EXPAND ENERGY Corp (EXE) Q2 2026 Earnings Call Transcript

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Expand Energy Corporation's second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's opening remarks, we will have a question and answer session. If you would like to ask a question, you will need to press star 11 on your telephone keypad. As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Ms. Brittany Rayford. Ma'am, please begin.

Thank you, Howard. Good morning, everyone, and thank you for joining our call today to discuss Expand Energy's 2026 second quarter financial and operating results. Hopefully, you've had a chance to review our press release and updated investor presentation that we posted to our website yesterday. During this morning's call, we will make 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 on other SEC filings. Please recognize that, except as required by 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 Vietz, Marcel Tunison, and Dan Turco. Mike will give a brief overview of our results, and then we'll open up the line for Q&A. So with that, thank you again. I'll now turn over the conference to Mike.

Thanks, Brittany. Good morning, and thank you for joining our call. It's now been six months since taking the role of interim CEO. I told you last quarter that I couldn't be more optimistic about the future of Xpand. Today's quarterly results are a testament to why I was optimistic then and why my optimism today continues to grow. Let's talk about why. First, the Xpand team has earned a well-deserved reputation for operational excellence and execution. This quarter was no exception. Our Southwest App team had a particularly good quarter. The team has consistently delivered tremendous operating results conducted with a safety-first mindset. Our employee and contractor safety is job number one. Second, we embrace that to be a great company, we need to be a disciplined allocator of capital. This year has been a clear reflection of that commitment. In the first quarter, our free cash flow surged as a result of high natural gas prices. We were able to capture this volatility and prudently chose to pay down $1.3 billion in gross debt. This was intentionally done to put us in a position to capitalize on times when commodity prices are soft. Prop month natural gas prices dipped after the first quarter, and we were prepared to act decisively when our stock price dislocated from our mid-cycle price view of $3.50 to $4. As our peer companies focused on paying off low-interest debt, we repurchased $850 million, or 4% of our outstanding shares. This is a great example of how we allocate capital to generate superior returns through the cycle. Our board also sees the value of this type of thinking and has authorized an additional $1 billion for future buybacks so that we can continue to act decisively when market conditions dictate. Third, we believe an upstream company must replace and build its drilling inventory to be successful over the long term. Organic leasing, when done well, is the most accretive and effective way to extend inventory. This year, we have been active in each of our operating areas, adding high-quality locations that are either accretive to our near-term drilling plans or give us the ability to grow production when natural gas prices rise. We also believe in inorganic transactions. However, I will remind you our bar is high. Any transaction must do more than add scale. It must create long-term strategic value and position the company to become something stronger and more impactful over time. These opportunities are rare and must meet our non-negotiables. Fourth, we are positioning SPAN for the long term as North America's leading integrated natural gas company. In February, I mentioned on our earnings call that we had a renewed focus on our marketing commercial efforts. We laid out a three-part framework. 1. Facilitating and capturing new demand 2. Reaching premium markets and 3. Monetizing volatility In the first quarter, we announced the LNG transaction with Delphin extending our reach globally and advancing our goals on both capturing new demand and reaching premium markets The team is hard at work on additional transactions We look forward to sharing details as they're finalized On Monday, we announced the purchase of Twin Eagle, which immediately accelerates our marketing commercial strategy and puts us in the driver's seat to reach premium markets and monetize volatility. Before I talk how Twin Eagle is a game changer for Xpand, I would like to welcome the Twin Eagle employees to the Xpand team. Jeremy Davis, CEO of Twin Eagle, and his team have built an incredible business and brand over the past 15 years plus. We believe this acquisition is a transformational opportunity to unite Expand's industry-leading diverse supply and financial strength with Twin Eagle's premier physical marketing platform, creating the leading integrated natural gas company. We will soon be the undisputed largest independent natural gas producer and leading gas marketer, scaling our business from a regional player to a coast-to-coast heavyweight across the United States and Canada. reaching customers that none of our domestic peers can touch. Rather than relying on directional commodity price exposure, Twin Eagles business is built around linking customers to physical supply by using transportation and storage assets to create value. The model is unique, repeatable, and scalable. It is an origination and optimization company benefiting from customer relationships with an average retention rate of 90%. This provides Twin Eagle with lower earnings volatility on their base business while preserving the upside during supply disruption events. Simply put, this repeatability, which starts with deep customer relationships, is why they have been profitable every year since inception. Together, we are strategically positioned to benefit from a new era of demand pulled from power, industrial, and LNG consumers across North America. We will more effectively monetize regional volatility and reach high-value markets, providing us with a unique value creation opportunity that will differentiate us from our peers. We expect Twin Eagle will contribute more than $200 million of EBITDA in year one and grow to $350 million per year as we capture synergies over the next two years. Important to note, our estimates assume normal market conditions and do not reflect the potential upside associated with periods of elevated volatility. With our confidence in this deal, we are raising our incremental marketing commercial free cash flow target to $750 million. We look forward to working with Jeremy and the entire Twin Eagle team to maximize the value of every molecule. Finally, before taking your questions, a quick update on the CEO search. We originally said that we expect the process to take six to nine months. We're at the six-month mark, and we will meet our goal. With that said, in the last earnings call, we told you that the Expand team would not stop focusing on creating long-term value for our shareholders during the CEO's transition. I hope today you will see that we were serious. If there is one thing I have learned about the Expand team, it's that it plays to win. We attack our business with urgency, maintain our disciplined approach to value creation, and keep our promises. I could not be more impressed with the enthusiasm and professionalism of this team, nor optimistic for the company's future. With that, we welcome your questions. Operator, please open the line.

