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Darrin Henke

Thanks, Danny.
While the macro environment is challenging, the Chord team continues to execute with excellence, and we're off to a great start this year. We have tremendous confidence in our execution ability, and we have the flexibility and optionality to reduce activity if needed while still generating significant free cash flow at lower prices.
As Danny mentioned, we are laser focused on driving continued efficiency throughout the program. As a result, we were able to lower our 2025 capital by $30 million without changing our production targets. This $30 million reduction is incremental to the $90 million dollar reduction to the 2025 budget versus pro forma 2024 capital. Furthermore, this $30 million reduction is also net of expected tariff pressure later in the year, which wasn't contemplated in our February guidance.
We've certainly made a lot of progress improving capital productivity over the past year. Since we're on the topic of efficiency improvements, we wanted to give you an update on Chord's 4-mile program. As announced earlier in the year, Chord successfully drilled and completed our first 4-mile lateral and reached the TD exceeding 30,400 feet while cleaning out the frac plugs. The cleanout was executed in only one run and was much faster than we originally expected, leading to a total well cost approximately $1 million below the original budget.
Additionally, we ran tracers on this well and subsequently observed every stage of the lateral contributing to production. Initial volumes and pressure indications are encouraging, but we need to monitor the flat period and initial decline before drawing definitive conclusions.
Over the spring, cord successfully drilled two additional 4-mile wells, with drilling times again faster than expected. These wells are in the queue to be completed later this year.
As we announced in April, we're planning to spud a total of seven 4-mile wells over the next 8 to 9 months, and with success, Chord is likely to implement many more in 2026 and beyond. As a reminder, our initial approach to 4-mile wells will be converting two 2-mile DSUs to one 4-mile DSU.
However, similar to Chord's evolution on the 3-mile program, as we make progress on execution and drive the risk adjusted returns higher, we could ultimately look to convert some of our existing 3-mile inventory into 4-mile wells. Relative to 2-mile wells, 4-mile wells are expected to recover 90% to 100% more ultimate recovery for only 40% to 60% more capital. On a break-even basis, 4-mile laterals are expected to be anywhere from $8 to $12 per barrel lower than 2-mile wells.
It's important to remember that all else equal, longer laterals will deliver slightly higher IPs versus 2-mile wells staying flatter longer and exhibit shallower declines. When comparing analog well performance on a per foot of lateral basis, initially longer lateral wells would typically be lower than 2-mile wells as the higher IP is more than offset by the longer lateral. However, typically in a 6-to-12-month period, the longer flat period and shallower declines will lead longer laterals to catch up to the 2-mile well on a recovery per foot basis.
Additionally, Chord's [choke] methodology is more restrictive than most peers, which minimizes sand flow back and ultimately lengthens the life of our ESPs, saving costs and delivering higher returns on average. Given our focus on improved returns versus higher IP rates, we have been implementing this more restrictive choke program on the inter plus wells, which will impact the optics of initial IP rates per foot on a year-over-year basis. Again, perfect performance is an appropriate way to judge well productivity over the long term, but early data can and often is misleading.
Turning to LOE, Chord lowered its full year guidance, reflecting strong first-quarter execution in our current outlook. LOE has been a major focal point for the company in recent years, and Chord has been able to drive efficiency improvements through multiple avenues, including streamlining workover expenses and reducing downtime. Chord strives for additional improvements as we competently manage capital allocation, maximize returns, and efficiently generate free cash flow.
Lastly, I wanted to comment on Chord's operational efficiency. Our teams continued to perform with excellence and aim to drive cycle times lower for both drilling and completions. We are drilling 3-mile wells 13% faster than a year ago, and our full-time frac crew is using simulfrac operations on most pads, which has driven down non-productive time and materially increased the lateral footage completed on a daily basis.
Pumping hours per month are also well above basin peers. On the post frac cleanout outside, Chord continues to dry faster cycle times as we leave the basin in 3-mile laterals.
To sum it up, Chord's execution and delivery remain best in class. We're off to a great start in 2025 and look forward to additional progress as our teams relentlessly pursue continuous improvement and innovative solutions.
I'll now turn it over to Richard.

