# EXPAND ENERGY Corp (EXE) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from EXPAND ENERGY Corp's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/895126/000089512625000021/exe-20241231.htm
Accession: 0000895126-25-000021
Filing date: 2025-02-26
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/EXE/
All MD&A years: /company/EXE/mda/
Previous year: /company/EXE/mda/fy2023/ (FY 2023)
Next year: /company/EXE/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, liquidity, results of operations and certain other factors that may affect our future results. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future and should be read in conjunction with Item 8 of Part II of this report.

Introduction

On October 1, 2024, we completed the Southwestern Merger, creating a premier energy company that we believe is underpinned by a leading natural gas portfolio adjacent to the highest demand markets, premium inventory, a resilient financial foundation and an investment grade balance sheet. We believe that this new company is uniquely positioned to deliver affordable, lower-carbon energy to meet growing domestic and international demand while creating sustainable value for stakeholders. In conjunction with the closing of the Southwestern Merger, Chesapeake Energy Corporation changed its name to Expand Energy Corporation.

Expand Energy is the largest independent natural gas producer in the U.S., based on net daily production, and is focused on responsibly developing an abundant supply of natural gas, oil and NGL to expand energy access for all. Our operations are located in Louisiana in the Haynesville and Bossier Shales (“Haynesville”), in Pennsylvania in the Marcellus Shale (“Northeast Appalachia”) and in West Virginia and Ohio in the Marcellus and Utica Shales (“Southwest Appalachia”).

Our strategy is to create shareholder value through the responsible development of our significant resource plays while continuing to be a leading provider of natural gas to markets in need. We continue to focus on improving margins through operating efficiencies and financial discipline and improving our ESG performance. To accomplish these goals, we intend to allocate our human resources and capital expenditures to projects we believe offer the highest cash return on capital invested, to deploy leading drilling and completion technology throughout our portfolio, and to take advantage of acquisition and divestiture opportunities to strengthen our portfolio. We also intend to continue to dedicate capital to projects designed to reduce the environmental impact of our production activities.

Additionally, we aim to be conscientious in our efforts and how they will shape our approach to sustainability for the future and have established the following goals:

•Net zero (Scope 1 and 2) greenhouse gas emissions by 2035.

•Maintain 100% responsibly sourced gas (RSG) certification across our portfolio.

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Recent Developments

Southwestern Merger

On January 10, 2024, Chesapeake and Southwestern entered into an all-stock agreement and plan of merger (the “Merger Agreement”). Southwestern was an independent energy company engaged in development, exploration and production activities, including related marketing activities, within its operating areas in the Appalachia and Haynesville shale plays. Our Board of Directors and the Board of Directors of Southwestern both approved the Merger Agreement. At separate special meetings each held on June 18, 2024, Chesapeake’s stockholders approved the issuance of Chesapeake’s common stock to the stockholders of Southwestern in connection with the Southwestern Merger, and Southwestern’s stockholders approved the Merger Agreement.

On October 1, 2024, the Southwestern Merger was completed, and we issued approximately 95.7 million shares of our common stock to Southwestern’s shareholders in connection with the Merger Agreement. Under the terms of the Merger Agreement, subject to certain exceptions, each share of Southwestern common stock was converted into the right to receive 0.0867 of a share of the Company’s common stock. Based on the closing price of our common stock, the total value of such shares of our common stock issued to Southwestern’s shareholders was approximately $7.9 billion. See Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Investment Grade Rating

On October 1, 2024, we received an investment grade rating from S&P Global Ratings (“S&P”). S&P assigned an issuer-level rating of ‘BBB-’ on our unsecured debt and raised our issuer credit rating to ‘BBB-’, with a stable outlook. Additionally, on October 2, 2024, we received an investment grade rating from Fitch Ratings (“Fitch”). Fitch affirmed our revolver credit rating at ‘BBB-’ and upgraded the rating on our senior notes to ‘BBB-’, with a stable outlook. As a result of these investment grade ratings and the satisfaction of certain other conditions, certain restrictive covenants on our credit facility fell away and became more permissive. The leverage ratio and current ratio financial covenants and PV-9 Coverage Ratio are no longer effective, and the Company is required to maintain compliance with a total indebtedness to capitalization ratio, which is the ratio of the Company’s total indebtedness to the sum of total indebtedness plus stockholders’ equity, not to exceed 65%. See Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Issuance of Senior Notes, Senior Notes Tender Offer and Redemption of Debt

In December 2024, we completed our underwritten public offering of $750 million aggregate principal amount of our 5.70% Senior Notes due 2035 (the “2035 Notes”). Additionally, we announced an offer to purchase for cash, any and all of our outstanding 2026 Notes (the “Tender Offer”). Upon expiration of the Tender Offer, approximately 91%, or $453 million, of the 2026 Notes were validly tendered and not validly withdrawn. In a separate transaction during the fourth quarter of 2024, we redeemed all of the $304 million aggregate principal of the SWN 2028 Notes for approximately $312 million, which included an $8 million premium to call the notes.

