Proactive Investors - Diversified Energy Company PLC (LON:DEC) (DEC) has announced a significant acquisition that bolsters its position in the Central Region of the US by acquiring approximately 510 billion cubic feet equivalent (Bcfe) of proven developed producing (PDP) reserves for $410 million.
This move is part of DEC's strategy to consolidate its working interest in wells it already operates. The transaction is seen as highly advantageous. It carries a favourable cost per unit, especially notable as it incurs no additional general and administrative expense for the company.
It is also expected to counteract natural production declines by adding around 122 million cubic feet equivalent per day (MMcfepd) in extra output, with about 80% of this being natural gas. This represents around a 15% increase in overall company production.
Financially, this acquisition is expected to generate robust cash flows, with a projected underlying profit (adjusted EBITDA) of $126 million for 2024. This translates to an attractive EBITDA multiple of roughly 3.1 times.
"The highly accretive transaction announced today increases our Central Region opportunities and reinforces our commitment to a highly disciplined growth strategy," said CEO Rusty Hutson.
DEC announced the deal alongside prelims, which revealed it generated EBITDA of $543 million in 2023 (up from $503 million) and achieved average daily production of 821 million cubic feet of gas or the equivalent of 137,000 barrels of crude.
The company said it is 'recalibrating' its dividend to a quarterly payout of 29 cents per share, or $1.19 per year.
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