Investment bank UBS Securities is upbeat on Chord Energy, a U.S. oil and gas producer, saying the company's newer, longer horizontal wells could help it land near the top of its third-quarter production guidance once more. In a note published Monday, UBS highlighted that Chord has met or exceeded the high end of its oil-volume guidance for three straight quarters, and it believes the extended wellbores are a key reason.
What are long laterals?
In oil and gas drilling, a "lateral" is the horizontal section of a well that runs through the rock formation. Traditional wells might have laterals of one or two miles, but Chord has been drilling four-mile laterals. Longer laterals allow a single well to contact more of the reservoir, which can boost output per well and improve economics, even if the upfront cost is higher.
UBS estimates Chord's total third-quarter production will come in at about 281,300 barrels of oil equivalent per day, within the company's guidance range of 277,700 to 284,000. The bank also sees oil output of 163,300 barrels a day, near the top of management's forecast. These numbers suggest Chord is continuing to execute well on its drilling program.
Cash returns and buybacks
For investors, the more significant part of UBS's analysis may be about cash returns. The bank says Chord could repurchase nearly 10% of its market value in 2027 using "strip" prices—that is, today's futures curve for oil and gas—and still keep more than $500 million in cash on the balance sheet. UBS also raised its price target on the stock to $193 from $184.
Buybacks are a math story: if a company retires a meaningful chunk of its shares, cash flow per share and earnings per share can rise even if overall production is fairly steady. That can matter more to how the stock trades than a small beat or miss versus quarterly volume guidance, because many energy investors focus on per-share free cash flow and "shareholder yield"—the cash returned through dividends and repurchases.
UBS's other claim—that Chord would still hold more than $500 million in cash—is what could make that plan feel durable through oil-price swings. A cash buffer helps a repurchase program keep running even if commodity prices dip, and it gives management optionality for future drilling inventory or potential acquisitions.
What it means for investors
For everyday investors, the key takeaway is that Chord Energy appears to be executing well on its drilling strategy, and the company is returning a lot of cash to shareholders. But it's important to remember that energy stocks are heavily tied to oil and gas prices, which can be volatile. A company can do everything right operationally, but if commodity prices fall, revenue and profits will likely follow.
UBS's outlook for early 2027 shows oil volumes settling around 159,000 to 161,000 barrels a day on capital spending of $1.4 billion to $1.45 billion, roughly in line with Wall Street expectations. That suggests the market is already pricing in a modest decline from current levels, which is typical as wells mature and the company focuses on high-return projects.
Investors should also note that Chord's performance is part of a broader trend in the energy sector, where companies are increasingly prioritizing shareholder returns over aggressive production growth. This shift has made energy stocks more attractive to income-focused investors, but it also means less upside from rising oil prices if companies choose to return cash rather than reinvest in new supply.
For context, other energy names are also in focus. For example, RBC sees a pullback in Williams as a setup for Q3 gains on new projects, and Energy Transfer's recent deal expands its West Texas gas network. Meanwhile, oil prices dropped 2% recently as those moves rippled through the sector.
As always, no single analyst note should drive an investment decision. But UBS's view on Chord highlights the importance of operational efficiency and capital discipline in the energy patch. For those holding Chord or considering it, watching quarterly production reports and the company's buyback activity will be key.
