I see that Rusty & Co are splashing the cash to grab more assets in their Virginia(s) / Appalachian heartlands. Literally cash on this occasion, no shares or additional borrowing, which I thought was noteworthy. Others may disagree?
Diversified Announces Strategic Bolt-on Acquisition of Complementary Producing & Midstream Assets in the Appalachian Basin
Production Economics Expected to Benefit from Diversified's Regional Presence and Scale
Acquisition Grows Coal Mine Methane Revenue Generation Potential
Diversified Energy Company PLC (LSE:DEC; NYSE:DEC) ("Diversified" or the "Company") is pleased to announce the acquisition of operated natural gas properties and related facilities located within Virginia, West Virginia, and Alabama (the "Assets") from Summit Natural Resources (the "Seller") (together with the assets, the "Acquisition").
Transaction Highlights
• Purchase price of ~$45 million, to be fully funded through cash on hand and current liquidity
• Current net production of ~12 MMcfepd (2 Mboepd)(a)
• PDP Reserves of 65 Bcfe (11 MMBoe) with PV-10 of ~$55 million(b)
◦ Purchase price equivalent of ~PV-16(b)
• Estimated 2025 Adj. EBITDA of ~$12 million(b)
• Existing Coal Mine Methane ("CMM") volumes with opportunities to extend future production
• Appalachian assets overlap existing operations providing synergies for increased cash margins
• Strategic midstream pipeline growth facilitating capability to route additional produced volumes to premium sales points
• Expected closing of the Acquisition during the first quarter of 2025
Commenting on the Acquisition, CEO Rusty Hutson, Jr. said:
"This asset package is strategically located within our existing southern Appalachia operations and is uniquely positioned to benefit from the operational expertise of our field teams. Additionally, with this strategic acquisition, we anticipate capturing additional revenue from the sale of incremental environmental credits with our growth in the production of coal mine methane. The acquisition is anchored with stable production and strategic midstream assets, which provide optionality for existing production volumes to move to premium-priced markets. This bolt-on package will provide additional opportunities for us to drive improved margins through our Smarter Asset Management programs that continue to be a foundation and support for our consistent cash flows.
We continue to believe there is a sizeable backlog of organic Coal Mine Methane cash flow growth within our current Appalachian portfolio, and this acquisition highlights our ability to leverage existing capabilities, assets, and intellectual capital to grow this segment of our revenue stream inorganically. As we kick-start 2025, we are committed to our strategic imperative of "Energy-Optimized" and our unique solutions-based approach to improving operational and emissions performance of acquired assets while expanding margins and continuing to create long-term value for our shareholders."
Upside Potential for Coal Mine Methane Revenues
The Acquisition includes wells that qualify for Alternative Energy Credit ("Environmental Credit") generation through the production of Coal Mine Methane ("CMM", together with the credit "CMM Revenues") and expands Diversified's ability to generate CMM Revenues. Additional CMM Revenue potential will be assessed following the close of the Acquisition.
Bolt-On Assets Expected to Benefit from Considerable Scale and Consolidation Experience
The Acquisition includes 300 net producing wells that are located within Diversified's operational footprint in the Appalachian states of Virginia and West Virginia (~60% of Acquisition production), where personnel will quickly evaluate and deploy Diversified's Smarter Asset Management practices as the Assets are integrated into existing operations.
Additionally, the Acquisition includes 265 net producing Coal Mine Methane wells located within Alabama (~40% of Acquisition production) that are highly proximate to Diversified's corporate headquarters in Birmingham, Alabama. The Company looks forward to establishing an operating presence in the region and implementing processes and field operations that build on Diversified's significant platform of best practices, field expertise, and technology.