EXPAND ENERGY Corp

Results of Operations

The results of operations discussed below include amounts pertaining to Southwestern after the merger closed on October 1, 2024.

Natural Gas, Oil and NGL Production and Average Sales Prices

Natural Gas, Oil and NGL Sales

Natural gas, oil and NGL sales during the Current Quarter increased $1,643 million compared to the Prior Quarter. The Southwestern Merger resulted in a $1,153 million increase during the Current Period due to increased volumes across all of our operating areas. Additionally, higher average prices, which were consistent with the upward trend in index prices for all products, drove a $402 million increase.

Natural gas, oil and NGL sales during the Current Period increased $3,354 million compared to the Prior Period. The Southwestern Merger resulted in a $2,430 million increase during the Current Period due to increased volumes across all of our operating areas. Additionally, higher average prices, which were consistent with the upward trend in index prices for all products, drove a $837 million increase.

Production Expenses

Production expenses during the Current Quarter and Current Period increased $102 million and $190 million compared to the Prior Quarter and Prior Period, respectively. The increases were primarily related to the Southwestern Merger and increased volumes across all of our operating areas.

Gathering, Processing and Transportation Expenses

Gathering, processing and transportation expenses during the Current Quarter and Current Period increased $409 million and $799 million compared to the Prior Quarter and Prior Period, respectively. These increases were primarily related to increased volumes and rates across all of our operating areas due to the Southwestern Merger.

Severance and Ad Valorem Taxes

Severance and ad valorem taxes during the Current Quarter increased $31 million compared to the Prior Quarter. The increase was primarily related to a $35 million increase due to the Southwestern Merger, which impacted each of our operating areas. The increase due to the Southwestern Merger was partially offset by a decrease in Haynesville statutory severance tax rates, which resulted in a per unit decrease.

Severance and ad valorem taxes during the Current Period increased $50 million compared to the Prior Period. The increase was primarily related to a $65 million increase due to the Southwestern Merger, which impacted each of our operating areas. The increase due to the Southwestern Merger was partially offset by a decrease in Haynesville statutory severance tax rates, which resulted in a per unit decrease.

Natural Gas, Oil and NGL Derivatives

See Note 11 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of our derivative activity.

General and Administrative Expenses

Total general and administrative expenses, net during the Current Quarter and Current Period decreased compared to the Prior Quarter and Prior Period, respectively, as the increase in employee compensation and benefits, as a result of the Southwestern Merger, was offset by a corresponding increase in allocations and reimbursements due to increased drilling and production activity. The per unit decreases in total general and administrative expenses, net during the Current Quarter and Current Period are due to increased production volumes as a result of the Southwestern Merger.

Separation and Other Termination Costs

During the Prior Period, we recognized $23 million of separation and other termination costs related to one-time termination benefits for certain employees.

Depreciation, Depletion and Amortization

The absolute increase in depreciation, depletion and amortization for the Current Quarter and Current Period compared to the Prior Quarter and Prior Period is primarily related to the Southwestern Merger. Depreciation, depletion and amortization per Mcfe decreased during the Current Quarter and Current Period compared to the Prior Quarter and Prior Period due to lower depletion rates on wells acquired in the Southwestern Merger.

Other Operating Expense, Net

During the Current Quarter and Prior Quarter, we recognized approximately $25 million and $15 million, respectively, of costs related to the Southwestern Merger, which included employee expenses, legal fees, consulting fees and financial advisory fees.

During the Current Period and Prior Period, we recognized approximately $52 million and $26 million, respectively, of costs related to the Southwestern Merger, which included employee expenses, legal fees, consulting fees and financial advisory fees.

Interest Expense

The increase in total interest expense during the Current Quarter and Current Period compared to the Prior Quarter and Prior Period 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. Capitalized interest increased during the Current Quarter and Current Period compared to the Prior Quarter and Prior Period primarily as a result of increased capital activity following the completion of the Southwestern Merger.

See Note 4 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for additional discussion.

