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Diversified Energy Company PLC (LSE: DEC; NYSE: DEC) has reported robust operational and financial results for the year ending December 31, 2024. The company achieved an average net daily production of 791 MMcfepd, with a December exit rate of 864 MMcfepd. This performance reflects the company’s capacity to maintain consistent production levels despite industry-wide challenges.
Total revenue, inclusive of hedges, reached $946 million, bolstered by $151 million in commodity cash hedge receipts, which supplemented the total revenue of $795 million. Operating cash flow stood at $346 million, although the company reported a net loss of $87 million, primarily due to $141 million in tax-effected, non-cash unsettled derivative fair value adjustments. Adjusted EBITDA was recorded at $472 million, with an adjusted free cash flow of $211 million, reflecting an adjusted EBITDA margin of 51%.
In addition to production achievements, Diversified made significant strides in capital allocation and debt management. The company retired over $200 million in debt principal through amortizing debt payments and returned $105 million to shareholders, including $21 million in share buybacks. Furthermore, Diversified completed $585 million in strategic and bolt-on acquisitions during 2024, marking a continued commitment to growth through value-accretive transactions. The company also retired 202 wells in Appalachia, surpassing its target for the third consecutive year, and achieved a 13% reduction in Scope 1 methane intensity from 2023.
The year 2024 was transformative for Diversified, highlighted by the $1.3 billion acquisition of Maverick Natural Resources. This acquisition positions Diversified as the largest producer in the Western Anadarko Basin and marks its entry into the Permian Basin. The company anticipates over $50 million in annual synergies by year-end 2025 from this acquisition, further strengthening its financial and operational foundation.
Diversified Energy Company Reports Fourth Quarter and Full Year 2024 Results
Diversified’s performance in 2024 exceeded market expectations in several key areas. Analysts had projected an earnings per share (EPS) of $0.51 and revenue of $273.5 million for the quarter. In contrast, Diversified reported total revenue of $268 million and an EPS of $0.515.
The company’s 2024 adjusted EBITDA of $472 million and an adjusted EBITDA margin of 51% further highlight its operational efficiency. While the reported net loss of $87 million could be seen as a setback, it is essential to note that this figure includes non-cash adjustments related to unsettled derivative fair value, which do not impact the company’s cash flow. The adjusted free cash flow of $211 million indicates a strong cash generation capability, enabling Diversified to pursue strategic acquisitions and debt reduction.
Diversified’s strategic acquisitions and capital allocation efforts have also paid off, as evidenced by the completion of $585 million in strategic and bolt-on acquisitions. These acquisitions have not only expanded the company’s asset base but have also positioned it for continued growth.
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Diversified Energy Sets Ambition Targets for 2025
Looking forward to 2025, Diversified Energy has set ambitious targets that reflect its confidence in continued growth and operational efficiency. The company expects total production to range between 1,050 to 1,100 MMcfe/d, with approximately 25% of this production comprising liquids and 75% natural gas. Total capital expenditures are projected to be between $165 million and $185 million, aligning with the company’s focus on strategic investments and operational enhancements.
Adjusted EBITDA for 2025 is anticipated to be between $825 million and $875 million, while adjusted free cash flow is projected at approximately $420 million. These projections indicate a robust financial outlook, driven by the anticipated synergies from the Maverick acquisition and the company’s ongoing efforts to optimize its cost structure and enhance cash flow generation. The leverage target is set between 2.0x to 2.5x, reflecting a balanced approach to debt management and capital allocation.
Diversified’s strategic focus for 2025 includes leveraging the operational synergies from the Maverick acquisition and enhancing free cash flow growth through advantageous natural gas hedges. The company also plans to generate approximately $40 million from the divestiture of undeveloped leasehold during the first half of 2025.
These initiatives, coupled with the anticipated increase in cash flow from CMM environmental credit sales, position Diversified for a strong year ahead, with significant opportunities for growth and value creation for its shareholders.
Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
