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EXPAND ENERGY Corp (EXE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered strong operational and financial execution: adjusted EBITDAX $1.176B, adjusted net income $265M ($1.10 per share), net cash from operations $1.322B, and net production ~7.20 Bcfe/d (92% gas) .
  • Versus Wall Street, Q2 EPS of $1.10 was a slight miss vs S&P consensus $1.15*, while revenue and EBITDA materially beat (Revenue: $2.68B actual vs $2.07B consensus; EBITDA: $2.01B actual vs $1.14B consensus). The beats were driven by stronger volumes, improved realizations, and efficiency synergies; EPS miss reflects hedging/derivative impacts and tax mix .
  • Guidance updated: D&C capital cut by ~$100M, total 2025 capex now ~$2.85–$3.00B; annual synergies raised to ~$500M in 2025 and ~$600M by 2026; net debt paydown doubled to $1.0B; declared base dividend $0.575 and variable dividend $0.89 for September 2025 .
  • Catalysts: accelerated deleveraging, higher synergy capture, record drilling productivity supported by AI/ML, and strategic positioning to supply LNG and power markets near the Haynesville corridor .

What Went Well and What Went Wrong

What Went Well

  • Raised synergy outlook and execution: company increased 2025 synergies to ~$500M and 2026 to ~$600M; drivers include Haynesville D&C efficiency, sand mine utilization, and non-comp G&A optimization .
  • Record drilling performance and AI/ML deployment: highest average drilled footage/day across all three business units in Q2; management highlighted proprietary ML tools (DrillOpsIQ, SEER) contributing to real-time optimization and faster cycle times .
  • Capital discipline and returns: reduced D&C capex guidance by ~$100M; returned $448M in Q2 (base dividend $137M, variable dividend $211M, buybacks $100M); increased 2025 net debt reduction to $1.0B .

“Simply put, we're spending less while producing more, the very definition of capital-efficient operations.” — Nick Dell’Osso, CEO .

What Went Wrong

  • Basis and differential pressure: Q2 saw challenging basis in Haynesville and Appalachia; near-term uplift limited as NG3 ramps with offsetting capacity costs, though medium-term realizations expected to improve with LNG demand .
  • EPS under consensus despite revenue/EBITDA beats: the $0.05 EPS miss vs S&P likely reflects derivative and tax dynamics (large unrealized derivative gains and non-linear cash tax effects) impacting GAAP vs adjusted profiles* .
  • Elevated GP&T and DD&A: Q2 GP&T was $563M and DD&A $769M; per-Mcfe GP&T and DD&A underline cost intensity even amid efficiency gains .

Financial Results

GAAP and Non-GAAP Performance vs Prior Quarters

MetricQ4 2024Q1 2025Q2 2025
Total revenues and other ($USD Millions)$2,001 $2,196 $3,690
Natural gas, oil and NGL revenues ($USD Millions)$1,595 $2,300 $2,021
Marketing revenues ($USD Millions)$649 $910 $788
Derivative gains/(losses) ($USD Millions)($245) ($1,014) $877
Net income ($USD Millions)($399) ($249) $968
Diluted EPS ($USD)($1.72) ($1.06) $4.02
Net cash from operations ($USD Millions)$382 $1,096 $1,322
Cash capex ($USD Millions)$536 $563 $657
Free cash flow ($USD Millions)($154) $533 $665
Adjusted net income ($USD Millions)$131 $487 $265
Adjusted diluted EPS ($USD)$0.55 $2.02 $1.10
Adjusted EBITDAX ($USD Millions)$964 $1,395 $1,176

Estimate Comparison (S&P Global)

MetricQ1 2025Q2 2025
Primary EPS Consensus Mean (estimate → actual)1.87* → 2.02*1.15* → 1.10*
Revenue Consensus Mean ($USD) (estimate → actual)2,242.7M* → 3,210.0M*2,066.98M* → 2,676.0M*
EBITDA Consensus Mean ($USD) (estimate → actual)1,298.46M* → 470.0M*1,136.20M* → 2,011.0M*
Revenue - # of Estimates9*10*
Primary EPS - # of Estimates22*20*

Values retrieved from S&P Global.*

Margins

MetricQ1 2025Q2 2025
EBITDA Margin %14.64%*75.15%*
EBIT Margin %-7.51%*46.41%*
Net Income Margin %-7.76%*36.17%*

Values retrieved from S&P Global.*

Segment Production and D&C Capex

Segment KPIQ4 2024Q1 2025Q2 2025
Haynesville net production (MMcfe/d)2,338 2,617 2,978
Northeast Appalachia net production (MMcfe/d)2,425 2,668 2,662
Southwest Appalachia net production (MMcfe/d)1,649 1,503 1,562
Total net production (MMcfe/d)6,412 6,788 7,202
Haynesville D&C capex ($USD Millions)$300 $286 $348
Northeast Appalachia D&C capex ($USD Millions)$97 $103 $117
Southwest Appalachia D&C capex ($USD Millions)$103 $165 $138

