January 6, 2025
Diversified Energy
Company PLC
("Diversified" or the "Company")
Diversified Announces
Strategic Bolt-on Acquisition of Complementary Producing
& Midstream Assets in the Appalachian Basin
Production Economics Expected
to Benefit from Diversified's Regional Presence and
Scale
Acquisition Grows Coal Mine
Methane Revenue Generation Potential
Diversified Energy Company PLC
(LSE:DEC; NYSE:DEC) ("Diversified" or the "Company") is pleased to
announce the acquisition of operated natural gas properties and
related facilities located within Virginia, West Virginia, and
Alabama (the "Assets") from Summit Natural Resources (the "Seller")
(together with the assets, the "Acquisition").
Transaction Highlights
• Purchase
price of ~$45 million, to be fully funded through cash on hand and
current liquidity
• Current
net production of ~12 MMcfepd (2 Mboepd)(a)
• PDP
Reserves of 65 Bcfe (11 MMBoe) with PV-10 of ~$55
million(b)
◦ Purchase
price equivalent of ~PV-16(b)
• Estimated
2025 Adj. EBITDA of ~$12
million(b)
• Existing
Coal Mine Methane ("CMM") volumes with opportunities to extend
future production
•
Appalachian assets overlap existing operations
providing synergies for increased cash margins
• Strategic
midstream pipeline growth facilitating capability to route
additional produced volumes to premium sales points
• Expected
closing of the Acquisition during the first quarter of
2025
Commenting on the Acquisition, CEO
Rusty Hutson, Jr. said:
"This asset package is strategically located within our
existing southern Appalachia operations and is uniquely positioned
to benefit from the operational expertise of our field teams.
Additionally, with this strategic acquisition, we anticipate
capturing additional revenue from the sale of incremental
environmental credits with our growth in the production of coal
mine methane. The acquisition is anchored with stable production
and strategic midstream assets, which provide optionality for
existing production volumes to move to premium-priced markets. This
bolt-on package will provide additional opportunities for us to
drive improved margins through our Smarter Asset Management
programs that continue to be a foundation and support for our
consistent cash flows.
We
continue to believe there is a sizeable backlog of organic Coal
Mine Methane cash flow growth within our current Appalachian
portfolio, and this acquisition highlights our ability to leverage
existing capabilities, assets, and intellectual capital to grow
this segment of our revenue stream inorganically. As we kick-start
2025, we are committed to our strategic imperative of
"Energy-Optimized" and our unique solutions-based approach to
improving operational and emissions performance of acquired assets
while expanding margins and continuing to create long-term value
for our shareholders."
Upside Potential for Coal Mine Methane
Revenues
The Acquisition includes wells that
qualify for Alternative Energy Credit ("Environmental Credit")
generation through the production of Coal Mine Methane ("CMM",
together with the credit "CMM Revenues") and expands Diversified's
ability to generate CMM Revenues. Additional CMM Revenue potential
will be assessed following the close of the Acquisition.
Bolt-On Assets Expected to Benefit from Considerable Scale and
Consolidation Experience
The Acquisition includes
300 net producing wells that are located
within Diversified's operational footprint in the Appalachian
states of Virginia and West Virginia (~60%
of Acquisition production), where personnel will quickly evaluate
and deploy Diversified's Smarter Asset Management practices as the
Assets are integrated into existing operations.
Additionally, the Acquisition
includes 265 net producing Coal Mine
Methane wells located within Alabama (~40%
of Acquisition production) that are highly proximate to
Diversified's corporate headquarters in Birmingham, Alabama. The
Company looks forward to establishing an operating presence in the
region and implementing processes and field operations that build
on Diversified's significant platform of best practices, field
expertise, and technology.
Footnotes:
(a)
|
Current production based on
estimated average daily production for January
2025; Estimate based on historical performance and
engineered type curves for the Assets
|
(b)
|
Based on engineering reserves
assumptions using historical cost assumptions and NYMEX strip as of
October 28, 2024 for the twelve months
ended December 31, 2025. NTM Adjusted EBITDA and PV-10 are Non-IFRS
measures. See "Use of Non-IFRS Measures"
|
For Company-specific items, refer
also to the Glossary of Terms and/or Alternative Performance
Measures found in the Company's 2024 Interim Report dated
June 30, 2024 and Form 20-F for the year ended December 31, 2023
filed with the United States Securities and Exchange
Commission.
For further information, please
contact:
Diversified Energy Company PLC
|
+1
973 856 2757
|
Doug Kris
|
dkris@dgoc.com
|
Senior Vice President, Investor
Relations & Corporate Communications
|
www.div.energy
|
|
|
FTI
Consulting
|
dec@fticonsulting.com
|
U.S. & 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
unique and 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.
