Diversified Energy Company is significantly expanding its Permian Basin operations through the $1.8bn acquisition of Birch Resources, increasing its production base, strengthening operational control and creating opportunities to improve efficiency across a larger portfolio of mature oil and gas wells.
The acquisition is expected to increase Diversified’s Permian production from approximately 9,000 to 77,000 barrels of oil equivalent per day, while adjusted EBITDA from the assets is projected to rise from $64m to $612m. This represents an increase of around eightfold in both measures, giving the company a substantially larger position in one of the US’s major oil-producing regions.
The enlarged production base provides greater scope to spread operating costs across more wells, improve field crew utilisation and reduce travel between sites. Ownership of operated assets also gives Diversified more direct control over maintenance, production uptime and cost management, creating opportunities to improve the performance of the acquired portfolio.
Chief executive Rusty Hutson said the transaction builds on 25 years of experience acquiring and managing mature producing assets in Appalachia. Diversified focuses on proved developed producing (PDP) wells with relatively low production decline rates, seeking to improve operating efficiency, hedge future production and manage well retirement.
The company entered the Permian Basin through its acquisition of Maverick Natural Resources, completed approximately 18 months before the Birch announcement. The Birch deal accelerates its expansion, moving it from an initial regional position to a much larger operating platform.
Diversified believes the Permian’s growing inventory of mature producing wells creates further acquisition opportunities as other operators concentrate on new drilling and development. Its established operating model is designed to generate value from existing production through cost control and operational improvements rather than relying solely on drilling new wells.
The acquisition is supported by an expanded strategic partnership with Carlyle Group, which now has a $10bn focus on pursuing further producing-asset opportunities. This provides additional capacity to pursue acquisitions that fit Diversified’s strategy, although future growth will depend on identifying suitable assets and completing transactions on appropriate terms.
Diversified Energy Company plc (LON:DEC, NYSE:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