Yes, sir. Ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 1-1 again. Again, if you have a question or comment at this time, please press star 1-1 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Arun Jayarun from J.P. Morgan. Your line is open, sir.

Yeah, good morning, Mike and team. Mike, I wanted to get your thoughts on how you think the Twin Eagle acquisition aligns with Expand's overall strategy.

Thank you for the question, Arun. Overall, we said in my first call here in February that we're going to focus on our M&C business. And that focus has turned into integrated gas company. And that is the bigger vision on how to go customer back because we think this is a demand pull future as opposed to a supply future. So if you think that's the number one goal is to get customers, Twin Eagle has that. It has over 1,000 customers. That business is based on those relationships. They've had them for eight years. And so we know it's repeatable. So if you think about integrated gas supply, we believe that having a national footprint, 1,000 customers, Twin Eagle is a perfect fit for us.

Great, great. And just my follow-up, Mike, just in terms of the broader landscape, you know, one of your peers in the Appalachia Basin, which also has an integrated model, similar scale, has been able to link several natural gas supply deals with utilities power projects for data centers, et cetera. I want to get your thoughts on whether you view the Twin Eagle acquisition with your expanded transportation portfolio, customer intimacy, do you view this as an enabler to get supply deals for Xpand called over the line?

I absolutely do think that. You know, of course, we have a large position in Appalachia. We will absolutely look for deals there as well. But what Twin Eagle gives us, it gives us the whole United States as our playground. There are utilities all over the country near population centers who are building data centers. We don't think data centers will only be in the east. We think they'll be all over. Twin Eagle already has long relationships with utility companies. They will ultimately be the big winner here, in my opinion. And so the footprint is what will make us special. Great.

Thank you. Our next question or comment comes from the line of Josh Silverstein from UBS. Mr. Silverstein, your line is now open.

Hey, thanks. Good morning, everybody. Still a question on capital allocation between the balance sheet and shoulder returns. You clearly bought back a significant amount of stock and just authorized another billion dollar buyback. But now you're buying Twin Eagle with the balance sheet and cash on hand.

So how do you flex between the two going forward? good morning josh marcel here taking your question there so when you think of the overall capital allocation framework right our number one priority is to reinvest in our ongoing business keep that engine going so that's our dnc capital our second priority is dividend we have a good and healthy dividend so we continue to pay that the third priority is our balance sheet and we've made great strides in that in q1 and that kind of allowed us to you know to have some flexibility as we went into the second quarter, as Mike talked about. And then the remaining cash will allocate to the highest kind of returning, you know, kind of opportunity that we have. And that could include buying back our own stock that is competing with other opportunities that we have. Specifically to the money spent on Twin Eagle, you know, it is a big amount. But for our company, we can absorb this within the facilities we have. We have ample liquidity. So I expect that over the next quarter, you know, we can do both balance sheet and looking at other opportunities to, you know, that return, yeah, that make good returns for shareholders as well.

Got it. And then maybe sticking on the cash flow statement, the CapEx trajectory was, you know, obviously you've been elevated this quarter. The 3Q guy was higher versus expectations. Can you just talk about the trajectory of this maybe into what's implied for the fourth quarter and how much of it was service inflation versus just a good opportunity to step up the leasing efforts, because it looks like you added a lot in the Hainesville and Appalachia.

Yeah, good morning, Josh. You know, we would expect that the capital will tail off as we go through the second half of the year. The first thing I would just note is that we do have a little bit less D&C activity in the second half of the year, primarily across our Appalachia business. On the second quarter specifically, you know, we continue to find great opportunities to go out and add organic leases. This is, of course, we're able to go leverage our operational and subsurface expertise, identify opportunities to get in early at a lower cost, which simply preserves our ability to generate premium returns off of that acreage in the long run. In addition, we like the acreage that we're getting because it's also providing real growth optionality for us as a company as we're looking at pretty significant demand growth as we exit the decade. There has been an element of realized inflation in the second quarter. And so just depending on where we see crude prices go, that will impact what we pay for fuel. And so that's all accounted for within our full year guide. The fourth quarter as a whole, also, I would just note that you do tend to see leasing activity ramped down in the fourth quarter. And that's really just, you just simply lose working days with the holidays. And so that does tend to lend itself to lower overall spend. But I would just note that, you know, we want to continue to be opportunistic. Financially, we're strong enough to be active out acquiring organic leases. We think it's a fantastic investment for the company. And if we continue to find these new opportunities, you know, that would end up pushing us towards the higher end of our capital range for the full year.

