Diversified Energy Acquires Canvas Energy: Growth and Synergy
Diversified Energy Company Expands in Oklahoma with Strategic Acquisition
In an exciting move within the oil and gas sector, Diversified Energy Company PLC (LSE:DEC; NYSE:DEC) has announced its acquisition of Canvas Energy for a total of approximately $550 million. This significant deal is viewed as a step forward for Diversified, further embedding its leadership position in the Oklahoma region.
The Game-Changing Acquisition
This acquisition aims to facilitate a notable enhancement in Diversified’s operational footprint. The combined resources will include quality operational properties and acreage primarily concentrated in key regions of Oklahoma, such as Major, Kingfisher, and Canadian Counties. As part of the acquisition, Diversified will gain 23 high-quality wells that have recently started production.
Significant Financial Impacts
A key aspect of this transaction is its expected impact on Diversified's financial performance. The acquisition is projected to provide approximately an 18% increase in Adjusted EBITDA and a remarkable 29% boost in Free Cash Flow, aided by a 13% rise in production levels while further expanding its proved reserves.
Unlocking Value Through Integration
Diversified’s management emphasizes the strength of its established integration playbook, anticipating that the acquisition will unlock significant value. The firm's existing corporate infrastructure will play a vital role in facilitating a smooth transition and realizing synergies. Their focus on operational overlap in Central Oklahoma allows them to optimize expenses effectively.
Transaction Highlights and Funding Details
The transaction is underpinned by impressive financial metrics with a purchase price relative to expected future EBITDA, making it a strategic move for enhancing cash flow and portfolio strength. The acquisition is to be funded through a strategic partnership with Carlyle, alongside existing liquidity and an issuance of approximately 3.4 million new shares of Diversified.
Synergies and Strategic Alignment
The anticipated synergies from this acquisition are expected to drive down operational costs, fostering a more robust financial footing for Diversified. A significant overlapping operational area coupled with attractive undeveloped acreage equips the firm with numerous opportunities for optimization and future growth.
CEO's Insight on the Acquisition
CEO Rusty Hutson, Jr. expressed enthusiasm about this acquisition, highlighting how it fits perfectly into Diversified's growth strategy. He emphasized the importance of leveraging partnerships and their track record of securing value-generating assets at attractive valuations for shareholders. By growing their portfolio of energy assets, Diversified aims to enhance cash flow, ultimately driving shareholder value.
Future Outlook Post-Acquisition
The completion of this acquisition is anticipated by the end of the upcoming fiscal year. With the integration process initiated, Diversified is poised to capitalize on its enhanced operational scale and focus on cash flow optimization. Their strategic alignment with Carlyle positions them well to manage this growth effectively.
Frequently Asked Questions
What is Diversified Energy's main goal with this acquisition?
Diversified Energy aims to expand its operational footprint in Oklahoma and increase cash flow through enhanced production and management of new assets.
How much will Diversified pay for Canvas Energy?
The total consideration for the acquisition of Canvas Energy is approximately $550 million.
What financial benefits are projected from the acquisition?
The acquisition is expected to result in an 18% increase in Adjusted EBITDA and a 29% increase in Free Cash Flow, alongside a boost in production.
How will the acquisition be funded?
The acquisition will be financed through a combination of existing liquidity, a strategic partnership with Carlyle, and the issuance of new shares.
When is the completion of the acquisition expected?
The acquisition is anticipated to close during the fourth quarter of the upcoming fiscal year.
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