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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 has announced its acquisition of high-working interest, operated natural gas properties in eastern Texas from Crescent Pass Energy for $106 million. The acquisition will be funded through a combination of new share issuance and a senior secured bank facility, with an estimated net purchase price of $100 million. The assets include 827 net operated PDP wells, adding 38 MMcfepd of production and 170 Bcfe reserves with a PV-10 valuation of $155 million. The acquisition is expected to close in Q3 2024 and is strategically aligned with Diversified's focus on high-quality, low-decline assets.
Diversified Energy Company (DEC) has completed acquiring a proportionate working interest in certain assets within their Central Region from Oaktree Capital Management. The acquisition, initially announced on March 19, 2024, was closed on June 7, 2024, for a net purchase price of $377 million after adjustments. The acquired assets include PDP reserves of 510 Bcfe with a PDP PV10 value of approximately $462 million. The current net production is 122 MMcfepd, with an estimated 2024 Adjusted EBITDA of ~$126 million.
Additionally, Diversified Energy has increased its revolving credit facility by 26% or $80 million, bringing the total borrowing base to $385 million. This upsize results in an estimated post-transaction liquidity of around $130 million.
Diversified Energy Company (LSE:DEC; NYSE:DEC) announced its inclusion in the Russell 2000 Index, effective July 1, 2024. This follows the company’s solid first-quarter results and recent NYSE listing. CEO Rusty Hutson, Jr. highlighted that the inclusion is a significant milestone, expected to broaden their investor base and enhance trading liquidity. The Russell 2000 Index, part of the annual Russell US Indexes reconstitution, is considered a bellwether of the US economy, focusing on small-cap American businesses. About $10.5 trillion in assets are benchmarked against these indexes, utilized extensively by investment managers and institutional investors for index funds and active investment strategies.
Diversified Energy has announced that its management team will participate in several upcoming investor meetings and conferences. These events include Stifel Investor Meetings on May 23 in Dallas, the Louisiana Energy Conference on May 29-30 in New Orleans, the Jefferies Energy Conference on June 5-6 in Kiawah Island, the JP Morgan Energy Conference on June 18 in New York City, and the KeyBanc Investor Meetings on June 25 virtually. Members attending include CEO Rusty Hutson, CFO Brad Gray, and SVP-IR & Corporate Communications Douglas Kris among others. Presentation materials will be available on the company's website.
Diversified Energy Company PLC (DEC) reported solid first-quarter results with a focus on debt reduction, expense improvements, and the benefits from the expansion of NGL processing capabilities at the Black Bear facility. The company recorded stable production figures, positive cash flow, adjusted EBITDA, and free cash flow. Additionally, strategic acquisitions, share repurchases, debt reduction, and the completion of the Oaktree working interest acquisition are highlighted. The company's commitment to sustainability and value creation through stewardship is emphasized, along with updates on emissions reduction activities, well retirements, and financial derivatives portfolio management.
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