Thank you. Our next question or comment comes from the line of Charles Mead from Johnson Mr. Mead, your line is now open.

Yes, good morning, Mike, to you and your team there. I want to ask another question on Twin Eagle. Maybe there's two parts to this. Can you describe for us what relationships you may have had with Twin Eagle in the past, for example, whether they were marketing some of your volumes or if there's any history between Expand and Twin Eagle. And also, when you look at the assets you acquired, of course, the people are a big part of it, but one of the biggest tangible pieces, it seems to me, is this 44 Bs of storage. And I wonder if you could talk about how you valued that, whether it was evaluated separately or whether it was just part of the whole, you know, just in the overall evaluation.

Sure, sure. Thank you, Charles, for the question. Of course, Twin Eagle has actually been around a long time. I mean, this is the original Banerjee team that spun out, and they've been doing this exact business for 30 years. The Twin Eagle team today, of course, is 15 in the latest iteration. Fun at one point in time, you know, Chesapeake was one of the equity owners of Twin Eagle. It got sold, sold in the past. So we've had a long relationship with them just in general. We don't sell a lot of gas to them historically, so there's not a lot of overlap. They focus a little bit more downstream from where most of our sales have been, which is what we like. We want to extend our reach, and they provide that reach. So known them for a long time. We have a perfect culture fit in that, of course, they're here in our spring complex. They're actually in our complex, and so they'll be moving to our building ultimately, but same type of people, their kids go to the same school that our employees go to, and so it's a great cultural fit as well. Storage specifically, we thought about storage as how do they achieve their returns, not specifically the storage assets themselves. It's how that translates into earnings and their ability to have repeat earnings. And that's the same way we looked at their FT and their AMA. It's like, what do they do with it more than exactly that specific asset?

That is great detail. Thank you, Mike. And then my follow-up is perhaps for Josh. The 33,000 acres that you guys picked up, I think it was in Sabine in Nackish Parish in Louisiana in the Natchez Fall Zone, can you talk about what you're seeing differently or what you're doing differently that now makes that acreage perspective for you where presumably, since it was sitting there unleased and open, it wasn't perspective for you or other Hainesville players so far?

Hey, Charles. Thanks for the question. You know, I think this really just comes down to, you know, you think about the Southwestern merger, us, you know, being in a position to deliver a tremendous amount of synergies through, you know, this continued operational excellence. I think we continue to establish ourselves in the Hainesville as the best operator in these deep, high-pressure gas wells. And that's exactly what we find in this NFZ, what we refer to as the NFZ extension. We are stepping down deeper into the Haynesville and Bossier. You end up moving down another 2,000 feet in true vertical depth. But we are made to go operate and develop these deep, complex, high-pressure reservoirs. We also just have a ton of subsurface information that we've built up over the last decade and a half of operating the basin. And so that just puts us in a technical and operational advantage to get into these plays early before others are fully valuing it and go in, in this case, acquiring over 100 locations at less than a half a million dollars a location. And so we feel really great about this position that we're building. Our goal is to always look at ROC in a way that maybe today it looks like Tier 2, and we're going to go make it Tier 1. And we see that same type of upside with this opportunity here.

Great. Thank you, Josh.

Thank you. Our next question or comment comes from the line of Matthew Portillo from TPH. Mr. Portillo, your line is now open.

Good morning, all. I just wanted to start out on the Gulf Coast, specifically hearing more from the industry around southeast demand from utilities and the interplay between that demand pull and the startup of LNG facilities, it's really starting to create an interesting dynamic. So I'm curious if you might be able to comment on how y'all are seeing the marketing opportunities that evolve as it relates to utilities. Does this potentially down the road between utilities and LNG create a premium market strategy for you all in terms of pricing or the ability to lay off FT? Just hoping you give us an update on how the market is evolving around the Hainesville, given that you are the largest producer.

Hey, good morning, Matt. This is Dan. So we remain very constructive around demand. We put a page together, I believe it's on page 15 of our deck, looking at demand. And this is really a historic wave of structural demand that's coming at us. You hit many aspects there, power, industrial, LNG. On the power side, we tend to be more conservative than others, but still significant demand and really electrification is growing. Data centers is a big story, but there's also microgrid solutions and just balancing of markets. This is evidence in the last few weeks we've seen record demand prints for the U.S. We hit an all-time high a couple weeks ago of 101 terawatts. So this is growing and real. Again, we are kind of on this conservative side. Industrial, same thing. This is often part of the market that's missed, and it's really in our backyard down in the Hainesville area. the amount of expansions happening at manufacturing sites, and then we're under some confidential conversations with new sites being contemplated for the back half of the decade. So we're excited about that. And then LNG, this is real, and it's real structural. We actually updated our demand, so we're a bit more bullish on LNG. We've seen some accelerated projects happening. We've seen more FIDs taking place. So really the confluence of all these demands coming together right in our backyard in Haynesville and Appalachia really sets up nice for our business. And again, Mike said it earlier, this is a demand pull. So we have a lot of customers coming to see us, being able to offer them different products, structural products, long-term products. That's something the expand footprint allows. And then adding Twin Eagle to this just makes us even integrated and more strong and enhanced. having that coast-to-coast footprint and being able to offer different types of products is going to be real beneficial for us and a differentiator.

