Feb 27 (Reuters) - Expand Energy EXE.O, formerly known as Chesapeake Energy and the biggest natural gas producer in the U.S., said on Thursday it was on track to boost output by more than 5% in 2026 from levels expected in 2025 so long as market conditions warrant such a move.

CEO Nick Dell'Osso told analysts during the company's fourth-quarter earnings call that Expand was prepared to boost output from around 6.4 billion cubic feet of gas equivalent per day (bcfed) in the fourth quarter of 2024 to an estimated 7.1 bcfed in 2025 and 7.5 bcfed in 2026, depending on market conditions.

Even though Expand's earnings beat fourth-quarter estimates, its shares slid by around 3% at midday on Thursday to a two-month low of $99.17.

That share price decline, however, was smaller than some other U.S. energy firms like the 8% drop in shares of APA APA.O and declines of 5% in shares of Comstock Resources CRK.N and Range Resources RRC.N.

Expand said in an earnings release that it expects to run about 12 rigs and invest about $2.7 billion to get to that 7.1 bcfed of production in 2025.

The company also said it intends to build incremental productive capacity for an additional $300 million by running about 15 rigs in the second half of the year to grow production from around 7.2 bcfed at the end of 2025 to an average of around 7.5 bcfed in 2026 should market conditions warrant.

"Since we won't pull the trigger on this incremental capacity until midyear, we have time to watch the market and we'll have the flexibility to adjust as necessary," Dell'Osso said. "We're very prepared for both increasing capital or decreasing capital as conditions warrant."

2024 was a difficult year for the gas market due in part to a small increase in the amount of gas exported as liquefied natural gas $(LNG)$, but 2025 and 2026 are shaping up to be much better as some LNG plants under construction enter service.

"There is greater than 11 bcfd (billion cubic feet per day) of LNG capacity under construction and the domestic power market continues to grow (with) supportive data centers and rising consumer demand," Dell'Osso said on the call.

"We have the assets, balance sheet and capital efficient operations to help meet this new demand," Dell'Osso said.

Spot gas prices at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana dropped 14% to a four-year low of $2.19 per million British thermal units (mmBtu) in 2024, prompting drillers to cut output for the first time since the COVID-19 pandemic reduced demand for the fuel in 2020.

The U.S. Energy Information Administration $(EIA)$ projected prices would jump to $3.79 per mmBtu in 2025 and $4.16 in 2026, prompting drillers to boost output to 104.6 bcfd in 2025 and 107.3 bcfd in 2026, up from 103.1 bcfd in 2024 and a record 103.6 bcfd in 2023.

"Expand is one of the few public operators that is positioned to respond to increased demand for natural gas deliveries into the (Gulf Coast) LNG corridor, and the response is coming a little sooner than was expected, but so is the demand," analysts at investment banking company Piper Sandler said in a note.

(Reporting by Scott DiSavinoEditing by Marguerita Choy)

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