Chord Energy Corporation Reports Financial and Operating Results for First Quarter 2023, Declares Base and Variable Dividends and Issues Second Quarter Outlook
1Q23 Operational and Financial Highlights:
- 1Q23 oil volumes of 95.1 MBopd were above the high-end of guidance due to strong well performance and accelerated activity;
- Total 1Q23 volumes of 164.7 MBoepd were above midpoint of guidance, with NGL volumes negatively impacted by ethane rejection;
- 1Q23 revenues totaled
$766 $115 $108 - E&P and other CapEx was
$202 - Net cash provided by operating activities was
$468 $297 - Adjusted EBITDA(1) was
$408 $198 - Cash of
$592 $400 - Announced the sale of certain non-Williston Basin, non-core properties for proceeds of approximately
$35M M with all transactions closing or expected to close during 2Q23. Recent total volumes included in divested assets were approximately 1.1 MBoepd with oil volumes of approximately 0.9 MBopd; - Total return of capital for 1Q23 set at
75% of Adjusted Free Cash Flow, including share repurchases of$15M M during 1Q23 at a weighted average price of$135.55 - Declared a base-plus-variable cash dividend of
$3.22 - In March, Chord Energy was added to the S&P MidCap 400 index. Additionally, Chord's S&P issuer bond rating increased to BB-; and
- Continued focused on ESG and Sustainability with active programs to reduce emissions and enhance disclosure. Sustainability report expected mid-year.
(1) Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for a reconciliation to the most directly comparable financial measures under |
"Chord's first quarter performance demonstrated the power of our premier Williston Basin position and strong operational execution which was enhanced through the 2022 merger," said Danny Brown, Chord Energy's President and Chief Executive Officer. "We saw better than expected well performance coupled with a modest acceleration of activity, which led to oil production above estimates and stronger than expected free cash flow. I'd like to offer my thanks to the entire Chord team for their resilience overcoming very difficult January conditions and putting the Company on excellent footing for the remainder of the year. Additionally, Chord was able to sell certain non-Williston, non-core assets and increased 2023 volume guidance when accounting for these divestitures. Shareholder returns remain robust, supported by deep, low-cost inventory and excellent capital efficiency. We remain excited about the oil and gas industry and the value we bring to the world. We are focused on sustainable value creation through disciplined capital allocation, responsible operations, and maintaining a strong balance sheet."
1Q23 Operational and Financial Update:
The following table presents select 1Q23 operational and financial data compared to guidance released in February 2023:
Metric | 1Q23 Actual | 1Q23 Guidance | ||
Oil volumes (MBopd) | 95.1 | 91.5 – 94.5 | ||
NGL volumes (MBblpd) | 32.7 | 34.5 – 35.5 | ||
Natural gas volumes (MMcfpd) | 221.4 | 212.0 – 218.0 | ||
Total volumes (MBoepd) | 164.7 | 161.3 – 166.3 | ||
Oil premium to WTI ($/Bbl) | $— | |||
NGL realization (% of WTI) | 28 % | |||
Residue gas realization (% of Henry Hub) | 79 % | |||
LOE ($/Boe) | ||||
Cash GPT ($/Boe)(1) | ||||
Cash G&A ($MM)(1,2) | ||||
Production Taxes (% of oil, NGL and gas sales) | 7.9 % | |||
E&P & Other CapEx ($MM)(3) | ||||
Cash Interest ($MM)(1) |
(1) | Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for a reconciliation to the most directly comparable financial measures under GAAP. | |||||
(2) | Excludes cash-related costs attributable to the merger of | |||||
(3) | Excludes capitalized interest of | |||||
During the three months ended March 31, 2023, net cash provided by operating activities was
Updated Outlook:
Chord is updating its outlook to reflect its latest projections including the impact of the non-core divestitures which removed 400 Bopd – 500 Bopd from 2Q23 and approximately 600 Bopd from FY23. Assuming pricing of
- Updating volume projections to account for strong well performance, a modest acceleration of activity in 1Q23, higher levels of ethane rejection and the production impact from the non-core divestitures for FY23. Excluding the non-core divestitures, FY23 oil volumes would increase by 0.6 MBopd compared to February guidance;
- Increasing residue gas realizations to account for higher levels of ethane in the residue gas stream. NGL realizations adjusted to reflect current market prices versus WTI;
- LOE per BOE reflect the impact of the non-core divestitures and lower NGL volumes due to moving ethane into residue gas stream, but otherwise unchanged compared to February guidance;
- Production tax as a percent of revenue is increasing due to lower Henry Hub price assumption of
$2.75 - 2023 E&P and other CapEx unchanged at approximately
$825M M –$865M M.
