REG - Diversified Energy - Trading Statement
11/02/2025 07:15
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RNS Number : 5964W Diversified Energy Company PLC 11 February 2025
February 11, 2025
Diversified Energy Company PLC
("Diversified" or the "Company")
Diversified Energy's Unique Strategy Produces Reliable Cash Flow and Strong
Full Year 2024 Results
Seventh Year in a Row of Approximately 50% or Better Cash Margins
Cash Flow Growth Initiatives Contributed Over $50 million in Cash Flow
Company Returned Over $105 million to Shareholders in 2024
Diversified Energy Company PLC (LSE: DEC, NYSE: DEC) is pleased to announce
the following operations and trading update for the year ended December 31,
2024.
Delivering Reliable Results
• Full-year 2024 average production of 791 MMcfepd (132 Mboepd)
◦ 4Q24 average production of 843 MMcfepd (141 Mboepd)
◦ December 2024 exit rate of 864 MMcfepd (144 Mboepd)
• 2024 Adjusted EBITDA((a)) of $470-$475 million; Adjusted Free Cash
Flow((b)) of $210-$215 million
• 2024 Adjusted EBITDA Margin((a)) of 50%and TTM Adjusted Free Cash
Flow Yield((b)) of 33%
◦ 2024 Total Revenue, Inclusive of Settled Hedges per Unit((c)) of
$3.21/Mcfe ($19.28/Boe)
◦ 2024 Adjusted Operating Cost per Unit((d)) of $1.70/Mcfe
($10.22/Boe)
Cash Flow Growth Initiatives
• Announced fixed-price contract for gas delivery to a major Gulf
Coast LNG export facility
• Generated ~$42 million year-to-date in cash flow through
divestiture of undeveloped leasehold
• Recorded $8 million in impact to Adjusted EBITDA from Coal Mine
Methane ("CMM") Revenues
Executing Strategic Objectives and Milestones
• Retired over $200 million in debt principal through amortizing
debt payments
• Returned $105 million to shareholders, including $21 million in
share buybacks((e))
• Completed $585 million (gross) in strategic and bolt-on
acquisition during 2024
• Announced accretive bolt-on acquisition of southern Appalachia
assets from Summit Natural Resources
• Announced transformative $1.3 billion acquisition of Maverick
Natural Resources
• Marked one full year of trading on the New York Stock Exchange and
as is customary, the Company expects to file a shelf registration with the US
Securities and Exchange Commission
Next LVL Milestones
• The Company retired 202 operated wells in 2024, marking its third
consecutive year to exceed its stated goal of retiring 200 wells per year
• Next LVL Energy completed a total 287 well retirements, including
Diversified's wells and 85 wells associated with state-owned orphan wells and
third-party operators
Rusty Hutson, Jr., CEO of Diversified, commented:
"Our team executed extremely well and continued to deliver solid results in
2024 that enabled us to advance our balanced capital allocation framework. Our
strong results highlight our unique business model that strives to deliver
consistent cash flow during the full range and volatility of commodity cycles.
Aligned with our priorities, we generated significant cash flows, returned
capital to investors, and paid down more than $200 million in debt principal,
all while executing and integrating over $585 million in accretive
acquisitions. Once again, our ability to deliver durable production and
consistent cash flow throughout the year was a result of our team's relentless
execution of our strategies. We are committed to lowering costs and improving
operational efficiencies across the organization, along with providing
innovative solutions to extract hidden value from our asset base. The results
we have achieved in 2024 strike at the heart of our business model and
strategy.
We believe that 2025 has the potential to be a transformative year for the
Company as we work to execute our strategic initiative to become the premier
public company focused on managing mature producing assets. The Company's
previously announced accretive acquisitions of Summit Natural Resources and
Maverick Natural Resources are proceeding as planned, and we have received
encouraging comments from both shareholders and the public debt and equity
markets. During the past year, we have seen our strategy and our previous
investment decisions yield increased performance in all aspects of our
business model. We are optimistic about our future and confident that our
current efforts will continue to position us well to have a significant
positive impact on shareholder value."
