Chord Energy Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Second quarter free cash flow of $141 million, with 92% returned to shareholders through dividends and share repurchases, reducing share count by ~10% year-to-date.
  • Positive Sentiment: Operational efficiencies drove a $50 million reduction in full-year capital spending while outperforming production guidance, thanks to faster cycle times and less downtime.
  • Positive Sentiment: The expedited four-mile lateral program now targets seven wells online by year-end at costs below expectations, offering 90–100% more EUR for only 40–60% higher CapEx and reducing supply costs by $8–$12 per barrel.
  • Positive Sentiment: Continuous improvement initiatives, including AI and machine learning projects, have lifted normalized 2025 free cash flow outlook by 20% and per-share cash flow by 25% since February.
  • Neutral Sentiment: Cord maintains peer-leading leverage with net debt at 0.3× EBITDA and ~$1.8 billion of liquidity, while advancing safety, gas capture, and other sustainability commitments ahead of a fall report.
AI Generated. May Contain Errors.
Earnings Conference Call
Chord Energy Q2 2025
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good morning, and gentlemen, and welcome to the Cord Energy Second Quarter twenty twenty five Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 08/07/2025. I would now like to turn the conference over to Bob Please go ahead.

Speaker 1

Thanks, Dennis, and good morning, everyone. This is Bob Bakanauskas, and today we are reporting our second quarter two thousand twenty five financial and operational results. We are delighted to have you on the call. I am joined today by Danny Brown, our CEO Michael Lu, our Chief Strategy Officer and Chief Commercial Officer Darren Henke, our COO Richard Roebuck, our CFO as well as other members of the team. 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 Securities Litigation Reform Act.

Speaker 1

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 in our earnings releases, as well as in our filings with the Securities and Exchange Commission, including our annual report on Form 10 ks and our quarterly reports on Form 10 Q. We disclaim any obligation to update these forward looking statements. 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 the current investor presentation, which you can find on our website.

Speaker 1

And with that, I'll turn the call over to our CEO, Danny Brown.

Speaker 2

Thanks, Bob. Good morning, everyone, and thanks for joining our call. Over the next few minutes, I plan to provide a brief overview of our second quarter performance and resulting return of capital, and then briefly touch upon some of our current initiatives before passing it to Darren, who will provide more color on our operations. Darren will then hand it over to Richard for more details on our financial results before we open it up for Q and A. So, turning to the second quarter results, Core delivered great performance with solid operating results yielding free cash flow above expectations, which supported robust shareholder returns.

Speaker 2

Specifically, second quarter oil volumes were above the top end of guidance, reflecting strong execution, well performance, and less downtime, while capital was favorable to guidance, largely reflecting improved program efficiencies. My thanks to our entire organization for delivering favorable results once again, and in particular to our folks in North Dakota, who did a great job navigating unusually high rain in May, positioning us to surpass expectations. This strong performance led to adjusted free cash flow for the second quarter of approximately 141,000,000 and we returned 92% of this free cash flow to shareholders. Notably, after our base dividend of $1.3 per share, all incremental capital return was utilized for share repurchases. Since closing the Enerplus transaction, Cord has reduced its share count by approximately 10% through early August.

Speaker 2

Given our view on the intrinsic value of our shares relative to how they currently trade in the market, we expect a continued focus on share repurchases in the current environment. Ford has been successful in driving strong per share growth while paying out significant dividends to shareholders and keeping the balance sheet in good shape. Turning to operations, the core team has demonstrated exceptional performance across all areas of the business. Cycle times have been reduced, well performance continues to be robust, and downtime levels are better than anticipated. These improvements to the business gave us additional operational flexibility and allowed us to reduce full year capital by $50,000,000 versus the original budget, while exceeding expectations on the production side.

Speaker 2

Consistent with our initial 2025 plan and given current commodity prices, Court intends to redeploy a second frac crew in the fourth quarter. This should give us an early start on the 2026 program and we would expect volumes to trough in the 2025 and grow off of those levels in early twenty twenty six. We'll give some preliminary thoughts on the 2026 program in November, but I'm very pleased with the progress we've made since announcing our three year plan and our ability to deliver volumes more efficiently, resulting in higher free cash flow. And while I'm pleased with our current performance, I'm even more pleased that we have the opportunity and several ongoing initiatives to further improve the business. On the four mile lateral front, given encouraging early results, we've expedited the program and now anticipate having seven wells online by year end.

