Chord Energy Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

There are 10 speakers on the call.

Operator

Good morning, and welcome to the Cord Energy First Quarter 2023 Earnings Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Michael Liu, Chief Financial Officer, please go ahead.

Speaker 1

Thank you, Danielle. Good morning, everyone. Today, we are reporting our first 2023 financial and operational results. We're delighted to have you on our call. I'm joined today by Danny Brown, Chip Rymer, Richard Roebuck and other members of the team.

Speaker 1

Please be advised that our remarks, including the answers to your questions, include statements that we believe to be forward looking statements within the meaning of the Private and Securities Litigation Reform Act. These forward looking statements are subject to risks and uncertainties that could cause Actual results to be materially different from those currently disclosed in our earnings releases and conference calls. Those risks include, among others, matters that we have described During this conference call, we will make reference to non GAAP measures and reconciliations to the applicable GAAP measures can be found in our earnings releases and on our website. We may also reference our current investor presentation, which you can find on our website. With that, I'll turn the call over to our CEO, Danny Brown.

Speaker 2

Thanks, Michael. Good morning, everyone, and thanks for joining our call. Last evening, Core reported our Q1 2023 results and updated full year outlook. As you know, last year was a pivotal year for the organization as we announced the merger of equals transaction between Whiting and Oasis Petroleum, laid the groundwork for the integration and established how we would operate as a new organization. In 2023, we are focused on operational execution and driving the synergies from the merger.

Speaker 2

And as you read in our press release last night, we had a strong start to the year. In the Q1, oil volumes were significantly above expectations due to continued strong well performance and a modest acceleration of activity. As we discussed last call, January performance was negatively impacted by beer weather in late December. However, the team did a fantastic job restoring production and ramping up our drilling and completions activity quickly. We turned in line 15 wells in the quarter, which was at the upper end of our 11 to 15 range, with about half of those wells being 3 mile laterals.

Speaker 2

With the additional activity, capital was towards the high end of our range, but overall free cash generation exceeded expectations. Turning to return of capital. For the quarter, we declared a variable dividend of $1.97 per share with a base dividend which remains unchanged at $1.25 per share. The aggregate variable payment of approximately $82,000,000 is The difference between 75 percent of the $199,000,000 of adjusted free cash flow generated in the Q1 minus the base dividend of about 52,000,000 Minus $15,000,000 of share repurchases. As a reminder, the variable dividend is intended to make up any difference between our targeted free cash flow payout and the amount distributed through base dividends and share repurchases.

Speaker 2

Our capital return program is peer leading and demonstrates our commitment to capital and shareholder returns. Since we closed the merger last year and underpinned through strong operational performance, Cord has returned a As we reflect on our shareholder return over the past two quarters, we recognize that the amount of share repurchases is lighter than we might desire, particularly Our view on the intrinsic value of our equity when compared to market value. Accordingly, as we look forward, we will continue to be opportunistic with share repurchases, We intend to be more balanced between dividends and buybacks in the future. Now turning to operations. We continue to be pleased with our underlying well And as can be seen on Slide 10 of our updated investor presentation, our development program continues to deliver above expectations.

Speaker 2

This is partially attributed to our practice of wider well spacing, which we believe improves per well recoveries and reduces variability of performance across the asset and to our move to more 3 mile laterals. Core began to bring on its first 3 mile laterals toward the end of 2022 and these are expected to comprise about 50 3 mile laterals will be a key part of the go forward program and are expected to deliver 40% to 50% more EUR for about 20% more D and C costs. Just a quick note on the production profile of these wells. Part of the capital savings reflect but stayed flat longer with shallower declines. Said another way, as 3 mile laterals become a larger share of wedge wells, very early time well production per lateral foot becomes less relevant and longer dated cumulative production versus capital cost is a more appropriate performance metric.

Speaker 2

After the Q1, Cord announced the sale of certain non core properties outside the Williston Basin from the legacy Whiting Trust assets for proceeds of approximately $35,000,000 The specific divested assets consisted of multiple packages in various parts of the U. S. With total volumes of approximately 1100 barrels of oil And oil volumes of roughly 900 barrels per day. We expect all divestitures to close during the Q2 and our guidance has been updated to reflect the sales. The divestitures decreased oil volumes by about 600 barrels of oil per day for the full year, but Cord expects All 600 barrels of oil per day given strong well performance and a modest acceleration of activity in the Q1.

