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Diversified Energy expands Texas footprint with $106 million acquisition

EditorAhmed Abdulazez Abdulkadir
Published 07/10/2024, 08:01 AM

BIRMINGHAM - Diversified Energy Company PLC (LSE:DEC)(NYSE:DEC) has announced the conditional acquisition of natural gas properties in eastern Texas from Crescent Pass Energy for a purchase price of $106 million, subject to customary adjustments. The net purchase price is estimated at $100 million, with an anticipated closing during the third quarter of 2024.

The assets, which include operated natural gas properties and related facilities, are expected to complement Diversified's existing operations in the region. They consist of approximately 170 billion cubic feet equivalent (Bcfe) of proved developed producing (PDP) reserves, with a present value-10 (PV-10) of $155 million.

The acquisition is set to add 38 million cubic feet equivalent per day (MMcfepd) of production, which is a 5% increase over the first quarter of 2024 reported production.

Funding for the acquisition will come 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 supported by the acquired assets. The ordinary shares will be subject to a customary commercial lock-up agreement.

Diversified's CEO, Rusty Hutson, Jr., highlighted the strategic fit of the acquired assets with the company's existing portfolio, noting the potential for cost efficiencies and the alignment with the company's focus on high-quality, low-decline producing assets.

The acquired properties are expected to maintain Diversified's industry-leading corporate declines and capital intensity with an annual decline rate of approximately 9%. The production is significantly gas-weighted, with approximately 92% gas volumes. The acquisition also includes over 500 miles of owned pipelines and compression facilities, as well as undeveloped acreage that presents further potential upside opportunities.

This acquisition is classified as a Class 2 transaction under the FCA Listing Rules, and the announcement complies with the company's disclosure obligations pursuant to Chapter 10 of the FCA Listing Rules.

The information in this article is based on a press release statement from Diversified Energy Company PLC.

In other recent news, Diversified Energy Company has been making significant strides. Truist Securities initiated coverage on the company with a Buy rating, highlighting its strong performance in shareholder returns and a well-hedged business strategy. The firm also noted Diversified Energy's high free cash flow yield, approximately 8% fixed dividend, and its lower base production decline rate of around 10% year-over-year as key positive attributes.

Further, Truist Securities anticipates that Diversified Energy will continue to be active in the mergers and acquisitions landscape. This is in line with the company's history of making strategic acquisitions and capitalizing on opportunities presented by the current wave of non-core asset divestitures in the exploration and production space.

Adding to these developments, Diversified Energy Company has announced its impending inclusion in the Russell 2000® Index. This is expected to enhance the company's visibility in the U.S. investment community, potentially expanding its investor base and enhancing stock trading liquidity. The CEO, Rusty Hutson, Jr., views this as a significant milestone for the company that follows robust first-quarter results and a recent listing on the New York Stock Exchange.

InvestingPro Insights

In light of Diversified Energy Company PLC's recent acquisition announcement, a glance at the company's financials and market performance through InvestingPro provides valuable insights. With a market capitalization of $676.51 million USD and a particularly low P/E ratio of 0.9 as of the last twelve months ending Q4 2023, the company presents an interesting case for investors looking for value in the energy sector. The low price to earnings ratio could suggest that the market has not yet fully recognized the potential earnings power of Diversified's expanded asset base post-acquisition.

Investors eyeing dividend income might find Diversified Energy's consistent dividend payments appealing. An InvestingPro Tip notes that the company has not only maintained but raised its dividend for 8 consecutive years, showcasing a commitment to returning value to shareholders. Moreover, the dividend yield stands at a significant 5.7% as of the latest data, which is quite attractive in the current investment landscape.

However, it's worth noting that the company's revenue has seen a substantial decline, with a -56.28% change over the last twelve months as of Q4 2023. This could be a point of concern for investors, although the strategic acquisition might be aimed at reversing this trend through increased production and operational efficiencies.

For those considering a deeper dive into Diversified Energy's financial health and future prospects, InvestingPro offers additional tips. There are currently 6 more InvestingPro Tips available, which can provide further guidance on the company's performance and outlook. Interested readers can access these tips and take advantage of a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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