Diversified Energy Company(DEC) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for the year was approximately $950 million, with adjusted EBITDA of$ 472 million, representing a 50% adjusted EBITDA margin [24] - Free cash flow for the year was $211 million, and net debt stood at approximately$ 1.6 billion [24] - Debt principal reduction totaled approximately $205 million in 2024, representing almost 13% of outstanding debt [13][24] Business Line Data and Key Metrics Changes - Average net daily production was approximately 790 million cubic feet equivalent per day, with a December exit rate averaging over 860 million [23] - Over 50% of produced volumes are now generated in the central region [23] - The company executed over$ 2 billion in acquisitions during the year, including the recently closed Summit and Maverick acquisitions [14][10] Market Data and Key Metrics Changes - The company has diversified its production base since May 2021, positioning itself to participate in both LNG exports and data center energy needs [23] - The acquisition of Maverick adds nearly 1 million acres and expands the company's footprint to five core-operated basins [36] Company Strategy and Development Direction - The company aims to optimize existing long-life and undervalued U.S. energy assets while minimizing traditional exploration and production risks [7] - The focus remains on systematic debt reduction, returning capital to shareholders, and growing through strategic acquisitions [13] - The company is expanding into coal mine methane capture and environmental credits, anticipating over 300% growth in free cash flow from this segment over the next 24 months [30] Management's Comments on Operating Environment and Future Outlook - Management believes the share price is undervalued due to macro headwinds not connected to industry fundamentals [32] - The company expects to see significant synergies from the Maverick acquisition, with guidance for combined free cash flow totaling $420 million in 2025, representing a 200% uplift compared to standalone results [43][48] - Management maintains a disciplined approach to acquisitions and emphasizes the importance of operational efficiency and cost reduction [27][55] Other Important Information - The company has a fixed per-share dividend that is deemed sustainable for a long period, even with the enlarged share capital post-Maverick acquisition [78] - The company has identified significant untapped value in undeveloped acreage, with plans for additional sales throughout 2025 [20] Q&A Session Summary Question: Thoughts on organic growth versus low-cost PDP acquisitions - Management sees continued growth through accretive acquisitions and plans to invest in non-operated working interests from the Maverick transaction [54] Question: Details on cash flows from the data center project JV - Revenue streams will include selling gas and potential coal mine methane, but specific splits have not been developed yet [59] Question: Capacity for share repurchases - Approximately 7% remains under the current authorization for share repurchases, with plans for another 10% authorization at the upcoming AGM [66] Question: Update on dividend sustainability post-Maverick - The fixed dividend is sustainable for a long period, and the company is confident in its ability to cover it with increased free cash flow [78] Question: Assumptions driving free cash flow guidance for 2025 - The company maintains a 10% corporate decline rate and anticipates additional production from the JV, with pricing supported by hedging strategies [85][87] Question: Unit costs for Maverick and environmental credit sales - Specific cost information for Maverick has not been published, but environmental credit sales are booked under other revenue, with approximately$ 8 million to $10 million recorded in 2024 [96]