Great. And then the second question, just on broader capital allocation trends, obviously that the 2027 strip has come under pressure and maybe some of the smaller privates and smaller publics have been a bit more growth focused in the near term. Just curious, given how large your footprint is across the U.S., being the largest gas producer kind of across the U.S. And as you guys think about capital allocation, if the market does require growth from expand down the road, is it still fair to think about with the slide you guys lay out on slide six? I probably need to see something in a $3.75 to $4 mid-cycle case for growth to return from a larger producer like yourself.

Yeah, you know, the view on mid-cycle prices is absolutely driving how we think about capital allocation back into our business. We think that $350 to $4 range still fits. We think that's the prices that will be required to balance the market ultimately. And so as we think about, you know, heading in towards the end of the decade where you start to see, you know, larger demand growth, Dan just referenced, you know, specifically the LNG power and industrial demand growth that we see. And so if we start to adjust up that view on mid-cycle price, this business is positioned to grow. And it's not just in the depth of our inventory, but it's also the access to infrastructure that the company maintains, specifically across the Haynesville asset. We've talked about the NFC extension earlier. That's adding locations. That creates a real growth option with unconstrained infrastructure. We have our East Texas position that we're building. We are well positioned, especially where we sit on the cost curve, to be out in front. And, again, the supply-demand fundamentals support it. We are in a position to go grow. Thank you.

Thank you. Our next question or comment comes from the line of Doug Leggett from Wolf Research. Mr. Leggett, your line is now open.

Thank you. Good morning, everybody. Thanks for having me on. Guys, I've got two questions, if I may. I'm looking at, I think it's, I'm looking at slide number seven, which is the drilling efficiency, the improvement, obviously pretty impressive. But my question is, at some point, should we expect the improved capital efficiency, if you like, to translate to a lower CapEx number? Because it seems that you're doing, you've got the capacity to do more with less, if you like, given that you haven't changed your production guidance. That's my first. My second one is a follow-up, if you don't mind, on Twin Eagle. The 200 million, obviously, and the synergies, you guys have got a track record, forgive me for this, have been somewhat conservative on your synergies. So I'm curious how you would frame the risk of delivering the 250, and I'm excluding the extra 100 because you already had 500 in your own numbers. And I guess my point is, what's the trajectory and what's the impact on your break-even? Thanks.

Yeah. Hey, good morning, Doug. This is Josh. I'll take the first part of your question. And I think really what you're getting at is, you know, is there an expectation that our maintenance CapEx adjust, given the, you know, some deficiencies that we're seeing. You know, I think at a corporate level, you know, we still see our maintenance CapEx kind of X growth leasehold and growth D&C spend in the East Texas position, you know, still sitting around that, you know, 2.8 level. There has been some headwinds on the CapEx front just primarily through higher fuel costs So that will, you know, serve as a bit of an offset to the efficiency gains. But, you know, I think we continue to unlock ways in which we improve our capital efficiency. You know, of course, the great execution results that we've seen in southwest Appalachia is one example. We also highlight in the slide deck on page 8 what we're, you know, achieving with our enhanced completions in the Haynesville, which, you know, has the ability to increase our per-well production to the tune of about 5% to 10%. And most importantly there, that's really about flattening that year two and year three decline rate. So those things will ultimately translate into our 2027 maintenance capital level. So I do expect as we head into next year on a maintenance capital level that we do see some modest improvements year over year.

Good. Hey, Doug, and let me pick up on your second question. So the first bit was on the 200 million of a quiet EBITDA of Twin Eagle, right? So that's kind of what we call our base EBITDA or their base EBITDA. And they've been consistently delivering that over the last couple of years in a low volatility kind of part of the market. When there's volatility, that number could be one and a half to two X of that particular number. So, you know, but we have kind of guided to the normal volatility type of range. 250 million of synergies. I think you're right. We have a track record of over delivering and being conservative of that. And we'll do everything that we can to squeeze that out and to accelerate delivery of that. We're pretty excited about, you know, what bringing together kind of our supply and financial strength can do with the capabilities and relationships and the infrastructure that Twin Eagle team have. And when we bring that together, what it can unlock. Just then to the break even question, right? So on an excluding dividend basis, which is probably most comparable to others, we're around $2.70 today. The acquisition itself will reduce that break-even by about $0.05 to $0.10. With the synergies, that's about $0.10 to $0.15. And if you include the full $0.750 of M&C delivery, which we shared in our deck, that's around a $0.30 break-even improvement overall. So there you got all the stats.

