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    CHRD
    Earnings call· Mar 2026(Q1 FY26)

    Chord Energy Q1 FY26 earnings call CHRD

    May 6, 2026 Source

    Executive summary

    Chord Energy Q1 FY26 — Strong FCF, Increased Oil Volume Outlook, and 4-Mile Lateral Success

    Chord Energy delivered a solid first quarter, exceeding oil volume and free cash flow expectations despite market volatility. The company updated its 2026 outlook with increased oil volumes and maintained capital discipline, while successfully advancing its 4-mile lateral program. Management remains committed to robust shareholder distributions, prioritizing debt reduction over variable dividends, and will opportunistically pursue M&A in the Bakken.

    Highlights

    5

    • Adjusted free cash flow of $324 million substantially exceeded expectations.

    • Oil volumes delivered above the high end of guidance, with a 2,000 bbl/day increase in the 2026 outlook.

    • Successfully executed and turned in line its first full 4-mile DSU development, the Toonie pad, with execution and early performance in line with expectations.

    • Achieved a 37% reduction in D&C cost per foot over the past 4 years and 22% lower future F&D costs.

    • Expected 2026 free cash flow of approximately $1.4 billion, assuming $80 oil and $3.25 MMBtu natural gas.

    Concerns

    2

    • Unprecedented amount of volatility and uncertainty in commodity markets, leading to a cautious flat to slight growth volume outlook.

    • Potential to taper share repurchases if higher oil prices are fully reflected in the share price, to avoid pro-cyclical buybacks.

    Guidance & targets

    9
    CategoryTargetConfidence
    2026 Oil Volumes
    2,000 bbl/day increase
    high materiality
    High
    2026 Free Cash Flow
    approximately $1.4 billion
    high materiality
    High
    2026 Drilling and Completions Capital
    consistent with February outlook
    high materiality
    High
    2026 Oil Realizations
    modest premiums to WTI
    medium materiality
    High
    2026 Turn-in-Lines (TILs) Longer Laterals
    approximately 80%
    medium materiality
    High
    2026 Spuds 4-mile Laterals
    approximately 60%
    medium materiality
    High
    2026 Hedged Oil Volumes
    approximately 1/3
    medium materiality
    High
    2027 Hedged Oil Volumes
    less than 15%
    medium materiality
    High
    Long-term Volume Growth
    mid-single digits
    high materiality
    Medium

    Operational metrics

    11
    Shareholder Distributions
    $145 million
    Q1 FY26

    Returned to shareholders through a combination of base dividend and share repurchases.

    Balance Sheet Allocation
    $175 million
    Q1 FY26

    Amount sent to the balance sheet after accounting for lease acquisitions occurring in the quarter.

    Operating Rigs
    5
    current

    Currently running 5 rigs, 1 full-time frac crew and 1 spot crew.

    Frac Crews
    1 full-time, 1 spot
    current

    The spot crew is scheduled to drop around midyear, earlier than February expectations due to faster cycle times.

    D&C Cost per Foot Reduction
    37%
    past 4 years

    Significant reduction in drilling and completion cost per foot underpins the strong economics of 4-mile wells.

    Future F&D Cost Reduction
    22%
    past few years

    Clearly demonstrating sustained efficiency gains on a company level.

    Prompt Quarter Hedging Capacity
    55%
    prompt quarter

    Ability to lock in up to 55% of volumes if pricing surpasses certain thresholds, as part of a systematic hedging program.

    4-mile Laterals Producing
    12
    current

    Including 5 on the Toonie pad.

    4-mile Laterals Drilled
    33
    current

    Tons of learnings from these wells.

    Inventory 4-mile Locations
    50%
    current

    Approximately 50% of Chord's inventory consists of 4-mile locations.

    Operated Wells
    5,000
    current

    High-return projects across roughly 5,000 operated wells for production optimization.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activity37% reduction%
    Realized price differentialmodest premiums
    Basin level production volume2,000 bbl/day increasebbl/day
    FCF shareholder distributions$1.4 billionUSD
    Weather event volume earnings impact—

    Orderbook & backlog

    1
    Share Buyback AuthorizationRobustQ1 FY26

    Management indicates continued focus on share repurchases, but may taper if share price fully reflects higher oil prices to avoid pro-cyclical buybacks.

    Deals & partnerships

    1
    nullDivestment of non-core Marcellus acreage

    Marcellus acreage remains a non-core asset. Management is looking to maximize value for shareholders through divestment but is not in a rush, as it has low friction costs and contributed significant value in Q1 FY26.

