Diversified Energy: Expanding into the Permian Basin

Diversified Energy Company PLC (DEC) is nearing a deal to acquire operated natural gas properties and related facilities in the Permian Basin from Summit Natural Resources. This strategic acquisition will expand DEC's presence in the region and bring several benefits to the company. The acquisition is expected to close during the first quarter of 2025, subject to customary terms and conditions.



The acquired assets include 300 net producing wells, with current net production of ~12 MMcfepd (2 Mboepd), and PDP Reserves of 65 Bcfe (11 MMBoe) with a PV-10 of ~$55 million. The purchase price of ~$45 million will be fully funded through cash on hand and current liquidity. The acquisition is expected to generate ~$12 million in estimated 2025 Adj. EBITDA.



The acquisition brings several strategic benefits to DEC:

1. Strategic Location and Synergies: The acquired assets are located within DEC's existing southern Appalachia operations, allowing for synergies and increased cash margins. This overlap in operations enables DEC to quickly integrate the new assets and deploy its Smarter Asset Management practices.
2. Growth in Coal Mine Methane (CMM) Revenues: The acquisition includes wells that qualify for Alternative Energy Credit generation through CMM production, expanding DEC's ability to generate CMM Revenues. This growth in CMM Revenues aligns with DEC's commitment to its strategic imperative of "Energy-Optimized" and improving operational and emissions performance.
3. Midstream Pipeline Growth: The acquisition includes strategic midstream pipeline assets that facilitate the routing of additional produced volumes to premium sales points. This growth in midstream infrastructure supports DEC's long-term goal of expanding margins and creating long-term value for shareholders.
4. Consolidation and Scale: The acquisition allows DEC to leverage its existing capabilities, assets, and intellectual capital to grow its revenue stream inorganically. This expansion aligns with DEC's commitment to maintaining a strong balance sheet and liquidity.
5. Long-term Growth Potential: The acquisition's PDP Reserves and estimated 2025 Adj. EBITDA indicate the long-term growth potential of the assets. This aligns with DEC's goal of consistent cash flow generation and long-term value creation for shareholders.

In conclusion, Diversified Energy's expansion into the Permian Basin through the acquisition of operated natural gas properties and related facilities brings several strategic benefits and aligns with the company's long-term goals. The acquisition will contribute to DEC's short-term production and revenue growth through the addition of new wells and reserves, and the long-term growth potential of the assets will continue to drive the company's growth and value creation.