Good morning from misty Hamburg where the Sky Princess eased in this morning, echoes of the Beatles hang in the air…

Oil is slightly better this morning after Israel’s apparently genuine ceasefire offer was shattered by overnight missile attacks by Hezbollah. And US natural gas rose by 30 cents to $2.86 after the November contract expired quite well as we go into the colder winter months. 

Diversified Energy Company

Diversified has announced the closing of its previously announced acquisition of operated natural gas properties located within eastern Texas from a regional operator.

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.”

I liked this deal when I first saw it which isn’t unusual, it is immediately accretive, ups the margin by increasing scale and utilising meaningful cost synergies. It uses the undeveloped part of the portfolio which is pure profit and adds to FCF, and what is great is that it can be repeated over and again, and it fits the company’s excellent use of hedging.

Once again the model works, there are plenty of these deals to be done and I would expect more of them and they can trade out of some of the deals thus reducing the acquisition costs and increasing profitability and they are accretive, bring on the empty horses…

Borders & Southern

Borders & Southern has announced the extension of its Production Licences PL018, PL019, PL020, including the Darwin Discovery Area.

The Licences were due to expire on 31 December 2024. After applying for a two-year extension, the Company has gratefully received confirmation from the Falkland Islands Government (“FIG”) that the revised expiry date of the three Production Licence will now be 31 December 2026.

Harry Baker, Chief Executive Officer of Borders & Southern, commented:
“We are pleased to have our three Production Licenses extended and we are grateful and would like to thank FIG for its ongoing support. 

“Our prime focus continues to be the monetisation of the Darwin Gas condensate discovery that contains 462 MM bbls of recoverable liquids plus material upside in adjacent structures by identifying a suitable partner to appraise it. The licence extensions will allow us to continue our search for a partner and move the Darwin discovery forward by either testing Darwin East or drilling another target. 

“We strongly believe that the upstream energy industry is rebalancing from ESG and renewable energy and is once again investing in upstream exploration with renewed interest in play-opening frontier locations and seeking attractive opportunities, like Darwin.

“We continue to be encouraged by progress on the relaunched farm-out process where we are working with a large global advisor and look forward to providing further updates as and when appropriate. Once a partner has been secured, we believe the Company offers investors significant upside potential.”

Very important this but it would have been a disaster if it hadn’t happened. This is not the last chance saloon but B&S needs to go find a partner PDQ if Darwin is to be unlocked, with the potential upside here that should be possible, after all one keeps hearing that companies are on the lookout for good, sizeable plays…

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog