Diversified Energy Share Price Rose 6.16% on Closing Asset Sale

The Diversified Energy Company PLC (LON: DEC) share price rose 6.16% after announcing the successful completion of a noteworthy deal, allowing the company to extract additional value from its existing assets. The transaction was notable for its creativity and favourable economics, contributing to increased liquidity and a decrease in the company's overall debt.

To provide a brief overview, the company sold its producing assets located in the Appalachian region to a Special Purpose Vehicle (SPV named DP Lion Equity Holdco LLC). In this arrangement, Diversified Energy retained a 20% minority stake and continues to oversee the operation of these assets.

The transaction resulted in significant capital for the company, amounting to around $200 million. This sum was a combination of funds raised through an asset-backed securitisation by the SPV and the sale of an 80% equity interest in the SPV, which alone contributed approximately $30 million.

After accounting for related expenses, the proceeds from this transaction were allocated towards repaying existing loans under the company's Sustainability-Linked Loan facility. This repayment strategy reduced the company's net debt by about 12%. The remaining funds were designated for general corporate needs.

The deal's valuation implied a 5.7 times multiple of the anticipated hedged 2024 EBITDA, which is expected to be around $35 million. The assets involved in this transaction, which the SPV now holds, were previously part of the collateral for the company's Sustainability-Linked Loan.

Based on projected commodity prices, the assets were valued at a PV-10 of roughly $230 million and produced about 50 MMcfe daily. This valuation led to a redetermination of the borrowing base for the company's revolving credit facility, which is now $305 million. 

The strategic transaction marks a significant step for Diversified Energy in optimising its asset base and strengthening its financial position.

Rusty Hutson, Jr., CEO of the Company, commented: “This latest transaction further demonstrates the attractiveness of Diversified's asset base that provides reliable production and consistency of cash flows. At an attractive multiple, this Transaction has provided a path for the Company to unlock additional value from our assets, reduce our outstanding debt, and enhance our liquidity.”

The Diversified Energy share price. 

The Diversified Energy share price rose 6.16% to trade at 1176.25p from Friday’s closing price of 1108.00p.