February 11, 2025
Diversified Energy
Company PLC
("Diversified" or the "Company")
Diversified Energy's Unique Strategy
Produces Reliable Cash Flow and Strong Full Year 2024
Results
Seventh Year in a Row of Approximately 50%
or Better Cash Margins
Cash Flow Growth Initiatives Contributed
Over $50 million in Cash Flow
Company Returned Over $105 million to
Shareholders in 2024
Diversified Energy Company PLC (LSE: DEC,
NYSE: DEC) is pleased to announce the following operations and
trading update for the year ended December 31, 2024.
Delivering Reliable
Results
• Full-year 2024
average production of 791 MMcfepd (132 Mboepd)
◦ 4Q24 average
production of 843 MMcfepd (141 Mboepd)
◦ December 2024 exit
rate of 864 MMcfepd (144 Mboepd)
• 2024 Adjusted
EBITDA(a) of $470-$475 million; Adjusted Free Cash Flow(b)
of $210-$215
million
•
2024
Adjusted EBITDA
Margin(a) of 50%and TTM Adjusted Free Cash Flow
Yield(b) of 33%
◦ 2024 Total
Revenue, Inclusive of Settled Hedges per Unit(c)
of $3.21/Mcfe ($19.28/Boe)
◦ 2024 Adjusted
Operating Cost per Unit(d) of $1.70/Mcfe ($10.22/Boe)
Cash Flow Growth
Initiatives
• Announced
fixed-price contract for gas delivery to a major Gulf Coast LNG
export facility
• Generated
~$42
million year-to-date in cash
flow through divestiture of undeveloped leasehold
• Recorded
$8
million in impact to Adjusted
EBITDA from Coal Mine Methane ("CMM") Revenues
Executing Strategic
Objectives and
Milestones
• Retired
over $200 million in debt principal through amortizing
debt payments
• Returned
$105
million to shareholders,
including $21 million in share
buybacks(e)
• Completed
$585
million (gross) in strategic and
bolt-on acquisition during 2024
• Announced
accretive bolt-on acquisition of southern Appalachia assets from
Summit Natural Resources
• Announced
transformative $1.3 billion acquisition of Maverick Natural
Resources
• Marked one full
year of trading on the New York Stock Exchange and as is customary,
the Company expects to file a shelf registration with the US
Securities and Exchange Commission
Next LVL
Milestones
• The Company
retired 202 operated wells in 2024, marking its third
consecutive year to exceed its stated goal of retiring 200 wells
per year
•
Next LVL
Energy completed a
total 287 well retirements, including Diversified's
wells and 85 wells associated with state-owned orphan
wells and third-party operators
Rusty Hutson, Jr., CEO of Diversified,
commented:
"Our team executed extremely well and
continued to deliver solid results in 2024 that enabled us to
advance our balanced capital allocation framework. Our strong
results highlight our unique business model that strives to deliver
consistent cash flow during the full range and volatility of
commodity cycles. Aligned with our priorities, we generated
significant cash flows, returned capital to investors, and paid
down more than $200 million in debt principal, all while executing
and integrating over $585 million in accretive acquisitions. Once
again, our ability to deliver durable production and consistent
cash flow throughout the year was a result of our team's relentless
execution of our strategies. We are committed to lowering costs and
improving operational efficiencies across the organization, along
with providing innovative solutions to extract hidden value from
our asset base. The results we have achieved in 2024 strike at the
heart of our business model and strategy.
We
believe that 2025 has the potential to be a transformative year for
the Company as we work to execute our strategic initiative to
become the premier public company focused on managing mature
producing assets. The Company's previously announced accretive
acquisitions of Summit Natural Resources and Maverick Natural
Resources are proceeding as planned, and we have received
encouraging comments from both shareholders and the public debt and
equity markets. During the past year, we have seen our strategy and
our previous investment decisions yield increased performance in
all aspects of our business model. We are optimistic about
our future and confident that our current efforts will continue to
position us well to have a significant positive impact on
shareholder value."
Operations and Finance
Update
Production
Diversified exited the year with December
2024 average production of 864 MMcfepd (144 Mboepd), up 11% versus the December 2023
exit rate of 775 MMcfepd (129 Mboepd), reflecting the cumulative effect of
the Company's 2024 acquisitions and industry-leading PDP declines
of ~10%
per
year(f).
