REG - Diversified Energy - Diversified Closes East Texas Asset Acquisition

Diversified EnergyAnnouncement

30/10/2024 07:00

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RNS Number : 1315K  Diversified Energy Company PLC  30 October 2024

October 30, 2024

 

 Diversified Energy Company PLC

("Diversified" or the "Company")

Diversified Energy Closes Acquisition of East Texas Assets

Diversified Energy Company PLC (LSE: DEC, NYSE:DEC) ("Diversified" or the
"Company") announces the closing of its previously announced acquisition of
operated natural gas properties located within eastern Texas (the "Assets")
from a regional operator (the "Seller") (the "Acquisition").

Acquisition Highlights

•     Total gross purchase price of $69 million before customary
purchase price adjustments

◦     $68 million for high working-interest PDP asset package

◦     $1 million for residual (5%) interest of retained undeveloped
acreage

•     Acquisition net purchase price of $49 million after customary
purchase price adjustments

▪     PDP reserves of ~70 Bcfe (~12 MMBoe) and a PDP PV10 of ~$89
million((a))

▪     Current net production of 21 MMcfepd (~4 MBoepd)((b))

•     Estimated NTM Adjusted EBITDA of ~$19 million million((c))

•     Purchase price multiple of ~3.5x((c)) (gross)

 

As previously announced, the net consideration for the Acquisition consists of
a combination of the issuance of 2,342,445 new US-dollar denominated ordinary
shares to the Seller (the "New Shares"), and cash consideration of $22
million, drawing from a senior secured bank facility supported by the acquired
assets and existing liquidity. The New Shares represent approximately 4.57% of
the Company's existing issued share capital. The shares conveyed to the seller
are subject to standard regulatory restrictions for a period of six months.

CEO Rusty Hutson, Jr. commented:

"We are excited to announce the completion of another acquisition of
high-quality, bolt-on assets within our Central Region, which are immediately
accretive to operations, further increase operating scale and provide the
opportunity for cost synergies. We look forward to welcoming our new employees
as Diversified leverages their experience for efficient integration, and the
deployment of our Smarter Asset Management and sustainability initiatives
across these assets."

 

Admission of Shares and Total Issued Share Capital

The Company has applied for the New Shares to be admitted to the Equity Shares
(Commercial Companies) Category of the Official List of the Financial Conduct
Authority and to trading on the Main Market of the London Stock Exchange PLC,
and expects admission to occur on or around 31 October 2024. The New Shares
will rank pari passu in all respects with the Company's existing ordinary
shares of 20 pence each ("Ordinary Shares"), and will be eligible for trading
on the New York Stock Exchange.

Following the allotment and issue of the New Shares, the Company will have
51,295,645 Ordinary Shares in issue and holds no Ordinary Shares are held in
treasury. Shareholders may use the figure of 51,295,645 as the denominator in
calculations to determine if they are required to notify the Company of their
interest in, or a change to their interest in the Company under the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules.

Footnotes:

 (a)  PDP reserves values (including volumes, PV-10 and approximate PV value)

    calculated using historical production data, asset-specific type curves and an
      effective date of June 1, 2024 and based on the NYMEX strip at August 12,
      2024 through December 2026, with WTI held flat at $70.00/bbl and Henry Hub
      held flat at $3.61/MMBtu thereafter.  PV-10 is a Non-IFRS measure. See "Use
      of Non-IFRS Measures"
 (b)  Current production based on estimated average daily production for October
      2024; Estimate based on historical performance and engineered type curves for
      the Assets
 (c)  Based on engineering reserves assumptions using historical cost assumptions
      and NYMEX strip as of August 12, 2024 for the twelve months ended September
      30, 2025. Purchase price multiple based on Gross Purchase Price and
      Acquisition's estimated Next Twelve Months (NTM) Adjusted EBITDA (unhedged).
      NTM Adjusted EBITDA is a Non-IFRS measure. 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  Interim Report for
the six months ended June 30, 2024.

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
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" 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. 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. The pro forma
financial information in this announcement is for informational purposes only,
is not a projection of our future financial performance, and should not be
considered indicative of actual results that would have been achieved had the
Acquisition actually been consummated on the date or at the beginning of the
period indicated. 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.

PV10

PV10 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, PV10 is based on a pricing methodology and discount factors that
are consistent for all companies. In this announcement, PV10 is calculated
using NYMEX pricing. It is not practicable to reconcile PV10 using NYMEX
pricing to standardized measure in accordance with IFRS at this time.
Investors should be cautioned that neither PV10 nor the Standardized Measure
represents an estimate of the fair market value of proved reserves.

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