Expand Energy Corp. (EXE): Management Meeting Highlights Focus on Self-Help Initiatives and Potential for Opportunistic Buybacks Amid Share Softness

Research evidence excerpt

Expand Energy Corp. (EXE): Management Meeting Highlights Focus on Self-Help Initiatives and Potential for Opportunistic Buybacks Amid Share Softness

ent target, management noted EXE’s base business will develop more natural

downside protection given the improved operating margin.

Capital Allocation Outlook. With an outlook for strong FCF generation in a mid-cycle

pricing environment (~$3.50-$4.00/MMBtu Henry Hub) and following a period of

deleveraging, management highlighted an expectation to allocate incremental excess

FCF towards share repurchases given what they view as the compelling valuation of the

stock at current levels. Given EXE’s high bar for upstream asset acquisitions as a result of

the durability and quality of EXE’s existing inventory, management noted that any

potential upstream natural gas acquisition would have to provide material synergies and

compete with the returns of EXE’s existing business. On non-upstream M&A,

management highlighted that EXE is more focused on opportunities with limited capital

intensity and noted that the company will evaluate investments that help facilitate

demand creation and unlock greater value of EXE’s existing upstream assets. The

company remains focused on accessing premium markets to drive margin improvements

and would evaluate volume reallocation relative to production growth for pipeline

projects that offer beneficial firm takeaway agreements. Management highlighted the

benefits of EXE’s equity commitments to NG3 (30% ownership) that facilitated the

forward progress of the project, and that similarly, EXE would evaluate equity ownership

in a power, midstream, or LNG project if the investment would provide competitive

returns and would facilitate incremental natural gas demand.

Macro Outlook.