Additionally, on January 23, 2025, the $389 million aggregate principal of the SWN 2025 Notes (as defined below) was repaid and terminated with cash on hand and borrowings on the Credit Facility. See Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Repurchase Program and Enhanced Returns Framework

In October 2024, our Board of Directors authorized the Company to repurchase up to $1.0 billion, in aggregate, of the Company’s common stock and/or warrants. Additionally, we also announced our enhanced capital returns framework which is designed to more effectively return cash to shareholders and reduce net debt. The plan became effective January 1, 2025, and prioritizes the base dividend of $2.30 per share and a targeted $500 million of annual net debt reduction in 2025, which target will be redetermined annually. Once both have been funded, it is anticipated that 75% of remaining free cash flow will 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.

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Divestitures

On January 17, 2023, we entered into an agreement to sell a portion of our Eagle Ford assets to WildFire Energy I LLC for approximately $1.425 billion, subject to post-closing adjustments. This transaction closed on March 20, 2023 (with an effective date of October 1, 2022) and resulted in the recognition of a gain of approximately $337 million.

On February 17, 2023, we entered into an agreement to sell a portion of our remaining Eagle Ford assets to INEOS Energy for approximately $1.4 billion, subject to post-closing adjustments. This transaction closed on April 28, 2023 (with an effective date of October 1, 2022) and resulted in the recognition of a gain of approximately $470 million.

On August 11, 2023, we entered into an agreement to sell the final portion of our remaining Eagle Ford assets to SilverBow Resources, Inc. (“SilverBow”) for approximately $700 million, subject to post-closing adjustments. This transaction closed on November 30, 2023 (with an effective date of February 1, 2023) and resulted in the recognition of a gain of approximately $140 million. Due to the satisfaction of certain commodity price triggers, we received an additional $25 million cash consideration during the fourth quarter of 2024.

LNG Agreement

On February 13, 2024, we announced our entrance into an LNG export deal that includes executed Sales and Purchase Agreements (“SPA”) for long-term liquefaction offtake. Under the SPAs, we will purchase approximately 0.5 million tonnes of LNG per annum from Delfin LNG LLC at a Henry Hub price with a contract targeted start date in 2028, then deliver to Gunvor Group Ltd on a free on board basis with the sales price linked to the Japan Korea Market for a period of 20 years.

Investments - Momentum Sustainable Ventures LLC

During the fourth quarter of 2022, we entered into an agreement with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture project, which will gather and treat natural gas produced in the Haynesville Shale for re-delivery to Gulf Coast markets, including LNG export. The pipeline is expected to have an initial capacity of 1.7 Bcf/d expandable to 2.2 Bcf/d. The carbon capture portion of the project anticipates capturing approximately 1.0 million tons per annum of CO2 and delivering the CO2 to ExxonMobil Low Carbon Solutions Onshore Storage, LLC for additional transportation and storage. The natural gas gathering pipeline is projected for a potential in-service date in the fourth quarter of 2025. Through the end of 2024, we have made total capital contributions of $296 million to the project.

Economic and Market Conditions

Geopolitical risk and policy uncertainty continue to drive volatility in natural gas, oil and NGL prices, while macroeconomic headwinds in key consuming countries could impact global growth prospects, potentially affecting supply and demand for energy commodities. Domestically, the natural gas market balance has tightened, driven by increasing demand from new LNG export facilities, reduced industry activity levels, and a recent period of colder than average temperatures, providing support for prices in 2025 and 2026. Our future estimated cash flow is partially protected from commodity price volatility due to our current hedge positions that provide a floor price on over half of our projected gas volumes through the end of 2025 with significant upside participation via costless collars. For the foreseeable future, we believe our operational flexibility, cost structure and liquidity position will enable us to successfully navigate continued price volatility.

Rig count reductions across the lower 48 states of the United States led to service cost deflation in 2024 resulting in decreased operating and capital cost. Higher commodity prices in 2025 could lead to increased rig activity across the industry resulting in modest levels of inflation. We continue to monitor these situations, including the recently enacted tariff on steel by the current Presidential Administration, and assess their impact on our business, including business partners and customers. As a result of the Southwestern Merger, we assumed Southwestern’s oilfield service business that will allow for some vertical integration of our exploration and production operations, which may help to control costs and secure inputs for our operations. For additional discussion regarding risk associated with price volatility and economic uncertainty, see Item 1A Risk Factors in this report.

