• Diversified Energy Company purchased operating natural gas wells in East Texas for $68 million, strengthening its portfolio and increasing its scale.
• The acquisition includes 331 wells with a gas volume of approximately 69 percent and promises an operating profit of $19 million over the next twelve months.
• Rusty Hutson Jr., CEO of Diversified Energy, emphasized the strategic benefits of the transaction, particularly improving margins and maximizing value for shareholders.

Owner of an oil and gas site Diversified energy company has purchased several operating natural gas wells in East Texas for $68 million (£52.3 million).

The FTSE 250 company bought the assets from a regional operator, with the “significant” Proved Developed Production (PDP) reserve part of a larger sale in the region.

A third-party development company will also buy additional undeveloped land from the regional seller for about $19 million (£14.6 million). Diversified said it would also acquire a minority five percent stake in the land for $1 million (£800,000).

The two sales are expected to generate a total 331 fountains contains about 69 percent gas volume. The company estimates its operating profit for the next twelve months at $19 million, 3.5 times the purchase price.

“The production profile of the assets is highly complementary to the Company’s existing portfolio and operating strategy, with low annual production declines of ~15 percent for the next twelve months,” Diversified said in a Stock exchange announcement Today.

The money for the new assets will be raised through a combination of issuing new shares to the regional operator for approximately $35 million (£26.9 million) and security from the newly acquired wells.

Diversified said it expects the takeover to be completed in the fourth quarter of this year and that it would have to pay a transfer fee in case of failure.

Rusty Hutson Jr., CEO of Diversified, said, “This acquisition strengthens Diversified by expanding our presence in our East Texas operating area, increasing our scale and enabling margin improvement.

“Importantly, this acquisition extends our proven track record of executing disciplined transactions at attractive valuations.

“By combining our resources with those of a development partner, we underscore our company’s ability to creatively and thoughtfully structure transactions that create value and maximize cash flow generation for shareholders.”

By City AM

More top articles from Oilprice.com