The following table presents select operational and financial guidance for 2Q23 and FY23:
Metric | 2Q23 Guidance | FY23 Guidance | Original FY23 Guidance | |||
Oil volumes (MBopd) | 93.5 – 96.5 | 95.0 – 98.0 | 94.5 – 98.5 | |||
NGL volumes (MBblpd) | 33.5 – 34.5 | 33.0 – 34.0 | 35.5 – 36.5 | |||
Natural gas volumes (MMcfpd) | 217.0 – 223.0 | 216.0 – 220.5 | 215.0 – 221.0 | |||
Total volumes (MBoepd) | 163.2 – 168.2 | 164.0 – 168.5 | 165.5 – 172.0 | |||
Oil premium (discount) to WTI ($/Bbl) | ||||||
NGL realization (% of WTI) | ||||||
Residue gas realization (% of Henry Hub) | ||||||
LOE ($/Boe) | ||||||
Cash GPT ($/Boe)(1) | ||||||
Cash G&A ($MM)(1,2) | ||||||
Production Taxes (% of oil, NGL and gas sales) | ||||||
E&P & Other CapEx ($MM)(3) | ||||||
Cash Interest ($MM)(1) |
(1) | Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for a reconciliation to the most directly comparable financial measures under GAAP. | ||||||
(2) | Excludes cash-related costs attributable to the merger. | ||||||
(3) | Excludes capitalized interest of approximately | ||||||
Chord expects to pay no cash taxes in 2Q23, and expects to pay
Hedging Activity:
Chord recently added 4.0 MBopd of crude oil collars in 2H23 with weighted average ceiling of
Volumes (Bbl) | Weighted Average Prices | |||||||||||
Commodity | Settlement Period | Derivative Instrument | Total | Daily | Floor | Ceiling | ||||||
Crude oil | Q3 2023 - Q4 2023 | Two-way collar | 736,000 | 4,000 | $ 65.00 | $ 88.51 | ||||||
Crude oil | Q1 2024 - Q2 2024 | Two-way collar | 364,000 | 2,000 | 65.00 | 80.15 | ||||||
Crude oil | Q3 2024 - Q4 2024 | Two-way collar | 276,000 | 1,500 | 65.00 | 80.10 | ||||||
Select Operational and Financial Data:
The following table presents select operational and financial data from continuing operations for the periods presented.
1Q23 | 1Q22 | ||
Production data: | |||
Crude oil (MBopd) | 95.1 | 45.0 | |
NGLs (MBblpd)(1) | 32.7 | — | |
Natural gas (MMcfpd)(1) | 221.4 | 147.8 | |
Total production (MBoepd)(1) | 164.7 | 69.6 | |
Percent crude oil | 57.7 % | 64.6 % | |
Average sales prices: | |||
Crude oil, without realized derivatives ($/Bbl) | $ 76.04 | $ 95.34 | |
Differential to NYMEX WTI ($/Bbl) | — | 1.22 | |
Crude oil, with realized derivatives ($/Bbl) | 65.79 | 79.27 | |
Crude oil realized derivatives ($MM) | (87.7) | (65.0) | |
NGL, without realized derivatives ($/Bbl)(1) | 21.13 | — | |
NGL, with realized derivatives ($/Bbl)(1) | 22.10 | — | |
NGL realized derivatives ($MM) | 2.9 | — | |
Natural gas, without realized derivatives ($/Mcf)(1) | 2.66 | 8.09 | |
Natural gas, with realized derivatives ($/Mcf)(1) | 2.31 | 7.67 | |
Natural gas realized derivatives ($MM) | (7.0) | (5.6) | |
Selected financial data ($MM): | |||
Revenues: | |||
Crude oil revenues | $ 650.9 | $ 385.9 | |
NGL revenues(1) | 62.2 | — | |
Natural gas revenues(1) | 53.1 | 107.6 | |
Total oil, NGL and natural gas revenues | $ 766.2 | $ 493.5 | |
Cash flows: | |||
Net cash provided by operating activities: | $ 468.8 | $ 265.6 | |
Non-GAAP financial measures(2): | |||
Adjusted EBITDA | $ 408.3 | $ 287.4 | |
Adjusted FCF | 198.6 | 217.5 | |
Adjusted net income attributable to Chord from continuing operations | 194.4 | 174.5 | |
Select operating expenses: | |||
Lease operating expenses ("LOE") | $ 153.4 | $ 63.2 | |
Gathering, processing and transportation expenses ("GPT") | 37.0 | 32.4 | |
Production taxes | 60.5 | 35.9 | |
Depreciation, depletion and amortization | 133.8 | 44.7 | |
