On Wednesday, RBC (TSX:RY) Capital Markets adjusted its price target on shares of Chord Energy Corp (NASDAQ: CHRD), bringing it down from $185.00 to $180.00, while reaffirming an Outperform rating on the stock. The revision follows Chord Energy's third-quarter 2024 earnings release, which provided detailed insights into the company's near-term free cash flow (FCF).
The analyst from RBC Capital expressed a positive outlook on the company's three-year plan, which indicates that Chord Energy can maintain oil production levels with a capital expenditure of $1.4 billion. This level of spending is projected to be sustainable for several more years. Chord Energy's asset base was also a point of focus, with the analyst estimating that the company has an inventory depth that can last over ten years, with the core assets maintaining tier 1 economics for 5 to 6 years.
Further optimism was expressed regarding Chord Energy's operational advancements, particularly the success with drilling 3-mile lateral wells. The potential for extending to 4-mile laterals could further enhance the company's production efficiency and extend its core asset life.
The report also highlighted the company's strategic approach to delivering shareholder value. The analyst expects Chord Energy's management to continue prioritizing shareholder returns through stock buyback programs. This strategy was deemed sensible by RBC Capital, especially given the current undervalued state of Chord Energy's shares in the market.
In other recent news, Houston-based Chord Energy Corp confirmed its $3 billion borrowing base, maintained its $1.5 billion aggregate elected revolving commitment amounts, and extended its loan options.
The company has entered into a Sixth Amendment to its existing Credit Facility, providing continued financial flexibility until December 1, 2025. In addition, the company reported strong Q3 results, raising its full-year pro forma oil guidance and trimming its capital guidance. Despite production curtailments due to wildfires in North Dakota, Chord Energy achieved an adjusted free cash flow of about $312 million, returning 75% of it to shareholders.
The company's three-year outlook projects stable oil volumes and $1.4 billion in annual capital expenditures. Recent developments also include the integration of Enerplus (TSX:ERF) (NYSE:ERF) assets, aiming for over $200 million in annual synergies. However, production curtailments are expected to impact Q4 oil volumes by about 900 barrels per day. Analysts note that the company's capital allocation strategy is adaptable to commodity price fluctuations, and improvements in gas prices could be seen with the online launch of LNG Canada in mid-2024.
InvestingPro Insights
Adding to RBC Capital's positive outlook on Chord Energy Corp (NASDAQ: CHRD), recent data from InvestingPro provides additional context to the company's financial position and market performance. Despite the reduced price target, Chord Energy's financials suggest a robust operational foundation.
InvestingPro data reveals that Chord Energy boasts a P/E ratio of 6.57, indicating that the stock may be undervalued relative to its earnings. This aligns with RBC Capital's view that the company's shares are currently undervalued in the market. Additionally, the company's revenue growth of 20.68% over the last twelve months demonstrates strong top-line performance, supporting the analyst's positive stance on Chord Energy's operational capabilities.
InvestingPro Tips highlight that Chord Energy "pays a significant dividend to shareholders," with a current dividend yield of 7.93%. This substantial yield could be particularly attractive to income-focused investors, especially considering the company's ability to maintain oil production levels with sustainable capital expenditure, as noted in the RBC Capital report.
Another InvestingPro Tip points out that Chord Energy "operates with a moderate level of debt," which complements the analyst's confidence in the company's three-year plan and long-term inventory depth. This moderate debt level suggests financial flexibility, potentially allowing Chord Energy to continue its shareholder-friendly policies, including stock buybacks, as mentioned in the report.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Chord Energy's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.