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Liquidity and Capital Resources

Liquidity Overview

Our primary sources of capital resources and liquidity are internally generated cash flows from operations and borrowings under our Credit Facility, and our primary uses of cash are for the development of our natural gas and oil properties, acquisitions of additional natural gas and oil properties and return of value to stockholders through dividends and equity repurchases. We believe our cash flow from operations, including from the acquired Southwestern business, cash on hand and unused borrowing capacity under the Credit Facility, as discussed below, will provide sufficient liquidity during the next 12 months and the foreseeable future. As of December 31, 2024, we had $2.8 billion of liquidity available, including $317 million of cash on hand and $2.5 billion of aggregate unused borrowing capacity available under the Credit Facility. As of December 31, 2024, we had no outstanding borrowings under our Credit Facility.

Further, we may from time to time seek to retire, refinance or amend some or all of our outstanding debt or debt agreements through exchanges, open market purchases, privately negotiated transactions, tender offers or otherwise. Such transactions, if any, and the terms thereof, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in such financing transactions may be material. See Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion of our debt obligations, including principal and carrying amounts of our senior notes.

Dividends

On February 26, 2025, we declared a base quarterly dividend payable of $0.575 per share, which will be paid on March 27, 2025 to stockholders of record at the close of business on March 11, 2025. See Note 10 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of the Board and will depend on the Company’s financial results, cash requirements, future prospects and other relevant factors. The Company’s ability to pay dividends to its stockholders is restricted by (i) Oklahoma corporate law, (ii) its Certificate of Incorporation, (iii) the terms and provisions of the Credit Agreement governing the Credit Facility and (iv) the terms and provisions of the indentures governing its 5.500% Senior Notes due 2026, 5.875% Senior Notes due 2029, 6.750% Senior Notes due 2029, and 5.70% Senior Notes due 2035 as well as the senior notes assumed from Southwestern, including the 5.375% Senior Notes due 2029, 5.375% Senior Notes due 2030 and 4.750% Senior Notes due 2032.

Derivative and Hedging Activities

Our results of operations and cash flows are impacted by changes in market prices for natural gas, oil and NGL. We enter into various derivative instruments to mitigate a portion of our exposure to commodity price declines, but these transactions may also limit our cash flows in periods of rising commodity prices. Our natural gas, oil and NGL derivative activities, when combined with our sales of natural gas, oil and NGL, allow us to better predict the total revenue we expect to receive. See Item 7A Quantitative and Qualitative Disclosures About Market Risk included in Part II of this report for further discussion on the impact of commodity price risk on our financial position.

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Contractual Obligations and Off-Balance Sheet Arrangements

As of December 31, 2024, our material contractual obligations include repayment of senior notes, derivative obligations, asset retirement obligations, lease obligations, undrawn letters of credit and various other commitments we enter into in the ordinary course of business that could result in future cash obligations. In addition, we have contractual commitments with midstream companies and pipeline carriers for future gathering, processing and transportation of natural gas to move certain of our production to market. The estimated gross undiscounted future commitments under these agreements were approximately $9.9 billion as of December 31, 2024. As discussed above, we believe our existing sources of liquidity will be sufficient to fund our near and long-term contractual obligations. See Notes 4, 5, 7, 13 and 16 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Credit Facility

On December 9, 2022, we entered into the Credit Agreement, as amended by the Initial Credit Agreement Amendment and the Investment Grade Credit Agreement Amendment, maturing in December 2027. The Credit Facility provides for aggregate commitments of $2.5 billion, with a $500 million sublimit available for the issuance of letters of credit and a $50 million sublimit available for swingline loans. As of December 31, 2024, we had approximately $2.5 billion available for borrowings under the Credit Facility.

Borrowings under the Credit Agreement may be alternate base rate loans or term SOFR loans, at the Company’s election. On October 1, 2024, we received an investment grade rating from S&P Global Ratings (“S&P”). S&P assigned an issuer-level rating of ‘BBB-’ on our unsecured debt and raised our issuer credit rating to ‘BBB-’, with a stable outlook. Additionally, on October 2, 2024, we received an investment grade rating from Fitch Ratings (“Fitch”). Fitch affirmed our revolver credit rating at ‘BBB-’ and upgraded the rating on our senior notes to ‘BBB-’, with a stable outlook. As a result of these investment grade ratings and the satisfaction of certain other conditions, (i) the Pre-IG Credit Agreement was automatically amended by the Investment Grade Credit Agreement Amendment, (ii) all liens and guarantees previously provided by the Company and its subsidiaries in connection with the Pre-IG Credit Agreement were released and (iii) all guarantees previously provided in connection with the Company’s senior notes were released. Such Investment Grade Credit Agreement Amendment, among other things, removed the application of the borrowing base provided for in the Pre-IG Credit Agreement and modified the pricing and covenants as discussed in Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Assumption of Southwestern’s Senior Notes and Southwestern Credit Facility Extinguishment

