4-Mile Laterals And Williston Basin Will Shape Energy Resilience

Key Takeaways

• Enhanced drilling technology, efficiency initiatives, and low decline rates position Chord for sustained margin growth and resilience amid rising global oil demand.
  
• Strong capital discipline and a secure balance sheet enable reliable shareholder returns, robust M&A capacity, and protection against market volatility.
  
• Reliance on oil and gas amid energy transition, regulatory pressures, regional risks, ESG investing trends, and high ongoing costs threaten Chord Energy’s future growth and profitability.

Catalysts

Operates as an independent exploration and production company in the United States.

• Chord Energy is rapidly advancing the adoption of 4-mile laterals, which are expected to deliver around double the ultimate recovery for only 40 to 60 percent more capital compared to 2-mile wells, driving materially lower breakeven prices and allowing a greater share of the company’s inventory to generate attractive returns as global energy needs steadily rise; this will significantly improve both revenue growth and net margins over the next several years.
  
• Increased efficiency initiatives, including systematic cost improvements in drilling, completions, LOE, and marketing contracts, are expected to drive continued reductions in operating costs across Chord’s large, contiguous Williston Basin acreage, resulting in expanding net margins and higher free cash flow throughout commodity price cycles.
  
• The company’s strong balance sheet, low leverage, and disciplined capital allocation enable consistent shareholder returns through dividends and buybacks, while also preserving capacity for opportunistic M&A in a consolidating sector, directly enhancing earnings per share and providing stability against price volatility.
  
• With production underpinned by some of the lowest base decline rates in the peer group and inventory life sustained at over 10 years, Chord is uniquely positioned to capitalize on persistent global oil demand from emerging markets and population growth, ensuring long-term revenue visibility and resilience.
  
• By leveraging technological advancements to unlock additional drilling inventory and improve recovery rates, Chord is widening its economic resource base—supporting upward reserve revisions while capturing premium pricing as North America’s role as a secure, reliable energy supplier becomes increasingly valued in an uncertain geopolitical environment, thus supporting higher long-term earnings and asset values.

Chord Energy Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Chord Energy compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Chord Energy's revenue will grow by 5.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 17.2% today to 15.9% in 3 years time.
• The bullish analysts expect earnings to reach $931.1 million (and earnings per share of $17.26) by about July 2028, up from $865.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 9.8x on those 2028 earnings, up from 7.2x today. This future PE is lower than the current PE for the US Oil and Gas industry at 12.3x.
• Analysts expect the number of shares outstanding to decline by 6.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.46%, as per the Simply Wall St company report.

Chord Energy Future Earnings Per Share Growth

Risks

• The accelerating global energy transition and mounting decarbonization efforts could reduce long-term demand for oil and gas, directly threatening Chord Energy’s revenue base and its future growth prospects.
  
• Increasing regulatory and policy restrictions targeting hydrocarbon production and emissions may drive up Chord Energy’s compliance costs and introduce operational challenges that can erode net margins over time.
  
• Chord Energy’s heavy operational dependence on Bakken Shale and Williston Basin assets exposes the company to region-specific economic and geological risks, which could cause revenue volatility and downward pressure on earnings if basin decline rates increase or drilling economics deteriorate.
  
• Competition for investor capital is intensifying as ESG standards become more central in investment decisions, potentially restricting Chord Energy’s access to affordable capital and diminishing its ability to sustain or grow shareholder returns.
  
• Ongoing high capital requirements for drilling and completion—paired with the need to continually innovate with longer laterals—could result in rising CapEx and cost pressure, threatening free cash flow and compressing long-term returns on invested capital if efficiency gains plateau or commodity prices fall.

Valuation

• The assumed bullish price target for Chord Energy is $164.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Chord Energy's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $164.0, and the most bearish reporting a price target of just $105.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $5.9 billion, earnings will come to $931.1 million, and it would be trading on a PE ratio of 9.8x, assuming you use a discount rate of 6.5%.
• Given the current share price of $108.05, the bullish analyst price target of $164.0 is 34.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.