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Expand Energy was founded in 1989 as Chesapeake Energy by Aubrey McClendon and Tom L. Ward, and it has since evolved into the largest independent natural gas producer in the United States. The company is headquartered in Oklahoma City and was renamed Expand Energy in October 2024 after Chesapeake Energy and Southwestern Energy completed their merger. The company’s operations are concentrated in some of the most productive gas basins in North America, including the Appalachian Basin and the Haynesville Shale. It also maintains interests in the Marcellus, Utica, Haynesville, and related Mid-Continent assets.

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Expand Energy (EXE): Company Profile, Stock Price, News, Rankings

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Expand Energy

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Good day, and welcome to Expand Energy 2026 First Quarter Earnings Teleconference. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star one one on your telephone. You would hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. We ask that you limit yourself to one question and one follow-up. Please note that this event is being recorded. I would now like to hand the conference over to Brittany Raiford, Vice President, Treasurer and Investor Relations. Please go ahead.

Good morning, everyone, thank you for joining our call to discuss Expand Energy's 2026 first quarter financial and operating results. Hopefully, you've had a chance to review our press release and the updated investor presentation that we posted to our website yesterday. During this morning's call, we will be making forward-looking statements which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance, and the assumptions underlying such statements. Please note that there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including the factors identified and discussed in our press release yesterday and in other SEC filings. Please recognize that except as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place undue reliance on such statements.

We may also refer to some non-GAAP financial measures, which help facilitate comparisons across periods and with peers. For any non-GAAP measure, we use a reconciliation to the nearest corresponding GAAP measure that can be found on our website. With me on the call today are Mike Wichterich, Josh Viets, Marcel Teunissen, and Dan Turco. Mike will give a brief overview of our results, and then we will open up the teleconference to Q&A. With that, thank you again. I will now turn this teleconference over to Mike.

Thanks, Brittany. Good morning, and thank you for joining our call. The team delivered another solid quarter. Honestly, they make great execution look easy. Over the past two and a half months, I've had the opportunity to work with our team and spend time with our customers, speak to potential domestic and international counterparties. I gotta tell you, I'm more optimistic today about our industry and company than ever. There's no disputing our industry is in the midst of a major demand growth. The big three drivers of demand, AI power, the reshoring of heavy industry, and global LNG growth, are converging to make the future bright for natural gas. All of this was happening even before the recent events of the Middle East. Now, in addition to structural demand growth, energy security has pushed the U.S. natural gas to the forefront.

Expand is uniquely positioned to take advantage of these events. Simply put, we have positioned ourselves to be in the right place at the right time. For example, our Gulf Coast assets sit at the epicenter of LNG. In fact, our largest customers today are LNG facilities, and there is an increasing recognition of the strength and competitive advantage of our Haynesville position. According to third-party reports, today we own 72% of the lowest break-even inventory in the basin, allowing us to deliver certified natural gas directly to LNG facilities with minimal risk of basis floods. Fundamentally, we see LNG as a natural extension of our business. AI-driven power and industrial demand is rapidly growing in the region. When you combine structural demand growth and energy security, we believe the Gulf Coast is well-positioned to become a premium price market.

Our Appalachia assets sit at the core of AI power demand. We believe the Northeast will soon see demand growth of 4 to 6 Bcf per day. In-basin demand growth will unlock pipeline-constrained production. We're also seeing a renewed optimism to build infrastructure to serve more Americans in the Northeast and Southeast markets. In-basin demand growth, combined with new infrastructure, will unleash our low-cost inventory and create substantial value for both Expand and our shareholders. Now, let's turn our attention to the first quarter. Financially, we did well. We generated $1.7 billion of free cash flow inclusive of working capital inflows. True to our word, our strong cash flows were used to reduce gross debt by $1.3 billion and return over $290 million to our shareholders through base dividends and buybacks.

