Diversified Energy’s $1.27bn acquisition of Maverick Natural Resources: A strategic expansion into liquids-rich assets
Diversified Energy Company PLC (LSE: DEC; NYSE: DEC) has announced the acquisition of Maverick Natural Resources, a portfolio company of EIG, in a transaction valued at approximately $1.27 billion. This transformative deal represents a pivotal step in Diversified Energy’s strategy to expand its portfolio of liquids-rich assets, diversify its commodity mix, and establish a stronger foothold in the U.S. energy market.
The acquisition significantly boosts natural gas production while increasing the company’s exposure to high-yield basins, including the Permian Basin. Upon completion, the combined company will operate across five core regions, producing 1,200 MMcfe/d (~200 Mboe/d), and achieve an enterprise value of $3.8 billion.
How does Maverick Natural Resources strengthen Diversified Energy’s presence in the Permian Basin?
The integration of Maverick Natural Resources introduces Diversified Energy to the Permian Basin, specifically the Northern Delaware region, known for its high-return, liquids-rich zones. This move complements Diversified’s existing operations in the Western Anadarko Basin, particularly in the Cherokee Play, and reinforces its position in other prolific regions, including Appalachia, Barnett, and Ark-La-Tex.
By acquiring Maverick’s portfolio, Diversified Energy enhances its operational scale and shifts its production profile from 85% natural gas and 15% liquids to a more balanced mix of 45% natural gas and 55% liquids. This diversification reduces reliance on natural gas price volatility, ensuring greater revenue stability.
In a statement, Rusty Hutson, Jr., CEO of Diversified Energy, highlighted the strategic benefits of the acquisition:
“This transaction provides us with high-quality assets and exceptional operational expertise that align with our commitment to sustainability and long-term value creation. The combined portfolio spans key regions, offering new opportunities for joint venture partnerships and organic growth.”
What are the financial implications of this acquisition for Diversified Energy?
This energy sector acquisition is expected to deliver a 55% increase in free cash flow, with the combined company generating approximately $345 million in free cash flow annually. Additionally, the acquisition boosts Diversified’s total revenue to an estimated $1.8 billion, with improved adjusted EBITDA margins exceeding $2.00 per Mcfe.
The assets acquired from Maverick are being integrated at a valuation of 3.3 times its trailing 12-month adjusted EBITDA, reflecting strong value-accretive metrics. The deal also includes:
- $700 million in assumed debt, including Maverick’s revolving credit facility and other outstanding credit obligations.
- $345 million in newly issued Diversified Energy shares allocated to Maverick’s unitholders.
- $207 million in cash payments, with adjustments for Maverick’s outstanding debt.
Upon closing, EIG will own approximately 20% of Diversified Energy’s outstanding shares, aligning the two companies’ long-term interests.
How does this acquisition enhance Diversified Energy’s growth strategy?
The acquisition of Maverick Natural Resources aligns with Diversified Energy’s strategy to expand its multi-basin exposure while maintaining disciplined capital management. The combined company benefits from enhanced economies of scale, operational efficiencies, and synergies resulting from its Smarter Asset Management practices.
Diversified plans to integrate Maverick’s experienced technical teams to optimize production and unlock potential from its newly acquired undeveloped acreage. These assets, particularly in the Western Anadarko Basin and Permian Basin, offer significant optionality for organic growth through joint venture partnerships.
The deal also underscores Diversified’s commitment to sustainable energy production. By leveraging technology-driven emissions monitoring and responsible operational practices, the company aims to enhance its environmental performance while driving shareholder value.
What role does EIG play in this transaction?
EIG, a leading investor in energy infrastructure, has played a key role in facilitating this acquisition. As the former owner of Maverick Natural Resources, EIG will remain a core shareholder in the combined company, holding approximately 20% of Diversified Energy’s outstanding shares.
Jeannie Powers, Managing Director and Head of Domestic Traditional Energy at EIG, expressed confidence in Diversified’s ability to drive long-term value:
“Diversified Energy has a unique business model and a proven track record of operational excellence. Combining Maverick’s assets with Diversified’s portfolio represents a strategic opportunity to create sustainable value for all stakeholders.”
What governance changes will occur post-acquisition?
Diversified Energy’s leadership team will remain intact following the transaction, with Rusty Hutson, Jr. continuing as CEO and David Johnson serving as Chairman of the Board. EIG will appoint two directors to Diversified’s Board, reflecting its significant equity stake in the company.
Additionally, Diversified announced the resignation of Sylvia Kerrigan from its Board of Directors, effective January 24, 2025, due to other commitments. Her departure is amicable, and the company has appointed Sandy Stash as lead independent director, effective January 25, 2025.
What’s next for Diversified Energy and Maverick Natural Resources?
The acquisition has been unanimously approved by Diversified’s Board of Directors and is expected to close in the first half of 2025, pending regulatory clearances and shareholder approval.
The newly combined company will focus on debt reduction, sustainable dividends, and strategic share buybacks, ensuring consistent shareholder returns. With access to an upsized $1.5 billion credit facility, Diversified is well-positioned to manage its financial obligations and pursue future growth opportunities.
This acquisition marks a milestone in Diversified Energy’s growth journey, solidifying its reputation as a leader in natural gas production and liquids-rich energy assets.
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