Richard Robuck

Thanks Darrin. I'll round out our conversation with some final thoughts that expand on comments made earlier and in our press release.
I'll start with the strength of our balance sheet. In the first quarter, the team completed the issuance of a $750 million senior secured notes at 6.75% that are due in 2033 and by increasing our elected commitment amounts under our revolver to $2 billion. We continue to have pure leading leverage and strong liquidity as we navigate the current environment. We also layered on additional hedges during the first quarter and our derivative position can be found in our latest investor deck.
Next, I'll cover differentials. Oil differentials in the first quarter averaged $2.30 below WTI, which weakens slightly from our prior quarter, but were within our original guidance range. We expect oil differentials to improve modestly over the course of the year, which is reflected in our updated guidance.
NGL realizations were 20% of WTI in the first quarter, just above the midpoint guidance. Natural gas realizations of 63% were above the top end of guidance and benefited from seasonally strong regional prices in both the Bakken and Marcellus.
We anticipate realized natural gas prices to soften during the middle of the year before improving modestly toward the end of the year, reflecting normal seasonality. As a reminder, certain marketing fixed fees are deducted from our NGL and natural gas prices. This drives higher operating leverage Chord's realizations for both NGLs and natural gas in times of weaker prices and benefits realizations in times of higher prices.
Separately, the team has done a great job managing costs, beating first-quarter guidance and with continued momentum for the balance of the year as LOE is down $0.30 per BOE and capital is down $30 million in our 2025 guidance.
Production taxes averaged 6.8% of commodity sales in the first quarter, which was below our expectations. This primarily reflects the impact of non-recurring refund for (inaudible) wells that received an adjusted tax rate during the quarter.
The oil revenue from these low producing wells is taxed at a reduced rate. Additionally, the production tax rate was impacted by higher gas revenues as a percent of total sales as gas is taxed differently than oil. For the remainder of the year, we anticipate production taxes to average 8.5% of commodity sales.
First quarter cash taxes were in line with our expectations at $34 million and we expect full year cash taxes to approximate 4% to 9% of EBITDA at WTI prices ranging between $55 and $75 dollars per barrel. There have been no changes to full year cash tax guidance issued in February other than the yearly range now reflects actual first-quarter results.
In closing, thanks again to the core team for all their hard work and intense focus on improving day to day operations during the period of market uncertainty. We are pleased with the company's first-quarter performance and believe that we're in a strong position to successfully deliver on our goals for the remainder of the year.
With that, I'll hand the call over to Vincent for questions.

Question and Answer Session

Operator

(Operator Instructions) Oliver Huang, TPH.

Oliver Huang

Good morning, Danny and team, and thanks for taking the questions.
Just wanted to start on activity levels and I know there are many variables that go into the decision-making process and understand the biases to not pick up the spot frac crew in Q4 at this time whether it is more returns driven or just not wanting to chew through precious inventory at these oil prices.
But if we're talking about crude with a five handle on it once Q4 and even early 2026 comes around, would one full-time simulfrac fleet be the default optimal ballpark of activity levels for 2026 as well if you could just maybe walk through the thought process on what would need to happen to justify the bringing back of the spot crew for a portion of the year?

Daniel Brown

Yeah, thanks for the question, Oliver, and I think you framed it well. At the end of the day, it's really just a capital allocation decision for us, and it's going to depend on a variety of factors, so we'll be looking at service costs based on this. We'll be looking at our own share price candidly because again, it's just a capital allocation decision. But all else being equal, I think what we would want to see is oil, I would say firmly and what we would think would be durably in the 60s in order to bring that second frac crew back.
So with oil at a 5 handle, again, all else equal, we probably would anticipate we'd have better capital allocation opportunities in an environment like that, and that's kind of how we're thinking about it. But again, we have not made that decision. We're in a really nice place just naturally through our program that we've reduced activity in this environment, and it gives us a chance to monitor.
And so we've gone down to the single frac crews that's doing simul fracs for us. It's a very efficient program and we'll maintain this, and we'll really make a final call on this in the third quarter. So no decisions have been made but wanted to be transparent about kind of how we're thinking about this environment, and I think you framed the situation well.

