Diversified Energy Reports Strong Q3 Results Amid Strategic Growth Focus

Highlights:

• Robust Financial Performance: Diversified Energy achieved $102 million in operating cash flow and $115 million in adjusted EBITDA for Q3.
• Strategic Debt and Share Repurchases: Year-to-date, the company has repaid $154 million in debt and executed $20 million in share buybacks.
• Expansion and Well Retirement Progress: The company retired 165 wells by September, targeting 200 by year-end, while integrating assets from recent acquisitions.

Diversified Energy Company PLC (LSE:DEC, NYSE:DEC) has showcased its operational strength and financial discipline in the third quarter, focusing on cash flow generation, debt reduction, and strategic growth. CEO Rusty Hutson emphasized the company’s consistent delivery of shareholder returns, backed by solid financial metrics and a clear growth strategy.

Strong Financial Metrics

In its Q3 update, Diversified Energy reported an average production rate of 829 million cubic feet equivalent per day (MMcfepd), with an impressive September exit rate of 851 MMcfepd. Operating cash flow for the quarter reached $102 million, while adjusted earnings (EBITDA) amounted to $115 million. Despite non-cash impairments leading to a minor net loss of $1 million, the company’s financial health remains robust.

“Year-to-date, we have declared $85 million in dividends, retired $154 million in debt, and executed over $20 million in share repurchases,” Hutson said, highlighting the company’s commitment to strengthening its balance sheet and delivering consistent shareholder returns.

Growth Strategy and Acquisitions

The acquisitive nature of Diversified Energy has been a key component of its growth strategy. The company is currently integrating assets from three major acquisitions completed earlier this year. Hutson pointed out that the operational infrastructure in place allows for significant business expansion without a proportional increase in general and administrative expenses.

“This scalable and capable platform gives us a valuable advantage in executing our growth strategy,” Hutson stated. He noted that strategic hedging contributed $53 million in Q3 and $130 million year-to-date, supporting the company’s financial stability.

Looking ahead, Diversified Energy plans to leverage its robust platform to explore new revenue streams. Initiatives include sales of undeveloped land, additional LNG agreements, and expansion into adjacent markets like Coal Mine Methane (CMM) capture, which offers potential for environmental credits.

Debt Reduction and Well Retirement Progress

A major focus for Diversified Energy has been debt management and well retirement. As of September, the company had reduced its outstanding debt by $154 million year-to-date and executed approximately $20 million in share buybacks, reflecting its commitment to maintaining a strong balance sheet.

Furthermore, the company has made significant headway in its well retirement program, decommissioning 165 wells across its Appalachian operations. It remains on track to meet its target of retiring 200 wells by the end of 2024.

Hutson expressed confidence in the company’s direction, noting, “We are well positioned for additional opportunities to diversify our revenue streams and enhance our financial performance heading into the remainder of the year.”

Outlook

With a stable financial footing, strategic asset integrations, and an eye on new growth opportunities, Diversified Energy is poised for continued strong performance. The company’s focus on optimizing cash flow, reducing debt, and exploring new revenue avenues demonstrates a clear path forward as it navigates the evolving energy landscape.