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Diversified Energy acquires eastern Texas gas assets

Diversified Energy Company PLC has announced the acquisition of high-value natural gas assets from Crescent Pass Energy for £84 million ($106 million).

The deal, expected to close in Q3 2024, will bolster Diversified’s presence in eastern Texas with 827 net operated wells and over 170,000 acres of commercially attractive leasehold.

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Funding for the acquisition comes from a mix of sources. Diversified will harness its NYSE listing to issue approximately 2.4 million new US dollar-denominated ordinary shares directly to the seller. The remainder will be financed through a senior secured bank facility and existing liquidity.

The purchase price represents a PV-20 valuation, signalling Diversified’s confidence in the assets’ long-term value. At £2,100 ($2,651) per flowing Mcfe, the deal is attractively priced within the company’s target range.

Current net production from the assets stands at 38 MMcfepd, with low annual declines of around 9%. This aligns well with Diversified’s strategy of acquiring stable, long-life assets. Estimated next twelve months EBITDA of £20.6 million ($26 million) represents a 3.8x purchase multiple.

“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,” said CEO Rusty Hutson, Jr.

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“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.”

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