Income Taxes

The projected full year current and deferred taxes are allocated to the Current Period based on the proportion of year-to-date pre-tax book income to the projected full year pre-tax book income. As a result, an income tax expense of $190 million was recorded for the Current Period. Of this amount, $56 million was related to current taxes and $134 million was related to deferred taxes. An income tax benefit of $61 million was recorded for the Prior Period. That amount was entirely related to projections of deferred federal and state income taxes. Our effective income tax rate was 20.9% and 23.3% during the Current Period and the Prior Period, respectively. Our effective tax rate can fluctuate due to the impact of discrete items, state income taxes and permanent differences. See Note 8 of the notes to our condensed consolidated financial statements included in Item 1 of Part I of this report for a discussion of income taxes.

Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include our current expectations or forecasts of future events, including matters relating to armed conflict and instability in Europe and the Middle East, along with the effects of the current global economic environment, and the impact of each on our business, financial condition, results of operations and cash flows, actions by, or disputes among or between, members of OPEC+ and other foreign oil-exporting countries, market factors, market prices, our ability to meet debt service requirements, our ability to continue to pay, and the amount and timing of, cash dividends and/or repurchase common stock or notes, our ability to capture synergies and our ESG initiatives. Forward-looking and other statements in this Form 10-Q regarding our environmental, social and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as “aim,” “predict,” “should,” "expect," “could,” “may,” "anticipate," "intend," "plan," “ability,” "believe," "seek," "see," "will," "would," “estimate,” “forecast,” "target," “guidance,” “outlook,” “opportunity” or “strategy.”

Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include:

•reduced demand for natural gas, oil and NGLs;

•negative public perceptions of our industry;

•competition in the natural gas and oil exploration and production industry;

•the volatility of natural gas, oil and NGL prices, which are affected by general economic and business conditions, as well as increased demand for (and availability of) alternative fuels and electric vehicles;

•risks from regional epidemics or pandemics and related economic turmoil, including supply chain constraints;

•write-downs of our natural gas and oil asset carrying values due to low commodity prices;

•significant capital expenditures are required to replace our reserves and conduct our business;

•our ability to replace reserves and sustain production;

•uncertainties inherent in estimating quantities of natural gas, oil and NGL reserves and projecting future rates of production and the amount and timing of development expenditures;

•drilling and operating risks and resulting liabilities;

•our ability to generate profits or achieve targeted results in drilling and well operations;

•leasehold terms expiring before production can be established;

•risks from our commodity price risk management activities;

•uncertainties, risks and costs associated with natural gas and oil operations;

•our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used;

•pipeline and gathering system capacity constraints and transportation interruptions;

•risks related to our plans to participate in the global LNG value chain;

•terrorist activities and/or cyber-attacks adversely impacting our operations;

•risks from failure to protect personal information and data and compliance with data privacy and security laws and regulations;

•disruption of our business by natural or human causes beyond our control;

•a deterioration in general economic, business or industry conditions;

•the impact of inflation and commodity price volatility, including as a result of decisions made by OPEC+ and armed conflict and instability in Europe and the Middle East, along with the effects of the current global economic environment, on our business, financial condition, employees, contractors, vendors and the global demand for natural gas and oil and on U.S. and global financial markets;

•our inability to access the capital markets on favorable terms;

•the limitations on our financial flexibility due to our level of indebtedness and restrictive covenants from our indebtedness;

•challenges with employee retention and increasingly competitive labor market;

•risks related to acquisitions or dispositions, or potential acquisitions or dispositions;

•security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, or from breaches of information technology systems of third parties with whom we transact business;

•our ability to achieve and maintain ESG certifications, goals and commitments;

•legislative, regulatory and ESG initiatives, including those addressing the impact of climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal;

•federal and state tax proposals affecting our industry;

•risks related to an annual limitation on the utilization of our tax attributes, which was triggered upon the completion of the Southwestern Merger, as well as trading in our common stock, additional issuance of common stock, and certain other stock transactions, which could lead to an additional, potentially more restrictive, annual limitation; and

•other factors that are described under Risk Factors in Item 1A of our 2024 Form 10-K.

We caution you not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the filing date, and we undertake no obligation and have no intention to update this information, except as required by law. We urge you to carefully review and consider the disclosures in this report and our other filings with the SEC that attempt to advise interested parties of the risks and factors that may affect our business.

All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

Information About Us

Investors should note that we make available, free of charge on our website at expandenergy.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases. We may use the Investors section of our website to communicate with investors. It is possible that the financial and other information posted on the Investors section of our website could be deemed to be material information. Documents and information on our website are not incorporated by reference herein.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including Expand Energy, that file electronically with the SEC.