Speaker 2

Currently, we have four wells drilled and costs have consistently been below our original expectations. We also have one well, the Rysted, which has been producing since February. Performance from this well continues to be strong and it recently began natural decline after more than four months of flat or increasing production. Darren will get into a little more detail on the program, but suffice it to say, we like what we're seeing and are preserving the flexibility to lean into the Fourmile program in 2026. Next, I'd like to provide a brief update on some of our continuous improvement initiatives aimed at increasing free cash flow.

Speaker 2

Slide 11 outlines the approximately 3,000,000,000 of controllable cost across the business between operated D and C capital, lease operating expenses, marketing expenses and G and A. So far in 2025, we've made progress reducing all of these areas and are on track to exceed original production guidance with less capital and better margins. Slide six outlines the improvement we made for 2025 free cash flow relative to February guidance, normalizing for price levels. The free cash flow outlook has improved 20% since February and when including the effect of share repurchases, slide seven highlights that our expectations for free cash flow per share has grown 25% since February. Going back slightly further to when we announced the Enerplus transaction, pro form a free cash flow per share is up more than 35%, again all on normalized pricing.

Speaker 2

That's impressive performance, maybe even more impressive when considering we preserved the balance sheet along the way. And my sincere thanks to the CORD team for driving this level of improvement. A key component of CORD's ongoing continuous improvement focus is the use of data analytics, machine learning, and artificial intelligence in various areas of the business, and I'd like to highlight just a few of the projects we've been working on. On the production side, Cord is working to optimize ESP to rod lift conversion decisions by using AI and machine learning to generate production profiles, forecast ESP run life, and calibrate economic decisions for our wells. Similarly, CORT is enhancing gas lift efficiency by employing an algorithm to model optimization curves and inform economic decision making.

Speaker 2

On the reservoir side, CORD is implementing a machine learning model to identify geologic contributions of production in EUR across various parts of the basin, while from a planning perspective, we're using new optimization tools to more efficiently run our workover fleet and plan for Frac Protect to avoid unnecessary expense and downtime. The company is also rolling out dynamic interactive dashboards which will give our teams, including our lease operators, real time business performance insights. The pace of innovation and adoption has been swift, and these tools support improved value of delivery to our shareholders by harnessing the power of technology to increase efficiency and insight and to improve our capital allocation decision making with not just better data, but also with better models that are easier to use. We are in the early innings of what's possible, but we're already seeing an impact and are excited about what the future holds. Lastly, a few words on sustainability before handing it to Darren.

Speaker 2

At CORD, we believe oil and natural gas will remain essential to meet the world's energy needs for the foreseeable future. CORD is proud of our work providing reliable and affordable sources of energy while maintaining a commitment to operating in a sustainable and responsible manner. Cord continues to make progress on our already strong sustainability initiatives with a focus on putting safety first, minimizing our environmental impact, and being a good partner in our communities. I should mention that Chord's safety and gas capture performance are off to a great start this year. We plan to publish an updated sustainability report in the fall, which will reflect the full integration of Chord and Enerplus.

Speaker 2

So, to summarize, Chord is performing and offers a unique value proposition to investors. I couldn't be more pleased with the state of the business as we are in a fabulous position to generate substantial value now and in the coming years. And with that, I'll turn it to Darren.

Speaker 3

Thanks, Danny. The core team is consistently improving the organization and enhancing performance. I would like to take this opportunity to discuss the notable progress being made across all operations. In 2024, the pro form a capital budget to deliver similar production levels was approximately 1,500,000,000 Currently, our 2025 CapEx guidance stands at 1,350,000,000.00, a dramatic improvement in efficiency year over year. Ford has driven strong efficiency gains through the rollout of longer laterals, wider spacing, alternative well designs, and cost saving strategies, resulting in better economics and higher production.

Speaker 3

On the drilling side, we've seen notable efficiency improvements with spud to rig release times down about a day year over year. I should also note that year to date, we've drilled seven alternate shape wells coming in below budget, both from a cost and cycle time perspective. Turning to completions. Dammel frac operations continue to drive faster cycle times. Pumping hours per day have increased 20% versus last year, and the savings per well is around $300,000 versus zipper operations.

Speaker 3

Cleanout times have improved as well for both standard and long lateral wells. Looking at our facilities, based on a recent third party study, cord has best in class facility costs, and we continue to explore additional technologies to drive further efficiencies. Turning to LOE and workover, Chord continues to focus on lowering its failure rates and reducing cycle times to restore lost production. Failure rates are improving as CORD optimizes artificial lift across its producing well base. When CORD fracs its wells, we tail in with resin coated sand, and then we manage the initial production rate, all to limit sand flowback.

