Chord Energy Corporation — Q1 2024 Form 10-Q Summary
Business context and reporting period
Chord Energy is an independent exploration and production company focused on crude oil, NGL and natural gas assets in the Williston Basin. This unaudited Form 10-Q covers the three months ended March 31, 2024, filed May 9, 2024.
Financial and operating metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenues | $1.085 billion | $896.5 million | Up 21% |
| Oil, NGL and gas revenues | $748.2 million | $766.2 million | Down 2% |
| Purchased oil and gas sales | $337.1 million | $130.3 million | Up 159% |
| Operating income | $272.9 million | $326.1 million | Down 16% |
| Net income | $199.4 million | $297.0 million | Down 33% |
| Diluted EPS | $4.65 | $6.87 | Down 32% |
| Net cash from operations | $406.7 million | $468.8 million | Down 13% |
| Capital expenditures | $258.5 million | Source text does not provide a comparable total | — |
Production averaged 168,424 Boepd, including 99,036 Bopd of crude oil; approximately 59% of production was oil. Crude oil production increased from 95,113 Bopd in Q1 2023, while total production increased from 164,740 Boepd.
Average crude oil sales price was $75.32 per barrel, compared with $76.04 in Q1 2023. Average NGL pricing declined to $15.09 per barrel from $21.13, and natural gas pricing declined to $1.16 per Mcf from $2.66. After derivative settlements, realized crude oil price was $75.17 per barrel.
Lease operating expense was $159.2 million, or $10.39 per Boe. Gathering, processing and transportation expense was $54.0 million, or $3.52 per Boe. DD&A expense increased to $168.9 million from $133.8 million. The filing does not present a separately defined GAAP gross or EBITDA margin; calculated operating margin was approximately 25.1% of total revenue and net margin was approximately 18.4%.
Cash and equivalents were $296.4 million at March 31, 2024, compared with $318.0 million at year-end 2023. Total assets were $7.026 billion and stockholders’ equity was $5.075 billion.
Long-term debt consisted of $400.0 million of 6.375% senior unsecured notes due June 1, 2026, net of deferred financing costs. The revolving credit facility had no borrowings, $8.9 million of letters of credit and $991.1 million of unused capacity. Management reported approximately $1.3 billion of total liquidity and compliance with credit-facility covenants.
Material changes versus comparable periods
- Total revenue increased primarily because purchased oil and gas sales rose by $206.8 million; production-related oil, NGL and gas revenue declined by $18.0 million.
- Net income declined $97.6 million, reflecting lower commodity pricing, higher DD&A, higher gathering and transportation costs, and a $27.6 million derivative loss versus a $66.9 million derivative gain in Q1 2023.
- Operating cash flow declined $62.1 million, while capital expenditures increased by approximately $49.8 million versus Q1 2023, according to management.
- Production increased year over year due to additional wells turned to sales, but first-quarter production declined from Q4 2023 because of inclement weather.
- G&A expense declined to $25.7 million from $32.5 million, although Q1 2024 included $8.1 million of merger-related costs associated with the Enerplus transaction.
- Exploration and impairment expense fell to $6.2 million from $24.9 million. Q1 2023 included a $17.5 million Denver office lease impairment; Q1 2024 included a $3.9 million oil-in-tank inventory write-down.
- The company paid $152.4 million of dividends and repurchased $30.0 million of common stock. The Q1 2024 declared dividend was $3.25 per share, versus $4.80 per share in Q1 2023.
Guidance, outlook, commentary, risks and unusual items
Chord entered into an agreement to acquire Enerplus in a stock-and-cash transaction. Enerplus shareholders are to receive 0.10125 Chord shares and $1.84 in cash per Enerplus share. Closing was expected on May 31, 2024, subject to customary conditions, including required approvals. The transaction had not closed as of March 31, 2024.
Management stated that it believes current liquidity is adequate to fund capital expenditures and contractual obligations for the next 12 months and the foreseeable future. No formal production, capital spending or earnings guidance is provided in the filing text.
Commodity prices remain the primary business risk. Other significant risks include Williston Basin concentration, pipeline and transportation constraints, possible Dakota Access Pipeline disruption, weather, inflation, supply-chain and labor availability, environmental and regulatory requirements, counterparty credit risk, interest rates, cybersecurity and the execution, financing, approval and integration of the Enerplus acquisition.
Outstanding commodity derivatives covered 5.770 million barrels of 2024 crude oil production, 3.552 million barrels of 2025 crude oil production, 651,600 MMBtu of 2025 natural gas production and 270,000 barrels of 2026 crude oil production. The filing reports a net unrealized crude oil derivative liability of $22.0 million at March 31, 2024.
Chord received a $25.0 million earn-out payment during the quarter related to its 2021 Permian Basin divestiture. Remaining contingent consideration had a March 31, 2024 fair value of $46.1 million, subject principally to WTI price conditions.
The company declared a $2.94 per-share base-plus-variable dividend on May 7, 2024, payable June 5, 2024. It had $653.0 million remaining under its $750.0 million repurchase authorization at quarter-end.
Important facts for investors to verify
- Verify the closing date, consideration and financing impact of the Enerplus acquisition, including any changes to Chord’s share count, debt and liquidity.
- Assess sensitivity to crude oil, NGL and natural gas prices, including the effects of existing derivative collars and swaps.
- Reconcile production growth with declining realized NGL and natural gas prices and higher DD&A and transportation costs.
- Review capital spending, free cash flow after dividends and repurchases, and the sustainability of the base-plus-variable dividend policy.
- Monitor the second-quarter 2024 borrowing-base redetermination and covenant compliance.
- Evaluate contingent earn-out payments and the risk that future WTI prices below contractual thresholds could terminate remaining payments.
- Review environmental, plugging and abandonment obligations, including the $170.7 million asset retirement obligation balance.
- Track the paused SEC climate-disclosure rule and any resulting compliance costs or disclosure requirements.