That's really helpful, guys. Thanks very much indeed.

Thank you. Our next question or comment comes from the line of Scott Hanold from RBC Capital Markets. Mr. Hanold, your line is now open.

Yeah, thank you. My first question is also on Twin Eagle, and I'd be interested to see if you all could compare and contrast the advantages of this more commercial strategy for integration versus owning midstream assets, so more of the asset-heavy kind of opportunities. So can compare and contrast the two, you know, kind of advantages and disadvantages of those strategies?

Maybe I'll start and I'll let Marcel jump in. You know, generally we consider this a capital light opportunity. So we are reaching premium markets and a bigger footprint for a lot less money up front. That generally goes to superior returns. That was part of the thesis of why we wanted to do this particular transaction. After that, it doesn't mean we won't do things like NG3, which is, hey, if we can do midstream deals in partnerships that help us get our gas to better markets and we'll use Twin Eagle to go and market around that, we would do those types of things. Being a midstream company is not what we are. We're not a midstream company. We're not trying to be a midstream company. We think there are a lot of great ones out there. Williams does a great job. Kinder Mortgage does a great job. And so that's a hard place for us to compete.

We prefer to compete on the customer basis and upstream basis but if we have opportunities to unlock our gas to go further and increase our prices we're going to do that anything to add okay okay thanks for that and my follow-up is is um you know just on the western haynesville can you give us a sense of you know what you've seen from you know the the the first well so far and and on the cost side and you know what at some point in time you know do you think this can compete with the greater portfolio Yeah, hey, Scott.

Josh here. You know, we've been really pleased with what we've seen both from an execution and early productivity in the western Hainesville. It's incredibly complex. It's deep. You're over 17,000 feet deep there, and so costs are high. You know, we absolutely see line of sight through improved drilling techniques, better completion designs, not just to drive down cost over time, but also to further enhance well productivity. You know, that play for us, you know, I would just note is truly considered exploratory in nature. There are still a lot of things that, you know, we have to learn. But what we love about it is the upside of growth that it provides for the company. We do have a ways to go, I would say, to further appraise it. We just finished drilling our second well in the play in the second quarter. That was just a vertical test well to further delineate the reservoir, pleased with what we've seen there, and we'll drill a third well later in the year. The first well is on production. That data is now in the public domain. I've been pretty pleased with productivity, high pressures, and so it does have the making. But again, this is something for us that we've put in the appraisal stage, and we really have that luxury simply because of the depth of inventory that we have across our Louisiana position. Over 2,000 locations, roughly 20 years of inventory, and the fact that we own 75% of all Tier 1 inventory really puts us in a position of strength and simply not as dependent upon the Western Haynesville, but again, I would just note this creates a great growth option for the company as we head into the back end of the decade.

Thank you.

Thank you. Our next question or comment comes from the line of John Freeman from Raymond James. Mr. Freeman, your line is open.

Thank you. Good morning. I wanted to follow up, Josh, on some of your comments on the Haynesville where you talked about the success that you all have had on the enhanced completions, which you slow showing the slide deck. And if maybe you can just sort of elaborate a little bit as I believe those, you know, the one trade-off is you do have a little bit longer cycle times, which I think pushed some of those Hainesville tills into next year. But if you can just sort of elaborate on that dynamic.

Yeah, sure. You know, we've really put ourselves in a competitive advantage in the Hainesville. For one, you know, just the scale gives us, you know, additional opportunities to go out and how we source certain components of the supply chain. As an example, our procurement of sand comes at roughly a third of the cost of where our competitors are, and that's really one of the items that's unlocking this greater well We can simply pump larger, more complex completions, and that's what's ultimately delivering the increased production, but most importantly, improvement in returns and lower break-evens. Specifically, you know, on your point on the cycle times, you know, with the bigger fracks, that leads to large, longer pump times, longer drill out periods. And so the knock on impact is it does start pushing out some of our tills. We'll end up with, you know, roughly 10 fewer tills in the year than what we anticipated. You know, there's opportunities to go, you know, accelerate those. But the current environment, you know, really, you know, isn't necessarily needing that incremental gas. So we're happy to allow these turning lines to float into 2027.

And then just my follow-up question, just sticking with the Hainesville, can you discuss what's kind of being evaluated with the Gen X testing that's underway, what your, it looks like the initial results are promising, but just remind us kind of what you're testing Yeah, sure.

You know, one of the things about the Hainesville is you, you know, you end up producing roughly 70% of the EUR in the first couple of years. of production. And so what we're trying to unlock is to create a structural change in how we drain the reservoir and therefore how those longer-term decline rates show up. We simply want to access more of the reservoir from a common wellbore. And so we are experimenting with some various completion techniques that allows us to enhance that stimulated rock volume with the goal of increasing URs, which we believe ultimately will lead to better returns in the asset, lower reinvestment rates, and lower break-evens. And so, you know, we've been pleased with what we've seen to date. That's a little bit too early for us to talk about it. We think there's a real competitive advantage with what we're doing. And so, we'll, you know, hopefully be in a position to talk about that in the year to come.