Speaker 3

This typically results in one less ESP run over the life of the well. We've also upgraded our rod pump equipment, which has resulted in a longer life leading to less downtime. Additionally, our enhanced scale has allowed CORE to more efficiently service a larger production base, and we continue to make progress on optimizing logistics. We're prioritizing high impact targets, shortening the length of time to get wells back on production, and reducing the cost of workover repairs. Now to give you an update on Chord's four mile program.

Speaker 3

As Danny mentioned, we have expedited the program and now expect seven four mile wells turned in line by the end

Speaker 4

of the year.

Speaker 3

The Rysted well, our first four miler, has been online since February. Slide nine shows the actual production revolt results versus type curve. Volume and pressure indications are encouraging, and our TRACER study indicates every stage of the lateral is contributing to production. The well just recently went into decline, so we'll continue to study the volume profile, but it's looking really strong so far. Relative to a two mile well, four mile wells are expected to recover 90 to 100% more EUR, or only 40% to 60% more CapEx.

Speaker 3

On a breakeven basis, this translates to an $8 to $12 per barrel cost of supply reduction, yielding up to 30% lower F and D costs relative to two mile wells. If CORD continues to exceed expectations on the execution of four mile wells, we are likely to implement many more in 2026 and beyond. I to talk more about our progress and implications for the twenty sixth plan on our November call. To sum it up, CORT has an impressive track record of consistent execution and strong returns. We look forward to delivering on our long term outlook.

Speaker 3

I'll now turn it over to Richard.

Speaker 5

Thanks, Darren. I'll round out our conversation with some final thoughts that expand on comments made earlier or in our press release. Danny covered our volume performance, which was above expectations. Looking at pricing, oil differentials in the second quarter averaged $2.15 below WTI, which improved slightly from our prior quarter and were within our guidance range. For the full year, oil diffs guidance improves reflecting the tightening in the second half.

Speaker 5

Turning to gas and NGLs, as expected, pricing was lower sequentially reflecting normal seasonality. NGL realizations were 9% of WTI in the second quarter, while natural gas realizations were 32% of Henry Hub. Our full year guidance was adjusted to reflect our current outlook. As a reminder, certain marketing fixed fees are deducted from our NGL and natural gas prices. This drives higher operating leverage, which hurts realizations for both NGLs and natural gas in times of weaker prices and benefits realizations in times of higher prices.

Speaker 5

Lease operating expenses, or LOE, were $10.2 per BOE, which was at the higher end of the guidance range that we set in May, primarily due to increased workover costs as the team did a great job restoring production volumes after significant first quarter weather disruptions. Ford had achieved notable improvements in reducing cycle times for high capacity wells, which led to some higher costs but also had some positive impacts on volumes. Ford's full year LOE per BOE guidance remains unchanged. Production taxes averaged 7.3% of commodity sales in the second quarter, which was below our expectations. This primarily reflects the impact of non recurring refund for stripper wells received during the quarter.

Speaker 5

Our oil revenue from these low producing wells is taxed at a reduced rate. We expect these refunds to have a lower impact in future quarters. We have adjusted our full year production tax guidance to reflect our first half performance and our go forward expectations. Cash G and A expenses were $22,000,000 below our guidance. For the full year, we have reduced cash G and A guidance by $7,000,000 as a team exceeded synergy expectations and drives our continued improvement initiatives, including efficiencies gained through the use of various data analytics, machine learning and artificial intelligence tools that Danny mentioned earlier.

Speaker 5

Second quarter cash taxes were approximately $32,000,000 or 5.9% of EBITDA, which was within our guidance range. We have lowered the full year cash tax range to 3.5 to 6.5% of EBITDA at WTI prices in the second half of the year ranging between $60 and $80 per barrel. The reduction reflects our latest forecast, which include the impacts of recent tax legislation. Board continues to have peer leading leverage and liquidity. Net debt levels increased from the first quarter, largely reflecting a non recurring working capital swing.

Speaker 5

As of July 31, net debt was approximately $810,000,000 a decline of almost $80,000,000 from June 30. Net debt or net leverage was approximately 0.3 times on a trailing twelve month basis. As of June 30, the board had $180,000,000 drawn on its $2,750,000,000 credit facility with 2,000,000,000 of elected commitments. Liquidity as of June 30 was approximately $1,800,000,000 including $40,000,000 of cash and $1,790,000,000 available under the credit facility net of letters of credit. We also layered in additional hedges during the second quarter and in July.

