Alex Ruus Chord Energy Corp CHRD-Q HOLD Nov 15, 2024

Recently re-established a small position, about 3%. Paying 75% of free cashflow to shareholders, debt free, significant discount to US peers. Big enough to attract institutional investors once the sentiment tide turns to energy. 50% upside at $80 oil. 

ERF is being bought by a North Dakota producer, Chord Energy Management. He's bullish oil. Using an $80 per barrel baseline, CHRD next year (after they absorb Enerplus) should trade at 3.4x cash flow and 14% free cash flow yield (vs. most names at 7-8%). At a 5x multiple next year, CHRD would trade at $253 price target or 42% upside.

They recently bought Enerplus and remains a pure play on North Dakota. His favourite US name, though prefers Canadian oil. A good $14 free cash flow yield, but there are better opportunities.

He's been buying, now a full position of 4%. Returning 75% of free cashflow via buybacks. Report by Raymond James says it has the deepest inventory in the area of any producer. Ability to drive rerating over time. Target $243, 37% upside modestly, probably closer to 50% upside.

Likes it, owns a little. Trades at 3.5x cashflow, big enough scale. Good capital appreciation prospects.

Owns shares in energy income fund. Strong dividend yield that is sustainable. Excellent inventory, with good shale exposure. Premium pricing in North Dakota. Better names for capital appreciation, but a quality name. Would recommend for income investors. 

Has it in his main fund and his income fund. Pure-play Bakken producer. Off the radar of US institutions, as it's just too small for that market. Vast majority of free cashflow will come to shareholders as buybacks, and over time this will drive a re-rating. An opportunity for very good upside.

Chord Energy's 2025 free cash flow, with only about a fifth of its daily oil production hedged against WTI volatility, could be relatively exposed to likely declines in crude benchmarks this year. Still, its total production could climb 17% to 271 MBoepd, using the midpoint of guidance, which may outpace the 14% increase in its E&P and other capital spending, which should aid FCF. While these increases should be driven by the first full year of the Enerplus acquisition, a growth in synergies from the deal could contribute to this relatively lower rise in capex. With its potential, its dividend and its valuation, we would be OK holding still. 
Unlock Premium - Try 5i Free

Welcome to the U.S. Has no buyers. Also, Enerplus shareholders (in the merger) are getting CHRD stock and have been selling it. CHRD has 10 years of stay-flat inventory, not decades in the Oil Sands, though is good for a US shale company. Trades at 14% free cash flow yield and returning 75% to shareholders. Deep value, but you need US investors to care in this name (Canadian ones have opportunities in Canada). CHRD is stuck. No catalyst, except higher oil prices which he doesn't expect until next year.