Operationally, like our peers, we kept Appalachia assets running with an impressive 98% uptime during Winter Storm Fern. Our Gulf Coast assets were impacted by the storm, resulting in some shifting of CapEx from first quarter to second quarter. Importantly, our full-year production and capital guidance are unchanged. A lot of you, and frankly, a lot of our peers, are anxious to hear about our progress in the Western Haynesville. Early production results from our first well have been encouraging. We are pleased with our execution and cost competitiveness on the well and have more wells planned this year. Stay tuned. Last year, we made tremendous operational improvements, but we see room for continuing operational improvements across the portfolio and are excited about the early impact of machine learning and AI is having on lowering costs, enhancing well productivity. I see this as our own self-help program.

Marketing and Commercial has been our primary focus of the quarter. As promised, we have attacked this opportunity with discipline and urgency. The time is now for us to improve our margins, grow cash flow per share. Our goal this year was to increase the number of commercial opportunities evaluated to ensure that we are achieving the best risk-adjusted returns for our shareholders. I'm happy to say we've made great progress on this front. On our last call, we stated the size of the prize of this effort is about $0.20 of margin improvement, which equates to approximately $500 million of repeatable incremental free cash flow per year. We do not believe that we have to swing for the fence searching for one transformational deal. We will be disciplined and create value by stacking singles and doubles across three general categories. First, reaching premium markets.

Our expansive footprint across three different operating areas gives us access to more customers and options to optimize our flows. To be clear, we're changing our mindset to be a more customer solution-focused company. In the past six months, we've added a combined 0.5 Bcfd of term sales and firm transportation to end users, extending our reach to premium markets. Second, monetizing volatility. In the first quarter alone, we generated nearly $90 million incremental value, a great example of how we can capture and monetize the volatility we see in the market. While this was primarily driven by unique events, these are the types of gains we're looking to achieve more sustainably. Finally, facilitating and capturing new demand. Today, we announced a new offtake SPA with Delfin LNG for 1.15 million tons per year, extending our market reach to global demand centers.

We see great value in this transaction as it's bigger, reaches market sooner and cheaper compared to our previous agreement, which has been terminated. Our LNG strategy will be dynamic and shaped by the economic merits of each agreement, partnership, or joint venture. We will take a portfolio approach, continuing to add to our LNG opportunities over the next several years with different types of contracts. In parallel, we'll continue to pursue opportunities to broaden our power sector customer base, supplying natural gas to a growing number of power generators, load serving utilities, and increasing our exposure to data centers and hyperscalers. We have no doubt that Expand is built for this moment. Why? We're the largest natural gas producer in North America. Counterparties want to do business with someone who's going to be around for the next 20 years.

The depth of our portfolio, combined with our investment-grade balance sheet, provide that confidence. We are in the right place at the right time. Nearly 90% of expected U.S. demand growth can be served by our assets. Lastly, we have a team that can execute. We reset the economics of our Haynesville position last year, and today we continue to see opportunities to strike more value from every dollar of capital we deploy across our portfolio. Before we take your questions, I would like to take a moment to thank Brittany for her service as interim CFO. She did a terrific job. I'd also like to welcome Marcel Teunissen to the team as Executive Vice President and CFO. Marcel is the kind of leader who can elevate our entire organization. He brings deep experience that aligns perfectly with the opportunities we've highlighted today.

I'd also like to note our CEO search is progressing well and remains on target for the timeline I presented on our last call. However, the team is not waiting around. The board and management team are fully aligned. We are executing our plan today, and we see numerous paths to reaching more markets and improving our margin. Thank you. Operator, please open the line for questions.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matthew Portillo with TPH. Your line is open.

Good morning, all. I wanted to start out on LNG. Could you perhaps discuss why the Delfin LNG project was attractive to expand? 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?

Great. Thanks, Matt. This is Mike. Number one, our LNG strategy is really an extension of our Haynesville. We think about it more broadly than I believe most, which is we think about first delivering gas to Gillis, which we think will ultimately be a premium market because it's connected to all the LNG facilities. In fact, LNG facilities are our biggest customers today. When we start to think about on the water, of course, LNG, we think about that as international pricing. We want exposure to the prices, whether it be JKM or TTF or others. Delfin is the start, and we'll call it our foundational sort of contract in order to start to capture the LNG market, you know, opportunity and the premium pricing. It kind of flows into our bigger marketing plan.

