The East Texas acquisition marks the fifth deal in Diversified’s Central Region within the past year, which CEO Rusty Hutson Jr. said demonstrates Diversified’s status as a “capable consolidator of low-decline producing assets.” (Source: Hart Energy)
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
Ithaca Energy to Buy Eni's UK Assets in $938MM North Sea Deal
2024-04-23 - Eni, one of Italy's biggest energy companies, will transfer its U.K. business in exchange for 38.5% of Ithaca's share capital, while the existing Ithaca Energy shareholders will own the remaining 61.5% of the combined group.
EIG’s MidOcean Closes Purchase of 20% Stake in Peru LNG
2024-04-23 - MidOcean Energy’s deal for SK Earthon’s Peru LNG follows a March deal to purchase Tokyo Gas’ LNG interests in Australia.
TotalEnergies to Acquire Remaining 50% of SapuraOMV
2024-04-22 - TotalEnergies is acquiring the remaining 50% interest of upstream gas operator SapuraOMV, bringing the French company's tab to more than $1.4 billion.
TotalEnergies Cements Oman Partnership with Marsa LNG Project
2024-04-22 - Marsa LNG is expected to start production by first quarter 2028 with TotalEnergies holding 80% interest in the project and Oman National Oil Co. holding 20%.
Is Double Eagle IV the Most Coveted PE-backed Permian E&P Left?
2024-04-22 - Double Eagle IV is quietly adding leases and drilling new oil wells in core parts of the Midland Basin. After a historic run of corporate consolidation, is it the most attractive private equity-backed E&P still standing in the Permian Basin?