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Overview of Diversified Energy Company PLC
Diversified Energy Company PLC (DEC) is a publicly traded energy company specializing in the acquisition, operation, and optimization of mature natural gas and oil assets. Headquartered in Birmingham, Alabama, DEC's operations are concentrated in the Appalachian Basin and the Central United States, spanning states such as West Virginia, Pennsylvania, Ohio, Texas, and Louisiana. The company is listed on both the London Stock Exchange (LSE: DEC) and the New York Stock Exchange (NYSE: DEC).
Core Business Model
DEC's business model revolves around acquiring long-life, low-decline producing assets and leveraging its proprietary Smarter Asset Management approach to enhance operational efficiency and maximize cash flow. By focusing on mature assets with stable production profiles, the company minimizes capital intensity while generating consistent free cash flow. DEC also operates associated midstream infrastructure, enabling cost-efficient transport and marketing of its production.
Geographic Footprint and Asset Portfolio
The company's diversified asset base includes thousands of producing wells and extensive midstream networks. Its Appalachian operations are a cornerstone of its portfolio, benefiting from proximity to high-demand markets and established infrastructure. Recent expansions into Texas and Louisiana have bolstered its Central region footprint, providing additional scale and opportunities for operational synergies.
Differentiated Strategies
- Smarter Asset Management: DEC employs data-driven techniques to optimize production, reduce costs, and extend the economic life of its wells.
- Environmental Stewardship: The company is committed to responsible asset retirement and has developed expertise in well plugging and reclamation. It also generates revenue through the capture and sale of Coal Mine Methane (CMM), contributing to environmental sustainability.
- Hedging and Financial Discipline: DEC uses an extensive hedging program to mitigate commodity price volatility, ensuring stable cash flows and protecting shareholder value.
Competitive Position
Diversified Energy operates in a competitive landscape alongside major oil and gas producers and smaller independent operators. Its focus on mature, low-decline assets and operational efficiency sets it apart. The company's integrated midstream capabilities and geographic diversification further enhance its resilience and market access. Additionally, its emphasis on environmental performance positions it favorably in an industry increasingly scrutinized for sustainability practices.
Challenges and Opportunities
While DEC's reliance on acquisitions raises questions about long-term organic growth, its disciplined approach to asset integration and cost management mitigates these concerns. The company's expansion into adjacent revenue streams, such as CMM credits and LNG supply agreements, highlights its adaptability and commitment to value creation.
Conclusion
Diversified Energy Company PLC exemplifies a strategic approach to natural gas and oil production, focusing on operational excellence, environmental responsibility, and financial stability. Its unique business model and diversified asset base make it a significant player in the energy sector, offering reliable cash flow and sustainable growth opportunities.
Diversified Energy Company (LSE/NYSE:DEC) has completed two significant transactions: the acquisition of Summit Natural Resources assets and its tenth Asset Backed Securitization (ABS X). The Summit acquisition, valued at ~$42 million, includes natural gas properties and midstream infrastructure across Virginia, West Virginia, and Alabama, delivering ~12 MMcfepd current net production and 65 Bcfe in PDP reserves.
The $530 million ABS X note refinancing achieved record demand (6.5x oversubscribed) and features a master trust structure with investment-grade rated notes carrying a ~6.4% blended fixed coupon in A tranche. Strategic hedges are expected to boost EBITDA by ~40% ($38 million) for refinanced assets. The acquisition assets feature Coal Mine Methane volumes with potential for expanded production and environmental credits, while benefiting from premium Transco Zone 5 pricing exposure.
Diversified Energy Company (LSE: DEC; NYSE: DEC) has announced the pricing of its underwritten public offering of 8.5 million ordinary shares at $14.50 per share, expecting to raise approximately $123.3 million in gross proceeds. The offering is set to settle on February 21, 2025.
The underwriters have a 30-day option to purchase up to an additional 850,000 ordinary shares. The company plans to use the net proceeds to repay part of the debt expected from the proposed acquisition of Maverick Natural Resources, If the acquisition doesn't close, the funds will be used for debt repayment and general corporate purposes.
The offering is being managed by multiple financial institutions, with Citigroup and Mizuho acting as joint book-running managers. The completion of the offering is not conditional upon the Maverick acquisition, and vice versa.
Diversified Energy Company PLC (LSE: DEC; NYSE: DEC) has announced a proposed underwritten public offering of up to 8.5 million ordinary shares in the United States, with an additional option for underwriters to purchase up to 850,000 shares. Citigroup and Mizuho are serving as joint book-running managers for the offering.
The company plans to use the net proceeds to repay a portion of the debt expected from its proposed acquisition of Maverick Natural Resources, , announced on January 27, 2025. If the acquisition doesn't close, proceeds will be used for debt repayment and general corporate purposes. The offering's completion is not contingent on the acquisition, and vice versa.
Diversified Energy Company (DEC) reported strong financial results for 2024, with full-year average production of 791 MMcfepd and an exit rate of 864 MMcfepd in December 2024, marking an 11% increase from December 2023. The company achieved Adjusted EBITDA of $470-$475 million with a 50% margin, and Adjusted Free Cash Flow of $210-$215 million.
