Diversified Energy Company plc (LON: DEC; NYSE: DEC), has announced that it has entered into a definitive agreement to acquire Maverick Natural Resources, a portfolio company of EIG for total consideration of approximately $1,275 million. The Acquisition combines two complementary asset packages, pairing high-quality Proved Developed Producing weighted production assets with the lowest corporate decline and capital intensity among peers. The acquisition of Maverick by Diversified 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.
Financial and Strategic Accretive Acquisition Provides Opportunity for 95% Increase in Revenue, Enhanced Margins, Expense Synergies, and 55% Increase in Free Cash Flow
Unique & Differentiated Business Model Offers Reliable Production, Multi-Basin Commodity Diversification, and Strong Hedging Program that Enables Consistent Free Cash Flows
Significant Operating Scale Provides Optionality for Organic Growth Through Established Low-Risk, High-Return Development Partnership
Expands Proven Roll-Up Model to the Permian Basin and Forges Partnership with Energy Focused Investor EIG
Modern Field Management Philosophy of Experienced Diversified Team Well Positioned to Leverage Technology, Capture Synergies and Unlock Portfolio Value
he Acquisition further executes upon Diversified’s strategy for maintaining the optionality of multiple development opportunities through established joint venture partnerships across the combined portfolio of vast undeveloped acreage in multiple high-returning basins. A portion of the acquisition directly offsets Diversified’s core Western Anadarko position with active development in the Cherokee Play, and provides a new Permian asset base with multiple zones in the Northern Delaware Basin.
The combined company is expected to generate substantial free cash flow, delivering strong, consistent shareholder value creation through disciplined debt reduction, a sustainable fixed dividend, and strategic share repurchases. The combined company will have an enterprise value of approximately $3.8 billion and operate across five distinct operating regions, with a combined production base of approximately ~1,200 MMcfe/d (~200 Mboe/d).
OPERATING AND FINANCIAL METRICS
| USD Millions unless otherwise noted | Diversified | Maverick |
| Current Production (MMcfe/d) | ~850 | ~350 |
| Commodity Mix | ~85% Natural Gas ~15% Liquids | ~45% Natural Gas~55% Liquids |
| Total Revenue, Inclusive Settled Hedges(a) | ~$940 | ~$900 |
| Adjusted EBITDA(b) | ~$555 | ~$380 |
| Free Cash Flow(c) | ~$220 | ~$125 |
| EV/EBITDA(d) | ~4.5x | ~3.3x |
| Leverage(e) | 2.9x | 1.8x |
| PV-10 of Total Proved Reserves(f) | ~$3.9 Billion | ~$2.1 Billion |
| PV-10 of PDP Only(f) | ~$3.9 Billion | ~$1.7 Billion |
For the twelve-month period ended September 30, 2024 unless otherwise noted
CEO COMMENTARY
Rusty Hutson, Jr., CEO of Diversified, commented:
“This acquisition expands our unique and highly focused energy production company with a complementary portfolio of attractive, high-quality assets. We have a proven track record of unlocking value from acquisitions while maintaining our commitment to sustainability leadership, and this acquisition provides us with great assets and employees that complement this strategy. The acquired producing assets have demonstrated leading well performance and are a natural fit with our operating advantage and existing acreage. Notably, the combined footprint in Oklahoma and the Western Anadarko Basin creates one of the largest in terms of production and acreage, which includes the emerging Cherokee formation.
Diversified shareholders will share in the significant upside potential of the combined company, with its cash flow projected to provide durable and consistent returns and enabling significant debt reduction, further enhancing our long-term value creation proposition. We view commodity, geography, asset, and business segment diversification as strategic advantages that drive more resilient and consistent free cash flow and long-term value creation for our combined company.
Diversified anticipates benefiting from the additional capital investment optionality for organic cash flow generation from joint venture partnerships that continue to optimize our combined high-quality asset base. We plan to leverage Maverick’s experienced technical asset development team to unlock undeveloped acreage potential through an even larger combined footprint, and I am confident that Diversified’s management team will bring its expertise in efficiently integrating acquisitions to further expand our Smarter Asset Management practices.
We have created a strong platform of people and financial resources to build and operate an organization that continues to be the Right Company at the Right Time to responsibly produce American energy, deliver reliable free cash flow, and drive shareholder value.”
Rick Gideon, CEO of Maverick Natural Resources:
“Today marks an important milestone for all of us at Maverick Natural Resources. We have great respect for the innovative approach and stewardship demonstrated by the team at Diversified and are pleased to enter into this partnership. Maverick has built a strong foundation of execution and efficiency across our portfolio, and we look forward to combining our complementary portfolio of assets with Diversified. I would also like to express my gratitude to the team at Maverick for their hard work and dedication in supporting our strategic efforts and contributing to this achievement.”