Oliver Huang

Thanks, Danny, that's helpful color. And maybe for a follow-up, I think slide 11 does a really good job in illustrating the magnitude of potential capital savings with a 4-mile lateral program and I know Darrin hit on it very briefly in the prepared remarks, but should we think about the potential move to incorporate a 4-mile development plan being more gradual or an immediate jump from that 40% to 50% to the 80% goal?
Because it would seem that once you're able to confirm the success, there should be very minimal reason to do 2-mile laterals within the program. And any sort of color in terms of time frame we could see this progression on and if you could remind us how big of an undertaking this would be in terms of altering previously approved permits?

Daniel Brown

Yeah, I think you again framed it pretty well. As we look at this, we've moved over from a 2-mile to a 3-mile program pretty quickly, and I would say we're probably poised to move to a 4-mile program about equally as quickly, maybe slightly more quickly, candidly, because we've sort of built up some courage and some operational ability as we progress through the 3-mile program. Gotten better at cleaning out our wells, have started to get 4 miles under our belt now.
And so I suspect that we could move over to that program pretty swiftly and maybe even a little more swiftly than we've moved over to a 3-mile program. It will require us re-permitting. It's going to require some work from the development team to sort of optimally lay out all of these different pads and because it's -- if you think about it, we have sticks laid out on a map for every single sort of spot and inventory location that we've got and so it's really a full recontemplation of our development plan which includes roads, midstream connections, everything that's associated with that as you work through this.
So that does take a little time for us to work through. We got to go through the permit process, but I would suspect we'll be able to move to this more swiftly than we did a 3-mile program. Yeah, and so I'll kind of leave it there but we're encouraged with what we're seeing we think it's a great opportunity and I think we could move over to a program in a reasonably swift manner.

Oliver Huang

Awesome, thanks for the time, Danny.

Operator

Noah Hungness, Bank of America.

Noah Hungness

Morning, everyone. For my first question here, first quarter looks like a really strong quarter with oil production higher than expected. 2Q also looks stronger than maybe what a lot of us had in our models. Could you maybe talk to us about how the oil cadence, what the oil cadence looks like for 3Q and 4Q for this year?

Daniel Brown

Yes, thanks for the question, Noah. I think if you look at kind of how we're guiding for the full year relative to what we just did for 1Q and 2Q, you can kind of -- it implies that oil will be drifting down, particularly in the fourth quarter. And if you think about what we've talked about, the fact that we're dropping to a one crew program right now and contemplating picking one up again in the fourth quarter that also ought to imply a little bit on the cadence of our oil production.
And so we do anticipate oil production is going to fall as we move into the back end of the year. If we elect to pick up that second frac crew in the fourth quarter, that will obviously we'll start completing those wells, we'll tell them, maybe starting at the very end of the fourth quarter, but really into 2026, and you'll see that production cadence pick back up again.
But yeah, we do anticipate seeing oil fall a little bit as we drop this frac through. We'll bring tills on through the 3third quarter. We won't bring as many tills on in the fourth quarter, and so you'll start to see our production volumes fall a little bit into 4Q and if we pick that frac crew up, they'll move back up again in 1Q.

Noah Hungness

And for the third quarter, last quarter results you mentioned that 3Q would be above 2Q. Should we kind of think maybe with 2Q rising that 3Q would be flat versus the prior quarter?

Daniel Brown

Yeah, I think flattish to 2Q is probably a good expectation.

Noah Hungness

Great, and then for my second question, just could you maybe add a little more color on what's giving you guys the confidence to increase your original plan from spotting three 4-mile laterals to seven, and then will you be testing anything new with these additional wells, like a different cleanout technique or anything else?

Daniel Brown

Yeah, I think we've just seen positive results, is the short answer, but I'm going to turn it over to Darrin to provide a little more color, but we like what we're seeing so far and that's giving us a little confidence, but I'll turn it to Darrin for more color.

Darrin Henke

Yeah, so we have three wells drilled now and each wells drilled, better than we anticipated. We've seen more torque and drag just really operationally everything's gone as well or better than expected, so that's definitely given us confidence to move forward with additional testing, additional wells which will help us convert to ideally a more longer lateral program, 4 miles, et cetera.
Down the road, 4 miles and when I say et cetera, I'm talking about alternate well shaped as well. So really everything's going very well operationally in that regard, Noah, so that's just giving us confidence to press forward faster.

