Diversified Completes Acquisition of Summit Natural Resources and Tenth Asset Backed …

Diversified Energy Company PLC has successfully finalized an acquisition of natural gas properties and midstream pipeline infrastructure in Virginia, West Virginia, and Alabama from Summit Natural Resources, solidifying its standing as a leading issuer of oil and gas securitizations. This strategic acquisition aims to increase cash flow from coal mine methane environmental credits, expand midstream infrastructure, and enhance pricing in the Southern Appalachia region.

The acquisition, spearheaded by Diversified, involved a net purchase price of approximately $42 million and current net production of around 12 MMcfepd. The proven developed producing (PDP) reserves stand at 65 Bcfe with a present value of approximately $55 million. The estimated 2025 adjusted EBITDA is projected to be around $12 million. This latest acquisition also includes existing coal mine methane volumes that present opportunities for future production expansion and additional environmental credits. The strategic merger of Appalachian assets provides synergies for increased cash margins, while the added midstream pipeline assets allow for an enhanced capability to improve commodity realizations.

In conjunction with the asset acquisition, Diversified also secured an asset-backed securitization (ABS) refinancing, introducing an ABS X note. The proceeds from this transaction will serve to consolidate and repay the previous ABS I, ABS II, and Term Loan I principal amounts. By utilizing these assets, alongside additional Summit Natural Resources assets, as collateral in the new structure, Diversified anticipates an improved hedging profile leading to enhanced margins and cash flows. The ABS issuance, structured as a master trust with a $530 million note, garnered significant interest, being oversubscribed 6.5 times by 20 unique investors, highlighting the quality of cash flows and Diversified’s reputation as a responsible issuer.

The ABS X note further benefits from strategically placed hedges that are expected to contribute an additional 40% ($38 million) to EBITDA of the refinanced assets. The notes are rated investment grade with a blended fixed coupon rate of approximately 6.4% in the A tranche, and improved amortization is anticipated to generate increased cash flows.

Sustainability is a key focus for Diversified, with the sustainable Fitch providing a Second Party Opinion confirming that the KPIs of the ABS align with the ICMA framework for sustainability-linked bond principles. This commitment to sustainability reflects Diversified’s broader strategy to align financing activities with its sustainability goals.

Reflecting on the recent developments, CEO Rusty Hutson, Jr. expressed excitement over the completion of the acquisition and ABS transaction, underscoring the potential for increased revenues from the newly acquired assets. The operational expertise of Diversified’s field teams, coupled with exposure to premium Transco Zone 5 pricing, positions the Company for continued success in the oil and gas sector.