On October 1, 2024, the Southwestern Merger was completed, and we assumed approximately $3.7 billion of Southwestern’s senior notes. On October 1, 2024, Southwestern’s existing credit facility was terminated, with all loan amounts and other obligations outstanding thereunder repaid in full and all commitments thereunder extinguished, for approximately $585 million, which included all outstanding borrowings, accrued interest and transaction fees. See Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Capital Expenditures

For the year ending December 31, 2025, we currently expect to complete and turn in line 240 to 270 gross wells utilizing approximately 11 to 15 rigs and plan to invest between approximately $2.9 – $3.1 billion in capital expenditures. We currently plan to fund our 2025 capital program through cash on hand, expected cash flow from our operations and borrowings under our Credit Facility. We may alter or change our plans with respect to our capital program and expected capital expenditures based on developments in our business, our financial position, our industry or any of the markets in which we operate.

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Sources and (Uses) of Cash and Cash Equivalents

The following table presents the sources and uses of our cash and cash equivalents for the periods presented:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023","","2022"],["Cash provided by operating activities","","$","1,565","","","$","2,380","","","$","4,125"],["Proceeds from divestitures of property and equipment","","21","","","2,533","","","407"],["Proceeds from Credit Facility, net","","\u2014","","","\u2014","","","1,050"],["Receipts of deferred consideration","","166","","","\u2014","","","\u2014"],["Proceeds from issuance of senior notes, net","","747","","","\u2014","","","\u2014"],["Proceeds from warrant exercise","","3","","","\u2014","","","27"],["Capital expenditures","","(1,557)","","","(1,829)","","","(1,823)"],["Contributions to investments","","(75)","","","(231)","","","(18)"],["Payments on Credit Facility, net","","\u2014","","","(1,050)","","","\u2014"],["Payments on Exit Credit Facility, net","","\u2014","","","\u2014","","","(221)"],["Business combination, net","","(459)","","","\u2014","","","(1,967)"],["Cash paid to purchase debt","","(767)","","","\u2014","","","\u2014"],["Debt issuance and other financing costs","","(11)","","","\u2014","","","(17)"],["Cash paid to repurchase and retire common stock","","\u2014","","","(355)","","","(1,073)"],["Cash paid for common stock dividends","","(388)","","","(487)","","","(1,212)"],["Other","","(3)","","","\u2014","","","\u2014"],["Net increase (decrease) in cash, cash equivalents and restricted cash","","$","(758)","","","$","961","","","$","(722)"]]
[[/GREPCENT_TABLE]]

Cash Flow from Operating Activities

Cash provided by operating activities was $1.57 billion, $2.38 billion and $4.12 billion during the years ended December 31, 2024, 2023 and 2022, respectively. The decrease in 2024 is primarily due to lower prices for the natural gas, oil and NGL we sold. The decrease in 2023 is primarily due to lower prices for the natural gas, oil and NGL we sold as well as decreased sales volumes related to our Eagle Ford divestitures. Cash flows from operations are largely affected by the same factors that affect our net income, excluding various non-cash items, such as depreciation, depletion and amortization, certain impairments, gains or losses on sales of assets, deferred income taxes and mark-to-market changes in our open derivative instruments. See further discussion below under Results of Operations.

Proceeds from Divestitures of Property and Equipment

In 2023, we sold our Eagle Ford assets through three separate transactions resulting in total cash proceeds of $2.5 billion after customary post-closing adjustments. In 2022, we sold our Powder River Basin assets to Continental Resources, Inc. for approximately $400 million after customary closing adjustments. See Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Proceeds from Credit Facility, net

In 2022, we borrowed a net $1.05 billion under the Credit Facility. We utilized these borrowings to terminate the Exit Credit Facility. A portion of the borrowings under the Credit Facility were repaid with internally generated cash provided by operating activities.

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Receipts of Deferred Consideration

During 2024, we received $166 million in deferred consideration associated with our Eagle Ford divestiture transactions. See Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Proceeds from Issuance of Senior Notes, net

In 2024, we completed our underwritten public offering of $750 million aggregate principal amount of our 5.70% Senior Notes due 2035. See Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Capital Expenditures

Our capital expenditures during the year ended December 31, 2024 decreased compared to the year ended December 31, 2023, primarily as a result of decreased drilling and completion activity within our Northeast Appalachia and Haynesville operating areas, as well as reduced activity in Eagle Ford due to our Eagle Ford divestitures. Our capital expenditures during the year ended December 31, 2023 were in line with the capital expenditures during the year ended December 31, 2022, primarily as a result of increased drilling and completion activity within our Haynesville operating area, partially offset by reduced activity due to our Eagle Ford divestitures. During the year ended December 31, 2024, our average operated rig count was 9 rigs and 133 spud wells, compared to an average operated rig count of 11 rigs and 193 spud wells in the year ended December 31, 2023 and 14 rigs and 217 spud wells in the year ended December 31, 2022. We completed 81 operated wells in the year ended December 31, 2024 compared to 166 in the year ended December 31, 2023 and 216 in the year ended December 31, 2022.