Noah Hungness

Good stuff, guys. Thanks.

Operator

Derrick Whitfield, Texas Capital Securities.

Derrick Whitfield

Good morning, all, and congrats on a strong 1Q.
Wanted to focus on your maintenance capital with my first question. If we were to assume the approximate 150,000 barrels per day rate implied by your second half guide, could the current rate of activity generate flattish growth in 2026? And if so, what would the maintenance capital be to sustain that at current cost and an optimal level of 3 mile or greater laterals?

Daniel Brown

Yeah, I think if the question -- for us to maintain 150 to 5, is around a 1.5 crew program and so if we go down to something sub that I think we would -- that's probably unlikely to maintain, a 150 program, and so it would be something sub that if you're talking about a one crew simulfrac program.

Derrick Whitfield

Terrific, and then just any color on what that would be from a capital perspective as you guys see cost at current?

Daniel Brown

Yeah, so as we're looking into '26, I will say that as we think about -- one, I wouldn't normally give -- we don't really start getting soft guidance until the third quarter for the prompt year and so we're clearly ahead of that, and lots of in a very dynamic environment, but generally speaking, if we're looking into -- if we pull the -- go down to a one frac crew program, you're probably talking about around a third of our operated activity coming out of the program through '26.
And so that's sort of the impact associated with this and so that 1.5 crews, you just think about it, delivering about a third of the tills over the course of the year. So that's the impact. Capital would be associated with that and clearly some wedge volume would be associated with that as well if we followed that path.

Derrick Whitfield

Great. And then maybe just shifting over to your self-help slide on page 12, Danny, if you or Darrin could just speak to how material the LOE and market contract opportunities could be to lower your cash costs? I know several of your marketing contracts are set to renew over the next couple of years.

Daniel Brown

Yes, I think we've got a tremendous opportunity in this space, and clearly, we're focused on CapEx and CapEx gets a lot of the headline numbers, but these other pieces have just as big an impact on free cash flow. Any dollar saved regardless of the bucket it comes from just translates right into that incremental free cash flow column.
To your point, we do have marketing contracts that are rolling off over the next few years. That gives us opportunities to renegotiate there. We've also seen tremendous benefit -- I mentioned in my prepared comments we've consolidated some contracts. If you think about it, we've got three legacy organizations, all of which had contracts with different midstream providers.
Some of those, it was a little unwieldy for both parties to manage those contracts and so we've been able to consolidate into a single contract that offered us better rates. So that's a good thing. And then from an LOE perspective, I just think we've got tremendous opportunity there as we continue to leverage the scale we built as an organization to improve and lower LOE, but maybe I'll give Darrin an opportunity to talk a little bit about some of the specifics we're looking at.

Darrin Henke

Yeah, we continue to work with our vendors to reduce our costs, particularly chemical costs, things of that nature, also spending a tremendous amount of time getting the Enerplus wells, the legacy Enerplus wells to have the same run times that we have on the legacy Chord wells. And so if we can reduce the downtime, improve run times, spread out the -- requiring fewer workovers into the future that obviously saves us a lot of money and improves cash flow with the additional production so just never ending looking at these type of opportunities there.

Derrick Whitfield

Thanks, that's great. I'll turn it back to the operator.

Operator

Paul Diamond, Citi.

Paul Diamond

Good morning, thanks for taking the call. Just a quick one. Could you give a bit more detail on kind of the total addressable market, those 4-mile laterals versus locations? Talk about being 50% of the program, but should we think about that extrapolating out kind of the wider inventory numbers, or is there a different kind of decline rate in that over time?

Daniel Brown

Thanks for the question, Paul. So if as we think about our -- I'm going to frame it this around long lateral inventory. And so long lateral inventory, we're trying to shoot to sort of over 80% of our total inventory set. 4-mile laterals, if you think about the opportunities set there, that's probably under 50% of the program, but 80%, is what we're shooting for 3 miles, let's call it 3 mile plus, which just offers tremendous incremental efficiency gains relative to what we see from a 2-mile program.
And then what was the second part of your question?

Paul Diamond

Oh no, just to be -- can we extrapolate that over time to like total sticks like on the inventory perspective?