Total select operating expenses | $ 384.7 | $ 176.2 | |
Earnings per share: | |||
Basic earnings (loss) per share | $ 7.13 | $ (1.01) | |
Diluted earnings (loss) per share | 6.87 | (1.01) | |
Adjusted diluted earnings per share (Non-GAAP)(2) | 4.49 | 8.32 |
(1) | Beginning in 3Q22, the Company reported crude oil, NGLs and natural gas on a three-stream basis. Prior to 3Q22, the Company reported crude oil and natural gas (including NGLs) on a two-stream basis. This change impacts comparability between periods. | |||||
(2) | Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for a reconciliation to the most directly comparable financial measures under GAAP. | |||||
The Company turned in line (TIL'd) 15 gross (11 net) operated wells in 1Q23.
Capital Expenditures:
The following table presents the Company's total capital expenditures ("CapEx") by category for the period presented:
1Q23 | |
CapEx ($MM): | |
E&P | $ 201.8 |
Other | 0.5 |
Total E&P and other CapEx | 202.3 |
Capitalized interest | 1.4 |
Total CapEx | $ 203.7 |
Dividend Declaration:
Chord declared a base-plus-variable cash dividend of
Balance Sheet and Liquidity:
The following table presents key balance sheet data and liquidity metrics as of March 31, 2023 (in millions):
March 31, 2023 | |
Revolving credit facility(1) | $ 1,000.0 |
Revolver borrowings | $ — |
Senior notes | 400.0 |
Total debt | $ 400.0 |
Cash and cash equivalents | $ 592.3 |
Letters of credit | 6.1 |
Liquidity | $ 1,586.2 |
(1) | ||||||
Conference Call Information
Investors, analysts and other interested parties are invited to listen to the webcast:
Date: | Thursday, May 4, 2023 |
Time: | 10:00 a.m. Central Time |
Live Webcast: | https://app.webinar.net/16nXqV1G8Wm |
Sell-side analysts wishing to ask a question may use the following dial-in:
Dial-in: | (888) 317-6003 |
Intl. Dial-in: | (412) 317-6061 |
Conference ID: | 7946962 |
A recording of the conference call will be available beginning at 1:00 p.m. Central Time on the day of the call and will be available until Thursday, May 11, 2023 by dialing:
Replay dial-in: | (877) 344-7529 |
Intl. replay: | (412) 317-0088 |
Replay access: | 8634496 |
The call will also be available for replay for approximately 30 days at https://www.chordenergy.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Chord expects, believes or anticipates will or may occur in the future, including any statements regarding the benefits and synergies of the merger, future opportunities for Chord, future financial performance and condition, guidance and statements regarding Chord's expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements. The words "anticipate," "ensure," "expect," "if," "intend," "estimate," "probable," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "would," "potential," "may," "might," "likely," "plan," "positioned," "strategy" and similar expressions or other words of similar meaning, and the negatives thereof, are intended to identify forward-looking statements. Specific forward-looking statements include statements regarding Chord's plans and expectations with respect to the return of capital plan, production levels and reinvestment rates, anticipated financial and operating results and other guidance and the effects, benefits and synergies of the merger, including and the anticipated impact of the merger on Chord's results of operations, financial position, growth opportunities and competitive position.
