Expand Energy Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Neil Mehta - Goldman Sachs Group, Inc. - Analyst : Yeah, good morning, Nick, and team. I appreciate all the comments here today. I, I'd love your updated thoughts around hedging. You guys did layer in a lot of those hedges for 2026, just talk about, the way you're thinking about the plan going forward and why you elected to do that.

Question: Neil Mehta - Goldman Sachs Group, Inc. - Analyst : Yeah, thank you. And then the follow up is just on, your perspective on the gas commodity. We have had a pretty dramatic move in the front backs have been pretty well bid still, but in the front, do you think that's supply or demand, and then you may just talk about your perspective on balance of the year and how we move, how we progress from here.

Question: Neil Mehta - Goldman Sachs Group, Inc. - Analyst : Makes a lot of sense. Thanks, Nick.

Question: Douglas Leggate - Wolfe Research - Analyst : Thanks. Good morning, everyone. Nick, I wonder if I could follow up on that. I mean, just looking at the hedge range, I think you and I have talked in the past, and I'm sure others about the volatility, the increased volatility of this market, and you've got like a 50% spread on these hedges just as a matter of record. My question is, navigating that, you've talked about lowering your break even for the portfolio. Where is that today? Where do you think, it can get to during this period? And obviously, there's a lot goes into that, the synergies, the incremental delivery of those synergies, the marketing uplift in margins, and so on. I'm just wondering if you could talk to us about the trajectory for your break even as you pay down debt.

Question: Douglas Leggate - Wolfe Research - Analyst : Just to, just for clarity, Nick, is that the current spending level or is that maintenance capital spending level?

Question: Douglas Leggate - Wolfe Research - Analyst : Okay, great stuff. My follow-up is, it's a marketing question, I'm afraid. I know I tried this last quarter, but you recently had a trip out to Asia. I know you're looking at outlets, all over the place, I guess, for your gas as the biggest gas producer now in the US, but I'm curious if you're ready to offer REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 1:00PM, EXE.OQ - Q1 2025 Expand Energy Corp Earnings Call any kind of insight as to what impact that can have on real realized prices for you guys, and to the extent you can share, what that LNG, potential supply bank look like for expand going forward into US LNG facilities.

Question: Douglas Leggate - Wolfe Research - Analyst : Good to hear you on the call then thanks so much.

Question: Zachary Parham - JPMorgan Chase & Co - Analyst : Hey, thanks for taking my question. I wanted to ask on the cash return program in this first six month period of the new framework, you're going to have some free cash flow that falls into Tranche 3. Can you give some detail on how you're thinking about cash return from that bucket? Do you plan to be active buying back the stock, or will you lean more towards a variable dividend or maybe a combination of both?

Question: Zachary Parham - JPMorgan Chase & Co - Analyst : Thanks, and then my follow up wanted to ask on Haynesville activity levels in the slides you show you're up to 4-frat crew there. That compares to the prior disclosure that it indicated you average three crews from the year or for the year. Can you talk about what's changed from an operational perspective? Have you pulled forward a little bit of activity just given some higher pricing? Just curious what's changed in the operational plans there.

Question: Devin McDermott - Morgan Stanley - Analyst : Hey, good morning, thanks for taking my questions. So you had a slide in the deck, I believe it's slide 8 just highlighting some of the trends you're seeing on well costs and the fact that there's no material impact from tariffs. I was wondering if you just talk through in a bit more detail some of the different buckets there, the trends you're seeing, and how the overall number that 0% to 2% deflation compares first year expectations going into this year.

Question: Devin McDermott - Morgan Stanley - Analyst : Got it. Okay, that's really helpful. And then, I wanted to step back, and Nick ask you a higher-level strategy question. One of your peers recently announced a bolt on transaction in Appalachia, and you know you highlighted the success of the Chesapeake, Southwestern merger, and some of your prepared remarks. It's very evident in the operating results over the last few quarters as well, I imagine that given the quality of the portfolio that you have, it's a fairly high bar for further deals or further M&A, but I wanted to get your high level views on further industry consolidation, the role you see expanded playing in that, and what kind of key financial or strategic metrics you would look at and evaluating any potential opportunities going forward.

Question: Devin McDermott - Morgan Stanley - Analyst : Understood thank you.

Question: Nitin Kumar - Mizuho - Analyst : Hey, good morning, guys. I think I wanted to maybe touch on there's been some, discussion, from the President about the constitution pipeline, as one of the larger producers in the Northeast, Marcellus, you are positioned to be, benefiting from that. So, could you maybe talk a little bit about, what do you think the chances are of that pipeline being built, what might the timeline or the commitment required look like. And then maybe just generally like are you seeing other opportunities for expanded demand for gas within the Appalachia? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 1:00PM, EXE.OQ - Q1 2025 Expand Energy Corp Earnings Call

Question: Nitin Kumar - Mizuho - Analyst : Great, thanks for the call then. And then, my follow up is just on the cadence of, spending, first quarter came in, just a little bit below your expectation, but good to see that momentum, you talk about deflation here you maintain your full year, target, so maybe this one might be for Zach, but you know what is the, cadence of the deferred hills, the ducks, and then at what point do you expect to start seeing the spending on the productive capacity for 2026.