Operations and Finance Update
Production
Diversified exited the year with December 2024 average production of 864
MMcfepd (144 Mboepd), up 11% versus the December 2023 exit rate of 775 MMcfepd
(129 Mboepd), reflecting the cumulative effect of the Company's 2024
acquisitions and industry-leading PDP declines of ~10% per year((f)).
Diversified ended the year with 4Q24 average production of 843 MMcfepd (141
Mboepd) and full-year 2024 average production of 791 MMcfepd (132 Mboepd).
The Company's production continues to be positively impacted by Diversified's
Smarter Asset Management ("SAM") approach focused on the improvement and
optimization of production profiles, development of efficiency gains and
extension of well life, and the Company is well-positioned to again-deliver on
a solid operational foundation for robust cash flows in 2025 with the
additional impact of the recently announced acquisitions of Maverick Natural
Resources and Summit Natural Resources.
Margin, Realized Price and Total Cash Expenses per Unit
Diversified's resilient cash flow strategy is exemplified by the Company's
2024 Adjusted EBITDA Margin of 50%, marking the Company's seventh consecutive
annual period of ~50% margins or higher.
The Company's commitment to responsibly hedge production and initiatives to
expand revenue generation is reflected in 2024 Total Revenue, Inclusive of
Settled Hedges per unit of $3.21/Mcfe ($19.28/Boe), with Financial Derivatives
Settled in Cash delivering $151 million in cash flows, and Midstream &
Other Revenue delivering $63 million in supplemental income during the year.
Prudent expense management resulted in the stable Adjusted Operating Cost per
Unit for 2024 of just $1.70/Mcfe ($10.22/Boe) representing a minimal 1% change
when compared to the prior year.
2024 2023
$/Mcfe $/Boe $/Mcfe $/Boe %
Total Commodity Revenue, Including the Impact of derivatives settled in cash $ 3.05 $ 18.30 $ 3.27 $ 19.62 (7)%
Other Revenue(1) 0.16 0.98 0.13 0.75 31 %
Average Realized Price(1) $ 3.21 $ 19.28 $ 3.40 $ 20.37 (5)%
Adjusted Operating Cost per Unit((d)) 2024 2023
$/Mcfe $/Boe $/Mcfe $/Boe %
Lease Operating Expense(2) $ 0.73 $ 4.40 $ 0.64 $ 3.83 15 %
Midstream Expense 0.24 1.44 0.23 1.38 4 %
Gathering and Transportation 0.31 1.86 0.32 1.92 (3)%
Production Taxes 0.12 0.72 0.21 1.26 (43) %
Total Operating Expense(2) $ 1.40 $ 8.42 $ 1.40 $ 8.39 - %
Employees, Administrative Costs and Professional Fees((g)) 0.30 1.80 0.29 1.74 3 %
Adjusted Operating Cost per Unit(2) $ 1.70 $ 10.22 $ 1.69 $ 10.13 1 %
Adjusted EBITDA Margin((a)) 50% 53%
( )
(1) 2024 excludes $0.06/Mcfe ($0.34/Boe) and 2023 excludes $0.09/Mcfe
($0.57/Boe) of other revenues generated by Next LVL Energy 2024 excludes
$0.09/Mcfe ($0.54/Boe) & 2023 excludes $0.08/Mcfe ($0.48/Boe) of proceeds
from land sales
(2) 2024 excludes $(0.07)/Mcfe ($(0.40)/Boe) and 2023 excludes $(0.07)/Mcfe
($(0.43)/Boe) of expenses attributable to Next LVL Energy
Values may not sum due to rounding
( )
( )
Results of Hedging and Current Financial Derivatives Portfolio
( )
Diversified's consistent application of the Company's differentiated hedging
strategy resulted in a 2024 weighted average natural gas hedge floor of
$3.26/MMbtu and realized price of $2.49/MMBtu, providing insulation from
historically low commodity prices and representing respective premiums of 44%
and 10% to the 2024 NYMEX average Henry Hub settlement price of
$2.27/MMbtu((h)). The Company enters 2025 with ~80% of consolidated production
hedged, and stands to benefit from the recent improvement in the forward
strip. The table below reflects Diversified's full-year hedge positions
through calendar year 2027 as of December 31, 2024:
( )
GAS (Mcf) NGL (Bbl) OIL (Bbl)
Wtd. Avg. Hedge Price((i)(j)) ~ % of Production Hedged((k)) Wtd. Avg. Hedge Price((i)) ~ % of Production Hedged((k)) Wtd. Avg. Hedge Price((i)) ~ % of Production Hedged((k))
FY25 $3.32 85% $33.98 60% $64.25 90%
FY26 $3.25 75% $32.38 55% $62.44 55%
FY27 $3.27 70% $32.29 45% $62.67 50%
Environmental Update
Asset Retirement Progress and Next LVL Energy Update
During the year, the Company exceeded its Appalachian well retirement
commitments and stated plugging goals by retiring 202 Diversified-operated
wells. Total well retirements by Next LVL Energy in Appalachia amounted to 287
wells, including 51 retirements associated with state orphan well programs.
