Diversified Energy Co. Plc agreed on April 26 to a $50 million acquisition of East Texas assets marking the fifth deal in Diversified’s central regional focus area, which the company only established roughly a year ago.
“Having emerged as a significant operator in the Central Region with a proven track record of execution in Appalachia and a strong balance sheet, we are well positioned to capitalize on additional opportunities,” Diversified CEO Rusty Hutson Jr. commented in a company release.
Headquartered in Birmingham, Ala., and listed on the London Stock Exchange, Diversified’s business model focuses exclusively on buying high margin, low-decline producing assets, which, until an acquisition in Louisiana last May, had all been focused in the Appalachian Basin. Since then, Diversified has added to its Central Region portfolio. This has included previously acquired assets in East Texas and northwest Louisiana from Tanos Energy Holdings III LLC and Indigo Minerals LLC.
“Our enlarged regional footprint complements our portfolio of high-quality assets and provides additional scale from which we can derive operational synergies as we optimize asset performance and the associated costs,” Hutson said.
Diversified’s latest acquisition comprises certain East Texas upstream assets and related facilities from a private seller that includes 691 gross (346 net) operated PDP wells. Current production is about 3,700 boe/d (100% natural gas), or 22 MMcfe/d, with estimated engineered next 12-month PDP decline rate of roughly 7%, according to the company release.
The total purchase price for Diversified’s latest acquisition is $100 million. However, thanks to a previously announced strategic participation agreement with Oaktree Capital Management LP, Diversified has agreed to contribute 50%, or $50 million, of the total purchase price.
Diversified Energy
|
|||
Date announced | Seller | Asset location | Estimated value ($MM) |
4/26/22 | Undisclosed | East Texas | $50 |
10/7/21 | Tapstone Energy | Midcontinent | $419 |
7/5/21 | Tanos Exploration | Cotton Valley; Haynesville | $154 |
5/21/21 | Blackbeard Operating | Barnett Shale | $180 |
4/30/21 | Indigo Minerals | Cotton Valley | $135 |
Under the agreement, funds managed by Oaktree will make a nonoperated working interest investment in the acquisition. Oaktree will promote Diversified with 5% of its interest in the acquisition. Accordingly, Diversified will obtain a 52.5% working interest in the acquisition for contributing 50%, or $50 million, of the purchase price.
Diversified plans to fund the cash consideration of $50 million entirely with cash on hand and borrowings on the company’s revolving credit facility. The company also said it has the opportunity to retain experienced personnel from the seller following a customary transition service period to help facilitate the implementation of Diversified’s “smarter asset management” program.
“With a compelling purchase multiple of 1.4 times net cash flow, this acquisition represents another accretive, fully cash and debt-financed acquisition that further demonstrates our status as a capable consolidator of low-decline producing assets within the Central Region. ... We are pleased to once again partner with Oaktree to acquire assets with material upside potential available through smarter asset management,” Hutson added.
Diversified’s smarter asset management program includes the optimization of well performance, reduction of labor and vendor costs, return of wells to production, optimization of artificial lift systems and lowering of overhead expenses.
Stifel served as exclusive financial adviser to Diversified in connection with the acquisition.
Recommended Reading
US Drillers Cut Oil, Gas Rigs for Fourth Week in a Row-Baker Hughes
2024-04-12 - The oil and gas rig count, an early indicator of future output, fell by three to 617 in the week to April 12, the lowest since November.
US Drillers Add Oil, Gas Rigs for First Time in Five Weeks
2024-04-19 - The oil and gas rig count, an early indicator of future output, rose by two to 619 in the week to April 19.
US Drillers Cut Oil, Gas Rigs for Third Week in a Row
2024-04-05 - The oil and gas rig count, an early indicator of future output, fell by one to 620 in the week to April 5, the lowest since early February.
US Oil, Gas Rig Count Rises to Highest Since September: Baker Hughes
2024-03-01 - The U.S. oil and natural gas rig count is at its highest since September 2023.
Ohio Utica’s Ascent Resources Credit Rep Rises on Production, Cash Flow
2024-04-23 - Ascent Resources received a positive outlook from Fitch Ratings as the company has grown into Ohio’s No. 1 gas and No. 2 Utica oil producer, according to state data.