Diversified ended the year with 4Q24 average
production of 843 MMcfepd (141 Mboepd) and full-year 2024 average
production of 791 MMcfepd (132 Mboepd).
The
Company's production continues to be positively impacted by
Diversified's Smarter Asset Management ("SAM") approach focused on
the improvement and optimization of production profiles,
development of efficiency gains and extension of well life, and the
Company is well-positioned to again-deliver on a solid operational
foundation for robust cash flows in 2025 with the additional impact
of the recently announced acquisitions of Maverick Natural
Resources and Summit Natural Resources.
Margin, Realized Price and Total Cash
Expenses per Unit
Diversified's resilient cash flow strategy
is exemplified by the Company's 2024 Adjusted EBITDA Margin
of 50%, marking the Company's seventh consecutive
annual period of ~50% margins or higher.
The Company's commitment to responsibly
hedge production and initiatives to expand revenue generation is
reflected in 2024 Total Revenue, Inclusive of Settled
Hedges per unit of
$3.21/Mcfe ($19.28/Boe), with Financial Derivatives Settled in
Cash delivering $151 million in cash flows, and Midstream &
Other Revenue delivering $63 million in supplemental
income during the year.
Prudent expense management resulted in the
stable Adjusted Operating Cost per Unit
for 2024 of just
$1.70/Mcfe ($10.22/Boe) representing a minimal
1%
change when compared to the
prior year.
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2024
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2023
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$/Mcfe
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$/Boe
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$/Mcfe
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$/Boe
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%
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Total
Commodity Revenue, Including the Impact of derivatives settled in
cash
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$
3.05
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$ 18.30
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$ 3.27
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$ 19.62
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(7)%
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Other
Revenue1
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0.16
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0.98
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0.13
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0.75
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31 %
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Average Realized
Price1
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$
3.21
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$ 19.28
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$
3.40
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$ 20.37
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(5)%
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Adjusted Operating Cost per
Unit(d)
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2024
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2023
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$/Mcfe
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$/Boe
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$/Mcfe
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$/Boe
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%
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Lease
Operating Expense2
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$
0.73
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$
4.40
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$ 0.64
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$ 3.83
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15 %
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Midstream Expense
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0.24
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1.44
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0.23
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1.38
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4 %
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Gathering and Transportation
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0.31
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1.86
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0.32
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1.92
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(3)%
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Production Taxes
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0.12
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0.72
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0.21
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1.26
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(43) %
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Total Operating
Expense2
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$
1.40
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$
8.42
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$
1.40
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$ 8.39
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- %
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Employees, Administrative Costs and
Professional Fees(g)
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0.30
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1.80
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0.29
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1.74
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3 %
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Adjusted Operating Cost per
Unit2
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$
1.70
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$ 10.22
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$
1.69
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$ 10.13
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1 %
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Adjusted EBITDA
Margin(a)
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50%
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53%
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1 2024 excludes $0.06/Mcfe ($0.34/Boe) and
2023 excludes $0.09/Mcfe ($0.57/Boe) of other revenues generated by
Next LVL Energy 2024 excludes $0.09/Mcfe ($0.54/Boe) & 2023
excludes $0.08/Mcfe ($0.48/Boe) of proceeds from land
sales
2 2024 excludes $(0.07)/Mcfe ($(0.40)/Boe) and
2023 excludes $(0.07)/Mcfe ($(0.43)/Boe) of expenses attributable
to Next LVL Energy
Values may not sum due to
rounding
Results of Hedging and Current
Financial Derivatives Portfolio
Diversified's consistent application of the
Company's differentiated hedging strategy resulted in a 2024
weighted average natural gas hedge floor of $3.26/MMbtu and realized price of
$2.49/MMBtu, providing insulation from
historically low commodity prices and representing respective
premiums of 44% and 10% to the 2024 NYMEX average Henry Hub
settlement price of $2.27/MMbtu(h). The Company enters
2025 with ~80% of consolidated production hedged, and
stands to benefit from the recent improvement in the forward strip.
The table below reflects Diversified's full-year hedge positions
through calendar year 2027 as of December 31,
2024:
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GAS (Mcf)
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NGL (Bbl)
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OIL (Bbl)
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Wtd. Avg. Hedge
Price(i)(j)
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~ % of Production
Hedged(k)
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Wtd. Avg. Hedge
Price(i)
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~ % of Production
Hedged(k)
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Wtd. Avg. Hedge
Price(i)
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~ % of Production
Hedged(k)
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FY25
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$3.32
|
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85%
|
|
$33.98
|
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60%
|
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$64.25
|
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90%
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FY26
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$3.25
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75%
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$32.38
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55%
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$62.44
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55%
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FY27
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$3.27
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70%
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$32.29
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45%
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$62.67
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50%
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Environmental Update
Asset Retirement Progress and Next LVL
Energy Update
During the year, the Company exceeded its
Appalachian well retirement commitments and stated plugging goals
by retiring 202 Diversified-operated wells. Total well
retirements by Next LVL Energy in Appalachia amounted to
287
wells, including
51
retirements associated with
state orphan well programs.
Next
LVL Energy continues to be a strategic and value-additive component
of Diversified's vertically integrated operations focused on the
full life cycle of operated wells and to provide third-party
revenue to offset the cash costs associated with the retirement of
operated wells.
Acquisition Update
2024 Acquisitions
Update
The
Company's previously announced acquisition of Oaktree Working
Interests, Crescent Pass Energy assets and East Texas assets were
successfully closed in the course of the year, representing $585
million (gross) in strategic, accretive acquisitions in 2024. These
assets have been fully integrated into Diversified's systems and
processes, and are already benefiting from the Company focus on
safe, efficient operations through the application of Smarter Asset
Management.
Summit Natural
Resources
Diversified's previously announced
acquisition of Appalachia and Alabama assets from Summit Natural
Resources is proceeding as planned and the Company expects to close
the transaction in the first quarter of 2025.
Maverick Natural
Resources
As
previously announced on January 27, 2025, Diversified has entered
into a definitive agreement to acquire Maverick Natural Resources
for total consideration of approximately $1,275 million. The
acquisition of Maverick by Diversified (the "Acquisition") adds
immediate scale, increases liquids production, and creates a
combined company with long-term free cash flow generation, superior
unit cash margins, and a compelling sustainability
profile.
The
Acquisition is expected to close during the first half of 2025,
subject to customary closing conditions, including, among others,
regulatory clearance and approval by Diversified shareholders for
the issue and allotment of the Ordinary Shares pursuant to the
merger agreement.
2024 Annual Results and Conference
Call Details
Diversified will release its 2024 full-year
results on Monday, March 17, 2025 and will host a conference call
that day at 12:30 PM GMT (8:30 AM EDT) to discuss the Annual
Results.
Footnotes:
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(a)
|
Adjusted EBITDA represents
earnings before interest, taxes, depletion, and amortization, and
includes adjustments for items that are not comparable
period-over-period; As presented, Adjusted EBITDA includes the
impact of the accounting basis for land sales; Adjusted EBITDA
Margin represents Adjusted EBITDA (excluding the adjustment for the
accounting basis on land sales) as a percent of Total Revenue,
Inclusive of Settled Hedges; For purposes of comparability,
Adjusted EBITDA Margin excludes Other Revenue of $16 million in
2024 and $28 million in 2023, and Lease Operating Expense of $19
million in 2024 and $21 million in 2023 associated with
Diversified's wholly owned plugging subsidiary, Next LVL
Energy.
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(b)
|
Free Cash Flow represents
net cash provided by operating activities less expenditures on
natural gas and oil properties and equipment and cash paid for
interest; As used herein, Adjusted Free Cash Flow represents Free
Cash Flow, plus cash proceeds from undeveloped acreage sales;
Adjusted Free Cash Flow Yield is calculated using
2024 Free Cash Flow per share, divided by the 2024 average share
price of $13.47; Free Cash Flow per Share calculated as Adjusted
Free Cash Flow divided by average shares outstanding of 48,031,916
during the period.
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(c)
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Includes the impact of
derivatives settled in cash; Excludes the impact of land sales
during the period; For purposes of comparability, excludes certain
amounts related to Diversified's wholly owned plugging subsidiary,
Next LVL Energy.
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(d)
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Adjusted Operating Cost
represent total lease operating costs plus recurring administrative
costs. Total lease operating costs include base lease operating
expense, owned gathering and compression (midstream) expense,
third-party gathering and transportation expense, and production
taxes. Recurring administrative expenses (Adjusted G&A) is a
Non-IFRS financial measure defined as total administrative expenses
excluding non-recurring acquisition & integration costs and
non-cash equity compensation; For purposes of comparability,
excludes certain amounts related to Diversified's wholly owned
plugging subsidiary, Next LVL Energy.
