Despite a $114 million or 85 cent a share loss in the third quarter, Nick Dell’Osso, Expand Energy’s President and Chief Executive Officer called it a strong quarter.
Nearly a month after Chesapeake Energy’s merger with Southwest Energy was completed, the company released its third quarter earnings report showing $422 million in net cash from operating activities, adjusted net income of $22 million or 16 cents a share and adjusted EBITDAX of $365 million.
“Our strong third quarter results, recent Investment Grade rating and preliminary 2025 outlook demonstrate the power of our advantaged portfolio and resilient financial foundation,” said Dell’Osso, Expand Energy’s President and Chief Executive Officer.
“Our integration efforts are already delivering, allowing us to raise our annual synergy expectations by 25% to $500 million, as we drive to lower our breakeven costs and more efficiently reach markets in need. As the largest domestic producer of natural gas, and a top producer globally, we are built to answer the call for affordable, reliable, lower carbon energy and expand opportunity for all stakeholders.”
In the third quarter, legacy Chesapeake operated an average of seven rigs to drill 30 wells and turned seven wells in line, resulting in net production of approximately 2.65 bcfe per day (100% natural gas). Additionally, the company built an inventory of 18 drilled but uncompleted (“DUCs”) wells and 12 deferred turn in lines (“TILs”).
Expand Energy continues to execute its previously disclosed plan to defer completions and new TILs. As of October 1, 2024, the combined company had 58 DUCs, excluding working inventory, and 58 deferred TILs. The company stated it intends to prudently activate production as market conditions warrant.
Expand Energy is currently running 12 rigs (8 in Haynesville, 2 in Northeast Appalachia, and 2 in Southwest Appalachia) and 6 completion crews (3 in Haynesville, 2 in Northeast Appalachia, and 1 in Southwest Appalachia). At current market conditions, the company expects to drop two rigs in the first quarter of 2025.
Annual Synergy Outlook and Preliminary 2025 Capital & Operating Program
Expand Energy increased its expected annual synergy outlook by $100 million to $500 million. The company expects to achieve approximately $225 million in synergies in 2025 and to achieve the full $500 million in annual synergies by year end 2027.
In 2025, at current market conditions, the company expects to run 10 to 12 rigs and invest approximately $2.7 billion yielding an estimated daily production of approximately 7 bcfe per day. Expand Energy will provide complete guidance in early 2025.
Shareholder Returns Update
Expand Energy plans to pay its quarterly base dividend of $0.575 per share on December 4, 2024 to shareholders of record at the close of business on November 14, 2024.
The company announced its enhanced capital return framework which is designed to more effectively return cash to shareholders and reduce net debt. The plan is expected to go into effect January 1, 2025, and prioritizes the base dividend of $2.30 per share and $500 million of annual net debt reduction. Once both have been funded, it is anticipated that 75% of remaining free cash flow be distributed as market conditions warrant, between share repurchases and additional dividend payments. The remaining free cash flow would be maintained on the balance sheet.
In conjunction with the enhanced framework, Expand Energy’s Board of Directors approved a $1 billion repurchase authorization.