Diversified Energy has signed a conditional purchase and sale agreement to buy working interests in operated natural gas assets in East Texas from Crescent Pass Energy for about $106 million.

The acquisition, which Diversified will fund through an issuance of equity and debt, includes about 170,000 acres of commercially attractive leasehold in both East Texas and the Freestone Trend, Diversified said in a July 10 press release.

The deal comes during a prolonged dip in natural gas prices that some analysts expect to rebound as demand ramps up for LNG exports and to meet the power needs of data centers.

The leasehold is contiguous with Diversified's existing East Texas assets and will offer opportunities to realize synergies from scale and asset density, the company said.

The assets include 827 net operated proved developed producing (PDP). Crescent Pass’ net production averages the equivalent of 38 MMcf/d (6 Mboe/d, ~92% gas) with annual declines of about 9%, Diversified said.  Diversified will also add more than 500 miles of owned pipelines and associated compression facilities as well as additional undeveloped acreage that presents potential upside opportunities.

Diversified said it will pay $2,651 per flowing thousand cubic feet equivalent gas for the assets, which include PDP reserves of about 170 Bcfe (28 MMboe) with a PV-10 of $155 million.

Based on next-12-months estimated EBITDA of $26 million, the purchase price represents a 3.8x multiple, Diversified 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,” Diversified CEO Rusty Hutson Jr. said.  “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.”

Hutson said the evolution of the company’s funding sources, including the recent listing of the company on the New York Stock Exchange, provides the company with the flexibility for M&A.

Diversified will fund the deal by issuing approximately 2.4 million new ordinary shares direct to the seller as well as a senior secured bank facility supported by the acquired assets. The company will also use existing liquidity from the company's recently increased borrowing capacity. Diversified said the net purchase price will be $100 million.

The ordinary shares will be subject to a customary commercial lock-up agreement. Diversified said it expects acquisition to close in third-quarter 2024.