Forward-Looking Statements
This announcement contains
forward-looking statements (within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995). These forward-looking
statements, which contain the words "anticipate", "believe",
"intend", "estimate", "expect", "may", "will", "seek", "continue",
"aim", "target", "projected", "plan", "goal", "achieve",
"opportunity" and words of similar meaning, reflect the Company's
beliefs and expectations and are based on numerous assumptions
regarding the Company's present and future business strategies and
the environment the Company will operate in and are subject to
risks and uncertainties that may cause actual results to differ
materially. No representation is made that any of these statements
or forecasts will come to pass or that any forecast results will be
achieved. Expected benefits of the Acquisition may not be realized
and the Acquisition may not close on the terms described in this
release at all. Forward-looking statements involve inherent known
and unknown risks, uncertainties and contingencies because they
relate to events and depend on circumstances that may or may not
occur in the future and may cause the actual results, performance
or achievements of the Company to be materially different from
those expressed or implied by such forward-looking statements. Many
of these risks and uncertainties relate to factors that are beyond
the Company's ability to control or estimate precisely, including
the risk factors described in the "Risk Factors" section in the
Company's Annual Report and Form 20-F for the year ended December
31, 2023, filed with the United States Securities and Exchange
Commission. Forward-looking statements speak only as of their date
and neither the Company nor any of its directors, officers,
employees, agents, affiliates or advisers expressly disclaim any
obligation to supplement, amend, update or revise any of the
forward-looking statements made herein, except where it would be
required to do so under applicable law. As a result, you are
cautioned not to place undue reliance on such forward-looking
statements.
Use
of Non-IFRS Measures
Certain key operating metrics that
are not defined under IFRS (alternative performance measures) are
included in this announcement. These non-IFRS measures are used by
us to monitor the underlying business performance of the Company
from period to period and to facilitate comparison with our peers.
Since not all companies calculate these or other non-IFRS metrics
in the same way, the manner in which we have chosen to calculate
the non-IFRS metrics presented herein may not be compatible with
similarly defined terms used by other companies. The non-IFRS
metrics should not be considered in isolation of, or viewed as
substitutes for, the financial information prepared in accordance
with IFRS. Certain of the key operating metrics are based on
information derived from our regularly maintained records and
accounting and operating systems.
Adjusted EBITDA
As used herein, EBITDA represents
earnings before interest, taxes, depletion, depreciation and
amortization. Adjusted EBITDA includes adjusting for items that are
not comparable period-over-period, namely, accretion of asset
retirement obligation, other (income) expense, loss on joint and
working interest owners receivable, (gain) loss on bargain
purchases, (gain) loss on fair value adjustments of unsettled
financial instruments, (gain) loss on natural gas and oil property
and equipment, costs associated with acquisitions, other adjusting
costs, non-cash equity compensation, (gain) loss on foreign
currency hedge, net (gain) loss on interest rate swaps and items of
a similar nature.
Adjusted EBITDA should not be
considered in isolation or as a substitute for operating profit or
loss, net income or loss, or cash flows provided by operating,
investing, and financing activities. However, we believe such a
measure is useful to an investor in evaluating our financial
performance because it (1) is widely used by investors in the
natural gas and oil industry as an indicator of underlying
business performance; (2) helps investors to more
meaningfully evaluate and compare the results of our operations
from period to period by removing the often-volatile revenue impact
of changes in the fair value of derivative instruments prior to
settlement; (3) is used in the calculation of a key metric in one
of our Credit Facility financial covenants; and (4) is used by us
as a performance measure in determining executive compensation. We
are unable to provide a quantitative reconciliation of
forward-looking Adjusted EBITDA to the most directly comparable
forward-looking IFRS measure because the items necessary to
estimate such forward-looking IFRS measure are not accessible or
estimable at this time without unreasonable efforts. The
reconciling items in future periods could be
significant.
PV-10
PV-10 is a non-IFRS financial measure
and generally differs from Standardized Measure, the most directly
comparable IFRS measure, because it does not include the effects of
income taxes on future net cash flows. While the Standardized
Measure is free cash dependent on the unique tax situation of each
company, PV-10 is based on a pricing methodology and discount
factors that are consistent for all companies. In this
announcement, PV-10 is calculated using NYMEX pricing. It is not
practicable to reconcile PV-10 using NYMEX pricing to standardized
measure in accordance with IFRS at this time. Investors should be
cautioned that neither PV-10 nor the Standardized Measure
represents an estimate of the fair market value of proved
reserves.