Contributions to Investments

During the years ended December 31, 2024, 2023 and 2022, contributions to investments primarily consisted of contributions to our investment with Momentum Sustainable Ventures LLC to build a new natural gas gathering pipeline and carbon capture project. See Note 15 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for additional information.

Payments on Credit Facility, net

During the year ended December 31, 2023, we made net repayments of $1.05 billion on the Credit Facility, utilizing a portion of the proceeds from the Eagle Ford divestitures and internally generated cash provided by operating activities.

Payments on Exit Credit Facility, net

In December 2022, we entered into the Credit Facility and terminated the Exit Credit Facility, repaying all amounts outstanding and extinguishing all commitments thereunder.

Business Combination, net

In connection with the completion of the Southwestern Merger during 2024, we terminated Southwestern’s existing credit facility, with all loan amounts and other obligations outstanding thereunder repaid in full and all commitments thereunder extinguished, for approximately $585 million utilizing cash on hand as well as the cash assumed from Southwestern. During the year ended December 31, 2022, we completed the Marcellus Acquisition for approximately $2 billion and 9.4 million shares of our common stock. See Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion of these acquisitions.

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Cash Paid to Purchase Debt

In 2024, we announced an offer to purchase for cash, any and all of our outstanding 2026 Notes, the “Tender Offer”. Upon expiration of the Tender Offer, approximately 91%, or $453 million, of the 2026 Notes were validly tendered and not validly withdrawn. In a separate transaction during the fourth quarter of 2024, we redeemed all of the $304 million aggregate principal of the 2028 Notes assumed in the Southwestern Merger for approximately $312 million, which included an $8 million premium to call the notes. See Note 4 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Debt Issuance and Other Financing Costs

During 2024, we paid $11 million of one-time fees to lenders related to the changes to our Credit Facility as well as for the issuance of the 2035 Senior Notes. During 2022, we paid $17 million of one-time fees to lenders to establish the Credit Facility.

Cash Paid to Repurchase and Retire Common Stock

We did not repurchase any shares during 2024. During 2023, we repurchased 4.4 million shares of our common stock for an aggregate cost of approximately $355 million. During 2022, we repurchased 11.7 million shares of our common stock for an aggregate cost of $1.1 billion. The repurchased shares of common stock were retired and recorded as a reduction to common stock and retained earnings. See Note 10 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

Cash Paid for Common Stock Dividends

As part of our dividend program, we paid common stock dividends of $388 million, $487 million and $1.2 billion during the years ended December 31, 2024, 2023 and 2022, respectively. See Note 10 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for further discussion.

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Results of Operations

Year ended December 31, 2024 compared to the year ended December 31, 2023

Below is a discussion of changes in our results of operations for 2024 compared to 2023. The results of operations discussed below include amounts pertaining to Southwestern after the merger closed on October 1, 2024. A discussion of changes in our results of operations for 2023 compared to 2022 has been omitted from this Form 10-K, but may be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 21, 2024.

Natural Gas, Oil and NGL Production and Average Sales Prices

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2024"],["","","Natural Gas","","Oil","","NGL","","Total"],["","","MMcf per day","","$/Mcf","","MBbl per day","","$/Bbl","","MBbl per day","","$/Bbl","","MMcfe per day","","$/Mcfe"],["Haynesville","","1,532","","","2.14","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,532","","","2.14"],["Northeast Appalachia","","1,809","","","1.88","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,809","","","1.88"],["Southwest Appalachia","","270","","","2.42","","","3","","","60.41","","","21","","","27.44","","","417","","","3.42"],["Total","","3,611","","","2.03","","","3","","","60.41","","","21","","","27.44","","","3,758","","","2.16"],["Average NYMEX Price","","","","2.27","","","","","75.72"],["Average Realized Price (including realized derivatives)","","","","2.75","","","","","61.04","","","","","26.91","","","","","2.84"],["","","Year Ended December 31, 2023"],["","","Natural Gas","","Oil","","NGL","","Total"],["","","MMcf per day","","$/Mcf","","MBbl per day","","$/Bbl","","MBbl per day","","$/Bbl","","MMcfe per day","","$/Mcfe"],["Haynesville","","1,551","","","2.30","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,551","","","2.30"],["Northeast Appalachia","","1,834","","","2.22","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,834","","","2.22"],["Eagle Ford","","85","","","2.25","","","21","","","77.80","","","10","","","25.62","","","274","","","7.64"],["Total","","3,470","","","2.25","","","21","","","77.80","","","10","","","25.62","","","3,659","","","2.66"],["Average NYMEX Price","","","","2.74","","","","","77.63"],["Average Realized Price (including realized derivatives)","","","","2.64","","","","","72.89","","","","","25.62","","","","","2.99"]]
[[/GREPCENT_TABLE]]