These statements are based on certain assumptions made by Chord based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of Chord, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, the ultimate results of integrating the operations of Oasis and Whiting, the effects of the business combination on Chord, including Chord's future financial condition, results of operations, strategy and plans, the ability of Chord to realize the anticipated benefits or synergies of the merger in the timeframe expected or at all, litigation relating to the merger, changes in crude oil, NGL and natural gas prices, war and political instability in
Any forward-looking statement speaks only as of the date on which such statement is made and Chord undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. Additional information concerning other risk factors is also contained in Chord's most recently filed Annual Reports on Form 10-K, for the year ended December 31, 2022, subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other SEC filings.
About Chord Energy
Chord Energy Corporation is an independent exploration and production company with quality and sustainable long-lived assets in the Williston Basin. The Company is uniquely positioned with a best-in-class balance sheet and is focused on rigorous capital discipline and generating free cash flow by operating efficiently, safely and responsibly to develop its unconventional onshore oil-rich resources in the continental
Chord Energy Corporation Consolidated Balance Sheets (Unaudited) (In thousands, except share data) | |||
March 31, 2023 | December 31, 2022 | ||
ASSETS | |||
Current assets | |||
Cash and cash equivalents | $ 592,300 | $ 593,151 | |
Accounts receivable, net | 790,989 | 781,738 | |
Inventory | 60,887 | 54,411 | |
Prepaid expenses | 29,180 | 17,624 | |
Derivative instruments | 24,728 | 23,735 | |
Other current assets | 32 | 11,853 | |
Total current assets | 1,498,116 | 1,482,512 | |
Property, plant and equipment | |||
Oil and gas properties (successful efforts method) | 5,320,711 | 5,120,121 | |
Other property and equipment | 69,011 | 72,973 | |
Less: accumulated depreciation, depletion and amortization | (611,716) | (481,751) | |
Total property, plant and equipment, net | 4,778,006 | 4,711,343 | |
Derivative instruments | 38,231 | 37,965 | |
Investment in unconsolidated affiliate | 112,997 | 130,575 | |
Long-term inventory | 20,669 | 22,009 | |
Operating right-of-use assets | 22,501 | 23,875 | |
Deferred tax assets | 126,304 | 200,226 | |
Other assets | 18,579 | 22,576 | |
Total assets | $ 6,615,403 | $ 6,631,081 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities | |||
Accounts payable | $ 7,909 | $ 29,056 | |
Revenues and production taxes payable | 568,387 | 607,964 | |
Accrued liabilities | 481,764 | 362,454 | |
Accrued interest payable | 9,597 | 3,172 | |
Derivative instruments | 175,622 | 341,541 | |
Advances from joint interest partners | 3,087 | 3,736 | |
Current operating lease liabilities | 11,589 | 9,941 | |
Other current liabilities | 10,132 | 3,469 | |
Total current liabilities | 1,268,087 | 1,361,333 | |
Long-term debt | 394,626 | 394,209 | |
Asset retirement obligations | 148,137 | 146,029 | |
Derivative instruments | 260 | 2,829 | |
Operating lease liabilities | 22,267 | 13,266 | |
Other liabilities | 23,286 | 33,617 | |
Total liabilities | 1,856,663 | 1,951,283 | |
Commitments and contingencies | |||
Stockholders' equity | |||
Common stock, | 439 | 438 | |
Treasury stock, at cost: 2,359,755 shares at March 31, 2023 and 2,249,088 shares | (266,953) | (251,950) | |
Additional paid-in capital | 3,487,648 | 3,485,819 | |
Retained earnings | 1,537,606 | 1,445,491 | |
Total stockholders' equity | 4,758,740 | 4,679,798 | |
Total liabilities and stockholders' equity | $ 6,615,403 | $ 6,631,081 | |
Chord Energy Corporation Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) | |||
Three Months Ended March 31, | |||
2023 | 2022 | ||
Revenues | |||
Oil, NGL and gas revenues | $ 766,200 | $ 493,502 | |
Purchased oil and gas sales | 130,317 | 159,467 | |
Total revenues | 896,517 | 652,969 | |
Operating expenses | |||
Lease operating expenses | 153,408 | 63,187 | |
Gathering, processing and transportation expenses | 37,015 | 32,398 | |
Purchased oil and gas expenses | 129,593 | 161,627 | |
Production taxes | 60,517 | 35,858 | |
Depreciation, depletion and amortization | 133,791 | 44,673 | |
General and administrative expenses | 32,484 | 24,367 | |
Exploration and impairment | 24,864 | 510 | |
Total operating expenses | 571,672 | 362,620 | |
Gain on sale of assets, net | 1,227 | 1,521 | |
Operating income | 326,072 | 291,870 | |
Other income (expense) | |||
Net gain (loss) on derivative instruments | 66,934 | (367,922) | |
Net gain (loss) from investment in unconsolidated affiliate | (2,216) | 60,137 | |