Great. Thanks, Josh.

Thank you. Our next question or comment comes from the line of Neil Mehta from Goldman Sachs. Mr. Mehta, your line is now open.

Yeah, good morning, Mike, Marcel, team. Mike, thanks for the color around the CEO process. Maybe you can unpack that a little bit more for us. It sounds like, you know, you said six to nine months. We're six months in and it'll get done by the next, by nine months. At this point, you probably have some visibility, Mike. Maybe you talk a little bit about characteristics that the board's looking for? Are you happy with how the process is progressing and any updates you want to provide to the market?

Sure.

Process is progressing well. We're definitely in the back third of this, which is why I'm confident, you know, we'll meet our goals. The person that we're looking for is someone who has a long career in energy. We've talked about how it won't be someone from the outside of the industry. Person will have, you know, success on their resume that we hope to capture and bring to our company. They'll have to believe in the integrated gas story model that we've been working on. I mean, I don't think that's very controversial in what we're trying to do. And so that person will like that and have an opportunity to make that even better. But look, this company is not made on one person. It's made on a team. And I think we spend just as much time working on our team. If you think about the last six months, you know, of course, we have Marcel here, who's been an amazing addition to the team as CFO. We've also had chief risk officer. We've had, now we have a CHRO with us today. And then we've done other stuff that is actually super helpful to the team. This last six months, we've rebuilt our business development team in Houston, Texas. Why is that important? You do not have Twin Eagle without building a phenomenal team to work it. And so that is something of the benefits that we talked about, why we're going to move from Oklahoma City, that team has really outkicked the goal in this one. So it's about team first because there's no perfect CEO, but the CEO will have – they'll definitely have success, and they'll definitely mean energy.

Thanks, Mike. And one of the things I took away from the slide is, you know, growing confidence around the southwest part of the Appalachian business. And just talk about, as you think about where you want to be deploying dollars, Haynesville versus the northeast versus southwest. Is Southwest continuing to move up the pecking order, and if so, why?

Yeah, you know, credit to the team, again, you know, for the work that we've been doing in Southwest app. But, you know, I think it's worth just noting, you know, if you go back to the integration of Chesapeake and Southwestern, really it was the Hainesville, you know, was the focus of that integration. And, of course, we, you know, delivered a tremendous amount of synergies from that asset. But one of the advantages that we have as a company is that being multi-basin, running large development programs, we will drill roughly 200 wells a year. We have plenty of opportunities to test new tools, equipment, designs, and then go export those rapidly across the other business units. And that's exactly what we've seen happen in southwest Appalachia, just leveraging all the learnings that we've been able to put in place from across the company. Specifically on the capital allocation front, this is the power of our portfolio, being across three distinct operating basins that each have their own production characteristics and cost characteristics associated with them. One of the great things about Southwest Appalachia, of course, is you have liquid exposure. And so I've talked earlier about the realized inflation associated with higher fuel costs. Well, that's been more than offset by about 3x of increased EBITDA associated with higher liquid costs in the year. And so as we think about, you know, capital allocation across the business, we're always going to be tuned in to the fundamentals. And as we see, you know, movements in mid-cycle price, as we see movements in cost structures, we're in a position to reallocate capital differently to generate the best return on capital for our shareholders.

Thank you. Our next question or comment comes from the line of Kevin McCurdy from Pickering Energy Partners. The line is open, sir.

Hey, good morning. I wanted to dive into the EBITDA forecast for Twin Eagle a little bit more and how you arrived at that estimate.

When you forecast that $200 million a year, is that driven by kind of historical EBITDA, storage and transport spreads, or is the value really in the origination agreements? and then maybe you could add on what kind of variability you anticipate on that even a number for a good year and a bad year okay thanks for the question kevin so the 200 million is what we have seen quite rateably over the last couple of years and we have used that as the basis right it's a rateable business uh you know so we use this as a basis looking forward as well and a bit earlier i talked about this isn't kind of normal volatility here when there's high volatility events there's upsides to this particular number about one and a half to two x you should think about when there's when there's more volatility so that's the basis the business yes it starts with origination from the customer contracts back into the infrastructure and then back into supply but where the real value is driven off is optimizing the logistics of this business and the twin eagle team is really good at that and that's what drives most of the the value in that business um mike already mentioned that earlier and we shared that there's over 1300 customers within the twin eagle book there are many support agreements both supply as well as infrastructure that support all of that um you know and it has been quite repeatable and the team has proven it by being profitable every single year for the last 15 years right and especially that 200 million dollar number has been the underlying basis for the last couple of years and we feel comfortable with that. And then I talked a bit about the upside or the synergies that we can deliver when we integrate that. And I think on the TwinEagle side, particularly, you know, our financial strength as well as our long-term supply allows them to add, you know, a customer base that they have so far not been able to kind of touch the longer duration type of agreements that they can do. And then, you know, to the expand portfolio, the TwinEagle capability their customer relationships their access to you know kind of coast to coast and into canada will really help to unlock value from the nine b's today or so that we are moving today so that's the way that uh this deal uh you should expect the deal to work great appreciate that answer um and maybe as a follow-up i wanted to ask about the production cadence um it looks like 3Q guidance is kind of flattish, but the implied 4Q is higher.