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(e)
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Share repurchases include
activity by Diversified's Employee Benefit Trust.
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(f)
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Calculated as the rate of
decline in average daily production from December 2023 to December
2024, adjusted to exclude the impact of acquisitions and
divestitures.
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(g)
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As used herein, employees,
administrative costs and professional services represents total
administrative expenses excluding cost associated with
acquisitions, other adjusting costs and non-cash expenses. We use
employees, administrative costs and professional services because
this measure excludes items that affect the comparability of
results or that are not indicative of trends in the ongoing
business.
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(h)
|
Calculated as the average
monthly settlement price for NYMEX Henry Hub futures
contracts.
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(i)
|
Weighted average price
reflects the weighted average of the swap price and floor price for
collar contracts as applicable.
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(j)
|
MMBtu prices have been
converted to Mcf using a richness factor of 1Mcf=1.036 MMBtu,
calculated as the weighted average Btu richness factor for the
twelve months ended December 31, 2024.
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(k)
|
Illustrative percent
hedged, calculated using December 2024
average production and
assuming a consolidated annual corporate decline rate of
10%;
Calculation assumes constant product mix over the illustrative
decline period.
|
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 and available on the Company's
website.
For further information, please
contact:
|
Diversified Energy Company PLC
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+1
973 856 2757
|
|
Doug Kris
|
dkris@dgoc.com
|
|
Senior Vice President, Investor
Relations & Corporate Communications
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www.div.energy
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|
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FTI
Consulting
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dec@fticonsulting.com
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U.S. & UK Financial Public
Relations
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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 unique and
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) concerning the financial condition, results of operations and
business of the Company and its wholly owned subsidiaries (the
"Group"). All statements other than statements of historical fact
are, or may be deemed to be, forward-looking statements. These
forward-looking statements, which contain the words "anticipate",
"believe", "intend", "estimate", "expect", "may","should","intend",
"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 and the Group 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 or
the Group 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 or
the Group's ability to control or estimate precisely, such as the
expected timing and likelihood of completion of the Acquisition and
the risk that problems may arrise in successfully integrating
Maverick or that the combined company may not achieve synergies as
expected,as well as factors such as future market conditions,
currency fluctuations, the behavior of other market participants,
the actions of regulators and other factors such as the Company's
or the Group's ability to continue to obtain financing to meet its
liquidity needs, the Company's ability to successfully integrate
its other acquisitions, changes in the political, social and
regulatory framework in which the Company or the Group operate or
in economic or technological trends or conditions. The list above
is not exhaustive and there are other factors that may cause the
Company's or the Group's actual results to differ materially from
the forward-looking statements contained in this announcement,
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 "SEC") and the risk factors descibed in
Exhibit 99.2 to the Company's Form 6-k furnished with the SEC on
January 27, 2025.
Forward-looking statements speak only as of
their date and neither the Company nor the Group nor any of its
respective 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. In
light of these risks, uncertainties and assumptions, the events
described in the forward-looking statements in this announcement,
may not occur. As a result, you are cautioned not to place undue
reliance on such forward-looking statements. Past performance of
the Company cannot be relied on as a guide to future performance.
No statement in this announcement is intended as a profit forecast
or a profit estimate and no statement in this announcement should
be interpreted to mean that the financial performance of the
Company for the current or future financial years would necessarily
match or exceed the historical published for the
Company.
Unaudited Financial
Information
Certain financial and operating results
included in this announcement are based on unaudited
estimated results. These estimated results are subject
to change upon completion of the Company's
audited financial statements for the year ended
December 31, 2024, and changes could be material.
The Company anticipates publishing its audited
financial results for the year ended December 31, 2024
on Tuesday, March 17, 2025.
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. We have not presented reconciliations of the
non-IFRS measures included in this announcement because the
comparable IFRS measures will not be accessible until the Company's
audited financial results for the year ended December 31, 2024 are
complete. The Company will include the comparable IFRS
measures and reconciliations of the non-IFRS measures in its
release of full-year results, which we expect to publish on
Tuesday, March 17, 2025.
