Diversified Energy: FTSE 250 firm stumps up £52m for Texas natural gas field
Oil and gas site owner Diversified Energy Company has bought several operated natural gas wells located within East Texas for $68m (£52.3m).
The FTSE 250 firm bought the assets from a regional operator. The “significant” PDP (proved developed producing) reserve was part of a wider sale in the area.
A third-party development company will also buy an additional amount of undeveloped acreage from the regional seller for about $19m (£14.6m). Diversified said it would also buy a minority five-percent stake in the land for $1m (£800,000).
The two sales are expected to total 331 wells containing about 69 per cent gas volumes. The company estimated its operating profit over the next twelve months at $19m, 3.5 times the purchase multiple.
“The production profile of the assets is highly complementary to the company’s existing portfolio and operational strategy, with low annual production declines of ~15 per cent for the next twelve months,” Diversified said in a stock exchange notice today.
The cash for the new assets will be raised through a combination of a new share issuance to the regional operator for about $35m (£26.9m), along with collateral from the newly purchased wells.
Diversified said it expected to close the acquisition in the fourth quarter of this year and is subject to a break fee if it falls through.
Diversified CEO Rusty Hutson Jr said: “This purchase strengthens Diversified by expanding our footprint in our East Texas operating area, increasing our scale, and allowing for margin enhancement.
“Importantly, this acquisition extends our proven track record of completing disciplined transactions at attractive valuations.
“By joining resources with a development partner, we are highlighting our Company’s ability to creatively and thoughtfully structure transactions that add value and maximise cash flow generation for shareholders.”