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Diversified Energy Company to cultivate new 'region of focus' as it aims to replicate Appalachia successes

Last updated: 10:39 20 Mar 2024 EDT, First published: 07:00 18 Dec 2020 EST

Snapshot

  • Diversified Energy bulks up in the Central Region with $410m acquisition
  • Diversified Energy ‘a well-managed growth business’ says Stifel
  • Diversified Energy announces closing of innovative deal to unlock current asset value
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About the company

Diversified Energy Company PLC is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.

Through its differentiated strategy, the company acquires existing, long-life assets and invests in them to improve environmental and operational performance until retiring those assets in a safe and environmentally secure manner. 

How it is doing

19 Mar 2024

Diversified Energy Company PLC (LSE:DEC, NYSE:DEC) has announced a $410 million acquisition that bolsters its position in the central region of the US by acquiring approximately 510 billion cubic feet equivalent (Bcfe) of proven developed producing (PDP) reserves.

This move is part of DEC's strategy to consolidate its working interest in wells it already operates. The transaction is seen as highly advantageous. It carries a favourable cost per unit, especially notable as it incurs no additional general and administrative expense for the company.

It is also expected to counteract natural production declines by adding around 122 million cubic feet equivalent per day (MMcfepd) in extra output, with about 80% of this being natural gas. This represents around a 15% increase in overall company production.

Financially, this acquisition is expected to generate robust cash flows, with a projected underlying profit (adjusted EBITDA) of $126 million for 2024. This translates to an attractive EBITDA multiple of roughly 3.1 times.

26 Feb 2024

Diversified Energy Company PLC (LSE:DEC, NYSE:DEC) today launched a tender offer, giving its shareholders the option to participate in the company’s share buy-back programme.

It comes as the company seeks to give shareholders optionality whilst it advances a capital-return strategy.

15 Feb 2024

Diversified Energy Company PLC (LSE:DEC, NYSE:DEC) is to give shareholders a choice as it rolls out a US$43 million capital return programme – they can either receive a dividend or sell their shares back to DEC via a tender offer.

The overall US$43 million pot is equivalent to the total dividends paid for the third quarter.

What the brokers say

20 Mar 2024

Stifel has resumed coverage of Diversified Energy Company PLC (LSE:DEC, NYSE:DEC) with a bullish outlook, highlighting the firm's strategic growth initiatives, value enhancement through acquisitions, and efficient capital reallocation. 

Diversified's recent acquisition of Oaktree Capital's interest in certain Central Region assets, valued at approximately $410 million, represents the group's largest venture in the Central Region of the US to date and is expected to significantly bolster its financial positioning.

The acquired assets are forecast to generate an adjusted EBITDA of $126 million in 2024, with an expected payback period of less than five years.

What management says

01 Feb 2024

 

Diversified Energy CEO Rusty Hutson joined Steve Darling from Proactive to share news regarding an innovative transaction that the company has closed. This transaction has allowed Diversified Energy to unlock additional value from its existing asset base while also improving liquidity and reducing leverage. Diversified Energy is primarily focused on natural gas and liquids production, transportation, marketing, and well retirement.

Hutson explained that the company decided to execute a sale of producing assets in Appalachia to a Special Purpose Vehicle (SPV), while retaining a 20% minority interest in the SPV and maintaining operatorship of the assets. This strategic move generated proceeds of approximately $200 million for Diversified Energy, comprising an Asset Backed Securitization placed at the SPV and a sale of an 80% equity interest in the SPV for approximately $30 million.

Diversified Energy announces closing of innovative deal to unlock current...

  Diversified Energy CEO Rusty Hutson joined Steve Darling from Proactive to share news regarding an innovative transaction that the company has closed. This transaction has allowed Diversified Energy to unlock additional value from its existing asset base while also improving liquidity and...

on 02/01/2024