Next LVL Energy continues to be a strategic and value-additive component of
Diversified's vertically integrated operations focused on the full life cycle
of operated wells and to provide third-party revenue to offset the cash costs
associated with the retirement of operated wells.
Acquisition Update
2024 Acquisitions Update
The Company's previously announced acquisition of Oaktree Working Interests,
Crescent Pass Energy assets and East Texas assets were successfully closed in
the course of the year, representing $585 million (gross) in strategic,
accretive acquisitions in 2024. These assets have been fully integrated into
Diversified's systems and processes, and are already benefiting from the
Company focus on safe, efficient operations through the application of Smarter
Asset Management.
Summit Natural Resources
Diversified's previously announced acquisition of Appalachia and Alabama
assets from Summit Natural Resources is proceeding as planned and the Company
expects to close the transaction in the first quarter of 2025.
Maverick Natural Resources
As previously announced on January 27, 2025, Diversified has entered into a
definitive agreement to acquire Maverick Natural Resources for total
consideration of approximately $1,275 million. The acquisition of Maverick by
Diversified (the "Acquisition") adds immediate scale, increases liquids
production, and creates a combined company with long-term free cash flow
generation, superior unit cash margins, and a compelling sustainability
profile.
The Acquisition is expected to close during the first half of 2025, subject to
customary closing conditions, including, among others, regulatory clearance
and approval by Diversified shareholders for the issue and allotment of the
Ordinary Shares pursuant to the merger agreement.
2024 Annual Results and Conference Call Details
Diversified will release its 2024 full-year results on Monday, March 17, 2025
and will host a conference call that day at 12:30 PM GMT (8:30 AM EDT) to
discuss the Annual Results.
US (toll-free) + 1 877 836 0271
UK (toll-free) + 44 (0)800 756 3429
Web Audio https://www.div.energy/news-events/ir-calendarevents
(https://www.div.energy/news-events/ir-calendarevents)
Footnotes:
(a) Adjusted EBITDA represents earnings before interest, taxes, depletion, and
amortization, and includes adjustments for items that are not comparable
period-over-period; As presented, Adjusted EBITDA includes the impact of the
accounting basis for land sales; Adjusted EBITDA Margin represents Adjusted
EBITDA (excluding the adjustment for the accounting basis on land sales) as a
percent of Total Revenue, Inclusive of Settled Hedges; For purposes of
comparability, Adjusted EBITDA Margin excludes Other Revenue of $16 million in
2024 and $28 million in 2023, and Lease Operating Expense of $19 million in
2024 and $21 million in 2023 associated with Diversified's wholly owned
plugging subsidiary, Next LVL Energy.
(b) Free Cash Flow represents net cash provided by operating activities less
expenditures on natural gas and oil properties and equipment and cash paid for
interest; As used herein, Adjusted Free Cash Flow represents Free Cash Flow,
plus cash proceeds from undeveloped acreage sales; Adjusted Free Cash Flow
Yield is calculated using 2024 Free Cash Flow per share, divided by the 2024
average share price of $13.47; Free Cash Flow per Share calculated as Adjusted
Free Cash Flow divided by average shares outstanding of 48,031,916 during the
period.
(c) Includes the impact of derivatives settled in cash; Excludes the impact of
land sales during the period; For purposes of comparability, excludes certain
amounts related to Diversified's wholly owned plugging subsidiary, Next LVL
Energy.