Speaker 2

Said another way, Cord is keeping its February full year oil guidance unchanged at 96,500 barrels of oil per day despite selling these non core volumes. Gas and NGL volumes and realizations were also adjusted to reflect higher levels of ethane rejection and recent benchmark pricing. Finally, an update on ESG. Chord is still on track to resume publishing a full sustainability report in 2023, which will include robust disclosure on performance through 2022. Chord continues to work towards improving disclosure and performance for its ESG initiatives.

Speaker 2

To sum things up, we're off to a very strong start And most material integration projects are complete. We've created a better company with a strong financial outlook capable of supporting high levels of sustainable free cash flow at prices much lower than current market benchmarks. With that, I'll turn it over to Michael for some additional updates.

Speaker 1

Thanks, Danny. I'll highlight a handful of key operating and financial items for the Q1 and discuss our updated 2023 guidance. As Danny mentioned, oil volumes were strong in the Q1 about 2.3% over midpoint guidance. Total volumes also exceeded Natural gas realizations also benefited by colder weather in January February. Importantly, the net impact to revenue was favorable.

Speaker 1

Combined natural gas and NGL revenue totaled $115,200,000 which exceeded revenue implied by midpoint volume and differential guidance using actual Q1 2023 benchmark pricing. Our 2023 guidance has been updated to assume ethane rejection continues through the remainder of the year. Additionally, we lowered our Henry Hub assumption from $3.50 to $2.75 per MMBtu. Bakken crude pricing closely tracked WTI over the quarter and we expect to realize slight premiums to WTI through the remainder of the year. Is expected to increase sequentially each quarter with the Q4 of 2023 volumes the highest of the year.

Speaker 1

4th quarter volumes stand to benefit from 3rd quarter TILs as 4th quarter TILs will drop off considerably. As Danny mentioned earlier, our full year oil production guidance has increased when adjusted for asset sales due to the strong performance of the asset base and the strong performance of our team. Turning to cash costs. LOE and GPT on a per unit basis We made some adjustments to the outlook to reflect the volume impact of the ethane rejection and of the divestitures. On an aggregate dollar basis, guidance is essentially unchanged for the Williston business.

Speaker 1

Production taxes were approximately 7 9% of oil and gas revenue in line with guidance. We now expect this to increase slightly over the course of 2023, which reflects lower natural gas prices. Said another way, oil is becoming a larger percentage of the revenue mix and is taxed at a higher rate than gas. Cord cash G and A expense was $18,200,000 in the 1st quarter, which was in line with guidance and excludes $2,800,000 of merger related costs. Our 2023 cash G and A guidance remains unchanged at $63,000,000 to $73,000,000 Cord paid no cash taxes during the Q1 and does not expect to make a payment in the 2nd quarter either.

Speaker 1

In the second half of the year, Cord expects cash taxes to approximate 2% to 10% of second half EBITDA at oil prices between $70 $90 per barrel. Our full year capital budget guidance remains unchanged at 825 to $865,000,000 As a reminder, we set our 2023 budget assuming year end 2022 pricing levels holding flat through 2023. While equipment utilizations remain high, pricing has generally plateaued and remains around year end 2022 levels. All this has led to a great quarter and significant free cash flow of 199,000,000 This paired with our return of capital framework results in another quarter of significant return to shareholders. Turning to liquidity, Cord recently redetermined its borrowing base, which is reduced from $2,750,000,000 to $2,500,000,000 due to lower bank commodity pricing assumptions.

Speaker 1

Elected commitments remain at $1,000,000,000 with nothing drawn as of March 31. Cash was approximately $592,000,000 as of March 31 as well. In closing, the core team continues to execute well and drive strong returns, which supports our sustainable free cash flow profile as well as our peer leading return of capital program. We are incredibly proud to be a safe and responsible low cost provider of energy, which fuels a better world. We're also proud of the entire core team, which continues to show care for each other and for our communities and the courage to always do what is right.

Speaker 1

With that, I'll hand the call over to Danielle for questions.

Operator

We will now begin the question and answer session. The first question comes from Phillips Johnston of Capital One. Please go ahead.

Speaker 3

Hey guys, thanks. Maybe just first just a generic question on what you're seeing in the M and A arena these days and What kind of appetite the company has for acquisitions in the near to intermediate term?

Speaker 2

Yes. Thanks, Phil. This is Danny. I think the M and A market, it's interesting. We've got clearly, there's been some volatility in the commodity.

