Expand Energy Corporation (EXE) Earnings

Management highlights

### Overview - Team delivered solid quarter, industry in major demand growth with drivers like AI power, reshoring, global LNG growth. Expand uniquely positioned in Gulf Coast and Appalachia. - Financially: $1.7B free cash flow, reduced debt by $1.3B, returned over $290M to shareholders. - Operationally: Appalachia assets 98% uptime during storm; Gulf Coast CapEx shifted. Early production in Western Haynesville encouraging. - Marketing/C commercial: Focused on 3 categories - reaching premium markets, monetizing volatility, facilitating/capturing new demand, made progress with $90M incremental value in Q1 and new offtake SPA with Delfin LNG. - Leadership: Welcomed Marcel Teunissen as EVP and CFO; CEO search progressing.

Guidance

Full year production and capital guidance unchanged. Expect to continue executing on strategies to reach more markets and improve margin. Rebalanced capital allocation with share buybacks after achieving debt reduction goal.

Segment performance

Financially, Expand generated $1.7 billion of free cash flow inclusive of working capital inflows. Gross debt was reduced by $1.3 billion and over $290 million was returned to shareholders through base dividends and buybacks. Operationally, Appalachia assets had 98% uptime during Winter Storm Fern; Gulf Coast assets were impacted by the storm, shifting CapEx from first to second quarter. Early production results from the Western Haynesville first well were encouraging. Marketing and Commercial focused on reaching premium markets, monetizing volatility, and facilitating/capturing new demand, with progress made on these fronts.

Risks & headwinds

No specific risks explicitly detailed in the provided transcript

Analyst Q&A

• Q: Wanted to start out on LNG. Could you perhaps discuss why the Delfin LNG project was attractive to Expand? And then maybe more broadly, could you talk about your thoughts on the global gas market as it relates to supply-demand balances and how this might play into your LNG marketing portfolio from a time to market perspective.

  A: Great. Thanks, Matt. This is Mike. Number one, our LNG strategy is really an extension of our Haynesville...

• Q: Marcel, I welcome, first of all, I wonder if I could take advantage of this being your first call. You obviously joined from a retail company, but you have a tenure at Shell, long tenure at Shell before that. So I wonder if you could maybe just share with us why did you take this position? What do you think you bring to the table? And if I may, on that last point, we know Mike is very keen on getting the breakeven down in market is a big part of that. So I wonder if you could share your thoughts on how you think you fit into that strategy. And I guess my follow-up is on one of my favorite topics, which is cash return on balance sheet, you appear to have inherited a pretty stellar balance sheet in the first quarter. My question is, when you think about hedging, when you think about volatility what is the right capital structure in terms of balancing things like cash returns versus continuing to delever.

  A: Well, great. Thank you, Doug. Thank you for the question. It's a pretty long run. So it's good to get out there. So maybe just by way...

• Q: Maybe to start off with an operational question. You guys made tremendous progress on well cost last year. CapEx also came in lower in the first quarter, but you also had kind of lower turn in lines I wonder if you had any comments on leading edge well costs are you still making progress on efficiencies? And maybe any comments on increased competition for services or higher prices you're seeing out there?

  A: Kevin, yes, we continue to make progress on our operational efficiencies...

• Q: Scott Hanold: Yes. I'd like to kind of go to some of the commercial stuff you all laid out in Slide 8 on your presentation deck. It seems like you've defined what the LNG, the industrial side, the power side is as catalyst. How do you think about the ideal allocation reaching to those various end users? And do you think one area is under, I guess, underlooked by other companies. It feels like industrial is an opportunity你 all have that I don't hear others talking about as much.

  A: Yes. I mean, I think about it in timing more than anything. I think the Gulf Coast, when I think about what's going to show up, LNG is going to show up first. That makes the Haynesville particularly valuable. What people that are missing, of course, is the rest of the world, International actually are much, much more optimistic about the demand, the world's demand and the need for LNG. And so if we overperform, I feel like it will be in that area. When we get to industrial, industrial will come, but those are always big projects. We haven't seen the FIDs yet like we see on LNG. Power is just all over I mean it's every -- whether it be in Louisiana or Texas or in Appalachia, we're seeing tremendous sort of discussion about power. But when that generation equipment comes on is a little bit to be [indiscernible] . And so it feels like that's secondary right now. It's not that we're not chasing it. We chase it every day. But LNG is here, and so you can plan for it and you can start building your asset to serve it.

