Chord Energy Corp

As of March 31, 2024, we had $1.3 billion of liquidity available, including $296.4 million in cash and cash equivalents and $991.1 million of aggregate unused borrowing capacity available under our Credit Facility (defined below). Our primary sources of liquidity are from cash on hand, cash flows from operations and available borrowing capacity under our Credit Facility. Our primary liquidity requirements are for capital expenditures for the development of oil and gas properties, dividend payments, share repurchases and working capital requirements.

Capital availability will be affected by prevailing conditions in our industry, the global economy, the global banking and financial markets, stakeholder scrutiny of ESG matters and other factors, many of which are beyond our control. The U.S. Federal Reserve’s increases in interest rates and the potential for such rates to increase further or to remain elevated for an extended period of time have created additional economic uncertainty. Although we are unable to predict future interest rates, this disruption to the broader economy and financial markets may reduce our ability to access capital or result in such capital being available on less favorable terms, which could in the future negatively affect our liquidity. We believe, however, we have adequate liquidity to fund our capital expenditures and meet our contractual obligations during the next 12 months and the foreseeable future.

Our cash flows depend on many factors, including the price of crude oil, NGLs and natural gas and the success of our development and exploration activities as well as future acquisitions. We actively manage our exposure to commodity price fluctuations by executing derivative transactions to mitigate the impact of changes in crude oil, NGL and natural gas prices on our production, which mitigates our exposure to crude oil, NGL and natural gas price declines; however, these transactions may also limit our cash flow in periods of rising crude oil, NGL and natural gas prices.

Commodity derivative contracts. As of March 31, 2024, our commodity derivative contracts cover 5,770 MBbls of our crude oil production for 2024, 3,552 MBbls of our crude oil production and 651,600 MMBtu of our natural gas production for 2025 and 270 MBbls of our crude oil production for 2026. See “Item 3. Quantitative and Qualitative Disclosures about Market Risk” for additional information.

In April 2024, we entered into new commodity derivative contracts to manage risks related to changes in crude oil prices. The following table summarizes these commodity derivative contracts:

We also have contracts which include provisions for the delivery, transport or purchase of a minimum volume of crude oil, NGLs, natural gas and water within specified time frames, the majority of which are five years or less. Under the terms of these contracts, if we fail to deliver, transport or purchase the committed volumes we will be required to pay a deficiency payment for the volumes not tendered over the duration of the contract. We believe that for the substantial majority of these agreements our future production will be adequate to meet our delivery commitments or that we will be able to purchase sufficient volumes of crude oil, NGLs and natural gas from third parties to satisfy our minimum volume commitments. See “Item 1. Financial Statements (Unaudited)—Note 17—Commitments and Contingencies” for additional information on our volume delivery commitments.

Our material cash requirements from known obligations include repayment of outstanding borrowings and interest payment obligations related to our long-term debt, obligations to plug, abandon and remediate our oil and gas properties at the end of their productive lives, payment of income taxes, obligations associated with outstanding commodity derivative contracts that settle in a loss position, obligations to pay dividends on vested equity awards that include dividend equivalent rights and obligations associated with our leases. In addition, we have announced a return of capital plan pursuant to which we intend to return capital to stockholders through a mix of base and variable dividend payouts, supplemented by opportunistic share repurchases. There were no borrowings outstanding under the Credit Facility (defined below) as of March 31, 2024; however, on a quarterly basis, we pay a commitment fee on the average amount of borrowing base capacity not utilized during the quarter and fees calculated on the average amount of letter of credit balances outstanding during the quarter.

Merger-related costs. In connection with the Arrangement, we incurred certain costs for advisory, legal and other third-party fees which were recorded to G&A expenses on the Condensed Consolidated Statements of Operations. During the three months ended March 31, 2024, we incurred merger-related costs of $8.1 million primarily related to legal and advisory services.

Revolving credit facility. We have a senior secured revolving credit facility (the “Credit Facility”) with a borrowing base of $2.5 billion and elected commitments of $1.0 billion that is due July 1, 2027. As of March 31, 2024, we had no borrowings outstanding and $8.9 million of outstanding letters of credit, resulting in an unused borrowing capacity of $991.1 million. Additionally, we are permitted to incur term loans in addition to the revolving loans provided under the amended and restated credit agreement. We were in compliance with the financial covenants under the Credit Facility as of March 31, 2024. See “Item 1. Financial Statements (Unaudited)—Note 11—Long-Term Debt” for additional information.

We are expected to complete our semi-annual borrowing base redetermination in the second quarter of 2024.

