Expand Energy Cuts Appalachian Rigs to 2, Defers Wells Amid Weak Market
Key Facts
Expand Energy is scaling back activity in the northeastern Appalachia region in the fourth quarter and delaying the start-up of wells in response to a weak natural gas market. The company’s forecast shows it will cut the number of rigs in the region to 2 in the fourth quarter, from 3 in each of the first three quarters of 2026. Chief Operating Officer Josh Viets said the company deferred bringing about 9 wells online that had been scheduled to start production in the third quarter. He added that the company is waiting for the “optimal timing” to bring them into service. He said flexibility on start-up timing would continue through 2027, making the move an adjustment to activity and supply timing rather than evidence of a broad cut in actual production.
The company reported net production of 7.54 billion cubic feet equivalent per day in the third quarter, of which natural gas accounted for 92%. It operated an average of 11 rigs during the period, drilled 46 wells and brought 59 wells online. In its earnings presentation, it said weak prices in the Appalachian Basin had led it to curtail production in the quarter, adding that production “remains responsive to market conditions.” That places the fourth-quarter rig reduction within an operational response that began as regional prices weakened. Even so, the company’s full-year 2026 forecast still points to average daily production of between 7.45 and 7.55 billion cubic feet equivalent.
The company expects fourth-quarter production to range between 7.4 and 7.6 billion cubic feet per day, a range Viets described as wide and reflective of operating flexibility. For the year, it expects to operate 11 to 12 rigs, with capital spending of about 3 billion dollars. Its target range for average daily production in 2026 is between 7.45 and 7.55 billion cubic feet equivalent. The guidance highlights that cutting Appalachian rigs and deferring wells do not, by themselves, change the announced annual production range. Viets said the company would continue to keep the timing of deferred well start-ups flexible through next year.
Market data point to a divergence between current price weakness and expectations for gas demand. The Henry Hub spot price was 3.02 dollars per million British thermal units in the week ended October 23, compared with 3.20 dollars in the week ended October 16. Meanwhile, U.S. working gas inventories stood at 3,644 billion cubic feet on October 16. Inventories were 35 billion cubic feet above the five-year average for that week, but 152 billion below their level a year earlier. The Energy Information Administration said ample inventories relative to the five-year average limit upward pressure on prices in its outlook.
Conditions in the Haynesville Basin are particularly important for the company, as the average realized price for its production there was 2.68 dollars per million British thermal units in the third quarter. Expand said its assets in the western part of the basin need prices above 4 dollars per million British thermal units to become competitive. The company estimated that Haynesville production may need to increase by about 5 billion cubic feet per day over 4 to 6 years to meet demand. It also expects well productivity in the basin to improve by about 2% to 3% annually. These figures put the gap between the realized price and the level the company considers necessary for its assets to be competitive at the center of its development timing decisions.
Expand shares fell about 2% in afternoon trading on October 28, despite adjusted earnings per share for the quarter ended September 30 exceeding analysts’ average estimate. Adjusted earnings were 1.46 dollars per share, compared with an average estimate of 1.27 dollars. For its market outlook, the Energy Information Administration expects the Henry Hub average price to be 3.16 dollars per million British thermal units in 2027, down 32 cents, or 9%, from the 2026 average. The company is scheduled to pay a quarterly base dividend of 0.575 dollars per share on December 3 to shareholders of record at the close of November 12. Decisions on when to bring the deferred wells online during 2027 remain tied to the timing the company considers appropriate, according to its chief operating officer.