Question: Nitin Kumar - Mizuho - Analyst : Great, thanks for the colour guys.

Question: John Freeman - Raymond James & Associates, Inc. - Analyst : Thanks, good morning, just a question of the, if the Haynesville gets ramped, over the next few years, is there any, sort of additional either infrastructure or just sort of non-DMC, spending that we should be aware of or is that sort of percentage of total capital in the Haynesville for non-DNCs stay at a similar sort of rate?

Question: John Freeman - Raymond James & Associates, Inc. - Analyst : Got it. And then just, the follow up for me, on, you've obviously done a really good job of making progress on the, on a synergy capture and just sort of looking at the slide that y'all got, in your deck in slide 6. Is it fair to say that it looks like everything that y'all kind of needed to achieve on a run rate basis is kind of there with the company owned sand mine, the lower financing cost, the completion design, all that stuff that was in that. Additional synergy bucket is sort of basically in place and now it's just a matter of just continuing that run rate to achieve the $500 by year in '26 or is there something else that I'm missing that's yet to be in place?

Question: John Freeman - Raymond James & Associates, Inc. - Analyst : Thanks, appreciate it.

Question: Kalei Akamine - Bank Of America - Analyst : Hey, good morning, guys. I want to ask you about the Haynesville guidance. Can you kind of give us a sense where Haynesville gas production is in real time, i.e., what is it today or perhaps at the end of March? If the message is that you're getting to 295 BC out today and 2Q and holding flat. I guess the nuance there is that the Haynesville's largest producer isn't growing very much for the rest of the year, and that's constructed for a second out 25 balances, but you also mentioned that the NG 3 pipe is coming on at the end of the year and you have capacity on it, so I'm kind of wondering how that gets filled. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 1:00PM, EXE.OQ - Q1 2025 Expand Energy Corp Earnings Call

Question: Kalei Akamine - Bank Of America - Analyst : You got it. I appreciate that. Next, I'd like to go to operating expenses versus our estimate. That's where the beat was in this quarter. We were kind of expecting a certain cadence for unit cost that starts high and trends lower as you grow volumes, but in one queue you're already at the low end. So kind of wondering how that trends from here.

Question: Kalei Akamine - Bank Of America - Analyst : Thanks for taking my questions guys.

Question: Phillip Jungwirth - BMO - Analyst : Thanks. Good morning. When you think about your $350 to $4 mid-cycle view, just with the lower crude price, I was wondering how associated gas plays into your outlook and generally what type of what level of oil production that assume for the from the lower 48 and if we undershoot that over the next couple years, how would you think about upside in terms of incremental call in the Haynesville?

Question: Phillip Jungwirth - BMO - Analyst : Great thanks. And you had really strong realizations across the board, but did want to ask about the Haynesville specifically and just your medium term outlook there for differentials, or net backs, just with several new pipes starting up in the play including your NG3 pipe in LNG ramping, supply being slow to respond and maybe with that in the update on the gas marketing and trading efforts that you've established over the last year.

Question: Phillip Jungwirth - BMO - Analyst : Great thanks guys.

Question: Scott Hanold - RBC - Analyst : Yeah, thanks all. Hey, look, you all have a plan to start spending the $300 million of growth capital in the second half of the year. Can you give me a sense, given the volatility and just sort of the broad macro environment, how do you think about the optionality of doing that or not? If the gas market does break down, would you go ahead and spend that and build. That productive capacity or would you defer the spending to next year? I guess the third option is, do you spend it this year and just build a deferred kind of till backlog just, what, which one of those options would you, kind of evaluate doing if the macro remains uncertain and prices come down a bit.

Question: Scott Hanold - RBC - Analyst : That's really good. I like the way that that's played out. My follow up question is going to go back to one of the earlier questions on, Tranche 3 as you move into that then, I understand obviously, you're not going to give us exact colour on how you're going to, return that cash, but can you give me a sense of with your discussion with investors, how do they view the variable dividend and we've seen a lot of the sector kind of back away from variables in in Favor of buybacks you know. Can you give us your general view on the value in the variables and do you think your investors or just broadly investors would welcome that?

Question: Scott Hanold - RBC - Analyst : Thank you for that.

Question: Matthew Portillo - Tudor, Pickering, Holt & Co. Securities - Analyst : Good morning, all. Just one question on my end. I was curious if you might be able to talk a little bit about the Utica, just your acreage prospectivity. I think you guys have about 5 wells planned to till there this year and kind of what you're looking for from a resource unlock perspective. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 1:00PM, EXE.OQ - Q1 2025 Expand Energy Corp Earnings Call

Question: Matthew Portillo - Tudor, Pickering, Holt & Co. Securities - Analyst : Perfect, thank you.