Speaker 2

And my general thought is volatility in the commodity makes M and A a little bit more difficult because it can create some bid ask dynamics between buyers and sellers. But more broadly For ourselves and how we think about M and A, we've mentioned many times that consolidation thematically is something that we're very, very We produce a commodity and generally speaking larger organizations are going to be better positioned to be low producers of a commodity. And so consolidation is something that we believe in and we're committed to. And so that will entail some M and A for us. And we've said many times that We are going to be looking to be part of a larger equity story and that can involve us consolidate and it could also involve us being consolidated, but being part of a larger equity story is something that's important to us.

Speaker 2

And so we are constantly on the lookout For assets that fit us well, we'll be disciplined as we go through that. We think bigger only makes sense if you it also makes you better. And so we'll be very disciplined in how we look at it, but being a larger being part of a larger organization is something that makes a lot of sense to us.

Speaker 3

Okay, great. And just a question maybe for Michael. Gas realizations as a percentage of NYMEX obviously are running stronger than expected and it Seems like that's mostly a function of the increased ethane rejection. I think you mentioned the effects of cold weather for Q1. But As far as your improved guidance for the rest of the year, just wondering if ethane rejection is the sole factor or are you just are you seeing better Realizations on an apples to apples basis than you originally anticipated?

Speaker 1

Yes. We're seeing generally Things in line with what we anticipated. But the ethane rejection obviously because that stays in the Stream improves those realizations overall. So that's where the change has been. We think it's going to be left in the stream.

Speaker 1

It may not be, but that's how we're guiding going forward. So it's in line with what we saw in the Q1.

Speaker 3

Yes. Okay. Thanks guys.

Operator

The next question comes from Derrick Whitfield of Stifel. Please go ahead.

Speaker 4

Thanks. Good morning all and congrats on a strong start to the year.

Speaker 2

Thanks, Derek.

Speaker 4

Perhaps for Danny or Mike, dividends have accounted for heavier allocation of the return of capital program to date as you noted in your prepared remarks. As you think about prosecuting a program with a heavier buyback focus, could you comment on your framework for share repurchases and your sense on investor

Speaker 2

Sure. Thanks, Derek. I'll start off and then maybe ask Michael to weigh in. We've as we've come out, one, I'd say we are committed to having a strong return of capital program as an organization. We think that's Important to instill capital discipline within the organization and also to provide shareholder returns.

Speaker 2

And so it's a pretty key tenet of our strategy. Along with that, we as we've gone through this program, the overall return of capital has been very, very robust We've continued to engage with investors all along the way about form of capital return and that's a subject that we've talked a lot about internally and we've certainly Sought out and gotten input from investors as well. I think generally speaking, the preference is to have a bit more of a balanced program than what we've demonstrated certainly over the last two quarters. And so as we think about the framework moving forward, We've mentioned previously that the framework is something that looks at intrinsic value and relative trading performance. As We looked at relative trading performance.

Speaker 2

I think our view on that has been pretty narrow and widening up our view on relative performance We'll put us in a position to execute some more buybacks as we move forward. So the discount intrinsic value Has kind of remained with the equity and so we think it's a great opportunity for return of capital, just with discount from intrinsic value versus how our equity trades in the market. So it's a compelling opportunity for us and I think you'll see us do a little more as we move forward. Anything to

Speaker 1

add Michael? Yes. The only thing I would add to that Derek is I think that as we've Engage shareholders, I think that one, they're almost all very appreciative of our return on capital framework and And kind of leading on that side and what we're doing on the 75% return at current kind of leverage levels. And then 2, As we talk about kind of that mix, I think every investor has a slightly different view and we have Pretty good balance of those that prefer variables, prefer buybacks and so we're going to match that with being just a little bit more balanced in the program.

Speaker 4

Terrific. And for my follow-up, I wanted to focus on the output from your case study on Page 7. I was certainly positively surprised by the $40,000,000 increase in your NPV per DSU and your ability to achieve a similar recovery With 50% less wells, in the former approach, so 2015 and before, do you have a sense on when the wells began to communicate And separately, were the D and C designs similar from a profit intensity perspective?

Speaker 5

Yes. This is Chip Reimer and good morning. Thanks for the question. Yes. The when they started communicating, probably a good question.

