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Diversified Energy Company to Acquire Eastern Texas Natural Gas Assets

Sam Boughedda trader
Updated 10 Jul 2024

Diversified Energy Company (LON: DEC) announced Wednesday that it has struck an agreement to acquire high-quality natural gas assets in eastern Texas from Crescent Pass Energy.

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The acquisition is predicted to bolster DEC's presence in the region with complementary producing assets and is expected to close in the third quarter of 2024.

The $106 million purchase price represents a PV-20 valuation and includes the issuance of new shares to the seller alongside a senior secured bank facility.

The assets boast a current production of 38 million cubic feet equivalent per day (MMcfepd) with low annual declines, significantly weighted towards gas (92%). DEC believes the production profile aligns perfectly with its existing portfolio and strengthens its industry-leading decline rates.

The acquisition is estimated to generate ~$26 million in Net To Merchant (NTM) EBITDA, translating to a purchase multiple of 3.8x. Additionally, the assets come with proven developed producing (PDP) reserves of approximately 170 billion cubic feet equivalent (Bcfe) with a PV-10 value of $155 million.

“The target assets are a perfect fit with our existing East Texas operations,” said CEO Rusty Hutson, Jr. “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.”

The assets boast over 827 operated PDP wells and are situated near DEC's existing holdings in East Texas. It also includes over 500 miles of pipelines and offers additional undeveloped acreage for future value creation.

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Sam is a trader and lead stock market writer at AskTraders. After starting his career in the forex market, Sam now focuses on stocks, specifically consumer staples.