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Natural Gas, Oil and NGL Sales

[[GREPCENT_TABLE]]
[["","","Year Ended December 31, 2024"],["","","Natural Gas","","Oil","","NGL","","Total"],["Haynesville","","$","1,205","","","$","\u2014","","","$","\u2014","","","$","1,205"],["Northeast Appalachia","","1,242","","","\u2014","","","\u2014","","","1,242"],["Southwest Appalachia","","239","","","69","","","214","","","522"],["Total natural gas, oil and NGL sales","","$","2,686","","","$","69","","","$","214","","","$","2,969"],["","","Year Ended December 31, 2023"],["","","Natural Gas","","Oil","","NGL","","Total"],["Haynesville","","$","1,300","","","$","\u2014","","","$","\u2014","","","$","1,300"],["Northeast Appalachia","","1,483","","","\u2014","","","\u2014","","","1,483"],["Eagle Ford","","70","","","596","","","98","","","764"],["Total natural gas, oil and NGL sales","","$","2,853","","","$","596","","","$","98","","","$","3,547"]]
[[/GREPCENT_TABLE]]

Natural gas, oil and NGL sales in 2024 decreased $578 million compared to 2023. Lower average prices, which were consistent with the downward trend in index prices for gas and oil, drove a $426 million decrease in 2024. The Eagle Ford divestitures resulted in a $764 million decrease. Additionally, planned curtailments and activity deferrals led to lower sales volumes in Haynesville and Northeast Appalachia for decreases of $243 million and $167 million, respectively. These decreases were partially offset by a $1.0 billion increase due to the Southwestern Merger.

Production Expenses

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["","","","","$/Mcfe","","","","$/Mcfe"],["Haynesville","","$","170","","","0.30","","","$","185","","","0.33"],["Northeast Appalachia","","97","","","0.15","","","81","","","0.12"],["Southwest Appalachia","","49","","","0.32","","","\u2014","","","\u2014"],["Eagle Ford","","\u2014","","","\u2014","","","90","","","0.91"],["Total production expenses","","$","316","","","0.23","","","$","356","","","0.27"]]
[[/GREPCENT_TABLE]]

Production expenses in 2024 decreased $40 million compared to 2023. The decrease was primarily due to a $90 million decrease due to the Eagle Ford divestitures, which was partially offset by a $49 million increase in Southwest Appalachia due to the Southwestern Merger. Haynesville had a net decrease of $15 million due to a $51 million decrease in workover activity, saltwater disposal expenses and treating expenses, partially offset by a $36 million increase related to the Southwestern Merger. Northeast Appalachia increased $16 million due to an additional $22 million of expense related to the Southwestern Merger, partially offset by a $6 million decrease related to lower workover expense, saltwater disposal and repairs and maintenance.

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Gathering, Processing and Transportation Expenses (“GP&T”)

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["","","","","$/Mcfe","","","","$/Mcfe"],["Haynesville","","$","326","","","0.58","","","$","263","","","0.46"],["Northeast Appalachia","","507","","","0.77","","","433","","","0.65"],["Southwest Appalachia","","202","","","1.33","","","\u2014","","","\u2014"],["Eagle Ford","","\u2014","","","\u2014","","","157","","","1.57"],["Total GP&T","","$","1,035","","","0.75","","","$","853","","","0.64"]]
[[/GREPCENT_TABLE]]

Gathering, processing and transportation expenses in 2024 increased $182 million compared to 2023. The increase was primarily due to a $404 million increase related to the Southwestern Merger. The increase was partially offset by a $157 million decrease due to the Eagle Ford divestitures. Additionally, curtailments led to decreased volumes resulting in decreases of $58 million and $66 million in Haynesville and Northeast Appalachia, respectively. These decreases were partially offset by increases of $11 million and $48 million related to rate increases in Haynesville and Northeast Appalachia, respectively.

Severance and Ad Valorem Taxes

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["","","","","$/Mcfe","","","","$/Mcfe"],["Haynesville","","$","60","","","0.11","","","$","105","","","0.19"],["Northeast Appalachia","","15","","","0.02","","","14","","","0.02"],["Southwest Appalachia","","22","","","0.14","","","\u2014","","","\u2014"],["Eagle Ford","","\u2014","","","\u2014","","","48","","","0.48"],["Total severance and ad valorem taxes","","$","97","","","0.07","","","$","167","","","0.13"]]
[[/GREPCENT_TABLE]]

Severance and ad valorem taxes in 2024 decreased $70 million compared to 2023. The decrease was primarily related to a $48 million decrease due to the Eagle Ford divestitures and a $50 million decrease in Haynesville, which was driven by a decrease in the statutory severance tax rates. These decreases were partially offset by an increase of $5 million in Haynesville and an increase of $22 million in Southwest Appalachia due to the Southwestern Merger.