Daniel Brown

The nice thing about doing this is it just really does lower our breakeven economics here pretty significantly. And so as we do that, obviously inventory that might not have been compelling for us to go develop previously becomes -- starts to offer really attractive rates of return. And so you do sort of suck some inventory into the system when you're able to lower your breakeven costs, which we're able to do with these 4-mile laterals. And so I do think it does have a dual benefit not only of improving our capital efficiency but also sort of giving us more runway to go continue to develop the field.

Paul Diamond

Understood, makes perfect sense. Just a quick follow-up, given the current volatility, how should we be thinking about any shifting sentiment, the macro and as far as how that would kind of read through into your willingness to either expand or contract your existing hedge book?

Daniel Brown

Yeah, lots of volatility clearly within the marketplace right now. We try to take a -- we take a reasonably conservative view on hedging, part of part of our opportunity here is we have a fantastic balance sheet. We have low reinvestment rate, we've got strong free cash generation even down to very low prices and so and what we found is over time, human nature seems to be that you hedge at the exact wrong times when oil is high, you think it's going to go higher and you won't hedge and when oil's low, you think it's going to stay low forever so you hedge and you've done just the exact wrong thing.
So I think one of the great things is just the resiliency of the business and the organization we've created is a great hedge to us. Having said that, we think some predictability is helpful, so you've sort of seen our hedge book get created. We don't want to be more than about 40% hedged in the prompt quarter. We typically hedge less and lower prices, hedge more and higher prices.
That's kind of how we look at hedging and so I don't really see a change to that framework because our whole framework on how we think about hedging is in recognition of the fact that we're in a cyclical business and so not much change to our philosophy there.

Paul Diamond

Understood, appreciate the clarity. I'll leave it there.

Daniel Brown

Thanks, Paul.

Operator

Josh Silverstein, UBS.

Josh Silverstein

Yeah, thanks. Good morning, guys. Just wanted to ask on a couple questions on the M&A side. First, just on the Marcellus, just wanted to see how your thinking is with that asset, obviously, stronger gas prices this year relative to last year. How are you thinking about that as kind of a core fit within the portfolio right now and potentially use the proceeds there?

Daniel Brown

Yeah, as we said before, we like that asset. It's in the core of the basin. We've got a great operating partner associated with that. However, it's not core for our organization, and so we recognize that that's not a non-core position for us and we're going to look to maximize value on that over time. Clearly, gas price relative to oil price is more constructive now than it has been historically and so we're always looking at how we can maximize value.

Josh Silverstein

Got it. And then just on Williston M&A, you guys are always active and looking to do some bolt-ons and other transactions. Have you seen any change in valuations or how people are thinking about transacting in the base and just given the lower oil prices right now?

Daniel Brown

I'd say the move's been pretty swift and still fairly recent. As a general comment, I would say that significant and rapid movements in price aren't really helpful for M&A just in that it creates a bit as spread between buyers and sellers that's not really helpful to get deals done. So price stability is always a nice thing to have if you want to get deals done. So I haven't really seen any significant impact, but by the same token, I think it's our expectation that M&A may just be a little bit more challenged in this environment than it would be in an environment of more stability.

Josh Silverstein

Thanks, guys.

Operator

Geoff Jay, Daniel Energy Partners.

Geoff Jay

Hi, guys. My question is really about sort of the increase in cycle times from sort of 2-mile to 3-mile to 4-mile and as you sort of migrate to a greater percentage of the longer laterals, how will that sort of change or I guess cadence of spending and production if you kind of look out to 2026 and 2027?

Daniel Brown

Yeah, my expectation is that as we -- the cycle time per well increases, but the cycle time per foot decreases. And so as you think about that, you can accomplish the same sort of lateral foot drilling with lower capital cost and fewer wells. And so it all depends on what you're solving for. If you're solving for delivering a particular well count, that's one issue. But what we're solving -- that's not necessarily what we're solving for.
And so I think what we're going to look at is what's the right capital allocation decision for us in the environment that we're in, and then the production will be an output of that, not necessarily an input to that. So anyway, the nice thing is that again the cycle times stretch out a little bit, but the delivery, the per foot delivery actually improves pretty significantly associated with this.

