoint.”

asked by Hsu-Lei Huang · answered by Daniel Brown

Given the Q1 oil uplift and better Q2/Q3 guide, is there a case for running higher activity in Q4 to maintain operational momentum, even if it means CapEx creep?

Management stated they are happy with current activity levels and do not plan to increase activity in Q4. They will release the spot frac crew mid-year as planned and do not see significant efficiency improvements from pushing incremental activity. They remain comfortable with their current approach.

“Yes. Phillip (sic) [ Jack ], I think at this point, we're pretty happy with our activity levels. We've got the spot crew, we'll release later this year. And so that we run that crew continuously until we drop it. So it's not really like we're trying -- we need to manage white space on a -- sort of in between an existing program, it's just we'll drop that. And so I don't think there's a lot of efficiency improvement we pick up by pushing incremental activity through the system.”

asked by Jack Kindregan · answered by Daniel Brown

With oil near $100/barrel, is this an opportunity to be aggressive with buybacks, or would Chord wait for a more countercyclical time?

Management believes their stock price is not reflecting the current headline oil price, making buybacks very attractive at current levels. They will continue aggressive buybacks but may taper if the stock price fully reflects higher oil prices to avoid pro-cyclical behavior.

“Clearly, the -- if you look at the prompt -- if you look at the headline oil price, our stock is not underwriting anywhere near that level in our opinion. And so we really like where our stock's at right now, and I think their buybacks will command. They are very attractive at the current levels.”

asked by Scott Hanold · answered by Daniel Brown

What are Chord's thoughts on incremental buybacks versus debt repayment for the remainder of the year if prices stay elevated?

Management reiterated that their return on capital framework prioritizes a strong base dividend plus share repurchases, with excess FCF going to the balance sheet for debt reduction. They like current share prices for buybacks but will remain disciplined to avoid pro-cyclical behavior if oil prices are fully reflected in the stock.

“We have -- based on -- we listen to investors and based on a lot of investor feedback, we're not really focused on variable dividends at this point. So I think our return of capital program is really going to be made up of our -- what we think is a pretty strong base dividend plus share repurchases.”

asked by Neal Dingmann · answered by Daniel Brown

What is the latest messaging regarding long-term plans for the Marcellus acreage?

Management stated the Marcellus acreage remains a non-core asset. They are looking to maximize shareholder value through divestment but are not in a rush, as it has low friction costs and contributed significant value in Q1.

“So I think the messaging around Marcellus really kind of remains consistent. We continue to see that as a non-core asset and have been very front foot and consistent in saying that we're looking to maximize value for our shareholders. And that would include divesting that asset.”

asked by Phillips Johnston · answered by Daniel Brown

Thoughts on M&A in the current elevated price environment, especially regarding a large Bakken package for sale, and Chord's leverage capacity for inventory mix?

Management believes Chord is highly competitive in the Bakken due to synergies and subsurface knowledge. They will remain disciplined, noting that market clearing prices often don't make them a "better company." They expect more assets to come to market with elevated prices but anticipate a valuation gap between buyers and sellers.

“I think from a positioning perspective, we clearly -- our footprint in the Bakken really stretching across the entirety of the basin means that any package that comes to market there, we think we can be quite competitive on. We can bring synergies to bear, I think, really like no one else can.”

asked by John Edelman · answered by Daniel Brown