Chord Energy Corporation (CHRD) Earnings

Management highlights

- Financial Performance & Capital Return * Adjusted second quarter 2026 free cash flow came in at $414 million, exceeding market expectations * 54% of adjusted free cash flow ($220 million) was returned to shareholders in Q2 2026 via base dividends and share repurchases * As of quarter-end, the company held $612 million in cash, with normalized leverage declining below 0.5x; starting Q3 2026, the company will increase shareholder returns to at least 75% of adjusted free cash flow - Operational & Technological Improvements * The company's 5-year maintenance-plus operating model has created a large, resilient low-decline production base with competitive supply costs and sustainable free cash flow * Multiple continuous improvement initiatives are underway: longer lateral well drilling, faster cycle times, base production optimization, AI integration, and marketing contract optimization * 26 four-mile lateral wells have been completed to date, with early performance meeting expectations; the program will scale through H2 2026 and into 2027 * Frac cycle times have accelerated year-to-date, pushing 2026 production volumes to the front of the year and de-risking the full-year development program * Cord successfully completed the basin's first trimal frac, which is expected to reduce completion costs while maintaining execution quality for select assets * AI optimization of rod pump artificial lift has been broadly deployed across the company's well fleet, reducing equipment wear and improving production; AI is also being rolled out to optimize workover rig scheduling across over 5,000 wells * Equipment reuse and scalable facility design have reduced facilities-related capital spending - Base Production Enhancement Initiatives * The company is expanding an existing program of workovers and chemical treatments across its proved developed producing (PDP) base to arrest production declines and increase output * Early results from new chemical treatment testing have been encouraging, prompting expansion of testing to a larger group of wells; only limited upside is currently assumed in guidance while effectiveness and returns are evaluated * The expanded program has created mild near-term upward pressure on lease operating expense (LOE), but management views the expansion as justified to maximize long-term asset potential * A dedicated team focused on improving electric submersible pump (ESP) runtime and performance has delivered strong early returns, with significant further upside opportunity

Guidance

- Full-year 2026 average oil production guidance is maintained at 161,000 barrels of oil per day, which remains 2,000 barrels of oil per day above the initial 2026 outlook, driven by low-cost short-cycle base production investments - Full-year capital expenditure guidance is essentially unchanged from prior outlooks; a meaningful reduction in capital spending is expected in Q3 2026 after exiting the second fracking crew in July 2026, with a further decline projected for Q4 2026 - Full-year LOE guidance has been raised to $10.30 per BOE, reflecting increased costs from the expanded base production enhancement program, higher-than-expected workover costs, and higher non-operated LOE - Bakken crude differentials have been updated to reflect current market conditions: the Q2 2026 premium to WTI is expected to fade through the second half of 2026, with full-year guidance now projecting pricing slightly below WTI; natural gas and NGL differential guidance has also been updated to current market conditions - As of the call, approximately 38% of H2 2026 oil volumes are hedged, and approximately 18% of 2027 oil volumes are hedged, after incremental hedging activity in recent months

Segment performance

Cord Energy did not break out financial performance for multiple distinct product segments in this earnings call. The company reports consolidated oil-weighted upstream production results, with second quarter 2026 adjusted free cash flow of $414 million, and total expected 2026 average oil production of 161,000 barrels of oil per day. No separate absolute or percentage revenue contribution data was provided for individual product segments.

Risks & headwinds

- Unusually high macroeconomic and commodity price volatility has been observed in 2026, with the outlook for oil prices remaining uncertain, which could cause actual results to differ materially from forward-looking guidance and projections - The expanded chemical workover program is still in the testing phase; early results are encouraging, but ultimate effectiveness, economic returns, and production upside remain unconfirmed, which could lead to lower-than-expected production gains from the initiative - Forward-looking statements made on the call are inherently subject to known and unknown risks and uncertainties, as outlined in the company's SEC filings (including Form 10-K and Form 10-Q), that could cause actual performance to differ materially from current projections

Analyst Q&A

• Q: The company announced it will increase capital return to at least 75% of adjusted free cash flow starting Q3 2026. Should this policy be expected for the remainder of 2026 and going forward? /

  A: Management expects to maintain the 75% minimum payout for Q3 and Q4 2026. The company pre-committed to this level of return once normalized leverage dropped below 0.5x, a threshold that has now been hit. While the policy remains flexible if leverage were to rise again, management currently anticipates meeting or exceeding the 75% floor for the foreseeable future.

• Q: What is the outlook for Bakken crude differentials after the Q2 premium to WTI, and what is the current supply-demand balance for pipeline takeaway capacity? /

  A: Bakken differentials have historically ranged from a $2 discount to a $2 premium to WTI. The Q2 2026 premium was driven by broadly flat basin production, ample takeaway capacity, and a steep oil curve backwardation tied to geopolitical volatility. Management expects the premium to fade in H2 2026, so guidance now projects slightly sub-WTI pricing, but differentials would likely strengthen again if front-month oil prices spike and curve backwardation reoccurs.

• Q: What does the current workover program look like, what has early chemical testing shown that led to expansion, and when will enough data be available to update production guidance for chemical program gains? /

  A: Workovers cover a wide range of activities, from repairing offline wells to optimizing production on underperforming assets. Early results from new chemical treatments have been encouraging enough to justify expanded testing across a larger well population. Management will only incorporate upside from the program into official guidance once results are proven consistent and durable, which will vary by treatment type. To date, the program has successfully arrested production declines on a large share of participating wells.

• Q: What is the upside opportunity for trimal frac in 2027, and what share of the company's well inventory could use this completion method? /

  A: Management is currently investigating trimal frac optionality for 2027, and expects it could make up 20% to 50% of next year's completion program. The first basin trimal frac delivered strong efficiency improvements, and the company is also testing remote fracking that would enable trimal operations across multiple pads simultaneously. It is too early to estimate how much of the company's long-term inventory is suited to the method.