So I just wanted to confirm your intentions to kind of ramp into the 4Q. And if so, is that really the new run rate or is that just maybe a run rate for the winter months?

Yeah, Kevin. So we do anticipate at this point in time to have a modest ramp of volume into the fourth quarter. This is showing up primarily and across our Appalachia business units where we would anticipate winter-driven demand to start to tighten bases. And so we think, you know, growing production into that demand pool makes a lot of sense for the company. Now, I will say that, you know, if we start to see demand soften, weather's not showing up, you know, I think we do reserve the right. We've proven over time to be active managers of production. That's both with curtailments through shoulder seasons as well as how we think about our turn-in line schedule. So we do expect to be up over 7.6 BCF a day in the fourth quarter, but we give a range for a reason, and that's because we want to maintain flexible with how we deliver volumes and best align those volumes with price. Now, as we think about that run rate coming out of the year, right now, again, our business is built around delivering that 7.5 BCF a day. And you will see us move above and below that, of course, across the year. Again, trying to best align our production with price.

I appreciate that.

Thank you. Our next question or comment comes from the line of Gabe Daoud from Truist. Your line is now open.

Hey, thanks. Morning, Mike and Marcel and everyone. Maybe just a quick one for me on Twin Eagle, maybe a question for Marcel. On the $200 million EBITDA, maybe more of an accounting question, but how should we think about that showing up and expands P&L over time? Is that all just kind of dump into the marketing line or would that impact expand upstream realizations over time?

Yeah, we expect it to show up in accounting in three different lines and we'll work out the details and provide some more clarity kind of as we kind of complete the deal and into the next year, right? So the first line, you would see it in realizations clearly. It's integrated to our business. The second line is marketing as you do. And then the third line in derivatives, we also expect to see some of that. We're working now to plan our integration as well as kind of completion of the transaction. And once we get to that point, we'll be able to help you guide into 2027 as well.

Okay. Okay, great. Thanks, Marcel. And then another quick follow-up on TwinEagle. So you mentioned the magnitude of outperformance during a period of dislocation. So I'd imagine 1Q, Twin Eagle probably put up a number significantly higher than what the quarterly run rate would imply. Is that right? Is it that 1.5 to 2X number that you cited?

I think you'll see when we post their financials that they absolutely outperformed this 200. Got it. Thanks, guys.

Thank you. Our next question or comment comes from the line of Betty Jiang from Barclays. Ms. Jiang, your line is open.

Good morning. I want to start with a macro question first it speaks to the slide 15 I think one of the key investor investor debate these days is just reconciling this longer-term very structural high growth but at the same time there's the near term bearish gas headwinds so longer term if this demand growth materializes is how do you guys think about ultimately filling that demand? How much do you think will be coming from the Hainesville versus Appalachia, which now seemingly will be a gross driver as well, and associate the gas? And then in the near term, you know, given where it's gas prices here, do you think we could see some slowdown in the Hainesville, whether that's coming from Expen or other Hainesville more broadly until there's a stronger gas price signal.

Yeah. Hey, Betty, this is Josh. So I think in the near term, you know, specifically in the Hainesville, I think there's an expectation that you do see some additional production growth in the back half of the year. There's probably half a B to a B a day of additional growth, but I think I would just note that that's really dependent upon the actions of one operator in the basin. You know, clearly the market sits in a modestly oversupplied position right now. You're also, you know, faced with additional Permian egress that's coming on, you know, to the tune of, you know, three and a half or so BCF a day of additional egress by year end. And so that will keep, you know, the markets, I would say, in the oversupply position, you know, through at least probably the first half of 27. I think as we get into the second half, we do anticipate, you know, some structural tightening in the markets, you know, where we would anticipate five and a half to six BCF a day of new demand showing up. And so as we think about that demand, not just through 27, but again, I think you have to think a little bit longer term than that. you know, looking at 19 to 24 BCF a day of incremental demand by the end of the decade, you know, our business is built to be able to, you know, grow into that demand. Specifically, we think about the Hainesville with our deep inventory, the access to infrastructure, now of the business being further enhanced, you know, combining with Twin Eagle, you know, we are very well positioned to meet the needs of customers heading into the end of the decade.

That's helpful. And actually, that ties into my Twin Eagle follow-up. So, some Northeast producers do talk about growing into contracted demand. That's historically not the same stance for expand. With Twin Eagle's marketing capabilities, do you think there's more appetite if these contract opportunities materialize that you will tie your volume growth with that?

