Diversified Energy Company (DEC) investor relations material

Business model and strategy

• Focuses on acquiring and optimizing mature, cash-generating energy assets (PDP) across 11 U.S. states, leveraging scale and vertical integration for margin enhancement.

• Uses asset-backed securities (ABS) for financing, maintaining a cost of capital below 10%, and has completed 30 accretive acquisitions in seven years.

• Operates a branded asset retirement company, Next Level, handling a significant share of asset retirement in the Appalachian Basin.

• Sells undeveloped acreage and forms joint ventures, such as with Mewbourne Oil, to optimize portfolio and generate additional cash flow.

• Maintains discipline in acquisitions, prioritizing fit and value, and often walks away from deals that do not meet criteria.

Financial performance and capital allocation

• Achieved over $1 billion in annualized EBITDA and a $6 billion reserve base, with a production mix of 72% natural gas.

• Repurchased 6% of shares YTD, with $61 million spent through Q3, and pays a fixed dividend yielding 7-8%, modeled at $90 million annually.

• Guided 2025 free cash flow at $440 million, with 20% allocated to dividends; debt is paid down via fully amortizing ABS structures.

• Recent acquisitions, such as Canvas Energy, are financed with significant external investment (e.g., $400 million from Carlyle for a $550 million deal).

• Cost of capital for equity is proxied at 8% (dividend yield), while recent ABS financings are at 6-6.5% tied to SOFR.

Growth opportunities and market outlook

• Sees a robust pipeline of M&A opportunities, with $70-90 billion in assets expected to come to market in the next 1-2 years.

• Expansion into new basins is considered if assets offer scale and operational synergies; recent M&A trends create generational opportunities.

• Portfolio optimization through land sales and JVs helps offset production decline and sustain cash flow.

• Corporate production decline is managed at 10% annually, offset by acquisitions, land sales, and third-party revenue streams.