Interest expense, net of capitalized interest | (7,135) | (7,216) | |
Other income | 5,193 | 1,754 | |
Total other income (expense), net | 62,776 | (313,247) | |
Income (loss) from continuing operations before income taxes | 388,848 | (21,377) | |
Income tax (expense) benefit | (91,849) | 1,826 | |
Net income (loss) from continuing operations | 296,999 | (19,551) | |
Income from discontinued operations attributable to Chord, net of income tax | — | 485,554 | |
Net income attributable to Chord | $ 296,999 | $ 466,003 | |
Earnings (loss) attributable to Chord per share: | |||
Basic from continuing operations | $ 7.13 | $ (1.01) | |
Basic from discontinued operations | — | 25.15 | |
Basic total | $ 7.13 | $ 24.14 | |
Diluted from continuing operations | $ 6.87 | $ (1.01) | |
Diluted from discontinued operations | — | 25.15 | |
Diluted total | $ 6.87 | $ 24.14 | |
Weighted average shares outstanding: | |||
Basic | 41,568 | 19,306 | |
Diluted | 43,149 | 19,306 | |
Chord Energy Corporation Consolidated Statements of Cash Flows (Unaudited) (In thousands) | |||
Three Months Ended March 31, | |||
2023 | 2022 | ||
Cash flows from operating activities: | |||
Net income including non-controlling interests | $ 296,999 | $ 468,314 | |
Adjustments to reconcile net income including non-controlling interests to net cash | |||
Depreciation, depletion and amortization | 133,791 | 44,673 | |
Gain on sale of assets | (1,227) | (520,421) | |
Impairment | 23,304 | — | |
Deferred income taxes | 73,923 | (7) | |
Net (gain) loss on derivative instruments | (66,934) | 367,922 | |
Net (gain) loss from investment in unconsolidated affiliate | 2,216 | (60,137) | |
Equity-based compensation expenses | 11,854 | 4,848 | |
Deferred financing costs amortization and other | (3,791) | 3,433 | |
Working capital and other changes: | |||
Change in accounts receivable, net | (14,657) | (111,813) | |
Change in inventory | (12,753) | 667 | |
Change in prepaid expenses | 1,211 | (369) | |
Change in accounts payable, interest payable and accrued liabilities | 8,176 | 52,122 | |
Change in other assets and liabilities, net | 16,699 | 16,348 | |
Net cash provided by operating activities | 468,811 | 265,580 | |
Cash flows from investing activities: | |||
Capital expenditures | (172,328) | (48,831) | |
Proceeds from divestitures, net of cash divested | 7,034 | 147,056 | |
Costs related to divestitures | — | (11,368) | |
Derivative settlements | (91,656) | (70,670) | |
Proceeds from sale of investment in unconsolidated affiliate | 12,347 | — | |
Distributions from investment in unconsolidated affiliate | 3,015 | 13,116 | |
Net cash provided by (used in) investing activities | (241,588) | 29,303 | |
Cash flows from financing activities: | |||
Proceeds from revolving credit facilities | — | 15,000 | |
Deferred financing costs | — | (9) | |
Repurchases of common stock | (15,003) | — | |
Tax withholding on vesting of equity-based awards | (10,300) | (4,132) | |
Dividends paid | (202,473) | (70,579) | |
Payments on finance lease liabilities | (388) | (229) | |
Proceeds from warrants exercised | 90 | 457 | |
Net cash used in financing activities | (228,074) | (59,492) | |
Increase (decrease) in cash and cash equivalents | (851) | 235,391 | |
Cash and cash equivalents: | |||
Beginning of period | 593,151 | 174,783 | |
End of period | $ 592,300 | $ 410,174 | |
Supplemental non-cash transactions: | |||
Change in accrued capital expenditures | $ 46,097 | $ 17,504 | |
Change in asset retirement obligations | 234 | (428) | |
Investment in unconsolidated affiliate | — | 568,312 | |
Non-GAAP Financial Measures
The following are non-GAAP financial measures not prepared in accordance with GAAP that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company believes that the foregoing are useful supplemental measures that provide an indication of the results generated by the Company's principal business activities. However, these measures are not recognized by GAAP and do not have a standardized meaning prescribed by GAAP. Therefore, these measures may not be comparable to similar measures provided by other issuers. From time to time, the Company provides forward-looking forecasts of these measures; however, the Company is unable to provide a quantitative reconciliation of the forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because management cannot reliably quantify certain of the necessary components of such forward-looking GAAP measures. The reconciling items in future periods could be significant. To see how the Company reconciles its historical presentations of these non-GAAP financial measures to the most directly comparable GAAP measures, please visit the Investors—Documents & Disclosures—Non-GAAP Reconciliation page on the Company's website at https://ir.chordenergy.com/non-gaap.