Well, absolutely. One of our fundamental principles is we want to facilitate new demand so that we can grow into it. I mean, the value of Twin Eagle is if they can help us identify and put that demand together, then we'll grow into it.

Thank you. Our next question or comment comes from the line of Philip Youngworth from BMO. Mr. Youngworth, your line is open.

Yeah, thanks. i'm curious what the dynamic is across twin eagles producer network and purchase agreements at the wellhead and this part of the strategy at all evolved at all given the combination with expand and and separately just how has customer feedback been so far to the deal uh and when you hear from them what are they most excited about around the combination when we talk to twin eagle guys they think of this as a three-legged stool they have their customers they have credit and they have supply.

We're taking care of both credit and supply. So they're sort of giddy on that because customers always drive transactions and customers want to have surety supply and they want to know people are in business for long term. And so that is, makes them and their group super excited. Other things that they're excited about is term. You know, when you don't have the, they have a pretty short term credit facility by having a long term, they starting to get excited about how do I extend term, what type of customers, and size. So absolutely, team is ready to go.

Okay, great. And then the marketing commercial strategy started around $500 million, $0.20 in MCF. With Twin, we've raised that to $7.50 or $0.30.

Is there any reason you wouldn't look to keep pushing this higher, even if it requires additional inorganic investment? it yeah no we'll uh we'll continue to push that higher and look for opportunities right so the way that we have uh now structured that our original 500 about half of that we were expecting to come from new demand so primarily lng and the rest of our kind of uh you know kind of premium demand markets as well as volatility management clearly with the twin eagle acquisition we we get some of that we deliver synergies and accelerate what we had identified but we think we can do now quicker and then we still have our lng that comes on top of this that's the 750 and and as mike started uh you know kind of saying if we want to you know we are the leading integrated gas company and so we continue to push into that customer end and see where we can identify more value on that side and we'll we'll prefer to do that capital light as we uh as we have already said thank you thank you our next question or comment comes from the line of michael ciala from stevens Mr. Ciali, your line is open.

Yeah, good morning. Your leasing, you mentioned, came in higher than expected. I just want to see what the opportunity set looks like there going forward. And if you maintain the pace of leasing activity that you had in the first half, is it fair to assume that you might be pushing toward the high end of your capital CapEx guidance for the year?

Yeah. Hey, Mike, yeah, QT was definitely, I think, the highlight for us. You know, I think we have been working very, very hard to bring forward some interesting opportunities for the company, you know, case in point, the 3,000 acres that we acquired in the core of Bradford County. That's something we've been working for, you know, well over two years to bring to fruition. So, you know, we have a very capable and active land organization working in concert with those subsurface teams to turn up new opportunities. And so we do remain heavily focused on identifying new opportunities. They're simply hard to predict. And so, you know, we do anticipate, you know, across the second half of the year that spending will wind down a little bit. But if there's good opportunities, the company is well-positioned financially to go action these creative transactions.

Gotcha. And, Mike, last quarter you said on the marketing side you thought you could stack a lot of singles and doubles together. and you didn't really need to do a large deal, but you did one, obviously, with Twin Eagle here. How did those opportunities change now? Are they still part of the plan, or do those go away with the Twin Eagle deal?

No, we're still chasing those transactions. We'll end up stacking those singles and doubles, and that will continue. We'll just have a bigger footprint to put them across. And so you'll see us have plenty of activity in both sort of our original strategy as well as twin-angle strategy.

Very good. Thank you.

Thank you. Our next question or comment comes from the line of John Annis from Texas Capital. Mr. Annis, your line is now open.

Good morning, all, and thanks for taking my questions. For my first one, with pro forma storage increasing to 49 BCF, how much of that capacity is currently committed to existing customer arrangements versus available for optimization? And is the opportunity more about seasonal spreads, physical reliability, or creating structured products for customers?

Well, sure. So we're not prepared to disclose, you know, exactly the customer relationships we have in storage. You know, we think about it more holistically, and when we back up, we like to think about margin across the value chain, particularly around seasonal opportunities. Of course, they add gas in low-price environments, and then in the winter, they take it out. So you should think about, like, this cycle.

Makes sense. And then maybe taking a step back, does the expanded marketing and storage platform increase the value of maintaining spare productive capacity in the upstream business? Just, I guess, in other words, does the integrated platform make you more willing to build productive capacity, curtail or grow production depending on market signals than you were on a standalone basis?

Yeah, John, we actually love that concept. Of course, we've been proponents of actively managing production. And I think as we get closer to customers, have better insights on supply and demand trends, that just puts us in a stronger position to actively manage production, you know, both up and down.

Thank you. Ladies and gentlemen, this concludes our Q&A session. At this time, I would like to turn the conference back over to Mr. Mike Wistridge for any closing remarks.

Thank you, everyone, for joining our call. We're excited about this transaction, and we're excited about our team that we're building here. We expect to have a big quarter next quarter, so please stay tuned. Thank you for your time.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.