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Natural Gas, Oil and NGL Derivatives

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["Natural gas derivatives - realized gains","","$","919","","","$","488"],["Natural gas derivatives - unrealized gains (losses)","","(951)","","","1,199"],["Total gains (losses) on natural gas derivatives","","$","(32)","","","$","1,687"],["Oil derivatives - realized gains (losses)","","$","1","","","$","(38)"],["Oil derivatives - unrealized gains","","(3)","","","88"],["Total gains (losses) on oil derivatives","","$","(2)","","","$","50"],["NGL derivatives - realized losses","","$","(4)","","","$","\u2014"],["NGL derivatives - unrealized losses","","(13)","","","\u2014"],["Total losses on NGL derivatives","","$","(17)","","","$","\u2014"],["Contingent consideration - realized gains","","$","25","","","$","\u2014"],["Contingent consideration - unrealized losses","","(12)","","","(9)"],["Total gains (losses) on contingent consideration","","$","13","","","$","(9)"],["Total gains (losses) on natural gas, oil and NGL derivatives","","$","(38)","","","$","1,728"]]
[[/GREPCENT_TABLE]]

See Note 13 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for a complete discussion of our derivative activity.

Marketing Revenues and Expenses

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["Marketing revenues","","$","1,290","","","$","2,500"],["Marketing expenses","","1,310","","","2,499"],["Marketing margin","","$","(20)","","","$","1"]]
[[/GREPCENT_TABLE]]

Marketing revenues and expenses decreased in 2024 compared to 2023 as a result of decreased oil marketing activities, primarily as a result of the Eagle Ford divestitures in 2023.

Exploration Expenses

During 2024, exploration expense of $10 million was primarily the result of $6 million of non-cash impairment charges on unproved properties and $3 million of geological and geophysical expense. During 2023, exploration expense of $27 million was primarily the result of $12 million of non-cash impairment charges on unproved properties and $11 million of geological and geophysical expense.

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General and Administrative Expenses

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["Total G&A, net","","$","186","","","$","127"],["G&A, net per Mcfe","","$","0.14","","","$","0.09"]]
[[/GREPCENT_TABLE]]

Total general and administrative expenses, net during 2024 increased $59 million compared to 2023, primarily due to a decrease in our producing well count following the Eagle Ford divestitures, which reduced our allocations and reimbursements of G&A. Additionally, compensation and other corporate expenses increased following the Southwestern Merger.

Separation and Other Termination Costs

During 2024 and 2023, we recognized $23 million and $5 million, respectively, of separation and other termination costs related to one-time termination benefits for certain employees.

Depreciation, Depletion and Amortization

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["DD&A","","$","1,729","","","$","1,527"],["DD&A per Mcfe","","$","1.26","","","$","1.14"]]
[[/GREPCENT_TABLE]]

The absolute increase in depreciation, depletion and amortization for 2024 compared to 2023 is primarily related to the Southwestern Merger. Depreciation, depletion and amortization per Mcfe increased for 2024 compared to 2023 primarily related to production curtailments during 2024.

Other Operating Expense, Net

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["Other operating expense, net","","$","332","","","$","18"]]
[[/GREPCENT_TABLE]]

During 2024, we recognized approximately $312 million of costs related to the Southwestern Merger, which included $148 million related to employee expenses and the remainder of the costs relating to transaction fees, consulting and legal fees and other fees related to the transaction.

Interest Expense

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["Interest expense on debt","","$","181","","","$","143"],["Amortization of premium, discount, issuance costs and other","","(7)","","","(9)"],["Capitalized interest","","(51)","","","(30)"],["Total interest expense","","$","123","","","$","104"]]
[[/GREPCENT_TABLE]]

The increase in total interest expense 2024 compared to 2023, was primarily due to our assumption of Southwestern’s Senior Notes as a result of the Southwestern Merger, which resulted in an increase in interest expense on debt. Additionally, our capitalized interest increased in 2024 compared to 2023 primarily as a result of the capitalized interest related to our investment with Momentum Sustainable Ventures LLC. See Note 4 and Note 15 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for additional discussion.

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Other Income, net

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","2023"],["Other income, net","","$","86","","","$","79"]]
[[/GREPCENT_TABLE]]

Other income during the time periods presented above primarily consists of interest income and deferred consideration amortization. The increase in 2024 compared to 2023 was primarily due to increased interest income related to our higher average cash balance in 2024.