Speaker 5

Our derivative position can be found in our latest investor deck. In closing, Cord's execution and delivery remains best in class. I'm looking forward to the additional progress as our team relentlessly pursues continuous improvements and innovative solutions. With that, I'll hand the call back over to Anas for questions.

Operator

Thank you. Ladies and gentlemen, now begin the question and answer session. One moment please for your first question. Your first question comes from Scott Hanold with RBC Capital Markets. Please go ahead.

Speaker 4

Yes. Thanks. Good morning. You all talked a couple of times about seeing some good stuff from the Fourmile wells and integrating more of that into 2026 potentially. Could you provide us some context what level of investment in these four mile wells from a risk reward perspective makes sense?

Speaker 4

And what needs to be done on the permitting front in order to make that a bigger part? Do you need to start re permitting stuff? I assume you're already underway with that, but just some color there.

Speaker 3

Yeah, the permitting activity, Scott is well underway for next year and beyond relative to four miles. So we're really preparing ourselves to go either way. We're setting ourselves up with the optionality for four miles, but also three miles or two miles, whatever the case may be for the original plan. So we're set up either way from a permitting standpoint.

Speaker 2

Scott, I will say that we are really encouraged with the early results here and you can actually withstand some fairly reasonable degradation of performance from the fourth mile and still have this be the right economic decision from an IRR perspective. And so we're really encouraged with the early results. Looks like we're already over 97% of what two two miles would deliver and so we're getting close with this first well at least to 100% contributions in short order from the four mile well relative to two miles. But the economics of these four miles is going to be really strong. And so you can withstand some degradation in that last mile and still have that be the right decision, even though we're seeing performance that's above our original expectations here.

Speaker 4

Right, right. So it sounds like you guys are prepared to potentially move pretty quick on this, if you can. Okay. And then I get sorry about that. My follow-up is just on the Marcellus.

Speaker 4

Obviously, it's obviously a non core position that I didn't hear much of an update on it today. But can you give us your most recent thoughts on where that fits into the stack of initiatives with regards to monetization?

Speaker 2

Yes. Scott, appreciate the question and the interest in that. I'd say Marcellus is we've been pretty transparent that we think Marcellus is a great asset. It's in the core of that basin, but it's not core to our portfolio. And so we're going to be very focused on making sure that we deliver maximum value from that asset.

Speaker 4

Fair enough. Thanks.

Operator

Thanks, Scott. Thank you. Your next question comes from Oliver Huang with TPH. Please go ahead.

Speaker 6

Good morning, Danny and team, and thanks for taking our questions. Wanted to start out on the Rydstead Well, get a bit more detail than what you already highlighted in the prepared remarks. Just any main takeaways or observations from the drilling of the well, the completion of the well, the flowback, the productivity in the first six months. I understand it'll probably get better and faster with the subsequent wells as things look pretty encouraging here. But do you have to ask, is there anything that you all might look to potentially change up or tweak with respect to any of these items as we think about prosecuting on the remaining $4 that are scheduled this year?

Speaker 3

Yeah. The execution on the Rysted went really almost flawlessly. We we were able to drill the well with one bottom hole assembly. You know, we were concerned that it would take rotary steerable steel to directionally control the well maybe in that last mile and we just haven't seen that on any of the wells that we drilled. So overall, the drilling performance has gone better than expected.

Speaker 3

We've only completed one well so far, the Rystad and of course it's outperformed its type curve by 30%. As Danny said, it's almost cumed in a little over one hundred and fifty days, what two mile wells would have been expected to cume in this area, so very quickly performing very similar to two mile wells. So we're just really excited about what we're seeing, we're excited with how the team has been able to execute on these wells, but we do need to complete some more and we're going to before the end of the year, we'll have seven online, so we have six more to complete and bring online before the end of the year and we'll be a lot more intelligent after we get a number of those under our belt.

Speaker 6

Awesome. Makes sense. And maybe just for a follow-up question. I know it's still super early in the process, but as you all have done the work looking at how your acreage footprint sits today on how to optimize the development program, if you all were to kind of go ahead with a more material shift towards four mile laterals, is there a general view in terms of how much incremental net lateral footage expansion we would be talking about that would move into the economic bucket that otherwise wouldn't have?

