Diversified Energy declares third quarter divi as it retires wells at pace

Diversified Energy declared a third quarter interim dividend of 4.25 cents per share on Thursday, up 13% year-on-year, on the back of record average net daily production of 128,000 barrels of oil equivalent per day, which was 20% higher year-on-year.

The FTSE 250 company said its third quarter exit rate was 133,000 barrels of oil equivalent per day for the period.

Its third quarter hedged adjusted EBITDA was $92m, up 22% year-on-year, while free cash flow improved 20% to $72m, representing a 23% annualised free cash flow yield.

Cash margins came in at nearly 50%, which the board said was driven by higher revenue realisations.

Diversified reported a pro-forma leverage ratio post the recently-announced Tapstone acquisition of 2.2x, while the board said higher commodity prices and a “favourable” outlook supported its hedging strategy.

The company said it had retired around 115 Appalachian wells in the year-to-date at an average cost of $22,000 each, representing 144% of the annual state agreement requirements of 80 per year.

“We continue to deliver strong operational and financial results through the third quarter demonstrated by consistently strong cash margins and higher production from our recently acquired assets,” said chief executive officer Rusty Hutson Jr.

“The integration and diligence of our Central Region acquisitions are progressing nicely, giving us heightened confidence in our ability to execute our growth strategy and to increase our quarterly dividend to a new high of 4.25 cents per share.

“As we realise synergies, progress our ‘Smarter Asset Management’ programmes and proactively hedge in a higher commodity price environment, we expect to achieve even higher margins.”

Hutson said that importantly, demonstrating the firm’s commitment to continuously improve its sustainability performance, it had met and exceeded our annual state-required well retirements by more than 40%.

“I look forward to sharing similar accomplishments along with providing a comprehensive overview of the company's environmental, social and governance-related initiatives at our upcoming capital markets day.”

At 0945 BST, shares in Diversified Energy Company were down 1.19% at 115.8p.