Cash GPT
The Company defines Cash GPT as total GPT expenses less non-cash valuation charges on pipeline imbalances and non-cash mark-to-market adjustments on transportation contracts accounted for as derivative instruments. Cash GPT is not a measure of GPT expenses as determined by GAAP. Management believes that the presentation of Cash GPT provides useful additional information to investors and analysts to assess the cash costs incurred to market and transport the Company's commodities from the wellhead to delivery points for sale without regard to the change in value of its pipeline imbalances, which vary monthly based on commodity prices, and without regard to the non-cash mark-to-market adjustments on transportation contracts classified as derivative instruments.
The following table presents a reconciliation of the GAAP financial measure of GPT expenses to the non-GAAP financial measure of Cash GPT for the periods presented:
Three Months Ended March 31, | |||
2023 | 2022 | ||
(In thousands) | |||
GPT | $ 37,015 | $ 32,398 | |
Pipeline imbalances | (6,005) | 316 | |
Mark-to-market adjustments on derivative transportation contracts | 11,157 | — | |
Cash GPT | $ 42,167 | $ 32,714 | |
Cash G&A
The Company defines Cash G&A as total G&A expenses less G&A expenses directly attributable to the merger of equals with Whiting, non-cash equity-based compensation expenses, G&A expenses attributable to shared service allocations and other non-cash charges. Cash G&A is not a measure of G&A expenses as determined by GAAP. Management believes that the presentation of Cash G&A provides useful additional information to investors and analysts to assess the Company's operating costs in comparison to peers without regard to the aforementioned charges, which can vary substantially from company to company.
The following table presents a reconciliation of the GAAP financial measure of G&A expenses to the non-GAAP financial measure of Cash G&A for the periods presented:
Three Months Ended March 31, | |||
2023 | 2022 | ||
(In thousands) | |||
General and administrative expenses | $ 32,484 | $ 24,367 | |
Merger costs(1) | (2,793) | — | |
Equity-based compensation expenses | (11,854) | (4,800) | |
G&A expenses attributable to shared services | — | (1,624) | |
Other non-cash adjustments | 411 | (2,218) | |
Cash G&A | $ 18,248 | $ 15,725 | |
(1) | Includes costs directly attributable to the merger of equals with Whiting for the three months ended March 31, 2023. | |||||
Cash Interest
The Company defines Cash Interest as interest expense plus capitalized interest less amortization and write-offs of deferred financing costs. Cash Interest is not a measure of interest expense as determined by GAAP. Management believes that the presentation of Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on the Company's debt to finance its operating activities and the Company's ability to maintain compliance with its debt covenants.
