Established by the 2024 merger of Chesapeake Energy and Southwest Energy, Expand Energy Corp. (EXE) is the largest producer of natural gas in North America. The company acquires and develops properties to produce gas, natural gas liquids (NGL), and crude oil, notes Tom Hutchinson, editor of Cabot Dividend Investor.
Expand has huge exposure to the fastest-growing natural gas-producing shale basins in the country. It operates approximately 1.83 million net acres in the Haynesville shale in Louisiana, Marcellus Shale in northeastern Appalachia, and the Marcellus and Utica Shale in Ohio and West Virginia.
Expand Energy Corp. (EXE)
As a company involved in exploration and production, the business model is to find gas, get it out of the ground, and sell it for a profit. Profits are determined by the spread between the cost of production and the final sales price, along with the volume of sales.
Prior to the merger in 2024, Chesapeake Energy had gone through bankruptcy. But the merger provided stability and remedied any remaining problems. There was also fat to cut. The new company was easily able to slash costs and create much greater efficiency.
For example, the Haynesville basin in Louisiana was able to deliver the same production it took 13 rigs to generate in 2023 with just seven rigs this year. As a result, breakeven prices are significantly lower throughout the basin.
The company expects to produce an average of 7.15 billion cubic feet of gas equivalent per day (Bcfe/d) in 2025. That will be a 177% increase over last year’s average. For perspective, one Bcfe/d is enough to supply about 5 million US homes. Expand also says it can grow production to 7.5 Bcfe/d in 2026. At the same time, Expand is reducing capital expenses.
Expand Energy pays dividends as well. The history is short because the company is new and dividends only started in the first quarter of this year. The payout is currently $0.575 per quarter, which translates to $2.30 per year for a yield of 2%.
However, the company paid a supplemental dividend in addition to the regular payout in the August quarter, totaling $1.465. Including the high dividend, the trailing yield is 2.6%. There is a possibility of more extra dividends going forward.
Recommended Action: Buy EXE.
