Chord Energy CorpCHRD
Chord Energy Corp Fair Value Disclosure
Fair Value Measurements
In accordance with the FASB’s authoritative guidance on fair value measurements, certain of the Company’s financial assets and liabilities are measured at fair value on a recurring basis. The Company’s financial instruments, including certain cash and cash equivalents, accounts receivable, accounts payable and other payables, are carried at cost, which approximates their respective fair market values due to their short-term maturities. The Company recognizes its non-financial assets and liabilities, such as ARO (see Note 13—Asset Retirement Obligations) and properties acquired in a business combination (see Note 9—Acquisitions) or upon impairment (see Note 8—Property, Plant and Equipment), at fair value on a non-recurring basis.
Financial Assets and Liabilities
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
The following tables set forth by level, within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis:
| Fair value at December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Commodity derivative contracts (see Note 7) | $ | — | $ | 85,678 | $ | — | $ | 85,678 | |||||||||||||||
Investment in equity securities (see Note 11) | 119,698 | — | — | 119,698 | |||||||||||||||||||
| Total assets | $ | 119,698 | $ | 85,678 | $ | — | $ | 205,376 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
Commodity derivative contracts (see Note 7) | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Total liabilities | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Fair value at December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Commodity derivative contracts (see Note 7) | $ | — | $ | 18,793 | $ | — | $ | 18,793 | |||||||||||||||
Contingent consideration (see Note 7) | — | 22,780 | — | 22,780 | |||||||||||||||||||
Investment in equity securities (see Note 11) | 142,201 | — | — | 142,201 | |||||||||||||||||||
| Total assets | $ | 142,201 | $ | 41,573 | $ | — | $ | 183,774 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
Commodity derivative contracts (see Note 7) | $ | — | $ | 2,246 | $ | — | $ | 2,246 | |||||||||||||||
| Total liabilities | $ | — | $ | 2,246 | $ | — | $ | 2,246 | |||||||||||||||
Commodity derivative contracts. The Company enters into commodity derivative contracts to manage risks related to changes in crude oil and natural gas prices. The Company’s swaps and two-way and three-way collars are valued by a third-party preparer based on an income approach. The significant inputs used are commodity prices, discount rate and the contract terms of the derivative instruments. These assumptions are observable in the marketplace throughout the full term of the contract, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace and are therefore designated as Level 2 within the fair value hierarchy. The Company compares the valuation performed by the third-party preparer to counterparty valuation statements to assess the reasonableness of its valuation. The determination of the fair value also incorporates a credit adjustment for non-performance risk, as required by GAAP. The Company calculates the credit adjustment for derivatives in a net asset position using current credit default swap values for each counterparty. The credit adjustment for derivatives in a net liability position is based on the market credit spread of the Company or similarly rated public issuers. The credit risk adjustments to the fair value of the Company’s net derivative assets and liabilities were not material for the periods presented. See Note 7—Derivative Instruments for additional information.
Contingent consideration. In connection with the 2021 divestiture of certain oil and gas properties, the Company was entitled to receive up to three earn-out payments of $25.0 million per year for each of 2023, 2024 and 2025 if the average daily settlement price of NYMEX WTI exceeded $60 per barrel for such year (the “Contingent Consideration”). The fair value of the Contingent Consideration was determined by a third-party preparer using a Monte Carlo simulation model and Ornstein-Uhlenbeck pricing process. The significant inputs included NYMEX WTI forward price curve, volatility, mean reversion rate and counterparty credit risk adjustment. The Company determined these were Level 2 fair value inputs that were substantially observable in active markets or can be derived from observable data. In each of January 2024, 2025 and 2026, the Company received $25.0 million related to the 2023, 2024 and 2025 earn-out payments, respectively. See Note 7—Derivative Instruments for additional information.
Investment in equity securities. The Company owns common units in Energy Transfer, which are accounted for using the fair value option under FASB ASC 825-10, Financial Instruments. The fair value of the Company’s investment in Energy Transfer was determined using Level 1 inputs based upon the quoted market price of Energy Transfer’s publicly traded common units at December 31, 2025 and 2024, respectively. See Note 11—Investment in Equity Securities for additional information.