Jeannie Powers, Managing Director and Head of Domestic Traditional Energy, EIG:
“We are extremely pleased to have entered into this acquisition and look forward to contributing as a core shareholder. We aim to work closely with the Diversified management team and Board to support the Company’s focus on delivering long-term value. Diversified is uniquely positioned in the upstream space with a differentiated business model and a history of operational excellence. The combination of Maverick’s assets with Diversified’s existing footprint represents a strategic opportunity that we believe can support value creation for all stakeholders.”
COMPELLING STRATEGIC AND FINANCIAL RATIONALE
• Value Maximizing Combination: The Acquisition is expected to be accretive to key metrics including cash flow, leverage, and valuation multiples. The assets are being acquired at approximately 3.3 times LTM Adj. EBITDA(g). The combined company had approximately $1.8 billion in combined revenue(g), and approximately $345 million in combined free cash flow(g). The acquisition provides meaningful free cash flow accretion, with combined adjusted per unit EBITDA margins in excess of 2.00 per Mcfe(g).
• Strong Financial Position, Liquidity and Capital Markets Access: Leverage accretive acquisition that integrates additional investment-grade ABS notes, allowing for a natural deleveraging process. Additional size and scale enhances the Company’s trading liquidity and access to capital markets, bolstering its ability to efficiently finance its business and pursue bolt-on accretive acquisitions.
• Multi-Basin Exposure and Scale: Combination enhances position in core geographies across Appalachia, the Western Anadarko, Permian, Barnett, and Ark-La-Tex regions, with commodity product diversification, including beneficial exposure to oil markets, to create a more resilient market cycle risk profile and more durable revenue. This multi-basin scale also provides capital investment optionality for organic growth by acquisition or growth by high returns joint venture partnership development projects.
• Unique Operational Approach: Company focused on responsible operations and stewardship of existing energy infrastructure assets, including well optimization and managing the assets by leveraging technology, vertical integration, and scale to the ultimate end of life. By leveraging the complementary operations focus, utilizing technology, aligning resources, and sharing expertise, Diversified is poised to optimize performance, extract substantial value, and drive growth.
• Commitment to Stewardship and Environmental Performance: Combined company focus on achieving tangible targets, and dedicated actions to driving sustainability, transparency, and environmental progress through asset improvement and optimization practices, data-driven innovation of ongoing measurement, monitoring, and mitigation of emissions.
• Proven Process to Capture Synergies: Diversified’s established integration playbook and corporate infrastructure are anticipated to unlock significant and sustainable value with fast, effective and efficient integration. Familiarity with the asset base and the combined density provides considerable expense savings and a meaningful earnings contribution.
TRANSACTION DETAILS
The gross Acquisition value of $1,275 million (inclusive of debt assumption) represents an approximate 3.3 times LTM EBITDA(g) multiple. Consideration is expected to be satisfied through the assumption of approximately $700 million of Maverick debt outstanding associated with its RBL, an ABS amortizing note and other outstanding credit, the issuance of approximately 21.2 million new U.S. dollar-denominated Diversified Ordinary Shares to the unitholders of Maverick valued at approximately $345 million at signing, and approximately $207 million in cash, with the mix of Ordinary Shares and cash subject to adjustment based on the outstanding amount of Maverick’s RBL at Completion.
The combined company will have an enterprise value of approximately $3.8 billion as of signing. Upon completion, EIG will own approximately 20% of the outstanding Ordinary Shares, inclusive of the Ordinary Shares currently owned from previous transactions. The Ordinary Shares will be subject to a customary lock-up agreement.
The Company has received commitments for $900 million on a new upsized $1.5 billion, four-year credit facility which incorporates both the existing Diversified RBL and the new RBL assets from Maverick as collateral. The amended and restated credit facility provides necessary liquidity for the cash consideration of the acquisition and to refinance Maverick’s RBL. Additionally, the Company intends to undertake potential refinancings related to other credit products outside of the Company’s credit facility.
The Acquisition is subject to a $50 million break fee payable by Diversified Gas & Oil Corporation in certain circumstances.
LEADERSHIP AND GOVERNANCE
The Company will continue to be led by its proven management team that reflects the strengths and capabilities of the organization. Upon closing, Mr. Hutson will continue to serve as Chief Executive Officer and as a member of the Board. Diversified’s current Chair of the Board, David Johnson, will continue to serve as the Chair of the Company’s Board.