Question: Geoff Jay - Daniel Energy Partners - Analyst : Hi, I guess I was thinking about and I really appreciate the colour on the tariff, impact on spend, but I guess my question is if you know if these tariffs persist as, they kind of they stand today, would you expect a step change in costs in 2026 as you're contracted, materials roll over?

Question: Scott Hanold - RBC - Analyst : Yeah that makes sense. All right thank you.

Question: Michael Scialla - Stephens - Analyst : Morning everybody. Nick, you mentioned you expect free cash flow and collection next year, which is interesting given how capital efficient 2025 is with the return of the deferred tills and the ducks. Can you talk about the drivers for that inflection next year? Is it primarily due to just the way the strip prices or how much of that depends on further efficiency gains? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 1:00PM, EXE.OQ - Q1 2025 Expand Energy Corp Earnings Call

Question: Michael Scialla - Stephens - Analyst : Got it. And you you've talked about the tariffs from a cost perspective. I'm wondering if you could talk more broadly just from high level how you think about that potentially impacting LNG markets and is that having any impact on your discussions on your gas marketing efforts.

Question: Michael Scialla - Stephens - Analyst : Appreciate it thank you.

Question: Leo Mariani - ROTH - Analyst : Yeah, I wanted to follow up a little bit, on sort of price synergies. So you guys talked a lot about this, when the Chesapeake Southwestern merger was announced. You certainly, mentioned that you're engaged in a lot of discussions. You hit your investment grade ratings. Clearly production, is up. I know you can't comment on specific projects, but maybe just talk about your kind of level of confidence on getting some of these gas price related synergies today, versus when you announced, the Chesapeake Southwestern merger.

Question: Leo Mariani - ROTH - Analyst : Okay, I appreciate that. And then just on the operational side, obviously you guys had really good success, here, in the first quarter, certainly got kind of more than kind of a quarter of the pills done here in the quarter. Sounds like you're bringing on, another frat crew as well, in the Haynesville and 2Q. So it feels like the ops are a little bit ahead of schedule. Just wanted to kind of take your temperature on, the op side here. So to the extent that you continue to execute well operationally, could we see a few more tills, than you've got it to here in 2025, or would you guys likely maybe choose to kind of save some CapEx, towards the back end of the year, for quote unquote budget exhaustion?

Question: Leo Mariani - ROTH - Analyst : Okay thanks.

Question: Betty Jiang - Barclays - Analyst : Good morning. I just have one clarification question on the return framework, how to think about determining the available cash flow for cash return for the rest of the year. Your target provided last quarter was $500 million broken into 2,250 million Tranches per each fiscal half year with the $468 million that was done in one queue. Do you see that meeting your first half requirement or that's effectively completing most of your requirement for the year?

Question: Betty Jiang - Barclays - Analyst : Got it. The second half will still get re-evaluated separately.

Question: Betty Jiang - Barclays - Analyst : Okay great thank you.

Question: Paul Diamond - Citigroup Inc. - Analyst : Thank you. Good morning, thanks for taking my call. Just a quick one talking about the kind of the synergy outlook. So you've done a pretty good job of both the OpEx and capital side of kind of progressing towards that $400 million per annum by year end. Seems to be a bit more chunky. I wanted to get an idea if we should think about that more, kind of like step changes along the way, or should it be more thought of as the year going forward.

Question: Paul Diamond - Citigroup Inc. - Analyst : No, it makes perfect sense. I appreciate the time. I'll leave it there.

Question: Kevin MacCurdy - Pickering Energy Partners - Analyst : Hey, good morning. I have another question on the marketing side. Slide 13 of your deck, details your marketing contracts and, talks about a Bcfe a day of going to Gillis and in 425. Do you have any colour or expectations for how that market at Gillis is shaping up and how that could impact your margins?

Question: Kevin MacCurdy - Pickering Energy Partners - Analyst : Great, so sounds like positive for margins, and then maybe for a second question to ask a different way on the CapEx trajectory, you came in low in the first quarter, the guidance points to step up in 2Q, any colour, that you can share on the expectations for the back half of the year as it compares to Q1 and Q2 for CapEx.

Question: Kevin MacCurdy - Pickering Energy Partners - Analyst : Great, thank you.

Question: Charles Meade - Johnson Rice - Analyst : Good morning, Nick, to you and your team there. You guys have really had a murderer's row Q&A line up this morning. So I'm impressed and thanks for taking the time. I just have one short question on tills. I think it'll be a short question. Have you guys seen anything that surprised you, either positive or negatively as you brought on these deferred tills that--we're kind of sitting bottled up for, whether two, three, four months and, is there any kind of difference in that answer variation between what you've seen in the Haynesville, Southwest app or Northeast app? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 1:00PM, EXE.OQ - Q1 2025 Expand Energy Corp Earnings Call

Question: Charles Meade - Johnson Rice - Analyst : That's great detail. Thanks Josh.