Income Tax Expense (Benefit)

We recorded an income tax benefit of $127 million in 2024. Of this amount, $4 million is related to current federal and state income tax benefit, and the remainder is related to deferred federal and state income taxes. We recorded income tax expense of $698 million in 2023. Of this amount, $270 million is related to current federal and state income taxes, and the remainder is related to deferred federal and state income taxes. See Note 9 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for a discussion of income tax expense (benefit).

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Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States require us to make estimates and assumptions. The accounting estimates and assumptions that involve a significant level of estimation uncertainty and have or are reasonably likely to have a material impact on our financial condition or results of operations are discussed below. Our management has discussed each critical accounting estimate with the Audit Committee of our Board of Directors.

Natural Gas and Oil Reserves. Estimates of natural gas and oil reserves and their values, future production rates, future development costs and commodity pricing differentials are the most significant of our estimates. The accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. In addition, estimates of reserves may be revised based on actual production, results of subsequent exploration and development activities, recent commodity prices, operating costs and other factors. These revisions could materially affect our financial statements. The volatility of commodity prices results in increased uncertainty inherent in these estimates and assumptions. Changes in natural gas, oil or NGL prices could result in actual results differing significantly from our estimates. See Supplemental Disclosures About Natural Gas, Oil and NGL Producing Activities included in Item 8 of Part II of this report for further information.

Accounting for Business Combinations. We account for business combinations using the acquisition method, which is the only method permitted under FASB ASC Topic 805 – Business Combinations and involves the use of significant judgment. Under the acquisition method of accounting, a business combination is accounted for at a purchase price based on the fair value of the consideration given. The assets and liabilities acquired are measured at their fair values, and the purchase price is allocated to the assets and liabilities based upon these fair values. The excess, if any, of the consideration given to acquire an entity over the net amounts assigned to its assets acquired and liabilities assumed is recognized as goodwill. The excess, if any, of the fair value of assets acquired and liabilities assumed over the cost of an acquired entity is recognized immediately to earnings as a gain from bargain purchase.

The Company’s principal assets are its natural gas and oil properties, which are accounted for under the successful efforts accounting method. The Company determines the fair value of acquired natural gas and oil properties based on the discounted future net cash flows expected to be generated from these assets. Discounted cash flow models by operating area are prepared using the estimated future revenues and operating costs for all proved developed properties and undeveloped properties comprising the proved and unproved reserves. Significant inputs associated with the calculation of discounted future net cash flows include estimates of (i) future production volumes based on estimated reserves, (ii) future operating and development costs, (iii) future commodity prices escalated by an inflationary rate after three years, adjusted for differentials, and (iv) a market-based weighted average cost of capital by operating area. The Company utilizes NYMEX strip pricing, adjusted for differentials, to value the reserves. The NYMEX strip pricing inputs used are classified as Level 1 fair value assumptions and all other inputs are classified as Level 3 fair value assumptions. The discount rates utilized are derived using a weighted average cost of capital computation, which includes an estimated cost of debt and equity for market participants with similar geographies and asset development type by operating area.

See Note 2 of the notes to our consolidated financial statements included in Item 8 of Part II of this report for additional information on our business combinations, including the Southwestern Merger, which was completed on October 1, 2024.

Income Taxes. Income taxes are accounted for using the asset and liability method as required by GAAP. Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets for tax attributes such as NOL carryforwards and disallowed business interest carryforwards are also recognized. Deferred tax assets represent potential future tax benefits and are reduced by a valuation allowance if it is more likely than not that such benefits will not be realized.

In assessing the need for a valuation allowance or adjustments to existing valuation allowances, one source of evidence is a projection of income exclusive of existing timing differences. Our judgement regarding the realizability of deferred tax assets is thus partially affected by estimates of future financial condition.

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We also routinely assess potential uncertain tax positions and, if required, establish accruals for such positions. Accounting guidance for recognizing and measuring uncertain tax positions requires that a more likely than not threshold condition be met on a tax position, based solely on its technical merits of being sustained, before any benefit of the uncertain tax position can be recognized in the financial statements. If it is more likely than not a tax position will be sustained, we measure and recognize the position following a cumulative probability estimate.

Impairments. Long-lived assets used in operations, including proved gas and oil properties, are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in future cash flows expected to be generated by an asset group. Individual assets are grouped for impairment purposes based on a judgmental assessment of the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. If there is an indication the carrying amount of an asset may not be recovered, the asset is assessed by management through an established process in which changes to significant assumptions such as prices, volumes, and future development plans are reviewed. If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value by discounting using a weighted average cost of capital. Because there usually is a lack of quoted market prices for long-lived assets, the fair value of impaired assets is assessed by management using the income approach. Level 3 inputs associated with the calculation of discounted cash flows used in the impairment analysis include our estimate of future natural gas and crude oil prices, production costs, development expenditures, anticipated production of proved reserves and other relevant data. Additionally, we utilize NYMEX strip pricing, adjusted for differentials, to value the reserves.

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