Diversified Energy acquires $69m package of East Texas gas assets

20th Aug 2024 09:00

(Sharecast News) - Diversified Energy announced a conditional agreement to acquire a package of natural gas assets in eastern Texas on Tuesday, for $69m.

The FTSE 250 company said the assets, purchased from a regional operator, include a significant proved developed producing (PDP) component valued at $68m.

It marked Diversified's second expansion in East Texas in 2024, further increasing its operational scale in the Central Region.

The transaction also involved a third-party development company, which would acquire undeveloped acreage valued at $19m.

Diversified said it would retain a 5% interest in the undeveloped land for $1m.

The total transaction value, including both PDP assets and undeveloped acreage, was around $87m.

Diversified said it planned to fund its portion of the acquisition through a combination of new dollar-denominated shares issued directly to the seller, valued at $35m, and available liquidity.

The deal was expected to close in the fourth quarter, subject to customary conditions and a break fee if the transaction does not proceed.

It said the acquired assets were expected to produce 21 million cubic feet equivalent per day of natural gas, with an estimated next 12 months EBITDA of $19m.

The acquisition was anticipated to enhance Diversified's cost efficiencies by leveraging its 'smarter asset management' programme and existing resources in East Texas.

Diversified said the PDP reserves were estimated at 70 billion cubic feet equivalent, with a PV10 present value of $89m.

"This purchase strengthens Diversified by expanding our footprint in our East Texas operating area, increasing our scale, and allowing for margin enhancement," said chief executive officer Rusty Hutson, Jr.

"Importantly, this acquisition extends our proven track record of completing disciplined transactions at attractive valuations.

"By joining resources with a development partner, we are highlighting our company's ability to creatively and thoughtfully structure transactions that add value and maximise cash flow generation for shareholders."

At 0840 BST, shares in Diversified Energy Company were down 0.68% at 1,027p.

Reporting by Josh White for Sharecast.com.