When I think about the three different sort of categories, you know, we want to be in premium markets. We think LNG will do that as we move into Europe and to Asia. Two, of course, volatility. It's a different volatility sort of shape than our Henry Hub exposure. Then, of course, new demand, that's a new facility that's getting built. So it is actually helping new demand in the area. In fact, that gas will come from both Sabine Pass and Calcasieu Pass. Dan, why don't you tell them a little bit more about the details?

Yeah. Thanks, Matt. As you know, we originally had a agreement with Delfin in Vessel Two, and we had this opportunity where our conditions precedent date passed, and we terminated that contract.

As Mike said, we believe in the global LNG demand here, so we had the opportunity to look at Vessel One and take out a larger position. Important to that was we terminated the back-to-back contract as well. As Mike alluded to, this gives us all the integrated strategy that we're trying to do, facilitate that new demand through that SPA, reach premium markets, get that asymmetry, and importantly, have some of the control on the water, either ourselves or through long-term partnerships, where we can create more value and take a portfolio approach to our supply position and our sales position downstream, offer different terms and tenures of sales and also different indexations. The other important aspect I'd point out here is we're trying to integrate this through our value chain, we have a long-term partnership with Delfin.

We're negotiating with them right now to be their gas supply manager. We're integrating it right through our value chain. That differentiates us and brings more value to us, and we think brings more value to the customers. We're able to offer different solutions.

Great. Maybe as a follow-up on the marketing side, if we look out over the medium term, at least to us, it feels like it might be a bit of a challenge, given the inventory exhaustion for smaller producers around the Gulf Coast to maintain a supply level that can keep up with demand growth over the next few decades. I was just curious if you see an evolution in Gulf Coast supply-demand balances. Specifically, do you think we need to see more pipeline capacity coming out of the Northeast to help bolster supply on the Gulf Coast over the medium to long term?

It's Mike again. Generally, we agree. We agree we have a lot of demand coming to a very small area. That's, of course, near our Haynesville, the asset. We feel pretty well-positioned, and we're fortunate to have a deeper inventory than most, we'll be able to go a lot longer than everyone else. Long term, when you start thinking about 20-year contracts, of course, you need to find other supply in different basins. You know, that, of course, can come from the Northeast. We're always worried about can it be done or not should it be done. We definitely think it should be done. More gas will have to come from Appalachia and, you know, of course, we'll benefit from that on our own assets.

Of course, everyone knows there's gonna be more gas that's coming from the Permian as well.

Thank you. Our next question comes from the line of Doug Leggate with Wolfe Research. Your line is open.

Thanks. Good morning, everybody. Thanks for taking my questions. 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 with Shell before that. 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? If I may, on that last point, we know Mike is very keen on getting the break even down, and marketing is a big part of that. I wonder if you could share your thoughts on how you think you fit into that strategy. I guess my follow-up is on one of my favorite topics, which is cash return and 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?

Great. Thank you, Doug. Thank you for the question. It's a pretty long one, so I'll, you know, it's good to get to get out there. Maybe just by way of my background, right?

Yeah. Okay. I'll take them all. You know, just by way of my background, so I've been in the energy sector for almost three decades, and I've worked in the upstream, the midstream, the downstream, on the oil side, the gas side, and also in every part of the world, so bring an international perspective on that. I've done finance jobs, obviously, but also commercial corporate development strategy jobs and operations. The last five years, as you mentioned, I've been in a Canadian downstream company, really on the customer demand side, you know, working on optimizing the integrated margin, capital allocation, and the likes. Prior to that, I spent almost 25 years at Shell, which the last many years on Shell's integrated gas business. That's how I kind of come to the job.

To expand, I think most of it has been said by Mike, right? I think the Expand platform is just incredible in terms of its size, in terms of its positioning here within the U.S. It's at a time that the energy market is really, both in the U.S. and globally, is gonna transform fundamentally, and we're well-positioned. You look at the strategy, you know, where we, where we are. You know, we wanna capture more value by being integrated into that value chain, and that's where I bring a lot of, kind of experience and background. I'm excited about the opportunity and what we can do here with the team, incredible people, and as I said, an incredible business and platform to kind of grow from.

