Diversified Energy acquires a natural gas field in Texas

• Diversified Energy Company has bought natural gas wells operating in East Texas for $68 million, strengthening its portfolio and increasing its scale.
• The acquisition includes 331 wells with approximately 69% gas volumes, promising an operating profit of $19 million over the next twelve months.
• Diversified Energy CEO Rusty Hutson Jr highlighted the strategic benefits of the deal, particularly margin growth and maximizing shareholder value.

Oil and gas site owner Diversified energy company bought several operating natural gas wells located in East Texas for $68m (£52.3m).

The FTSE 250 firm bought the assets from a regional operator. The “significant” PDP (proven producing developed) reserve was part of a wider sale in the area.

A third-party development company will also purchase an additional amount of undeveloped acreage from the regional seller for approximately $19m (£14.6m). Diversified said it would also buy a five percent minority stake in the land for $1m (£800,000).

The two sales are expected to total 331 wells containing approximately 69 percent gas volumes. The company estimated its operating profit for the next twelve months at $19 million, a 3.5 times acquisition multiple.

“The asset’s production profile is highly complementary to the company’s existing portfolio and operating strategy, with low annualized production declines of ~15% for the next twelve months,” Diversified said in a scholarship notice today.

The cash for the new assets will be raised through a combination of a new share issue to the regional operator for around $35m (£26.9m), together with guarantees from newly acquired wells.

Diversified said it expects to close the acquisition in the fourth quarter of this year and is subject to a break fee if it succeeds.

Diversified CEO Rusty Hutson Jr said, “This acquisition strengthens Diversified by expanding our footprint in our East Texas operating area, increasing our scale and enabling margin improvement.

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

“By joining resources with a development partner, we highlight our company’s ability to creatively and thoughtfully structure transactions that add value and maximize cash flow generation for shareholders.”

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