Diversified Energy strikes gold with massive Texas gas deal

Diversified Energy Company PLC (LSE: DEC; NYSE: DEC), a leader in the natural gas sector, has executed a conditional purchase and sale agreement to acquire key natural gas properties and related facilities in eastern Texas from Crescent Pass Energy. The acquisition, valued at $106 million before adjustments, with an estimated net purchase price of $100 million, underscores the company’s strategic expansion efforts. It will be financed through the issuance of approximately 2.4 million new U.S. dollar-denominated ordinary shares directly to the seller and a senior secured bank facility, highlighting the company’s robust financial strategies and recently increased borrowing capacity.

This transaction is poised to enhance Diversified’s operational footprint significantly, adding 38 MMcfepd (6 Mboepd) of production, which is a 5% increase over the first quarter of 2024. The assets, valued at a purchase multiple of 3.8x with an EBITDA estimate of approximately $26 million for the next twelve months, are expected to close in the third quarter of 2024. The assets are particularly attractive due to their low decline rate of about 9% annually, aligning with the company’s focus on high-quality, low-decline assets.

Diversified Energy Company PLC secures a major acquisition of natural gas properties in Texas for $100 million, expanding its footprint and enhancing operational efficiencies.

The CEO of Diversified, Rusty Hutson, Jr., emphasized the strategic fit of the acquisition, stating, “The target assets are a perfect fit with our existing East Texas operations and offer meaningful opportunities for cost efficiencies upon completion of the Acquisition.” This acquisition not only increases the company’s scale in its Central region but also aligns with its Smarter Asset Management approach aimed at enhancing margins and growing free cash flow.

The assets include 827 net operated PDP wells, over 500 miles of owned pipelines, and associated compression facilities, along with additional undeveloped acreage that presents further upside potential. Their proximity to Diversified’s existing East Texas assets is expected to create immediate operational synergies, enhancing overall efficiency and performance.

This transaction is classified as a Class 2 transaction under the FCA Listing Rules, adhering to rigorous disclosure obligations. The acquisition’s strategic and financial metrics are based on detailed engineering reserves assumptions and market conditions as of mid-2024, reflecting the company’s commitment to transparency and fiscal prudence.

This acquisition represents a significant step for Diversified Energy Company PLC in consolidating its leadership in the natural gas industry. By strategically acquiring and managing mature producing assets, Diversified not only strengthens its market position but also demonstrates a sustainable business model that can adapt to dynamic market conditions and capitalize on operational synergies.