That's the background and why I joined and the opportunity I've seen. In terms of break-even prices, you asked a question what I believe around break-even prices. You know, we are leading there within the industry. We're well below $3 now on a break-even price. You know, that break-even price by capturing margin, you know, will just create more value for our shareholders when we do that. We'll continue to work on the cost side, as Mike also alluded to, with Josh and his team, but also by capturing more of that upside on the margin, we will just improve our relative position even further. That's an important part. The balance sheet, you know, made incredible progress on the balance sheet.

The way I look at that, you know, it's important for us to be investment-grade. We're a big company. We are counterparty. People need to be able to rely on us. Of course, we want to be investment-grade not just in the good times, but through cycle, and that's important. You've seen after Q1 that we now have peer leading kind of leverage. You know, we reduced most of the free cash flow we generated in the first quarter to reduce our gross debt and of course, to put some additional cash on the balance sheet as well. Going forward, this continue, you know, our strategy continues to be anchored on that balance sheet, as we think of the opportunities that we have.

Having said that, I think, you know, given the allocation of free cash in the first quarter and the progress that we've made relative to what we laid out at the start of the year, you know, we can rebalance a little bit the pace of that, you know, and also, kind of, lean a bit more on the, and shift that kind of balance to shareholder returns in the form of buyback. That's kind of how we think through this. Let me pause there unless there, Doug, there was a part of the question that I, that I didn't get.

No, I just wanna, you know, maybe just on that last point. You know, the end of the day, your breakeven is still above where the gas price is right now. I mean, do you think about that as opportunistic? Do you think about it as ratable? When you're theoretically, you know, at a gas price, which is burning cash, you know, by definition below breakeven, is now the right time to buy back your stock, or is now the right time to put cash in the balance sheet? I'm just trying to understand where buybacks sit in the seriatim of priorities.

Yeah. I think we do both, right? We, you know, we can walk and chew gum. You know, we're still generating cash. Of course, our hedging program means we are realizing prices well above what you see-

... in the spot markets at the moment as well. I think that's important. Think of our buyback program as opportunistic, right? Relative for the value we can get, you know, in buying back. It's a capital allocation question, and it's a balancing act, and I think you highlight that well.

Thank you. Please stand by for our next question. Our next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Your line is open.

Hey, great. Thanks for taking my question. Maybe to start off with an operational question. You guys made tremendous progress on well costs last year. CapEx also came in lower in the first quarter, but you also had kind of lower turning lines. I wonder if you had any comments on leading edge well costs. Are you still making progress on efficiencies? Maybe any comments on increased competition for services or higher prices you're seeing out there?

Good morning, Kevin. We, you know, we continue to make progress on our operational efficiencies. Just in the last couple weeks, we've drilled the fastest well ever within our Utica program in Southwest Appalachia. The teams continue to do a phenomenal job in finding ways to unlock new value. I think, you know, we'll continue to see those strides. You know, an area of focus right now is for us, you know, perfecting how we drill our 3 mi laterals in the Haynesville. I still see upside there. You know, as far as pressure on services, you know, of course, we've seen an uptick in rig counts in the Haynesville. We really haven't seen the impacts of that, you know, show up in our business yet.

You know, our costs have been stable, I would say, outside of some nearer term inflation around diesel prices, which is, you know, largely tied to the conflict in Iran. Beyond that, I would say the cost structures have been relatively stable.

Great. Appreciate that detail. Then maybe for my second question, I'll move to the Western Haynesville. I realize that program is still pretty early. Is there anything you can share with us on what you saw on the first well in terms of, you know, where you think well costs are gonna go? Where you think, you know, you can take your expertise from the legacy Haynesville and translate it over to the Western Haynesville? Any thoughts on production on that first well? Thanks.