The following table presents a reconciliation of the GAAP financial measure of interest expense to the non-GAAP financial measure of Cash Interest for the periods presented:
Three Months Ended March 31, | |||
2023 | 2022 | ||
(In thousands) | |||
Interest expense | $ 7,135 | $ 7,216 | |
Capitalized interest | 1,421 | 600 | |
Amortization of deferred financing costs | (1,198) | (855) | |
Cash Interest | $ 7,358 | $ 6,961 | |
Adjusted EBITDA and Adjusted Free Cash Flow
The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion and amortization ("DD&A"), merger costs, exploration expenses and impairment expenses and other similar non-cash or non-recurring charges. The Company defines Adjusted EBITDA from continuing operations as Adjusted EBITDA less Adjusted EBITDA from discontinued operations. The Company defines Adjusted Free Cash Flow as Adjusted EBITDA from continuing operations less Cash Interest and E&P and other capital expenditures (excluding capitalized interest and acquisition capital).
Adjusted EBITDA and Adjusted Free Cash Flow are not measures of net income or cash flows from operating activities as determined by GAAP. Management believes that the presentation of Adjusted EBITDA and Adjusted Free Cash Flow provides useful additional information to investors and analysts for assessing the Company's results of operations, financial performance, ability to generate cash from its business operations without regard to its financing methods or capital structure and the Company's ability to maintain compliance with its debt covenants.
The following table presents reconciliations of the GAAP financial measures of net income including non-controlling interests and net cash provided by operating activities to the non-GAAP financial measures of Adjusted EBITDA and Adjusted Free Cash Flow for the periods presented:
Three Months Ended March 31, | |||
2023 | 2022 | ||
(In thousands) | |||
Net income including non-controlling interests | $ 296,999 | $ 468,314 | |
Interest expense, net of capitalized interest | 7,135 | 10,901 | |
Income tax expense | 91,849 | 39,396 | |
Depreciation, depletion and amortization | 133,791 | 44,673 | |
Merger costs(1) | 2,793 | — | |
Exploration and impairment expenses | 24,864 | 510 | |
Gain on sale of assets | (1,227) | (520,421) | |
Net (gain) loss on derivative instruments | (66,934) | 367,922 | |
Realized loss on derivative instruments | (91,858) | (70,670) | |
Net (gain) loss from investment in unconsolidated affiliate | 2,216 | (60,137) | |
Distributions from investment in unconsolidated affiliate | 3,015 | 13,116 | |
Equity-based compensation expenses | 11,854 | 4,848 | |
Other non-cash adjustments | (6,213) | 1,260 | |
Adjusted EBITDA | 408,284 | 299,712 | |
Adjusted EBITDA from discontinued operations | — | (12,296) | |
Adjusted EBITDA from continuing operations | 408,284 | 287,416 | |
Cash Interest | (7,358) | (6,961) | |
E&P and other capital expenditures | (202,296) | (62,915) | |
Adjusted Free Cash Flow | $ 198,630 | $ 217,540 | |
Net cash provided by operating activities | $ 468,811 | $ 265,580 | |
Changes in working capital | 1,324 | 43,045 | |
Interest expense, net of capitalized interest | 7,135 | 10,901 | |
Current income tax expense | 17,927 | 39,403 | |
Merger costs(1) | 2,793 | — | |
Exploration expenses | 1,559 | 510 | |
Realized loss on derivative instruments | (91,858) | (70,670) | |
Distributions from investment in unconsolidated affiliate | 3,015 | 13,116 | |
Deferred financing costs amortization and other | 3,791 | (3,433) | |
Other non-cash adjustments | (6,213) | 1,260 | |
Adjusted EBITDA | 408,284 | 299,712 | |
Adjusted EBITDA from discontinued operations | — | (12,296) | |
Adjusted EBITDA from continuing operations | 408,284 | 287,416 | |
Cash Interest | (7,358) | (6,961) | |
E&P and other capital expenditures | (202,296) | (62,915) | |
Adjusted Free Cash Flow | $ 198,630 | $ 217,540 | |
(1) | Includes cash-related costs directly attributable to the merger of equals with Whiting that were incurred during the three months ended March 31, 2023. | |||||
Adjusted Net Income Attributable to Chord and Adjusted Diluted Earnings Attributable to Chord Per Share
Adjusted Net Income Attributable to Chord and Adjusted Diluted Earnings Attributable to Chord Per Share are supplemental non-GAAP financial measures that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income Attributable to Chord as net income attributable to Chord after adjusting for (1) the impact of certain non-cash items, including non-cash changes in the fair value of derivative instruments, non-cash changes in the fair value of the Company's investment in an unconsolidated affiliate, impairment and other similar non-cash charges, (2) merger costs and (3) the impact of taxes based on the Company's effective tax rate applicable to those adjusting items in the same period. Adjusted Net Income Attributable to Chord is not a measure of net income as determined by GAAP.
