Diversified Energy Company today announced the execution of a conditional purchase and sale agreement for the acquisition of high-working interest, operated natural gas properties and related facilities located within eastern Texas from Crescent Pass Energy.

The Acquisition will be funded through a combination of the issuance of approximately 2.4 million new U.S. dollar-denominated ordinary shares direct to the Seller and a senior secured bank facility supported by the acquired assets, along with existing and expanded liquidity from the Company's recently increased borrowing capacity. The ordinary shares will be subject to a customary commercial lock-up agreement. The Company expects to close the Acquisition in the third quarter of 2024.

Acquisition Highlights

• Purchase price of $106 million before anticipated, customary purchase price adjustments

  • Estimated Net Purchase Price of $100 million

  • Anticipated close during the third quarter of 2024

• Net purchase price represents a PV-20 valuation

• Current net production of 38 MMcfepd (6 Mboepd)(a) with low annual declines of ~9%(b)

  • Complements industry-leading corporate declines and capital intensity

  • Significantly gas-weighted production with ~92% gas volumes

  • Attractively priced at $2,651 per flowing Mcfe

  • Provides opportunities for additional cost efficiencies

• Estimated NTM EBITDA of ~$26 million(c) representing a 3.8x purchase multiple

  • PDP Reserves of ~170 Bcfe (28 MMboe) with PV-10 of $155 million(b)

• Assets are contiguous with Diversified's existing East Texas assets

  • Proximity to existing assets creates immediate line of sight to future operating efficiencies

  • Includes ~170,000 acres of commercially attractive leasehold in both East Texas and the Freestone Trend

Commenting on the Acquisition, CEO Rusty Hutson, Jr. said:
"The target assets are a perfect fit with our existing East Texas operations and offer meaningful opportunities for cost efficiencies upon completion of the Acquisition. The accretive transaction adds scale to our Central region footprint and remains consistent with our strategy to focus on high-quality, low-decline producing assets at attractive PV values where we can apply our Smarter Asset Management approach to enhance margins and grow free cash flow. The evolution of our funding sources, illustrated by the use of direct equity issuance to the seller as a portion of the consideration, highlights the importance of our recent NYSE listing while providing additional financial flexibility. Our Company has a long-standing, demonstrated track record of delivering value to shareholders from our strategy of acquiring, optimizing, and managing mature producing assets, making us the Right Company at the Right Time."

Bolt-On Addition of Low-Decline PDP Assets

The Acquisition's estimated NTM EBITDA of ~$26 million represents a 3.8x purchase multiple and reflects attractive valuations of PV-20 and $2,651 per flowing Mcfe, well within the Company's target valuation range.

The Assets include 827 net operated PDP wells and are expected to add 38 MMcfepd (6 Mboepd) of production (+5% vs 1Q2024 reported of 723 MMcfepd) and ~170 Bcfe reserves with a PV-10 of $155 million. Additionally, the production profile of the Assets are highly complementary to the Company's existing portfolio and operational strategy, with low annual production declines of ~9% per year that result in an unchanged consolidated decline rate, pro forma for the Acquisition. The Assets also include over 500 miles of owned pipelines and associated compression facilities and feature additional undeveloped acreage that presents potential upside opportunities in line with Diversified's demonstrated ability to unlock value on non-core assets.

The Assets are in close proximity to the Company's previously acquired East Texas assets and provide opportunities to realize synergies attributable to operating scale and asset density.

The Acquisition constitutes a Class 2 transaction for the purposes of the FCA Listing Rules, and this announcement is made in accordance with the Company's disclosure obligations pursuant to Chapter 10 of the FCA Listing Rules.

1. Current production based on estimated average daily production for August 2024; Estimate based on historical performance and engineered type curves for the Assets

2. Estimated annual rate of production declines and 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 May 1, 2024 and based on the 4-year NYMEX strip at June 18, 2024 with terminal price assumptions of $3.94/MMBtu and $68.06/Bbl for natural gas and oil, respectively. For more information, please refer to "Use of Non-IFRS Measures"

3. Based on engineering reserves assumptions using historical cost assumptions and NYMEX strip as of June 18, 2024 for the 12 month period ended July 31, 2025; does not include the impact of any projected or anticipated synergies that may occur subsequent to acquisition Purchase price multiple based on Net Purchase Price and Acquisition's estimated Next Twelve Months (NTM) Adjusted EBITDA (unhedged)

KeyFacts Energy Industry Directory: Diversified Energy   l   KeyFacts Energy: Acquisitions & Mergers news