Yeah. You know, the well's been online for the last couple months now, came online in early March. You know, we're still monitoring well performance there. I would say we've been very pleased with what we've seen to date. You know, we liked what we saw when we initially drilled the pilot well there, so we knew we were getting into a really good overpressured reservoir there. Again, it's still early. We wanna, you know, be methodical about how we appraise those results. We've also just here recently in the last week spud our second well about 15 mi to the north of our first producing well. I do think on the cost side that I have every expectation that we will continue to work ourselves down the cost curve.

You know, we're by far the, you know, most proficient operator in the Haynesville. We've built up a lot of history drilling, you know, our deep hot wells in the southern part of the Louisiana core. So of course, we're going, you know, several thousand feet deeper, but there's a lot of learnings that we can translate into the Western Haynesville position. In fact, when we just look at our first well that we drilled in the area, last year, you know, we're already on the lower end of the cost curve relative to what we've seen from competitors. Again, that's on one well. I have every expectation that we'll continue to leverage those learnings and continue to work ourselves down the cost curve.

Thank you. The next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.

Yeah. Thanks so much. Marcel, congratulations, and looking forward to working with you again. Mike, you gave us a little bit of an update on the CEO process. It sounds like you're tracking for a Q3 or Q4 event, just any mark to market on how you're progressing through it, how you're attacking this process, and what you're looking for and timing?

I like the way you said that, mark-to-market. Look, number one, the team is not waiting for a new CEO. I think you should see from our behavior and our quarter results here, and efforts on marketing, that there's no waiting for a CEO to show up before we do something. Number one job is just to continue to create value for our shareholders. With that, of course, we're looking for our leader, and we still expect to be on the same time. The market, I'd say, is still kind of at the money on my six-month sort of prediction of when this person would show up. We don't think that we'll find the perfect person. We think we're trying to build the perfect team. With that team, you hear about Marcel's background.

Of course, we have marketing with Dan, Josh, we're thinking it very holistically. We expect to have an energy person, not someone from Starbucks or Chipotle to come into this job, something more closer to our business. On path, on strategy, I think that's fine. Today, it's just about execution that we continue until this person's arrival.

That's really helpful. Then, just to follow up on the hedge-to-wedge strategy. You know, you have a good slide on in the deck just talking about how volatile the gas environment has been. You know, we've been living in this $2-$6 range, obviously in the shoulder. We're below the midpoint of that range. The hedging strategy has worked out pretty well for you guys. You have some competitors out there that are running a much more unhedged program. You know, as you guys think about the balance sheet being where it is, what's the right approach to hedge-to-wedge? Just while we're talking about hedging, just any comments on the gas macro broadly, as we set up for 2026.

Thanks Neil, and good to hear your voice, and looking forward to working with you. It's Marcel Teunissen here. Let me answer the question on hedging and then I'll pass it on the macro to Mike. You know, coming in, you know, from the outside, you know, and obviously risk management is a critical part of how we manage the business. I've studied the hedge-to-wedge program and all of that, and it is the right approach for our company. I think if you look at it, really the volatility of the market, which you point out, is just much faster than how we can plan for capital. By hedging the wedge, we really create that kind of.

You know, we protect the downside while we preserve the upside, and that creates consistency in the cash flow generation as well as predictable returns. For where we are, you know, with the balance sheet as well, I think it's the right approach. It's not a static approach, and you've actually seen that in, you know, in the first quarter, right? We kind of lay out what we wanna do, and then we optimize around that position in a way, not in a speculative way, but really from approach of risk management and then optimization.

I think the last thing I would say is that being, you know, the largest player in the market, we have a lot of information of what is moving around, and that allows us to just capture a bit more, make the program more efficient, and you can expect that we continue to do that.

Yeah. On, on the macro front, you know, when we think strategy, we don't think this year. It's like trying to predict the weather, of course, and even next year. We're thinking much longer term. We think the large macro program, macro demand is sort of amazing. Generally think that that macro shows up bigger in the Gulf Coast before the Appalachia, 'cause LNG is on the schedule that you can see. You can see massive sort of growth in Calcasieu Pass and Sabine Pass. Think that will be a premium market. That's not to say Appalachia won't get its fair share with AI demand in power generation, definitely feels like Gulf Coast is positioned to be, to be impacted first.

Our next question comes from the line of Scott Hanold with RBC Capital Markets. Your line is open.

Thanks. I'd like to kinda, you know, go to some of the commercial stuff you all laid out in slide eight on your presentation deck. It seems like you've defined, you know, what the LNG, the industrial side, the power side as catalysts. How do you think about the ideal allocation reaching to those various end users? Do you think one area is under, you know, I guess underlooked by other companies? It feels like industrial is an opportunity you all have that, you know, I don't hear others talking about as much.

Yeah. I mean, I think about it in timing more than anything. I think the Gulf Coast, you know, when I think about what's gonna show up, LNG is gonna show up first. That makes the Haynesville particularly valuable. What people 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. If we overperform, I feel like it will be in that area. You know, when we get to 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, you know, whether it be in Louisiana or Texas or in Appalachia, we're seeing tremendous sort of discussion about power.

You know, when that generation equipment comes on is a little bit TBD. It feel like that's secondary right now. It's not that we're not chasing it. We chase it every day. LNG is here, and so you can plan for it and you can start building your asset to serve it.

When you think about the LNG opportunity, obviously you signed the Delfin agreement, but, you know, given what's happened in the global LNG market right now, you know, how competitive is it? Is it tough to, you know, be able to contract in this market given the heightened nature of it? It's, you know, my analogy would be, you know, if your house is on fire, that's not the time you call your insurance agent for, you know, more coverage, right? Is, you know, how is that LNG market? Can you actually get things done?

Yeah, this is Dan. In terms of contracting on this, I'll talk about it on the supply side and the sales side, right? On the supply side, this Delfin contract is a long-term SPA, so that's priced at cost of liquefaction. It's easy to get those kind of deals done at the moment. There's a few more in the market that are available that we're looking at. On the sales side, this is again, a longer-term business driven by long-term relationships. LNG doesn't trade like really any other market in the world. It's really driven by long-term relationships, fundamentally underpinned by long-term contracts. We've been in discussions with counterparties already on how we could end up supplying them different.

In the real near term, yes, the markets are priced to perfection, if you're gonna get a short-term strip in this year, you're gonna have to pay up for it on the US Gulf Coast. We're setting up this business for the long term, we expect to add supply positions and have a sales portfolio on the other end where we can market differently and a mix and a real portfolio approach to longer term contracts and shorter term contracts and spot exposure.

Thank you. Our next question comes from the line of John Freeman with Raymond James. Your line is open.

Good morning. Thank you. I wonder if you go back on the marketing slide on that slide 13 that you have got where you sort of, you show sort of the three-prong sort of strategy to achieve this, you know, $0.20 uplift. You know, the first one, the facilitating and capturing new demand like Delfin is obviously longer term back in way. These are four or five years or more till you sort of get to realize those versus the other two, 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 of the ultimate prize, the $0.20, you know, kind of uplift, like how much of that can y'all achieve with just those other two kind of buckets, the premium markets and the monetizing volatility?

You know, of course, of course, it doesn't matter where it comes from and ultimately, you know, our ability to execute will determine exactly where it is. In our, in our view today, we think this is about 50/50. 50% on facilitating and capturing new demand and 50% on the other two categories. Between those categories, they're a little bit intermingled, so exactly how they're broken out, we don't and we don't even think about it that way necessarily because they're all often combined. But think about the bottom, the bottom two of those things as sort of near term and about half in the top, the very top one, about half and a little bit longer.

That's great. The y'all removed the heat map slide, you know, in the presentation this time. I'm just making sure there's nothing's changed in the way that y'all sort of think about that relationship between kind of production, CapEx and the natural gas price.

