Diversified Energy Company (DEC) H1 2024 earnings summary

Executive summary

• Generated $121 million in free cash flow in H1 2024, with a 38% yield and 50% cash margins, reflecting operational efficiency and capital discipline.

• Adjusted EBITDA was $218 million, with a 49% margin, and net income was $16 million, down 98% year-over-year due to lower prices and production.

• Completed $516 million in announced acquisitions, including Oaktree and Crescent Pass, and distributed over $65 million to shareholders in H1 2024.

• Retired 174 wells, including third-party and orphan wells, advancing environmental commitments.

• Equity trades at a 30%-37% discount to peers, seen as a buying opportunity.

Financial highlights

• Total revenue, including settled hedges, was $446 million, down 18% year-over-year; net gain on commodity derivative settlements was $78 million.

• Paid down $108 million in debt principal on ABS notes in H1 2024.

• Free cash flow conversion rate was 55% of EBITDA, leading peers.

• June 2024 exit rate: 855 MMcfepd (143 Mboepd); net debt/adjusted EBITDA at 2.6x.

• Capital expenditures were $21 million, down from $32 million in H1 2023.

Outlook and guidance

• Production expected to trend toward high single-digit engineered declines in H2 2024, with recent acquisitions offsetting declines and increasing year-end volumes above 2023.

• Robust hedging program with 60-80% of natural gas volumes hedged over the next five years, 2024 hedged substantially above NYMEX strip.

• On target to reduce borrowings by ~$185 million and decrease leverage to the lower end of the stated range.

• Management expects to meet capital expenditure needs from operating cash flows and existing liquidity.

• A $0.29/share interim dividend was proposed for payment in September and December 2024.