Diversified Energy Co. Plc acquired the well services and plugging assets of Contractor Services Inc. (ConServ) of West Virginia, the third such acquisition Diversified said July 27 that it had made this year.
The acquisition significantly enhances Diversified’s ability to meet its goal of retiring at least 200 wells per year across the company’s Appalachian footprint, “well in excess of state minimum plugging requirements and with locally based internal equipment and crews,” according to the company’s press release.
Diversified has consistently exceeded state-minimum plugging obligations of 80 wells per year since its inception in 2018, the company reported in its May earnings presentation.
Since February, Diversified has acquired plugging businesses, including its May purchase of Ohio-based Nick’s Well Plugging LLC (NWP), to retire more wells while building scale and efficiencies in its internal plugging program. No financial details were disclosed for any of the deals.
According to Diversified, the acquisitions provide third-party revenues from other operators and state agencies to offset the company’s own well retirement costs. Ownership of the service firms also insulates the company from cost inflation and reduces its exposure to reliance on third-party service firms.
ConServ will be added to Diversified’s plugging division within its existing Next LVL Energy asset retirement platform, which was acquired in the first quarter.
With ConServ, Diversified’s plugging program now includes 15 well plugging rigs, an increase of 70% since first-quarter 2022. Diversified also said it has an expanded portfolio of services that enhance the company’s ability to retire wells and perform related site preparation and reclamation activities.
ConServ’s assets include three derrick rigs that supplement the servicing and retiring of both deep vertical and unconventional wells, and also include a number of service rigs and auxiliary equipment. Diversified’s “suite of offerings” now includes cementing, wireline and trucking and construction services, which reduce the need to incur related contractor expenses and provide incremental revenue streams.
ConServ, based in Spencer, W.Va., is a privately held business founded in 1970 and led by David and Scott Freshwater.
Brad Gray, executive vice president and COO, said its investments to vertically integrate asset retirement expertise and equipment have positioned Diversified as one of the largest full-service plugging providers in the region. The scope of its operations will benefit “both our existing operations and the plugging needs of others in the Appalachian Basin,” he added.
“This acquisition serves to not only highlight our long-standing commitment as responsible assets stewards and operators from acquisition to retirement, but also our dedication to doing so in a manner that is beneficial to all of our stakeholders and the environment,” Gray said. “With our expanded asset retirement capacity, we are efficiently delivering on our plugging comments as well as servicing the needs of other companies and state governments as the premier Appalachian plugging service provider.”
Diversified is an independent energy company engaged in the production, marketing and transportation of primarily natural gas related to its synergistic U.S. onshore upstream and midstream assets.
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. The company holds positions in both the Appalachian Basin and its central regional focus area including across Louisiana, Oklahoma and Texas, which the company only established roughly a year ago.
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