LONDON, UK: Diversified Energy Company (LSE: DEC) has successfully completed the acquisition of a substantial working interest in key assets from Oaktree Capital Management.
The deal, initially announced on March 19, 2024, marks a strategic consolidation for Energy Company, enhancing its position in the energy sector.
The acquisition, valued at a purchase price of $410 million before adjustments, settled at a net price of $377 million after customary adjustments. This move not only strengthens Energy Company’s reserves by 510 Bcfe (approximately 85 MMBoe) but also boosts its current net production to 122 MMcfepd (around 20 Mboepd).
In tandem with the acquisition, Energy Company has reevaluated the borrowing base of its revolving credit facility, the Sustainability Linked Loan (SLL), resulting in a significant 26% increase. The borrowing base now stands at $385 million, with the company’s post-transaction liquidity estimated at approximately $130 million.
Financial analysts highlight the acquisition’s favorable metrics, with an estimated 2024 Adjusted EBITDA of around $126 million and a purchase price multiple of approximately 3.0x. The valuation of the PDP-only assets stands at roughly PV17.
Moreover, Energy Company has secured hedges on about 60% of the acquired assets’ 2024 production at an average price of $3.89/MMBtu, safeguarding against market volatility.
The financial structure of the acquisition includes $83 million in deferred cash payments to Oaktree and the assumption of Oaktree’s proportionate debt of approximately $120 million related to the ABS VI amortizing note, among other liquidity sources.
This acquisition is poised to deliver significant value to Energy Company’s stakeholders and solidify its market presence in the years to come.
CEO Rusty Hutson, Jr. commented: “This transaction represents another deliberate step in our disciplined approach to focus on accretive acquisitions that enhance our scale, deliver margin expansion, and expand free cash flow. The net purchase price of these high quality assets approximates a PV17 valuation and represents a low multiple of the Assets annual cash flows. As the natural acquirer of Oaktree’s working interest in the Central Region, the transaction was a unique opportunity to consolidate these assets and represents the culmination of a successful, multi-year partnership with Oaktree. I would also like to thank our financial partners for their continued support, demonstrated by the increase in the borrowing base of our Sustainability Linked Loan, and the highly successful ABS VIII financing.”
Diversified Energy Company reshuffles executive team and board of directors
Leave a Reply