Expand Energy Corporation

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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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 Rayford, Vice President, Treasurer, and Investor Relations. Please go ahead.

Good morning, everyone, and 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 consists 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 Wisterich, Josh Beetz, Marcel Tunison, and Dan Turco. Mike will give a brief overview of our results, and then we will open up the teleconference to Q&A. So 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 made 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've got to 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. So now, in addition to structural demand growth, energy security has pushed the U.S. natural gas to the forefront. Xpand 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 Hainesville 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. Demand in the region is not just LNG, 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 Xpand 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 Hainesville. 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, so 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 20 cents 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 the 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 off-take SPA with Delphin 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 markets 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 ventures. 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 Xpand 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 Hainesville 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 Tunison 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.