(d) Adjusted Operating Cost represent total lease operating costs plus recurring
administrative costs. Total lease operating costs include base lease operating
expense, owned gathering and compression (midstream) expense, third-party
gathering and transportation expense, and production taxes. Recurring
administrative expenses (Adjusted G&A) is a Non-IFRS financial measure
defined as total administrative expenses excluding non-recurring acquisition
& integration costs and non-cash equity compensation; For purposes of
comparability, excludes certain amounts related to Diversified's wholly owned
plugging subsidiary, Next LVL Energy.
(e) Share repurchases include activity by Diversified's Employee Benefit Trust.
(f) Calculated as the rate of decline in average daily production from December
2023 to December 2024, adjusted to exclude the impact of acquisitions and
divestitures.
(g) As used herein, employees, administrative costs and professional services
represents total administrative expenses excluding cost associated with
acquisitions, other adjusting costs and non-cash expenses. We use employees,
administrative costs and professional services because this measure excludes
items that affect the comparability of results or that are not indicative of
trends in the ongoing business.
(h) Calculated as the average monthly settlement price for NYMEX Henry Hub futures
contracts.
(i) Weighted average price reflects the weighted average of the swap price and
floor price for collar contracts as applicable.
(j) MMBtu prices have been converted to Mcf using a richness factor of 1Mcf=1.036
MMBtu, calculated as the weighted average Btu richness factor for the twelve
months ended December 31, 2024.
(k) Illustrative percent hedged, calculated using December 2024 average production
and assuming a consolidated annual corporate decline rate of 10%; Calculation
assumes constant product mix over the illustrative decline period.
For Company-specific items, refer also to the Glossary of Terms and/or
Alternative Performance Measures found 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 and available on the Company's website.
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) concerning the
financial condition, results of operations and business of the Company and its
wholly owned subsidiaries (the "Group"). All statements other than statements
of historical fact are, or may be deemed to be, forward-looking statements.
These forward-looking statements, which contain the words "anticipate",
"believe", "intend", "estimate", "expect", "may","should","intend", "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 and the Group 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. 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 or the Group 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 or the Group's ability to control or estimate precisely,
such as the expected timing and likelihood of completion of the Acquisition
and the risk that problems may arrise in successfully integrating Maverick or
that the combined company may not achieve synergies as expected,as well as
factors such as future market conditions, currency fluctuations, the behavior
of other market participants, the actions of regulators and other factors such
as the Company's or the Group's ability to continue to obtain financing to
meet its liquidity needs, the Company's ability to successfully integrate its
other acquisitions, changes in the political, social and regulatory framework
in which the Company or the Group operate or in economic or technological
trends or conditions. The list above is not exhaustive and there are other
factors that may cause the Company's or the Group's actual results to differ
materially from the forward-looking statements contained in this announcement,
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 "SEC")
and the risk factors descibed in Exhibit 99.2 to the Company's Form 6-k
furnished with the SEC on January 27, 2025.
Forward-looking statements speak only as of their date and neither the Company
nor the Group nor any of its respective 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. In
light of these risks, uncertainties and assumptions, the events described in
the forward-looking statements in this announcement, may not occur. As a
result, you are cautioned not to place undue reliance on such forward-looking
statements. Past performance of the Company cannot be relied on as a guide to
future performance. No statement in this announcement is intended as a profit
forecast or a profit estimate and no statement in this announcement should be
interpreted to mean that the financial performance of the Company for the
current or future financial years would necessarily match or exceed the
historical published for the Company.
Unaudited Financial Information
Certain financial and operating results included in this announcement are
based on unaudited estimated results. These estimated results are subject to
change upon completion of the Company's audited financial statements for the
year ended December 31, 2024, and changes could be material. The Company
anticipates publishing its audited financial results for the year ended
December 31, 2024 on Tuesday, March 17, 2025.
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. We have not presented reconciliations of the non-IFRS
measures included in this announcement because the comparable IFRS measures
will not be accessible until the Company's audited financial results for the
year ended December 31, 2024 are complete. The Company will include the
comparable IFRS measures and reconciliations of the non-IFRS measures in its
release of full-year results, which we expect to publish on Tuesday, March 17,
2025.
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