Diversified Energy turns driller in shift away from acquisition-led growth

Diversified Energy Company PLC (LSE:DEC, NYSE:DEC, FRA:DG20) , the Alabama-based gas producer listed in London and New York, is to start drilling its own wells, a departure from the acquisition-led model that built the company.

The company said it would launch a one-rig operated development programme in Oklahoma in the second half of this year, spending $35 million to $50 million.

It expects the drilling to have a material impact on production in 2027.

Diversified has identified more than 450 economic drilling locations in Oklahoma, equivalent to more than 20 years of work at a one-rig pace.

Second quarter adjusted earnings before interest, tax, depreciation and amortisation fell 14% to $240 million.

The margin on those earnings narrowed to 52% from 64%, reflecting softer realised prices and lower proceeds from asset sales.

Total commodity revenue rose to $504 million from $395 million, helped by the Canvas, Sheridan and Camino acquisitions.

Net income of $248 million included a $352 million non-cash gain on unsettled derivatives, the contracts used to hedge future prices.

Average production was 1,253 million cubic feet of gas equivalent a day, of which 71% was natural gas.

The company sold non-core assets in the Barnett Shale and Arkansas for $147 million, part of a disposal programme that has raised more than $500 million since the start of 2023.

Diversified has returned about $136 million to shareholders this year, including $93 million of buybacks covering roughly 9% of its shares.