Speaker 5

I think what we've done and identified as we're going through the process and understanding returns Getting the best rate of return, we understand we weren't getting what we thought out of the DSU. That was what it actually was costing us more to get what we thought we could get out of it. And so, as we went in and we started looking at up spacing, we identified that we could literally impact these wells with similar fracs. We fine tune the fracs now. We're down to £1100 per foot and 20 to 25 barrels per foot.

Speaker 5

I think we fine tune the fracs that we're able to now communicate across, staying above 1,000 foot between the wells and be able to Stimulate all that rock and get way better production. So over this period of time, I think it's a fine tuning of completions, after you realize maybe we over Spent money in some of those DSUs. And at this point, the way we're running our business is very efficient. If you look at capital efficiency and the value, you saw the $40,000,000 in value that we're bringing out DSU, just minimize the cost that's going in there, but you are getting the same recoveries or very close to the same recoveries.

Speaker 4

And Chip, maybe just to clarify, it seems that the biggest change was really with the Three Forks and the intensity that you guys were approaching with that. And the perspective was that you would be fracking up and recovering more within that unit. But seemingly that's where you were seeing the communication between the Middlebach Three Forks is when you guys are fracking up.

Speaker 5

Yes, yes. We're in the process of majority of our wells in the future here are all Bakken to your point.

Speaker 4

That's very helpful. Thanks for your time.

Operator

The next question comes from Scott Hanold of RBC Capital Markets. Go ahead.

Speaker 6

Hey, thanks. You all have obviously have a nice cash balance and does provide you some optionality if something on the M and A side It comes in front of you, but can you give us a sense of the strategy with that going forward? If how long are you going to wait If something doesn't come up on the M and A side to hold that cash in, what optimally then would be the best Strategy to kind of return that to shareholders. Do you would it be kind of a balance of the type of shareholder returns? Would it be like just a big What are your thoughts on that?

Speaker 6

Sure.

Speaker 2

I'll start off, Scott. This is Danny. So I think we don't have a specific time frame with which we're looking at potential M and A activity or potential acquisitions. To your point, one, we do have Nice cash balance and one of the reasons we have that is because we do want to be front footed and opportunistic if we see meaningful and additive and accretive M and A in And I think we'll see that. And so we don't have a specific time line.

Speaker 2

But clearly, a negative net debt capital structure over the Long term probably isn't a really sensible capital structure for the organization. And so we wouldn't look to have that over the long term, but I don't know that there There's a specific target on a specific date. My anticipation is that we will be because We are looking to be opportunistic and front footed on an M and A front that we will be successful in finding some opportunities to make some sensible acquisitions. And so I think that will probably be the first utilization of that capital. But to your point, if it doesn't materialize over time, it's not a really sensible capital structure for us long term.

Speaker 6

Okay. I appreciate that. And Just to clarify too, when you talk about M and A, you all plan still are planning to stay focused in the Williston or Have you started to kind of think other opportunities outside the basin yet?

Speaker 2

I think the Williston clearly there's a lower bar for us within the Williston relative to other basins. And so never say never in other areas, but we bring a lot of synergies, a lot of knowledge to bear within the Williston Basin. And so I think moving outside the basin for the right opportunity is something that we would look at, but clearly The sort of industrial logic and synergies we can bring for in basin acquisitions makes a ton of sense.

Speaker 6

Got it. Thank you. Appreciate that.

Operator

The next question comes from Bertrand Donis of Truist. Please go ahead.

Speaker 7

Hey, morning guys. On the well results, your Indian Hills results are looking pretty encouraging. It seems even Getting a little bit better over time. Was that what you were expecting internally? And then kind of secondly, you know 55% to 60 And of your inventory, it can be amenable to that 3 mile lateral program.

Speaker 7

Could you maybe break out what you're seeing this year and next And maybe if that has any impact on cost savings?

Speaker 5

Yes. Appreciate the question For Trent, yes, we are was it what we were expecting? Our teams really fine tune this and try to understand what the Going back to the prior question and seeing these uplifts are exciting to us. I would say it's probably what In the range of what we thought the avenue we thought was going to be. That continues to improve.

Speaker 5

We're seeing additional improvement on the base and the wedge. And so I'm really excited about where we're going. On the 3 miles, we're going to scatter across the basin here. We've expanded. We've historically been in Sanish.

Speaker 5

We've done a little FBR. We are looking into Indian Hills as you're aware and some other basins. But on that one page there, I think what we're showing across the board, we're going to be doing this and expanding this to the West, Really excited about where that's going on the 3 miles and the value it's going to create. When you look at your taken the well cost from $860, $70 a foot down to $6.70 $6.60 a foot. You're making a huge impact as Danny had indicated on some of We're going forward.

