EXPAND ENERGY Corp Q2 FY2024 earnings call

• Cost Reduction and Breakeven Improvement: Recognized 50% improvement in Marcellus drilling performance since 2022, 20% decrease in drilling costs over two years in Marcellus, 25% decrease in Haynesville saltwater disposal cost per barrel since Q3 last year, and lowered full-year capital and production expense guidance by $50 million and ~8% respectively.
• Production Flexibility: Deferred 46 TILs and built 29 DUCs, expect up to 1 Bcf a day of productive capacity by year-end, proactively curtailed volumes in spring shoulder months and prepared to do so again in fall, disciplined in activating deferred capacity based on market conditions.
• Merger with Southwestern: Confident in delivering planned synergies, focused on integration planning, expect merger to close in back half of the year, sees potential in business combination for greater strength.

The company has two main product segments: Marcellus and Haynesville. In the Marcellus, there has been a 50% improvement in drilling performance since 2022, with feet drilled per day up ~50% over two years, average lateral length in Q2 increased by nearly 3,000 feet, and drilling costs down 20% over two years. In the Haynesville, production expense has been reduced, with saltwater disposal cost per barrel down 25% since the third quarter of last year due to route optimization, owned asset utilization, vendor partnerships, and deflation. The revenue contribution percentages aren't explicitly stated in absolute terms but the focus is on the performance of these segments.

• Lowered full-year capital and production expense guidance by $50 million and ~8% respectively.
• Expect to have up to 1 Bcf a day of productive capacity available by year-end.
• Anticipate merger with Southwestern to close in back half of the year.

• FTC process related to merger with Southwestern could have implications, but integration efforts are derisking the synergy target.
• Market conditions and pricing fluctuations could impact production curtailment decisions.

Q: On deferred activity, clarification on price signal and bottom production levels A: Price is a signal, focus on supply-demand, not too worried about bottom production, will monitor and be prudent.

Q: Thoughts on behind the meter deals and catalysts A: Excited about electricity demand growth, need technology providers, users, generators, and fuel for generation to come together, potential catalyst but more about trend and supply-demand.

Q: FTC process and synergy risk A: Longer integration period helps derisk, confident in achieving $400 million synergies, will update on synergies post-closing.

Q: Deflationary trends and LNG outlook A: Softening service pricing, anticipate more weakness in back half of 2024 and 2025, excited about multi-year LNG ramp, well positioned.

Q: Price-related curtailments and fall curtailment plans A: Will curtail again if prices repeat spring lows, historical pattern of modest shoulder season reductions.

Q: PDP decline and asset performance A: PDP decline outperforms modeling, market has hard time seeing underlying decline, reducing activity helps base perform better.

Q: 2025 volumes and flexibility between basins A: Standalone volumes could be up to 3.5 Bcf a day, flexible on which basin to bring back first.

Q: Haynesville volumes, pricing, and operational efficiencies A: Pricing better now, decline continues, operational efficiencies include insulated drill pipe, sand sourcing changes.

Q: Flexibility between Marcellus and Haynesville and momentum project A: Flexible on basin activation, momentum project settled, back on track, in-service end 2025, provides flexibility.

Q: Upper vs Lower Marcellus well performance A: Upper Marcellus less productive, but teams work to improve economics via longer laterals and hybrid wellbore designs.

Q: SWD cost trend and Marcellus well cost trajectory A: Continue to invest in water disposal, expect ~$800 well costs averaging, fluctuates with lateral length optimization