The latest research note from Tennyson Securities highlights a strong finish to 2025 for Diversified Energy (LON:DEC), with the company reporting solid operational performance, robust cash flow and continued strategic expansion. According to the note, the company’s fourth quarter momentum helped push full year results to the upper end of guidance while also setting the stage for further growth in 2026.
Energy research analyst Tim Hurst-Brown points out that the company closed the year on a particularly positive note. In his words, “Overall, a solid set of numbers at the better end of guidance and accompanied by several incremental positives.”
Record Production Drives Strong Financial Performance
Diversified Energy reported record quarterly production in the fourth quarter of 2025, reaching 200 kboepd, representing an increase of more than 40 percent compared with the previous year. This performance was largely supported by the company’s Maverick and Canvas acquisitions, which significantly boosted output.
For the full year, production averaged 181 kboepd, within the guided range of 175 to 183 kboepd. Approximately 75 percent of output was dry gas, underlining the company’s strong exposure to natural gas markets.
Financially, the company delivered results at or above expectations:
FY25 Highlights
- Average production: 181 kboepd
- Q4 record production: 200 kboepd
- EBITDA: US$956 million, above guidance of US$900 to US$925 million
- Free cash flow: US$440 million
- Net debt: US$2.8 billion at year end
- Leverage: Improved to 2.3x from 3.0x a year earlier
- Shareholder returns: US$185 million through dividends and buybacks
The company maintained its 29 cent quarterly dividend and repurchased US$100 million of shares, representing roughly 10 percent of shares outstanding. These distributions underline Diversified Energy’s focus on delivering shareholder returns while continuing to grow the business.
Strategic Acquisition Adds Production And Synergies
Alongside the results announcement, Diversified Energy also revealed a new bolt on acquisition. The Sheridan acquisition is expected to add approximately 10 kboepd of production and US$52 million of next twelve month EBITDA.
The purchase price of US$245 million, equivalent to around 4.7x PV15, is considered strategically attractive. Importantly, the assets are located close to the company’s existing operations in east Texas, allowing for operational efficiencies and integration benefits.
The assets also feature low decline production of around 6 percent per year, which aligns with Diversified Energy’s strategy of acquiring mature, cash generative assets. Additional upside may come from around 75,000 acres of developed acreage associated with the acquisition.
New Joint Venture Supports Future Growth
Another development outlined in the research note is a new non operated drilling joint venture in the Permian Basin with a private exploration and production company. This arrangement provides Diversified Energy with an additional route to monetise development acreage in Texas.
The company expects its non operated drilling activity to add approximately 10.8 kboepd of production in 2026, helping to offset roughly half of the group’s natural production decline.
Capital expenditure associated with these activities is expected to fall between US$135 million and US$155 million.
2026 Outlook Remains Stable
Guidance for 2026 suggests broadly stable performance compared with 2025. Diversified Energy expects:
- Production: 195 to 202 kboepd
- EBITDA: US$925 million to US$975 million
- Free cash flow: around US$430 million
Importantly, this outlook does not include any contribution from the Sheridan acquisition, which is expected to close in the second quarter of 2026.
The company has also secured authorisation to repurchase up to 10 percent of its shares outstanding, equivalent to roughly 7.8 million shares, supporting the continuation of its opportunistic share buyback programme.
Final Thoughts
Diversified Energy’s FY25 results reflect steady operational execution, strong cash generation and continued strategic expansion through acquisitions and partnerships. With production growth from recent deals, additional drilling partnerships and a disciplined capital return programme, the company appears well positioned to maintain stable performance while pursuing further opportunities in the US energy market.
