Diversified Energy (DEC) , an oil and gas producer focused on the Appalachian Basin in the US, announced interim results for the 6 months ended 30 June 2023 (1H23).
Diversified Energy reported record average net daily production of 142 Mboepd, up 4.4% from 136 Mboepd in 1H22, with a June 2023 exit rate of 144 Mboepd. The oil and gas producer maintained a low consolidated corporate decline rate of ~10%. However, revenues declined by 45% to US$487m as a result of a 52% drop in the average realised sales price during the period.
Adjusted EBITDA increased by 26% in H123 to US$283m from US$224m a year ago. 1H23 adjusted cost per unit decreased by 10% to US$1.66 Mcfe from US$1.84 Mcfe. Overall, the adjusted EBITDA margin for 1H23 was 52%, up from 48% in 1H22.
Diversified Energy's net income for the period was US$631m, including US$761m (pre-tax) of non-cash hedge valuation gain that erased last year's loss of US$935m. Annualised free cash flow yield was 32%, excluding the impact of working capital.
Liquidity was approx. US$103m after the company generated US$62m net in liquidity through sale of non-core assets. Diversified Energy completed US$262m of acquisitions during the period of complimentary Central Region upstream assets. US$84m of dividends was paid to shareholders through 2Q23 and the declared dividend for 2Q23 was US$0.04375/share.
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Overall, a positive update from Diversified Energy. The company achieved record production in 1H23, up 4.4% year-on-year boosted by the acquisition of the Tanos II assets. Underlying profits rose 26% and net income was US$631m, erasing last year's US$935m loss. The reported revenue decline was offset by substantial hedging. This was despite DEC retiring 174 wells in Appalachia and increasing its MSCI sustainability rating to AA.
Despite lower commodity prices, Diversified Energy again delivered robust cash margins of 52%, an increase from 48% last year. The oil and gas producer continued to focus on stewardship, conducting 120,000 upstream surveys and emissions surveys on 6,300 mi of midstream systems. A focus on leaner operation resulted in the sales of non-core assets bringing US$62m in cash, the abovementioned closing of 174 wells, and a range of productivity enhancements and cost reduction measures on existing assets. At the same time, Diversified continued its consolidation strategy with the Tanos II acquisition and said it is seeking further M&A opportunities.
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