REG - Diversified Energy - Diversified Acquires Complementary Bolt-On Assets

Diversified EnergyAnnouncement

06/01/2025 07:00

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RNS Number : 1514S  Diversified Energy Company PLC  06 January 2025

 

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.

 

 

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