Additional KPIs

KPIQ4 2024Q1 2025Q2 2025
Adjusted Free Cash Flow ($USD Millions)$73 $577 $692
Net Debt ($USD Millions)$5,369 $4,901 $4,404
Avg realized price ($/Mcfe, incl. realized derivatives)$3.11 $3.69 $3.14
Natural gas mix (%)91% 92% 92%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total capital expenditures ($USD Billions)2025E~$2.7B base + ~$0.3B productive capacity (total ~$3.0B) $2.85–$3.00B total; base capital $2.575–$2.725B; productive capacity up to $275M Lowered base D&C by ~$100M; reduced productive capacity by ~$25M (upper bound)
Annual synergies2025E / 2026E~$400M (2025); $500M (2026) ~$500M (2025); ~$600M (2026) Raised
Net debt reductionFY 2025$500M $1.0B Raised
Dividend frameworkQ2 2025 / Sept 2025Base dividend $0.575/sh Base $0.575/sh; Variable $0.89/sh; total $1.465/sh payable Sept 4, 2025 (record Aug 14, 2025) Added variable dividend
Production outlook2025E~7.1 Bcfe/d avg Maintained ~7.1 Bcfe/d avg; exit capacity ~7.2 Bcfe/d; optional growth to ~7.5 Bcfe/d in 2026 Maintained with added capacity detail
Operating cost ranges2025EN/AUpdated per-Mcfe ranges: Production $0.23; GP&T $0.90–$1.00; G&A $0.07–$0.09; DD&A $1.05–$1.15 Updated detail
Cash income taxes2025EN/ARevised outlook with OBBB: $50–$100M at $3.50 HH; book tax 22–24% (30%/70% current/deferred) Lower vs prior framework

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
SynergiesTarget lifted to ~$400M (2025) at Q4; on track in Q1 Increased to ~$500M (2025) and ~$600M (2026) Improving
Drilling efficiency / AIIntegration focus; cycle-time improvements noted Record footage/day across basins; ML tools (DrillOpsIQ, SEER) highlighted Accelerating
Basis differentialsPersistent Appalachia constraints Q2 basis headwinds; near-term NG3 impact neutral; medium-term uplift with LNG Mixed near-term; constructive medium-term
Capital allocationBuild productive capacity in 2H25 D&C reduced ~$100M; maintain capacity; flexible to pivot Leaner, more optional
DeleveragingIG issuance and $500M 2025 target Net debt paydown doubled to $1.0B More aggressive
LNG/power commercializationIntent to supply premium markets Active discussions; aim to reduce cash flow volatility via structured contracts Advancing
Taxes (OBBB)N/AOBBB lowers cash taxes; 70% deferred, 22–24% book rate guidance More favorable

Management Commentary

  • “We now expect to recognize approximately a 50% increase to annual synergies, realizing $500 million and $600 million in 2025 and 2026, respectively… approximately $425 million more free cash flow in 2025” — Nick Dell’Osso, CEO .
  • “We're spending less while producing more… reducing our 2025 capital investments by approximately $100 million while maintaining production” — Nick Dell’Osso .
  • “No real urgency [on long-term contracts]… we’re looking at selling gas domestically and internationally in all kinds of different forms… risk-reward to protect downside and participate in upside” — Dan Turco, EVP Marketing & Commercial .
  • “Weighted average floor $3.75 and ceiling $4.77 [for new collars]… programmatic but opportunistic on volatility spikes” — Mohit Singh, CFO .
  • “OBBB restores incentives for domestic capital investment… duration of tax savings is fairly long” — Mohit Singh .

Q&A Highlights

  • Contracting strategy: EXE is pursuing structured LNG/power agreements to lower cash flow volatility while retaining upside; no urgency to sign, considering direct, tolling, and partnership models .
  • Balance sheet and returns: Company favors deleveraging at good prices to reduce equity volatility and enhance through-cycle payouts; net debt reduction increased to $1.0B .
  • Drilling productivity and costs: Footage/day up materially; Haynesville well costs around ~$1,300 per foot, trending ~$1,200 for formation wells; improvements aided by proprietary sand sourcing .
  • Basis outlook: Q2 basis headwinds acknowledged; NG3 near-term impact neutral, medium-term realizations expected to improve with LNG capacity and seasonal dynamics .
  • Tax and hedging: OBBB reduces cash taxes; hedging program adds collars above breakeven while preserving upside .

Estimates Context

  • Q2 EPS of $1.10 was modestly below S&P consensus $1.15* (miss), while revenue ($2.676B actual vs $2.067B estimate) and EBITDA ($2.011B vs $1.136B) were significant beats*, implying stronger operations and realizations offset by EPS mix and tax effects* .
  • Q1 set a strong bar with EPS, revenue beats, and margin compression from derivatives; estimate revisions likely reflect improved operational cadence and synergy capture, plus updated tax outlook post-OBBB*.
  • Forward quarters should see estimate recalibration for lower base D&C capex, higher synergies, and deleveraging, while consensus needs to incorporate updated basis and contract mix trajectory*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat-miss mix: Revenue and EBITDA beat materially, but EPS slightly missed consensus; operational momentum remains strong .
  • Enhanced capital discipline: ~$100M D&C cut and flexible productive capacity maintain ~7.1 Bcfe/d while preserving 2026 optionality to ~7.5 Bcfe/d .
  • Returns and balance sheet: $448M returned in Q2; full-year net debt paydown raised to $1.0B, increasing capacity to defend payouts through-cycle .
  • Structural advantages: Largest U.S. gas producer with advantaged Haynesville deliverability to LNG corridor; multi-basin optionality reduces volatility .
  • Technology edge: Proprietary AI/ML tools delivering record drilling KPIs, supporting sustained cost and cycle-time improvements .
  • Tax tailwinds: OBBB materially lowers 2025 cash taxes and improves estimate visibility; expect non-linear tax effects across price scenarios .
  • Trading implications: Near-term narrative favors deleveraging and synergy upside; watch for contract announcements (LNG/power), basis normalization, and hedging adds on volatility spikes to drive re-rating .