Speaker 2

Yes, I'd say, I can't quantify that for you, Oliver, but what I'll tell you is with the breakeven reductions that Darren mentioned earlier, clearly some of the areas on the periphery of the basin are going to start to come in and compete for capital in the way that they did previously. And the existing wells that we moved to four miles are going to look just better. And so, clearly we need to get some more of these over our belt. We're working through, as Darren mentioned, the permitting and planning to make sure that we can prosecute a more aggressive four mile program with the existing with sort of our existing contemplation. Looks like four miles could be up to around 50% of our development plans on a go forward basis.

Speaker 2

And as we go through that work, we'll be of course going back and looking at the basin and reevaluating and there's no doubt that some of the acreage on the peripheries will start compete more attractively for capital.

Speaker 6

Makes sense. Thanks for the time, Danny.

Operator

Thanks, Oliver. Thank you. Your next question comes from Derrick Whitfield with Texas Capital. Please go ahead.

Speaker 1

Good morning, all, and congrats on a strong 2Q update.

Speaker 2

Thanks, Derrick.

Speaker 1

Setting aside the somewhat perplexing stock response this morning as you guys have one of the better rate of change stories in the sector at present, I wanted to ask your thoughts on how low you could drive your corporate level breakevens, given the breakthroughs you're experiencing with four mile laterals and the cost initiatives you've outlined on slide 11.

Speaker 2

As we think about the I appreciate the question, Derek, and we think we had a great quarter too. So as we think about the overall breakeven of the program, again, you can think of sort of 50% of our inventory moving over to a four mile lateral perspective and that yielding call it between an 812%, so let's just take 10 as the midpoint. If that's half of our inventory just sort of with simple linear math, you'd say maybe that's a $5 improvement across organization. And so that's the kind of positive uplift we're talking about in moving towards this. But that's not that's I think should also be taken in combination initiatives we have within the organization.

Speaker 2

So we're really trying to improve all aspects of our business to deliver incremental free cash flow. So the four miles are exciting, but we're trying to make progress on LOE and all of our other elements of expense as well. So yeah, of opportunity for organizational improvement as we move forward.

Speaker 1

That's great, Denny. And I honestly want to lean in with where you just ended there. When you think about the AI and machine learning advances you're seeing, how material could the cost gains be relative to what you've accomplished to date? And what are some of the biggest needle movers for you?

Speaker 2

I'd say, Derek, it's just so early and so nascent in this process. But what I can tell you is just a little bit of insight. I sat in a meeting yesterday afternoon internally and we went through 31 different projects that were underway organically working through the organization to drive improvements across every aspect of our business you could think of. And these were folks, again, all organically driven. And so this is, I would call innovation and data analytics at Cord as being sort of decentralized in concept but centralized in influence and oversight.

Speaker 2

And so we've really empowered our folks to lean into getting very familiar with data, how to use data sets. We've got folks across the organization now programming and SQL and Python and just doing things in manner that is so much more efficient than we used to do things. And so where that leads, it's going to lead to lower cost structure. To quantify that at this point, I think it's pretty tough, but I can tell you it's permeating every aspect of our business, it's exciting and it seems to me that the pace that this is moving is pretty quick and it's building steam.

Speaker 7

Great color. I'll leave it there.

Operator

Thanks, Gary. Thank you. Your next question comes from John Abbott with Wolfe Research. Please go ahead.

Speaker 7

Appreciate it. Thank you for taking our questions. So maybe I'll just sort of tag along on the AI question here. So, Dan, you just talked about opportunities are being driven organically. So when you think about this and when you think about AI, what is the cost of actually implementing these initiatives?

Speaker 7

And what are the advantages of looking at these solutions internally versus externally? If you could speak to that. In other words, using a vendor versus developing internally.

Speaker 2

Yeah, so I think it's a reasonable question, John. I'll make a few comments then maybe ask Michael to make a few as well. I'll tell you that from my view, the cost of implementation is actually quite small. When you think about the datasets, first it all starts with having clean organized data. And so we spent a lot of time over the last few years and candidly were probably helped with the mergers and acquisitions that we've done over time because we had these big data sets come in that we needed to get put into the corporate architecture.

