Expand Energy Corp Q3 2024 Earnings Call Summary

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

Question: Kevin McCarthy - Pickering Energy Partners - Analyst : Hey, good morning. My first question is on the capital costs. I think the outlook for $2.7 billion in 2025 was lower than expected. My question is, how did the $225 million in synergies in 2025 compare to your original target? And what else are you seeing on the well costs in your legacy assets? It looks like quarterly production came in, or quarterly CapEx came in lower than expected again this quarter?

Question: Kevin McCarthy - Pickering Energy Partners - Analyst : Great. And my follow up is on OpEx. And I know you don't have all the details yet on 2025, but just curious if the 4Q OpEx guidance is a good starting point for next year, or is there anything else that you've identified synergies on the OpEx side in the near term?

Question: Kevin McCarthy - Pickering Energy Partners - Analyst : Thank you, and congratulations on closing the deal. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call

Question: Doug Leggate - Wolfe Research - Analyst : Thanks, everyone. Good morning. I guess, Nick, first of all, I'll also add my congratulations to the synergy uptick, but forgive me for this one. I guess we're never happy with some synergy targets because they tend to be risks at the outset. You obviously never want to put a number that you can deliver. So I guess what question is that, are you done in terms of your view of what you think the merger can deliver? There are a lot of things discussed, and we went to the Haynesville with you last year. And in terms of what you could do differently, obviously, you've got a chance to potentially refinance some of the higher cost debt, although the debt maturity site looks pretty attractive. There's a lot of things that you could take off a bunch of different things. So I guess my question is how have your risked the delivery of the synergies? How would you characterize the medium term outlook where we're going to be sitting this time next year in terms of how this target looks?

Question: Doug Leggate - Wolfe Research - Analyst : Very cool answer, Nick. I guess you're right. The track record, the history, and the experience you've got of integration is something that I don't think all of us should forget. My follow-up is kind of a macro question. We ask you this question a lot, but on slide 10, you've laid out the cadence potentially of bringing back production. I'll be blunt. I think there's some skepticism on the capital efficiency benefits you're getting from drilling wells now completely normal, bringing them online. So, I wonder if I could ask you to speak to your confidence in the 2.7, 2.8 sustaining capital? And more importantly, what are the conditions under which you would not bring back this production in 2025?

Question: Doug Leggate - Wolfe Research - Analyst : Great. Thanks, guys.

Question: Matthew Portillo - TPH - Analyst : Good morning all. Just a quick question around the opportunities for additional optimization, as you mentioned, maybe a bit longer dated, but curious on the midstream side, specifically thinking about maybe some of your contracts in the Northeast, but also in the Haynesville. Do you guys see any opportunity over the next few years to optimize your midstream and marketing side of the business?

Question: Matthew Portillo - TPH - Analyst : Great. And then maybe just as a follow-up on drilling and completion. I know you all had highlighted really the opportunity to drive down cost at the drill bit given faster cycle times specifically in the Haynesville. That was curious if you landed on a fluid loading design there. I think there was a bit of a difference in how you all historically at Chesapeake looked at fluid loading versus how maybe Southwestern looked at it and if that's been incorporated into your outlook in 2025 and beyond in terms of cost savings?

Question: Matthew Portillo - TPH - Analyst : Thanks, all.

Question: Kelly Ackerman - Bank of America - Analyst : Hey, good morning, guys. Thanks for taking my questions. This question also goes to the capital budget and maybe the optics of it. Wondering if you can remind us how much capital Southwestern with capitalizing and then maybe offer some soft guide for interest expense in 2025. The rub here is that you've guys have done a great job and grinding down there capital number. And I guess some are just trying to bridge from my previous reference point.

Question: Kelly Ackerman - Bank of America - Analyst : Got it. I appreciate that. My second one is just more housekeeping. Can you remind us how much production capacity that you currently have curtailed by basin and maybe offer any insight as to where you think the industry is? And I'll leave it there. Thanks.

Question: Kelly Ackerman - Bank of America - Analyst : Thanks, guys. I Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call

Question: Neil Mehta - Goldman Sachs - Analyst : Yeah, good morning, Nick and his team. Thanks for doing ourselves. First question is just the enhanced capital return framework slide 13. Maybe you could spend some time talking about as you evaluated all the different strategies about allocating and return capital. Why do you optimize towards this design? And how should investors be thinking about the cadence of capital returns as we get into '25, now that you have a little more visibility through hedging program? Thanks.

Question: Neil Mehta - Goldman Sachs - Analyst : Thanks, Mohit. And just a follow-up on the macro, Nick you about your view of mid cycle over the years. I am just curious how you think about the moving pieces here as we go to '25 and '26. You've got obviously some challenges ramp as we go through '26, but you've got global capacity on the other side. And we're seeing power demand really surprised the upside because less spare capacity. So it feels like there's a lot of moving pieces curious on your views. And has this enthusiasm around AI and power demand changed your view of mid-cycle to the upside at all? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call

Question: Neil Mehta - Goldman Sachs - Analyst : Thank you, Nick. Appreciate it.

Question: Nitin Kumar - Mizuho - Analyst : Sorry, good morning, guys. Thanks for taking my question. Obviously, there's a lot of things were kind of unpack with long-term efficiencies here. So sorry to ask this, but in 2025, you said $2.7 billion. And I think, Nick, you mentioned long term in 2027 when all the synergies are under your belt, it's about 2.8. Do you have faced the gap in 2026. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call You should still has some DUCs by our math, but also you can probably adding activity. So how has had a couple of trend of between '25 and '26 -- between '25 and '26 and '27?