Speaker 5

So excited about where that's going to go to improve some of our well results.

Speaker 7

And then if I could try to marry 2 of the comments you made so far. One was kind of that, hey, you are in the market, you're happy to look at consolidation, That's part of your day to day. And then also that it seems like investors are very receptive of a more balanced Buyback program, that shareholder returns are still on the forefront. How do you look about look at Your formula that could maybe dip down into a lower free cash flow payout if you buy some assets, Does that stop you from looking at certain packages that would require you to dip above the 0.5 leverage? Or do you think maybe with right deal, the market would accept it.

Speaker 2

So I think with the obviously the return of impact our return of capital program is a consideration we would take in as we were looking at any potential acquisition. And so it's something that would be Sort of worked into the calculus of as we evaluated the deal. I would say that if we found an asset that we thought was compelling and made us a better organization, it's one of the reasons we laid the framework out there to be transparent to investors that if we did something and our leverage went above 0 point Then we might ratchet back the return of capital because maintaining a strong balance sheet is very important to us. And so we would do that if we thought The deal was compelling, very accretive and we would obviously have a pathway to get back down to lower Absolute debt and relative debt levels over time with the free cash generation of the asset. So it's something we would take into account.

Speaker 2

Could we Would we move above 0.5? I would say we would move above 0.5 if it was the right deal, but we would think that deal was ultimately delivering the most value to shareholders. But it's one of the reasons why we put the framework In the first place, we'll be very transparent about how we're thinking about it.

Speaker 7

That's good. And then just for housekeeping, it's not a big deal that you sold, but Are there any other non Williston assets that you have or just maybe non core? Just how much is left in the coffers? And that's all I got.

Speaker 2

Yes. So we've got a small amount and we'll see that are non core and probably don't probably make more sense and they're nice assets, but probably make sense in someone else's hands than in our own. And so we'll look at that as we move forward and communicate it if we're successful on anything there, but Small in nature, small in volume.

Speaker 7

That's perfect. Thanks.

Operator

Thank you. The next question comes from Oliver Huang of Tudor, Pickering, Holt. Please go ahead.

Speaker 8

Good morning, everyone, and thanks taking my questions. Just a couple on the ops side of things. Certainly appreciate the longer dated results that you all shown in your presentation and can certainly understand we're still in the early days. But just kind of given the 23 program is a bit more spread out across the Williston from an aerial perspective, I was hoping to see if there was any color that you all are able to provide for initial observations for conservatively spaced wells outside of the Indian Hills area. Really just trying to get a sense for confidence or anything you all have seen to date to support a similar percentage uplift for less heavily developed areas like Red Bank, Foreman Butte and Painted Woods?

Speaker 5

Yes. Oliver, thanks for the question. This is Chip Reimer. Yes, it's early stages. If you think about it for Cord, I think we're 19, 20 wells right now at 3 milers since our conception in July.

Speaker 5

And so as we expand that and see more, I'm very Hopeful and positive that we're going to see some of the results, but you have to give us a little time down the road to be able to see those results as we go into some of these other areas that we're planning to go into for this year.

Speaker 8

Okay, fair enough. And specific to Sanish, just kind of given the area is a bit more developed and understand infills do sometimes make their way into program. Wondering if there is any way to speak to how spacing for the 2023 program in Sanish compares to 2022? And if there is any expectation for a year over year uplift in well productivity out of that region as a result?

Speaker 5

Sandage is the field that keeps on giving when it's all said and done. And we're focused on Some 3 milers in that area, we've seen some impact on 3 milers and it depends where we're looking for the right spacing and those kind Thanks. So last year we were very heavy in that area. I think over 50% of our wells were in that area. We're not nearly that percentage this year, but we're going to pick and choose where we want to go And look for the best productivity areas with that we think there's still value to be had at Sanish, but it is one field that keeps giving.

Speaker 8

Awesome. Thanks for the time.

Speaker 2

Thanks, Oliver.

Operator

The next question comes from Jon Abbott of Bank of America. Please go ahead.

Speaker 9

Hey, good morning and thank you for taking our questions. Really, first question, these are more sort of guidance related items. So we've seen one operator this morning modestly reduce their full year As they have potential line of sight on lower steel costs in the second half of the year, Could you just give us an update on how you're thinking about your CapEx guidance range this year as you sort of look at potential cost improvements?

