Both Chord and Enerplus have talented, hard-working people that have accomplished a tremendous amount, for
which they should be extremely proud. Ian and I are certainly proud of them, and we look forward to getting the teams together to share best practices and drive continuous improvement.
Slide 4 of our investor presentation gives a good summary of the merits of the deal. As you can see, this combination checks all the boxes between operating,
financial and strategic goals. It enhances scale and asset quality. Additionally, it delivers accretion on all key financial metrics, which is boosted by significant synergies that well get into. Additionally, the combination improves our
financial strength and returns, which, of course, supports our peer-leading return of capital profile.
Turning to Slide 5. You can see the terms of the
combination. The merger consideration is structured as 90% stock and 10% cash. Each Enerplus common share will be exchanged for 0.10125 shares of Chord common stock and $1.84 per share in cash. At this exchange ratio and the respective share prices
on February 20, 2024, the combined company would have an enterprise value of approximately $11 billion, inclusive of Enerplus net debt. Pro forma for the transaction, Chord shareholders will own approximately 67% and Enerplus
shareholders will own approximately 33% of the combined company on a fully diluted basis.
Following close of the transaction, the Board of Directors will
increase to 11 members, which will consist of seven representatives from Chord and four representatives from Enerplus. Ian will join the board and serve as advisor to the CEO. The Chord executive leadership team will continue to run the combined
company. The combination has been unanimously approved by the board of directors of both companies. Currently, we are expecting to close by mid-year 2024. Standard regulatory approvals are needed in both U.S.
and Canada, plus a shareholder vote, including HSR review.
This is a deal that is good for our shareholders; good for consumers as we should be able to
access and ultimately produce more resource than either company would have otherwise been able to do stand-alone; and good for our communities since as a larger organization, well be able to commit more time and resources to reducing our
environmental footprint and focusing on local communities.
Turning to Slide 6. We believe this transaction creates a combined company with meaningful
scale. The combined organization will have approximately 1.3 million net acres, with 98% of that in the Williston Basin. Additionally, combined fourth quarter 23 production is 279,000 barrels of oil equivalent per day, with over 90% of
that in the Williston Basin. The transaction also combines high-quality inventory, which supports sustainable free cash flow through the different commodity cycles.
We believe Chord and Enerplus have some of the best inventory in Bakken. To illustrate the point, since 2022 combined, Chord and Enerplus have brought 30% of
the top 100 wells online when looking at greater than six months of oil production while bringing only 15% of the wells online over the same time frame. Our combined position represents approximately 10 years of
low-cost development at the current pace with significant upside beyond that.
While the standalone inventory of
both companies has compelling returns, the combination expands our three-mile lateral opportunity. And we will continue to pursue additional longer laterals given the success weve had over the past two years. Just to flesh this three-mile
opportunity out a little more, over the course of 2023, Chord made significant progress in drilling, completing and cleaning out three-mile wells. Drilling times have been reduced by roughly 25% since the beginning of 2023, with it now only taking
10 to 11 days on average. On the clean-out side, weve made strong progress over the course of the year and reached TD in essentially all 30-plus three-mile wells
brought online in the second half.
We get asked frequently if there could be upside to our implied 80% productivity assumption for the third mile. We
believe this is a possibility, especially in light of our progress on clean-outs over the past year. However, it will take a little more time, likely until the end of this year, to get sufficient production history to effectively analyze the
three-mile declines and determine whether we can increase our EUR uplift assumptions from 140% to 150%.
The Enerplus team is in the early innings of
pivoting to three-mile laterals and already have over 10% of their inventory set. We see meaningful opportunity to increase this percentage in Enerpluss high-quality acreage, which supports better economics and more free cash flow.
Additionally, were continuing to evaluate four-mile laterals. And we expect to drill our first four-milers at the end of this year. If successful, these initiatives should further improve returns.
On Slide 7, you can see our pro forma market cap is over $10 billion, significantly increasing our size, positioning the combined company nicely within
our new large-cap peer group. The combined oil cut is high at 56% and positions us well given the current commodity backdrop.