The Company calculates earnings per share under the two-class method in accordance with GAAP. The two-class method is an earnings allocation formula that computes earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Adjusted Diluted Earnings Attributable to Chord Per Share is calculated as (i) Adjusted Net Income Attributable to Chord (ii) less distributed and undistributed earnings allocated to participating securities (iii) divided by the weighted average number of diluted shares outstanding for the periods presented.
The following table presents reconciliations of the GAAP financial measure of net income attributable to Chord to the non-GAAP financial measure of Adjusted Net Income Attributable to Chord and the GAAP financial measure of diluted earnings attributable to Chord per share to the non-GAAP financial measure of Adjusted Diluted Earnings Attributable to Chord Per Share for the periods presented:
Three Months Ended March 31, | |||
2023 | 2022 | ||
(In thousands) | |||
Net income attributable to Chord | $ 296,999 | $ 466,003 | |
Net (gain) loss on derivative instruments | (66,934) | 367,922 | |
Realized loss on derivative instruments | (91,858) | (70,670) | |
Net (gain) loss from investment in unconsolidated affiliate | 2,216 | (60,137) | |
Distributions from investment in unconsolidated affiliate | 3,015 | 13,116 | |
Impairment | 23,304 | — | |
Merger costs(1) | 2,793 | — | |
Gain on sale of assets | (1,227) | (520,421) | |
Amortization of deferred financing costs | 1,198 | 1,024 | |
Other non-cash adjustments | (6,213) | 1,260 | |
Tax impact(2) | 31,583 | 60,710 | |
Other tax adjustments(3) | — | (78,159) | |
Adjusted net income attributable to Chord | 194,876 | 180,648 | |
Adjusted net income attributable to Chord from discontinued operations | — | (6,142) | |
Distributed and undistributed earnings allocated to participating securities | (467) | — | |
Adjusted net income attributable to Chord from continuing operations | $ 194,409 | $ 174,506 | |
Diluted earnings attributable to Chord per share | $ 6.87 | $ 24.14 | |
Net (gain) loss on derivative instruments | (1.55) | 17.54 | |
Realized loss on derivative instruments | (2.13) | (3.37) | |
Net (gain) loss from investment in unconsolidated affiliate | 0.05 | (2.87) | |
Distributions from investment in unconsolidated affiliate | 0.07 | 0.63 | |
Impairment | 0.54 | — | |
Merger costs(1) | 0.06 | — | |
Gain on sale of assets | (0.03) | (24.81) | |
Amortization of deferred financing costs | 0.03 | 0.05 | |
Other non-cash adjustments | (0.14) | 0.06 | |
Tax impact(2) | 0.73 | 2.89 | |
Other tax adjustments(3) | — | (3.73) | |
Impact of diluted shares | — | (1.92) | |
Adjusted Diluted Earnings Attributable to Chord Per Share | 4.50 | 8.61 | |
Less: Adjusted Diluted Earnings From Discontinued Operations Attributable to Chord Per | — | (0.29) | |
Less: Distributed and undistributed earnings allocated to participating securities | (0.01) | — | |
Adjusted Diluted Earnings From Continuing Operations Attributable to Chord Per | $ 4.49 | $ 8.32 | |
Diluted weighted average shares outstanding | 43,149 | 20,974 | |
Effective tax rate applicable to adjustment items(2) | 23.6 % | 22.7 % | |
(1) | Includes cash-related costs directly attributable to the merger of equals with Whiting that were incurred during the three months ended March 31, 2023. | |||||
(2) | The tax impact is computed utilizing the Company's effective tax rate applicable to the adjustments for certain non-cash and non-recurring items. | |||||
(3) | Other tax adjustments relate to the change in the deferred tax asset valuation allowance, which was adjusted to reflect the tax impact of the other adjustments using an assumed effective tax rate that excludes its impact. | |||||
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SOURCE Chord Energy Corp.
