Summary of Diversified Energy Company Conference Call on Acquisition of Canvas Energy Company and Industry - Company: Diversified Energy Company (NYSE: DEC) - Acquisition Target: Canvas Energy, a privately held company based in Oklahoma City - Industry: Energy sector, specifically focused on oil and natural gas production Core Points and Arguments 1. Acquisition Announcement: Diversified Energy Company announced the acquisition of Canvas Energy for approximately $550 million, which is expected to close in Q4 2025 pending regulatory approval [4][8][9] 2. Production Increase: The acquisition is projected to increase Diversified's production by approximately 13%, adding around 147 million cubic feet or 24,000 barrels of oil equivalent per day, with a commodity split of 57% liquids and 43% natural gas [6][15] 3. Financial Metrics: The acquisition is anticipated to generate approximately $155 million in EBITDA over the next 12 months, representing an 18% increase to the current base, and a 29% increase in free cash flow [7][15] 4. Asset Quality: Canvas Energy adds approximately 240,000 net acres and enhances Diversified's low-decline production profile, with total crude reserves valued at approximately $1.4 billion on a PV10 basis [7][10] 5. Funding Structure: The acquisition will be funded through a combination of asset-backed securitization funding of up to $400 million and approximately 3.4 million shares of Diversified, maintaining a leverage-neutral transaction [8][9] 6. Strategic Growth: The acquisition aligns with Diversified's strategy of consolidating high-quality, cash-generating energy assets and optimizing existing long-life U.S. assets [4][5] 7. Operational Synergies: The company expects to achieve significant operational synergies through the integration of Canvas's assets, enhancing cash generation and operational efficiency [11][14] 8. Market Position: The acquisition reinforces Diversified's position as a leading player in the Oklahoma market, with a combined acreage footprint of approximately 1.6 million acres [10][15] Additional Important Content 1. Carlyle Partnership: This acquisition marks the first transaction utilizing the Carlyle strategic funding partnership, which is expected to facilitate future acquisitions of high-quality assets [9][23] 2. Focus on Undeveloped Acreage: Diversified is exploring opportunities for joint ventures or divestitures on undeveloped acreage acquired from Canvas, particularly in high-potential areas like the Scoopstack region [26][34] 3. G&A Structure: The corporate general and administrative expenses at Canvas are estimated to be around $25 million to $30 million, which Diversified plans to consolidate effectively [46] 4. Interest Rate and Maturity Terms: The interest rates for the asset-backed securitization are expected to be favorable due to declining treasury rates, with terms similar to previous ABS notes issued by Diversified [54] This summary encapsulates the key points discussed during the conference call regarding the acquisition of Canvas Energy by Diversified Energy Company, highlighting the strategic, financial, and operational implications of the transaction.
Diversified Energy Company (NYSE:DEC) M&A Announcement Transcript