![Diversified Energy Expands Central Region with $50 Million East Texas Acquisition](/sites/default/files/styles/hart_news_article_image_640/public/image/2022/04/diversified-energy-expands-central-region-50-million-east-texas-acquisition.jpg?itok=FWms_8at)
The East Texas acquisition marks the fifth deal in Diversified’s Central Region within the past year, which CEO Rusty Hutson Jr. said demonstrates Diversified’s status as a “capable consolidator of low-decline producing assets.” (Source: Hart Energy)
Diversified Energy Co. Plc agreed on April 26 to a $50 million acquisition of East Texas assets marking the fifth deal in Diversified’s central regional focus area, which the company only established roughly a year ago.
“Having emerged as a significant operator in the Central Region with a proven track record of execution in Appalachia and a strong balance sheet, we are well positioned to capitalize on additional opportunities,” Diversified CEO Rusty Hutson Jr. commented in a company release.
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, which, until an acquisition in Louisiana last May, had all been focused in the Appalachian Basin. Since then, Diversified has added to its Central Region portfolio. This has included previously acquired assets in East Texas and northwest Louisiana from Tanos Energy Holdings III LLC and Indigo Minerals LLC.
“Our enlarged regional footprint complements our portfolio of high-quality assets and provides additional scale from which we can derive operational synergies as we optimize asset performance and the associated costs,” Hutson said.
Diversified’s latest acquisition comprises certain East Texas upstream assets and related facilities from a private seller that includes 691 gross (346 net) operated PDP wells. Current production is about 3,700 boe/d (100% natural gas), or 22 MMcfe/d, with estimated engineered next 12-month PDP decline rate of roughly 7%, according to the company release.
The total purchase price for Diversified’s latest acquisition is $100 million. However, thanks to a previously announced strategic participation agreement with Oaktree Capital Management LP, Diversified has agreed to contribute 50%, or $50 million, of the total purchase price.
Diversified Energy
|
|||
Date announced | Seller | Asset location | Estimated value ($MM) |
4/26/22 | Undisclosed | East Texas | $50 |
10/7/21 | Tapstone Energy | Midcontinent | $419 |
7/5/21 | Tanos Exploration | Cotton Valley; Haynesville | $154 |
5/21/21 | Blackbeard Operating | Barnett Shale | $180 |
4/30/21 | Indigo Minerals | Cotton Valley | $135 |
Under the agreement, funds managed by Oaktree will make a nonoperated working interest investment in the acquisition. Oaktree will promote Diversified with 5% of its interest in the acquisition. Accordingly, Diversified will obtain a 52.5% working interest in the acquisition for contributing 50%, or $50 million, of the purchase price.
Diversified plans to fund the cash consideration of $50 million entirely with cash on hand and borrowings on the company’s revolving credit facility. The company also said it has the opportunity to retain experienced personnel from the seller following a customary transition service period to help facilitate the implementation of Diversified’s “smarter asset management” program.
“With a compelling purchase multiple of 1.4 times net cash flow, this acquisition represents another accretive, fully cash and debt-financed acquisition that further demonstrates our status as a capable consolidator of low-decline producing assets within the Central Region. ... We are pleased to once again partner with Oaktree to acquire assets with material upside potential available through smarter asset management,” Hutson added.
Diversified’s smarter asset management program includes the optimization of well performance, reduction of labor and vendor costs, return of wells to production, optimization of artificial lift systems and lowering of overhead expenses.
Stifel served as exclusive financial adviser to Diversified in connection with the acquisition.
Recommended Reading
Offshore Guyana: ‘The Place to Spend Money’
2024-07-09 - Exxon Mobil, Hess and CNOOC are prepared to pump as much as $105 billion into the vast potential of the Stabroek Block.
Valaris’ 1Q Sets Positive Tone for Offshore
2024-05-06 - Coming out of first-quarter 2024, drilling contractor Valaris expects a sustained upcycle for the offshore drilling industry supported by demand growth, OPEC+ production cuts and supportive commodity prices.
TotalEnergies Buys UK Power Plant from EIG for $575MM
2024-06-06 - TotalEnergies signed an agreement with EIG, an institutional investor in the global energy sector, for the acquisition of all the shares of West Burton Energy for an enterprise value of £450 million (US$575 million).
Talos Energy Expands Leadership Team After $1.29B QuarterNorth Deal
2024-04-25 - Talos Energy President and CEO Tim Duncan said the company has expanded its leadership team as the company integrates its QuarterNorth Energy acquisition.
Weatherford M&A Efforts Focused on Integration, Not Scale
2024-04-25 - Services company Weatherford International executives are focused on making deals that, regardless of size or scale, can be integrated into the business, President and CEO Girish Saligram said.