Portfolio

Diversified Energy reports solid third quarter

By Josh White

Date: Wednesday 15 Nov 2023

Diversified Energy reports solid third quarter

(Sharecast News) - Diversified Energy Company reported an average net daily production of 804 million cubic feet in its third quarter on Wednesday, equivalent to 134,000 barrels of oil daily.
When adjusted for extraordinary maintenance, the FTSE 250 firm said that average net daily production stood at 814 million cubic feet, or 135,700 barrels, per day.

It recorded a strong September exit rate of 806 million cubic feet or 134,400 barrels daily, making for an industry-leading consolidated corporate decline rate of about 10%.

Financially, Diversified Energy reported adjusted EBITDA of $140m, reflecting a 2% reduction in adjusted operating cost per unit to $1.63 per million cubic feet equivalent compared to the first half.

The company achieved an adjusted EBITDA margin of 52%.

Its annualised free cash flow yield stood at 22%, including the impact of working capital changes.

At the same time, it maintained a leverage ratio of 2.4x and received affirmation from Fitch for all five of its rated ABS notes as 'BBB' or higher.

The firm's current liquidity was $135m, and the company declared a third-quarter interim dividend of 4.375 US cents per share.

Diversified said it was on track to retire around 200 wells in 2023, with 136 of 169 external wells already retired year-to-date, in collaboration with state orphan well programmes.

"We have once again delivered consistent and reliable results during the third quarter despite continued commodity price headwinds," said chief executive officer Rusty Hutson Jr.

"Our solid operational execution against the high-quality assets we manage, the ongoing integration of our most recent acquisitions of Tanos II and ConocoPhillips, and our focus on efficiency delivered sequential cost improvement, translating into 52% adjusted EBITDA margins.

"The asset performance and stability of cash flows were further corroborated by Fitch's recent affirmation of its ABS notes rating."

Hutson said the combination of peer-leading, low capital intensity, and low corporate declines created a distinct competitive advantage for the company, mitigating the need to replace production while maintaining free cash flow generation from an asset base and providing consistent production.

"Implementing our smarter asset management programs enhances the discretionary cash flow we generate and increases the availability of capital for reinvestment, debt repayment, and return of capital to shareholders, ultimately creating long-term value.

"I am also incredibly proud of the ongoing focus on sustainability, with our achievements being rewarded by a distinguished panel of European judges bestowing our 2022 report, 'decarbonising while delivering', with the ESG Report of the Year, recognising it as the most accurate, best structured and informative report.

"Our commitment to providing long-term total returns to shareholders is underscored by our consistent dividend history, declaring our 25th consecutive dividend, returning over $800 million of capital to shareholders, including share repurchases, since going public in 2017."

At 0842 GMT, shares in Diversified Energy Company were up 2.82% at 72.74p.

Reporting by Josh White for Sharecast.com.

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