Chord Energy Q4 FY25 earnings call CHRD

Chord Energy reported an exceptional 2025, significantly improving its business through an evolving development program, driving efficiencies, and enhancing free cash flow. The company consistently delivered results exceeding expectations, with 2025 oil volumes surpassing original guidance by over 1,000 barrels per day and capital spending coming in approximately $60 million lower. This performance contributed to a strong Q4 FY25, with adjusted free cash flow of $175 million.

Chord drove $160 million of free cash flow improvement in 2025 from controllable items, including higher production, less capital, lower LOE, G&A, production taxes, and improved marketing costs. These run-rate improvements represent 23% of the estimated 2026 free cash flow. The company emphasizes an organization-wide effort to lower its cost structure, encompassing capital efficiency, operating expense, and marketing/midstream improvements, with expectations for further progress.

The company achieved its goal of converting 80% of its inventory to long laterals by year-end 2025, earlier than anticipated. This shift, combined with improved execution, significantly lowered Chord's cost of supply. The weighted average breakeven of its inventory was reduced by over 10% in 2025, primarily through organic portfolio improvements and select M&A. Chord currently boasts over 10 years of low breakeven inventory.

Chord's 2026 plan aligns with its preliminary outlook, targeting a low to no oil growth program with average volumes of 157,000 to 161,000 barrels of oil per day and capital of $1.4 billion. The company expects to generate approximately $700 million of free cash flow in 2026 at benchmark prices of $64/bbl oil and $3.75/MMBtu natural gas. Activity for 2026 includes running 5 rigs, 1 full-time frac crew, and 1 spot crew, with approximately 80% of TILs being longer laterals.

The marketing and midstream teams have achieved $30 million to $50 million in annual run-rate savings through new negotiations and contract renewals. As long-term contracts mature across the basin's oil, gas, and water infrastructure, Chord is securing new agreements at lower cost points. This ongoing optimization is expected to continue contributing to free cash flow improvements.

While GORs are flattening or slightly decreasing in the basin, some areas where Chord is expanding activity have slightly higher water production. The company is strategically investing in water disposal infrastructure to bring capacity closer to wellbores, enhancing E&P returns. This capital spend is considered productive and is already factored into the overall economics, with total basin disposal capacity deemed adequate.

Chord maintains a deep inventory of conservatively spaced, repeatable Middle Bakken locations, providing a strong foundation for future development. The company is also monitoring the full column of acreage and alternative formations, watching industry developments. While not currently a meaningful part of their program, the combination of longer laterals and alternative shaped wells could offer future upside for infill drilling and reserve capture as costs decrease and execution improves.