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Diversified Energy Company Plc acquires gas production assets in Oklahoma

“Replicating our success in Appalachia, we have quickly established ourselves as a significant operator in the central region,” Rusty Hutson said

Diversified Energy Company PLC (LSE:DEC, OTCQX:DECPF) struck its latest deal in the United States, picking up a package of predominantly gas producing assets in Oklahoma for US$218mln in cash.

It is acquiring interests in around 600 operating wells from Tapstone Energy Holdings. They presently yield about 12,000 barrels of oil equivalent per day, of which around 80% is either gas or natural gas liquids.

The deal is part of DEC’s rapid expansion into what it refers to as its ‘central region’ which comprises areas in Oklahoma, Louisiana, Texas, and Arkansas. It is a second leg to the business which previously established itself through a series of acquisitions in America’s Appalachia region.

“Replicating our success in Appalachia, we have quickly established ourselves as a significant operator in the Central Region, which positions us for additional growth,” said DEC chief executive Rusty Hutson.

He added: “With a net purchase price of less than two times net cash flow, this acquisition represents another highly accretive, fully balance sheet-financed acquisition that further demonstrates our status as a capable consolidator of producing assets within the Central Region.

“Our enlarged regional footprint strengthens our portfolio with additional high-quality assets and added scale to drive synergies.”

The deal is supported by DEC’s co-investor Oaktree Capital which through its parallel investment takes the total deal value to US$419mln – it is buying 48.75% of working interests in the assets for US$192mln. It is Oaktree’s third co-investment with DEC in the central region, totalling US$370mln of an envisaged US$1bn commitment, DEC highlighted.

For DEC, it increases production volumes in the central area by around 33% and adds around 35mln barrels of PDP (Proved Develop Producing) reserves.

The company said production presently benefits from high cash margins, of around 65% due in part to production having higher liquids content.

Rusty Hutson highlighted that the assets will also present material upside potential, through asset optimisation.

Read More: Diversified Energy Company Plc acquires gas production assets in Oklahoma

2021-10-07 01:28:00

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