Non-Financial Assets and Liabilities
The fair value of the Company’s non-financial assets and liabilities measured on a non-recurring basis are determined using valuation techniques that include Level 3 inputs.
Asset retirement obligations. The initial measurement of ARO at fair value is recorded in the period in which the liability is incurred. Fair value is determined by calculating the present value of estimated future cash flows related to the liability. Estimating the future ARO requires management to make estimates and judgments regarding the timing and existence of a liability, as well as what constitutes adequate restoration when considering current regulatory requirements. Inherent in the fair value calculation are numerous assumptions and judgments, including the ultimate costs, inflation factors, credit-adjusted discount rates, timing of settlement and changes in the legal, environmental and regulatory environments.
Oil and gas and other properties. The Company records its properties at fair value when acquired in a business combination or upon impairment for proved oil and gas properties and other properties. Fair value is determined using a discounted cash flow model. The inputs used are subject to management’s judgment and expertise and include, but are not limited to, future production volumes based upon estimates of proved reserves, future commodity prices (adjusted for basis differentials), estimates of future operating and development costs and a risk-adjusted discount rate.
Business Combinations. The Company records the fair value of the oil and gas properties acquired was calculated using an income approach based on the net discounted future cash flows from the oil and gas properties and related assets acquired. The inputs utilized in the valuation of the oil and gas properties acquired included mostly unobservable inputs which fall within Level 3 of the fair value hierarchy. Such inputs included estimates of future oil and gas production from the properties’ reserve reports, commodity prices based on future pricing assumptions (adjusted for basis differentials), operating and development costs, expected future development plans for the properties and the utilization of a discount rate based on a market-based weighted-average cost of capital. The Company also recorded ARO assumed in these acquisitions at fair value. The inputs utilized in valuing the assumed ARO were mostly Level 3 unobservable inputs, including estimated economic lives of oil and natural gas wells as of the acquisition date, anticipated future plugging and abandonment costs and an appropriate credit-adjusted risk-free rate to discount such costs. This valuation technique was used in the following business combinations:
•2025 Williston Basin Acquisition. On October 31, 2025, the Company completed the 2025 Williston Basin Acquisition (defined in Note 9—Acquisitions). The assets acquired and liabilities assumed were recorded at fair value as of October 31, 2025.
•Enerplus Arrangement. On May 31, 2024, the Company completed the Arrangement with Enerplus. The assets acquired and liabilities assumed were recorded at fair value as of May 31, 2024. In addition, the Company recorded goodwill as a result of the Enerplus Arrangement. Goodwill is subject to annual impairment evaluation as described in Note 2—Summary of Significant Accounting Policies—Goodwill.
•2023 Williston Basin Acquisition. On June 30, 2023, the Company completed the 2023 Williston Basin Acquisition (defined in Note 9—Acquisitions). The assets acquired and liabilities assumed were recorded at fair value as of June 30, 2023.
See Note 9—Acquisitions for additional information.
Goodwill Impairment. The Company tested goodwill for impairment annually on October 1 or whenever events or changes in circumstances indicated that the fair value of its reporting unit may have been reduced below its carrying value. The decline in the Company’s market capitalization during the second quarter of 2025, which was impacted by a decline in crude oil and
natural gas prices, indicated that it was more likely than not that the fair value of the Company’s reporting unit was less than its carrying value, which warranted a goodwill impairment test as of June 30, 2025. The fair value of the Company’s reporting unit was determined using an income approach analysis based on the Company’s net discounted future cash flows. The discounted cash flows were based on management’s expectations for the future and unobservable inputs and assumptions, which included estimates of future oil and gas production from the Company’s reserve report, commodity prices based on future pricing assumptions (adjusted for basis differentials), operating and development costs, and a discount rate based on the Company’s weighted-average cost of capital (all of which are designated as Level 3 inputs within the fair value hierarchy). The impairment test performed by the Company indicated that the fair value of its reporting unit was less than its carrying value, and that there was no remaining implied fair value attributable to goodwill. Based on these results, the Company recognized a non-cash impairment charge of $539.3 million to reduce the carrying value of goodwill to zero as of June 30, 2025. The non-cash impairment charge is included within impairment and exploration expenses on the Consolidated Statements of Operations for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2020 | Mar 8, 2021 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.