Yeah, John, this is Josh. That's right. I mean, it's not in the deck, but it's absolutely, you know, helping us formulate our, you know, views on production and therefore CapEx. It all centers around, you know, taking a three-five year view on a mid-cycle price. You know, of course, there's been a lot of volatility. Mike talked about this earlier in the nearer term gas markets. You know, as we think about the business over the next couple years, you know, we think, you know, delivering, you know, that 7.5 Bcfd given the current price outlook makes sense. If we see those fundamentals change, of course, like we've done in the past, we'll be responsive to those changing market conditions.

Thank you. Our next question comes from the line of Zach Parham with JPMorgan. Your line is open.

Hey, thanks for taking my question. Maybe just to follow up on John's question. Are you starting to think about your activity levels changing at all where current natural gas prices are? The 2027 strips falling to below $3.60. Are we getting closer to a price where you would consider moderating some activity or at least maybe building some deferred productive capacity as you've done in the past?

Yeah. You know, we're obviously, you know, looking, you know, where the strip is landing and we'll always be responsive to pricing. You know, that plan that we laid out and as the heat map that was referenced earlier is predicated on that $3.50-$4 price range. Of course, you know, we're still in that today, but we're not stuck to it. You know, just like we've done in the past, you know, 2024 and 2025 was a great example of this. You know, our toolkit, you know, is there and we know how to leverage flexible operations.

You know, if we see markets soften, you know, further, you know, we'll absolutely be in a position to defer turn-in lines, slow down our completion activities, as we see, you know, those are the best measures to, you know, better align our production with price.

Thanks, Josh. My follow-up just on the balance sheet and how you're thinking about capital allocation. You paid down $1.3 billion in debt in April. That meets your commitment to reduce debt by at least $1 billion this year. How do you think about allocating the incremental free cash flow after the dividend for the remainder of the year? Should we think about that going mostly to buybacks at this point?

I think the way that we look at it is that, you know, having achieved the goal that we set out at the start of the year, you know, we can now look at rebalancing that allocation, whereas in Q1, it went primarily to debt reduction, right? In the rest of the year, we can rebalance that with share buybacks and share all the distributions.

Thank you. Our next question comes from the line of Phillip Jungwirth with BMO. Your line is open.

Thanks. Good morning. Can you come back to the Delfin gas supply manager comment from earlier in the call? Just what all does this entail? Does this imply that you'd look to take additional offtake from the project? 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 or partner with?

Hey, 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, managing that capacity. It sets up naturally for us, given our footprint and how we our growth and what we're doing versus Delfin building that out, that capability on their own. It's kind of a win-win for both of us. It's the opportunity to supply to them and to manage the capacity into the facility. We're creating a long-term partnership. They're looking to do other vessels later on. Again, we'd be in the mix of supplying, supporting that new demand, getting after our strategy of facilitating, capturing new demand. When we look at all the other projects, we're looking 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. We have conversations with them. We look at all these projects in terms of value and economic risk. We believe in the long-term demand, both in the U.S. Gulf Coast and globally in LNG. We're gonna look at all these in projects individually in terms of their economic merit. Essentially, we're trying to build a well interconnected portfolio on our upstream and through to the LNG market.

Okay, that's great. Can you talk about what kind of role you see Expand playing in the Northeast for new power demand projects? I mean, you clearly have the dominant position in the Haynesville, but I mean, there's certainly larger competitors up there in Appalachia. Just how do you see the opportunities for Expand here versus the Gulf Coast, considering the different competitive dynamics?

Yeah. thanks for that question. This is Mike. In general, when I think about the Appalachia, I think about it in two buckets because we have Northeast P.A., which we actually are dominant in that particular area, and that's where our competitive advantage is on power generation, which is actually PJM, and that's the right market for it. So we're definitely, you know, in negotiations and discussions with power providers in that area in particular. Again, we feel like we have a competitive advantage there. In Southwest App, still location is to the western side of that, so we think we can be competitive on that side of the basin, as some of our other competitors are further east.

The overall strategy is to focus on where we're the best, and so we're thinking about Northeast P.A. in that market.

Thank you. Our next question comes from the line of Neal Dingmann with William Blair. Your line is open.