Upon completion of the Acquisition, the Company’s Board will consist of eight directors, six of whom are members of the current Diversified Board, including Mr. Hutson, and two of whom will be designated by EIG.
Due to other commitments, Sylvia Kerrigan has resigned from the Company’s Board of Directors effective as of January 24, 2025. Ms. Kerrigan, who has been a member of the Board since 2021, is leaving the Board in good standing and on amicable terms. Upon her departure from the Board, it is expected that the current Board and Remuneration committee member David Turner has been appointed chair of the Remuneration Committee and join the Nomination and Governance Committee effective January 25, 2025. Additionally, Sandy Stash will be appointed lead independent director effective January 25, 2025.
David Johnson, Non-Executive Chairman of the Board, commented:
“On behalf of our Board and Diversified’s management team, we thank Sylvia for her service to the Company. We have valued and appreciated her insight and industry expertise. We wish her well in her future endeavors.”
BOARD STATEMENT
The Board unanimously considers the Acquisition to be in the best interests of the shareholders of the Company as a whole. The Board believes the Acquisition would provide Diversified with significantly increased scale, long-term free cash generation, superior unit cash margins, low decline production base, a compelling environmental profile, and a robust regional consolidation opportunity.
TIMING AND APPROVALS
The Acquisition, which is expected to close during the first half of 2025, has been unanimously approved by the Board.
Completion is 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 Agreement.
ADVISORS
Citi is serving as financial and transaction advisor to Diversified. Truist and Stifel are serving as additional advisors to Diversified. Gibson, Dunn & Crutcher LLP and Latham & Watkins (London) LLP are serving as legal advisor to Diversified on the Acquisition. KeyBanc is serving as Administrative Agent and KeyBanc Capital Markets is the Lead Arranger on Diversified’s debt financing in connection with the Acquisition. Jefferies Securities is serving as financial advisor and Kirkland & Ellis LLP is serving as legal advisor to Maverick and EIG.
UK LISTING RULES
The Acquisition, because of its size in relation to Diversified, constitutes a “significant transaction” for the purposes of the Listing Rules, and is therefore notifiable in accordance with UKLR 7.3.1R and 7.3.2R. Additional details as required under the Listing Rules are presented in Appendix 1.
PRESENTATION AND WEBCAST
Diversified will host a conference call and webcast today at 1:30 p.m. GMT (8:30 a.m. EST) to discuss the Acquisition.
The conference call details are as follows:
| U.S. (toll-free) | + | 1 877 836 0271 |
| U.K. (toll-free) | + | 44 (0)800 756 3429 |
| Webcast | https://www.div.energy/news-events/ir-calendarevents | |
| Replay Information | https://ir.div.energy/financial-info |
A presentation detailing the acquisition will be posted to the Company’s website before the conference call. The presentation can be found at https://ir.div.energy/presentations.
| a) | Total revenue, inclusive of settled hedges, includes the impact of derivatives settled in cash; for more information, please refer to “Use of Non-IFRS Measures” |
| b) | Adjusted EBITDA presented for the twelve-month period ended September 30, 2024; Adjusted EBITDA for Maverick excludes certain non-recurring items primarily relating to restructuring and other transactional costs and is not adjusted for the divestiture of East Texas assets subsequent to the measurement period; Adjusted EBITDA for Diversified includes the annualized effect of acquisitions performed during the measurement period; for more information, please refer to “Use of Non-IFRS Measures” |
| c) | DEC Enterprise Value / Adjusted EBITDA (“EV/EBITDA”) calculated using Pro Forma Adjusted EBITDA for the twelve-month period ended September 30, 2024 and enterprise value (“EV”) as of January 17, 2025; Maverick EV/EBITDA multiple based on gross Acquisition value divided by the Acquisition’s Adjusted EBITDA for the twelve-month period ended September 30, 2024 |
| d) | 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; for more information, please refer to “Use of Non-IFRS Measures” |
| e) | Leverage is measured as Net Debt divided by Adjusted EBITDA; as used herein, Net Debt represents total debt as recognized on the balance sheet, less cash and restricted cash at September 30, 2024; for more information, please refer to “Use of Non-IFRS Measures” |
| f) | PV-10 for Diversified Energy as reported in the Company’s Annual Report for the year ended December 31, 2023 adjusted to reflect the impact of the acquisitions undertaken during calendar year 2024 ; PV-10 for Maverick calculated using historical production data, asset-specific type curves and an effective date of June 1, 2024 using the 10-year NYMEX strip at January 10, 2025 and excluding assets divested in October of 2024; for more information, please refer to “Use of Non-IFRS Measures” |
| g) | For the twelve-month period ended September 30, 2024; does not include the impact of any potential or expected synergies |
