Chord Energy’s shareholders are benefitting from the success the Bakken E&P has found in switching up and fine-tuning its drilling and spacing formula, says President and CEO Danny Brown.
It all started by switching up its well spacing, Brown told Hart Energy’s Nissa Darbonne at the Energy Capital Conference in June. Chord realized wells were being drilled too close together, which was affecting well economics. Widening the space between wells improved the amount of resource the company was able to pull out of the ground.
The success pushed Chord to look at other methods to lower capital expenditures or improve resource recovery, he said. This time, the company looked to drill longer laterals.
Chord went from 2-milers to completing its first 4-mile lateral in the first quarter of 2025, the company had said in its February 2025 earnings call.
Its shareholders are reaping the benefits.
“Those 4- mile laterals and 3- mile laterals have been really, really important because it's allowed us to deliver stronger economics, which has generated more free cash flow for us, which is really funneling into our return of return of capital program back to shareholders,” Brown said.
Brown dove deeper into Chord’s drilling successes and how its translating to shareholder returns with Nissa Darbonne in this exclusive interview at Hart Energy’s Energy Capital Conference in June.
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Nissa Darbonne, executive editor-at-large, Hart Energy: Hi, thank you for joining us. I'm Nissa Darbonne, executive editor-at-large for Hart Energy. We're visiting today with Danny Brown. Danny is president, and CEO of Chord Energy. Chord is now the largest Bakken producer in the Williston Basin. Thank you for joining us, Danny.
Danny Brown, CEO, Chord Energy: Happy to be here.
ND: So Danny, you just presented at the Hart Energy Capital Conference here in Houston, and we talked about many subjects. Among them were a lot of technical achievements Chord has been making, four-mile laterals. You're also testing U-turns. You mentioned too that y'all are looking at the strat column uphole and downhole for what might be last century targets that produced oil, but obviously the Bakken became the biggest prize in that time. So give us some highlights of your technical achievements.
DB: So I think the biggest thing, first of all, Nissa thank you for this. Been a pleasure to be here. Good to do the presentation earlier.
We have made a number of achievements over the last few years that I'm really proud of as an organization. I'd say it really started in earnest back in 2022. We decided that we took a shift really widening spacing of our existing development. And what we believed in was that we had spaced wells too tightly. And what that meant was that we weren't actually accessing new reserves. We were just thieving reserves from other wells, which meant we were overcapitalizing the DSUs. And so we were spending way too much capital in order to get all the resource out of the ground. So we widened our spacing up and we immediately saw our economics improve. And really, if you think about that, the idea is, “let's spend as little capital as possible to access the resource because that's going to give us the strongest economic returns.”
And so we took that same mentality and recognized that we would shortly be moving out of what was considered the historic core of the basin and more onto up the flanks of the basin where the rock is still really good, it's just not quite as good as what it is in the core. And we wanted to be able to make economic returns as strong or maybe even better than what we made in the core. And the only way we could do that was to change our development practice.
And so the first step was going to wider spacing, and that worked tremendously. And then we decided we wanted to leverage that even further, and we went to longer laterals. And so we went from a two mile program to a three mile program. And what we saw was for about 20% more capital, we got 50% more EUR. And so that's a great trade. And so in the economic returns we got from those wells started to compete and even surpass the historic economic returns we saw on the core. And so we were successful in that.
We've got a little over 200 of those wells in our pocket now that we've done. Absolutely working. And so we've been able to really open up a fantastic opportunity set for ourselves and our organization as we move forward. Now we're taking the next step is we've recently drilled some four-mile laterals. We've got a few in the ground one producing well, we'll probably talk about that in our next quarterly call. But green lights so far. And ultimately we think we can get to about 80% long lateral development across the basin. We've got about 10 years of inventory, all of which generate strong returns and that ability to generate those strong returns and to continue to generate strong returns has really come from this change in development practice and some of the new development techniques that we're employing in the field. Great job to the team. It's been very successful for us.
ND: So, Danny, how does this translate into your shareholder returns?
DB: It's a great, great question. So we've got a very, very strong shareholder return program, as you know. And so for those who may not be as familiar, we have taken a tack that we gear our shareholder returns off of leverage. And if we're in a low leverage scenario, which we are now only about 0.3 times levered as an organization, that if we're under half a turn levered, which we currently are, at least 75% of our free cashflow that we generate will go back to shareholders. Over the past couple of quarters, we have sent actually 100% of our free cash flow back to shareholders.
And the long lateral development is really where it all starts. It's those, the return on your investment has to be strong in order to generate the free cash flow so that we can have a strong return of the investment. And so those 4- mile laterals and 3- mile laterals have been really, really important because it's allowed us to deliver stronger economics, which has generated more free cash flow for us, which is really funneling into our return of return of capital program back to shareholders.
ND: And then I also wanted to ask you, is $60 oil, is Chord doing just fine there?
DB: I'd say we do better at $70, but at $60 I think we've got a very, very strong business developing, or delivering, very, very strong returns. That's generally when I talk about a 10-year inventory for our organization, that's really the threshold we set it at, is delivering strong economic returns at $60 or higher. And so at $60, the organization is fine, it's very healthy. Again, low reinvestment rate, low decline organization, lots of strong inventory. So $60 is a fine place for us.
As we start to get into the $50s, I would say then we have to ask ourselves from a capital allocation perspective, “is that the right spot for us to allocate capital?” If oil's in the $50s, we know that the market is telling us the world's oversupplied with oil because we've driven prices down. And so do we want to continue to deliver significant amounts of oil into an oversupplied market or is there better use for our capital? Our shares may be trading low at that point, it might make sense for us to do some share repurchases. There may be acquisition opportunities at that point that we would rather go make that acquisition at a low point in the cycle instead of putting it into organic activity. And so I think as you get under $60, just different capital allocation opportunities need to be put on the table that we weigh against that organic investment. But above $60, I think we're pretty confident that the organic investment's going to make the most sense from a capital allocation perspective.
ND: Super. Thank you so much, Danny.
DB: Thank you, Nissa.
ND: And thank you for joining us. Stay tuned here for more actionable energy intelligence.