June 7, 2024
Diversified Energy
Company PLC
("Diversified" or the "Company")
Completion of Acquisition
& Credit Facility Upsize
Diversified Energy Company PLC (LSE:
DEC, NYSE:DEC) announces the closing of its acquisition of the
proportionate working interest in certain assets within the
Company's Central Region (the "Assets") from Oaktree Capital
Management ("Oaktree"), as announced on March 19, 2024 (the
"Acquisition"). Concurrently, the Company also completed an
acquisition-related redetermination of the borrowing base of its
revolving credit facility (Sustainability Linked Loan, or the
"SLL") resulting in a 26% or $80 million increase in the borrowing
base to $385 million and estimated post-transaction liquidity of
~$130 million.
Acquisition Highlights
•
Purchase price of $410 million before customary
purchase price adjustments
•
Acquisition net purchase price of $377 million
after customary purchase price adjustments
▪
PDP reserves of 510 Bcfe (~85 MMBoe)
and a PDP PV10 of ~$462 million(a)
▪
Current net production of 122 MMcfepd
(~20 Mboepd)
•
Estimated 2024 Adjusted EBITDA of ~$126
million(b)
•
Purchase price multiple of
~3.0x(b) and ~PV17 valuation
on PDP-only assets
•
Includes hedges on ~60% of the Assets
2024 production at an average price of
~$3.89/MMBtu
Consideration for the Acquisition
consists of $83 million in deferred cash payments to Oaktree, the
assumption of Oaktree's proportionate debt of ~$120
million associated with the ABS VI amortizing note and other
expanded liquidity sources.
CEO
Rusty Hutson, Jr. commented:
"This transaction represents another deliberate step in our
disciplined approach to focus on accretive acquisitions that
enhance our scale, deliver margin expansion, and expand free cash
flow. The net purchase price of these high quality assets
approximates a PV17 valuation and represents a low multiple of the
Assets annual cash flows. As the natural acquirer of Oaktree's
working interest in the Central Region, the transaction was a
unique opportunity to consolidate these assets and represents the
culmination of a successful, multi-year partnership with
Oaktree. I would also like to thank our financial partners
for their continued support, demonstrated by the increase in the
borrowing base of our Sustainability Linked Loan, and the highly
successful ABS VIII financing."
Footnotes:
(a)
|
PDP reserves values (including
volumes, PV10 and approximate PV value) calculated using an
effective date of November 01, 2023 effective date based on
the 10-year NYMEX strip as at March 8, 2024; For more information,
please refer to "Use of Non-IFRS Measures"
|
(b)
|
Based on engineering reserves
assumptions using historical cost assumptions and NYMEX strip as of
March 8, 2024 for the 12 month period ended December 31, 2024;
includes the estimated impact of settled derivative instruments;
does not include the impact of any projected or anticipated
synergies that may occur subsequent to acquisition Purchase
price multiple based on Net Purchase Price and Acquisition's
estimated 2024 Adjusted EBITDA (unhedged)
|
For Company-specific items, refer
also to the Glossary of Terms and/or Alternative Performance
Measures found in the Company's Annual Report and Form 20-F
for the year ended December 31, 2023 filed with the United States
Securities and Exchange Commission.
For further information, please
contact:
Diversified Energy Company PLC
|
+1
973 856 2757
|
Doug Kris
|
dkris@dgoc.com
|
Senior Vice President, Investor
Relations & Corporate Communications
|
www.div.energy
|
|
|
FTI
Consulting
|
dec@fticonsulting.com
|
U.S. & UK Financial Public
Relations
|
|
About Diversified Energy Company PLC
Diversified is a leading publicly
traded energy company focused on natural gas and liquids
production, transport, marketing, and well retirement. Through our
differentiated strategy, we acquire existing, long-life assets and
invest in them to improve environmental and operational performance
until retiring those assets in a safe and environmentally secure
manner. Recognized by ratings agencies and organizations for our
sustainability leadership, this solutions-oriented, stewardship
approach makes Diversified the Right Company at the Right Time to
responsibly produce energy, deliver reliable free cash flow, and
generate shareholder value.
