Expand Energy is on track to increase US natgas production to meet the growing demand
Expand Energy, previously known as Chesapeake Energy, and the largest natural gas producer in America, announced on Thursday that it is on track to increase output by over 5% from the levels expected in 2020, as long as the market conditions allow for such an action.
The CEO of Expand, Nick Dell'Osso, told analysts on the company's earnings call for the fourth-quarter that the company was ready to increase output from 6.4 billion cubic foot equivalents per day (bcfed), in the fourth quarter 2024 to 7.1 bcfed by 2025 or 7.5 bcfed by 2026 depending on the market conditions.
Although Expand's fourth-quarter earnings exceeded estimates, its shares fell by about 3% on Thursday at noon to a low of $99.17.
This decline in share prices was however smaller than other U.S. Energy firms, such as the 8% decline in shares at APA, and the 5% declines in Comstock Resources, and Range Resources.
Expand stated in a earnings release that the company expects to invest $2.7 billion and run 12 rigs in order to reach 7.1 Bcfed in production by 2025.
The company said that it also intends to increase its production capacity from 7.2 billion bcfed by the end of 2025, to an average of 7.5 billion bcfed per year in 2026 if market conditions allow.
Dell'Osso stated that "since we won't be implementing this additional capacity until mid-year, we'll have time to monitor the market. We'll also have the flexibility to make adjustments as needed." "We are prepared to increase or decrease capital depending on the conditions."
The gas market had a tough year in 2024, due to the small increase in gas exports as liquefied gas (LNG). However, 2025 and 2026 will be better years as several LNG plants that are under construction come into service.
Dell'Osso, who spoke on the call, said that there is more than 11 billion cubic feet of LNG capacity being built. The domestic power market will continue to grow due to the support data centers are able to provide and the rising demand from consumers.
Dell'Osso stated that "we have the assets, balance sheets and capital-efficient operations to meet this new demand."
Gas prices on the spot at U.S. Henry hub benchmark
U.S. Energy Information Administration's (EIA) projections showed that prices would rise to $3.79/mmBtu by 2025, and to $4.16/mmBtu by 2026. Drillers increased output from 103.1/bcfd to 104.6/bcfd and 107.3/bcfd respectively in 2025, and up from 103.1/bcfd and a record of 103.6 bcfd for 2023.
Analysts at Piper Sandler wrote in a report that Expand is "one of the few publicly-traded operators who is well-positioned to meet the increased demand for LNG deliveries along the Gulf Coast". The response was a bit earlier than expected but the demand is also higher. (Reporting and Editing by Marguerita Chôy)
(source: Reuters)