Speaker 2

Yes. This is Danny. I think we've got our CapEx range. We're reaffirming our CapEx I think we've seen we kind of anticipated that cost at the end of 2022 would sort of maintain through the course of 20 And generally speaking, that's what we've seen. We've seen looks like there we could see steel come down in the back half of the year, a little too early to see that fully roll through, but early evidence that, that could happen.

Speaker 2

We've got some areas that are up modestly, some areas that are down modestly. But generally speaking, the services Has remained cost seemed like they've plateaued. I would say that generally speaking with clearly volatility in the commodity and the commodity and service costs normally follow each other, although that's not there is a lag between the 2. And so We'll have to monitor where the commodity goes over time because of lower commodity. It could lead to some downward pressure on service costs as we move forward as people think about their overall activity.

Speaker 2

But for right now, I think we feel good about where our capital is and are just reaffirming what we put out earlier in the year.

Speaker 9

Appreciate that, Johnny. And then And then another sort of yes.

Speaker 5

Okay. It's Chip. I've got a couple of things. The other thing is we're focused on is our synergies. And so if you look at the one page where We're showing cost per foot come down.

Speaker 5

We're doing the 3 milers versus the 2 milers. We have focused, you can see the days per Drilling, wasn't too long ago, we were in that 17% range with everybody else and we saved 20%. So the synergies we're seeing with the 2 Combined companies are coming to fruition. We're seeing huge value on the drilling side. We're putting facilities together that was used to take us maybe 16 weeks or down to 10 weeks Because they're modular, so these different ideas combined, we're able to manage some of that cost because of the synergies.

Speaker 2

John, As I've said here, I'll make one other comment. This is Danny again. The cadence of our capital spend is one thing to note, Phil. Well, Most of our we picked up a second completion crew about midway through the Q1, and we're going to run that Up to about the end of the Q3. And as you know, the completions is where so much of the capital spend is associated.

Speaker 2

So really quarters 23 will be The big capital spend quarters for the organization in 4th quarter as we drop that second crew toward the end of the 3rd quarter really will The capital spend in Q4 will be pretty significantly below the other quarters just because of the nature of how we've done the program. And one of the reasons we've done that is It's nice for us to have 2 crews work indoor during the sort of best weather months within North Dakota. So we'll drop that second crew as we right before we go into the Q4. So our capital spend in the Quarter will be will probably be our lowest of the year. So anyway, just a little on if we're linear extrapolation of capital spend, probably Lead you down a bad path because that's not how the program is actually set up.

Speaker 9

I appreciate that color. The second question, I've really enjoyed the discussion on longer laterals and water spacing. And again, this is maybe a bit more in the weeds. You modestly raised your oil guidance for the year at post the asset sale. So when you provided that oil guidance And when you thought about your move to what your move with wider spacing and also longer laterals, how do you risk that production guidance?

Speaker 9

In other words, Is there a possibility we could see higher output than you're currently guiding to this year? Could you work conservatively Modeling the impact of longer laterals.

Speaker 5

Yes. Well, one of the things, if you think about John, we don't up our facility side and so we're limiting that. So what you're going to see is maybe longer, Flatter for longer is what you're going to see. So that kind of that may be part of it what you're seeing. So there could be some upside.

Speaker 5

But I think we're pretty fair where we are right now and how we've got it modeled. But we're not changing the facility side. We're not adding a whole bunch of additional costs and we're keeping those 3 milers flatter a period of time.

Speaker 2

And John, one thing this is Danny. One thing is as we put our type curves together for the 3 mile laterals, we generally don't take 100% Credit for that last mile. And so if you look at the EURs we generate out of the wells, we only take a fraction of that last mile assuming that there will be some degradation. And what we've Maybe we're getting a little more contribution there than how we put the type curves together and so it's probably attributing some a little bit to the Oil outperformance we've seen. And so I think from our perspective, we'll probably being Slightly conservative is probably not a bad thing on this as we underwrite the programs and we'll probably continue that stance and if we see a little more come through so much the better.

Speaker 9

Very helpful. Thank you for taking our questions.

Speaker 2

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Danny Brown, Chief Executive Officer for closing remarks.

Speaker 2

All right. Thanks, Danielle. Well, to close out, I just want to thank all of the employees at Chord who, through their commitment and dedication, have put the company in a great position to succeed and

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