• Q: John Freeman: I wanted to go back on the marketing side on that. Slide 13 that you've got sort of you show sort of the 3-pronged sort of strategy to achieve this $0.20 uplift. And the first one, the facilitating and capturing new demand like Delfin is obviously, longer term, back in we test are 4, 5 years or more. So you sort of get to realize those versus the other 2 which are already underway, the premium markets and the monetizing volatility, where you're just trying to kind of ratably expand those. I'm curious like if the ultimate prize, the $0.20 kind of uplift, like how much of that can you all achieve with just those other 2 kind of buckets, the premium markets and the monetizing volatility.

  A: Of course, it doesn't matter where it comes from. And ultimately, our ability to execute will determine exactly where it is. In our view, today, we think this is about 50-50. 50% on facilitating and capturing new demand and 50% in the other 2 categories. Between those categories, they're a little bit intermingled. So exactly how they're broken out, we don't, and we don't think about it that way necessarily because they're often combined, but think about the bottom 2 of those things is sort of near term and about half in the top -- the very top one about half and a little bit longer.

• Q: Phillip Jungwirth: Can you come back to the Delfin gas supply manager comment from earlier in the call? Just what all does this entail this imply that you'd look to take additional offtake from the project? And if you look at other LNG opportunities, what all goes into the assessment as to whether that's an ideal project for Expand to participate in to partner with.

  A: Phillip, the gas supply manager, that's something that's under negotiation with Delfin at the moment, and that's supply from upstream, where we would be managing all the gas into the facility, manage that capacity. It sets up naturally for us given our footprint and how our growth and what we're doing versus Delfin building that out that capability on their own. So it's kind of a win-win for both of us. So it's the opportunity to supply to them and to manage the capacity into the facility. And then we're creating a long-term partnership. They're looking to do other vessels later on. And again, we'd be in the mix of supplying -- supporting that new demand, getting after our strategy of facilitating capturing new demand. And then when we look at all the other projects, we're looking at similar aspects. We like the integration through our Haynesville asset. We think we're well positioned to be able to supply to these facilities. We already are supplying around 2 Bcfd to these facilities. So we have conversations with them. And then we look at all these projects in terms of value and economic risk. And we believe in the long-term demand both in the U.S. Gulf Coast and globally in LNG. So we're going to look at all these projects individually in terms of their economic merit. But essentially, we're trying to build a well interconnected portfolio on our upstream and through to the LNG market.

• Q: Charles Meade: And your whole team there. My first question, I think, is probably for Josh, but you guys will fill it as you choose. It's specifically about the cadence of CapEx and activity in '26. If we look at your 2Q, volumes are essentially going to be flat and CapEx is up. And I'm curious, is that just some activity sliding from 1Q into 2Q? And -- or is that -- is perhaps already -- does that reflect some decisions you've already made to maybe defer tills or build some DUCs in 2Q is that's the low part of the curve for '26?

  A: Yes. Charles, thanks for the question. Q2 will end up being the high point of our CapEx for the year. Just the way the program was set up. It is a little bit more front-end loaded D&C activity is going to be just slightly higher in Q2 relative to the second half of the year, we'll actually have a couple of rigs across the Appalachia region coming out in the second half of the year. So that will leave CapEx just a little bit lower. And the other artifact in Q2 is just on our non-D&C CapEx. So it shows up in the guide. That's a little bit higher than what we'll see in other quarters in the year. That's really just timing of our leasehold acquisition program. We have several things that have been in the work, works over the first quarter of the year. We expect those to close in Q2. And then also Q1 tends to be a little bit lighter with our capital workovers, just because the weather conditions where as we get into the spring, it's much more favorable. So workover activity also picks up in Q2. But again, as we get into the second half of the year, activity will moderate just slightly. Production will grow modestly across Q3 and Q4, again, assuming the market is there. But really, I think the main thing there is that we are in a position where we expect to deliver 7.5 Bcf a day at $2.85 billion of CapEx.