Morning, Mike. Thanks for the time. My first question is just, Mike, simply on your strategy. I'm just wondering specifically, I know you've mentioned, you know, really taking a full integration focus, and I'm just wondering, could you give some details of what specific transactions make the most sense in the coming months? Would it be just simply like those of the Delfin agreement or, you know, maybe what else should be looking for as part of your strategy?

Sure. Sure. We're a producer. As a producer, we think of two things: sell more gas at higher prices. That's what we do. Our focus is really pushing towards new demand and better pricing. We're focused on our marketing. We think the time is now. That's where the opportunity is. Number one, we wanna, you know, sort of continue to look at the LNG value chain and push that because it's nearer term and it's close, and of course, we can actually provide our actual gas in the Haynesville. I think the word you just used, interconnectivity. I really like that, Dan. That's sort of first deal.

Doesn't mean, you know, we are competing heavily, of course, for power generation in Northeast PA, like I already mentioned.

Got it. Then just, you know, on my second question, just on the incremental free cash on the $0.20 an M that you continue to throw out there to capture. Am I correct on thinking I mean, what are you thinking timing around that? Is it a couple years or, you know, could it be even longer if some of the, you know, agreements are not FID or, you know, how should we think about the schedule of this?

Yeah. Like we just talked about, we think about it in two general buckets. We have three categories, but two generally buckets. We have our near-term bucket that's happening now. I mean, that's what you're seeing in our marketing that we just saw this quarter in the $90 million. That is a now answer. Let's chase, of course, long term, LNG, power. Those are three years. We have a lot of value to capture and to execute in this moment here in time.

Thank you. Please stand by for our next question. Our next question comes from the line of Charles Meade with Johnson Rice. Your line is open.

Good morning, Mike, to you and your whole team there. My first question I think is probably for Josh, but you guys will field it as you choose. It's specifically about the cadence of CapEx and activity in 2026. If we look at your 2Q, your volumes are essentially gonna be flat and CapEx is up. I'm curious, is that just some activity sliding from 1Q into 2Q and, you know, or is perhaps already reflect some decisions you've already made to maybe defer TILs or build some DUCs in 2Q? Is that's the low part of the curve for 2026?

Yeah, Charles, thanks for the question. Q2 will end up being the high point of our CapEx for the year. Just the way the, you know, the program was set up, it is a little bit more front-end loaded. D&C activity is gonna be just slightly higher in Q2 relative to the second half of the year. We'll actually have a couple rigs across the Appalachia region, you know, coming out in the second half of the year. That will, you know, leave CapEx just a little bit lower. The other artifact in Q2 is just on our non-D&C CapEx, which 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 works over the first quarter of the year. We expect those to close in Q2. Also, you know, 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. Workover activity also picks up in Q2. 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's there. Really, I think the main thing there is, you know, we are in a position where we expect to deliver 7.5 Bcf a day at $2.85 billion in CapEx.

Got it. Thank you for that, Josh. Then, Mike, my follow-up was probably for you, and it's really about your financial approach to pushing, you know, pushing further down the value chain with these commercial opportunities. It looks to me that for the most part, what you guys have done is decided to, you know, sign up for capacity, or transport, rather than take equity stakes in projects. An exception to that seems to be your approach to storage, where you guys actually have, you know, spent money to get equity stakes in those facilities. Can you kind of tell us about how you evaluate looking at, you know, signing up for capacity versus buying equity stakes?

If that approach is either changing over time or changes between the kinds of opportunities you're looking at?

Sure, sure. Happy to take the question. Thank you. You know, generally speaking, we think about our capital allocation from a sort of a disciplined financial view. We think about it long term. Our first goal is always sell more gas, higher prices. I wanna repeat that about 10 times. We're on the same page. When you think about how to facilitate that, how do we facilitate it? You know, we facilitate it with NG3, our ownership there, 'cause we wanted to move more gas to Gillis. We thought about it in FT to move our gas further east into the southeast market. We think about it on a long-term value accretion basis. That's our first threshold. Well, first is strategic, then discipline on financial.

Expand Energy (EXE) Q1 2026 Earnings Call Transcript

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