Geoff Jay

That's fair. And then just to follow up on Paul's question from earlier just to make sure I understand the answer, when I look at slide 6 with your inventory life, they're both sort of sub 50 and sub 60. As you migrate to the longer laterals, you're saying there won't be significant degradation and sort of the inventory life of the program?

Daniel Brown

Yeah, because we're measuring inventory life not necessarily a stick count but on as sort of what we're -- relative to production capacity and reserves delivery relative to what we're currently producing.

Geoff Jay

Very good, thank you, guys.

Operator

Noel Parks, Tuohy Brothers Investment Research.

Noel Parks

Hi, good morning, I apologize if you touched on this already, but can you talk about sort of the potential footprint expansion that 4 miles could give you just making locations or parts of the play that were not quite economic feasible?

Daniel Brown

Yeah, I don't know how much specific I can provide around that. We've got some acreage maps that we've put out in the past and we're probably happy to visit with the -- on this sort of offline on areas where it was more at the very outskirts of the basin, areas where it was a little tougher for us to compete for capital. And so as we go for those opportunities to compete for capital as we move into 4 miles, I think some of those start to fall in to where they do offer very attractive rates of returns associated with development out there.
There will be a small footprint expansion associated with going successfully moving to 4-mile laterals again just because of the breakeven cost improvement that we'll see due to the more efficient development design.

Michael Lou

Well, the only thing I'll add to that, this is Michael, the only thing I'll add to that is the team's done an incredible job over the last few years increasing capital efficiency through 3-mile laterals spacing, 4-mile laterals, all these things are continuing to help the program. You heard in Danny's prepared remarks. He talked about a 10-year inventory life that sub-60, and we've been able to hold that flat at 10 years for the last 4 years.
Some of that's through M&A, but a lot of that's through this continuous improvement and the team really improving economics and bringing, like you're saying, acreage that currently isn't sub 60 into that sub 60 category. We still have quite a bit of that acreage that's not in that sub 60 category today that 4-mile laterals and continued kind of improvements from the team will continue to bring that into that 10-year inventory life and push down our current inventory life to a lower breakeven, so the team's doing a great job on that front.

Noel Parks

Great. And again, this is something that would just be incremental, but as I look ahead to the implications of the longer lateral sort of rippling through, would you have enough data, production data from your first or early 4 milers, to be able to get any bits of re-rating upward as far as reserve bookings? I don't know if you had two 2-mile pods on the books that we're going to go to 4 with the better economics and so forth, and would that needle get moved at all?

Daniel Brown

I think for our proven reserve base right now, as we move to 2s to a 4 we're really just capturing that entire resource. That's kind of already accounted for just in a more cost effective manner. As we're able to expand our opportunity to capture out because we have better breakeven economics, what'll happen is we'll have sort of more inventory associated with that that will move their way into the proven undeveloped category over time.
I think the actual wells themselves probably were just capturing, what we hope will be 100% of the resource of those 2-mile wells. We still need to see that over time. We're seeing that on threes. We still need to make sure that that's the case on fours, but as we expand, as we lower breakevens and expand our ability to expand the base and we'll bring more wells in which will make their way, will migrate their way into proven under (inaudible) and so and have a positive reserve impact for us.

Richard Robuck

So over time, there's a reserve impact biased upward and then capital biased downward so the PV should be biased upward.

Noel Parks

Terrific. Thanks a lot.

Operator

There are no further questions, I'll now turn the call back over to Danny.

Daniel Brown

Thanks, Vincent. Well, to close out, I want to thank all of our employees for their continued hard work and dedication to our organization. Despite the macroeconomic headwinds, this is the best position the company has been since I arrived four years ago. Our strategic actions, coupled with our fantastic operations team, have created what we believe is a valuable and increasingly rare asset.
Chord has substantial yet low decline and high oil cut production base which is paired with the deep portfolio of highly economic, lower risk, conservatively spaced and oil-rich inventory. We feel great about what we've accomplished and have a lot of confidence in our ability to deliver going forward.
As you can imagine, we will be closely monitoring the oil price environment and have the organizational flexibility to optimize capital allocation to drive returns and continue to generate strong free cash flow.
With that, I appreciate everyone's interest and thank you for joining our call.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.