Senior unsecured notes. As of March 31, 2024, we had $400.0 million of 6.375% senior unsecured notes outstanding (the “Senior Notes”) that mature on June 1, 2026. Interest on the Senior Notes is payable semi-annually on June 1 and December 1 of each year. See “Item 1. Financial Statements (Unaudited)—Note 11—Long-Term Debt” for additional information.

Cash Flows

Our cash flows for the three months ended March 31, 2024 and 2023 are presented below:

Cash flows provided by operating activities

Our net cash flows from operating activities are primarily impacted by commodity prices, production volumes, operating costs and G&A expenses. Net cash provided by operating activities was $406.7 million for the three months ended March 31, 2024. The decrease in net cash provided by operating activities of $62.1 million as compared to the three months ended March 31, 2023 was primarily due to a decrease in oil, NGL and gas revenues and a decrease in our working capital as well as increases in LOE, GPT expenses and merger-related costs. See “Results of Operations” above for additional information.

Working Capital. Our working capital is primarily impacted due to the factors discussed above, coupled with the timing of cash receipts and disbursements. Changes in working capital (as reflected in the Condensed Consolidated Statements of Cash Flows) decreased net cash flows from operating activities by $9.8 million and $1.3 million during the three months ended March 31, 2024 and 2023, respectively. Changes in working capital associated with our capital expenditure activities and settlement of outstanding commodity derivative instruments impact our cash flows from investing activities.

The Credit Facility includes a requirement that we maintain a Current Ratio (as defined in the Credit Facility) of no less than 1.0 to 1.0 as of the last day of any fiscal quarter. For purposes of the Current Ratio, the Credit Facility’s definition of total current assets includes unused commitments under the Credit Facility, which were $991.1 million as of March 31, 2024, and excludes current hedge assets, which were $26.5 million as of March 31, 2024. For purposes of the Current Ratio, the Credit Facility’s definition of total current liabilities excludes current hedge liabilities, which were $19.5 million as of March 31, 2024.

Cash flows used in investing activities

Net cash used in investing activities was $204.9 million for the three months ended March 31, 2024. The decrease in net cash used in investing activities of $36.7 million as compared to the three months ended March 31, 2023 was primarily due to a decrease of $79.6 million used to settle outstanding commodity derivative contracts and the receipt of the 2023 contingent consideration earn-out payment of $25.0 million in the first quarter of 2024. The decrease was partially offset by an increase of $49.8 million of capital expenditures incurred to develop our oil and gas properties during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Cash flows used in financing activities

For the three months ended March 31, 2024, net cash used in financing activities of $223.5 million was primarily attributable to dividends paid to shareholders of $152.4 million, income tax withholdings on vested equity-based compensation awards of $46.1 million and payments of $32.0 million to repurchase our common stock, partially offset by proceeds of $7.4 million from the exercise of outstanding warrants. Net cash used in financing activities for the three months ended March 31, 2023 of $228.1 million was primarily attributable to dividends paid to shareholders of $202.5 million, payments of $15.0 million to repurchase our common stock and payments of $10.3 million for income tax withholdings on vested equity-based compensation awards.

Capital Expenditures

Expenditures for the acquisition and development of oil and gas properties are the primary use of our capital resources. Our capital expenditures are summarized in the following table:

(1)Other capital expenditures includes items such as infrastructure capital, administrative capital and capitalized interest. Capitalized interest totaled $0.7 million for the three months ended March 31, 2024.

(2)Total capital expenditures for the three months ended March 31, 2024 includes approximately $3.9 million related to non-operated divested assets that are expected to be reimbursed.

(3)Total capital expenditures reflected in the table above differs from the amounts shown in the statements of cash flows in our unaudited condensed consolidated financial statements because amounts reflected in the table include changes in accrued liabilities from the previous reporting period for capital expenditures, while the amounts presented in the statements of cash flows are presented on a cash basis.

Dividends

On May 7, 2024, we declared a base-plus-variable cash dividend of $2.94 per share of common stock. The dividend will be payable on June 5, 2024 to shareholders of record as of May 22, 2024. See “Item 1. Financial Statements (Unaudited)—Note 15—Stockholders’ Equity” for additional information.

See “Part II. Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—Return of Capital Plan” in our 2023 Annual Report for additional information regarding our strategy on future dividend payments. Future dividend payments will depend on the Company’s earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that the Board of Directors deems relevant.

Share Repurchase Program

During the three months ended March 31, 2024, we repurchased 193,269 shares of common stock at a weighted average price of $155.20 per common share for a total cost of $30.0 million, under our $750 million share repurchase program. As of March 31, 2024, there was $653.0 million of capacity remaining under our $750 million share repurchase program.

We repurchased 110,667 shares of common stock during the three months ended March 31, 2023 under the previous share repurchase program, which was replaced by our current $750 million share repurchase program.