Chord Energy Corporation (NASDAQ: CHRD) (“Chord”, “Chord Energy” or the “Company”) reported financial and operating results for the quarter ending September 30, 2022, declared base and variable dividends and provided an updated outlook for the business. The Company completed the merger of equals transaction between Oasis Petroleum Inc. (“Oasis”) and Whiting Petroleum Corporation (“Whiting”) on July 1, 2022.
The results for the third quarter of 2022 discussed within this release represent the consolidated results for Chord. The results for the nine months ended September 30, 2022 include the consolidated results for Chord for the third quarter of 2022 plus the results of legacy Oasis for the period prior to completion of the merger of equals on July 1, 2022, unless otherwise noted.
Click here for Chord Energy’s 2021 ESG Report
3Q22 Operational and Financial Highlights:
- Produced 172.5 MBoe/d in 3Q22, above the high-end of guidance released in August 2022. Oil volumes of 96.2 MBo/d exceeded the mid-point of the guidance;
- E&P and other CapEx was $230.1MM in 3Q22, below the low-end of August 2022 guidance largely due to timing. Full year 2022 CapEx guidance is unchanged;
- Combined LOE and GPT costs were below the mid-point of August 2022 guidance;
- Net cash provided by operating activities was $783.6MM and net income from continuing operations was $941.6MM;
- Adjusted EBITDA(1) was $564.6MM and Adjusted Free Cash Flow(1) was $325.7MM;
- Total return of capital for 3Q22 set at 85% of Adjusted Free Cash Flow;
- Declared a base-plus-variable cash dividend of $3.67 per share of common stock. The dividend will be payable on November 29, 2022 to shareholders of record as of November 15, 2022;
- Repurchased approximately $125MM, or approximately 1.2MM shares during 3Q22 at a weighted average price per share of $106.25;
- Cash of $658.9MM exceeded debt of $400.0MM, as of September 30, 2022;
- Monetized 16MM units of Crestwood Equity Partners LP (NASDAQ: CEQP) (“Crestwood”) for net proceeds (pre-tax) of $428.2MM. As of September 30, 2022, Chord owned approximately 5MM Crestwood units (less than 5% of Crestwood’s units outstanding);
- Received $13.7MM distributions from Crestwood in 3Q22 (included in Adjusted EBITDA);
- Progressed integration activities associated with the merger. Chord continues to expect approximately $100MM or more of combined capital, operating and G&A synergies;
- Published sustainability letter to stakeholders outlining Chord’s commitment to transparent reporting of its environmental, social and governance (“ESG”) performance. Highlights include reduced greenhouse gas (“GHG”) and methane intensity, and improved freshwater intensity. We remain focused on reducing GHG and methane emissions, and enhancing best practices and training to minimize the likelihood of safety incidents among employees and contractors. The letter and ESG metrics for 2019, 2020, and 2021 can be found at https://www.chordenergy.com/sustainability/.
“Chord Energy had strong operating performance in the third quarter which supported significant free cash flow and our peer-leading return of capital framework,” said Danny Brown, Chord Energy’s President and Chief Executive Officer. “This performance combined with Chord’s pristine balance sheet allows us to return to shareholders approximately $277MM, or 85% of Adjusted Free Cash Flow generated during the quarter. Additionally, we successfully monetized approximately 76% of our Crestwood ownership, unlocking additional value for our shareholders and further strengthening our balance sheet. Chord is making significant progress on the integration and remains confident in our ability to create a stronger, more efficient organization. Chord’s deep economic inventory, strong margins, low leverage and capital discipline make for a compelling outlook. We remain committed to delivering value to our shareholders while operating in a safe and sustainable manner.”
During the three months ended September 30, 2022, net cash provided by operating activities was $783.6MM and net income from continuing operations was $941.6MM ($21.84/diluted share). Adjusted EBITDA was $564.6MM, Adjusted Free Cash Flow was $325.7MM and Adjusted Net Income was $310.4MM ($7.20/diluted share). Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted Net Income are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for a reconciliation to the most directly comparable financial measures under GAAP.
On September 12, 2022, the Company sold 16,000,000 common units in Crestwood for pre-tax net proceeds of $428.2MM, representing approximately 76% of its ownership position. Chord expects to pay approximately $10MM – $15MM of cash taxes related to the divestment. Upon completion of the sale, on September 15, 2022, both Chord designated directors resigned from the Board of Directors of Crestwood Equity GP LLC, the general partner of Crestwood, pursuant to the terms of the director nomination agreement between the Company and Crestwood. The Company owns 4,985,668 Crestwood common units, representing less than 5% of Crestwood’s issued and outstanding common units.
Chord is providing a 4Q22 outlook which reflects the Company’s most recent forecasts. 3Q22 volumes were above the mid-point of guidance largely reflecting strong well performance; however, over the course of the quarter, Chord experienced delays in completing certain wells due to mechanical issues which shifted some CapEx from 3Q22 to 4Q22. FY22 CapEx estimate of $730MM – $750MM was reduced from the August update of $730MM – $760MM. Chord’s fourth quarter volumes guidance reflects the delay in new wells coming online, additional downtime of surrounding wells shut-in to facilitate hydraulic fracturing operations and the impact of a power disruption which resulted in nearly half of Sanish ESPs being knocked offline. Total current production estimates for 2H22 are above the mid-point of August guidance.
4Q22 cash taxes are expected to approximate $10MM – $20MM, plus an additional $10MM – $15MM of cash taxes associated with the divestment of Crestwood units.
The following table presents select operational and financial data from continuing operations, unless otherwise noted, for the periods presented. Effective July 1, 2022, the Company reported crude oil, NGLs and natural gas on a three-stream basis. Periods prior to July 1, 2022 were reported on a two-stream basis. This change impacts the comparability between periods.
Chord declared a base-plus-variable cash dividend of $3.67 per share of common stock. The dividend will be payable on November 29, 2022 to shareholders of record as of November 15, 2022. The base-plus-variable dividend was declared in connection with Chord’s previously announced plan to return 75%+ of capital to shareholders per quarter at leverage levels less than 0.5x. The total $3.67 per share dividend reflects a quarterly base dividend of $1.25 per share of common stock and quarterly variable dividend of $2.42 per share of common stock. Additional details regarding the calculation of the variable dividend can be found in the Company’s new investor presentation located on its website.
On October 31, 2022, Chord entered into its Second Amendment to Amended and Restated Credit Agreement, resulting in the borrowing base increasing from $2B to $2.75B and the elected commitment amount increasing from $800MM to $1B. On September 30, 2022, Chord had a cash balance of $658.9MM, no amounts drawn on its credit facility and $400.0MM of senior unsecured notes.
Chord Energy Corporation is an independent exploration and production company with quality and sustainable long-lived assets in the Williston Basin. Chord is uniquely positioned with a best-in-class balance sheet and is focused on rigorous capital discipline and generating free cash flow by operating efficiently, safely and responsibly to develop its unconventional onshore oil-rich resources in the continental United States. For more information, please visit the Company’s website at https://www.chordenergy.com.