Question: Nitin Kumar - Mizuho - Analyst : Great. Thanks for that color. The second part I want to maybe talk about is marketing. When you announced the deal with Southwestern, you talked about the expanded scale of the company and you've got the investment grade. So maybe you can give us a little color on how the efforts to market gas to more premium price points is going and specifically, the markets focused on them direct supplied to AI data centers and power-generation. Any thoughts on sort of how that market shaping up?

Question: Nitin Kumar - Mizuho - Analyst : Thanks for the color guys.

Question: Josh Silverstein - UBS - Analyst : Good morning, guys. Have a pretty big step change in capital efficiency on the pro forma outlook. But you also, we're seeing is on a stand-alone company. I'm curious where the bigger step change in efficiency is where the in the Haynesville or the Marcellus?

Question: Josh Silverstein - UBS - Analyst : Got it. And then looking back at the standalone companies before the merger, you guys were has the capacity to produce over 8 bcfe per day. The outlook for next year is 7. Do you see different scenario longer term where you get back to that level? Does that all come from the Haynesville because there's more growth there? I'm just curious how you're thinking about the longer-term production profiles company.

Question: Charles Meade - Johnson Rice & Company - Analyst : Good morning Nick to you and the whole expand team there. Nick, I wouldn't go back to you talked a lot you've got a lot of questions on the capital efficiency and the progression. It makes sense because as positive as your '25 guide is for CapEx, I think the bigger surprise to be and I think to a lot of people is about 2.8 number for 2006. I wanted to ask you maybe ask you had a question along these lines, but from a from a different angle, if I look at slide 9, and this goes back to a comment you made earlier in the year where you talked about '24 investing in working capital. And if I look at that, I look at your out your Doug, can you take out there for 4Q? I recognize there's a group numbers, but it looks to be like you've kind of have a -- on a net basis of working capital, kind of unproductive working capital investment in working capital of about $800 million at year end. And so maybe roll off $500 million of that in '25 and another $300 million in '26. Actually you talked about I think Josh talked about this earlier where you get the benefit of the tilts in '25 and the DUCs in 26, but still issue, even though you're rolling in synergies is still the least to me in this framework, it looks like your longer term sustainable CapEx is actually something north of two ways I would like 2.9 or 3. So is that a fair framework? And if it is, what am I missing there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call

Question: Charles Meade - Johnson Rice & Company - Analyst : Okay. Okay. Thank you for that, Josh. And then one other question. There was a transaction announced this morning on Northeast Marcellus, where you guys are an operator. And to me, that looked like a pretty attractive price to the seller. But I'm sure you guys were paying attention. But I wondered if you could just offer any comment on how involved you were in the process or whether or your thoughts on the valuation or anything you'd like to share there?

Question: Charles Meade - Johnson Rice & Company - Analyst : Great. Thanks, Nick.

Question: Leo Mariani - Ross - Analyst : I just wanted to follow up a little bit on the comments around maintenance CapEx here. So I think you guys are kind of saying that the $2.8 billion is more kind of related to the 7 bcfe per day here. I wanted to see if maybe we could get any kind of sensitivity around that. For example, if the production eventually grows to something more like 7.5 bcfe a day, would you have a maintenance CapEx level kind of associated with that?

Question: Leo Mariani - Ross - Analyst : Okay. Appreciate that. Let, just like to ask you guys on the debt reduction target. So I think you guys are talking about a $1.1 billion debt reduction by the end of 2025. I'm just curious, does that number include, I think Southwestern had around a $500 million revolver balance. I think you guys paid off roughly at the close of the deal. I'm just trying to get a sense that that's included in the $1.1 billion, which I guess would imply maybe an additional $600 million next year. Just trying to understand how the debt gets paid down ours.

Question: Leo Mariani - Ross - Analyst : Okay. Thank you.

Question: Michael Scialla - Stephens - Analyst : Morning, everybody. On to see how the '25 plan might change in a downside case if we had a mild winter market remains oversupplied, would you hold off on bringing the deferred tills back online? Or how do you weigh that against the holding off on spending on the capital on the DUCs?

Question: Michael Scialla - Stephens - Analyst : That makes sense. Okay. And then the low, if you walked us through a slide 13 on the new enhanced capital return framework. Wanted to see, as things stand right now, how you think about the buyback versus variable dividend, just given where the stock prices today?

Question: Michael Scialla - Stephens - Analyst : That's helpful. Appreciate it.

Question: Geoff Jay - Daniel Energy Partners - Analyst : Hey guys. Thanks for taking the question. My question is kind of on the 2.8 maintenance CapEx that you threw out there. What sort of activity level does that contemplate in terms of rig count? In other words, I know you're going to 10 in the first quarter we take it back to 12 in fourth quarter. Does that 2.8 contemplate like 12 or divested 14 you had in the third quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call Just kind of trying to understand, kind of what the initial thought I thought there.

Question: Geoff Jay - Daniel Energy Partners - Analyst : Okay, great. And then maybe to take the inverse of some of the other questions, what would you have to see in terms of market conditions or future strip to bring back those two regions dropping quicker?

Question: Geoff Jay - Daniel Energy Partners - Analyst : Perfect. Thank you.

Question: Phillips Johnston - Capital one Securities - Analyst : Just one for me to follow up for Mohit, just on the new return of capital framework and really the tranche to net debt reduction component. I think you noted the idea is to pay down $500 million annually, not just next year, but also kind of going forward as well. Should we think about the $4.5 billion in net debt level target in the sub one times leverage ratio target of as kind of a point where you had sort of tilt the mix more towards a return to shareholders once those are achieved? Or would you continue to ratchet down the list of $500 million a year per year debt payout? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:00PM, EXE.OQ - Q3 2024 Expand Energy Corp Earnings Call

Question: Phillips Johnston - Capital one Securities - Analyst : Makes sense. Thank you.