Speaker 2

And I think that was a strong catalyst for us to make sure that all our data was well organized, clean and accessible. And so because we had that as a backdrop, we could really lean into having this sort of clean data set that could then be leveraged. And so we've got some training courses we put through the organization, we've had hundreds of participants across the organization on what we call data camps and teaching people how to use, how to code. And it's been it's really taken off across the organization and we're just seeing this excitement around it and we're seeing tangible results from putting that in. That's all very low cost.

Speaker 2

There's some upscaling that's happening along the way and I think people are excited about it because they're able to sort of take ownership over their workflows and making their work flows more efficient, which I think is a good thing. So you could hire a third party to come in and do some of that. But I don't think that builds the organizational excitement and momentum like what I see going on inside our organization now. And I'll turn it over to Michael for incremental comments.

Speaker 8

Yeah, thanks Danny. Yeah, John, the only things I'd add to that are super proud of our teams in their embracing of kind of change. And Danny mentioned, I think some of mergers that we've done in the past has helped us continue to look for how do we kind of root out repetitive work. That's happening at every team at every level across the organization. And people are really embracing the desire for change and desire just getting better every day.

Speaker 8

So we're trying to provide, as Danny mentioned, kind of the tools for everybody to do that and the training to do that. We're also working with outside vendors in terms of their products continuing to get better through AI machine learning. There's a number of folks that are doing that within their own software programs that we're looking at how that improves our people's work and kind of their time efficiency, etc. And then we've got a team that's really trying to look outside of our industry as well. As we know, the oil and gas business is making some changes, but there are other industries that have also done massive changes across their businesses.

Speaker 8

And we're trying to look at what they're doing and and figure out how to implement some of what they're doing into our business as well. So it's kind of coming in multiple different types of ways that we're looking at the business.

Speaker 7

Appreciate that color. And then for the follow-up questions could be on 2026. You'll give us more thoughts exactly in November. And there's been already plenty of questions on four mile laterals. But when you look at 2026 and I mean, what are the factors that you're looking at in terms of what is the right amount of activity and what you're going to do?

Speaker 7

And then how do you see the cost savings from this year translating to next year as you sort of think about items such as tariffs? And somebody had mentioned this weakness in the stock today. I think the 4Q oil guide may have been a little bit low towards street expectations. How do you provide confidence as sort of you sort of think about oil growth into the following year?

Speaker 2

Yeah, appreciate that John. So maybe I'll take those maybe not quite in the order to ask, but if I miss something just let's make sure we address all those topics before we move on to the next person in the queue. So from a 4Q oil production perspective, I'd say as we've been pretty focused and deliberate in our comments that what we're focused on as an organization is really making strong capital allocation decisions. And for the purpose of generating strong free cash flow per share growth. And so that's what we're focused on, not absolute production growth, but strong free cash flow per share growth.

Speaker 2

And we've got some of that shown in our slide deck. So as we came across, as we've worked through 2025, the plan has been working exceptionally well. We're delivering more, we've seen stronger performance really from just about every aspect of the business. And so what we didn't want to do is sort of push production growth through the system at the expense of incremental capital when we had a different decision we could make, which was to peel back on capital a bit, which will naturally have a resulting decrease in production, but generate more free cash flow, which is great because we've been think candidly, we think our shares are pretty attractive here and as we generate incremental free cash flow, it means incremental share repurchases for us. So we like that setup.

Speaker 2

Because we went to zero frac crews at one point during the year and we brought a frac crew back, our tilt cadence is now there's some cyclicality in our till cadence. And so we're going to have the lowest number of TILs in the fourth quarter. And because we're bringing that frac crew back in the fourth quarter, we'll see that till count increase materially as we get into the first quarter of next year. And so the fourth quarter of this year will be our trough from a production standpoint, but we're going to grow up that trough. And I feel supremely confident about the plan we put out.

Speaker 2

The three year plan we put out in November was really with a static view of the world, including our own internal capabilities. And I can tell you our capabilities are much better now than they were then. And so I feel really, really confident about the plan, about the delivery in '26 and look forward to talking about it in November.

Speaker 7

Thank you very much.

Operator

Thanks, John. Thank you. Your next question comes from Kevin McCarthy with Pickering Energy Partners. Please go ahead.

Speaker 9

Hey. Good morning. Moving back to the four mile laterals for a minute, how much CapEx are you saving by doubling the four mile lateral program this year? And do you have any thoughts on the range of annual CapEx savings you could capture if you move to 50% of your program in four mile laterals like you highlighted in your deck?