    Capital programs

    1
    Toonie Pad DSU Developmentcompleted

    Benefit: 5 wells, including 1 alternate shape

    First full 4-mile DSU development successfully executed and turned in line. Execution and early performance are in line with expectations.

    Risks & headwinds

    3
    Unprecedented volatility and uncertainty in commodity marketscurrent

    null

    Mitigation: Running a maintenance plus program for over 5 years, flat to slight growth volume outlook, systematic hedging program, focus on capital reduction over incremental volume growth if efficiencies improve.

    High levels of excess low-cost oil capacitypersistent

    null

    Mitigation: Cautious approach to growth, monitoring global supply-demand balances, maintaining a flat to slight growth volume outlook to avoid exposure to price undermining.

    Risk of pro-cyclical buybacks if share price fully reflects higher oil pricesfuture

    null

    Mitigation: Chord may choose to taper repurchases if and when higher oil prices are more fully reflected in the share price. Excess free cash flow will go to the balance sheet to reduce net debt.

    What to watch in Q2 FY26

    5

    4-mile Lateral Contribution

    future update
    Current80% contribution on last mile
    TargetGreater than 80% contribution

    Why it matters

    Increased contribution from 4-mile laterals would significantly enhance inventory economics and production efficiency.

    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. And so it's a little too early for us to say that right now, but we're continuing to monitor our production. And given if we're -- if we continue to see things look positively, hopefully💬, we'll come out with an update at some point⏳ in the future, indicating that we're getting more from that last mile than we're currently underwriting.

    Q&A highlights

    8

    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

    2 min read7 chapters

    Detailed Narrative

    01

    Q1 Performance and Capital Discipline

    Chord Energy delivered a strong Q1 FY26, with adjusted free cash flow of $324 million, exceeding expectations. The company returned $145 million to shareholders through dividends and buybacks, while also allocating $175 million to the balance sheet after lease acquisitions. Despite market volatility🌐, Chord maintains a "maintenance plus" program focused on maximizing free cash generation and capital efficiency, with 2026 capital spending remaining consistent with prior outlooks.

    02

    Updated 2026 Outlook and FCF Generation

    The company updated its 2026 outlook to reflect a 2,000 bbl/day increase in oil volumes, with only a slight increase in LOE and unchanged capital. This is expected to generate over $40 million in incremental free cash flow, bringing the total projected FCF for 2026 to approximately $1.4 billion, assuming $80 oil and $3.25 MMBtu natural gas. This robust FCF is expected to support continued strong shareholder distributions.

    03

    Advancements in 4-Mile Lateral Development

    Chord successfully executed and brought online its first full 4-mile DSU development, the Toonie pad, consisting of five wells. Both execution and early performance met expectations. The company has achieved a 37% reduction in drilling and completion cost per foot over the past four years, leading to improved program-level capital efficiency and 22% lower future F&D costs. The 4-mile program is scaling in 2026, with 40% of TILs and 60% of spuds expected to be 4-mile laterals.

    04

    Base Production Optimization Initiatives

    Chord is actively optimizing its production base across approximately 5,000 operated wells through various high-return, short-cycle projects. These include accelerating workovers, reducing downtime, chemical treatments, de-bottlenecking surface constraints, and utilizing AI for artificial lift. The company has also restructured its production engineering team to dedicate resources to lower-producing wells, aiming for sustained improvements in base production and resting decline.

    05

    Capital Allocation and M&A Strategy

    Chord remains committed to robust shareholder distributions, primarily through a healthy base dividend and share repurchases, while opting against variable dividends. Excess free cash flow will be directed to the balance sheet to reduce net debt. The company expresses a disciplined approach to M&A, particularly in the Bakken where it sees significant synergies, but will only pursue deals that enhance shareholder value at appropriate market clearing prices.

    06

    Inventory Depth and Long-term Growth Potential

    Chord maintains a deep inventory of low-cost, sub-$60 WTI locations, representing over 10 years of drilling inventory. Approximately 50% of this inventory consists of 4-mile lateral locations. While currently maintaining a flat to slight growth outlook, the company has the capacity to accelerate to mid-single-digit volume growth if a durable, constructive macro environment with sustained above mid-cycle pricing emerges, which would also expand its inventory.

    07

    XTO Assets Development

    Chord is in the process of re-permitting its XTO assets for longer laterals. Development in this area is anticipated to be a late 2027 phenomenon, with more significant contribution expected in 2028, as the company maximizes the asset's potential.

    AI-generated summary of the company’s earnings call. Not investment advice.