Steady production is what Alabama-based Diversified Energy company leaders expect from their recent $240 million acquisition of ConocoPhillips Company assets in Oklahoma and Texas.
The deal was finalized this week according to Diversified’s announcement. It involved a purchase price of $240 million before customary purchase price adjustments and and acquisition net purchase price of $210 million after the customary purchase price adjustments.
What prompted the company’s interest in the Midcontinent holdings?
When Diversified “dipped our toes into Oklahoma, specifically into that western area of Oklahoma, the Western Anadarko, we loved that area,” CEO Rusty Hutson, Jr. told Hart Energy in a recent interview.
“Specifically, the basin’s production profile looks a lot like its eastern holdings, with typically mature wells that need little maintenance capex,” he told the news site.
“There’s not a lot of brand-new wells with high declines. They’re more mature producing assets.”
Diversified funded the acquisition with cash on hand and existing availability on the company’s Revolving Credit Facility resulting in post-transaction liquidity of approximately $200 million(f), which the Company expects to increase with a higher borrowing base on its Credit Facility as it adds these assets as additional collateral. Post-transaction leverage, as measured by pro forma Net Debt to Adjusted EBITDA, is ~2.2x(g).
Hutson called it another non-dilutive acquisition of high-quality assets.
“…we are excited to begin the process of efficient integration and deployment of Smarter Asset Management along with our ESG initiatives across this additional asset base. The successful close of this attractively priced acquisition increases asset density and enhances the opportunity for synergies within the Central Region, while providing robust cash flows that further support our dividend distributions and future accretive reinvestment.”
The acquisition involves about 1,500 producing wells and represents the company’s sixth major acquisition in the region and second in the Midcontinent. It is expected to increase Diversified’s production by about 9,000 boe/d.