Speaker 2

Yes, so for this year the amount of capital saved by increasing the plan is probably de minimis. Honestly, it's a relatively small part of the overall program and so I just think that that's maybe some modest levels of capital savings, but going to be pretty small. As we move more towards a much more substantial four mile program, I think you'd have to compare that. We'd already moved a bit to a three mile program and so to say that's going to be incremental savings, there's incremental savings from a three mile to a four mile but it's not as dramatic as from a two mile to a four mile. So it depends a little bit on how what the makeup is as we move forward.

Speaker 2

So clearly it's going to have downward pressure on capital to deliver the same volumes. I think it should be, I think folks recognize that we bring these wells on typically a little slower than we bring in the shorter laterals because we're trying to manage sand flow back into the ESPs and so as a result of that generally the early time production on these wells will be slightly lower on a per foot basis than the shorter laterals. But again, that's really because we're trying to manage the flow back and ensure that we don't put too much sand through the system which comes up our ESPs ends up cost requiring incremental expense for us. So you'll see that early time production be a little more modest from a throughput standpoint but it catches up pretty quickly and you could see that in the graph of Rysted that here after about one hundred and fifty days we're already at 97%. So, from a run rate capital perspective, it's going to get pushed down, but it's going to really be an issue of what is the mix of four versus threes versus two.

Speaker 2

And I think as we come out in November and start talking a little bit more about the future, we'll probably have some more specifics on that.

Speaker 9

Great. And I wanted to follow-up on the 4Q guide question. And we noticed that you reduced your turn line count a little bit this year. I'm just wondering if that has any impact on your fourth quarter production or your fourth quarter CapEx? Thanks.

Speaker 2

Well, think as the turn lines come down, that does have an impact on production because you just bring more less wells into the system. Again, we're not trying to manage to an absolute production volume. It's more about sort of generating strong free cash flow per share. And so we'll there's a little bit of a having fewer TILs just isn't necessarily going to mean you've got less production flowing through the system. Those TILs will come online.

Speaker 2

We've got some that come online late in the year that will the early twenty twenty six will benefit from and then we've got a bunch that come online early in '26. And so the overall capital program isn't actually that different year on year if you think about it from a drilling and completion perspective. I mean from guidance to what our expectations are now. The till counts more materially different because we've got some tills that were originally anticipated in late twenty five slipping into early twenty six, but the frac operations are still really taking place this year. So it's always tough when you look at till counts because moving them by a day may make it from one quarter to another or one year to another.

Speaker 2

So, some modest movements in till counts can make annual movements or quarterly movements seem more material.

Speaker 9

Appreciate the nuance there. Thank you.

Operator

Thanks, Kevin. Thank you. Your next question comes from Paul Diamond with Citi. Please go ahead.

Speaker 9

Good morning, all. Thanks for taking the call. Just wanted a quick one sticking on the full mile plan. How should we think about the lower CapEx level? You guys highlight 40% to 60% lower versus two miles.

Speaker 9

And I guess just trying to get an understanding of this if you're seeing any further incremental improvement there or will anything that affects two or three flow to four? Just kind of how to think of the relationship there.

Speaker 2

Yeah, so I think generally it's just all about every incremental foot you drill is the most efficient foot generally. At least that's what we've seen up to the lengths we've gotten to currently. And so we'll see improved capital efficiency associated with this program to the degree that we are, but that's just from the increased geometry. So as we get better and we know we're going to get better with repetition, I would expect you could have incremental things accrue to our benefit there. So as we get smarter in how we complete these wells, as we get smarter about bit selection, as we get smarter about casing design, as we get smarter about all these things and we will with repetition, we could see incremental benefits flow through and incremental capital reductions.

Speaker 2

And so the reductions we're talking about aren't sort of any improvement in our execution baked into that. It's really just the sort of the geometry advantage that going from four miles gives us.

Speaker 9

Got it, makes perfect sense. And then just sticking on the, there's one further long term question which might be too early for. The three mile plan that you all talked about that didn't include any of the operational improvements for the three to four mile laterals. And now that we're seeing that if the incorporation of those increased pretty massively, the current guide for this year is probably already at the top end of the range for that three mile or three year program. I guess is there any, I mean, safe to assume that there's upward pressure there over time and we'll get an update later or just kind of how you think about

Speaker 2

that? When you say upward pressure, you're talking about from a production perspective?

Speaker 9

Yeah, on the three year plan.