Key financial metrics include Total Revenue of $3.21/Mcfe and Adjusted Operating Cost of $1.70/Mcfe. DEC returned $105 million to shareholders, including $21 million in share buybacks, while retiring over $200 million in debt principal. The company completed $585 million in acquisitions during 2024 and announced a transformative $1.3 billion acquisition of Maverick Natural Resources.
The company maintained its environmental commitments by retiring 202 operated wells in 2024, exceeding its goal of 200 wells per year. DEC enters 2025 with approximately 80% of consolidated production hedged, positioning itself for potential market improvements.
Diversified Energy (LSE:DEC)(NYSE:DEC) has announced a definitive agreement to acquire Maverick Natural Resources for approximately $1.275 billion. The acquisition combines complementary asset packages and is expected to result in a 95% increase in revenue and a 55% increase in free cash flow.
The combined company will have an enterprise value of approximately $3.8 billion, operating across five distinct regions with a combined production of ~1,200 MMcfe/d. Maverick brings significant liquids exposure, with its production mix being 55% liquids and 45% natural gas, complementing Diversified's 85% natural gas and 15% liquids mix.
The transaction will be funded through the assumption of approximately $700 million of Maverick debt, issuance of 21.2 million new Diversified Ordinary Shares valued at approximately $345 million, and approximately $207 million in cash. Upon completion, EIG will own approximately 20% of outstanding Ordinary Shares. The acquisition is expected to close during the first half of 2025.
Pioneer Energy and Diversified Energy (DEC) have secured a $5 million grant from the U.S. Department of Energy and EPA to adapt Pioneer's Emission Control Treater™ (ECT) technology for marginal conventional wells. The technology will be demonstrated at DEC's East Texas locations for 12 months.
The ECT technology offers superior separation compared to existing phase separators, increasing crude yield by 5-10% while eliminating routine flaring and atmospheric storage tanks. The system features cloud-connected automation for remote monitoring and control, reducing operational costs and maintenance requirements.
The grant will fund the development of mini-ECT units as cost-effective replacements for existing infrastructure at marginal well sites. The demonstration will take place in the Cotton Valley Basin, aiming to extend well economic lifetime while eliminating methane emissions and flaring.
Pioneer Energy has secured $27 million in DOE funding through four distinct awards. The primary focus is on advancing their Emission Control Treater™ (ECT), a revolutionary zero-emissions well pad production technology that can boost crude yield by 5-10%. Three awards totaling $21 million will support ECT development across different applications, including a $10MM commercial-scale project, a $6MM sour crude processing initiative, and a $5MM marginal wells program.
The ECT technology eliminates routine flaring, removes the need for atmospheric storage tanks, and improves separation efficiency. It features cloud-connected automation for remote monitoring and control, reducing operational costs. The fourth grant, worth $6MM, partners with Emvolon to develop a flare gas to methanol system. All projects will undergo extended field demonstrations, with emissions reduction validation by Colorado School of Mines and Montrose Environmental Group.
Diversified Energy Company (LSE:DEC)(NYSE:DEC) has announced the acquisition of natural gas properties and facilities in Virginia, West Virginia, and Alabama from Summit Natural Resources for approximately $45 million. The acquisition includes current net production of ~12 MMcfepd, PDP Reserves of 65 Bcfe with PV-10 of ~$55 million, and is expected to generate ~$12 million in estimated 2025 Adj. EBITDA.
The strategic acquisition encompasses 300 net producing wells in Appalachia (~60% of production) and 265 net producing Coal Mine Methane wells in Alabama (~40% of production). The assets overlap with existing operations, providing operational synergies and opportunities to enhance cash margins. The deal includes strategic midstream pipeline assets that enable routing of production to premium sales points.
The transaction, expected to close in Q1 2025, will be fully funded through cash on hand and current liquidity. The acquisition expands DEC's Coal Mine Methane revenue generation potential and is expected to benefit from the company's Smarter Asset Management programs.
Diversified Energy Company (LSE:DEC)(NYSE:DEC) has announced its management team's participation in several upcoming investor conferences and meetings. The team, including Rusty Hutson (Founder & CEO), Brad Gray (President & CFO), and Douglas Kris (SVP-IR & Corporate Communications), will attend five major events between November and December 2024.
The schedule includes the Southwest IDEAS Conference in Dallas (Nov 20), Stephens Annual Investment Conference in Nashville (Nov 21), Reuters Energy Transition North America in Houston (Dec 5), Mizuho Energy, Power & Infrastructure Conference in New York (Dec 10), and Truist Energy Event in Houston (Dec 17). Presentation materials are available on the company's investor relations website.
Diversified Energy (LSE/NYSE:DEC) reported Q3 2024 results with average production of 829 MMcfepd and September exit rate of 851 MMcfepd. The company achieved Operating Cash Flow of $102 million, Adjusted EBITDA of $115 million, and Free Cash Flow of $47 million, with a 49% EBITDA margin. Total Revenue per Unit was $3.23/Mcfe. The company retired $154 million in debt principal year-to-date, declared a $0.29 dividend, and repurchased ~1.4 million shares worth $20 million. Notable developments include a fixed-price LNG export contract, $23 million from undeveloped leasehold sales, and expansion into Coal Mine Methane generating $8-10 million EBITDA in 2024.
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