Forward-Looking
Statements
This announcement contains
forward-looking statements (within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995). These forward-looking
statements, which contain the words "anticipate", "believe",
"intend", "estimate", "expect", "may", "will", "seek", "continue",
"aim", "target", "projected", "plan", "goal", "achieve" and words
of similar meaning, reflect the Company's beliefs and expectations
and are based on numerous assumptions regarding the Company's
present and future business strategies and the environment the
Company will operate in and are subject to risks and uncertainties
that may cause actual results to differ materially. No
representation is made that any of these statements or forecasts
will come to pass or that any forecast results will be achieved.
Forward-looking statements involve inherent known and unknown
risks, uncertainties and contingencies because they relate to
events and depend on circumstances that may or may not occur in the
future and may cause the actual results, performance or
achievements of the Company to be materially different from those
expressed or implied by such forward looking statements. Many of
these risks and uncertainties relate to factors that are beyond the
Company's ability to control or estimate precisely, including the
risk factors described in the "Risk Factors" section in the
Company's Annual Report and Form 20-F for the year ended December
31, 2023, filed with the United States Securities and Exchange
Commission. The pro forma financial information in this
announcement is for informational purposes only, is not a
projection of our future financial performance, and should not be
considered indicative of actual results that would have been
achieved had the Acquisition actually been consummated on the date
or at the beginning of the period indicated. Forward-looking
statements speak only as of their date and neither the Company nor
any of its directors, officers, employees, agents, affiliates or
advisers expressly disclaim any obligation to supplement, amend,
update or revise any of the forward-looking statements made herein,
except where it would be required to do so under applicable law. As
a result, you are cautioned not to place undue reliance on such
forward-looking statements.
Use of Non-IFRS
Measures
Certain key operating metrics that
are not defined under IFRS (alternative performance measures) are
included in this announcement. These non-IFRS measures are used by
us to monitor the underlying business performance of the Company
from period to period and to facilitate comparison with our peers.
Since not all companies calculate these or other non-IFRS metrics
in the same way, the manner in which we have chosen to calculate
the non-IFRS metrics presented herein may not be compatible with
similarly defined terms used by other companies. The non-IFRS
metrics should not be considered in isolation of, or viewed as
substitutes for, the financial information prepared in accordance
with IFRS. Certain of the key operating metrics are based on
information derived from our regularly maintained records and
accounting and operating systems.
Adjusted EBITDA
As used herein, EBITDA represents
earnings before interest, taxes, depletion, depreciation and
amortization. Adjusted EBITDA includes adjusting for items that are
not comparable period-over-period, namely, accretion of asset
retirement obligation, other (income) expense, loss on joint and
working interest owners receivable, (gain) loss on bargain
purchases, (gain) loss on fair value adjustments of unsettled
financial instruments, (gain) loss on natural gas and oil property
and equipment, costs associated with acquisitions, other adjusting
costs, non-cash equity compensation, (gain) loss on foreign
currency hedge, net (gain) loss on interest rate swaps and items of
a similar nature.
Adjusted EBITDA should not be
considered in isolation or as a substitute for operating profit or
loss, net income or loss, or cash flows provided by operating,
investing, and financing activities. However, we believe such a
measure is useful to an investor in evaluating our financial
performance because it (1) is widely used by investors in the
natural gas and oil industry as an indicator of underlying
business performance; (2) helps investors to more meaningfully evaluate
and compare the results of our operations from period to period by
removing the often-volatile revenue impact of changes in the fair
value of derivative instruments prior to settlement; (3) is used in
the calculation of a key metric in one of our Credit Facility
financial covenants; and (4) is used by us as a performance measure
in determining executive compensation. We are unable to provide a
quantitative reconciliation of forward-looking Adjusted EBITDA to
the most directly comparable forward-looking IFRS measure because
the items necessary to estimate such forward-looking IFRS measure
are not accessible or estimable at this time without unreasonable
efforts. The reconciling items in future periods could be
significant.
PV10
PV10 is a non-IFRS financial measure
and generally differs from Standardized Measure, the most directly
comparable IFRS measure, because it does not include the effects of
income taxes on future net cash flows. While the Standardized
Measure is free cash dependent on the unique tax situation of each
company, PV10 is based on a pricing methodology and discount
factors that are consistent for all companies. In this
announcement, PV10 is calculated using NYMEX pricing. It is not
practicable to reconcile PV10 using NYMEX pricing to standardized
measure in accordance with IFRS at this time. Investors should be
cautioned that neither PV10 nor the Standardized Measure represents
an estimate of the fair market value of proved reserves.