Speaker 2

Yeah. And so again, I think what we're looking to do is trying to generate strong free cash flow per share. And so not necessarily drive production through the system. And so if we can have equivalent production for lower capital that may accomplish sort of the same thing that we're trying to accomplish here. But I'll tell you the efficiency gain this year through our operational improvements when combined with what we think is likely to be a movement more towards a four mile program, which again has a geometry advantage and a capital efficiency advantage.

Speaker 2

None of that was contemplated when we put the three year plan out. And so we've seen lots of things that should be benefiting the three year plan as we move forward. Again, look forward to talking about that more in November. But that was a static plan and our capabilities have improved since we put that plan out.

Speaker 9

Got it. Understood. Appreciate the color. I'll leave it there.

Speaker 7

Thank

Operator

you. Your next question comes from Jeff Jay with Daniel Energy Partners. Please go ahead.

Speaker 9

Hey, guys. Just one more question on and just one for me on the four miles. I guess I'm just curious what milestones are you kind of waiting for or watching for to kind of get to the 50% of your program? And I guess what are the gating factors?

Speaker 2

I think the big thing, Jeff, is can we get this? Can we repeatedly, mechanically get to the bottom, get all the way drilled out to or get all the way out to the toe, successfully put our fracs away, get the wells cleaned out all the way to the toe and then see contribution across the full lateral. So the first well went great, but we've got one under our belt from a full drill complete turn in line perspective. So we've got several more that we've drilled, they've drilled well. We've generally been favorable to our expectations.

Speaker 2

And maybe not generally, maybe completely, maybe everything has been favorable to our expectations from that standpoint, from a drilling standpoint. But we've only completed one and so we need to get a few more reps under our belt just to make sure that mechanically we can get this done. If mechanically we can get it done and that's repeatable, which we have expectations it will be, but we need to make sure that's the case, then I think you'll see us move pretty swiftly into a more full scale four mile development.

Speaker 9

Makes sense to me. Thanks.

Speaker 3

Thanks, Jeff.

Operator

Thank you. Your next question comes from Nawah Hanis with Bank of America. Please go ahead.

Speaker 10

Good morning, team. For my first question here, I was hoping to go back to the TILs. The 15 TILs that kind of have been shifted a little bit. Is it fair to think that most of that capital will be spent in 2025 with the production impact then being a bit of a tailwind in 2026?

Speaker 2

I think that's a good portion of it's being spent in 2025. And I'd say that happens a bit every year. You drill and complete wells at the end of the year and then you get the benefit from them in '26. And so I don't know how much more acute it is this year than any other previous years, but no doubt we've got completion activities happening in the fourth quarter as a result of bringing that completion crew back, which '26 will benefit from.

Speaker 10

Great, that's helpful. And then on the marketing and transportation front, it seems like in the midstream world, there's been a lot of movement there on potentially adding egress out of basin. And just given your all size in the basin as the largest operator there, how are you guys positioned to potentially take advantage of that? And I guess, could you help us kind of try to quantify what that opportunity means Cord?

Speaker 8

Yeah, no, we're obviously talking to everybody. We feel like we've got good egress as it is. And so, we feel good on that front. But like you said, there are some new plans coming into place. We'd certainly love to see more options out of the basin.

Speaker 8

And to the extent that we can be supportive in getting some of those in place, we're going to do that. More options are always better.

Speaker 10

Gotcha. And do you think there's any potential for that to follow flow through onto a lower GP and T costs or increased realizations?

Speaker 8

Yeah, I think with more options in the basin and more egress, you're going to see better differentials over a long period of time as well as better full GPT costs. I don't know how to quantify that just yet. We're going have to see if these things get built and what it looks like as that happens.

Speaker 7

No. That's helpful color. Thanks, guys.

Operator

Thanks. Thank you. There are no further questions from our phone lines. I would now like to turn the call back over to Danny Brown for some closing remarks.

Speaker 2

Thanks, Anas. In closing, I extend my sincere appreciation to all of our employees and contractors for their continued dedication and diligence. The company is well positioned for success and to deliver significant value for our shareholders. Through our strategic initiatives and the strength of our team, we have created what we believe is an increasingly rare and valuable asset. Chord has a substantial production base with low decline rates and a high oil cut, which is complemented by a deep portfolio of economically attractive, lower risk, conservatively spaced, oil rich inventory.

Speaker 2

And we've been getting better. We are proud of the progress we've made as a company and in our ability to deliver in the future. And with that, I appreciate everyone's interest. Thanks for joining our call.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines. Have a great day.

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