Diversified Energy Company PLC Diversified Closes Value Enhancing Asset Sale (2746Y)
02 Enero 2024 - 1:00AM
UK Regulatory
TIDMDEC
RNS Number : 2746Y
Diversified Energy Company PLC
02 January 2024
2 January 2024
Diversified Energy Company PLC
("Diversified" or the "Company")
Diversified Closes Value Enhancing Asset Sale
Diversified Energy Company PLC (LSE: DEC, NYSE: DEC) is pleased
to announce that it has closed an innovative transaction (the
"Transaction") that has allowed the Company to unlock additional
value from its current asset base at an attractive multiple while
further enhancing liquidity and reducing leverage.
In summary, the Transaction consisted of the Company executing a
sale of producing assets in Appalachia (the "Assets") to a Special
Purpose Vehicle ("SPV"; DP Lion Equity Holdco LLC) in which
Diversified retained a 20% minority interest and operatorship of
the Assets. The Transaction generated proceeds to the Company of
approximately $200 million, comprised of an Asset Backed
Securitization placed at the SPV and a sale of an 80% equity
interest in the SPV for approximately $30 million. Proceeds (net of
transaction-related costs) were used to repay outstanding
borrowings under the Company's Sustainability-Linked Loan
(revolving credit facility), resulting in an approximate 12%
reduction in net debt, and for general corporate purposes.
The implied valuation of the Transaction represents a multiple
of 5.7 times the expected hedged 2024 EBITDA of approximately $35
million. The sold Assets owned by the SPV were previously included
as collateral on the Company's Sustainability-Linked Loan and had a
PV-10 of approximately $230 million (gross production 50 MMcfe per
day) based on forward looking commodity prices, which resulted in
the borrowing base for the Company's revolving credit facility
being redetermined to $305 million.
Rusty Hutson, Jr., CEO of the Company, commented:
"This latest transaction further demonstrates the attractiveness
of Diversified's asset base that provides reliable production and
consistency of cash flows. At an attractive multiple, this
Transaction has provided a path for the Company to unlock
additional value from our assets, reduce our outstanding debt, and
enhance our liquidity."
For further information, please contact:
Diversified Energy Company PLC +1 973 856 2757
Doug Kris dkris @dgoc.com
www.div.energy
FTI Consulting DEC@fticonsulting.com
US & UK Financial Public Relations
About Diversified Energy Company PLC
Diversified is a leading publicly traded energy company focused
on natural gas and liquids production, transport, marketing, and
well retirement. Through our differentiated strategy, we acquire
existing, long-life assets and invest in them to improve
environmental and operational performance until retiring those
assets in a safe and environmentally secure manner. Recognized by
ratings agencies and organizations for our sustainability
leadership, this solutions-oriented, stewardship approach makes
Diversified the Right Company at the Right Time to responsibly
produce energy, deliver reliable free cash flow, and generate
shareholder value.
Non-IFRS Financial Measures
The SPV prepares and presents its consolidated financial
statements in accordance with International Financial Reporting
Standards. However, management believes that EBITDA multiple, a
non-IFRS financial measure, provides investors with additional
useful information in evaluating the transaction. This non-IFRS
measure is not intended to be a substitute for any IFRS financial
measure and, as calculated, may not be comparable to other
similarly titled measures of performance of other companies in
other industries or within the same industry.
We calculate and define EBITDA of the SPV as net income,
adjusted to exclude: (1) interest expense, (2) income tax expense,
and (3) depreciation and amortization. EBITDA has limitations as an
analytical tool and should not be considered in isolation or as a
substitute for financial information presented in accordance with
IFRS. Some of the limitations of EBITDA include that (1) it does
not reflect capital commitments to be paid in the future, (2)
although depreciation and amortization are non-cash charges, the
underlying assets may need to be replaced and EBITDA does not
reflect these capital expenditures, (3) it does not reflect tax
payments that may represent a reduction in cash available to us and
(4) it does not include certain non-recurring cash expenses that we
do not believe are representative of the SPV's business on a
steady-state basis. Because of these limitations, when evaluating
the SPV's performance, you should consider Adjusted EBITDA
alongside other financial measures, including the SPV's net loss
and other results stated in accordance with IFRS.
Additionally, management believes that the presentation of the
non-IFRS financial measure of PV-10 provides useful information to
investors because it is widely used by professional analysts and
sophisticated investors in evaluating natural gas and oil companies
and properties. PV-10 is not a measure of financial or operating
performance under IFRS. PV-10 should not be considered as an
alternative to the standardized measure as defined under IFRS.
PV-10 differs from the standardized measure of discounted future
net cash flows because it does not include the effects of income
taxes. Neither PV-10 nor the standardized measure represents an
estimate of fair market value of our natural gas and oil
properties.
In reliance on the exception provided by Item 10(e)(1)(i)(B) of
Regulation S-K, we have not reconciled the forward-looking multiple
of EBITDA of the SPV or the PV-10 of the Assets included above to
the most directly comparable IFRS measure multiple because the
comparable IFRS measure is not accessible on a forward-looking
basis and the Company is unable to provide such reconciliation,
without unreasonable effort, due to the inherent difficulty in
predicting, with reasonable certainty, the future impact of items
that are outside the control of the SPV or otherwise non-indicative
of its or the Assets ongoing operating performance. Preparation of
such reconciliations would require a forward-looking balance sheet,
statement of income and statement of cash flow, prepared in
accordance with IFRS, of the SPV and such forward-looking financial
statements are unavailable to the SPV without unreasonable
effort.
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